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jean - claude trichet : presentation of the ecb β s annual report 2005 to the european parliament introductory statement by mr jean - claude trichet, president of the european central bank, to the european parliament, strasbourg, 26 october 2006. * * * monsieur le president, mesdames et messieurs les deputes, c β est pour moi un grand honneur et un grand plaisir de m β exprimer aujourd β hui devant vous. je suis ici pour presenter au parlement europeen, comme le prevoit le traite, le rapport annuel 2005 de la bce. mais comme vous le savez, les relations entre le parlement et la bce vont au - dela des obligations specifiques qui sont imposees par le traite. de fait, nous avons etabli, au fil des annees, un dialogue tres etroit qui β je tiens a le souligner β s β est intensifie au cours de cette annee. ce mois - ci, c β est la troisieme fois que j β interviens devant vous. de meme, mes collegues au sein du directoire de la bce ont ete en contact etroit avec le parlement europeen concernant diverses questions, telles que la reforme du fmi, les systemes de paiement et les systemes de compensation et de reglement. pour notre part, nous attachons la plus grande importance aux contacts portant sur ces questions. ich werde ihnen zunachst einen kurzen uberblick uber die wirtschaftlichen und geldpolitischen entwicklungen im jahr 2005 geben und die geldpolitischen maΓnahmen der ezb erlautern. danach mochte ich einige anmerkungen zu punkten und vorschlagen machen, die sie in ihrem entwurf einer entschlieΓung zum jahresbericht 2005 der ezb vorgebracht haben. economic and monetary issues let me first of all welcome the assessment of the economic and monetary affairs committee as regards the ecb β s monetary policy in 2005 and beyond.
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background, the ecb will definitely follow - up on your request for further analysis. i do not exclude that we will conclude that there is a real case for enhancing the present framework which relies essentially on the vigilance of the financial institutions that are themselves under supervision as regards their counterparty risks on the hedge funds. but i also note that any such enhancement should be agreed upon at the level of the international community and, in particular, on the basis of an appropriate transatlantic discussion. as regards payment and settlement issues, let me first thank the european parliament for the support expressed for the implementation by november 2007 of the target2 system. being an integrated large - value payment system, target2 will provide for efficiency gains and improved liquidity management by banks. in this regard, i should like to refer to an increased pressure to also have an integrated platform for the settlement of securities transactions in euro. the eurosystem is therefore currently examining, in co - ordination with the european commission and in close co - operation with the market, the feasibility of setting up a eurosystem infrastructure for the provision of securities settlement services in central bank money. a decision on whether to offer such a service, referred to as β target2 - securities β, is expected in early 2007. in the field of retail payments, we strongly support the efforts to establish a single euro payment area ( sepa ). we welcome the eu commission β s initiative for a directive on payment services and i warmly welcome european parliament β s contribution to a swift adoption of this directive to assist the banking industry in their implementation of sepa payment instruments as from 1 january 2008. i thank you very much for your attention. i am now available to answer your questions.
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time, senator barbara mikulski, only because i read a newspaper article about her work in the senate as the daughter of polish immigrants, which really resonated with me. little did i know that i was going to be back at the hart building a few decades later, making the rounds to meet with various senators as i prepared for my senate confirmation for the federal reserve. in grad school, i spent time as a visitor both at the brookings institution and at the san francisco fed - where i worked on my phd research while surrounded by policy - focused professionals. stepping into these institutions pushed me out of my comfort zone and into the world of policy and discussions about what it took to prepare for federal open market committee ( fomc ) meetings while i was a grad student immersed in a highly technical phd. program. little did i know that i was going to be back at the fed attending those fomc meetings myself and at brookings just a few months ago giving my first speech as a governor. i know as students, many of you have already done internships and searched for these opportunities around policymaking, and i want to tell you that this is exactly what will make you grow moving forward. like me, you may someday be surprised to find yourself revisiting those important places where you once studied and learned, but now as a senior professional in a position to provide service in a very different way. for decades, i spent much of my career in academia pursuing answers to my big questions on poverty by doing research and teaching at universities. throughout, i always focused on those same questions that drove me to study economics in the first place - and always with my sights on the role of policy and the implications for real people, like my grandpa and others i had seen in colombia and in the united states, who lacked opportunities. and that's when my next big detour came. just one year after being recruited by georgetown, i was approached by the u. s. department of labor to be its chief economist. while i knew i could contribute my knowledge in the middle of the great recession about the drivers of unemployment and effective policies to create jobs, i had never spent time working in government. this certainly pushed me out of my comfort zone again, and i am very glad it did, because i learned a great deal about how policy actually gets made while using my expertise and knowledge to conduct evidencebased policymaking. little did i know that the data on
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2 the study spells out the relative advantages of different types of funds for different kinds of projects β preservation versus development, for example β and details which funds are best for the early, middle, or late stages of a project. turning to support for small businesses, community development staffers across the federal reserve conduct extensive research and analysis of the challenges and opportunities facing small business owners. for example, the 12 federal reserve banks collaborate on the annual small business credit survey, which surveys business owners about their financing needs and experiences to provide timely insights to policymakers, service providers, and lenders. 3 in addition to providing information on small business credit conditions, the federal reserve is trying to advance understanding of the best economic development strategies for supporting small businesses. the kansas city fed has helped lead on these issues through its β grow your own β entrepreneurship - based economic development guidebook, and its 2018 growing entrepreneurial communities summit. 4 these are just a few of the ways that federal reserve banks and the board of governors support the efforts of community development organizations. i hope that our work will be useful as you chart a path forward for your second decade of service to utah, and i look forward to continued collaboration between the federal reserve and community development organizations such as ucns. together, we can help support thriving communities across the wasatch front, the state of utah, and across our nation. thank you again for inviting me to speak, and congratulations again for 10 years of building stronger communities in utah. 1234 1 ucns is the parent organization of four separate organizations that, in combination, work to advance access to affordable housing, including homeownership and housing near high - capacity or high - frequency transit ; support economic development and job creation by funding small businesses ; and improve access to important community infrastructure. 2 2. elizabeth mattiuzzi, β funds for kickstarting affordable housing preservation and production : lessons for new investors, β community development research briefs ( san francisco : federal reserve bank of san francisco, march 2019 ). return to text 3 see www. fedsmallbusiness. org / for more information. 4 the guidebook is available at www. kansascityfed. org / ~ / media / files / publicat / community / gyo / entrepreneurship - econ - dev - local - communities. pdf. 2 / 2 bis central bankers'speeches
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8 million in the united states. this is encouraging, but it remains insufficient. we cannot be complacent in any respect. europe must develop its growth potential continuously. all countries must pursue resolutely their structural reforms, in pension systems, product market and labour markets. jointly, they have devised the europe 2020 strategy. education, research and innovation is one key area ; resource efficiency a second ; and high employment and social cohesion the third main area. the european central bank fully supports all efforts along this europe 2020 strategy. a specific example is the completion of the single market in services. it makes full economic sense that the internal market in services, which is the sector in which the majority of people work, is fully completed. new areas of growth, like the digital sector, energy and the environment will clearly benefit from more competition and create new jobs. 4. conclusion let me draw to a conclusion. we are today 12 years into economic and monetary union. i have emphasised our achievements and i have emphasised where we need to strengthen the framework. monetary union can function effectively in a europe of sovereign states with an appropriate economic union. and creating an appropriate economic union is where the reform efforts need to be directed. for that, we have to do in europe what alexis de tocqueville so admired in 19th century america, whose greatness did not lie β in being more enlightened than any other nation, but rather in the ability to repair her faults. β bis central bankers β speeches when repairing the faults in our governance framework, we must not let the indications of economic recovery distract ourselves from the urgency for action. policy - makers must keep in mind that the governance failures of the past are still to be fixed and the growth challenges of the future still to be solved. while i have stressed the challenges we face, we must also recognise our achievements. europe is in the vanguard of nations working together peacefully. we have replaced confrontation and conflict with cooperation and consensus. we have combined political freedom with economic freedom and social peace. these are remarkable achievements β and they are quite clearly achievements to which many people elsewhere in the world are aspiring. it is for this reason that i have dedicated all my working life to put the french - german friendship to the service of europe as a whole, with all nations united. and it is for this reason that i believe deeply in our economic and monetary union. the europe to which i have dedicated my career is one where different countries, different
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the interest of the us economy. the interpretation gained added plausibility, despite later denials, when it was seen in conjunction with the fed β s earlier announcement on downward risks to the inflation outlook. the likelihood that the us dollar might decline further, with tacit acquiescence from the us authorities, has led many observers to believe that a significant change is occurring in the international environment. a declining us dollar helps the us economy adjust to its problems, but also shifts those problems in part to other countries. in passing, i have to say that i am not criticising the united states for this β to date, they have shouldered more than their fair share of the responsibility for getting a global expansion going. but, if we are interested in increasing global growth, rather than just having a redistribution of the pattern of growth between countries, many countries which have enjoyed the stimulus of exporting to the united states when the us dollar was high will need to find domestic sources of expansion. there is a great deal of scepticism about how successful the two main areas outside the united states β japan and the euro area β will be in this endeavour. it is in this general context that some central banks have reduced interest rates over the past few days. as you know, we did not. this was not because we are unaware of the downward risks that are presented by the global economy, nor because we think our economy is somehow immune to international problems. it was because we clearly have stronger domestic conditions in place already as a result of current policy settings ( not to mention higher inflation than most countries ), and hence have not had the same sense of urgency in reducing interest rates that several others clearly did. we are, however, very conscious of the risks the australian economy faces. obviously, the first one is that the world economy fails to recover and that, in time, this feeds through to a protracted weakening in the australian economy. the main direct channel through which this could occur would be a further weakening in exports. at the same time, we have seen that because our economy is healthy relative to others, and hence our interest rates are not as low as others, foreign investors have found australian dollar - denominated assets attractive to acquire. thus, a second channel could be through an excessive appreciation of the australian dollar. not that i think what has happened to date could be in any way labelled excessive. the trade - weighted exchange rate has returned to its post - float average, while the
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scale, chart 1 compares two stylised benchmarks β the stock of banknotes ; and 20 % of retail commercial bank deposits2 β to the size of central bank balance sheets between the period before the global financial crisis and today. in the uk, the upper end of that benchmark range is nearly half the size of the bank of england β s balance sheet today, and six times that in 2007. this is the assumption used in the illustrative scenario in section 3 of the bank β s 2021 discussion paper new forms of digital money | bank of england, and reflects the share of uk deposits that is non interest bearing. bank of england sources : individual central banks β published data, imf, bank calculations. those are big numbers. but they aren β t unprecedented in the history of central banking. in the uk, even the top end of the range in chart 1 would still leave the stock of publicly - provided means of payment at around the levels seen in the mid - 20th century ( chart 2 ). this underscores the point that, while the technology for any future cbdc may be new, the use of the central bank balance sheet to provide state - backed transactional money would not be : indeed, it is one of the oldest functions of central banks. bank of england sources : bank of england, imf. 2. stablecoins that are truly stable may have much the same impact as public authorities reflect on the case for cbdcs, private sector providers have been developing so - called β stablecoins β, which claim to be pegged to the value of fiat currencies. i say β claim β, because recent weeks have suggested such promises may be less than fully credible. the value of terrausd β once one of the larger β stablecoins β by market capitalisation β fell to zero in just a few days. and tether, sometimes asserted to be the backbone of the cryptocurrency ecosystem, lurched precariously below parity for a period ( chart 3 ). these gyrations have multiple causes. but β stable β they are not. and the lack of complete, real time, information on the assets backing the promise of convertibility, 3 means that holders of such coins must accept at least the possibility of finding themselves badly out of pocket. such β buyer beware β warnings may be sufficient for coins that are only in niche use. but they cannot be enough for any that reach systemic scale.
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greater trade, investment and innovation. this high road leads to more jobs, higher sustainable growth, and better risk management across the g20. but there is another path β the low road β where trust and cooperation diminish, fragmentation hardens, capital flows are disrupted, and trade and innovation are curtailed. if authorities do not have sufficient confidence that their efforts to promote financial stability are being reciprocated elsewhere, then concerns about the risks of openness to domestic financial stability could intensify. if they do, domestic authorities will act to safeguard their primary responsibilities. all speeches are available online at www. bankofengland. co. uk / speeches without cooperation, host authorities may become more inclined to impose local requirements on domestic entities, to insulate domestic stability in cases where there is no support from the group or coordination amongst authorities in responding to distress. in a world where many banks and fmis are highly interconnected both financially and operationally that would generate significant inefficiencies, frustrating the benefits that flow from open international trade and investment. taking the low road would be a sub - optimal for all, with fewer jobs, lower growth and higher domestic risks. vi. the path taken by brexit how the brexit negotiations conclude will be a litmus test for responsible financial globalisation. we start from a position where the high road is both readily attainable and highly desirable for all involved. the uk and the rest of the eu have exactly the same rules governing our systems. and we have the most highly developed frameworks for intensive supervisory cooperation. capital flows seamlessly across our borders. the current eu legal regime allows firms to passport throughout the union, supervised by the home supervisor. the eu and uk are therefore ideally positioned to create an effective system of deference to each other β s comparable regulatory outcomes, supported by commitments to common minimum standards and open supervisory co - operation. these commitments could be reinforced by reliance on independent peer reviews and a new, independent dispute resolution mechanism. such an outcome would be entirely consistent with the uk government β s stated aim of a new, comprehensive, bold and ambitious free trade relationship with the eu that embraces goods, services and network industries. and such an approach could be applied more broadly to the immense benefit of the global economy. the uk and eu have the potential to create the template for trade in financial services β one that leverages the tremendous progress that has been made in recent years building resilience and cooperation
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, jackson hole symposium 2018. 15 see nevo, a. and wong, a. ( 2018 ), β measuring inflation in the modern economy β a micro price - setting view β, ecb forum on central banking. 5 / 5 bis central bankers'speeches
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rates may work smoothly in an economic model, i am less certain how the general public would react, particularly after millennia of positive nominal rates. not only would such rates be deeply unpopular, there may also be unintended changes in behaviour that could dampen the effectiveness of the measure. the fact that banks do not pass negative rates on to most depositors, 3 and notably not to households, is a warning sign for central banks of how people may react if attempts were made to extend the lower bound of rates downwards by replacing cash with some form of remunerated digital currency. what assets the central bank ought to hold against these widely held liabilities driving bank disintermediation and deleveraging? a potential decision to issue a central bank digital currency ( cbdc ) needs to be assessed in relation to the impact on the financial system. in an extreme case, during a systemic banking crisis, holding risk - free central bank - issued cbdc could become vastly more attractive than 1 / 5 bis central bankers'speeches bank deposits. there could be a sector - wide run on bank deposits, magnifying the effects of the crisis. even in the absence of a crisis, readily convertible cbdc could crowd out bank deposits β putting the two - tier banking system at risk. then, the efficient flow of credit to the economy would likely be impaired. the central bank β now holders of deposit funding β would have to decide which projects to finance, either directly, by replacing commercial banks, or indirectly, by deciding which banks would receive funding. this would lead to a situation in which the central bank pretends to know better than the established system of the decentralised allocation of credit. overall, there is currently no convincing motivation for the eurosystem to issue cbdc to the general public. it is unnecessary and appears to be disproportionate to the aims put forward by its proponents. there is no need to fix something that is not broken. if anything, one could imagine a digital representation of cash that replicates the features of cash in the reasonably distant future, if people demanded it. and i have not even mentioned the insufficient robustness or reliability of some technologies like dlt, or their energy insufficiencies and dependencies. how does technological change affect the monetary transmission mechanism and monetary policy? technological change has multifaceted effects on the transmission mechanism. it is important not to jump to conclusions, for example that, because the phillips curve has become flat
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the health and conduct of the sector. the reserve bank β s insurance agenda for the coming year ( or years ) is thus very full. we are committed to openly communicating our development priorities to insurers and the wider public, so that individuals and firms have the opportunity and ability to be an active participant in the policy development. https : / / www. rbnz. govt. nz / news / 2019 / 01 / fma - and - rbnz - report - on - life - insurer - conduct - and - culture ref # 8609867 v1. 2 page 7 of 7 what we ask of you, is that you engage openly and early with us, and that you heed the lessons of the banking and life insurer conduct and culture reviews. we look forward to working with the industry and other interested parties as we embark upon this next phase of our insurance supervision development. thank you for your time today, and in the near - future. ref # 8609867 v1. 2
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building confidence and reducing risks in the insurance sector a speech delivered at the insurance council of new zealand conference on 5 november 2019, auckland, new zealand by adrian orr, governor ref # 8609867 v1. 2 page 2 of 7 β you never know these days. uninvited guests may force you to take an unplanned trip to an unknown destination ; doesn β t hurt to be in your sunday clothes. β β anurag shourie, half a shadow tena koutou katoa my thanks to the insurance council for inviting me to speak with you this morning. it is a pleasure and privilege to be here. in the almost - decade since parliament passed the insurance act in 20101, the insurance industry has had to deal with the consequences of many β uninvited guests β. the christchurch and kaikoura earthquakes presented unique ongoing challenges to the industry. so too have other single - firmspecific events, such as the failure and liquidation of cbl insurance. furthermore, the findings from the australian royal commission and our recent conduct and culture review - jointly undertaken with the financial markets authority ( fma ) - demonstrate the need for ongoing constructive change across the sector. i am going to share with you today the reserve bank β s perspectives on some of these events, and about the future direction of our insurance policy and supervision work - including some of the initiatives that we will seek your feedback on in due course. our desire is to ensure that the insurance sector is financially sound and trusted. we must be in our best β sunday clothes β all week long. promoting soundness and confidence is challenging the insurance industry is a crucial part of any modern economy. it is the part of the ecosystem that society relies heavily on to both mitigate risks and / or transfer the risk - burden to those best able to manage it. there are just under 90 licensed insurers operating in new zealand. through the insurance act, the reserve bank is tasked with maintaining the soundness of the insurance sector, and public confidence in the sector. by definition, this task is far from straight forward. the nature of insurance contracts can vary greatly between insurers or insured events, and are often dependent on the individual circumstances of the policy holder. furthermore, there are significant information - asymmetries between an insurance provider and their customer, and the risks of providing poor or outdated information run in both directions. β who is good for what, and
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, we are engaging with the curriculum setting bodies like national council of educational research and training ( ncert ), education boards like central board for secondary education ( cbse ), central and state governments to try and embed such concepts in the school curriculum. channels of financial literacy taking into consideration different cultures and market development needs, we are adopting a multi - channel approach to cover different financial and education levels in various age groups. we have a link on financial education on the rbi website for the common man, containing material in 13 indian languages, which includes comic books on money and banking for children, puzzles, competitions, etc. top executives of reserve bank of india undertake outreach visits to remote villages on a continuous basis to spread the message of financial awareness and literacy. a young scholars scheme has been instituted wherein, around 150 graduate students are selected each year from across the country, who are provided summer internship in various offices of the reserve bank and are expected to submit small project reports relevant to the bank β s functioning. moreover, these young scholars are required to visit some schools in their region and explain their project to school students, so as to create greater awareness among the school students regarding the functioning of the reserve bank. besides, town hall meetings, participation in information / literacy programmes organized by press, enacting plays and skits, arranging stalls in local fairs / exhibitions, etc. are some other initiatives towards this objective. who all are partnering in this initiative? everybody has to be involved in the financial literacy efforts. in india, a large number of stakeholders including the central and state governments, financial regulators and players, civil society, educationists and others are involved in spreading financial literacy. as we have adopted a bank led model for financial inclusion, banks are actively contributing to our financial literacy initiatives by setting up financial literacy and credit counselling centres with focus on educating people on availability of various deposit, credit and remittance products offered by banks, so as to create demand for the same, with the aim of attaining financial inclusion. as on march 31, 2012, there are 429 flccs functioning throughout the country. use of mobile financial literacy vans by banks in the north eastern states, weekly radio programmes on financial literacy in some states by banks and similar programmes in tribal districts by nabard, awareness programmes on various government sponsored self employment schemes involving bank loans and subsidy by government agencies like kvic, dics, sc / st corporations, mass media campaigns, tie ups with educational institutes, financial
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discuss certain other innovative developments which have the potential to be disruptive of course, but not of so desirable, or of questionable, relevance, or at least we need to be carefully monitoring and be vigilant. in particular, i want to discuss two developments β digital money or crypto currency and crowd funding. 31. what is crypto currency? crypto currency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. 32. what is crowdfunding? crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system. 33. are these disruptive innovations for inclusive growth? both these developments are based on leveraging technology in unusual way, so they are innovative ; both have the great potential to be disturbing the standard ways in which currency and credit systems are operated, and so are disruptive. do these developments have potential implications for financial inclusion? yes, of course ; they both can assist financial inclusion and therefore inclusive growth. crypto currency can support activities which do find difficulties in settling such transactions in the normal ways. the crowdfunding can help some funds needy person bis central bankers β speeches or entity, in searching and locating those who have the particular aptitude and willingness to help that person or entity, as only such people / entities respond to the crowdfunding call. this way both can support financial inclusion. 34. then, why do i say that they may not be desirable? why do i say that they may be questionable? for one thing, they both hope to operate in a regulator free environment. in matters financial, it is a quintessential received wisdom of several centuries that unregulated financial system has immense scope for depriving ordinary public of their hard earned money and therefore highly risky to be permitted to grow. it doesn β t stop there ; there will be no enforcer as well. this is extremely risky, especially when such a system operates internationally. it is true that in crowdfunding there will be a platform which does have the role of an enforcer. however, its effectiveness is questionable and mostly one - sided. secondly, both have the potential to support criminal, anti - social activities like money laundering, terrorist funding and tax evasion. while we
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erm ii parties on bulgaria and assessment of prior commitments of bulgaria β and β letter by executive - vice president dombrovskis and commissioner gentiloni to erm ii parties on croatia and assessment of prior commitments of croatia β, european commission, 10 july 2020. 11 it is worth noting that the core work of the comprehensive assessment exercises on bulgarian and croatian banks took place and was finalised before the outbreak of the coronavirus ( covid - 19 ) pandemic and hence could not take into account the impact of this crisis. 12 for example, the ecb will not adopt decisions addressed to banks in the member state concerned, but rather instructions addressed to the nca, which will in turn adopt the required national administrative measures addressed to banks. moreover, the member state in close cooperation is not represented in the governing council. for this reason, a special procedure allows the nca in close cooperation to express disagreement with the supervisory board β s draft decisions and with any objections by the governing council to those draft decisions. if no agreement is reached, the member state may opt to terminate close cooperation. 13 the application letters from the bulgarian and croatian authorities including the annex with the post - entry commitments to be taken at the time of erm ii entry are available on the ecb website. see β application letter from the bulgarian authorities β and β application letter from the croatian authorities β. 4 / 4 bis central bankers'speeches
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dimension of the launch of the euro and the great number of watchers and academics, not to speak of market participants, who were very sceptical, to say the least, about emu, it is surprising to me that the successful transition to the euro has received so little attention from academic researchers. stressing the importance of the monetary pillar at the time of the introduction of the euro must not be interpreted as suggesting that, now that the ecb has matured, we do not need it any more. in fact, in see, for example, trichet ( 2005a, b ) see, for example, assenmacher - wesche and gerlach ( 2006 ), kugler and kaufmann ( 2005 ) and hofmann ( 2006 ). see woodford ( 2006 ). christiano and rostagno ( 2001 ) present a theoretical framework showing that monitoring monetary dynamics can help to minimise the possibility that inflation expectations might settle on a point that is inconsistent with the central bank β s inflation objective. in this context, a central bank commitment to systematically monitor monetary indicators and factor them into policy would act as an insurance device which prevents instability from arising in the first place. the interesting feature of this commitment is that, in equilibrium, such a central bank would not necessarily be observed to react to unstable dynamics in monetary aggregates, as these would never materialise in the first place. however, such a favourable outcome would presuppose, rather than disprove, the existence of the strategic commitment to act forcefully in the event of abnormal developments in monetary indicators. christiano, motto and rostagno ( 2006 ) show that taking into account monetary indicators in the conduct of monetary policy can also alleviate the macroeconomic volatility arising from overly optimistic expectations. in an earlier paper, christiano, motto and rostagno ( 2003 ) also showed that a monetary policy rule that assigned more weight to monetary developments would have substantially mitigated the severity of the great depression. see borio and lowe ( 2002, 2004 ), borio, english and filardo ( 2003 ), borio ( 2005 ) and white ( 2006 ). see detken and smets ( 2004 ) and adalid and detken ( 2006 ). for a more detailed discussion see trichet ( 2005c ) and ecb ( 2005 ). helping us to take good and timely policy decisions, the monetary analysis has played an important role in our success in fully preserving the
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ways people think and do their banking business today. 9. the outcome of e - banking in pakistan will be gradual but the trends towards adoption of information technology are quite encouraging. transformation from traditional banking modes to modern ways of banking is taking place at a fast pace. a number of alternate delivery channels for provision of banking services like atms, credit cards, pos ( point of sale ) terminals, internet banking, debit cards already exist in our country to benefit the masses. currently, 93 % of the total bank branches are offering real - time online services. 10. i would like to acknowledge the efforts of tameer bank and telenor towards financial inclusion and deposit mobilization. it will not only bring economic prosperity but also help alleviate poverty and improve living standards of the people of pakistan. state bank of pakistan looks forward to the success and positive outcomes of easypaisa khushaal and expects more innovative products from tameer microfinance for promoting deposit mobilization and financial inclusion agenda. bis central bankers β speeches
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per the latest assessment made by the rbi. gdp growth in the first quarter of 2009 - 10 is broadly consistent with that ( 6. 1 per cent ). the current focus is to bring back the economy to the high growth path as a key means to ensure higher living standard for all. the planning commission in the eleventh five year plan document ( 2007 - 12 ) identified a number of priorities to fasten an inclusive growth process so that the economy can grow at a rate of around 9 per cent during the plan period. one of the key requirements of growth is capital formation and for this it is imperative that more and more of household savings are directed to financial savings thereby facilitating capital formation. currently financial savings constitute 48. 5 of total household savings. if this share is to go up, there is need for much greater penetration of the banking, insurance and capital market products in the country. the policy of financial inclusion is therefore critical for greater capital formation to ensure higher and sustained growth. i would like to specifically touch upon the issues of ensuring adequate credit for agriculture, msme and infrastructure, all of which are critically important to achieve sustainable and inclusive growth. these are rightly placed as growth engines in the current workshop. agriculture after recording robust and above trend growth during 2003 - 08, overall agriculture output decelerated during 2008 - 09 despite a record level of food grains production at 233. 9 million tonnes. higher production was aided by rabi output, while kharif output was affected by floods in some states. production of coarse cereals, pulses, oilseeds, showed slippage and output of sugarcane and cotton declined over the year. diversification of indian agriculture towards horticulture, livestock and fisheries has been evident for some years with their joint share reaching close to 60 per cent of the agriculture and allied gdp. allied sector is expected to grow between 5 per cent and 6 per cent during 2008 - 09. although there has been a drop in the share of agriculture in the gdp from 36. 4 per cent in the 1980s to around 17. 0 per cent now, the number of people dependent on agriculture for their food and livelihood remains largely unchanged at nearly 60 per cent underscoring the importance of agriculture to sustain growth in the country. various studies predict that in the long term, the increased demand due to population growth and rising per capita income, would outstrip the supply of cereals, pulses, edible oil and sugar. key issues that need addressing in this context have been identified as
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has been made towards correcting imbalances, further efforts are desirable - with every country doing its part - to help reduce medium - term risks associated with the imbalances. the us will have to try to curb household and government borrowings and strengthen national savings, without hurting recovery and excessive dollar depreciation. the focus of fiscal consolidation in the us has to remain on the expenditure side, though revenue measures aimed at broadening the revenue base and tax system with greater emphasis on consumption tax rather than income tax cannot be ruled out ( weo, september 2006 ). with the housing market slowing down in the us, some increase in private savings is expected. this will be further helped by policy initiatives such as introduction of health savings accounts that would raise incentives for household savings and passing of pension legislation. the euro area needs to pursue structural reforms, especially product and labour market policies, to boost domestic demand and broad base the recovery. japan has started recovering finally. its current account surplus has begun to narrow down from 3. 8 per cent of gdp in 2004 to 3. 6 per cent of gdp in 2005 and the trend is continuing in 2006 with domestic demand strengthening. it is widely agreed that japan should further strengthen its financial system and carry out other structured reforms to provide further flexibility in the economy. further flexibility in exchange rate policies is desirable for the emerging market economies. any attempt by emes to intervene excessively and sterilize their forex reserves to maintain their competitiveness will further delay the adjustment process. however, as indicated earlier that unless there are substantial changes in exchange rates, it seems that one cannot expect corrections to global imbalances. studies have shown that with unchanged growth rates in the us and the rest of the world, the us dollar would need to depreciate by nearly 33 per cent - equivalently, the non - us currencies would have to appreciate, on average, by 50 per cent - to balance the us trade account ( obstfeld and rogoff, 2004, 2005 ). another study has pointed out that dollar should depreciate by 30 per cent in real terms to bring us cad within 2 per cent ( mussa, 2004 ). promoting efficient absorption of higher oil revenues in oil - exporting countries with strong macroeconomic policies should also be a key element of this correction mechanism. it is suggested that these countries could boost expenditures to some extent in areas where social returns are high like education, health, infrastructure and social security.
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professionals, bringing in rich and diverse perspectives for students. role of economists / researchers in shaping policy 4. in keeping with the occasion, let me say a few words about economists. their vital role in shaping public perceptions and discourses and in designing strategic policies in the corporate sector, central banks, governments and multilateral institutions, is more often than not unsung. rigorous research and training helps in formulating informed set of policy choices and consequent decisions. in the domain of public policy, we have to distinguish between the direct and the indirect impact that economists can make. the former is what we usually think of when we consider how experts might affect formulation of a policy, say, minimising the subsidy burden on the exchequer. however, their greatest contribution to policymaking may take place through less direct routes such as through their research by nudging policymakers to think about economic problems / challenges in newer / different ways. 5. policy makers too have a crucial role in creating an enabling environment for economists to contribute to society. in this context, the government of india has to be lauded for instituting three land mark reforms in recent years. one cannot and page 2 of 6 should not underestimate the sagacity and uncommon courage of the government to undertake reforms that can only be described as truly transformative. these will shape, for the better, our economic evolution in the years and decades to come. 6. in 2016, the government legislated amendments to the rbi act to invest the reserve bank of india with the specific mandate to operate the monetary policy framework of the country whose primary objective is to β maintain price stability while keeping in mind the objective of growth β. this was a fundamental shift in the institutional architecture for the conduct of monetary policy, with the formal transition to a flexible inflation targeting framework and the relinquishing of the monetary policy decision by the governor to a six member monetary policy committee ( mpc ). another momentous reform is the establishment of the gst council whereby the government of india has created one of the most effective institutional mechanisms for cooperative federalism. along with the state governments, it has offered a refreshing counter - narrative to the divisive course of the international federal dialogue, voluntarily choosing to relinquish and then pool sovereignty for a larger collective cause. also, the enactment of the insolvency and bankruptcy code, 2016 ( ibc ) is a watershed towards improving the credit culture in our country. the ibc provides for
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maximum amount that the counterparties can borrow through these operations will be raised to β¬3, 000 billion. as a bridging measure, until june 2020 additional ltros will be conducted at favourable conditions and with full allotment of the amounts requested. alongside the asset purchase programme already under way, equal to β¬20 billion in monthly purchases, banca d β italia address by governor ordinary general meeting of shareholders a further β¬120 billion has been allocated for additional net purchases until the end of the year, with a significant contribution from the private sector purchase programmes. these measures were further reinforced at the meeting of 18 march last, when the governing council announced a new programme for the purchase of public - and private - sector securities amounting to β¬750 billion this year. this new pandemic emergency purchase programme ( pepp ) will continue until the end of 2020 but may be extended if the public health emergency continues. ample flexibility is envisaged for purchases of public - sector securities to enable, should market conditions require it, divergences with respect to the current allocations, both in respect of jurisdictions and asset classes. the range of eligible securities issued by private firms has been extended to include commercial paper of sufficient credit quality ; the eligibility criteria for collateral have been relaxed further, to facilitate recourse to refinancing by banks. within our mandate, we stand ready to increase the volume of purchases, adjust their composition and explore all possible options for supporting the economy in this acutely difficult phase. it was also decided to consider revising past self - imposed limits in carrying out these operations, to the extent necessary to make the interventions proportionate to the current risks ; any impediment that might hamper the effective transmission of monetary policy will not be tolerated. the balance sheet at the end of 2019, the bank of italy β s total assets amounted to β¬960 billion, a decrease of β¬8 billion compared with the year before. assets continued to consist mostly of securities purchased for monetary policy purposes, equal to β¬384 billion, of which around β¬320 billion made up of italian government securities. refinancing operations, totalling β¬220 billion, decreased by β¬24 billion owing to early repayments on tltro ii operations, only partly offset by amounts allotted under the new tltro iii operations. overall, monetary policy assets make up more than 60 per cent of the total balance sheet. the value of gold rose by almost β¬20
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closing address delivered by mr. millison narh first deputy governor, bank of ghana at 2017 continental seminar of the association of african central banks ( aacb ) at movenick ambassador hotel on may 05, 2017 the executive secretary, aacb, colleague central bankers, distinguished guests, ladies and gentlemen, introduction 1. i am delighted to be part of the 2017 continental seminar. i am reliably informed that the deliberations were very fruitful. 2. effective communication has now emerged as one of the most crucial and latest addition to the menu of monetary and financial stability policy tools at the disposal of central banks in our modern era. within the framework of inflation targeting and market based, prudential regulation of financial institutions, the need to have an effective, wellcoordinated and targeted communication strategy cannot be ignored by any central bank that wants to succeed in delivering the twin mandate of price and financial stability. 3. as was mentioned, the importance of having a carefully planned communication strategy is well captured in the statement by a deputy governor of the federal reserve bank of new zealand, that β central bank β s pronouncements have economic and social impact. β 4. to this end my colleague, the second deputy governor of bank of ghana, challenged you to find answers to three important questions at this seminar : a. how should central banks manage communication in times of financial crisis? b. how does effective communication enhance central bank credibility and effectiveness of monetary policy and for maintaining stability in the financial sector? and c. what lessons should we learn from cross - country experiences in central bank communications strategies? 5. i hope the various expert presentations and the plenary sessions have helped you enhance your knowledge and understanding of these and other pertinent issues bordering on communication in the central bank. 6. some of the key points gathered at this seminar include but not limited to the following : a. that effective central bank communication requires a consciously designed strategy in line core mandates, the adoption of the most suited medium, and with specific target audience in mind ; b. there is also the need to have specific strategies for monetary policy and financial stability. but the effectiveness of adopted strategies should be assessed regularly through surveys and feedback in order to adjust to the changing circumstances ; c. finally, the issue of consistency in message, proper coordination and adequate funding of communication activities must not be underestimated. 7. colleague governors and i would surely be expecting to receive the communique from this seminar to help us consider
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overall. underlying inflation in the euro area is expected to continue to rise gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion, the corresponding gradual absorption of economic slack and rising wage growth. turning to the monetary analysis, broad money ( m3 ) continues to expand at a robust pace, with an annual rate of growth of 5. 1 % in september 2017, after 5. 0 % in august. as in previous months, annual growth in m3 was mainly supported by its most liquid components, with the narrow monetary aggregate m1 expanding at an annual rate of 9. 7 % in september 2017, up from 9. 5 % in august. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to non - financial corporations increased to 2. 5 % in september 2017, after 2. 4 % in august, while the annual growth rate of loans to households remained stable at 2. 7 %. the euro area bank lending survey for the third quarter of 2017 indicates that net loan demand has continued to increase for all loan categories. credit standards have further eased for loans to households, while they remained broadly unchanged for loans to enterprises. banks β overall terms and conditions on new loans have continued to ease for all categories of loans. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households, access to financing β notably for small and medium - sized enterprises β and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to recalibrate the policy instruments to ensure the degree of monetary accommodation necessary to secure a sustained return of inflation rates towards levels that are below, but close to, 2 %. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to strengthening the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in all euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. regarding fiscal policies, all countries would benefit from intensifying efforts towards achieving a more growth - friendly composition of public finances. a full, transparent and consistent implementation of the stability and growth pact and of the macroeconomic imbalance procedure over time and across countries remains essential to increase the res
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benoit cΕure : lessons from east asia for the euro area speech by mr benoit cΕure, member of the executive board of the european central bank, at the asia europe economic forum on β challenges and prospects for asian and european economies β, beijing, 28 october 2013. * * * i would like to thank ine van robays for her contribution. i remain solely responsible for the opinions contained herein. ladies and gentlemen, the global economic and financial crisis confronted the world economy not only with financial turbulence, loss in output and social distress on a scale not seen since the great depression. it also created a series of challenges for policy - makers. across the euro area, it exposed structural and institutional weaknesses that had remained hidden during the preceding era, the β great moderation β. times of crisis are times of hardship β but they are also times of change and opportunity. this seems particularly true for europe, where progress has often come in this way. the second world war was the impetus for the european coal and steel community, which was established to prevent another war between france and germany. it formed the nucleus of today β s european union. the demise of the bretton woods system in the 1970s was the catalyst for a european single currency, which was eventually introduced in 1999. i β ll be talking today about the effects of the present crisis and the various challenges it has presented for the euro area. i β ll compare it with the east asian crisis of 1997. in my view, there are similarities that yield useful policy lessons for the euro area. but there are also differences that need to be kept in mind. what can we learn from the asian crisis? what are the parallels between the asian crisis in 1997 β 1998 and the euro area crisis? the economies of emerging asia were characterised by buoyant growth and a brisk expansion of credit ( see chart 1 ). this rise in debt was facilitated by considerable inflows of foreign capital, which financed significant external deficits ( see chart 2 ). this led to growing financial imbalances, and in particular to currency and maturity mismatches on the balance sheets of local banks. in addition, the economic boom prevailing at that time was accompanied by a loss of competitiveness of the region β s export sector. investors typically under - priced potential risks as they had overly optimistic expectations of the medium - term growth prospects. they did not identify systemic vulnerabilities such as the risk of sudden stops in capital flows or of twin
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confidence that the euro will prove a stimulus for further economic and financial integration. the introduction of the euro banknotes and coins has not only enhanced price transparency, it will also highlight the fact that the european single market is not yet complete and that a number of regulatory, administrative or legal impediments to the free circulation of goods, the cross - border provision of services and to labour mobility still exist. it is my belief that the euro, as a visible symbol of european identity in everyday life, will increasingly bring these obstacles to light and stimulate efforts to eliminate them. in this way, the euro will accomplish one of the pre - eminent functions of the single currency, namely to " crown " the establishment of a single market in europe. finally, i should like to mention that this is my last appearance in this forum as vice - president of the ecb. i should like to thank the members of the committee on economic and monetary affairs for the very fruitful exchange of views, both in the context of my presentation of the ecb's annual report and on other occasions. this committee has indeed played an important role in bringing the euro closer to the citizens of europe.
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benoit cΕure : low interest rates are not inevitable opinion piece by mr benoit cΕure, member of the executive board of the european central bank, in les echos, 9 november 2016. * * * after nearly a decade of crisis, the euro area is once again experiencing growth. in volume terms, gdp now exceeds its 2008 level and the unemployment rate has posted a steady decline. monetary policy has been instrumental in supporting this welcome recovery. but the improvement is too feeble to be a cause for true rejoicing. and some observers are concerned about the consequences of low interest rates on financial stability and profitability in the financial sector. is monetary policy facing an efficiency problem? or is it actually dangerous? the answer is clearly no. let β s remember where we β re coming from. the euro area experienced a sovereign debt crisis coupled with a banking crisis, which shattered confidence and precipitated a double - dip recession in our continent at a time when other major economies were already recording positive growth. today, high debt levels are still holding back the recovery and non - performing loans weigh heavily on the balance sheets of many of our banks. headwinds have also emerged β this time from the external side β as a result of weakening global economic activity. since 2014, net exports have made practically no contribution to euro area growth. that means that we have only our own strengths to rely on to sustain growth. finally, and most importantly, our economies are suffering the effects of an erosion of long - term growth prospects and a relative increase in the global supply of savings. long - term growth in the euro area has halved since the crisis, to less than 1 % a year. these factors β the origins of which are in part technological and demographic β have played a part in reducing the β natural β level of interest rates that is consistent with balanced growth and price stability over a longerterm perspective. this is crucial : to support a given growth trajectory, monetary policy must be more accommodative than before. without our exceptional measures, growth would be weaker, the unemployment rate higher and inflation would be zero or even negative. the ecb will continue to support the recovery of the euro area in an uncertain international climate. a highly accommodative monetary policy remains appropriate, and will continue to be appropriate until inflation is firmly back on track and heading towards 2 %. the side effects of our measures are at present limited and give us no reason to question their
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zeti akhtar aziz : consumer protection and financial education welcoming address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the financial inclusion policymakers forum on β consumer protection and financial education β, kuala lumpur, 5 april 2011. * * * it is my great pleasure to welcome you to this financial inclusion policymakers forum on β consumer protection and financial education β. bank negara malaysia is most honoured to host this event that brings together senior officials from the regulatory community from this region and participants from agencies with an interest in developing more inclusive financial systems. financial inclusion has now emerged as an important global agenda in ensuring sustainable long - term economic growth. the g20 summit in 2010 recognised financial inclusion as one of the main pillars of the global development agenda. this is a significant development as it reflects the global recognition and importance being given to social and economic development and for such growth to be inclusive in its outreach. financial inclusion is an integral part of such an inclusive growth process. a high degree of financial inclusion will allow for the various segments of the economy, regardless of income levels, economic activity and regions to have access to financial services. at its most basic level, financial inclusion provides the means and opportunity for undertaking essential financial transactions for savings and the accumulations of financial buffers and having access to financing. promoting financial inclusion, however, remains a significant challenge. it is estimated that 2. 7 billion adults in the world economy are currently excluded from the financial system. in addition to the g20 initiative, there are other global institutions such as the consultative group to assist the poor ( cgap ), alliance for financial inclusion ( afi ) and the international finance corporation ( ifc ) that have assumed an increasingly active role at the international level in developing new research, setting standards and providing a platform for policymakers to share experiences. this improved visibility of financial inclusion on the global agenda has lent significant support to the initiatives at the national level to promote greater financial inclusion. in this recent decade there has also been a growing body of research in the area of financial inclusion. this has contributed towards enhancing our understanding of the different approaches and policies that have been adopted and their relative successes in achieving greater access to financial services. this has also allowed for an enhanced appreciation of the issues that need to be addressed and on how sustainable financial inclusion might be achieved in our own countries. while considerable progress has been made in improving the financial inclusion environment, the sheer numbers that remain excluded from the
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- specific training to meet the industry requirements, and equip practitioners with the practical knowledge, skills and expertise that are important to their respective job functions. malaysia β s financial sector has continued to forge ahead. the contribution of the financial industry to the country β s gdp has increased from 9. 2 % in the year 2000 to 11. 7 % in 2009 and this figure is expected to grow further in time. likewise, the employment growth in the financial sector will continue to accelerate, with increasing demands for specialised skills and enhanced expertise in finance. in the fast changing and increasingly complex financial landscape, our workforce in the financial sector must not only rise above current challenges, but must be well equipped to excel in the significantly changed environment. in malaysia, we have prioritised talent development in the financial sector as a strategic priority and to approach this in a holistic manner, across the spectrum of the financial services industry. the goal is to develop a deep pool of financial sector talent with world class capabilities to drive responsible growth and development of the financial sector. as many of the initiatives supporting these strategies are multi - disciplinary and multi - layered, the approach is grounded in a shared commitment with the industry in a comprehensive, coordinated and collaborative manner. this is our best hope for rising confidently to the human capital challenge that lies before us. with the strong support of all the key stakeholders and practitioners in the industry, we can make a critical and lasting contribution towards creating a talented workforce for the industry. in this journey, the sharing of best practices and experiences will be extremely valuable. i therefore welcome and encourage your participation at this international symposium to discuss the important issues, challenges and the way forward in talent development for the financial services industry. on this note, i wish you a successful and productive session. bis central bankers β speeches
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had a stabilising effect and helped avoid an even greater drop in swiss goods exports. ladies and gentlemen, in addition to the diversification towards asia, the longer term structural change in the composition of swiss goods exports thus also proved beneficial during the crisis. 2. 3 quality matters the third aspect i wish to address today is the quality of swiss goods exports. as a rule, the β made in switzerland β hallmark is used to denote excellence. but do swiss exports actually deliver high quality? quality is not easily measured. given the lack of alternatives, economists generally express the quality of goods in terms of β unit values β. literally speaking, this represents the average price per unit of weight, for instance per kilogram. i, too, will use this unit of measure. however, this unit makes more sense if groups of similar products are examined. in the aggregate figure for swiss goods exports, the price per kilo of rolex can be found alongside the price per kilo of tamiflu or per kilo of a regional train. this makes an international comparison problematic. thus, in addition to using unit values for aggregate exports, i will also include unit values for individual sectors. unsurprisingly, there are major differences between the sectoral unit values for switzerland. last year, watch exports had the highest unit value, at around eur 7, 000 per kilo. this was followed β by quite a considerable margin β by pharmaceuticals, at roughly eur 320 per kilo. exports of precision instruments were also somewhat above - average, at around eur 150 per kilo. 15 where does switzerland stand by international standards? compared with many other european countries, the unit value of swiss goods exports is very high. the only other country with a similarly high unit value for its exports is ireland. 16 when looking across sectors, it is evident that a considerable part of switzerland β s quality advantage can be attributed to watch exports. averaged over the last ten years, their unit value was almost 40 times higher than in the eu ( cf. chart 3 ). but there are also several other sectors where switzerland has a higher unit value than the eu, for example precision instruments. this is a sector where switzerland also has a comparative advantage ; partly due to historical factors, but also to continuous innovation. but even for exports of processed metal goods and machinery does switzerland have higher export unit values than, for instance, the eu. looking at developments over the last 20 years, it is primarily
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the prices of watch exports that have risen considerably. ireland also exports a lot of chemical and pharmaceutical products. besides, the unit values of its exports of electronic products are also very high. chart 3 source : eurostat. overall, the results from a unit value analysis support the assessment that switzerland is specialised in the production of high quality products. this is in line with previous studies. these show that swiss export products largely compete on quality, rather than on price. 17 given the level of know - how in switzerland, this ought to be the case in the future as well, assuming that swiss products can continue to fulfil the ever - growing demands on quality. to what extent could this have had a positive influence on the way in which exports developed in the most recent crisis? for the short term, at least, it can be assumed that higher quality products are more difficult to substitute than relatively homogenous goods. this applies not only to pharmaceuticals, but also to highly specialised products such as precision instruments. and this was indeed the case during the most recent crisis β swiss exports of precision instruments receded only slightly, and have since risen to such an extent that they now already exceed their pre - crisis level. even the watchmaking industry β which, as a producer of luxury goods, suffered a massive drop in demand during the crisis β has seen a strong recovery in the last year thanks to the global turnaround. accordingly, exports of watches are now only slightly below their pre - crisis level. 3. conclusion in closing, let me recap. the geographical orientation, the focus on products less sensitive to the business cycle, and the specialisation in top quality goods are the three factors likely to have mitigated the negative impact of the most recent financial and economic crisis on swiss exports. on the whole, the swiss export industry seems to be well positioned to compete successfully on a global level. such a conclusion is reassuring, because major challenges still lie ahead. for example, credit suisse ( 2006 ) : quality β the export industry β s only chance? for instance, switzerland β s increased focus on the asian market also has its risks. a significant slowdown in asia β s economic recovery β particularly in china β would undoubtedly impair swiss export prospects. needless to say, however, a renewed downturn in europe β still switzerland β s most important trading partner by far β would impact swiss exports to a far greater extent. furthermore, current exchange rate developments pose a major challenge for swiss
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##urities between two and 30 years trades at a negative yield. however, we will still purchase such securities as long as their yield to maturity exceeds the rate on the ecb β s deposit facility, which currently stands at - 20 basis points. this decision has two implications. first, it provides a strong commitment by the eurosystem to implement the pspp in all eligible jurisdictions. second, it curbs expectations about future government bond yields falling below the deposit facility rate, which could ultimately have a negative effect on banks β incentives to sell government bonds. the transactions under the pspp will be conducted via institutions eligible for participation in the eurosystem β s regular monetary policy operations as well as other regular counterparties used by the eurosystem for the investment of its euro - denominated investment portfolios. will the eurosystem be able to meet its quantitative targets? some market reports have suggested that the eurosystem may not be able to buy the intended amounts of government bonds in the market. let me state firmly that at this point there are no signs of issues in respect of sourcing the bonds. there were similar concerns in other countries at the time they launched large - scale asset purchases and yet they had no problems meeting their quantitative targets. and as so often in economics, the question boils down to an issue of supply and demand, and whether there will be a market clearing price. the concerns can be justified only if there is a mismatch between the effective supply of securities and the intended scale of our purchases. if that is the case, there will be no price that can clear supply and demand, and this would prevent us from buying the desired amounts. concerns about the potential scarcity of bonds are based on three main factors. first, there are expectations that net issuance from euro area jurisdictions over the life of the programme will be modest. indeed, the european commission forecasts that the aggregate euro area public budget deficit will fall to - 2. 2 % in 2015 and - 1. 9 % in 2016. as a result, the net issuance 7 of medium - and long - term securities by the euro area debt management offices ( dmos ) in 2015 is expected to be around β¬200 billion. looking at individual countries, a large majority will have a positive net issuance in 2015, but there are a few countries, e. g. germany, where net issuance is expected to be marginal or even negative. note, however, that the average weighted
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##sco, 22 july. 7 see www. ecb. europa. eu / press / pr / date / 2013 / html / pr131010. en. html. 8 see knight, f. ( 1921 ), β risk, uncertainty, and profit β, mifflin, boston, new york. 9 dow jones euro stoxx 50 volatility index. 7 / 7 bis central bankers'speeches
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of banks may turn out to be smaller β or, indeed, it might turn out be larger. tailoring community bank supervision i β ve already noted that it is a matter of considerable public policy concern if regulations, not market forces, are important causes of bank consolidation. federal reserve policymakers have recently discussed how better tailoring of supervision and regulation to community bis central bankers β speeches banks can be helpful in reducing the extent of this problem. 2 the federal reserve does some tailoring already, but i think we should do more. i β ll mention two examples of the kind of tailoring that i have in mind. i β ll then turn to two additional steps we might consider. on safety and soundness, the federal reserve and other agencies received excellent comments from community banks on the basel iii proposal. these comments led to changes to the proposed rule that reduce unnecessary burdens on smaller banks. 3 smaller banks can opt out from having their capital levels vary due to changes in particularly volatile aspects of income. the final rule also allows smaller institutions to continue to count certain types of stock or securities as capital, when larger banks cannot. i think the rule - making process worked well in this instance. issuing a preliminary rule and receiving comments from bankers allowed the final regulation to better address the actual risks posed by community banks. on the consumer side, the federal reserve has moved to a more risk - focused exam process, from the less flexible previous approach. the new framework allows our examiners to better tailor their exams to the consumer risks that a particular bank may actually pose. many banks that the minneapolis fed supervises do not engage in activities that pose a high risk to consumer protection. and many also have a strong, documented record of compliance and relatively little change in operations. under the new framework, examiners can more readily eliminate certain areas of review. the benefits of the new consumer program go beyond a more focused scope. the new framework encourages more of our supervisory work to occur off - site, thereby reducing the on - site burden we put on community banks. at the same time, where there are potentially risky activities, the new framework allows for a deeper dive. in sum, i think the new consumer exam framework epitomizes the tailoring we need. it β s based on an analytical approach aimed at improving supervision, and it also captures institution - specific details where appropriate. where can we engage in additional tailoring? governor daniel tarullo has noted potential benefits in reviewing statutes that apply new
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consider a standard measure of problem loans : the ratio of noncurrent and delinquent loans to bank capital and the allowance for loan loss. in the first quarter of 2009, that ratio rose for all loans to 24 percent for the median minnesota bank, double the 25 - year median level of 12 percent. for commercial real estate loans, the problem loan ratio rose to about 9 percent, nine times higher than the 20 - year median of 1 percent. bis central bankers β speeches the problem loan story has changed completely. the ratio for total loans is at 9. 5 percent for the median minnesota bank, right around the 25 - year low. and the ratio for problem commercial real estate loans for the median minnesota bank is at 2 percent and rapidly returning to pre - crisis levels. these same general patterns hold for the nation β s banks. the low earnings and negative loan growth for the median minnesota bank have also improved, but not yet to pre - crisis levels. return on average assets, a standard measure of profitability, has been holding very steady for the past several years at just below 1 percent. this is clearly better than the trough of 0. 5 percent during the crisis. but the 20 - year median is 1. 15 percent. currently, the return on average assets of the median minnesota bank is at 0. 94 percent, which is at the 19th percentile for the past 20 years. year - over - year net loan growth for the minnesota median bank is at 4. 6 percent. again, this is much better than the β 4. 7 percent crisis trough ; indeed, negative growth persisted through the end of 2012. but the 25 - year median is nearly 6 percent for minnesota banks, while 4. 6 percent is at the 39th percentile. the nation β s banks show similar general patterns. so, yes, there has been recovery in important ways for community banks in the state. but other important measures continue to lag historical norms more than five years after crisis depths. this weaker - than - hoped - for performance is one factor raising concerns for community banks about the additional supervision and regulation burden that faces them post - crisis. i β d like to turn to those concerns now. post - financial crisis supervision and regulation of community banks low earnings levels have many potential sources. let me mention three. first, on the revenue side, weak loan growth naturally leads to more competition for available loans and drives down returns. second, if banks can β t make more loans,
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accompanied by new establishments. structural changes generate developments that are often referred to at present as a β new economy β. the marked improvement in productivity maintains profits and keeps prices down. during the transformation, a good circle is created but it is difficult to tell how long it will last. it can be described, if you like, as a period of extensive rationalisation and heightened efficiency. the growth trend is raised for an indefinite period, enabling the economy to expand more rapidly without inflation taking off. it should be born in mind that the adaptation to the new information technology does not occur automatically. it is not the case that one day we suddenly find the new technology has begun to be implemented in ways that are leaving their mark on economic developments in general. the late 19th century provides important lessons about the necessary conditions for this good circle. at the beginning of the 1800s sweden was still a poor country with an unstable form of government, a chaotic monetary system and a general shortage of credit facilities. ninety years later the swedish economy had undergone a dramatic transformation. inflation was low, with an orderly monetary system. the nation was bursting with vitality in every field. an impressive range of products, many of them world leaders, were being developed on the basis of swedish inventions. swedish financial experts were engaged in the exploitation of the inventions at an early stage. employment was provided for more and more people, living standards rose and growth was among the highest in the world. opinions about the causes of the pronounced change in the swedish economy are not completely unanimous. the stable prices presumably played a part. when inflation is low or the price level is stable, those who have to plan for the longer run face less uncertainty. another significant factor was probably the credit system β s development in the 1800s. banks were established and the abolition of interest controls was followed by more financial expertise. that made it possible to exploit the inventions and finance investments in the emerging industries. an increasingly stable form of government presumably contributed, too. a series of constitutional reforms provided a guarantee of stability. economic activities benefited from the abolition of trade guilds, freedom to trade and the reform of joint - stock companies. the reform of elementary education was, of course, another important step that ultimately promoted human capital. this catalogue is not intended to be a complete account of all the factors behind sweden β s transformation from a poor country into a rapidly expanding industrial nation. the point i want to make is that a variety of institutional changes seem to have been needed to provide a
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key is [ to make ] the reference to asia - although it is very, very hard to refer to it - as a single entity. but we, i think, can work together, and this diversity actually presents a lot of opportunities, just as it is fraught with challenges. 1 / 2 bis - central bankers'speeches where all these put us is that we face a lot of interlinked uncertainties at both regional and global levels. these affect all of us. one can easily make the case that global disruptions require global solutions. but as any economist knows, the bigger the group, the harder it is for collective action to be rational. [ we can refer to ] the famous [ kenneth ] arrow impossibility theorem : " individually rational people are not necessarily collectively rational. " they prefer a to b, or b to c, and c to a. welcome, all of you. i look forward to a very fruitful conference. thank you for coming, and i hope you enjoy your stay here in mactan. let me turn the floor over to [ reserve bank of india ] deputy governor [ rajeshwar ] rao. 2 / 2 bis - central bankers'speeches
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a bayesian vector autoregression ( var ) which includes variables that affect wealth β house and stock prices β and variables that affect income β the unemployment rate and wages. 13 the app shock is identified by assuming ( i ) that it affects the term - spread on impact, without leading to a change in standard monetary policy over the full sample14under analysis ( which spans three years ) and ( ii ) that it has a positive effect on the real economy, on impact. 15 the shock is scaled to a term - spread reduction by 34 basis points, which is the estimated level of the impact of the announcement of the december 2016 app package on the euro area 10 - year bond rates. this implies that the size of the impact considered in the estimates presented in the charts below is smaller than the total effect of our unconventional policies from 2014 to 2016. the analysis is nevertheless representative and conclusive regarding the distributional impact of our monetary policy. the var estimated for the four largest euro area countries shows a degree of heterogeneity across the countries that can be taken as representative of the dispersion that would be found in all other euro area countries ( see chart 4 ). 5 / 14 bis central bankers'speeches chart 5 below shows the four countries β average reaction to the relevant variables ( house and stock prices, unemployment and wages ), four quarters after the impact of the app shock. 16 6 / 14 bis central bankers'speeches the app purchases are estimated to increase house prices by more than 1 % and stock prices by 0. 8 %. as for the variables, which affect household income ( in the bottom two panels ) : the unemployment rate declines by roughly 0. 7 percentage points, while wages rise somewhat. 17 in the second step, these aggregate results are combined with household - level data to estimate the effects of monetary policy on individual households. the hfcs provides detailed householdlevel data on income and wealth, but so far only for two waves. however, since the bulk of the effect on wealth occurs via asset prices, we can assume that the response of individual wealth components to the app after four quarters mirrors the response of asset prices at that horizon. 18 the assumption seems acceptable given the short horizon we are considering and 7 / 14 bis central bankers'speeches given the empirical evidence on the sluggishness of adjustment of holdings of real and also financial assets in household portfolios. 19 as for net wealth, chart 6 shows that the effects of the app on
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mr meyer reports on lessons from recent global financial crises remarks by mr laurence h meyer, member of the board of governors of the us federal reserve system, before the international finance conference, federal reserve bank of chicago, held on 1 october 1999. * * * on the principle that mistakes teach us as much as, if not more than, successes, i will take this opportunity to consider what can be learned to improve bank supervision and regulation from the financial crises that afflicted so many economies over the past 2Β½ years. i will consider two episodes β the asian financial crisis and the financial market turmoil surrounding the near - bankruptcy of the hedge fund long - term capital management ( ltcm ). because these episodes are too recent and too complicated to draw many firm conclusions that lead to concrete policy recommendations, part of my objective today is to identify some areas where i believe that further study would be particularly productive. the two crises the details of these two episodes are familiar to everyone here. the floating of the thai baht in july 1997 marked the onset of a period of market turbulence associated with the halting of new funds to and, in most cases, the flight of existing money from, many economies in southeast asia. because many entities in those nations relied on short - term funding in foreign currency for their ongoing operations, the drying up of funding from global financial markets quickly placed serious strains on them. and because the lines between the private and official sectors were often drawn imprecisely, these funding problems for firms soon became the burdens of national governments. such pressures, unfortunately, exposed numerous and substantial flaws in some of these financial systems, including lax lending policies, substantial mismatches in the maturities and foreign exchange denominations of assets and liabilities, seriously deficient standards for disclosure of basic private financial information, hedges based on erroneous presumptions about the correlations among returns, the failure to monitor ongoing loan performance, and the inadequacy of reserves against potential losses. in autumn 1998, we in the major industrial countries were reminded that emerging market economies did not have a monopoly on financial institutions that were inadequate in the task of assessing risks. the effective default of the government of russia on some of its obligations and the travails of ltcm in rebuilding its capital in the face of enormous trading losses β occurring as they did so soon after the crisis in asia β triggered a generalized reassessment of risk - taking by investors and market makers. interest rate risk spreads widened
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be conducted ; fourth, customers will be restricted to one mobile or secure device for the authentication of online banking transactions ; and fifth, financial institutions will be required to set up dedicated hotlines for customers to report financial scam incidents. financial institutions have been directed to be more responsive to scam reports lodged by customers. financial institutions have also been directed to facilitate efforts to recover and protect stolen funds, including to work with relevant agencies to prevent further losses. in addition, financial institutions are required to provide convenient ways for customers to suspend their bank accounts if they suspect that their accounts have been compromised as a result of a scam. customers will also be able to subsequently reactivate their accounts after a reasonable period to ensure that their accounts are secure. in short, bnm and the financial industry will continue to ensure that banking and payment channels remain secure and equipped with up - to - date security controls. the tighter security controls are being put in place to deter efforts by criminals to scam consumers. however, these controls may also inevitably lead to some friction or inconvenience in the online banking experience of customers. for example, online banking transactions might take a little longer to process. financial institutions will also conduct more checks when customers request to change or register a new phone number. make no mistake, while these measures entail some inconvenience, they are important to protect the interests of customers. in implementing these measures, bnm and the financial industry will continue to carefully balance between security considerations and customer convenience. bnm will also continue to monitor and take appropriate action on financial institutions to ensure that the highest levels of controls and security standards are observed. we will also continue to take effective preventive measures against ever - evolving financial scams. the effort to eradicate financial scams requires cooperation and concerted action from all parties, not just of bnm and the financial industry, but also from law enforcement agencies, relevant ministries and agencies, as well as the public. pdrm plays an important role in combating scams, and has implemented various initiatives on this front. this includes establishing the ccid scam response centre to facilitate the reporting by the public of financial scams. bnm and the financial industry will continue to cooperate with pdrm to combat financial crimes. this includes supporting efforts to recover stolen funds and bring scammers to justice. to combat scams effectively, the cooperation of law enforcement agencies is key, especially to share information and intelligence. in this regard, bnm
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speeches & interviews governor's speech at the launching of financial crime exhibition speaker : tan sri nor shamsiah mohd yunus / venue : kuala lumpur / language : english / speech / interview date : 26 sep 2022 / welcome to the launch of the financial crime exhibition. first of all, i would like to express my appreciation and gratitude to the inspector - general of the police for joining us at the launch of this virtual exhibition. scams and cybercrimes have been on the rise of late, not just in malaysia but all around the world. this is a concerning development which bank negara malaysia ( bnm ) takes seriously. this is especially so where these cases concern financial scams. we have been and will continue to step up efforts to combat financial scams, and in doing so collaborate with other stakeholders. these include rolling out preventive measures, pursuing more effective and coordinated enforcement actions, and raising public awareness. bnm requires banks in malaysia to adopt high standards of security, especially for internet and mobile banking services. from time to time, bnm also issues security advisories to the financial industry highlighting the latest modus operandi ( tactics ) of scammers and additional security measures that banks need to implement to protect their customers'savings. the reality, however, is that methods used by criminals will continue to evolve. bnm therefore continuously intensifies efforts and take steps to combat scams by introducing additional controls and safeguards from time to time. on this occasion, i would therefore like to announce the following measures which we have instructed financial institutions to take, to further strengthen safeguards against financial scams. first, financial institutions are required to migrate from sms one time passwords ( otp ) to more secure forms of authentication for online activities or transactions relating to account opening, fund transfers and payments, as well as changes to personal information and account settings. the major banks have already started this process of migrating to more secure forms of authentication ; second, financial institutions will further tighten fraud detection rules and triggers for blocking suspected scam transactions. customers will be immediately alerted when any such activity involving their banking accounts is detected. as an additional measure, financial institutions will block such transactions, and customers will be asked to confirm that such transactions are genuine before they are unblocked ; third, a cooling - off period will be observed for the first - time enrolment of online banking services or secure devices. during this time, no online banking activity is allowed to
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support the real economy. we believe the experience of the covid - 19 shock re - emphasises the need to have a robust, comprehensive and effective macroprudential framework. it also presents some lessons for how the framework could operate. through 2021 and beyond, we will return to that multi - year work programme in light of our experience of the covid - 19 shock and the evolution of the european legislative framework : in the area of bank capital, to deepen our holistic view on the interaction between the macroprudential buffers themselves and with other policies during periods of growth and periods of stress. this will inform the appropriate mix, level and build - up speed when the recovery is fully - fledged. for the mortgage measures, building on the benefits of having them as a permanent feature in the market, we will consider the overarching framework informing our regular calibration and further embed new data, to enhance our work in assessing their effectiveness. the initial phase of this work will focus on expanding our public engagement on the operation of the measures. in the area of market - based finance, the significant market turmoil that we saw in march has illustrated vulnerabilities in parts of the sector and there is growing international focus on the resilience of market - based finance. as i have mentioned before, we will continue to work with our european and international partners on the development of a comprehensive and proactive macroprudential framework in this area. work across all these pillars will continue alongside our regular analysis, assessment and calibration reviews of our existing tools. as a result, we will of course continue to take our annual decision on the calibration of the mortgage measures, the other - systemically important 3 / 4 bis central bankers'speeches institutions ( o - sii ) buffer and the quarterly decisions on the ccyb consistent with our approach. over time, and as the insights from the framework reviews are fully developed, they will become embedded in our regular calibration decisions. to sum up, our main messages coming from today β s fsr are three - fold : first, the overall risk environment remains very challenging and continues to be characterised by heightened uncertainty, closely linked to the path of β and response to β the virus and the structural implications of this crisis. second, the banking system as a whole has loss - absorbing capacity for shocks that are materially worse than current baseline projections. that loss - absorbing capacity is not, however, unlimited.
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sharon donnery : climate risk and sustainable finance forum capacity building working group remarks by ms sharon donnery, deputy governor of the central bank of ireland, at the launch of the " report from the climate risk and sustainable finance forum's working group on capacity building ", dublin, 27 march 2024. * * * my thanks to dorothy and kevin for the warm introduction. i am delighted to be here with you all at the launch of this report from the climate risk and sustainable finance forum's working group on capacity building. as many of you will be aware, the climate forum first met in june 2022, and is made up of senior - level representatives from the central bank and the irish financial sector, as well as climate risk and sustainable finance experts and academics. its main aim is to build and accelerate a shared approach between the financial sector and the central bank in the understanding and management of the financial risks and opportunities posed by climate change. we seek this through discussion of high - priority climate issues and the establishment of a framework within which industry can progress work on these topics. having identified climate - related capacity building as one of the high priority issues, i am very pleased to see the publication of the working group's report, and the first external piece of work from the climate forum come to fruition. i also look forward to the publication of the risk management working group report in the coming weeks. on behalf of the forum, my thanks to all working group members for their efforts and a special thanks to dorothy and kevin for co - chairing and delivering this work. the willingness of climate forum members to come together and support the working group, to devote time and resources, and to collaborate on this topic is very welcome, and to my mind reflective of the importance of the issue and the seriousness we must all treat it with. the transition to a sustainable net zero economy is critical for the economy and society and we encourage the ambitions and progress shown already through the climate forum to support financial services in playing its part to make this a necessary reality. while this report does not represent central bank requirements or guidance and is, rather, the work of the climate forum, i very much welcome its publication today. the work of the climate forum seeks to identify the ways in which progress can be achieved in a manner that is accessible for all financial market participants β and today's report is a good step forward in this journey. 1 / 2 bis - central bankers'speeches building capacity by enhancing our
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and medium - term inflation pressures. short - term changes in prices can affect people β s expectations about inflation, but it has usually been sensible for us to β look through β these effects. if we did not, we would typically be over - reacting, and pushing interest rates around more than medium - term considerations would warrant - and that might even exacerbate exchange rate fluctuations over time. some, of course, would suggest that we should be more active and should adjust the ocr, not just to offset the dampening impact of the exchange rate, but to try actively to reverse, or slow, the rate of increase in the exchange rate. in this case, of course, it is important to remember that the exchange rate has simply recovered to more normal levels, pricing new zealand assets and products more sensibly, albeit adjusting more quickly than is comfortable. and more generally, we need to be very cautious. we would be the first to acknowledge that monetary policy affects exchange rates, but modest changes in interest rates only rarely do so in a stable and predictable manner over periods that matter to people in the real economy. understanding, after the event, what has driven the exchange rate is one thing, but reliably forecasting it, or using monetary policy to influence it, is quite another. what we constantly do, however, is to look behind developments in the exchange rate. we want to understand as well as we can what has been going on and why, and we continually test our reasoning and judgements to ensure that our monetary policy decisions are not unnecessarily exacerbating exchange rate changes. this prudent and sensible approach has in fact been written into our mandate - the policy targets agreement with the minister of finance - since 1999. it keeps our focus on medium - term price stability, but requires us to ensure that in pursuing that medium - term goal we avoid unnecessary instability in output, interest and exchange rate. there are no simple answers as to how to apply these provisions to our policymaking ; to know just what is β unnecessary β, not just right now, but over the medium - term. sometimes, an ocr rise will exacerbate pressure on the exchange rate, but rises in both will be a necessary response to pressures on output and inflation. at other times, there will be scope for trade - offs, but there are rarely easy or reliable ones. for us, those choices might come more sharply into focus if we were to
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the exchange rate was something of a mixed blessing. that is perhaps always the case. a falling exchange rate does tend to be good for producers - firms and farmers in canterbury for example - but it is bad for consumers. it tends to feel better in the countryside than in the cities. it makes our wages look less attractive to prospective skilled migrants, but our beachside houses also appear cheaper to those wealthy foreigners looking for an antipodean holiday home, and so on. from a macroeconomic perspective, how we feel about these departures from β equilibrium β ( and our best assessment of that equilibrium level is somewhere in the range of 54 - 60 on the trade - weighted index ) depends a lot on what else is going on. in this case, the low exchange rate happened to provide a timely buffer when the world economy slowed down sharply : for exporters of manufactured goods and services, in particular, it provided an offset to the impact of the sharp slowdown in world economic activity. but for a variety of reasons, our economic growth proved so robust that new zealand was one of only a small number of countries that needed to raise interest rates quite a bit last year to help keep medium - term inflation pressures in check. the exchange rate had become too low for too long to really be helpful. and eventually, as these things do, the exchange rate began to correct - although no one could really reliably predict when this correction would get under way. in trade - weighted terms, our exchange rate has now risen by around 20 % since the end of 2001 ; one of the largest twelve - monthly changes that we have seen in the 18 years since the exchange rate was floated. it is important to put this in context though : even after a striking 30 % rise against the us dollar, that exchange rate is still only now around its average level for the last 10 years. on a trade - weighted basis, the exchange rate is now only a few per cent above its long - term average. as i noted earlier, changes in investors β attitudes and expectations tend to be the main prompts for substantial exchange rate moves. how did those attitudes change last year? for investors, the us β miracle β has turned sour. share prices have fallen for three consecutive years, and even us interest rates are unattractively low by international standards. america β s need to attract foreign capital - its huge current account deficit - remains as strong as ever. but when the us is no longer flavour of the decade
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attention to those regions and market segments that find themselves furthest from the targets. this is the case, because we may need a more in - depth understanding of the market practices and a dedicated action plan for those regions in order to see substantial progress at a global level. indeed, rome wasn't built in a day. nor did the splendour of florence arise overnight. they required time and dedication. conferences like this create the necessary time β to reflect, make connections, and share insights. and above all, they provide the inspiration to stay dedicated to our ambitions β and make our goals a reality. so let me wish you all good discussions and a lot of food for thought to inspire action once you go back home. thank you. 3 / 3 bis - central bankers'speeches
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nout wellink : the labour market in 2040 β greyer but full of vitality speech by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the symposium β demographic ageing : a broader view β, science center nemo, amsterdam, 11 october 2007. * * * imagine : it is the year 2040. those who turn 32 this year will then be 65 and so are now halfway there. demographic ageing will have reached its pinnacle in 2040. more than 4 million dutch people will then be older than 65, working out at a quarter of the population, whereas that age group now makes up less than 15 %. for every person over - 65, there will be just two compatriots aged between 20 and 65 1. in such a greying society, our cities and towns will look quite different to now. amsterdam city centre is likely to be a largely pedestrian zone, allowing for wider footpaths. political pressure will have forced the monument conservation authority to relax its rules. large groups of older people in the city will have been obliged to remove thresholds, install stair lifts and knock through walls. the two universities in the capital will have been forced to merge because of the smaller inflow of new students. only a handful of the many places of entertainment around rembrant square will still remain, but the classical performances at the concertgebouw and the muziektheater aan β t ij will be sold out every night. subsidies for museums may even have been scrapped owing to the overwhelming increase in visitor numbers. and here, in nemo, where today β s children make their first discoveries in the area of science and technology, there may be a shopping mall with stores full of books, golfing equipment, spectacles, hobby accessories, fine chocolates and garden tools. of course this is mere speculation. time will tell what life will really be like in 2040. but it β s a sure thing that the older people of the future will have a major influence. today we are looking at the economic consequences of population ageing. i want to talk to you about the impact of ageing on the labour market and how we can prepare ourselves for it. labour force in 2040 for a start, the average worker in 2040 will be older than at present and so have more work experience. owing to the rise in the number of pensioners, he will have fewer
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mario draghi : the future of the euro β stability through change contribution from mr mario draghi, president of the european central bank, published in β die zeit β, 29 august 2012. * * * across europe, a fundamental debate is taking place about the future of the euro. many citizens are concerned about where europe is heading. yet the solutions presented appear to them unsatisfactory. this is because these solutions offer binary choices : either we must go back to the past, or we must move to a united states of europe. my answer to the question is : to have a stable euro we do not need to choose between extremes. the reason this debate is taking place is not the euro as a currency. the objectives of the single currency remain as relevant today as they were when the single currency was agreed. to spread price stability and sustainable growth to all european citizens. to reap the gains of the world β s largest single market and make the historic process of european unification irreversible. to raise europe β s standing β not only economically but also politically β in a globalised world. the debate is taking place because the euro area has not yet fully succeeded as a polity. currencies ultimately depend on the institutions that stand behind them. when the euro was first proposed, there were those who said it would have to be preceded by a long process of political integration. this was because sharing a currency would imply a high degree of joint decision - making. member countries would be a β schicksalsgemeinschaft β and would need strong common democratic underpinnings. but a deliberate choice was made in the 1990s not to give the euro such features. the euro was launched as a β currency without a state β to preserve the sovereignty and diversity of member countries. this informed the so - called β maastricht setup β, which laid the euro β s institutional foundations. but as recent events have shown, this institutional framework left the euro area insufficiently equipped to ensure sound economic policies and effectively manage crises. for this reason, the way ahead cannot be a return to the status quo ante. the challenges of having a single monetary policy but loosely coordinated fiscal, economic and financial policies have been clearly revealed by the crisis. as jean monnet said, coordination β is a method which promotes discussion, but it does not lead to a decision. β and strong decisions have to be made to manage the world β s second most important currency. a
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new architecture for the euro area is desirable to create sustained prosperity for all euro area countries, and especially for germany. the root of germany β s success is its deep integration into the european and world economies. to continue to prosper, germany needs to remain an anchor of a strong currency, at the centre of a zone of monetary stability and in a dynamic and competitive euro area economy. only a stronger economic and monetary union can provide this. yet this new architecture does not require a political union first. it is clear that monetary union does entail a higher degree of joint decision - making. but economic integration and political integration can develop in parallel. where necessary, sovereignty in selected economic policy fields can and should be pooled and democratic legitimation deepened. how far should this go? we do not need a centralisation of all economic policies. instead, we can answer this question pragmatically : by calmly asking ourselves which are the minimum requirements to complete economic and monetary union. and in doing so, we will find that all the necessary measures are firmly within our reach. for fiscal policies, we need true oversight over national budgets. the consequences of misguided fiscal policies in a monetary union are too severe to remain self - policed. for bis central bankers β speeches broader economic policies, we need to guarantee competitiveness. countries must be able to generate sustainable growth and high employment without excessive imbalances. the euro area is not a nation - state where persistent cross - regional subsidies have sufficient popular support. therefore, we cannot afford a situation where some regions run permanently large deficits vis - a - vis others. for financial policies, there need to be powers at the centre to limit excessive risk - taking by banks and regulatory capture by supervisors. this is the best way to protect euro area taxpayers. there also needs to be a framework for bank resolution that safeguards public finances, as we see in other federations. in the u. s., for example, on average about 90, mostly smaller, banks per year have been resolved since 2008 and this had no impact on the solvency of the sovereign. political union can, and shall, develop hand - in - hand with fiscal, economic and financial union. the sharing of powers and of accountability can move in parallel. we should not forget that 60 years of european integration have already created a significant degree of political union. decisions are made by an eu council filled by national ministers and by a directly elected european parliament. the challenge
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towards the size it had in early 2012. that would imply an increase of around 1 trillion euros. there is considerable debate amongst economists and market participants as to whether the size of a central bank β s balance sheet is a relevant bis central bankers β speeches parameter ; and, above all, whether it has an impact on inflation expectations. let me give you my take on this. the statement by the governing council is not formulated as a firm commitment but as an expectation. nevertheless, it is very significant. it should certainly be seen as a clear indication that further policy action, if necessary, will not be inhibited by any overall quantitative restraint or limit. this is all the more important that the eurosystem balance sheet will be expanding whereas balance sheets of other central banks are bound to contract. communication on the size gives a very concrete signal and content about future policy intentions. as such, it can only help in bringing expectations more in line with our definition of price stability. i will end up with two remarks on the relationship between monetary and other policies. first, when inflation is low, it matters whether nominal wages are rigid or flexible. japan benefits from a high degree of wage flexibility. that is favorable to competitiveness, but may increase the economy β s vulnerability to deflationary pressures. by contrast, in europe, and especially in france, nominal wages are fairly rigid and keep growing, even in the current context, at a robust 1. 1 % annual rate. while this may be negative for profits and competitiveness, it currently provides a buffer and protection against any deflation risk. second, on fiscal policy : if, following milton friedman β s famous statement, β inflation is always and everywhere a monetary phenomenon β, central banks should be able to control inflation in all circumstances. i believe this is fundamentally true. recent experience has shown, however, that monetary policy is most efficient when operated in a supporting environment, especially as regards fiscal policy. this is often presented as a case for β cooperation β between fiscal and monetary authorities. i am not fully comfortable with this concept, as i don β t see how it fits with central banks β independence. however, there is no denying that fiscal and monetary policies interact, more or less harmoniously. following the crisis, concerns have been expressed on the risk of β fiscal dominance β as major central banks were engaged into large purchases of government bonds. in the current low inflation environment, the issue is different. depending on how they are conducted, fiscal policies
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i think we are close to the former ( levels ), and should be now sufficiently patient on the latter ( duration ). in other words, as transmission is of the essence, so is the persistence of our monetary policy. 1 / 2 bis - central bankers'speeches 1 villeroy de galhau, f., monetary policy transmission : where do we stand?, speech, 22 may 2023 2 lagarde, c., breaking the persistence of inflation, speech, 27 june 2023 2 / 2 bis - central bankers'speeches
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other developments contributing to the lower neutral rates, particularly lower potential growth rates, could be more permanent. global financial influences 8 / 11 bis central bankers'speeches in addition to the neutral rate declining, policy rates in other countries have been set even lower to provide the appropriate stimulus. on top of that, in a number of the major economies, policy is more expansionary than indicated by just the level of the policy interest rate. central bank balance sheets have expanded considerably as the central banks have purchased assets, in large part government debt ( graph 6 ). this program of asset purchases has finished in the us and the uk, but is still ongoing in the euro area and japan. the fact that monetary policy settings are more expansionary in the rest of the world than in australia, both through lower policy rates and balance sheet expansion, puts upward pressure on the australian dollar. capital is attracted by the higher rates of returns on offer here, which is likely to lead to an appreciation of the exchange rate. so, while an easier monetary policy elsewhere in the world should lead to faster growth in the world economy, which is good for the australian economy, an appreciating exchange rate works against this. to put it in economic terms, there are offsetting income and substitution effects for the australian economy. whether this is positive or negative in net terms for australia is an empirical issue. 10 generally, the evidence suggests that widening interest rate differentials do lead to an appreciation of the australian dollar. so that does counteract the benefit to the australian economy of faster global growth. it is conceivable that unconventional monetary policy may have a larger financial impact than movements in interest rates. 11 that is, the effect of unconventional policy through the exchange rate channel may be larger while the effect in terms of higher output may be smaller. again, it is an empirical issue. central bank asset purchases generate cross - border capital flows from investors seeking higher returns. some of that we see directly in a higher australian dollar exchange rate. but some of those cross - border flows are not quite so obvious. investors often tend to hedge their exchange 9 / 11 bis central bankers'speeches rate exposures to protect their offshore investments from exchange rate movements. as these investments increase there is more demand for such hedges, which causes the cost of hedging to increase. a direct measure of this is the cross - currency basis, which i spoke about recently. 12 for example, the relatively wide yen basis in part reflects the increased capital
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parallel with a recovery in profits. moreover, firms continue to reduce debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks β lending remains sluggish. issuance of corporate bonds and cp has been steady. money stock ( m2 + cds ) grew slower in may compared with the previous month on a year - on - year basis. in this financial environment, corporate financing conditions are easing, and the lending attitude of financial institutions is perceived by firms as less severe. it continues to warrant careful monitoring how these favorable developments in corporate financing environment will affect economic activities.
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the benefits of a resilient banking system should not be taken for granted. - for policymakers, it would help safeguard global financial stability and avoid the risk of a harmful β race to the bottom β in bank prudential standards. and it would serve as an important input towards greater financial integration in europe. europe has a strong track record of playing a lead role when it comes to multilateralism and sticking to global agreements. now, more than ever, it is crucial for europe to continue to demonstrate these traits, including with regards to globally agreed prudential standards. let me end with a few reflections about european financial integration in my capacity as governor of the bank of spain. european financial integration should also be further enhanced by taking further steps to cover the existing gaps in the euro area financial architecture that still prevent the complete eradication of fragmentation risk among european countries. completing these well - known gaps by finalizing the banking union should also come to the fore of eu financial policy priorities. while banking activity transcends national frontiers, and supervisory and resolution powers have been transferred to common institutions, the guarantee on deposits is still borne by member states. completing the third pillar of the banking union, namely a fully - fledged deposit guarantee scheme, will not only provide a credible safety net for depositors in an integrated banking market, but also will provide the necessary legitimacy of any institutional arrangement. in sum, completing the banking union is a crucial ingredient in helping to create the appropriate institutional and regulatory conditions for banks, investors and other stakeholders to adapt to the profound challenges the financial sector is and will be facing in the future. many thanks for your attention. 3 / 3
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15 june 2021 remarks for afme / omfif european financial integration virtual conference thank you for inviting me to deliver this address for your conference today. the theme of the conference β european financial integration β is both a timely and timeless one. on the one hand, the pandemic has further underlined the benefits of previous initiatives related to financial integration in europe, most notably the banking union and its core components. on the other hand, the past year has also refuelled longstanding debates and discussions on the need for european further financial integration. yet a prerequisite for a successful and enduring financial integration at the european level is for europe itself to be aligned with global financial standards in order to achieve a truly global level - playing field. as such, my remarks today, which are primarily in my capacity as chair of the basel committee, will focus on the crucial importance for europe to implement the basel iii framework in a full, timely and consistent manner. financial stability is a global public good. in a world with integrated financial markets, preserving global financial stability requires global minimum standards that are applied consistently and in full by all jurisdictions. this was indeed the motivation for initial basel standards in the 1980s following the latin american debt crisis. and it remains just as important today. covid - 19 has highlighted the clear benefits and importance of having a global and prudent set of regulatory standards for banks. much has been said about how the banking system has remained broadly resilient to date, and how banks have not been β part of the problem β in exacerbating the economic crisis. this is in no small part due to the fact that banks entered the pandemic on a much more resilient footing that during the great financial crisis, thanks to the initial set of basel iii reforms, and the ongoing cooperation among basel committee members over the past year. in addition, the unprecedented range of fiscal and monetary measures taken by jurisdictions around the world to support the real economy have largely shielded banks to date from losses. 1 / 3 yet in order to safeguard global financial stability, it is crucial to lock - in the benefits of the outstanding basel iii reforms by implementing them in a full, timely and consistent manner. doing so would ensure that the regulatory fault lines of the global banking system β most notably with regards to excessive variability in risk - weighted asset, the gravity of which remains as important today as it was pre - pandemic β are adequately fixed. these reforms benefited from an extensive consultation
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financial services what path for this particular sector in the years ahead would be best for hong kong and he would probably answer that continued expansion would of course be best. ask the same question to a neutral economist and he would probably decline to commit himself, saying only that the optimal strategy would be to allow the forces of comparative advantage to play out. whether that favours further development of the financial sector, or of something completely different, who can tell? i am often asked what we on the official side, or more particularly in the hong kong monetary authority, plan to do in order to ensure that our financial sector remains competitive and growthorientated. i find myself torn between replying " nothing at all " and " everything possible ". in fact both would be correct in their own way. " nothing at all " seems appropriate if one is content to allow market forces and the inexorable working of comparative advantage to fashion economic development. it is also consistent with hong kong's style of non - intervention. picking winners is not easy. the offer of sweeteners, first to one sector then another, now to one class of customer then another, may, unless it can be very convincingly justified by thorough cost - benefit analysis, be at best a zero - sum game and at worst a recipe for eventual higher taxation, the burden of which ultimately falls on those least able to shift it away from themselves - typically employees and consumers. " everything possible " seems appropriate in the context of our role in encouraging and catalysing innovation, spearheading collective initiatives in cases where there is insufficient incentive for any single entity to launch them, building infrastructure, and so on. in this latter regard i think that hong kong can take a certain amount of pride in some of the achievements in the financial sphere in recent years. in the interests of time let me mention only some of the developments in systems infrastructure with which we in the hkma have been involved : β’ first, the establishment of the central moneymarkets unit as an electronic clearing and custodial system for debt instruments ; although this dates back to 1990, the service has been progressively enhanced and extended since then, including, most recently, the building of linkages with similar systems in other centres in order to facilitate cross - border trading in bonds and other debt securities ; β’ second, the introduction of real - time gross settlement into the hong kong dollar inter - bank payments system in 1996 β we were one of the first economies in the world
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##ifies their high pay. the fact that hong kong appears to be, overall, a rather expensive place, relative to the majority of neighbouring economies, is a consequence and symptom of its success. as anyone can see by just looking around, this doesn't mean that we can no longer win any business. but we can only afford to pay ourselves what we are worth. if costs go too high and hong kong suffers an absolute loss of competitiveness ( as opposed to there merely being shifts in relativities between sectors ), then an adjustment process kicks in to restore competitiveness. since we have a fixed exchange rate, this adjustment occurs through downward pressure on domestic costs and prices. we have seen this process very clearly and effectively at work over the past three years or so ; for instance, the loss of competitiveness inflicted on hong kong by the currency depreciations elsewhere in the region in 1997 was made good largely through internal deflation within the space of about 18 months. at risk of my labouring the point, look at cities such as london, paris, zurich, tokyo and new york. in absolute terms they are expensive places, but they all generally thrive. the citizens don't hang their heads in shame at being in a high cost and high earning environment. indeed, many relish it. but none of the businesses there can afford not to search continuously for greater control of costs, for higher productivity, for new products and markets, and so on. competitive pressure may be intensified by globalisation and by the emergence of significant competition even from third world cities, where basic costs are hugely lower, but the very survival of the wealthy cities has not been seen to be seriously threatened on that score. over a period of time there may be marked shifts in relative income levels between different locations β hopefully as the living conditions of the poor advance more rapidly than those of the rich, although sadly there has been less evidence of that than one might have wished for β but there is no reason to expect the great cities of the world to sink out of sight. and if you add hong kong to that list, you will see the point i am trying to make. i'm not sure whether anyone a quarter of a century ago accurately predicted how important a contribution the financial and business services sectors would now be making to the hong kong economy. looking ahead, i am definitely reluctant myself to make any prediction about the mix of activity twenty - five years from now. ask anyone involved in
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benoit cΕure : monetary policy, exchange rates and capital flows speech by mr benoit cΕure, member of the executive board of the european central bank, at the 18th jacques polak annual research conference, hosted by the international monetary fund, washington dc, 3 november 2017. * * * i would like to thank t. kostka, a. mehl, i. van robays and j. grab for their contributions to this speech. i remain solely responsible for the opinions contained herein. central bank asset purchase programmes are often catalysts for significant cross - border capital flows. by compressing the ( excess ) return on domestic bonds, they encourage investors to rebalance their portfolios towards foreign, higher yielding assets. 1 such capital flows have reached historical dimensions in the case of the ecb β s asset purchase programme ( app ), with both resident and non - resident investors moving out of euro - denominated securities and into bonds issued predominantly by the safest non - euro area sovereigns. i examined these flows in detail in a recent speech at the ecb β s foreign exchange contact group meeting. 2 one intriguing observation i made in this speech was that there was no evidence of a causal link between such capital flows and exchange rate movements. findings based on event studies instead suggest that, around the time of central bank asset purchase announcements, investors price the exchange rate mainly on the basis of the information these programmes provide to markets about the expected future path of short - term interest rates. in this sense, the effect of asset purchases on exchange rates is not fundamentally different from that of conventional interest rate policy. today i would like to build on this previous contribution and provide further insights into the channels through which central bank asset purchase programmes are likely to affect the exchange rate. i will provide suggestive evidence that challenges the widely held view in the event - study literature that policy - induced portfolio rebalancing does not affect the exchange rate. 3 my remarks therefore confirm that portfolio rebalancing is a major transmission channel of central bank asset purchase programmes and provide some tentative support to theories of exchange rate determination in imperfect financial markets, which give a first - order role to capital flows. 4 unlike private portfolio rebalancing, however, central bank asset purchase programmes can be anticipated by investors. this means that exchange rates should adjust in a way that clears the expected future supply of and demand for currency resulting from anticipated cross - border capital flows. the implication is that asset purchase programmes
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staff macroeconomic projections indicate continued progress in reducing fiscal imbalances in the euro area. the aggregate euro area general government deficit is expected to have declined to 3. 2 % of gdp in 2013 and is projected to bis central bankers β speeches be reduced further to 2. 7 % of gdp this year. general government debt is projected to peak at 93. 5 % of gdp in 2014, before declining slightly in 2015. looking ahead, euro area countries should not unravel past consolidation efforts and should put high government debt ratios on a downward trajectory over the medium term. fiscal strategies should be in line with the stability and growth pact and should ensure a growth - friendly composition of consolidation which combines improving the quality and efficiency of public services with minimising distortionary effects of taxation. national authorities should also continue with the decisive implementation of structural reforms in all euro area countries. these reforms should aim, in particular, to make it easier to do business and to boost employment, thus enhancing the euro area β s growth potential and reducing unemployment in the euro area countries. to this end, the governing council welcomes the european commission β s communication of yesterday on the prevention and correction of macroeconomic imbalances and on the excessive deficit procedure. looking ahead, it is key that the macroeconomic surveillance framework in the euro area, which was significantly strengthened in the wake of the sovereign debt crisis, is implemented fully and in a consistent manner. we are now at your disposal for questions. bis central bankers β speeches
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, banks in india have just begun to exploit it as an effective non - branch delivery channel. the bankers will have to take a comprehensive view about their delivery channels. till now delivery channels were viewed in terms of cost and technology. delivery channels were devised focussing mainly on time and place advantage to the customers. however, with the continuing advances in wireless technology, flexibility in delivery channel device would be the forte of banks. successful adoption of wireless technology would help banks to offer not only any time, anywhere, but also any device banking. further, banks will have to build integrated delivery channels with both vertical and horizontal integration. in order to do so the banks should install an enabling and compatible multi - channel platform which should support and seamlessly integrate both the existing and future delivery channels. in today β s distributed computing environments, retail users sign onto many different applications and systems including email, networks, databases and web servers each typically requiring its own security procedure. the more systems users must navigate, the more ids and passwords they must remember. systems should be developed in such a way that a customer can use his atm card and his own atm pin ( personal identification number ) for customer authentication in a web transaction, which is normally not done in a web - based transaction or in any other delivery channel. the process cycle of the above single β signon β should be that once the customer initiates the transaction by entering the pin from any of the delivery channels, the pin entered by the customer is verified with the pin details of the customer and once the verification yields a positive response the customer will be allowed to perform the transaction. the pin, which the user enters to perform the transaction, should be a unique pin that can be used by the customer to perform the transaction across any delivery channel. in short, the banks should have a comprehensive system which will allow them to deliver dynamic end - to - end customer service that can reshape customer base, maximise cross - selling opportunities and generate a positive roi ( return on investment ) in the changing business economy.
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remain steadfast in our dedication to maintaining stability, fostering growth, and safeguarding the interests of customers. the inputs provided by deepak rana, vishal kumar prasad, pramanshu rajput and pradeep kumar are sincerely acknowledged. 7 / 7 bis - central bankers'speeches
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fit and proper β test of their owners, and the nature of any capital injection. with regard to the state banks, all regional development banks will be recapitalized by the government such that they have a capital adequacy ratio of at least 4 %. mergers between the seven existing state banks will allow us to create some stronger and healthier banks. for instance, four out of the seven state banks will be merged to create bank mandiri, which is expected to comprise 30 % of banking system deposits in indonesia. as the restructuring of the state banks takes place, the government will inject additional capital needed by the banks on a step - by - step basis. the cost of the bank restructuring program will be significant. however, every effort will be taken to minimize this cost and in particular to recover loans from recalcitrant debtors. in terms of the interest cost to the government in 1999 / 2000, it is estimated at a total of rp 34 trillion or euro 3. 5 billion. of this amount we believe around rp 16 trillion will be recoverable from sales of assets pledged to ibra by the owners of the banks. i should like to stress that it is not the intention of the government to stay forever and dominate the banking sector. the government β s involvement in the capitalization of the banking sector is only temporary to help the sector recover from the deep problems it is currently experiencing. in three to five years β time the government β s share in the private banks will be divested, and these banks are expected to be pure privately owned banks once again. nor is the intention of the government to be involved in the day - to - day operation of the banks during the three - to five - year period. we only need to make sure that the banks are run properly and efficiently. and the mechanism of the recapitalization program has been designed such as to assure that these ideas are materialized. i can also report to you today that we will continue our efforts in the future to improve the security of our financial system further. we will implement organizational and cultural change in the way we manage bank supervision. we will also review the workings of the amended bankruptcy law and make alterations to ensure that the law works as intended to allow both domestic and international creditors to gain security over the assets of debtors in default. i look forward to reporting our progress in these matters to you in future meetings. ladies and gentlemen, i hope that i have given you a
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all, who hears about the idea that never came to fruition - - but it serves as an important check in the policymaking process. as i mentioned, economic thinking at the cea has been marked by important continuities. nevertheless, the evolution of thinking at the cea over the years has reflected the economic challenges of each era as well as continuing developments in economic research. the ideas of keynesian stabilization that were an important motivation for the employment act reached their zenith during the kennedy administration. since that time, the cea has followed the economics profession away from a belief that fiscal policy can or should fine - tune the level of aggregate demand. during the 1960s and 1970s, the economy was confronted by rising inflation pressures, a series of energy shocks, and a slowdown in the underlying pace of productivity growth. at the same time, there was considerable ferment within the economics profession, as prevailing views of the inflation process and of the government's role in economic stabilization were challenged. successive ceas agonized over these issues and over whether to use the new ideas emerging from the academy and, if so, how. since the 1980s, the cea has focused increasingly on understanding the sources of economic growth and the supply side of the economy. the focus on international issues, too, has intensified as trade and international financial flows between the united states and other countries have grown. i should also note that, despite its overtly macroeconomic origins, the cea has expanded successfully into the realm of microeconomics, particularly issues related to regulatory policy and market structure. notwithstanding these changes in focus over time, there have been important intellectual continuities. in particular, a common theme throughout the cea's history has been a belief in the importance of market forces, and this belief stands as an important legacy of the cea. 2 / 3 of course, as chairman of the council during president ford's administration, i was close to some of these debates and decisions. i was recruited to serve as chairman of the council by president nixon's economic team. as it turned out, i was before the senate banking committee for confirmation the day that president nixon resigned. president ford quickly renominated me, and i began work at the cea in september 1974. i was privileged to serve president ford, and found him to be a very effective leader. parenthetically, there are some interesting parallels between president ford and president truman. both were serving as vice president
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should not amplify economic fluctuations. structural reform as i said, structural reform is ultimately the responsibility of individual economies. the crisis has reduced some of the imbalances almost automatically. in the euro area, economies with wide current account imbalances β including spain β have suffered relatively more than others. as a consequence, output and employment losses in these countries are acting as potent stabilisers to re - absorb long - standing gaps between domestic savings and domestic investment. as miguel fernandez - ordonez has said, some structural weaknesses have been revealed even more clearly and call for appropriate reforms. spain was on a pattern of growth in the run - up to the crisis that was not sustainable. before the decline, the housing market had seen an important boom fuelled by expected future higher earnings, an important inflow of migrants and low financing costs. the buoyancy of aggregate demand, in turn, supported a wage - setting environment that did not correspond to the underlying gains in productivity. in the future, changes in labour market institutions to make wages adjust to productivity are essential to repairing past cumulative misalignments. there is a need for moderation in wage claims to regain competitiveness. this window of opportunity cannot be missed in those countries where substantial increases of production costs have been one of the causes for widening imbalances in current accounts, and spain is one of them. in this country, the burden of the crisis has fallen disproportionately on temporary workers. compensation for those employed on a permanent basis has seen only minor adjustments. looking into the future, wage flexibility will need to be made more widespread. at the same time the main asset for growth and development in our societies is human capital. incentives need to be shaped to maintain and develop knowledge by each individual and β collectively β by companies and institutions. this includes training and investment into the workforce, supported by well - designed employment contracts. reforms in services, can further support the recovery and contain price increases once private expenditure recovers. in the end, these reforms, by increasing productivity and competitiveness help rebalance the external accounts on a permanent basis and reduce the reliance on external financing. needless to say, the complexity of the international financial crisis and the synchronised weakening of the real economy have put banks in a complex and exceptional position. in the short - term, with the economic slump and the high levels of unemployment, non - performing loans will be on the rise. and pressure on banks β balance
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and realistic fiscal exit strategies and for fiscal consolidation. some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing credibility. spain β where fiscal consolidation had progressed more than elsewhere β will have to make sure that it keeps its fiscal credibility in the years to come in strictly meeting the requirements of the stability and growth pact. a clear plan for a medium - term fiscal correction becomes even more pressing for rapidly ageing societies like ours, as an increasing numbers of pensioners will mean mounting claims on public transfers. iv. conclusion more than one year after the dramatic deepening of the financial crisis in september 2008, we can spot a number of signs of economic stabilisation in the euro area. we have halted the freefall in economic activity that we witnessed over a period lasting more than six months after the intensification of the crisis in mid - september 2008. but the crisis has debilitated the real economy. as i said, the crisis has proved so deep because it has deprived our citizens of confidence. every business activity is by its very nature an act of trust, an expression of confidence. as regards bankers, by granting loans more actively to entrepreneurs they can contribute to transmitting and inspiring confidence to the economy at large. being part of the euro area and the european union will help in this process. for what concerns the ecb and the entire eurosystem team, with banco de espana as a very active member of the team, our 330 million fellow citizens in the euro area ask that we continue to deliver price stability over the medium term, in line with our definition β less than 2 % but close to 2 %. our determination to anchor solidly inflation expectations has served us well since the introduction of the euro, including in the recent period of crisis, by helping to avoid the materialisation of the risk of deflation. the euro area can count on us to continue to be a solid anchor of stability and confidence in these challenging times. thank you for your attention.
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and its impact on the efficient functioning of the market. bis central bankers β speeches
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decade prior to 2012, to a little above three over the past four years. however, over the same time, the supply has grown significantly, so that the absolute amount of turnover hasn β t changed all that much. the turnover ratio of corporate securities has declined to a little above one in the decade prior to 2012 to its current level of about a half. graph 1 looking at this another way, the share of the government bond market that used to turnover in an average month now takes a bit over six weeks, while the average share of the corporate securities market that used to turnover in one month now takes closer to two months. we also hear from market participants that it is, in general, a bit more difficult to transact in size. should we be concerned about this? not necessarily. the corporate bond market in australia has never had a highly liquid secondary market. it has always been predominantly a buy and bis central bankers β speeches hold market, and most participants are well aware of this. more generally, bond market activity in australia has been structurally declining over a long period. in the mid 1990s, the turnover ratio for government bonds was around 10, by the late nineties this had fallen to around 7. a decade later in the mid 2000s, it had fallen to around 5 and now it is 3. there are number of explanations for this decline in turnover which i will now turn to. derivatives market participants have been increasingly transacting in derivative instruments rather than the cash bonds. since the mid 1990s, activity in bond futures and interest rate swaps, relative to bonds outstanding, has increased sharply ( graph 2 ). in 2015, the value of turnover in bond markets was around $ a2Β½ trillion whereas the value of turnover in both the australian dollar interest rate swaps and bond futures markets was each around $ a9 trillion. 4 growth in activity in these markets in recent years has significantly outpaced growth in issuance of australian dollar bonds. overall, the increase in derivative activity has more than offset the decline in bond market activity. graph 2 these figures are sourced from the afma. i β m only referring to interest rate and tenor basis swaps turnover here. bis central bankers β speeches there is a clear preference for bond issuers and investors in australia to manage the risk associated with their bond issuance or bond holdings by transacting in the derivative instruments rather than in the physical instruments. 5 this has resulted in a further concentration of liquidity in the derivative instruments and a
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##sbursed, which is the highest level so far. this supported the profitability of corporates, which has been on a constant rise since 2015. the corporate sector ended 2018 with a net profit of rsd 500 bn, which is by rsd 126 bn or by one third more than the year before. if we look at company size, we will see that profitability was in the positive zone in all categories β from micro to large enterprises. lending activity movements dinar interest rates movements ( p. a., in % ) ( excluding the exchange rate effect, y - o - y rates, in % ) 10. 3 5. 6 3. 6 2. 75 corporates loans - outstanding amounts * households loans - outstanding amounts * 7 years government securities * * key policy rate * * source : nbs, ministry of finance. * as of june 2019 * * as of july 2019 9. 7 15 9. 4 5 8. 9 - 5 - 5 - 10 - 10 - 15 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 - 15 20. 2 total ( lhs ) households ( lhs ) enterprises ( lhs ) investment loans ( rhs ) source : nbs. positive fiscal trends extended into 2018 β serbia recorded a fiscal surplus of around 0. 6 % of gdp. the share of public debt in gdp dropped by 4. 1 pp y - o - y to 53. 8 % in 2018, and went further down to 51. 8 % in may 2019. in the context of financial stability, particularly important is the reduction in the dollar share of public debt in the previous two and a half years, from around one third to around one fifth of total public debt in june this year. also, the country β s external position is sustainable. for four years in a row the current account deficit was fully covered by the inflow of foreign direct investment, which in 2018 reached eur 3. 5 bn or 8. 2 % of gdp. full coverage of the current account deficit continues in 2019. we have preserved financial stability. in such an environment, appreciation pressures prevailed in 2018 as well. the dinar strengthened against the euro owing to good macroeconomic indicators, greater interest in long - term investment in serbia and rising exports of goods and services. to prevent excessive short - term volatility of the dinar exchange rate, we intervened in the interbank foreign exchange market on both sides β by buying and selling foreign currency. we bought eur
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that sound economic policy was pursued in serbia and that the resilience of the domestic economy to potential risks was strengthened. by consistent implementation of monetary policy and full coordination with fiscal policy, the national bank of serbia significantly contributed to the country β s solid economic performance, which strengthened the basis for sustainable growth. we are therefore able to talk today about the lowest risk premium, which in july, for the first time since records are available for our country, fell below 60 bp. risk premium indicator β embi ( daily data, in bp ) embi global composite embi europe serbia source : jp morgan. thank you for your attention. please allow me now to pass the floor to general manager of the financial stability department mr darko kovacevic.
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outlook is broadly reflected in the december 2015 eurosystem staff macroeconomic projections for the euro area, which foresee annual real gdp increasing by 1. 5 % in 2015, 1. 7 % in 2016 and 1. 9 % in 2017. compared with the september 2015 ecb staff macroeconomic projections, the prospects for real gdp growth are broadly unchanged. the risks to the euro area growth outlook relate in particular to the heightened uncertainties regarding developments in the global economy as well as to broader geopolitical risks. these risks have the potential to weigh on global growth and foreign demand for euro area exports and on confidence more widely. according to eurostat β s flash estimate, euro area annual hicp inflation was 0. 1 % in november 2015, unchanged from october but lower than expected. this reflected somewhat weaker price increases in services and industrial goods, mainly compensated for by a less negative contribution from energy prices. on the basis of the information available and current oil futures prices, annual hicp inflation rates are expected to rise at the turn of the year, mainly on account of base effects associated with the fall in oil prices in late 2014. during 2016 and 2017, inflation rates are foreseen to pick up further, supported by our previous monetary policy measures β and supplemented by those announced today β the expected economic recovery, and the pass - through of past declines in the euro exchange rate. the governing council will closely monitor the evolution of inflation rates over the period ahead. this broad pattern is also reflected in the december 2015 eurosystem staff macroeconomic projections for the euro area, which foresee annual hicp inflation at 0. 1 % in 2015, 1. 0 % in 2016 and 1. 6 % in 2017. in comparison with the september 2015 ecb staff macroeconomic projections, the outlook for hicp inflation has been revised down slightly. turning to the monetary analysis, recent data confirm solid growth in broad money ( m3 ), with the annual rate of growth of m3 increasing to 5. 3 % in october 2015 from 4. 9 % in september. annual growth in m3 continues to be mainly supported by its most liquid components, with the narrow monetary aggregate m1 growing at an annual rate of 11. 8 % in october, after 11. 7 % in september. loan dynamics continued the path of gradual recovery observed since the beginning of 2014. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) increased to 0. 6 % in
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mario draghi : ecb press conference β introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 3 december 2015. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today β s meeting of the governing council, which was also attended by the commission vice - president, mr dombrovskis. based on our regular economic and monetary analyses, we today conducted a thorough assessment of the strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2 % in the medium term and re - examined the degree of monetary accommodation. as a result, the governing council took the following decisions in the pursuit of its price stability objective : first, as regards the key ecb interest rates, we decided to lower the interest rate on the deposit facility by 10 basis points to β 0. 30 %. the interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0. 05 % and 0. 30 % respectively. second, as regards non - standard monetary policy measures, we decided to extend the asset purchase programme ( app ). the monthly purchases of β¬60 billion under the app are now intended to run until the end of march 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2 % over the medium term. third, we decided to reinvest the principal payments on the securities purchased under the app as they mature, for as long as necessary. this will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance. the technical details will be communicated in due time. fourth, we decided to include, in the public sector purchase programme, euro - denominated marketable debt instruments issued by regional and local governments located in the euro area in the list of assets that are eligible for regular purchases by the respective national central banks. fifth, we decided to continue conducting the main refinancing operations and three - month longer - term refinancing operations as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of
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commission's report on the consequences of swedish membership in the emu came to the conclusion that sweden should wait until its labour market and wage formation showed sufficient flexibility to deal with a serious disturbance. however, it should be noted that the commission was envisaging a β small β eurozone with around 6 countries taking part, whereas now we are talking about 12 countries, representing 40 - 50 per cent of sweden's trade. moreover, in practice the swedish business climate has rarely come seriously out of synch with the eurozone. when sweden has done so, it has mainly been the result of mistakes in sweden's own economic policy and not due to any unforeseeable external disturbance that has afflicted the swedish economy. also, in this respect sweden has changed in recent years : the introduction of inflation targeting and expenditure ceilings should reduce the risks of new economic policy mistakes. in addition, there are strong indications that the correlation between swedish and eurozone growth will increase if we join the emu, as trade and integration with the euro countries will thereby be strengthened. we can see already how the long - term swedish market rates have covaried strongly with those in the eurozone in recent years, even during periods with differences in business climate report on the emu investigation ( sou 1996 : 158 ). between sweden and the eurozone. as far as a swedish membership of the emu would reduce these differences in business climate, it will lead to a long - term interest rate development that is more adapted to the business climate. if we still believe that sweden could become radically out of synch with the rest of europe, there is of course an alternative to using an independent exchange rate and monetary policy as shock absorbers. the more robust budget situation sweden enjoys today, for example, should provide a slightly greater scope than during the early 1990s for using fiscal policy for the purpose of stabilisation. one can also imagine building up buffer funds to pay for reduced payroll tax in crisis situations ( known as internal devaluation ) of the type introduced in finland. another variant of an asymmetrical disturbance is that asset prices β the property market and stock exchange β due to a too strong economic development are forced up for a short while. however, in situations such as this, the required tightening can usually be managed with the help of fiscal policy. naturally, stabilisation policy via the budget has its limitations since it only works with delay and is dependent on many other long
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inflation report. this does not prevent the fact that the recent valuation of the krona has brought new perspectives to the question of swedish membership in the third phase of the emu, i. e. participation in the eurozone. the volatility of the krona creates difficulties for export and import companies in making decisions regarding trade and investment. however well monetary policy functions, it still cannot supply the efficiency gains at the microeconomy level that ensue from a single currency. the effects on growth through both price competition over the borders and increased trade could be greater than we have previously often assumed. an independent monetary policy will of course remain the main argument against emu membership. the question is how valuable this is. in part, i do not consider the risk very large of sweden alone getting caught up in a crisis where these very instruments will be the best for stabilising our economy. in part, we have seen that the exchange rate can be governed for fairly long periods of time by factors on the financial markets that are not primarily related to the real economy. instead of acting as a shock absorber for business climate developments in sweden that are out of synch with other countries, there is a risk that the krona, by weakening more than motivated by fundamental factors, could instead upset sweden's possibilities for stabilising its development. the economic gains of remaining outside the eurozone thus appear uncertain, while recent research indicates that swedish debate has probably undervalued the integration gains from emu. when you hold your first euro banknote next year and take a closer look at it, you will be able to see that sweden is actually present, on the european map that adorns one side of every banknote. may i be permitted the cautious interpretation of this as a sign of things to come?
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to absorb shocks. in the meantime, interest rates across markets rose in response to gradual tightening of monetary policy ; turnover in the foreign exchange market recorded substantial increases ; and market capitalisation and price indices in the equity market continued to improve. figure 4 : ratio of capital funds to total assets of lcbs 8. 0 per cent 7. 0 6. 0 5. 0 4. 0 3. 0 2. 0 1. 0 0. 0 sep06 per cent figure 5 : non performing advances to total advances of lcbs 2005 sep - 06 it would also be noted in the year 2006, several important measures were taken to strengthen and improve the efficiency of the financial sector, improve risk management, enhance access to finance, strengthen the payment and settlement system as well as supervision and regulation. banks were required to include market risk in the computation of capital adequacy to ensure that they are adequately capitalised to meet any adverse fluctuations in market prices and are not vulnerable to any unanticipated shocks. prudential norms for classification and valuation of bank investment portfolios were further strengthened. to improve the safety and efficiency in the payments and settlements systems, the central bank also drafted a payment system policy in consultation with the national payment council to declare a public policy regarding the regulatory framework. as is well known, the central bank manages the employees β provident fund ( epf ). it does so by receiving member contributions, maintaining member accounts, investing funds and paying benefits to members. the total assets of the epf grew by 13 per cent to rs. 439 billion during the 12 months ending june 2006. total contributions and refunds during this period amounted to rs. 16 billion and rs. 13 billion, respectively. the total investment portfolio consisted mainly of government securities at 98 per cent, while the total income for the first half of 2006 amounted to rs. 25 billion. the central bank also manages the public debt to ensure that the government's financing needs and its payment obligations are met at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk. during 2006, the central bank took several measures to strengthen the management of public debt by : β’ increasing the capital requirements, introducing a risk based supervision system and supervision activities to strengthen the primary dealer system and financial sector stability β’ introducing on - line data reporting to enhance the transparency in trading government securities β’ facilitating capacity building of market players β’ permitting subscription upto 5 per cent of treasury bonds by
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problem at depository institutions. however, in recent years a significant amount of maturity transformation took place outside the traditional banking system β in the so - called shadow banking system β through the use of commercial paper, repurchase agreements, and other instruments. our ability to monitor the size and extent of maturity transformation has been hampered by the lack of high - quality and consistent data on these activities. better data on the sources and uses of maturity transformation outside of supervised banking organizations would greatly aid macro - prudential supervision and systemic risk regulation. another feature of the recent crisis was the extensive use of leverage, often in conjunction with maturity transformation. the consequences of this combination were dramatic. when doubts arose about the quality of the assets on shadow banking system balance sheets, a classic adverse feedback loop ensued in which lenders were increasingly unwilling to roll over the short - term debt that was used as funding. liquidity - constrained institutions were forced to sell assets at increasingly distressed prices, which accelerated margin calls for leveraged actors and amplified mark - to - market losses for all holders of the assets, including regulated firms. here, too, government regulators and supervisors had insufficient data to determine the degree and location of leverage in the financial system. more generally, the crisis revealed that regulators, supervisors, and market participants could not fully measure the extent to which financial institutions and markets were linked. a critical lesson from this crisis is that supervisors and investors need to be able to more quickly evaluate the potential effects, for example, of the possible failure of a specific institution on other large firms through counterparty credit channels ; financial markets ; payment, clearing, and settlement arrangements ; and reliance on common sources of short - term funding. a better system of data collection and aggregation would have manifold benefits, particularly if the data are shared appropriately among financial regulators and with a systemic risk council if one is created. it would enable regulators and a council to assess and compare risks across firms, markets, and products. it would improve risk management by firms themselves by requiring standardized and efficient collection of relevant financial information. it also would enhance the ability of the government to wind down systemically important firms in a prompt and orderly fashion by providing policymakers a clearer view of the potential impacts of different resolution options on the broader financial system. additional benefits would result from making data public to the degree consistent with protecting firm - specific proprietary and supervisory information. investors and analysts would have a more complete picture of individual firms β strengths and vulnerabilities, thereby contributing to
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mario draghi : euro area economic outlook, the ecb β s monetary policy and current policy challenges statement by mr mario draghi, president of the european central bank, prepared for the twenty - ninth meeting of the international monetary and financial committee, washington dc, 10 april 2014. * * * i would like to focus on the euro area economic outlook, the ecb β s monetary policy and current policy challenges. the recovery in the euro area is ongoing. euro area real gdp has now increased for three consecutive quarters and recent survey data are consistent with a continuation of this trend. looking ahead, a strengthening contribution from domestic demand should materialise, supported by our accommodative monetary policy stance, ongoing improvements in financing conditions working their way through to the real economy, and the progress made by euro area countries in terms of fiscal consolidation and structural reforms. in addition, real incomes are positively influenced by moderate commodity price developments, in particular lower energy prices. economic activity is also expected to benefit from a gradual strengthening of demand for euro area exports. at the same time, however, unemployment in the euro area remains high, even if labour markets have shown first signs of improvement, and, overall, unutilised capacity is sizeable. moreover, the necessary balance sheet adjustments in the public and private sectors will continue to weigh on the pace of the economic recovery. the risks surrounding the euro area economic outlook continue to be on the downside. they relate to geopolitical risks and an insufficient implementation of structural reforms in euro area countries as well as to developments in global financial markets and in emerging market economies. recent information remains consistent with our expectation of a prolonged period of low inflation that will be followed by a gradual upward movement in consumer prices ( hicp inflation rates ) during 2015 to reach levels closer to 2 % towards the end of 2016. the gradual decline in euro area inflation rates since last summer primarily reflects negative contributions from energy prices as well as a substantial fall in unprocessed food price inflation. at the same time, medium to long - term inflation expectations remain firmly anchored in line with our definition of price stability. both upside and downside risks to the outlook for price developments remain limited, and broadly balanced over the medium term. in this context, the possible repercussions of geopolitical risks and exchange rate developments will be monitored closely. the ecb β s monetary policy stance continues to be geared towards maintaining the degree of monetary accommodation warranted by the outlook for price
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interest rate expectations : a study of six central banks β, in c. kent and s. guttmann ( eds ), the future of inflation targeting, reserve bank of australia, sydney, pp 108 β 134, for an example of empirical work that studies how financial market prices respond to policy announcements and other forms of communication. responses to rba communications are little different to those of other central banks, suggesting that the rba is conveying a similar amount of information to the market as other central banks. ( paper available at http : / / www. rba. gov. au / publicationsandresearch / conferences / 2004 / connolly _ kohler. pdf. )'in reaching its decision [ to lower rates ], the board carefully weighed one other factor, namely the rapid pace of borrowing by households and the associated pressure on house prices. a further reduction in interest rates runs some risk, at the margin, of unnecessarily boosting this trend in the short term. but this risk has to be set against those which would come over the medium term from not responding to the likely effects of the continuing weakness abroad. on balance, the board β s judgement is that prospects for maintaining the economy β s good mediumterm performance will be improved by today β s action.'by the middle of 2002, with financial conditions at home and abroad quite expansionary, it seemed pretty clear that the worst of the danger of economic weakness was past. the australian economy was in fact growing quite strongly, and global conditions were recovering. hence the balance of risks was shifting : we were moving from a period in which it might have been a costly mistake not to let rates fall, into one where we were more likely to get into trouble by holding rates down, than by lifting them. the risk of potential problems of rates being left at generation lows was featured in the press statements announcing rate rises in may and june 2002. as we all know, the process of'normalising'interest rates turned out to be quite a lengthy one. this was partly because there were periodic bouts of renewed pessimism about global prospects β strange as it may seem, it is only three years ago that many people were seriously talking about the possibility of deflation in the united states, a far cry from the concerns being voiced more recently. 6 those concerns faded and were replaced by rising energy and resources prices, which history suggests can be associated with wider inflation pressures. but at the same time,
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or windows. other conventional banks have also expressed interest in providing sharia compliant products to an increasing customer base. ladies and gentlemen : among the challenges facing kenya β s ambition to be a hub of sharia compliant investment products to compliment the islamic banking in the country are lack of ; shariah compliant investment vehicles, an enabling legal and regulatory framework and awareness by majority of the populace that hinder the uptake of these investments. for the country to fully embrace islamic finance, there is need to extend beyond the offering of sharia compliant products by introducing such investment vehicles like unit trusts, corporate bonds ( sukuks ) and insurance ( takaful ) products and sharia compliant treasury bills and bonds ( government sukuk ). bis central bankers β speeches it is encouraging to note the ongoing efforts by the government and other players especially the capital markets authority and insurance regulatory authority to come up with a range of shariah compliant financial products. already there are positive signals of these efforts with the introduction of shariah compliant investments and insurance products. it is in this spirit that the kenyan government through the finance act 2010, amended section 45 of the central bank of kenya act, to allow the central bank as the government β s fiscal agent to recognize the payment of a β return β rather than β interest β on government securities. this amendment opens up the spectrum of sharia compliant investments in the country. ladies and gentlemen : the future of islamic finance in kenya and in the region remains bright. on its part, the government of kenya will continue to pursue policies that create an enabling environment that will eventually culminate in kenya establishing itself as a regional financial hub as envisaged in vision 2030. in addition, the central bank will continue to partner with the sector to promote financial inclusion by supporting innovation in the sharia compliant banking sector. with these few remarks, let me wish all participants to this conference, fruitful deliberations over the next two days and declare the 3rd gulf african bank annual east and central african islamic conference officially opened. thank you. bis central bankers β speeches
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from 2. 5 million to over 14 million in just over 5 years, while mobile money transfer services have led to over 15 million kenyans being integrated into the financial system. the regulated microfinance industry has also grown tremendously with the licensing of six deposit taking microfinance institutions with 57 branches, 1. 5 million deposit accounts valued at ksh. 9 billion and 0. 53 million loan accounts with an outstanding loan portfolio of ksh. 15 billion. despite these remarkable developments in the kenyan financial sector, we are cognisant of the fact that there still remains great need within the kenyan market for appropriate and more affordable financial services. given that this situation is not unique to kenya, but applies to most, if not all, african nations represented in this forum, it is imperative that improving access to financial services remains key in our development agenda. we need to solve costs, barriers to entry, physical distance and market concentration problems. ladies and gentlemen, as we undertake to enhance access to financial services as regulators and policy makers, we must ensure that financial services are provided a bis central bankers β speeches competitive market environment. let us learn from developments in the microfinance sectors in parts of bosnia and india, that recently experienced crises. the challenges in these countries were instigated by issues such as multiple lending and client over - indebtedness, aggressive competition, erosion of credit quality standards, a lack of transparency in pricing, a weak credit information sharing framework and inadequate regulation. beyond these challenges, currently the broader issue of transparent and responsible pricing is becoming a concern for the global microfinance industry. price is an incentive. transparent and responsible pricing is essential for stimulating growth, efficiency and effectiveness of the financial sector. it is indeed a key ingredient for incentivising innovation, enhancing informed decision - making by consumers and fostering the development of healthy, vibrant and competitive markets. transparency in pricing is critical because consumers have the right to know the exact price of products in the market. conversely, nontransparent ( or opaque ) pricing, prevents consumers from making informed decisions about borrowing. this ultimately reduces the ability of financial institutions to compete effectively, free market forces to operate properly and the financial sector to develop efficiently and sustainably. policies to entrench relevant consumer protection measures, including transparency and truth - in - lending regulations combined with the promotion of competition and efficiency among credit providers, can go a long way toward expanding the reach of sustainable finance, particularly credit, while safeguard
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lael brainard : unconventional monetary policy and cross - border spillovers speech by ms lael brainard, member of the board of governors of the federal reserve system, at the 16th international monetary fund jacques polak research conference β unconventional monetary and exchange rate policies β, washington dc, 6 november 2015. * * * among students of central banking, the great recession will be remembered in part for the monetary policy innovation it prompted. since 2008, we have seen several episodes of extreme financial conditions in major economies. in many countries, monetary policy has shouldered a large share of the policy response. debt - deleveraging dynamics and disinflationary pressures have confronted policymakers in several economies with the classic challenge of providing accommodation when constrained by the zero lower bound. in contrast to the great depression, a number of central banks have found the β courage to act, β which has led to important policy innovation. while it will take many years for rigorous research to distill the lessons from this period, i will offer a few preliminary observations. 1 the effectiveness of unconventional monetary policy for much of the period since 2008, many economies, including the united states, the united kingdom, switzerland, the euro area, and japan, have been at or near the zero lower bound. many economies have experienced depressed aggregate demand and large and persistent gaps between output and potential, which have led to significant reductions in the level of policy rates in order to achieve full employment and target inflation. moreover, the neutral level of short - term risk - free rates looks to be much lower now in many countries than it had been previously. a lower neutral rate raises the likelihood that the requisite monetary accommodation when using conventional tools alone implies setting the nominal policy rate below zero. with constraints on moving nominal interest rates significantly below zero, central banks have looked to unconventional policy, such as asset purchases. the evidence suggests that unconventional monetary policy can be effective at overcoming the limitations on policy at the zero lower bound by operating through channels broadly similar to conventional monetary policy. a number of studies have suggested that the forward guidance and large - scale asset purchases conducted by the federal reserve boosted the levels of employment and inflation at a time when the level of short - term interest rates was constrained by the zero lower bound. for example, engen, laubach, and reifschneider estimate that the federal reserve β s forward guidance and asset purchase programs may have lowered the unemployment rate by as much as 1 β 1 / 4 percentage points and increased
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for a dialogue with industry participants to ensure a well - designed regulatory regime that is effective and proportionate to the risks it addresses. the good news is that, in the future, growing global markets will present new and potentially rewarding opportunities for insurance companies. perhaps the not - so - good news is that the industry is also likely to face a multitude of challenges. the industry has made much progress in recent years. insurers and reinsurers have revised their underwriting philosophies, developed new models to assess risk, improved the adequacy of their risk profiles, and adjusted their coverage policies. many regulators have also made significant changes to ensure that their regulations keep pace with developments or, at least, do not fall too far behind. these efforts give me confidence that both firms and regulators will continue to meet the challenges that lie ahead. thank you, and i wish you all a very fruitful symposium.
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sovereign wealth funds ). it is also important to ensure that africa β s interests and priorities are represented in the review or design of any new global financial architecture relating to, for example, the role of the bretton wood institutions. we must also ensure that the financial crisis is not used as a pretext for relaxing or abandoning the hard - won commitments by africa and its development partners, at least in four main areas : - sustainable economic growth, including food security, climate change, infrastructure and / or trade ; - social development, notably health, education and the more important gender issues ; - good governance, and its associated financial and political accountability ; and - financing for development, including levels of development aid. the africa progress panel believes that the growing sense of mutual accountability between africa and its partners, whether traditional or new, needs to be encouraged and supported. while it would be unwise to make any predictions, the election of mr barack obama bodes well for not only the maintenance but also, it is to be hoped, the further evolution of commitments to africa by the united states of america. however, we should be aware that both africa β s traditional and new partners are under enormous pressure to cut expenditure, and this makes aid levels highly vulnerable. therefore, we should do everything possible to encourage them to live up to their commitments by, among others, reaffirming our side of the bargain. notably, this involves committing to the maintenance of fiscal and broad macroeconomic discipline, investing domestic resources with a view to achieving specific human development objectives, and strengthening political accountability at national and regional levels. to this end, the chairman and members of the africa progress panel would like to support, in any way we can, the adb president, dr kaberuka, the chairman of the african union commission and the executive secretary of the economic commission for africa as they ensure that africa β s interests are well understood and represented in critical discussions, some of which will take place in the next few months. african leaders are encouraged to network among themselves to forge a common position on these issues, in the best interests of the continent and its populace. on behalf of chairman kofi annan and other members of the africa progress panel, i thank you for your attention.
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gains, are also critical, as they help to enhance the resilience of the economy. i thank you for your attention.
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1930s, in the tumult of government expansion that was the new deal, when congress began a decade - long debate over how to manage the new regulatory state. the result was the administrative procedure act ( apa ). the apa continues to serve as the basis for the public disclosure and participation required for agency rule - writing and for the judicial review affected parties are guaranteed to challenge rules. this transparency is intended to prevent arbitrary, capricious, and thus ineffective regulation by inviting broad public participation and mandating a deliberate public debate over the content of proposed rules. one obvious purpose of this transparency is to provide clarity and predictability : it helps make clear how agencies are considering exercising their discretion. the significant 2 / 4 bis central bankers'speeches process protections in laws such as the apa are also meant to ensure fairness. the wisdom behind this approach is that fairness both helps bring forth more considered and effective regulations and builds respect for and adherence to the law, which is essential for enforcement. transparency is central to our ability to assert that our rules are fair. not everything that government does, however, can be accomplished in exactly the same way that regulations are written. one of these things is bank supervision. bank supervision banks are subjected to supervision, in addition to regulation, as an additional form of government oversight because of their complexity, opacity, vulnerability to runs, and indispensable role in the economy, enabling payments, transmitting monetary policy, and providing credit. the government provides a safety net to banks in the form of deposit insurance, and in return, banks are subject to government oversight that mimics some of the monitoring that the private sector would provide, absent the government safety net. the bank regulatory framework sets the core architectural requirements for the banking system, but it isn β t enough to set the rules and walk away like voltaire β s god. the potential consequences of disruption in the financial system are so far - reaching, and the erosion of market discipline resulting from the government safety net sufficiently material, that it is neither safe nor reasonable to rely entirely on after - the - fact enforcement to ensure regulatory compliance. supervisors are in a good position to monitor individual firms β idiosyncratic risks. and in addition to what they do at individual banks, supervisors monitor for risk that may be building among clusters of banks or across the banking system. these β horizontal β exams across multiple banks help highlight new or emerging risks and help examiners understand how banks are managing these risks. through
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to carry forward this work aligning supervision with the regulatory tailoring rules, i believe there is a compelling justification to make changes today to the composition of foreign banks in our portfolio of the largest banks, known as liscc. second, as i have discussed throughout my time at the board, i continue to look for ways to make our stress tests more transparent without making them game - able and without diluting their potency as a supervisory tool. i expect that we will continue to provide more transparency on the models we use for the stress tests, and on the hypothetical scenarios. additionally, i am advocating changes to our capital plan rule that will allow banks to receive and study their supervisory stress testing results prior to submitting their capital plans. currently, banks have a very limited time to adjust their capital distribution plans and only under limited circumstance. third, and principally as a transparency endeavor, i would endorse creating a word - searchable database on the board β s website with the historical interpretations by the board and its staff of all significant rules. regulatory interpretations by board staff have grown piecemeal over the decades and haven β t consistently been treated as the valuable resource they are. the board β s website has select interpretations of many laws but does not provide a comprehensive, userfriendly collection of regulatory interpretations, faqs, and commentary. fourth, i endorse putting significant supervisory guidance out for public comment. the board already invites comments on its regulations, as required under the apa, and regularly invites comment on some supervisory guidance and statements of policy. this practice of seeking comment on significant guidance leads to better, more informed supervision and better engagement by banks. and fifth, the board should adopt a rule on how we use guidance in the supervisory process. i would expect the rule to state that the board will follow and respect the limits of administrative law in carrying out its supervisory responsibilities. in particular, consistent with the september 2018 interagency statement on guidance, we would affirm the sensible principles that guidance is not binding and β non - compliance β with guidance may not form the basis for an enforcement action ( such as a cease - and - desist order ) or supervisory criticism ( such as a matter requiring attention ( mra ) ). this rule would be binding on the board and on all staff of the federal reserve system, including bank examiners. there are of course other ideas i have mentioned and will be pursuing, but this partial list should be informative and helpful
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in shanghai serves a supplementary rather than the main source of rmb funds for trade settlement purpose. in order to further promote the steady development of the rmb market in hong kong, the following refinement measures will take effect from january next year : participating ais can square their positions with the clearing bank when there is a shortfall of rmb arising from conversions with customers for cross - border trade settlement transactions. in other words, participating ais should first utilise the rmb trade proceeds purchased from their customers to satisfy requests for rmb conversions for trade settlement transactions before purchasing rmb through the clearing bank in shanghai. participating ais can only purchase rmb through the clearing bank in shanghai for their customers in relation to trade transactions due for payments to the mainland within three months. the hkma and the pboc estimate that the demand for rmb conversion in shanghai would be within rmb 4 billion in the first quarter of 2011. the volume of conversion will be assessed and appropriately adjusted after the first quarter taking into consideration the actual circumstances. in order to maintain a steady supply of rmb, the hkma will, as a standing arrangement, provide rmb funds of rmb 20 billion through its currency swap arrangement with the pboc, for cross - border rmb trade settlements. given the restrictions in the convertibility of rmb, participating ais are required to limit their rmb net open positions ( whether net long or net short ) to 10 % of their rmb assets or liabilities. participating ais β credit risk exposure to the clearing bank in their letter to the hkma in november, the hong kong association of banks raised the issue of credit limit against the background of an increasing amount of rmb deposits being placed by participating ais with the clearing bank as the rmb business in hong kong continued to expand and deepen. the hkma and the pboc have held discussions about this issue, and it is considered that the issue could in principle be resolved by the participating ais establishing custodian accounts with the clearing bank. this means that the rmb funds will be placed with the pboc shenzhen branch through the clearing bank as a custodian to overcome the issue of credit limit. we will further discuss with the pboc, the clearing bank and participating ais on the details of such an arrangement including the related legal documents and operational procedures. it is hoped that the arrangement can be implemented soon early next year. conclusion i believe
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survey to measure the financial literacy of micro, small and medium enterprises, as part of an international project coordinated by the oecd for the italian presidency of the g20, within the global partnership for financial inclusion. allow me to briefly recall the topics that will be discussed in today β s workshop today we will have an opportunity to discuss a wide range of topics that are relevant not only to long - term investment but also to the unprecedented health crisis we are experiencing. the role of non - bank financial intermediation ( the so - called nbfi sector ) has become increasingly important since the great financial crisis, also because of a prolonged phase of deleveraging in the banking sector. this is a topic that will be touched on today and has been at the forefront of discussions that are currently taking place in the major international regulatory policy fora. within the nbfi sector, investment funds and insurance companies represent a vital source of finance for non - financial corporations ( both equity and debt ). the stability of these corporations β financing sources is, in turn, a pre - requisite for their undertaking of investments, especially in activities such as research and innovation that have the potential to generate high growth. therefore, a long - term orientation of investment funds and insurance companies is essential to guarantee such stability. the covid - 19 crisis and the associated episodes of financial turbulence, especially those experienced in march 2020 with the so - called β dash - for - cash β episode, has revealed significant fragilities in the nbfi sector. spikes in volatility and illiquidity, whose effect can be significantly amplified by excessive leverage and liquidity mismatches, can quickly disrupt the provision of non - bank finance to the corporate sector and to the real economy. central banks and governments intervened promptly after the march 2020 episode in order to avoid wide scale economic damage and undesired consequences for both price and financial 2 / 4 bis central bankers'speeches stability. but central bank and public support cannot, and should not, be taken for granted : we must ensure that the nbfi sector becomes more resilient in its own right, independently of any support. to this end, international authorities are already working, under the leadership provided by the fsb, on building a macro - prudential framework to strengthen the nbfi sector β s resilience to shocks. the recent archegos episode is just the latest example of how urgent it has become to reach this objective.
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promote high impact boards and develop world class directors who are advocates of best practices and excellence in corporate governance. known as the financial institutions directors β education program or fide, it is currently the only governance initiative in the region that focuses exclusively on the financial sector and has trained hundreds of directors since its inception. the centre has now been renamed as the iclif leadership and governance centre with an enhanced faculty comprising renowned experts from the world leading institutions. iclif is also currently expanding its outreach beyond the asia pacific, middle east and african regions. these initiatives are based on the conviction that human capital development needs to also include the leadership level. human capital development in general is of strategic importance and is integral to the success of any organisation. building human capital capability has never been more important in today β s world. successful businesses of the future will be the bis central bankers β speeches ones that are able to fully harness their pool of talent. this more difficult operating environment demands new abilities to manage the new challenges and the new emerging opportunities, and the ability to deal with the high level of unpredictability. the role of leaders in such an environment is to create organisations that are able to effectively respond to the changing environment and at the same time nurture flexibility and innovation. also important is that it is also supported with high values. effective leaders in this era, will be those that can deliver results in this environment. it is all about having clarity of purpose and aligning the entire organisation to achieve these goals. thus, the investment in leadership development is vital to equip leaders and future leaders with the necessary capability to perform their role in the organisation. this brings us to the second part of our event today β the launch of one of iclif β s research studies which has been written by mr. rajeev peshwaria, the ceo of iclif, published globally as a book entitled β too many bosses, too few leaders β by simon schuster of new york. the book illuminates on what it really takes to be an effective leader. the book extends beyond the advice on the distinct behaviors and attributes required of leaders to providing β a clear path β, β a road map β to achieving leadership excellence at every level in the organisation. in my own experience, the core foundations to achieve superior performance set out in the book is essential. defining with great clarity the purpose and values of the organisation and articulating it throughout the entire organisation is key towards achieving these desired
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the green ecosystem to support the economy's transition. this includes refinements to our regulatory and supervisory approaches, facilitation of products and services, engagement and capacity building as well as efforts to bridge data gaps. we look forward to continuing close collaboration with the financial sector via the joint committee on climate change ( jc3 ) and other key stakeholders to further the climate agenda. finally, i would like to thank aicb and abm for facilitating this important conversation. thank you. 2 / 2 bis - central bankers'speeches
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: hart publishing ), p. 159, 162. barron j., and m. staten, ( 2003 ), β the value of comprehensive credit reports : lessons from the u. s. experience. β in credit reporting systems and the international economy ed. margaret miller. boston : mit press. zhang b et al, sustaining momentum, the 2nd european alternative finance industry report, cambridge centre for alternative finance ( cambridge university, september 2016 a ) ; zhang b et al, the 2015 uk alternative finance industry report, cambridge centre for alternative finance ( cambridge university, february 2016 b ) world bank. 2011a. general principles for credit reporting. washington dc : world bank. www. worldbank. org / en / topic / financialsector / publication / general - principles - for - credit - reporting international finance corporation 2012. credit reporting knowledge guide, washington dc : world bank. ( 1 ) source : page 1 β β the european credit information landscape : an analysis of a survey of credit bureaus in europe β aei. pitt. edu / 33375 / 5 / 5 bis central bankers'speeches
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g20 and the financial stability board ( fsb ) in particular have been instrumental in efforts aimed at enlarging the scope of financial regulation to make sure that the systemic importance and interconnectedness of institutions, markets, instruments no longer escape our vigilance. naturally, the necessary reform of otc derivatives markets has gained traction and the g20 has set a very clear roadmap on these matters. efforts aimed at integrating these markets into regulated and supervised market infrastructures are indeed an essential policy response to risks accumulated in these markets. however, the crisis has not just shown us that we should expand the scope of regulation and supervision. in fact, two clear trends have emerged and are greatly affecting the very nature of regulation. the first observable trend is that we must complement micro - supervision with macrofinancial supervision : this macroprudential approach has in fact developed in many countries. the second trend is that regulation needs to become more global in response to the globalization of finance. in that respect, the commitment by all g20 jurisdictions to implement basel ii by 2011 and to finalize this year a new package aimed at strengthening bank capital and liquidity standards is a great achievement. we are confident that making tangible progress on each of these fronts is an essential response from policy makers to the roots of the global financial crisis. to some extent, the ultimate aim of financial regulation has to do with financing the real economy. sound regulation should enable the stable provision of financial services to economic agents as they strive to finance their productive investments and consumption, which constitute the fuel for growth. banks are central to the financing of economic activity because they perform maturity and liquidity transformation as well as a credit risk screening function. this is especially true in continental europe, where they are responsible for more than 80 % of financial intermediation. this is why the current focus on enhancing banking regulation is right and progress on key reforms to strengthen bank capital and liquidity standards remains a top priority. the recent reform package of the basel committee will lead to a much more robust and resilient banking system in the future, with both a stronger capital and liquidity base than before the crisis. the challenge, now, is to calibrate and phase in the new framework in a way that does not impede the recovery and does not contradict our macroeconomic objectives. the macroeconomic assessment of the reforms underway will help us strike the optimal balance. we must also reduce procyclicality. some of
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- linear forward guidance, mentioning explicitly our tolerance for inflation overshooting, with reference to past inflation shortfalls. it is the combination of these three levers that should be used as the foundations of the β equilibrium triangle β of our monetary policy in this next phase of the covid crisis. ii. wider expectations are emerging let us return to the question of broadening public expectations of central banks. central banks are facing the risk of being considered not only the only game in town, but also the all - purpose game. that said, the reality of climate change, rising inequality β which i will touch briefly β and risks to financial stability β which you invited me to focus on β are all elements to be taken into account, and as such are parts of the ecb β s strategic review, more than the fed β s one. ii. a. climate change considering climate change is neither a mission creep, nor a mere militant conviction or a fad. it is an imperative : climate change does affect our ability to achieve price stability, our primary objective. on one side, extreme physical risk or more gradual transition risks will, and do already, affect supply. on the other side, the implementation of policies to mitigate climate change such as carbon taxes, emission targets or border adjustment tariffs will also affect input and consumer prices. for example the recent jump in headline inflation in the euro area illustrates these two points. part of the recent increase in energy prices was linked to higher electricity prices in spain due to unusually cold weather and the introduction of a carbon surcharge on prices of liquid fuels and gas in germany. in my view, there are three measures we central bankers can take. vi the first is to incorporate climate change into our macroeconomic models. second, we must gradually decarbonise our balance sheets in a pragmatic and targeted way by adapting the valuation of our assets. third, by disclosing the criteria by which we value assets, we can set a standard that others will follow. and market neutrality β which should take into account the mispricing of climate risks β should not put a brake on carbon neutrality. ii. b. inequalities page 7 sur 9 monetary policy inevitably has redistributive effects. it transfers revenue between lenders and borrowers, and affects asset prices and hence wealth. the evidence is preliminary but it suggests that the effects of more accommodative monetary policy has reduced income inequality by boosting revenues thanks to
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issuance ( figure as at end 2001 ). source : banque de france - central balance sheet data. 1. 2 these changes, and on top of them the introduction of the euro, have influenced the integration pattern on the money market, on the bond markets, on the derivatives markets and on the equity markets. integration is certainly - and naturally - most developed on the money market. interest rate differentials across regional deposit markets have vanished and the β law of one price β applies to all transactions within a deep and highly liquid pan - european market. cross - border transactions - for unsecured interbank deposits and repos - now account for over 50 % of all money - market cash transactions. eonia and euribor have within a very short time become the undisputed benchmarks for short - term interest rates. this is reflected for instance in the impressive development of the euro interest - rate swap market, where all but a few transactions are indexed on these benchmarks. this deep integration of the money market has prompted new organisational patterns in the banking sector, with a concentration of euro cash management activities making it possible to take advantage of higher liquidity levels on the secondary market. for instance, according to a survey by the international securities market association in june 2002, the top ten banks in a panel of 77 accounted for 55 % of the total reported business on the european repo market. as a result the price discovery mechanism on the money market is smoothened because trade decisions are based on information systems that capture the relevant parameters at euro - area level. the integration of euro - area financial markets has also deepened on the bond market : β rapid internationalisation has taken place. between 1998 and 2001, the relative share of corporate bonds issued by corporate borrowers in the euro area as a percentage of gdp has more than doubled, while it increased by one third in the united states. 2 β competition between all issuers, corporate or sovereign, has intensified. for sovereign issuers, the disappearance of currency risk and the convergence process driven by the maastricht treaty have transformed government bonds into directly competing risk free assets. as a consequence, sovereign issuers have implemented strategies aimed both at differentiating their issuance profiles - in order to diversify the opportunities offered to investors - and at establishing benchmarks on a selection of maturities. this is reflected by the building up of an outstanding amount of at least 5 bios euros on the internationally important 10 years segment, in each euro
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global authorities themselves did with their control and surveillance systems. the approach now should not be for the markets to be stopped in their progress, but rather for the authorities to catch up. private sector financial market operators, including multinational banking institutions, hedge funds and institutional fund managers, must in their own interest reconsider and review their modus operandi in the markets. in particular, risk management models must provide for the volatile global financial environment in which they now operate. many encouraging signs emerged from the discussion in washington d. c. to indicate that progress is now being made at all three levels, and that greater stability is gradually returning to the world financial system. south africa, like many other countries in a similar situation, is watching these signs of hope with great interest.
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a challenge given that the vast majority of south africans experienced a history of inferior quality education. the efforts of this university bears testimony to efforts to broaden access to quality education. notwithstanding the progress, greater efforts are needed to address the legacy of our past. even though our economy has improved significantly from twenty years ago, the recent period has been difficult. the world is in its sixth year of economic crisis. while most countries are out of recession, the crisis itself has not ended. measures taken to address the unfolding crisis had unintended consequences resulting in a constant mutation β for instance from a sub - prime crisis in the us affecting home owners and lenders to a systemic banking crisis ; from a systemic banking crisis to a fiscal deficit and sovereign debt crisis in many countries in europe ; from a wave of significant capital inflows and appreciating currencies in emerging economies to where more recently emerging markets have had to deal with a reversal of these flows and depreciating currencies, at a time when many of them are also facing rising inflation and slowing growth. what is consistent through this period is that growth is slower than historical averages, unemployment is higher and in particular youth unemployment, globally, is a major challenge standing at over 50 percent in a number of countries, including our own. the international bis central bankers β speeches labour organisation projects that unemployment levels are only likely to reach pre - crisis levels by 2017, a full ten years from the start of the crisis. ten years is a long time in the life of any person. the effects in terms of human suffering, reduced household savings, long term unemployment, skills atrophy and lost investment are likely to endure for an even longer period. the us economic recovery is still fragile and risks remain. the recovery in the us, still the largest economy in the world, is a positive factor for the rest of the world. however, partly as a consequence of higher growth, the reduction in their quantitative easing programme, whereby the fed is reducing its asset purchasing programme by us $ 10bn per month, is having detrimental effects on many emerging markets and an unsettling effect on financial markets globally. growth rates have slowed in major emerging markets such as china, india and brazil. many developing countries, from turkey to venezuela, are battling both domestic economic challenges and capital outflows. however, africa remains a bright spot in the world economy with sub - saharan african growth at over 5 per cent a year, providing significant opportunities
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##udential requirements related to the interplay between banks and hedge funds. this could create the potential for an asymmetry leading to distorted regulatory incentives. second, also on the basis of the fsb analysis, we need to look with new eyes at the eu regulatory framework and ask ourselves whether it can properly address systemic risks stemming from shadow banking. in the past, regulation was sectoral - based, without specific consideration of the interconnections existing in reality between financial sectors. in this context, i welcome the commission β s green paper, which contains a very helpful preliminary analysis on whether the regulatory initiatives undertaken so far in europe are addressing such new perspective. it also indicates outstanding policy issues on which further regulatory initiatives might be needed. the green paper is also referring to the need for europe to establish a permanent process for the collection and exchange of information by all relevant authorities to address shadow banking entities and activities. in this regard, i note that the esrb, as the eu macroprudential body with authority over the whole eu financial sector, is well placed to conduct a continuous monitoring of systemic risks stemming from shadow banking. iii. policy issues concerning securities financing : the ecb β s views i would like now to focus on the repo market, which is of particular importance for central banks. the repo market is a key source of financing for the banking sector and the shadow banking system. most recent estimates of the size of the repo market in the us are in the range of usd 12 trillions in early 2010. 3 there are no official data on the overall size of the repo market in the euro area, but according to the latest december icma survey, the total value of outstanding repos on the book of the 64 offices of 59 financial groups in the eu in december 2011 was of eur 6. 2 trillion in gross terms. secured lending via repos has been increasing significantly in the past recent years in detriment of unsecured forms of interbank lending in money markets. indeed, we estimate that since 2002 the daily turnover of the interbank secured lending more than doubled whereas the unsecured part of that marked decreased slightly. secured financing provides benefits over unsecured lending, especially during turbulent market times. at the same time, however, the reliance on secured financing provides a powerful channel of transmission of shocks in the financial system. the decline in collateral values translates in additional collateral calls possibly compounded with higher haircuts and margins requirements. a
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and when it gets up and running. in other words, the standards required to preserve safety against theft, fraud and operational failures may prove too demanding, or too costly, for many initiatives to get off the ground. this equilibrium would not imply a digital standstill, however. other initiatives can help meet growing consumer demand for payment services that work across borders and that are faster, cheaper and easier to use than current payment systems. libra has undoubtedly been a wake - up call for central banks to strengthen their efforts to improve existing payment systems. this by itself is undoubtedly a win - win situation for the global community. progress made by those central banks already operating at the technological frontier can be expected to increase the speed of technological diffusion across borders. europe is leading by example here. in november last year, for example, the eurosystem launched target instant payment settlement ( tips ) β a new market infrastructure which allows payment service providers to offer funds transfers to customers across europe in real time, around the clock, and on every day of the year. tips could be a role model for developing economies. it not only has the potential to help better prepare incumbents for the challenges arising from digital giants, it has also the potential to be a catalyst for financial inclusion, which should be a key objective of any public initiative in the payment field. central bank digital currencies a second, and related, equilibrium is what bank of england governor mark carney recently called a synthetic hegemonic currency that is provided through a network of central bank digital currencies β cbdcs for short. many central banks have been working on cbdcs in recent years, though at differing speeds, depending on differences in demand for cash by citizens, among others. sveriges riksbank and the central bank of uruguay, for example, are among the most advanced central banks in this area. their experiments with the β e - krona β and β e - peso β provide useful food for thought. the https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190917 ~ 9b6... 18. 09. 2019 digital challenges to the international monetary and financial system page 5 of 8 people β s bank of china has also reportedly accelerated plans for its own digital currency in response to libra. the costs and benefits of issuing a global synthetic currency have been discussed since john maynard keynes β bancor proposal
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aims at limiting system - wide distress and avoiding output costs. an important concept here is systemic risk ; the risk that liquidity or solvency problems in a bank may cause liquidity problems or insolvency in other institutions. thus, correlation and common exposures across institutions are important in the macroprudential approach. the second approach deals with risks originating from outside the financial system. this field has increasingly been recognized by researchers and policymakers in later years. strong growth in debt and asset prices, as well as macroeconomic disturbances like a surge in commodity prices or the unwinding of large imbalances in the world economy, can ultimately affect financial stability in a negative way. to identify potential sources of instability, we need indicators that contain useful information. with an estimate of the equilibrium values of debt ratios or asset prices, for example, we can study the gap between their current value and their equilibrium value. 4 if the gap is wide, the danger of a significant consolidation is present. however, the results must be interpreted carefully. equilibrium values are inherently difficult to determine, and it is not obvious that there is a stable and significant relationship between gaps and future economic activity. in addition, decisive factors in the judgement of the financial situation, like agents β confidence in the financial system, are also difficult to incorporate in the analysis. a related approach is to analyse the potential impact of adverse macroeconomic shocks on financial stability. stresstests are commonly used for this purpose. such tests investigate banks β ability to withstand different types of shocks under various economic conditions and with different monetary policy responses. when conducting stresstests, macroeconomic models have proven to be valuable. however, considerable work remains to be done in order to capture the behaviour of economic agents in the case of extreme macroeconomic events. hoggarth, glenn, ricardo reis and victoria saporta ( 2001 ). β cost of banking system instability : some empirical evidence β bank of england financial stability review, issue 10, article 5, june see for example borio, claudio ( 2003 ). β towards a macroprudential framework for financial supervision and regulation? β bis working paper no. 128 see for example borio, claudio and philip lowe ( 2004 ). β whither monetary and financial stability? the implications of evolving policy regimes β bis working paper no. 147 financial markets and institutions have become more interdependent. the possibility of contagion across borders thereby increases. cross - border capital flows
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- long consequences for economic developments. all that said, however, the challenges facing banks today require a broader set of instruments than those used by the nordic authorities 20 years ago, for two main reasons : first, the situation for banks is more complex. the authorities have to distinguish more clearly between insolvent banks and banks that are solvent but in need of more capital in order to increase lending. the lessons from the nordic banking crisis can be drawn on for the insolvent banks. for the solvent banks, the challenge is to maintain their lending capacity. this is particularly important given that other credit markets are not functioning normally, so that it is difficult, or impossible, for businesses to acquire funding directly from bond markets. but without more capital, the banks are not willing to accept new loans on their balance sheets. the main challenge facing the authorities today therefore is to ensure that solvent banks increase their financial strength and thereby their lending capacity. at the same time, it is important to have an exit strategy so that capital injections today do not translate into an increase in state ownership when the crisis is over. second, cross - border banking has been increasing. twenty years ago, all the main nordic banks were national banks. today, for example, four of the five largest banks in norway are foreign - owned ( three branches and one subsidiary ). a national authority cannot be expected to bolster the financial strength of branches of foreign banks : indeed, it could be complicated to do this even for foreign - owned subsidiaries. while we were able to choose national solutions to the banking crisis 20 years ago, any effective solution to today β s situation will require an internationally harmonised approach. as today β s financial crisis progressively gets resolved, it will be necessary to start the process of preventing future crises. this will require substantial reform of the regulatory framework. banks will have to strengthen their capital and their liquidity buffers. and financial regulation must have a less pro - cyclical effect. the objective must be to enable the banks to curb the impact of shocks on the economy, rather than to amplify them, as is the case now, where negative spirals are generated between the financial system and the real economy. because of the global character of today β s financial crisis, the authorities must work in concert to find solutions, both in terms of recapitalisation of the banks and regulation of the financial sector.
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was not limited to the pool of national saving. indeed, in the last few decades of the 19th century, saving and investment at the national level apparently were far less correlated with each other than they were for most of the 20th century, suggesting a greater degree of globalization of investment financing in the latter part of the 19th century than existed in the succeeding century relative to the size of our domestic economies. thus, our great grandparents lived in a world in which the product of their efforts well may have been sent to foreign shores. quite often, those efforts were funded in part by foreign investors. as a result, what happened in the financial markets of the city of london, however distant, would echo around the globe. although this system produced inevitable errors of mispricing and panic on occasion, it reliably funded the opening of new economies and the rolling back of frontiers across the americas. a considerable portion of the most impressive infrastructure built over the centuries - including the center of old mexico city itself, our system of canals in the united states, and thousands of miles of railroad track bed and bridges in all our countries - provides eloquent testimony to the net benefit of that international trade and finance. how the world differs but we should remember that the world of the 19th century differed in important respects from our own. for one, our great grandparents were more likely to relocate. given the great waves of immigration in the mid and late 19th century, it was not unprecedented in some countries that migration would change the population by one - tenth in a decade. the erection of hurdles to the free flow of workers since then implies that our national relationship with foreign countries is more likely to reflect commercial interests than lingering ties of earlier origin. it also requires that capital and managers relocate to tap the pool of lower - cost workers available worldwide, helping to explain both the rise of multinational firms and much of the expansion in real wages over time in developing countries. the output of our workers also differs. while ore - laden ships still cross the great lakes, quite often goods of far higher value are packed in the hold of a single cargo jet bound for a more distant location. simply put, the advent of the microchip has allowed producers to increase the value of output while shrinking the physical volume it takes up. the range of innovation in the high - technology industry is truly awesome, bringing new products on line at a staggering pace and directly adding to the advance of output per hour worked in that sector. and as knowledge and skill
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there was only one question in my mind, subject to the approval of the eccb monetary council : how quickly could we get this done? you see, typically, the design and production of a new note has a lead time of two years. i immediately called our director of currency, mr. rosbert humphrey who subsequently contacted de la rue, our longstanding currency partner. and so our journey to this launch began. of course, we had to secure the approval of the monetary council - which comprises the eight ministers for finance of the eccu participating governments - to do something that had never been done before. the monetary council ( which the honourable dennis cornwall sits on as grenada's finance minister ) unanimously approved grenada's request last july, after which we were officially off to the races. at this juncture, i wish to recognise the work of the grenada team led by orlando romain. orlando, as you all know, is one of grenada's leading creatives. orlando could you please stand and take a bow? i wish also to recognise the work of my colleague rosbert humphrey, director of our currency management department for his dedication to this collaboration. rosbert, could you please stand and take a bow? and i thank de la rue, the longstanding minter of eccb's notes, represented by mr. gareth evans who is here to witness this special occasion. gareth, could you stand and take a bow? prime minister, thank you for the pleasure of this collaboration. as you know the eccb celebrated its 40th ( ruby ) anniversary last year. during our celebrations, we hailed the contribution of our founders and framers. one of our founders is the grenadian who, on july 5th, 1983, signed the eccb agreement, without which there would be no eccb. does anyone recall who signed the eccb 2 / 4 bis - central bankers'speeches agreement for grenada? yes, it was maurice bishop who, two years prior on june 18th, 1981 in st. kitts, signed the treaty of basseterre on behalf of grenada, establishing the organisation of eastern caribbean states ( oecs ). grenada is the first member of the eastern caribbean currency union to have attained political independence. on the occasion of this golden milestone, grenada is creating another first with the launch of a $ 50 commemorative circulation note simply called the grenada $ 50. " commemorative " simply means that the note is issued on the special occasion of grenada '
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randal k quarles : disclosures and data - building strong foundations for addressing climate - related financial risks speech by mr randal k quarles, vice chairman for supervision of the board of governors of the federal reserve system, at the venice international conference on climate change, venice, italy, 11 june 2021. * * * introduction thank you for inviting me today. it is an honor to be here and, after more than a year of remote conversations, it is truly wonderful to see so many people in person. as chair of the financial stability board ( fsb ), i have the privilege of collaborating with the italian g20 presidency, the g20 finance ministers and central bank governors, and with the fsb membership on the most pressing issues affecting financial stability. 1 among those issues, one of increasing focus is understanding and monitoring climate - related financial risks. given the global nature of climate change, this demands a coordinated international effort. the fsb published last wednesday a climate roadmap that presents a comprehensive and coordinated plan to address climate - related financial risks. the fsb's roadmap dovetails with the ongoing work of the g20 sustainable finance working group ( sfw g ) to develop a broader sustainable finance roadmap. today, in my role as chair of the fsb, i would like to focus on the two foundational components of the fsb roadmap : disclosures and data. globally consistent, comparable, and reliable disclosures, as well as a broader set of high - quality, relevant data, together, can provide the basis to assess climate - related financial risks and the impact on financial stability. disclosure the fsb was an early leader in bringing attention to the importance of reliable, entity - level disclosures to assess and manage climate - related financial risks and opportunities. in 2015, the fsb submitted a proposal to the g20 to create an industry - led disclosure task force on climaterelated risks. 2 the work of this fsb - sponsored task force on climate - related financial disclosures, or tcfd, has led to greater recognition of the importance of climate - related financial risk and of comparable and reliable disclosure. the early development of industry - led recommendations and a usable framework by users and producers of this information was critical. the four core elements of the tcfd recommendations have provided a widely accepted framework for disclosures β covering governance, strategy, risk management, and metrics and targets. the task force has continued
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and we are in the process of launching an important study on the effects of reforms aimed at ending too big to fail. this evaluation is being led by claudia buch, vice president of the deutsche bundesbank. conclusion this is an important time for the fsb. we are nearing completion of the post - crisis reform agenda, a major accomplishment. with that comes the opportunity to turn our focus to ways in which we can improve the fsb and prepare it for the next phase of its existence. we will work diligently to enhance our transparency and to expand our efforts to reach out to as many stakeholders as possible. we will prepare for the next crisis by making sure that our framework to assess vulnerabilities to financial stability is state of the art and remains so going forward. and, we will work hard to maintain the important reforms in place, ensure they are working as intended, and, where possible, improve them. 4 / 4 bis central bankers'speeches
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njuguna ndung β u : the methodology of collection, compilation and analysis of international remittances statistics remarks by professor njuguna ndung β u, governor of the central bank of kenya, at the regional course on β the methodology of collection, compilation and analysis of international remittances statistics β, nairobi, 17 november 2014. * * * dr. sehliselo mpofu, director, macroeconomic management programme β mefmi ; distinguished facilitators and mefmi staff ; delegates ; ladies and gentlemen : it is a privilege for me to join you on this important occasion of the official opening of this regional course on β methodology for collection, compilation and analysis of international remittances statistics β. allow me from the onset, to extend a cordial welcome to you all on behalf of the government of kenya. we are indeed honoured and happy to host this important activity here in nairobi, kenya. i would like also to extend a very special welcome to the delegation from mefmi. we are honoured to host one of your capacity building events this year. as always this has attracted a high level of interest and attendance, an indication of the perceived need to bridge the existing capacity gaps in the compilation of remittances statistics. let me also thank the distinguished resource persons, dr. emmanuel kumah, who was formally of the imf statistics department, and mr. moris mpofu from the reserve bank of zimbabwe for accepting to bring their expertise to this course. i am confident that their vast knowledge will enable them to share experiences in this critical policy area and contribute immensely to the enhancement of skills in the mefmi region. as you are all aware, international remittances have grown to become significantly important in providing foreign exchange and financing. they, particularly, support millions of poor recipients. we cannot therefore afford to ignore the quality of data for such an important contributor to economic growth and development. until recently, unlike other countries with significant numbers in the diaspora, we in africa have paid little attention to the role of remittances in our development thinking. this must now change. there is increasing awareness of the importance of these remittances due to the fact that, unlike other financial flows, remittances mostly go directly to households, either for investment or consumption smoothing. therefore, they have important poverty alleviation benefits. the critical questions are therefore how much of this money is coming into
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banking sector embraces risk management. the first challenge relates to the implementation cost, particularly amongst medium and small banks. human resource competences are also a constraint. the other key challenge we note from our regulatory seat is the view by some institutions of risk management from just a compliance perspective. these are not insurmountable challenges and market players should pool resources and efforts to address them. in this regard, the central bank will work with the banking sector to entrench risk management. the bank will also leverage on the kenya school of monetary studies ( ksms ) to provide capacity building programs on risk management for the sector. i would also urge banks not to view risk management just from a compliance perspective but also as a business imperative. entrenchment of risk management enables institutions to effectively price their products in line with their risk profile. this will not only enhance their competitiveness but also maximize shareholder value. but information must be available to provide assessment on the risk profile. the central bank of kenya will therefore continue with its efforts to enhance risk management in banks. this drive will be supplemented by initiatives to scale - up surveillance at the system - wide level. in this regard, the bank β s existing early warning system will be scaled up to incorporate both macro and micro prudential indicators of financial stability. other measures that the central bank will take to strengthen it β s supervisory tools include : β’ stepping up supervisory co - operation and co - ordination with domestic and foreign financial sector regulators. this is particularly pertinent as kenyan banks extend their reach locally and regionally and also as products developed encourage other regulators to come into the picture. β’ encouraging the adoption of forward looking techniques by banks in their risk management framework. this is particularly in regard to the use of stress testing. this measure will however be accompanied by β market education β to ensure that the results are not misinterpreted. my role this evening was just to set the stage for the lively interactions on risk management that will follow shortly. the central bank is certainly open to considering ideas that can push forward the risk management frontier. it now remains for me to wish you fruitful deliberations and a pleasant evening. thank you.
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reduced the cost of doing business across countries. 7 firms have unbundled their production networks and relocated production and assembly in line with the relatively lower cost of production. as a result, trade flows of intermediate inputs increased almost threefold8 from 1990 to 2015. supply chain linkages intensified at a faster pace and were more resilient during the crisis compared with supply chain linkages with countries outside the single market. 9 second, the adoption of the acquis communautaire led to a more predictable legal environment and high - quality regulatory framework, which have increased investor confidence and contributed to a rapid inflow of foreign investment and technology. 10 the inflows of foreign direct investment ( fdi ) in the region amounted to around 6 % of gdp in the pre - crisis years, compared with only 3. 4 % in the eu as a whole. 1 / 4 bis central bankers'speeches countries that achieved a high level of institutional quality and governance, 11 and have been able to adopt the single currency, further benefited from the reduction of trade costs. 12 their participation in value chains has been consistently higher than that of other eu countries and they have made most progress in catching up with the average level of gdp per capita in the eu. but more importantly, the single currency β s main benefit has been to provide stability in the integration process. it has ensured that a critical mass of countries participating in the single market was insulated from exchange rate volatility during times of economic stress. by preventing competitive devaluations between countries within the bloc, the single currency has guaranteed the continued openness of the single market and strengthened the incentives for firms to increase their competitiveness through productivity gains. 13 all economies have gained from increased trade. since the 1990s, intra - eu trade has risen in real terms, even as emerging economies entered the global market. 14 trade has in turn supported productivity growth. cee countries, in particular, have been able to accelerate the process of technology absorption from firms at the productivity frontier, which has proved to be a key ingredient in the process of convergence. ecb research shows that technology transfers have contributed to strong productivity spillovers within european value chains. 15 a 10 % increase in total factor productivity ( tfp ) growth of western eu firms at the value chain frontier contributed to 4. 8 % tfp growth for cee firms participating in value chains, which in turn fostered wage convergence in these economies. global headwinds : vulnera
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s economies need to find new ways to boost tfp growth and deepen capital accumulation in order to β grow out β of their vulnerabilities. the main long - term challenge is moving towards a more balanced growth and financing model, which is more reliant on domestic innovation and on higher investment spending than it has been so far. this will only be possible if domestic institutions and governance are improved. those countries that joined the euro area have continued improving their institutional quality, partly owing to the accession process. in the other eu countries of the region, efforts to improve institutional quality have been more mixed in recent years. overall, institutional quality is still below the euro area average in almost all cee economies. 19 convergence is an ongoing process and reforms introduced over the past few years should not be rolled back. a high level of institutional quality is necessary to fully reap the benefits of the single market and maintain the sound economic structures necessary for the resilience of the single currency. the same applies to structural policies which were introduced to improve the competitiveness and resilience of cee economies. conclusion the single market created prosperity in cee countries, especially for those in the euro area, by generating convergence in per capita income. 20 indeed, the eu has been a source of growth and anchor of stability, allowing the region to catch up with eu living standards. conferences such as this one are valuable for policymakers to reflect on the region β s current vulnerabilities and to discuss new avenues for growth. today, we have with us a distinguished guest who, through her leadership of the imf, her experience as minister of the economy and finance and former chair of the g20, will undoubtedly bring valuable ideas and new insights to this conference. please give a warm welcome to christine lagarde. 1 the cesee region comprises albania, bosnia and herzegovina, bulgaria, the czech republic, croatia, estonia, hungary, kosovo ( this designation is without prejudice to positions on status and is in line with unscr 1244 and the icj opinion on the kosovo declaration of independence ), latvia, lithuania, montenegro, north macedonia, poland, romania, serbia, slovakia, slovenia and turkey. 2 zuk p., polgar, k., savelin, l., del hoyo j. and konig, p. ( 2018 ), β real convergence in central, eastern and south - eastern europe β, economic bulletin, issue 3, ecb. 3
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ready to answer questions once the other speakers have made their remarks. thank you very much for your attention.
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shared their knowledge and experience with their egyptian counterparts to reform the internal procedures and policies of the central bank of egypt towards a greater focus on risk - based supervision. this programme ended in november 2007 and was considered a success by all those involved. the new programme on banking supervision will begin on 1 january 2009 and will build on the capacity of the staff of the central bank of egypt in terms of risk - based supervision. as i have already mentioned, it will run for a period of three years and will be funded by the european union. the aim of the programme is to support the central bank of egypt in drafting new rules, policies and practices that will effectively create an appropriate egyptian version of the internationally accepted banking supervision standard known as basel ii. in this process we will also take account of the most recent european experiences from the financial market turmoil. more specifically, we will assist the central bank of egypt β s banking supervisors in developing a specific egyptian guideline for the implementation of basel ii, as well as a new regulation that will apply to banks in the country and a new reporting scheme for banks in order to provide the central bank of egypt β s banking supervisors with the information they need to carry out their job. before this goal is reached, many steps need to be taken and many publications will be printed. as always, it will be very important to design the new framework in such a way that it is suitable for local market conditions. with this aim in mind the european union β s banking supervisors will support the central bank of egypt in its key dialogue with egypt β s commercial banks to begin in the first half of 2009. from the side of the european system of central banks, or the escb, i. e. the european central bank and the national central banks of the european union, the programme will be implemented by the european central bank in partnership with seven national central banks, namely those of bulgaria, the czech republic, germany, greece, france, italy and romania. the banking supervisors from these countries will support and assist their egyptian colleagues in the challenging tasks that they have set out to achieve. i would like to welcome the representatives from the escb that are here today. from our side there will be a need to coordinate these efforts and to be continuously available to support the work of our egyptian colleagues. this will be the main task of mr herve leclerc, inspector of the banque de france, who will be our resident programme coordinator here in cairo from 1 january for three
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distinguishing whether an extension of the period for maintaining the current accommodative monetary policy is, for example, ( 1 ) the result of more pessimistic forecasts by a central bank on prices and economic activity or ( 2 ) the result of a more accommodative policy. the former may discourage aggregate demand while the latter may promote aggregate demand. the state - contingent approach may help to distinguish between these two cases. in relation to economic conditions ( or thresholds ), forward guidance can focus solely on prices or can include a wide set of economic variables ( e. g., the unemployment rate ). the different forms here reflect ( 1 ) the presence of other mandates given to the central bank, such as the dual mandate in the case of the federal reserve ; ( 2 ) the specific environment surrounding monetary policy at the time ( e. g., whether current inflation trends are above or below the inflation target ) ; and ( 3 ) the detailed measures adopted ( e. g., policy interest rate, asset purchases, or a combination of both ). the most important point i wish to highlight here is that the degree of details contained in the description of forward guidance can vary over time. it can be refined over time as economic recovery becomes firm, by giving more specific information about the duration of monetary accommodation or the economic conditions. b. forward guidance in japan let me now focus on forward guidance in japan. the bank has a long history of practicing communication strategy to generate monetary easing under the zero lower bound. there are a number of empirical analyses pointing to the effectiveness of this policy in japan, particularly in regard to the impacts on financial markets. 5 forward guidance also constitutes an important element of qqe. i will first explain the forward guidance used under the current see, for example, bank of england, β monetary policy trade - offs and forward guidance, β 2013. see, for example, nobuyuki oda and kazuo ueda, β the effects of the bank of japan β s zero interest rate commitment and quantitative monetary easing on the yield curve : a macro - finance approach, β bank of japan working paper series, no. 05 - e - 6, 2005 ; hiroshi ugai, β effects of the quantitative easing policy : a survey of empirical analyses, β bank of japan working paper series, no. 06 - e - 10, 2006 ; and jouchi nakajima, shigenori shiratsuka, and yuki terani
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baaack : japan β s slump and the return of the liquidity trap, β brookings papers on economic activity, 1998 ( 2 ) ; 137 β 205 ; david reifschneider and john c. williams, β β three lessons for monetary policy in a low - inflation era, β β journal of money, credit and banking, 32 part 2, 2000 : 936 β 66 ; gauti b. eggertsson and michael woodford, β the zero bound on interest rates and optimal monetary policy, β brookings papers on economic activity, 2003 ( 1 ) ; 139 β 211 ; and michael woodford, β methods of policy accommodation at the interest - rate lower bound, β speech delivered at the 2012 economic policy symposium, federal reserve bank of kansas city, 2012. bis central bankers β speeches open - ended, calendar - based, and state - contingent forward guidance forward guidance can take various forms. for example, it can be applied solely to the policy interest rate or to a broader set of monetary stimulus measures including the policy rate and asset purchases. it can be categorized as open - ended, calendar - based, or state - contingent ( or threshold - based ). 4 open - ended guidance can refer to an abstract description of the monetary easing policy duration ( such as β a considerable period β or β an extended period β ) or of the economic conditions under which the accommodative policy will be maintained ( such as β until deflationary concerns are dispelled β ). calendar - based guidance uses specific date expressions for monetary easing, such as β over the next six months. β some people consider that calendar - based forward guidance is superior to open - ended forward guidance from a transparency and effectiveness perspective. state - contingent guidance provides a clear description of the economic conditions under which the accommodative policy will be maintained by using, for example, a threshold on the inflation outlook. when comparing calendar - based and state - contingent forward guidance, the state - contingent approach is regarded as being superior for two reasons. first, it provides assurance of a central bank β s intention to maintain its accommodative monetary policy even after economic recovery strengthens by introducing such specific expressions in the guidance. second, a clear description of the relationship between the conduct of future monetary policy and the economic conditions contributes to enhancing transparency and predictability in the eyes of the markets and the public. the major drawback of the calendarbased approach is the difficulty in
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euro area governance, both by strengthening fiscal frameworks and improving crisis management mechanisms. much remains to be done. but if we keep on the right track, we will emerge from the crisis better equipped to take advantage of the opportunities offered by our common currency. bis central bankers β speeches
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economy will have to be optimised, and where public debate will have to bring together doctors and economists. their opinions may converge more easily than we believe. lastly, we know that we will emerge from this crisis with significantly higher levels of debt. this is clearly the case for government debt, with an increase of between ten and several dozen percentage points of gdp. but it is also the case for business debts : the longer the economic hiatus lasts, the more their problems will evolve from simple cash requirements to lasting balance sheet challenges and losses to be covered through capital increases. in financial terms, several businesses will go from facing liquidity constraints to solvency constraints. and the current cash flow problems will become stock problems. relatively speaking, the economic agents generally least affected by this crisis are households, which experience high levels of β forced saving β during the period. of course, this does not mean that, on a micro - economic level, some low - income households and financially vulnerable people are not already feeling the effects of lost income ; and these households, which struggle to make ends meet, have no precautionary savings. * * * this leads us to consider the lessons that history can teach us about recovering from crises, starting with the post - war years. this has become a particular focus of economic research today, even though, fortunately, our situation is less page 6 of 8 dramatic : the three " classic " themes β which give rise to so many questions β are the return to growth, debt treatment, and the proper use of monetary policy. 1 / how to support growth? in europe, there would be little sense in giving a cheque to every household, which forms part of the us recovery plan. we do not have β fortunately, to my way of thinking β the same social model. given the various social protection schemes in place in europe, to which we can add forced saving during periods of lockdown, household demand should recover quite spontaneously. in terms of total demand, greater uncertainty remains around investment and external demand, particularly with regard to the time needed for the global economy to overcome the public health crisis. supply from businesses could remain stymied in some sectors due to lasting loss of capacity ( bankruptcies ) and supply chain difficulties. this is therefore likely to require investment programmes and climate transition programmes that sustain demand while improving production capacity ; and for that, priority will have to be given to financing joint initiatives at the european level, particularly given its higher " debt capacity ".
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expert judgments. third, the supervisors'judgmental assessments were supplemented by objective, modelbased estimates for losses and revenues that could be applied on a consistent basis across firms. for example, we used statistical models to estimate residential mortgage losses at see board of governors of the federal reserve system ( 2009 ), " the supervisory capital assessment program : design and implementation, " white paper ( washington : board of governors, april 24 ). see board of governors of the federal reserve system ( 2009 ), " joint statement by secretary of the treasury timothy f. geithner, chairman of the board of governors of the federal reserve system ben s. bernanke, chairman of the federal deposit insurance corporation sheila bair, and comptroller of the currency john c. dugan : the treasury capital assistance program and the supervisory capital assessment program, " joint press release, may 6. see board of governors of the federal reserve system ( 2009 ), the supervisory capital assessment program : overview of results ( washington : board of governors, may 7 ). firms based on loan data submitted by the firms as part of the exercise. each participating institution was asked to supply detailed information, in a standardized format, about the composition of its residential real estate portfolios, including breakdowns by type of product, loan - to - value ratio, fico score, year of origination, and so on. these data allowed supervisors to consistently estimate potential future losses across firms using a variety of independently constructed models. some of these models were already in use to monitor risk as part of the ongoing supervisory oversight process, while others were developed or refined specifically for the capital assessment exercise. similarly, to assess firms'revenue projections for 2009 and 2010, the agencies examined the components of expected revenue in detail, compared the projections to historical results, and cross - checked the underlying assumptions with projections of portfolio growth, funding costs, and the like. the agencies also used more - formal statistical analyses to develop firm - by - firm forecasts that would reflect the historical relationship between revenues and macroeconomic conditions, thereby enabling them to assess which components were less likely to be sustainable in a weaker economy. information from all of these sources was incorporated into the final revenue projections. finally, the supervisors systematically incorporated all of these inputs into loss, revenue, and reserve estimates for each institution. determining the size of the capital buffer a key question in this assessment was the appropriate size of the capital buffers that these firms would be required to hold, as well
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it helps reduce uncertainty among investors regarding future losses and capital needs, and thereby improves the banking system's access to private capital, one of the key objectives of the program will have been achieved. it will be some time before we can evaluate the success of the program on this criterion. however, the initial indications are encouraging. each of the 10 banks requiring an additional capital buffer has pledged to have the necessary buffer in place by the november 9 deadline. many of the banks are well ahead in finding private - sector options for increasing their common equity, and several have announced plans for new equity issues. in another positive sign, several have announced plans to issue long - term debt not guaranteed by the fdic. lessons from the assessment program for the supervisory process we've learned important lessons in the capital assessment process that will inform our supervisory efforts in the future. notably, the process of comprehensively evaluating 19 major firms represented an important step forward in consolidated supervision, as it gave us insights into the challenges posed in understanding risks and exposures across complex organizations. the cross - firm aspects of the assessment program were also instructive from a supervisory point of view. as i have mentioned, unlike traditional examinations focused on individual banks, the assessment process specifically incorporated cross - firm and aggregate analyses of a set of firms that constitute a majority of the banking system. this approach allowed a broader analysis of risks than is possible within the traditional supervisory focus on individual institutions. supervisors evaluated loss rates for similar portfolios using consistent data and metrics, allowing them to identify outliers and more effectively evaluate the quality of individual firm estimates. the process was an iterative one, with both the firms and supervisors conducting sensitivity analyses around key assumptions. the federal bank regulators β the federal reserve, occ, and fdic β cooperated extensively throughout this process, from the design to the implementation. in addition, within each agency, many resources across a range of skills were brought to bear. for example, quantitative experts supported examiners by incorporating statistical tools to facilitate benchmarking across institutions and to develop consistent loss estimates. we learned from this effort that it is not a simple matter to simultaneously evaluate the consolidated risks for two - thirds of the assets in the u. s. banking system, using a common forward - looking framework and common metrics. but it was an enlightening exercise that will improve the toolkit we use to help ensure the safety and soundness not just of individual firms, but of the financial system more
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the demand for short - term, high - quality instruments was likely stimulated, on the one hand, by structural factors such as, fiscal consolidation in most of the industrial countries and the resulting decline in the issuance of government debt securities, and on the other, by economic factors such as the flattening of the yield curve. one further correction to the m3 statistics still needs to be made. to date, only provisional data are available on purchases of money market paper and of short - term debt securities by non - euro area residents. by the end of the year, revised m3 figures should be published taking full account of negotiable instruments held by non - euro area residents. one of the important general challenges of producing and interpreting statistics is to maximise their economic content. the revision of the monetary statistics in order to take into account purchases of negotiable instruments by non - euro area residents is a further step in this direction. the monetary statistics are among the most advanced statistics available for the euro area. they are based on a fully harmonised consolidated balance sheet and on fully harmonised money - issuing and money - holding sectors, as well as on harmonised financial instruments. in view of their close links with inflationary developments and their good leading indicator properties for future inflation, monetary developments must also play a prominent role in the monetary policy strategy of the ecb in the future. since the second quarter of 2000, growth in m3 has been declining mainly on account of the increase in the short - term interest rates. adjusted for the money market fund shares / units held by non - euro area residents, m3 grew at an annual rate of around 41 / 2 % in the first four months of 2001. if current data on purchases of money market paper and short - term debt securities of non - euro area residents are also taken into account, the annual rate of growth of m3 over recent months has probably been slightly below the reference value for m3. overall, monetary developments therefore point towards a favourable outlook for the medium - term maintenance of price stability. growth of credit to the private sector in the euro area has increased relatively strongly since the start of stage three of emu. in particular in 2000, some of the credit demand can, however, be attributed to the financing needs in the context of mergers and acquisitions, partly outside the euro area, and to the financing of umts licences. these factors, however, are not likely to affect domestic price developments. in this respect, the dynamics
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be overlooked. i should like to refer back to my opening lines : holding onto something which is well - established can hinder progress and change which in themselves can bring many advantages. this applies not only to the introduction of the euro but also to the enlargement of the european union. ladies and gentlemen, thank you for your attention.
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positive change β change that improves the system to be more accessible, safer, more equitable and more beneficial to every filipino. indeed, the philippines has registered uninterrupted economic growth for 69 quarters now. real gdp growth averaged five percent since 1999 and there are indications that growth is getting more broad - based. this gives us a level of confidence that we can address challenges that lie ahead. in this connection, i wish to share the report released yesterday by the imf mission to the philippines. it said strong macro fundamentals and improved governance provide a solid foundation to meet remaining challenges. such challenges include addressing poverty, underemployment and ensuring that economic growth benefits the broader population. according to the imf, the philippines continued to register solid growth in 2016, despite external headwinds, due in part to fiscal stimulus and supportive monetary conditions. it added that our initiatives to strengthen systemic risk monitoring in the financial sector have helped maintain financial stability in a challenging global environment. ladies and gentlemen. this is a credible third party assessment of the gains we have made together. in addition, the bsp continues to receive awards and recognition in the pursuit of its mandate to ensure low and stable inflation, maintain a sound and stable financial system, and operate an efficient payments and settlements system. as partners and stakeholders of the bangko sentral ng pilipinas, you rightfully share credit for this as well. thank you for your continuing support and confidence in the bsp! moving forward, we see potential risks that can elevate volatility and challenge our policymaking. nevertheless, our domestic sources of resilience will help us manage possible spillovers from global challenges such as weak and fragile growth, geo - political tensions, continuing uncertainty over us fed interest rates and brexit. and our economy remains on track as the new administration under president rodrigo duterte sets its priorities to achieve growth and a better life for our people. bis central bankers β speeches let us therefore continue to collaborate and work together so we can help overcome roadblocks to growth and prosperity in our country. on behalf of my colleagues at the monetary board and the bsp family, i thank all of you and look forward to making our partnership grow and our collaborations deeper and more meaningful. ladies and gentlemen. the african - american poet and pulitzer prize winner gwendolyn brooks once wrote β¦ and i quote : β we are each other β s harvest ; we are each other β s business ; and finally
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economic trends, and help us assess our vulnerability to external shocks. and it is our collaboration with banks that help us operate an efficient payments and settlements system that keep our financial system stable and facilitates the safe transfer of billions of remittances from overseas filipinos across the globe. but more than providing valuable support, our partners give us feedback on the effectiveness of our policy actions. this is an important facet of our partnership. thus, the bsp invests resources in engaging our stakeholders in policy formulation and regular consultation. we know that if we do not listen, we can lose our grounding and in the process, our policy actions may lose potency. it is important therefore that we sustain and continue to nurture our partnership. we count on this as one of the anchors that provide guidance and credibility to our decisions. bis central bankers β speeches moreover, our common vision of making lives better through our partnership have led us to cooperate in pushing for advocacies that matter. for instance, our campaign to protect our people against counterfeit banknotes led us to introduce new generation banknotes that have many new security features. we thank all of you therefore for helping spread information on these new security features and the demonitization of our old - design banknotes. as scheduled, our people have until december this year to exchange old - design banknotes with banks or the bsp. by 2017, old - design banknotes will no longer be accepted by banks ; an exception to this rule are overseas filipinos who have up to next year to exchange their old - design banknotes. in particular we thank the banks, malls, stores, public offices and transport groups for helping us spread the message of demonitization and the security features of our new banknotes across the country. another advocacy we are giving priority to is the development of an inclusive financial system. in particular, we have leveraged on our initial gains in microfinance and financial inclusion to develop and implement the national strategy for financial inclusion in partnership with other government agencies, the banks, the private sector, the academe and the ngo community. we are heartened by our continuing progress in scaling up our efforts to bring more filipinos into the financial mainstream β where sound financial management is developed, where the cost of money is more affordable, where savings are encouraged and protected, and where investment products provide opportunities for growth. in other words, ladies and gentlemen, through our collaboration, we have become agents of stability and of
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outline suggested changes to basel i. in part, these proposed changes are meant to address concerns about the potential adverse competitive effects of basel ii. the federal reserve takes concerns about competitive effects seriously and has conducted substantial research on the topic. during the process to amend basel i, we sought input from the industry and other interested parties. in view of those concerns, regulators have proposed changes to enhance the risk sensitivity of u. s. basel i rules ; we also remain vigilant about identifying potential competitive distortions that might be created with the introduction of basel ii. we are also mindful that amendments to basel i should not be too complex or too burdensome for the multitude of smaller banks to which the revised rules would apply. that is, in amending basel i for these institutions, we are trying to find the right balance between added risk sensitivity and regulatory burden. that balance is not necessarily easy to find. for example, one way to tie regulatory capital more closely to risk under basel i would be to expand the number of factors used to determine risk weights - for example, to include credit scores or external credit ratings. the tradeoff is that incorporating additional risk measures is likely to increase the burden of calculating regulatory capital. the comments received suggest that institutions differ on how best to make this tradeoff. we will continue to evaluate this tradeoff and solicit further comments on how to proceed. conclusion we expect that risk management and banking supervision will continue to develop along parallel tracks. the basel ii framework represents an important effort by supervisors to integrate leading - edge risk management practices with the calculation of regulatory capital requirements. the ongoing work on this framework has already led large, complex banking organizations to improve their systems for identifying, measuring, and managing their risks. indeed, banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks. the banking agencies will continue to promote supervisory approaches that complement and support banks'own efforts to enhance their risk - management capabilities.
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can rise and that negative amortization can increase the amount owed on the property above what was originally borrowed. these products warrant strong risk - management standards as well as appropriate capital and loan - loss reserves. compliance - risk management another area the financial sector and the regulatory community are focused on today is compliancerisk management. β compliance risk β can be defined as the risk of legal or regulatory sanctions, financial loss, or damage to an organization β s reputation and franchise value ; this type of risk may result when an organization fails to comply with the laws, regulations, or standards or codes of conduct that are applicable to its business activities and functions. the federal reserve expects banking organizations to have in place an infrastructure that is able to identify and control the compliance risks facing their organization. fortunately, many banking organizations in the united states substantially affected by these risks are ahead of the curve and have invested in enterprisewide corporate compliance. to create appropriate compliance - risk controls, organizations must first understand risks across the entire entity. managers should be expected to evaluate the risks and controls within their scope of authority at least annually. i also emphasize the need for the board of directors and senior management to ensure that staff members throughout an organization understand the compliance objectives and the role they have in implementing the compliance program. clear lines of communication and authority help to avoid conflicts of interest. an enterprise - wide compliance - risk management program should be dynamic and proactive, meaning it constantly assesses evolving risks when new business lines or activities are added or when existing activities are altered. to avoid having a program that operates on β autopilot, β an organization must continuously reassess its risks and controls and communicate with its business lines. an integrated approach to compliance - risk management can be particularly effective for bank secrecy act and anti - money - laundering ( bsa / aml ) compliance. often, the identification of a bsa / aml risk or deficiency in one area of business can indicate potential problems or concerns in other activities across the organization. controlling bsa / aml risk continues to be a primary concern for banking organizations. we recognize the investment and commitment that organizations have made toward compliance with bsa / aml requirements, and, in return, we continue to work to ensure that obligations in this area are clearly understood and communicated to banking organizations and examiners alike. the federal financial institutions examination council ( ffiec ) bsa / aml examination manual issued last year is one example of our interagency efforts. we also
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mar guΓ°mundsson : the financial crisis in iceland and ireland β what are the lessons five years later? opening address by mr mar guΓ°mundsson, governor of the central bank of iceland, at the half - day central bank of iceland conference β the financial crisis in iceland and ireland : what are the lessons seen to be five years later? β, reykjavik, 28 november 2013. * * * president of iceland, excellencies, ladies and gentlemen, on behalf of the central bank of iceland, i would like to welcome you all to this morning meeting, held five years after the collapse of iceland β s three cross - border banks, the enactment of the emergency legislation, and the beginning of the icelandic authorities β economic programme with the imf. and incidentally, it is exactly five years ago today that iceland β s parliament, alΓΎingi, passed legislation on comprehensive capital controls. at this short conference, which we call the financial crisis in iceland and ireland : what are the lessons five years later? the focus is on the situation that faced these and other small countries with big banks in the autumn of 2008, how we managed the first phase of the crisis, and the policies that were put in place to mitigate the effects of the shocks that were hitting us. joining us today are three highly distinguished speakers who will take the floor after my opening remarks. first is patrick honohan, governor of the central bank of ireland, who took office in september 2009 and has played a key role in dealing with the crisis in ireland. then we will hear from geir haarde, prime minister of iceland in the autumn of 2008, who oversaw both crisis management during the banking collapse and the design of the economic programme with the imf. our final speaker is franek rozwadowski, who until recently was the resident representative of the imf in iceland. it is well known, both in this country and among scholars of the international financial crisis around the world, that almost 90 % of iceland β s banking sector failed in the first week of october 2008. what is probably less well known is that at that point, iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005 β 2007 and a currency crisis in the first half of 2008. the banking collapse and the associated wealth loss and further currency depreciation made the recession significantly worse, of course, as did the recession that hit the global economy in the
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various studies including those published in our very own agriculture finance year book have demonstrated that these tax incentives did not result in any significant gains to farmers in the form of either reduced input prices, or an increase in lending to the agriculture sector. instead they benefited mostly the banks and importers while denying government revenues ; and as a result, government embarked on eliminating many of these tax incentives in the financial year 2014 / 15. what lessons can we learn from these experiences? agriculture in uganda is dominated by small holder farmers, of whom two thirds are engaged in subsistence agriculture, according to the 2014 uganda national population and housing census. therefore the agriculture development strategy must focus on the small holder farmer. any risk - sharing model for financing must be based on a clear understanding of the profile and origins of the risk. in this case, we must resolve what continually constrains the modernization of agriculture and what makes small holder farming very risky for financing. smallholder farmers face a raft of constraints to modernising their farming, of which lack of financing is not necessarily the most important. most smallholders produce very little surplus, beyond their own needs for consumption, which can be marketed. furthermore, the vulnerability of agriculture to the weather, pests and other hazards means that surpluses cannot be produced with any degree of reliability. in these circumstances, agriculture assumes a very high risk premium, and borrowing money to purchase agricultural inputs is very risky for farmers, and they will unavoidably struggle to repay loans. modernising smallholder agriculture in uganda requires a holistic set of interventions. the first priority should be to assist farmers to increase their output without exposing them to greater risks. there is evidence from agricultural projects that if smallholder farmers are given advice on the adoption of good agricultural practices, such as better seeds, optimal crop spacing, weeding, post - harvest handling etc, substantial increases in yields per acre can be achieved, even without the application of purchased inputs such as fertilisers. this would allow farmers to produce more marketable surplus and thereby generate cash incomes. the next step would then be to start applying modest amounts of purchased inputs such as fertilisers, to increase yields further. luckily, we are not short of demonstrable projects in the uganda and elsewhere that have markedly improved yields per acre and income of the farmers by providing this sort of comprehensive support. the 2015 agriculture finance year book for uganda provided an assessment of one such pilot by the one acre - fund in kamuli district.
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focused culture to develop products and services to meet the banking needs of the public. whilst they may target the blue - chip companies in the system for good reasons, there is a clear need to also give the small business enterprise sector a focus and to provide services to meet the needs of this relatively neglected sector of the banking market. 17. on this note, mr. chairman, let me once again congratulate the board, management and staff of standard chartered bank on the opening of this new headquarters building. ba es o f gh a na nk t. 1 9 5 7 thank you all for the attention.
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europe β s banking markets. for the first time, common legislation and rules will be applied by a single authority, strongly increasing transparency and banks β comparability across countries. but we must recognise that we have not reached the end of the journey. a single supervisor can more easily ensure comparability where there are single rules. remember the discussion about the different national definitions of non - performing loans in the context of the asset quality review. this is a telling example that the singleness of europe β s financial market is still challenged by piecemeal national rules and standards. in addition to banking supervision, there is a second area where fragmentation of europe β s financial market remains a stumbling block. seven years after the first shock waves of the financial crisis and two years after the sovereign debt crisis in the euro area, economic recovery is still some way off : euro area real gdp remained unchanged between the first and second quarters of this year. unemployment is still at 11. 5 %. prices in september rose by only 0. 3 % β and measures of inflation expectations have gone down. to restart growth, we must open financing channels, especially for small and medium - sized enterprises ( smes ). and this can best happen when financial markets are fully integrated. bis central bankers β speeches in the light of these various concerns, the aspiration to complete the single financial market has returned to the top of the agenda β and quite rightly so. the latest focus for this discussion is the creation of a european capital markets union. why a capital markets union? expectations for the project of a capital markets union are high. but to date, there is no common understanding of what it means or what it should look like. for the financial industry, it means new business opportunities ; for financial stability experts, it means better control of shadow banking ; and for entrepreneurs, it means better access to funding sources. as central banker, i would stress another major advantage of more integrated financial markets in the euro area : it would greatly facilitate the implementation of the ecb β s monetary policy. we are clearly at the beginning of the discussion of a capital markets union. but l believe that a broad public discussion is exactly what we need to generate ideas and start the opinionforming process. i therefore welcome the fact that lord hill has announced his intention to consult a broad range of stakeholders and conduct analyses before presenting more concrete proposals. i too do not have a ready - made blueprint in my bottom drawer. it is time to
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on certain industry dynamics, such as the extent of cross - ccp participation in various asset classes, and the scope for expanding interoperability. allow me to say a few words in conclusion. i have tried to present some of the benefits and challenges i would see from the continuing implementation of ccp interoperability. since the early days of the giovanni group, authorities have kept their focus on financial markets integration, but at the same time they have given increasing attention to financial stability concerns. ccp interoperability can play an important role to foster the first objective. nonetheless, we should not underestimate the complexity and the potential risks involved in establishing and supervising interoperability arrangements, particularly if interoperability spreads to new asset classes in future. i am confident that the collective supervisory process established under emir, which allows all relevant authorities to contribute to the monitoring of risks, can meet these challenges. the ongoing emir review process, as well as the upcoming report on the systemic risk and cost implications of interoperability arrangements, to be delivered by the commission to the european parliament and council, will provide us with an opportunity to discuss these issues and think about potential enhancements to the current regulatory framework. the ecb and the eurosystem look forward to contributing to these discussions. bis central bankers β speeches
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). see β the european crisis and the role of the financial system β, speech by vitor constancio, vice - president of the ecb, at the bank of greece conference on β the crisis in the euro area β athens, 23 may 2013 ( ecb website ). bis central bankers β speeches besides these fundamental goals, banking union also involves two practical aspects of more immediate concern that i will now address : ( i ) the repairing of banks β balance sheets to unclog the impaired credit channel and consolidate the on - going mild economic recovery ; ( ii ) the reduction of the bank - sovereign loop in order to further mitigate the remaining financial fragmentation6. i will complete my remarks by addressing the role of the srm as the necessary complement to the ssm in the banking union and finally, by dwelling upon the broader implications of banking union for european integration. i will only briefly touch upon the ssm as my colleague daniele nouy will elaborate on ssm issues during her speech later today. bank recapitalisation and the economic recovery in the past few years, one could hear many voices urging european policy makers to repair the balance sheets of banks so that these could again lend to the real economy and jump start gdp growth. there will be no growth without finance, the narrative goes. in this vein, the fact that the u. s. has returned to robust economic growth faster than europe has been, to a large degree, attributed to policy - makers acting quickly to repair the balance sheets of u. s. banks. this narrative, while intuitively compelling, is missing two crucial points. the first is that euro area bank balance - sheet repair has started for some time already. as i recalled recently7, since the onset of the global financial crisis, the top 20 european banks have increased capital, net of share buy - backs, by higher amounts than the corresponding top 20 american banks : usd 289 billion by eu banks against usd 179 billion by u. s. banks. and according to the fdic, the leverage ratios of the biggest european banks, calculated according to the same accounting standards, are very close to their american peers8. furthermore, since midlast year in particular, european banks have implemented write - offs and increased provisions and capital, partly anticipating the comprehensive balance - sheet assessment that the ecb is conducting this year. our estimates based on public information indicate that ssm banks ( comprising 128 institutions ) have, from july 2013 to april 2014
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of consumption still a long way off, the demand for commodities can be expected to remain robust and prices elevated for some time. in canada, the impact of rising commodity prices has been reinforced by strong growth in the supply of some commodities. oil is now our most important commodity by value, with its share of total canadian commodity production rising over the past 15 years from 18 per cent to 46 per cent ( chart 32 ). bis central bankers β speeches our challenge is to develop our commodities intelligently and sustainably and to ensure that the whole country benefits. infrastructure investments in pipelines and refineries to get western heavy oil, which is trading $ 40 below the world price, to central canada and to foreign markets would bring more of the benefits of the commodity boom to more of the country. increased interprovincial trade in goods and services provides another channel to capture more of the value added from energy, mining and agriculture for all of canada. this is already happening. for most provinces, trade inside canada has continued to grow from 2007 to 2011, offsetting all or some of the weakness in international trade over the same period ( chart 33 ). resilient financial system the financial system is a critical enabler, channelling savings to productive investments and helping firms and households to manage risks. our banks withstood the 2008 financial crisis and are considerably stronger today than they were then. they have substantially lengthened liquidity horizons. they have increased their common equity capital by 77 per cent, or $ 72 billion, since the end of 2007. and, as of 10 days ago, canadian banks met the new basel iii capital requirements, well ahead of the maximum phase - in period that extends to 2019. businesses can be confident that bank funding will remain available. core funding markets are also being strengthened so that market - based finance is a resilient source of diversification and innovation in funding markets, not instability. last february, the canadian derivatives clearing corporation launched a new central counterparty service for repo transactions. canada is on track to meet the g β 20 commitments regarding the clearing of over - the - counter derivatives. in this regard, in october, canadian authorities announced that market participants will be able to clear standardized over - the - counter derivatives using any central counterparty recognized by canadian authorities, including global central counterparties. our priority is to be among the leaders in adopting new, stronger global standards and to encourage others to do the same to maintain an open and competitive global financial system.
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by mr draghi and a handful of ecb executive board members ; it came about with the agreement of the large majority of the governing council, on which all national central banks governors in the euro area have a seat. i would never have imagined that the euro area could break up, as almost happened in 2012. nor did i think it possible that the ecb would have to print more than an additional β¬1. 5 trillion ( i. e. β¬1, 500, 000, 000, 000 ), and pump it into the economy in order to respect its mandate. the ecb has acted resolutely but the story is not over yet. in order to emerge from the crisis, it is crucial that the other authorities also do their homework. it is not up to monetary policymakers to resolve structural problems. bis central bankers β speeches
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ratings should be changed, the authorities β responsiveness to risk strengthened and arrangements for dealing with stress in the financial system implemented. other international bodies and institutions that have responded to the financial turbulences include the basel committee on banking supervision which just announced that it will take a number of steps to bolster the resilience of the banking system to financial shocks. moreover, the imf is sharpening its analysis of the financial sector and macro - financial linkages. it is welcome that the fund places greater focus on financial sector analysis in article ivs and continues its emphasis on financial sector assessment programmes. in this context, i would highlight that all 27 member states of the european union have either already completed an fsap or confirmed their future participation. it is welcome that a number of countries, including some systemically relevant ones, have expressed their intention to undergo an fsap exercise. at the eu level, the council of european ministers of finance ( ecofin ) has coordinated work aimed to strengthen supervisory and financial stability arrangements. this relates to the introduction of a european mandate for national supervisors, the clarification and strengthening of the functioning of the committees of supervisors at the level of the 27 eu member states and the wider use of colleges of supervisors to re - enforce the supervision of cross - border banking groups. moreover, a memorandum of understanding on cross - border cooperation in financial crisis situations between all relevant authorities in the eu, that is supervisory authorities, central banks and finance ministries, has been signed. in sum, a number of significant initiatives are underway at the various levels of governance of the global financial system to respond to the challenges of globalisation. to ensure that the responses by the bodies and forums in charge of global economic and financial stability are effective, it is of course crucial that they collaborate closely and complement each others β efforts. this should also be the case as regards the interaction between the fsf and the imf. conclusion the phenomenon of globalisation entails many important changes to the global macroeconomic, financial landscape. associated with this, it entails many policy challenges β both in terms of domestic macroeconomic policies and the international financial architecture. at the domestic level, a key challenge for monetary policy is to actively monitor changes in the inflation process, while continuing to solidly anchor inflation expectations. the strong relative price movements associated with globalisation make a firm focus on price stability is as essential as ever. at the same time, such a sound monetary policy framework can lay the foundations for foster
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, algorithmic trading improves liquidity for large - cap stocks. 2 another key enabler of modern finance is encryption technology. without it, there would be no online banking and no electronic payments. but encryption has not only aided the digitalisation of traditional finance. it has also facilitated the rise of a new asset class and a parallel financial system : crypto - assets and decentralised finance. the problems with crypto - assets are many, well - documented and not well - addressed β from weak fundamentals to questionable governance and inefficient validation methods. 3 but the encryption technology on which crypto - assets are based has so far proven robust. and distributed ledger technology can offer real benefits to our financial systems through the streamlining of processes. but it is perhaps artificial intelligence ( ai ) that may prove to be the most transformative for the financial system. for years now, analytical ai models designed to perform specific tasks have helped financial institutions in areas such as fraud detection, credit assessment and predicting portfolio returns. but the recent breakthroughs in generative ai β thanks to growth in computing power combined with extensive data access β are inducing a rapid uptake of ai across the board. according to one international study, almost two - thirds of companies β across all regions, sectors and sizes β are already using generative ai. 4 while new technologies have brought tremendous benefits for the financial system over time, they have always tended to carry potential risks with them. and we see this tension between opportunity and risk playing out today. the latest ai models, and budding technologies like quantum computing, have the potential to exert a profound impact on our economies and financial systems. technological change and vulnerabilities as a tool, technology is neither good nor bad. it all depends on who uses it, and for what purpose. the financial sector will come up with numerous ways to use ai to improve existing operations. but the reliance on ever more sophisticated technologies β which typically demand highly specialised skills and enormous levels of investment to implement and maintain β creates new vulnerabilities in our financial system. we see this especially in areas where our financial institutions are increasingly reliant on a small number of external service providers. in july, a faulty software update from a leading cybersecurity firm caused worldwide computer outages and severe disruptions across many sectors, including finance. for 2 / 5 bis - central bankers'speeches instance, over eight million devices operating microsoft windows were hit simultaneously around the world.
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the non - lending roles more than ever, development financial institutions need to step up to promote new growth areas. they should perform a broader role to stimulate economic activity that would not otherwise take place. they could also improve the quality and scale of such activities. they can provide unique value propositions in terms of advisory and nurturing new growth sectors to become profitable and thus, attractive for private investors. i will highlight two successful examples. firstly, in the korean wave example, they were the first to spearhead investments in the film and music industry. at that time, commercial banks did not have the capability to assess the viability of the industry, nor accept the intangible assets offered as collateral. it was only much later, 1 / 4 bis central bankers'speeches when the industry recorded healthy profits that private investments followed. the success speaks for itself. between 2008 and 2011, private domestic and foreign investments in the culture content industry had quadrupled to more than usd 157 million. the second example is uganda β s first ever private bond issuance by a multinational mobile telecommunications company. the provision of a financial guarantee by a development financial institution helped to connect uganda β s poor and low income population in more than 20 rural communities by enabling access to telecommunication services. this culminated in the telecom industry that now provides 135, 000 jobs for ugandans and contributes 1. 4 % of its gdp. taking lessons from these examples, i believe that development financial institutions need to possess three key traits to promote and champion the new growth areas : a. first, they must have specific mandates to develop and prioritise niche segments identified to be of strategic and economic importance. these will give them legitimacy with funders and partners ; b. second, affiliations with government, ministries and agencies to facilitate the design of appropriate government support. this will enable them to take higher risks ; and c. third, a broader focus on socio - developmental goals allows risk - return trade - offs to take into account positive externalities for the economy. the lessons we learnt imply that leaders must recognise and align their priorities to steer their respective institutions to contribute more broadly and strategically to economic development. this will include playing a more active role in technical assistance, and serving as key repositories of specialist knowledge, resource aggregators for strategic development projects and credible advisers to the government. these β additionalities β are important ingredients in ensuring the effectiveness of development financial institutions. strengthen accountability frameworks through performance standards that emphasise development additionalities while
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the bancassurance captured 45. 3 % of the new life insurance business premiums generated in 2005. through efficient cost structures of bancatakaful and with the entry of joint - venture takaful operators involving banks and savings institution with extensive nationwide branch network, the takaful industry should maximize the potential of this alternative distribution channel. finally, on the global front, islamic finance has made significant inroads and has achieved growing global recognition. another significant milestone in the progress of islamic banking and finance as recently announced by bank negara malaysia is the initiative to enhance the position of malaysia as an international islamic financial centre ( mifc ). with the vibrant domestic islamic financial industry that has become an integral component of the financial system, malaysia is now well positioned to be an international centre of origination and issuance of islamic financial instruments, fund and wealth management, islamic financial activities in international currencies and takaful and retakaful businesses. as at year 2005, the total gross contributions from takaful business outside malaysia recorded an insignificant proportion of the total contributions of the industry. the relatively low participation of takaful operators in international business, is however set to change with the recently announced mifc initiatives, to allow qualified local and foreign financial institutions to conduct the full range of islamic banking and takaful businesses in foreign currencies. it was also announced in the recent budget that attractive tax packages in terms of 10 year tax holiday are given to all takaful operators on their international currencies takaful business. in addition, mifc accords greater operational flexibility for the islamic financial institutions to conduct islamic financial services in foreign currencies from anywhere in malaysia. to ensure effective delivery system under mifc initiatives, the mifc executive committee, with bank negara malaysia as secretariat, has been set up to provide directions and drive implementation of policies and strategies to foster effectiveness and efficiency of the mifc. well capitalised and reputable financial institutions that possess sound track record are encouraged to set up international takaful operation in malaysia to conduct out - out takaful and retakaful businesses. the malaysian takaful operators should seize the opportunity to venture into out - out takaful business establishing an international currency business unit to offer takaful business in international currencies. ladies and gentlemen, in tandem with the rapid changes and expansion of the islamic financial sector, it is vital for us to have a strong, continuous support in talent management and
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issues that merit authorities β attention ( pdf ), june 27, 2017. 2 see david mills, kathy wang, brendan malone, anjana ravi, jeff marquardt, clinton chen, anton badev, timothy brezinski, linda fahy, kimberley liao, vanessa kargenian, max ellithorpe, wendy ng, and maria baird, β distributed ledger technology in payments, clearing, and settlement ( pdf ), β finance and economics discussion series 2016 β 095 ( washington : board of governors of the federal reserve system, 2016 ). 3 for example, the commodity futures trading commission published a statement on digital currencies making clear that many fall into the category of commodities under the commodity exchange act ( www. cftc. gov / pressroom / pressreleases / pr7231 β 15 ). the securities and exchange commission has published guidance on the treatment of digital currencies under the securities exchange act ( www. sec. gov / news / press - release / 2017 β 131 ). the internal revenue service has published guidance on the tax treatment of digital currencies ( www. irs. gov / pub / irs - drop / n - 14 β 21. pdf ). and the financial crimes enforcement network has published guidance on the treatment of digital currencies under the bank secrecy act ( www. fincen. gov / resources / statutes - regulations / guidance / application - fincens - regulations - personsadministering ). 4 see jerome h. powell, β financial innovation : a world in transition β ( speech delivered at the 41st annual central banking seminar, sponsored by the federal reserve bank of new york, new york, october 18, 2017 ). 5 / 5 bis central bankers'speeches
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ben s bernanke : semiannual monetary policy report to the congress testimony by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington, dc, 19 july 2006. * * * mr. chairman and members of the committee, i am pleased to be here again to present the federal reserve's monetary policy report to the congress. over the period since our february report, the u. s. economy has continued to expand. real gross domestic product ( gdp ) is estimated to have risen at an annual rate of 5. 6 percent in the first quarter of 2006. the available indicators suggest that economic growth has more recently moderated from that quite strong pace, reflecting a gradual cooling of the housing market and other factors that i will discuss. with respect to the labor market, more than 850, 000 jobs were added, on net, to nonfarm payrolls over the first six months of the year, though these gains came at a slower pace in the second quarter than in the first. last month the unemployment rate stood at 4. 6 percent. inflation has been higher than we had anticipated in february, partly as a result of further sharp increases in the prices of energy and other commodities. during the first five months of the year, overall inflation as measured by the price index for personal consumption expenditures averaged 4. 3 percent at an annual rate. over the same period, core inflation - that is, inflation excluding food and energy prices - averaged 2. 6 percent at an annual rate. to address the risk that inflation pressures might remain elevated, the federal open market committee ( fomc ) continued to firm the stance of monetary policy, raising the federal funds rate another 3 / 4 percentage point, to 5 - 1 / 4 percent, in the period since our last report. let me now review the current economic situation and the outlook in a bit more detail, beginning with developments in the real economy and then turning to the inflation situation. i will conclude with some comments on monetary policy. the u. s. economy appears to be in a period of transition. for the past three years or so, economic growth in the united states has been robust. this growth has reflected both the ongoing reemployment of underutilized resources, as the economy recovered from the weakness of earlier in the decade, and the expansion of the economy's underlying productive potential,
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terms of swiss francs, but only 13 % in terms of us dollars. in the longer term, the weakening in the swiss franc is indirectly contributing to the increase in prices by stimulating demand. second, real short - term interest rates have dropped. there has been a rise in expected inflation for the near future and this means β for given nominal interest rates β lower real expected yields for short maturities. an analysis of monetary conditions in terms of volumes leads to similar conclusions. let us begin with money, which is the best indicator to use if a broad - brush and long - term outlook for the economy and inflation is required. the m1 and m2 monetary aggregates, which were declining until not long ago, have been practically stable for some months. as for m3, it is continuing to exhibit moderate growth. the sub - prime crisis has confirmed the importance of mortgage loans as an indicator of the degree of relaxation of monetary policy. the reason for this is simple. because construction projects are long - term in nature, real estate investment reacts particularly sensitively to interest rates. consequently, mortgage loans were growing at a rate of 5 β 6 % in 2003 and 2004, when our monetary policy was firmly expansionary. these growth rates then declined gradually as we tightened our monetary policy in 2006 and 2007. last april, they settled at around 3. 3 %. the growth rate of other loans β a particularly heterogeneous category β remains high, confirming that the underlying trend in the economy remains dynamic. in december, we emphasised the need to give particular attention to conditions in the credit market in the light of the sub - prime crisis. in order to do this, the snb conducted a survey of 20 banks in march, in which they provided us with information on their intentions and expectations. this survey completed the analysis of credit volumes. it reveals, first, that banks have not significantly tightened lending conditions with respect to either households or companies over the course of the last few months. second, the banks state that, in broad terms, demand for credit has remained unchanged. third, they do not expect any significant change in either supply or demand in the months ahead. thus this survey confirms the conclusions of the analysis of credit volumes which, as we have seen, are continuing to rise. unlike similar surveys conducted in the us and the euro area, it shows that, for the time being, the sub - prime crisis has not led to a deterioration in credit conditions in switzerland. inflation and inflation risks
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thomas jordan : real estate, mortgages and monetary policy speech by mr thomas jordan, member of the governing board of the swiss national bank, at the iazi, schweizer immobilienkongress 2009, zurich, 10 november 2009. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). * * * there is a close interrelationship between real estate, mortgages and monetary policy. on the one hand, monetary policy impacts on the real estate and mortgage market. when the central bank reduces interest rates, this eases the burden on household and company budgets and fosters the demand for real estate. on the other hand, monetary policy also takes account of developments on the real estate market because these can affect economic growth, inflation and financial stability. once again, the current financial crisis has thrown these interrelationships into sharp relief. problems in a number of mortgage and real estate markets β in particular in the us and the uk β triggered the financial crisis and plunged the global financial system into a systemic crisis. this impacted on switzerland β s financial stability and made it necessary to create the stabilisationfund for the transfer of illiquid ubs assets. the swiss real estate and mortgage market played a positive role in various measures adopted by the snb to handle the financial crisis. swiss mortgages played a role in securing swiss financial stability in the limmat pfandbrief transactions, whereby big banks improved their refinancing situation by issuing covered bonds. consequently, switzerland β unlike other countries β was able to avoid introducing state - guaranteed bonds. with the drastic reduction in key rates and the subsequent decline in mortgage rates, the burden on households and companies was eased. in this way, the severity of the recession was somewhat alleviated and the risks of deflation reduced. however, the interest rate is now at a historic low and this means medium - term risks for the swiss real estate market and financial stability. experience shows that periods of low interest rates provide scope for excesses on the mortgage and real estate market. consequently, in the current environment in particular, attention should be given to ensuring that past mistakes are not repeated. caution must remain the watchword when granting loans.
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##cyclical capital buffer if warranted. in addition, macroprudential policies have become integral to many central banks β policy toolkits. various jurisdictions in asia such as singapore, hong kong, and indonesia have used macroprudential measures to reduce risks to their domestic financial systems and to dampen the impact of economic shocks, such as the application of loan - to - value limits for mortgage borrowings. however, the detailed impact of macroprudential policies is arguably less well understood. there are research challenges in this regard. for example, the bank for international settlements ( bis ) highlighted that the impact of tools are likely to vary across jurisdictions based on their domestic circumstances and phase of the financial cycle. a key focus area is how best to study the spillover impact across jurisdictions from a macroprudential policy decision point of view. another challenge relates to effectiveness. macroprudential tools have largely been employed in more recent years, and isolating their effectiveness from other measures will require further studies. 23 in this context, it may be remiss of me not to mention the apparent artificial divide that has existed between the analysis of the financial vis - a - vis the real sides of the economy. during the gfc, i recall some criticism that economists used mathematical models that did not sufficiently factor the critical roles that banks and other financial institutions play in the economy. since then, important strides have been made, including in the workhorse dynamic stochastic general equilibrium ( dsge ) models used at central banks, to better capture the key interactions between the financial sector and the rest of the economy. this is most pertinent for regulators and for central banks β work in economy - wide forecasting, policy analysis and scenario simulation. i would also encourage further research in this area, including developing empiricallyvalidated feedback relationships that can be embedded into models for stress testing purposes. evaluating the impact of fintech 25 turning now to a recent pet topic of interest β fintech. much has been written and reported on technology innovations that have and will continue to disrupt business models. there are also many views around disruptions to jobs and on socio - economic relationships. 3 / 5 bis central bankers'speeches let me make some brief comments on mas β regulatory stance towards innovation in financial services. for any innovation or a new technology - based business model to take off, it must be purposeful and value creating. for example, there are fintech entities that have entered the financial
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ong chong tee : the post - crisis financial landscape - what next? remarks by mr ong chong tee, deputy managing director ( financial supervision ) of the monetary authority of singapore, at the society for financial studies cavalcade asia - pacific conference's gala dinner, singapore, 13 december 2018. * * * professor laura starks β president, society for financial studies professor ron masulis β program chair professor jun - koo kang β associate chair, nanyang technological university professor bernard yeung β dean and stephen riady distinguished professor, national university of singapore, president, asian bureau of financial & economic research professor massimo massa β the rothschild chaired professor of banking, insead associate professor johan sulaeman β dean β s chair, department of finance, nus business school ladies and gentlemen, a very good evening. thank you for inviting a few of my mas colleagues and i to be here tonight. introduction the sfs cavalcade conference is a distinguished forum that brings together some of the sharpest minds in the world of finance and research. 2 this evening, i thought i could share some perspectives of a financial regulator. my hope is to flag a few pertinent issues that could do well with more research insights and discussion. as the great hungarian scientist albert szent - gyorgyi once said : β research is four things : brains with which to think, eyes with which to see, machines with which to measure and fourth, money β. i am sure that each of you will adequately deal with the money bit, but our collective minds and tools in financial studies that all of you have can do much to raise the understanding of the prospects and challenges for the financial system. one decade ago, we had the global financial crisis ( gfc ). as samuelson described it starkly : β what we know about the global financial crisis is that we do not know very much β. with the benefit of hindsight, vulnerabilities had indeed built up from : ( a ) highly leveraged financial institutions ; ( b ) severe liquidity mismatches ; ( c ) fairly opaque over - the - counter derivatives markets that transmitted risks rapidly when liquidity suddenly dried up ; as well as ( d ) moral hazards associated with financial institutions that were deemed β too big to fail β. ten years on, a number of key regulatory reforms are being implemented in stages to address these vulnerabilities. 5 take for example, the basel iii reforms after the
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to face high money laundering risk and medium high terrorism financing risk. the sector records the highest value of cash transactions and high risk customers ; and provides the highest number of high risk products compared to other sectors within the financial industry. this reflects the central role of the banking sector in intermediating money flows within an economy. one important compliance function that needs to be undertaken is the identity of the ultimate beneficial owner of companies, assets and financial transactions. financial institutions need to have controls and procedures to identify, verify and conduct due diligence on the beneficiaries. this must be complemented by a rigorous monitoring process. adherence to this requirement will inject transparency, accountability and ensure the integrity of the financial system. it will prevent criminals from hiding their ownership of companies and assets through complex methods and vehicles. i last spoke at this conference in 2011. the theme of the 2011 conference was β raising the bar in enforcement and compliance β. looking back and taking stock of the present state, i am glad to see that the whole industry has matured and progressed in such a significant way. this is validated by the ncc report that the sector β s control measures for both money laundering and terrorism financing are strong. further, fines imposed by the bank on financial institutions has decreased over the past few years, reflecting the progress made by institutions in ensuring adequate controls. i hope the industry continues to strengthen its capability to fight crime. another area in which progress has been made is the priority accorded within each institution to compliance. the focus of the compliance function has developed to become more comprehensive as financial institutions have a better understanding of the threats and risks involved. with increasing awareness of the direct and indirect costs of non - compliance, the compliance function is no longer viewed only as adherence to rules set by regulators, but is instead, an integral part of the organisation β s culture. the very fact that the theme of this 4 / 5 bis central bankers'speeches conference is on reshaping the future, governance and transparency is a testament to this. conclusion i spoke at length today about the responsibility that we have to combat crime and the ways to do so. let me end by saying that eradicating financial crime makes good business sense. financial crime is a cost and burden to all of society. robust governance and greater transparency is good for business. it creates an environment of trust and a level - playing field for businesses to flourish. this is important as we seek to ensure longevity and continuity of businesses and
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boundaries of innovation, the industry needs to understand the risks that they pose. one example is the rise of mobile banking, e - payments and virtual assets. in malaysia, mobile banking transactions have multiplied greatly, from around 500 million transactions in 2016 to almost 1. 3 trillion transactions in august this year. the ubiquity of mobile internet and increasing dependency on our smartphones is expected to increase the importance of this medium. this technology fosters financial inclusion and offers potential for greater customer engagement. one such potential is in meeting and strengthening know - your - customer requirements. by leveraging on technology, financial institutions will be able to conduct e - kyc with greater efficiency while making the customer experience more seamless. one such solution is being tested in the bank β s fintech sandbox. another area of growth comes from virtual assets. between the end of 2016 to date, market capitalisation of virtual assets have grown by an extraordinary rate of over 1000 % from around usd 20 billion to around usd 200 billion. while the technologies behind virtual assets may present great potential to revolutionise the way we conduct finance, the risks associated with virtual assets is an area that deserves much scrutiny. features that may allow anonymous or pseudonymous transactions and easier crossborder transfers of values carry money laundering and terrorism financing risks that need to be addressed. the fact that the reason for many virtual currencies is to skirt the formal financial system adds further to the reservations of many. on this front, the financial action task force ( fatf ) has published a number of reports on risks and guidance for risk - based approach in mitigating money laundering risks associated with technology such as virtual assets and internet - based payment services. understanding, monitoring and supervising virtual assets would require development of new techniques and methods. last but not least, in watching out for new and emerging risks, we must not forget that old risks may rear its head in new ways. there are two issues in relation to this : firstly, while the number of terrorist attacks have declined over the past few years, the nature of terrorism and terrorism financing have evolved. new modus operandi such as lone - wolf attacks and remote terrorist cells, as well as availability of new products in the financial sector, such as prepaid cards and mobile banking, has given rise to new patterns and methods of financing terrorism that are different from a decade ago. we must not forget that dealing with these financial crimes should remain a high priority due to the direct and immediate human costs
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faith in the risk - reducing potential of the securitization and a blinkered gaussian mind - set. 14 in short they used models β often of great sophistication β but poorly combined them with judgement and experience. as we noted, many have reached a relatively positive assessment of policy models, and of the re - constructive abilities of the profession. indeed, some others argued that the mistake was actually in not following models β prescriptions closely enough. for instance john taylor maintained that during the early 2000s, monetary policy in the us was set looser than that implied by the taylor rule. this, he claimed, caused the build - up of debt and risk - taking, which ultimately led to the onset of the great recession. likewise, michael wicken concluded that β β¦ the financial crisis was brought about more by a failure to employ modern macroeconomics than by its failings. if used sensibly, it will lead us out of the crisis. β 15 on the other side, those who criticize the types of macroeconomic models popular at central banks have argued that they mistook beauty for truth and were too complex and opaque to be used quickly. more recently stiglitz posed another question highlighting one important flaw of models : why does the economy not quickly return to full employment, as one would have expected in an equilibrium model? why do we persist in using models with such strongly counterfactual dynamics? more specifically the list of model troubles could include : linearity, rational expectations, complete markets, limited agent heterogeneity and financial imperfections. 16 on a more general perspective, some set the discussion in terms of the fact that some models give the impression of the possibility to fine tune or socially β engineer β the economy whereas less standard approaches β also inspired by other disciplines β see the economy rather as an everevolving social system for which one can merely set the broad framework conditions and institutions. this goes back to an old debate started indeed with ludwig von mises, who first discussed the concept of catalaxy, and made popular later on by friedrich hayek who elaborated on that concept and defined it as follows : β β¦ the order brought about by the mutual adjustment of many individual economies in a market β. hayek particularly stressed his view in that respect in his lecture to the memory of alfred nobel, the pretence of knowledge in which he forcefully challenged all those who believed that government had the wisdom or ability to successfully plan the
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or collectively trapped in a suboptimal equilibrium. ladies and gentlemen, let me first thank the organisers of this conference for inviting me to deliver the egon and joan von kaschnitz lecture. it is an honour for me to speak to an audience of distinguished academics who have shaped the intellectual debates in the field of international economics and finance over the past decades. central banks today operate in a highly interconnected world. to fulfil our mandates we have to both anticipate and react to swings in global commodity markets, trends in foreign demand and spillovers from international financial markets. and in recent years, these swings and adjustments have occurred more rapidly and with higher amplitudes, further complicating the life for central bankers. our reaction functions therefore become commensurately more complex, tied not only to how domestic markets for products, labour and capital adjust to shocks and react to policy impulses, but also crucially to adjustments in cross - border bis central bankers β speeches markets. this requires a profound understanding of the international macroeconomic adjustment process. in particular, during the past two decades, policy discussions in fora such as the imf, the g7 and g20 have been predicated on three key assumptions about that process. the first assumption, in response to shocks hitting individual economies, is that a reallocation ( or β rotation β in policymaker parlance ) of aggregate demand across economies would sustain an appropriate pace of global growth. the second assumption is that freely floating exchange rates would support such shifts in demand and generally act as shock absorbers in the global economy. and the third is that cross - border capital flows bring the benefit of risk - sharing and make international adjustments smoother, in addition to supporting an efficient international allocation of capital. the starting point of my remarks today is the recognition that recent theoretical and empirical research has started challenging these three assumptions. first, the capacity of the global economy to generate growth is under question. in an environment of low global growth, export - led strategies may be relevant for one economy, but in the aggregate they are bound to fail and they risk leading the global economy into a high saving, low real interest rate trap. there is in other words a fallacy of composition. we lack a clear vision of the combination of demand and supply side policies, and the broader design of the global economy, which will support growth beyond the short - term impulse provided by fiscal or monetary policy at the individual country level. second,
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burkhard balz : overcoming challenges together address by mr burkhard balz, member of the executive board of the deutsche bundesbank, to mark the occasion of a bundesbank representative taking up office in riga, riga, 31 january 2024. * * * check against delivery 1 words of welcome ladies and gentlemen, it is a great pleasure for me to be at the german embassy in riga today and to celebrate with you the official start of nikola marcinko's duties as the bundesbank's representative here in latvia. 2 eurosystem, monetary policy and cooperation 2024 is a year of european anniversaries. twenty - five years ago, on 1 january 1999, the euro was introduced as a single currency in eleven european countries, including germany, as an accounting currency. three years later, people in twelve european countries got their hands on euro banknotes and coins for the first time. twenty years ago, on 1 may 2004, latvia acceded to the european union ( eu ) together with nine other countries. 1 ten years later, on 1 january 2014, latvia became the 18th country to adopt the euro. latvijas banka became a member of the eurosystem. 2 today, the euro brings together people from no fewer than 20 countries. it is the currency for almost 350 million people and a symbol of europe. the euro is a binding force that promotes economic and political unity throughout our continent. alongside the single market, it plays an important role in nurturing economic prosperity and contributes to strengthening europe's resilience and sovereignty, including on the global stage. but the history of the euro has not been all sunshine and roses. the single currency has also had to weather a few storms. take, for example, the financial crisis that erupted in 2007 and the sovereign debt crisis that came in its wake. or the coronavirus pandemic and the russian war of aggression against ukraine. the resulting supply and energy shortages contributed significantly to the sharp rise in inflation rates. 3 4 to prevent the strong inflation dynamics from becoming entrenched, the ecb governing council responded forcefully, raising key interest rates ten times in a row between july 2022 and september 2023. inflation in the euro area has since eased significantly. this was due, in particular, to the sharp fall in energy prices, but it is a result of monetary policy tightening, too. 1 / 3 bis - central bankers'speeches nevertheless, the inflation rate for
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rigorous monitoring can contribute to ensuring a global level playing field. the results of numerous monitoring exercises are summarised in regular scoreboard and progress reports to the g20. in addition, international standard - setting bodies are stepping up their implementation monitoring instruments. to better coordinate the various bis central bankers β speeches mechanisms, the financial stability board, or fsb for short, and the relevant standardsetting bodies have jointly developed a coordinating framework. within this framework, six areas have been designated as deserving priority implementation and particularly intensive monitoring. i will now briefly address four of these priority areas β leaving out those dealing with sifis as another round table today is dedicated specifically to the regulation of sifis. a. basel framework first, the crisis made painfully clear that banks β equipment with capital and their liquidity positions were inadequate to withstand shocks to the financial system. the new regulatory standard basel iii will improve the resilience of individual banks with respect to both their capital and liquidity positions. basel iii allows some discretion in national implementation : for example, the transition period permits jurisdictions to determine how quickly they adopt the new rules β which will depend on both the state of the national financial system and the macrofinancial environment. moreover, as basel iii is an international minimum standard, jurisdictions might adopt tougher rules than the internationally agreed versions. considering the significant differences in the size of banking sectors relative to domestic economies and the implied potential consequences in case of bank failures, i believe this to be a sensible approach. at the same time, it poses the danger of inconsistent implementation and of raising prudential or level playing field issues. therefore, the basel committee on banking supervision ( bcbs ) will monitor on an ongoing basis the status of jurisdictions β adoptions of the basel rules, following a three - level approach : first - level assessments focus on whether the rules are adopted according to the agreed timelines while the second level deals with the content of the domestic rules. the third level extends the analysis of domestic rules to supervisory implementation at the individual bank level to assess whether they are delivering comparable outcomes. initially, third - level assessments will focus on the calculation of riskweighted assets across banks and jurisdictions. as the adoption of basel iii β in contrast to its predecessors β has been fully integrated into the political process, the commitment to implement the new rules is extremely high. europe is playing a pioneering role in the adoption process via the capital requirements directive iv. i am confident that the comprehensive monitoring by the
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average minimum reserve requirements. let me here point out that my intention is not to say whether one system is better than another ; i merely wish to illustrate that the differences in monetary policy steering systems may be one reason why central banks have acted differently. nor has there been reason to take measures, given the background of financial stability. swedish banks are profitable and financially strong, and therefore have good opportunities to manage unexpected negative events. however, as usual we are following developments closely. if there was a risk of problems arising that would make it difficult for the banks to conduct their operations and thereby endanger the system, the situation would be different. however, this is not the case today ; we are continuing to observe the financial crisis largely from the outside.
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peter praet : the transmission of recent non - standard measures speech by mr peter praet, member of the executive board of the european central bank, at the joint boe, ecb, cepr and cfm conference on β credit dynamics and the macroeconomy β, london, 11 december 2015. * * * i would like to thank carlo altavilla for his contribution to this speech. since june 2014 the ecb has adopted a series of new monetary policy measures, with the aim to both enhance the transmission of policy and to reinforce the accommodative policy stance to counter growing risks of a too prolonged period of low inflation. those measures have included reducing key policy rates to levels below zero, introducing a credit easing package β specifically our targeted long - term refinancing operations ( tltros ) β and expanding our asset purchase programme ( app ). they were decided against the backdrop of credit dynamics that were at the weaker end of what can typically be observed in the aftermath of banking crises, and, from summer of 2014 onwards, heightened downside risks to the inflation outlook and a concrete threat to the stability of inflation expectations. this complex package of policy measures has led to a significant easing in borrowing rates for the broad economy and should thereby continue to contribute to the recovery of the euro area economy and the return of inflation rates in the medium term to levels closer to 2 %. early evidence confirms that the current policy measures are delivering tangible results, in particular by improving financing conditions faced by firms β including small and mediumsized ones β and households, thereby stimulating credit demand and spending. starting with the cost of bank credit, this has fallen sharply across euro area member states as banks β funding conditions have eased and competition among lenders has accelerated in the wake of our policy measures. before the launch of the june 2014 credit easing package the bulk of the reduction in ecb key policy rates β a cumulative 125bps between september 2011 and june 2014 β had not been transmitted to the borrowing costs faced by households and firms in many vulnerable member states. from may last year ( when markets started to anticipate the credit easing package ) until october this year, however, bank lending rates for non - financial corporations ( nfcs ) fell strongly, by approximately 80bps for the euro area in aggregate. to put that in perspective, ecb staff estimates suggest that a reduction of the standard policy rates by around 100bps in june 2014 would have been required
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, such as financial institutions and institutional investors, became extremely cautious about counterparties'creditworthiness. that led to a sharp decline in transactions, not only in the interbank market where banks exchange funds but also in the cp and corporate bond markets where firms raise funds. as a result, the functioning of financial markets declined at a stroke, and the funds necessary for economic activity did not prevail. that, together with firms and households'intensified anxiety, shrank the global financial and economic activity in a panicky manner. the global economic conditions seem to have stopped worsening this spring. that is because the " acute pain " has started to dissipate for the following three reasons. first, ample fund supply by central banks and an aggressive injection of public funds into u. s. and european financial institutions have proved effective, and global financial markets have been regaining stability. second, inventory adjustments have progressed as a result of a substantial production cutback. and third, once plunged demand is now showing signs of gradual recovery, thanks to the effects of a large - scale economic stimulus around the globe. those developments are likely to continue for some time. if that is the case, what becomes more important from now is how to assess the effects of balance sheet adjustments centering on the united states and europe, which was the first factor behind the current economic downturn. however, that point is associated with high uncertainty. it takes a considerable period of time to complete the balance sheet adjustments following the experience of a large bubble. a possibility cannot be denied that the factors including the continued decline in the u. s. commercial real estate prices will make the adjustments more significant than envisaged in terms of duration and magnitude. meanwhile, emerging economies including china have recently been showing growth slightly stronger than expected. a large - scale economic stimulus in china has exerted favorable effects on the neighboring east asian countries, seemingly playing a role of raising economic growth of the regions as a whole. the bank will also pay attention to how the bold monetary easing in advanced countries affects emerging economies where the problem of balance sheet adjustments is relatively small. ii. the current state of and outlook for japan's economy based on the picture of the global economy, i will now move on to the current state of and outlook for japan's economy. from the autumn of last year, japan's economic conditions worsened far more sharply than those in the united states and europe where the current crisis had started. japan's real gdp
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##s. however, japanese institutional investors β preference for jgbs is strong partly in response to the international financial regulations, and partly due to a lack of attractive domestic investment opportunities. therefore, as the bank continues to purchase large - scale assets, that effect on the interest rate formation has been more strongly pronounced especially after the expansion of the qqe. in fact, the yield curve has flattened further, with the yield in the medium - term zone falling into negative territory albeit temporarily, and the super - long end of the yield curve also declining considerably. meanwhile, an increase in the volatility of the interest rate has been observed recently. i have been monitoring carefully how that shape of the yield curve will influence a variety of asset prices and investors β asset allocation as a policy effect. on the other hand, i have been monitoring the side effects β such as the effects on financial system stability, including the broadly - defined settlement system, and the market functioning. also a smooth restoration of markets β price discovery function will be an issue from somewhat a longer perspective, in the process of seeking for an exit from qqe, as the bank purchases about 90 percent of the total amount of jgbs β market issuance on a gross basis. second, my understanding is that in the assessment of the achievement of the bank β s price stability target, what is important is not to focus on the specific price indicators, but to examine whether various economic entities such as firms and households change their bis central bankers β speeches behavioral patterns based on the assumption of a certain level of inflation with monitoring a wide range of indicators including those related to wages carefully. it seems that there is no silver bullet for estimating people β s medium - to long - term inflation expectations, and therefore whether or not they have started to heighten their expectations, which have consistently remained lower than those in the united states and the euro area, can only be judged qualitatively from various economic entities β behavioral patterns. in that regard, households have had an outstandingly sticky preference for extremely inexpensive goods and services under deflation. however, such preference is not so strong as that in the past, and firms β price - setting behavior has also been changing in a positive manner. more importantly, a basic wage - setting mechanism β base salaries are revised in line with price increases, which was almost forgotten under deflation β has started to revive in labor - management wage negotiations. it could lead to a breakthrough in changing people β s
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current dispute between politicians and the european central bank over interest rate policy might be a foretaste of what is to come. a break - up of monetary union seems highly unlikely, but the potential for internal wrangling is clearly there and that could be disruptive to world financial markets. there must also be at least a possibility that closer integration of the eu could make it more self - contained and inward - looking. intra - eu trade could increase, while that with the rest of the world and hong kong could diminish. moreover, will the enlarged eu capital market suck in capital from asia to europe? in the first four months of this year, for example, japanese net purchases of european securities totalled us $ 9. 9 billion, while net sales of bonds and stocks in asia totalled us $ 2. 1 billion. extended diversion of capital to europe would undermine asia β s growth prospects as well as hong kong β s position as an international financial centre. this could also happen if the european banks are tempted to consolidate their business in asia to focus their efforts on their enlarged home market. this is not the occasion to be pessimistic. overall, i believe that the euro will be a good thing for europe and for the world economy. but as with any major change in the world financial architecture, hong kong will need to monitor developments closely and respond quickly to emerging threats as well as opportunities. let me now turn to the hkma β s regulatory response to the euro in hong kong. first, banks in hong kong need to be prepared to handle and account for the euro, particularly during the awkward transitional period before the legacy currencies disappear entirely. if they are not ready, many of the potential benefits of the euro for hong kong will simply not materialize. we have therefore issued advice to the banks on the steps that they need to take, such as : review of business strategies and business processes that might be affected by the euro ; review of nostro accounts in the legacy currencies ; adaptation of information systems ; and review of contracts that might be affected by introduction of the euro. secondly, we have thought it sensible to introduce legislation that will provide for continuity of contracts in relation to the introduction of the euro. in doing so, we are following the example of the eu itself as well as some other jurisdictions. in theory, such legislation may be unnecessary since the well - established β lex monetae β or β law of the currency β principle means that
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of science and technology is responsible for the network in trΓΈndelag county and conducts contact meetings. official statistics and current market information will continue to be the main basis for our assessments, but due to the time lag and revisions of statistics, supplementary information is useful. the regional network provides up - to - date information on the state of the norwegian economy. regular communication with local contacts in norway's business and community life provides us with information that supplements available official statistics. it also provides us with additional information on areas not covered by official statistical sources, and we learn which issues are of particular interest to enterprises. information received from the regional network supported the picture presented in the june inflation report : enterprises are reducing costs while households β financial position is strong. we are waiting to see if the results of the current round of talks will point to increased optimism in the business sector and in public entities or if the prospects for the future continue to be regarded as somewhat negative. inflation is low in norway. the rise in consumer prices adjusted for taxes and excluding energy products ( cpi - ate ) has slowed primarily due to developments in prices for imported consumer goods. low inflation is due to the appreciation of the krone throughout last year and low inflation abroad. the rise in prices for domestically produced goods and services has also slowed. this is particularly the case for domestically produced goods influenced by world market prices. domestic price inflation has nevertheless remained close to 3 per cent, due to high wage growth over several years. in july, the year - on - year rise in the cpi - ate was 0. 7 per cent, which is lower than projected in the june inflation report and substantially lower than the inflation target. there are also prospects that inflation will be low for some time ahead. the analysis in the june inflation report showed that a reduction in the sight deposit rate towards 3 per cent, combined with some depreciation of the krone, could bring inflation up towards the target two years ahead. more moderate wage settlements in the future would provide a basis for even further monetary policy easing and a weaker krone. without considerable monetary policy easing, inflation might have remained too low for an extensive period. the short - term nominal interest rate in norway has now reached a historically very low level. interest rates have not been lower since the first nine to ten years following the second world war. the real interest rate is also low, although by no means as low as it was when inflation plagued norwegian savers in the 1970s and 1980s
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shocks. bank β s liquidity coverage ratio ( lcr ) stood at 171. 4 percent as of end - march, well above the regulatory minimum of 100 percent. also, the net stable funding ratio of universal and commercial banks, which stood at 129. 1 percent as of end - march, indicates stable funding to serve customers in the short to medium term. outstanding loans of banks as of end - august grew by 4. 4 percent year - on - year. this shows that despite the effects of the pandemic, there is still substantial demand for loans and appetite among banks to lend. the non - performing loans ratio remained modest at 2. 8 percent as of end - august. we may see an uptick in the npl ratio in the coming months as a result of the crisis, but we expect the increase to be manageable. worth noting is that banks have been beefing up their provisioning for bad debts, with the npl coverage ratio standing comfortably at 107. 4 percent as of end - august. despite the increase in loan - loss provisioning, banks stayed profitable as of end - june, with annualized net profit growing year - on - year by 1. 8 percent. the bsp β s stress tests point to favorable banking system prospects amid risks. 3 / 5 bis central bankers'speeches results show npls will remain manageable, cars will stay above the 10 - percent requirement, liquidity will be sufficient, and profitability will stay intact. moving on to the final part of my speech, which is where we are steering the philippine economy. the entire government and the bsp are exerting enormous effort not only to help the economy and the filipino people survive this crisis but for us to be even better, stronger, more inclusive, technologically prepared, and more competitive than before the coronavirus pandemic. allow me to briefly expound on how the bsp is working toward this goal. the bsp is pushing for laws that will accelerate recovery and improve the structural makeup of the economy. among the laws we are pushing are : ( i ) the financial institutions strategic transfer or fist bill, which will help banks unload bad assets ; ( ii ) the government financial institutions unified initiatives to distressed enterprises for economic recovery or guide bill, which will provide assistance to distressed firms that are critical for economic recovery ; ( iii ) amendments to the agri - agra law to rationalize the way banks can support agriculture development ; ( iv ) amendments to
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bank secrecy laws to aid anti - money laundering and anti - tax evasion efforts, and promote integrity in governance ; and ( v ) amendments to the credit information system act to ease credit access of msmes. meantime, the bsp continues to refine monetary policy and banking regulations. in relation to price stability, the bsp last month started issuing our own securities, as allowed under our recently amended charter. this will help us better manage liquidity. on financial stability, we are committed to a dynamic regulatory environment that reflects an ever - changing landscape for our supervised entities. we will continue to refine regulations, taking into account good corporate governance, sound risk management, efficient financial intermediation, and effective customer service. the bsp is actively promoting financial technology, which helps speed up payments and capital turnaround and therefore boosts income and economic growth. my personal goal is that half of financial transactions in the country should be digital by 2023, the end of my term. but with enabling regulations and the pandemic, this may be achieved sooner β perhaps by the end of 2022. in fact, we have seen an exponential increase in the use of e - payments platforms instapay and pesonet. we have launched mobile apps for savings and investments. we have rolled out programs that pave the way for an extensive use of the qr code system for payments. the bsp embraces regulation technologies or β regtech, β which facilitate efficient delivery of regulatory requirements. the bsp has also pilot - tested a chatbot that can handle questions and concerns sent by the public through digital platforms with the use of artificial intelligence. amid these encouraging developments, the bsp has kept a sober eye on risks accompanying the use of electronic data. 4 / 5 bis central bankers'speeches in line with this, the bsp has launched a three - year digital payments transformation roadmap, which is anchored on promoting access to financial products through digital platforms, with appropriate safeguards. the roadmap has three pillars : ( i ) development of digital payment streams ; ( ii ) establishment of interoperable digital payments ecosystem ; and ( iii ) implementation of digital governance standards for consumer protection. with the roadmap, we expect digital banks to play a key role in expanding access to a broad range of financial services. the bsp will be introducing digital banks as a distinct bank classification. all these initiatives put the bsp at the forefront of the philippines β goal of becoming
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they head to the shops for their groceries. they could have used their cards at the terminals but obviously the choice of payment is still predominantly cash. our statistics revealed that we have an estimated share of banknote of $ 1, 500 per capita, by value β this is fairly high but expected in a cash based economy like solomon islands. so, i think we are not seeing yet the demise of cash in solomon islands. perhaps not in the next decade or two. obviously, the key observation from the numbers is that we all use cash in our daily transactions. that being the case, we need to know a little bit more about our notes and coins, how to handle them and the important roles that we all perform in the cash cycle in our various capacities. in that context, ladies and gentlemen, let me now touch a little bit about our new $ 5 banknote. our new polymer $ 5 banknote our new polymer $ 5 banknote is the last in our existing note series to be reformed. the proposal to reform the $ 5 note received the board β s approval in 2016 and, subsequently a currency tender committee was established and tasked to tender the project to note suppliers in a closed tender process. note printing australia was successful in the tender process, and that began our journey with npa in the production and supply of our new polymer $ 5 note, up until its delivery in early april this year. and i am pleased that the ceo of npa ( and his main man behind this project ) are here with us to witness this launch. looking back, i am amazed by the amount of work and time that went into the project from inception to delivery of the products. i can still recollect the many exchanges of emails, onsite visitations, training workshops conducted by technical experts from npa for our currency team β nuwan and brian are here and they can attest to this. importantly, the whole process involved numerous checks and balances, compliance to ensure the job meets international standards in note printing and satisfaction of in - house quality controls. indeed, it was not an β easy walk through the park β job. why the polymer substrate? the $ 5 denomination is currently the lowest in our family of banknotes. it is the most used banknote for low value transactions. currently, in terms of volume, we have about 2 million pieces of $ 5 notes in circulation. this is equivalent to 4 pcs per capita or $ 20 per person, by value. since the
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luke forau : launch of the new $ 5 polymer banknote speech by mr luke forau, deputy governor of the central bank of solomon islands, at the launch of the new $ 5 polymer banknote, honiara, 2 may 2019. * * * salutation permanent secretary ( ag ), ministry of finance and treasury, representatives from the ministry of commerce, industries, labor and immigration representatives from the ministry of fisheries and marine resources. cbsi board of directors ceos and country managers from the banking industry. our business partners from note printing australia and ccl β npa β s ceo mr. malcolm mcdowell and mr nuwan kalpage, and from polyteq, mr. brian lang. representatives from the media distinguished guests ladies and gentlemen, a very good morning and warm welcome to you all! it β s an honour to have you here with us this morning, to witness the launch of the country β s new polymer $ 5 banknote. as you may have already probably aware, the new polymer $ 5 note was unveiled recently at the international currency conference in dubai, united arab emirates. it was a fitting occasion given the presence of important global players in the cash cycle β from the note printers, ink suppliers, manufacturers of security features, suppliers of printing machines, suppliers of polymer substrates to the note issuing authorities that included the central banks and treasuries. but, at the currency conference, what seemed to be a topical issue was the general trend to move towards a cashless society, or rather a less cash society. discussions have been centred on the advent of modern technology which have facilitated seamless transfer of value between senders and receivers that seems to have now overtaken cash as a payment instrument. importantly, the rise of modern payment platforms such as the use of blockchain technology and cryptcurrency are topical discussions in the payment industry nowadays. these new payment solutions promise efficient, secure, and robust payments transactions. indeed, the payment landscape is changing. time of change while these modern payment platform changes are inevitably increasing for the advanced payment ecosystems, the payment landscape in solomon islands is predominantly evolves around cash as the major payment instrument. cash is still the main payment instrument for low value transactions throughout solomon islands and i believe will remain so for a considerable time into the future. 1 / 3 bis central bankers'speeches in honiara, where we have efpos terminals at checkout counters, people still run to the atms to withdraw cash before
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inflation and the strength of monetary policy transmission. you, ladies and gentlemen, have an important role to play in the latter β in the transmission of monetary policy. you see, decisions on the interest rate for loans and deposits are made at each and every sparda - bank. in the following, i will therefore discuss the current situation facing banks in germany. 4 current situation facing banks in germany when it comes to the environment that banks are operating in, much has changed since july 2022, when the ecb governing council set the reversal of monetary policy interest rates in motion. for a start, the turnaround led to a significant improvement in net interest income for institutions, both large and smaller ones. this is because lending rates were raised swiftly and sharply. at the same time, we're still seeing a great many institutions today remunerating sight deposits at rates close to zero, just as we were used to during the 12 - year period of low interest rates. since the ecb first raised its key interest rates in july 2022, it has mainly been the smaller lenders that have put up the interest rates they pay on overnight deposits. today, they are passing on just under one - third of the increases in the market interest rate that have happened since july 2022 β in some cases, significantly more, even. given the low level of remuneration, it is not surprising that the volume of sight deposits is gradually going down overall. ultimately, this is bringing normality to the portfolio structure. you see, in the low interest rate environment, more sight deposits were being held than ever before in the federal republic of germany. up to 2010, time deposits dominated in this country. then came a reversal in the ratio : at the end of 2021, sight deposits as a proportion of banks'total deposits peaked at just under 70 %. and it is precisely here, with these sight deposits, that institutions are proving much slower to pass on the rise in interest rates than one would expect, based on earlier episodes of rising interest rates. so with interest rate pass - through in this segment playing out more slowly than was usual in the past, institutions have been able to bolster their earnings. in the meantime, though, competition for deposits has been hotting up. the market is doing its job. customers looking for better rates can stick with their current bank and shift their money from sight deposits into time deposits. or they can switch between institutions. 3 / 7 bis - central bankers
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. its report does not mince its words : svb's board of directors and senior management failed. the bank ran into difficulties because it had a business model with multiple points of vulnerability : its customer base was highly concentrated, while the majority of liabilities were uninsured. added to this, there were grave deficiencies in risk management practices. but the federal reserve bank is also frank in its self - criticism β something which does it credit, in my view. supervisors failed to pick up on many of the problems at svb, despite the fact that some were public knowledge. while supervisors had been aware of unhealthy developments in risk management and governance, there was a lack of assertive intervention and, not least, of ways for supervisors to step in. i welcome the fact that the basel committee is analysing recent events in the banking sector with a view to assessing whether the regulatory framework and its scope should be adjusted in the light of what has happened. in any case, any adjustments should be 4 / 7 bis - central bankers'speeches discussed and agreed at an international level. it might make sense to probe both crisis prevention and crisis management instruments as part of this process. but, even as things stand today, the federal reserve bank's report can serve as encouragement to supervisors everywhere to apply supervisory instruments in a timely and consistent manner. this is in everybody's interests, including banks. it is important to keep an eye on the full gamut of risks : i've already mentioned interest rate risk and credit risk, but there's also operational risk to consider. as cyberattacks become increasingly frequent and we become ever more reliant on it services, more and more attention needs to be paid to sound crisis prevention. but, if the worst does end up happening, institutions need to know precisely what measures need to be taken after a cyberattack. and that's why we supervisors have, for some years now, been stepping up our ad hoc inspections focused on cyber and it risks. this involves shining a light on how hardy the banks are when it comes to these issues β i. e. their digital operational resilience. well - tuned risk management helps ensure that banks know where they stand at all times. this allows institutions to quickly spot mounting risks and potential losses and take appropriate action. at the same time, we all know that even well - tuned risk management cannot completely prevent stresses and strains. so it's important that
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christian noyer : where are we 11 months before e - day? speech delivered by christian noyer, vice - president of the european central bank, on the occasion of the forum " tremplin pour l'euro " in courchevel, france, on 2 february 2001 * * * ladies and gentlemen, just over two years ago, the european union adopted its own single currency. less than 11 months from today, we will be paying with euro banknotes and coins in our everyday transactions. by many measures, this development could justifiably be considered an achievement of historic proportions. with the arrival of euro banknotes and coins, the process of introducing a single european currency initiated in maastricht in 1991 will finally be complete. today, the minds of european central bankers, the banking community and many other interested parties are certainly focused on the immense organisational and logistical task entailed by the cash changeover. allow me nevertheless to briefly reflect on some of the developments that the euro has already triggered. first of all, the irrevocable fixing of exchange rates between the participating currencies and the introduction of the euro on 1 january 1999 can rightly be considered as the " crowning " of the single market. the euro is indeed " one money for one market ", as the studies supporting the original delors report succinctly put it. the euro has undoubtedly become an important catalyst in promoting the further integration of product and capital markets of euro area economies. more importantly, the policy - makers in the member states have realised that being part of a monetary union will not only produce substantial economic benefits. it also imposes certain constraints on their own policies. rigidities in labour and product markets, inappropriate fiscal policies and fragmented regulatory frameworks all have a negative impact on the economic conditions, proper functioning and growth potential of the euro area as a whole. tackling these challenges has become a clear political priority over the last few years. the ecb's success in maintaining price stability has certainly provided - and continues to provide - a crucial foundation for these efforts, by stabilising inflation expectations and instilling a " stability consensus " across europe. in this sense, the euro is one factor which is continuing to push euro area economies towards more balanced budgets and greater competitiveness. another important aspect of the transformation of the european economy that has been stimulated by the advent of the single currency is the increasing financial integration within the euro area. indeed, from
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, a centralised organisation of preparations would not have been feasible and was therefore ruled out from the start. rather, it was deemed appropriate to devolve responsibility for the organisation of the various contributions. this decentralised approach certainly has its advantages. it allows, within the agreed overall framework, for tailor - made solutions specific to each national environment. at the same time, it makes a clear assignment of responsibilities particularly crucial. i will not go into detail as concerns the changeover to the euro as a unit of account, because the responsibility for this clearly lies with the governments. but this does represent a large task since it concerns all public and private legal acts, administrations, companies and households. much responsibility therefore rests with the national administrations of the member states. they have to create the conditions by, amongst other things, adapting relevant legislation and administrative procedures so that, in all respects, businesses, consumers and the public at large are ready and able to change over to the euro, including as regards the use of the new banknotes and coins. the european commission and the eurogroup are monitoring the state of these preparations. nonetheless, the responsibility for implementation rests clearly with the member states, which have set up comprehensive national changeover plans. i might also mention that member states'governments are also responsible for the minting of some 50 billion euro coins. for its part, the eurosystem has the task of producing the 14. 5 billion euro banknotes and making them available to the banking sector. in addition to this, although not directly responsible, the ecb naturally attaches great importance to a smooth and well - prepared changeover in every aspect. to this end, the ecb and the national central banks of the euro area have endorsed a number of general principles, concerning, for example, the frontloading and sub - frontloading of the euro banknotes and coins. given the devolution of responsibilities for the cash changeover, such general principles are important to ensure a level playing - field and to avoid competitive distortions. also important is the common schedule for the changeover. this sets specific dates for the various stages of the process, which need to be respected by all concerned. there are, of course, three important dates which i would like to briefly recall : β’ the first of these is 1 september this year, the date on which each national central bank may begin " frontloading " euro banknotes and coins to credit institutions and other target groups. however, this period can
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reforms to the government β s tax policies and spending priorities that serve not only to reduce the deficit but also to enhance the long - term growth potential of our economy β for example, by encouraging investment in physical and human capital, by promoting research and development, by providing necessary public infrastructure, and by reducing disincentives to work and to save. we cannot grow out of our fiscal imbalances, but a more productive economy would ease the tradeoffs that we face. thank you. i would be pleased to take your questions. bis central bankers β speeches
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, particularly in the non - manufacturing sector, but also to keep a close eye on the extent to which companies β views regarding the economic outlook become more bullish as the recovery continues. outlook for prices and the conduct of monetary policy the japanese economy has been in a recovery phase since the summer of 2003. domestic corporate goods prices have been rising partly due to high crude oil prices. consumer prices, however, have been on a slightly declining trend due to the fact that the rise in corporate goods prices has mostly been offset by higher productivity and labor cost restraint. the bank has been providing ample liquidity in accordance with its commitment to continuing with the quantitative easing policy until the year - on - year rate of change in the consumer price index ( excluding fresh food prices, on a nationwide basis ) registers zero percent or higher on a sustainable basis. the positive impact of the commitment on the economy, acting via interest rates, has increased as the economic recovery has progressed. this impact is expected to become stronger as corporate profits continue to increase in line with the economic recovery. the bank β s thinking on the future conduct of monetary policy was explained in the outlook for economic activity and prices published in october 2004. the bank said that if higher productivity and other factors continue to broadly contain the upward pressure on prices as the economy follows a sustainable and balanced growth path, this will give the bank more latitude in conducting monetary policy. here, the β conduct of monetary policy β includes monetary policy decisions relating to the timing of the termination of the current monetary policy framework and the pace at which the bank will raise short - term interest rates to keep them consistent with economic conditions at the time. if prices remain less responsive to increased economic activity, the bank can more flexibly and effectively respond to emerging economic situations. for example, it could choose to continue with the quantitative easing policy as long as possible, or it could choose to raise interest rates at a moderate pace after the termination of the policy. whatever policy option is chosen in the future, it seems unlikely that the bank will be required to take precipitate action. it is in this sense that it enjoys β latitude β in making monetary policy decisions. as an end to the quantitative easing policy approaches, the bank will further endeavor to offer a lucid explanation of its assessment of the economic situation as well as the thinking behind its conduct of monetary policy. furthermore, the bank will continue to enhance its communication with market participants so that they will be better able to predict the conduct of
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william c dudley : the national and regional economic outlook remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the university at albany, albany, new york, 18 november 2011. * * * good morning. i am pleased to be at the university at albany. it is always a pleasure to speak with students and faculty because of the intellectual leadership role you play in your communities. i also welcome the addition of business leaders to this gathering because you shape the economic landscape in the region. so, i thank you all for coming today and helping make this such a rich audience. over the past 20 months, i have been engaged in a series of outreach meetings all across my federal reserve district. i consider these visits just as important as my trips to washington, d. c., to help formulate monetary policy or to switzerland to shape international bank regulation. the understanding of issues and concerns that i gain today will help ensure that my policy decisions reflect the public interest in the broadest sense. each visit within the region helps me deepen relationships with the people i represent. as you may know, the new york fed β s district includes all of new york state ; 12 counties in northern new jersey ; fairfield county, connecticut ; puerto rico ; and the u. s. virgin islands. in august, i met with community leaders, businesses and elected officials in newark, patterson and jersey city. earlier this year i went to brooklyn, the bronx, queens and puerto rico, while last year i visited several upstate cities. my trip started yesterday with a policy speech to the west point cadets and was followed by a colloquium with their economics faculty. so, this visit to the upper hudson valley brings me in contact with some of our country β s future leaders β you and the cadets who will lead our country in very important, if different, ways. i will also have a chance to see more of what makes albany so distinct from both downstate and upstate new york. of course, i may have a leg up on this because i was born and raised close by, in western massachusetts! the greater albany area is home to 900, 000 people β roughly the size of three average cities in the united states. you and your fellow residents tend to be highly educated and be employed as public servants. these factors are all part of what makes albany feel special. today, i want to talk with you first about the fed β what we do and why
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banks courage, perseverance and vision as they plot their course to the future. thank you.
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rather than weak supply. in spite of everything we have gone through, there has been no sovereign default of any advanced country apart from greece since the interwar period. yes, many of these countries have been downgraded lately, but what that means in terms of actual default probabilities is not clear to me at this point, although it might be somewhat clearer after the next session. the fact of the matter is that advanced countries have both considerable means and strong incentives to avoid default. even iceland was able to avoid a default after the collapse of 90 % of its financial sector and its deepest recession since the interwar period. so, for the post - war period, walter wriston has been largely right so far, in saying that β countries don β t go bust β β as far as advanced countries are concerned β although he was wrong as regards all countries. and what holds for advanced countries in this respect does so increasingly for the more important and advanced emes. i am not denying that sovereign risk has increased, more broadly speaking. higher deficits and debt levels and weaker growth prospects bear witness to this. but the degree to which this translates into higher default probabilities in the narrow sense is not clear. my prediction is that default probabilities will remain low for most advanced countries. what, then, about the reaction of rating agencies and markets? here again, we have the question of what rating agencies are actually trying to measure. i have long experience of dealing with them in my current and past jobs, and i have the sense that they are measuring something more than default probabilities. partly, therefore, a downgrade by one or two bis central bankers β speeches notches within an investment - grade category could be consistent with my view. then, on top of that, there is a significant amount of evidence to suggest that ratings do not see through the cycle. so the rating agencies and the markets are probably overestimating sovereign risk at the current juncture, in the same way that they underestimated it prior to the crisis. there is one important proviso to this statement, however : the negative feedback loop between sovereign risk and bank fragility, which in historical terms has been particularly severe in the recent period. thus, for some countries, the markets might be factoring in further socialisation of private sector losses. therefore, in addition to medium - term fiscal consolidation, a weakening of the nexus between sovereign risk and banking fragility is key
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they were not necessarily articulated fully at the time, these solutions entailed several goals : preserving a functioning domestic payment system, ring - fencing the sovereign in the case of bank failures, limiting the socialisation of private sector losses, and creating the conditions for rebuilding a domestic banking system. in essence, the adopted solution saved the domestic operations of the banking system by splitting up the banks and allowing the international part to go into a resolution process. furthermore, in order to stop an incipient run on domestic deposits, all deposits in iceland were declared safe and all deposits in icelandic - headquartered banks were given priority over other unsecured claims. as a result of these measures, the domestic payment system functioned more or less seamlessly throughout, and common citizens had continuous access to their deposits. bis central bankers β speeches there are still a number of misconceptions about this process in international discussions. there have been claims that iceland allowed its banking system to collapse, with what now seem reasonable results, and that others should consider doing the same. the fact is that iceland kept the domestic part of its banking system running throughout ; otherwise, the consequences would have been dire. some have claimed that the banks were nationalised. they were not. the old banks are private companies. they are in winding - up proceedings governed by law ; they are not under the control of the government. the government has a majority stake in only one of the new banks. others have claimed that iceland defaulted and got away with it. the opposite is true. the credit of the sovereign was preserved, and all debt obligations have been paid on time. moreover, the investment - grade credit ratings from moody β s and s & p were preserved throughout the crisis. this is why the sovereign has been able to tap international capital markets twice so far since the crisis struck. so the bottom line is that a sovereign default was avoided in spite of an almost unprecedented financial collapse and the worst economic recession since the interwar years. a key to that result was the ring - fencing of the sovereign from the collapse of the private banks. all debt service payments on sovereign debt, in both domestic and foreign currencies, have been made in full and on time. but the avoidance of default during the crisis does not come without the willingness to use the means available to avoid that outcome, even in very adverse situations, and the ability to endure the temporary hardship that comes with it. in addition, iceland β like ireland, probably β was helped by
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ardian fullani : press conference at the presentation of the first financial stability report of the central bank of the republic of kosovo speech by mr ardian fullani, governor of the bank of albania, at the presentation of the first financial stability report of the central bank of the republic of kosovo, pristina, 20 december 2010. * * * dear mr. gerguri, dear members of the governing board of the central bank of the republic of kosovo, dear mr. yilmaz, dear guests, it is always a great pleasure for myself and my colleagues to come to the central bank of the republic of kosovo. i would like to express my positive consideration that this institution is now well - shaped and is growing stronger at a stable and rapid pace. this development is an outcome of the clear vision of the governing structures and the commitment of the central bank β s staff in implementing the best standards relevant to the area. this time i am invited to testify another achievement of this institution, the first release of the financial stability report. i have the conviction that the public authorities, economic operators in kosovo and the public will appreciate the contribution of the central bank with respect to the identification and management of risks facing the financial system β s activity. in my speech i will first provide a general assessment of the great deal of importance given to financial stability issues and the central bank β s role in this regard. then i will share our experience at the bank of albania with the institutional approach to financial stability assessment function. the global crisis, which originally emerged as a financial system crisis, very soon transformed into a real economy crisis. due to the high integration of financial markets as a result of the presence of financial institutions engaged in cross - border activities and the manifold interinstitutional exposures, a financial system crisis can spread rapidly across many countries. on the other hand, due to the exceptional role in financial intermediation, a financial system crisis may hit the real sectors of the economy, placing the economic mechanism in a negative spiral that tends to reinforce itself. these developments will likely result threatening to the sustainability of the entire financial system and be followed by severe social consequences that are costly to public wealth. this two - year experience triggered an accelerated identification process of the mechanisms and measures that aim at preventing and handling similar situations in the future. at a broader economic context, these measures aimed at reforming the international monetary framework and reduce imbalances in the global macroeconomic framework. g - 20 policy -
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the pace of change in the size of the portfolio, the albanian banking sector continues to lend. to illustrate my point, only in 2018, the banking sector has granted new loans amounting to around eur 1. 1 billion ( equivalent ) to fund business investments, house purchase and consumption. the second moment pertains to the responsibility and the diligence of the banking sector vis - avis lending. as the administrator of public savings, responsibility and due diligence in lending are non - negotiable conditions. measures undertaken to bolster the short and medium - term development of albania should not run against its financial stability in the long term. yet, in coherence with my observations above, i judge that the banking sector should pay more attention to lending. this judgement is based on two theoretical premises and is enabled by an important precondition. first, a more proactive approach to lending is beneficial for the sustainable and long - term development of the banking industry. low return on assets is one of the problems facing the banking sector in albania, in the region, and beyond. such low rates of return β which in albania are induced also by ample foreign currency liquidity and will continue to be favoured by the reduction trend of the public debt and domestic borrowing by the government β increase the vulnerability of the sector to shocks. against this backdrop, the banking sector should increase its orientation toward lending as an instrument to enhance asset profitability and boost its longterm stability. in the same vein, leaving potential sectors or clients outside the focus will push them to turn to other segments of the financial market. this implies less income for the banking sector not only in the form of less income from lending, but also in the form of less income from other products in the package of services that banks offer to clients. second, a more proactive approach to lending is beneficial for the sustainable and long - term development of the albanian economy. our analyses, based on the available information and the bank lending survey for albania suggest a divergence in the pace of improvement in loan demand and supply. while this divergence does not seem to have, as of yet, a substantial impact on 2 / 5 bis central bankers'speeches lending, if it deepens further it will jeopardise the performance of credit and the pace of economic growth. in this light, i would like to underline that a series of studies, both at home and abroad, emphasise the fact that the albanian economy would
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output going forward, as well as the future growth rate of the economy and the trend for inflation. we use judgment to decide on a course of action, keeping in mind that the " ship " of the economy responds slowly to a change in the policy interest rate, and that there could be headwinds or tailwinds to deal with. and because we get monthly data on inflation and output, we can correct our course, if necessary, on subsequent policy interest rate announcement dates. let me expand on this. in conducting monetary policy, the bank uses three main strategies to reduce uncertainty. first, we use a variety of models to produce economic projections and to examine alternative assumptions about key variables. the use of multiple models helps to provide comprehensive for further details on uncertainty in the conduct of monetary policy, see p. jenkins and d. longworth. 2002. " monetary policy and uncertainty. " bank of canada review ( summer 2002 ). available at : http : / / www. bankofcanada. ca / en / review / 2002 / longworth _ e. pdf. p. l. bernstein. 2006. " risk : the hottest four - letter word in financial markets. " in global perspectives on investment management : learning from the leaders, 221, edited by r. n. sullivan and j. j. diermeier. charlottesville, va : cfa institute. information and analysis, and helps to guard against policy errors that could result from relying on a single economic model. the models we use range from single - equation indicator models to multiequation reduced - form models to dynamic stochastic general - equilibrium models, such as our newest model of the canadian economy, totem. 4 the second strategy we use to reduce uncertainty is to bring together a variety of information and indicators before we make an interest rate decision. these include both quantitative and qualitative measures covering international and domestic economic developments, the regional business outlook, monetary and credit conditions, and the views and expectations of financial market participants. as we sift through this information, we try to look through the noise and discern fundamental trends. we look carefully at both corroborating and non - corroborating evidence. finally, we apply judgment. the bank of canada does this by means of a committee that debates the issues and comes to a decision. interestingly, research suggests that the composition of a committee and the structure of a meeting can affect the quality of decision making, both in central
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calls for policy responses at the national level but also at the international level. it also calls for the consideration that such policy responses may have implications that extend beyond the domestic borders, benefits may also be derived from cross border coordination of policy responses to increase the prospects of achieving the desired outcomes. our conference today focuses on the impact of economic and financial globalisation on the role of central banks, as well as to assess how central banks can effectively contribute to promote stability in this environment. in particular, the conference will be looking at the implications and challenges that globalisation brings to the mandate of the central banks in preserving monetary and financial stability. the pace and nature of globalisation has also brought significant stress to the international financial architecture. the current financial crisis has highlighted the vulnerabilities in the international financial architecture, leading to renewed thinking about the reform of the global financial system. tonight, joseph stiglitz will be speaking on " strong institutions for growth and crisis management ". tomorrow, we will address some of the specific management challenges central banks face in a globalised environment. we will discuss some recent developments of central banks'cooperation and the areas for reform of the international financial architecture. ladies and gentlemen, the crisis presents an opportunity for us to re - evaluate, promote and embrace sustainable long terms solutions. our focus is for the discussion to contribute to the means through which central banks can contribute more effectively in promoting stability and economic growth. this conference will provide an opportunity to reassess our traditional views on many of the issues before us. on this note, i wish you a very engaging and substantive conference.
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manner so that private agents are in the best possible conditions to gauge the likely evolution of interest rates in response to economic developments. first of all, the ecb is very clear about its monetary policy strategy. in addition, the ecb informs the public through the monthly press conference held just after the first governing council meeting of the month where the economic and monetary diagnosis of the ecb and the decisions taken by the governing council are displayed and explained almost in real time. the ecb has been a pioneer in this domain and has been followed by other central banks keen on increasing the transparency of their actions and decisions. this transparency is one further element contributing to macroeconomic stability and long - term growth. in an environment where the predictability of interest rates movements and their likely relation with key macroeconomic developments is relatively high, firms can better manage their balance sheets. this reduces both their vulnerability to economic shocks and their risk management costs and creates the condition for better decisions as regards domestic and foreign investment. finally, i would like to stress the importance of maintaining price stability in enhancing the functioning of the labour market and contributing to sound nominal wage developments and competitive unit labour costs, which fosters firms β competitiveness, growth and job creation. in a credible regime of low inflation workers do not ask for extra - wage increases to compensate for inflation risk and firms and trade unions know ex - ante that firms will not be able to pass higher wages on to consumer prices. this helps to avoid excessive nominal increases, thus enhancing the ability of firms to efficiently manage their production costs and create new jobs. at the current juncture, it is important that there are no second round effects on wage and price settings arising from the recent increase in oil prices. such effects have not been observed till now. all economic agents know without any doubt that we are very vigilant in this respect ; and we trust that it is this vigilance and our credibility that are decisively contributing to prevent second round effects. the role of a stability oriented fiscal policy of great importance for the maintenance of macroeconomic stability and long term growth are sound public finances. the stability and growth pact, which complements and further specifies the eu treaty, provides a set of rules for the national fiscal authorities with the aim to ensuring fiscal soundness, by avoiding excessive deficits and safeguarding government finances, as defined by the attainment in the medium - term of budgetary positions β close to balance or in surplus β. far from being a straightjack
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started circulating in may last year. as i β m sure you β ll agree, the note you β re going to see is instantly recognisable as a ten. it certainly resembles the ten euro notes you have in your pockets, with its distinctive romanesque architecture. however, perhaps it will have more of a visual impact, as the images are larger and more defined, the colours are stronger and the bridge has added depth. when you take a closer look you β ll see the new ten has the same new features as the new five : a portrait of europa β a figure from greek mythology β in both the hologram and the watermark, as well as the emerald number, which changes colour from green to deep blue when you tilt the note. introducing a new banknote, especially one used as much as the ten, is a major undertaking. it requires a lot of planning and preparation to gradually replace the two billion or so ten euro notes currently in circulation. i would like to thank all who were involved in this process within the eurosystem. i would also like to thank the banks, retailers and other cash - handling professionals, who will, in the end, put those new notes in your hands. i know that banknote equipment manufacturers and suppliers are already working hard to ensure that the bis central bankers β speeches machines are adapted in good time so that the introduction goes smoothly, and i want to thank them as well for the vital part they play. we are announcing the date of issuance and are sharing the required technical information well in advance to give all parties enough time to get ready. the new europa series ten euro banknote will start circulating on tuesday 23 september this year. and now it β s time to see the new ten euro banknote. bis central bankers β speeches
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to achieve this objective : ( i ) improved loss absorbency and resilience, ( ii ) improved recovery and resolution, and ( iii ) improved supervision. assessing the effects of reforms requires a distinction between private as well as social costs and beneο¬ts. the internalization of systemic externalities and the withdrawal of implicit tbtf subsidies results, ceteris paribus, in an increase in funding costs. like the introduction of a pollution emission tax, an increase in funding costs will be perceived as a cost of reforms by private market participants while, at the same time, contributing to lower β emissions β β hence lowering the costs of ο¬nancial crises to the taxpayer. the withdrawal of subsidies also has implications for the risk - taking of banks. the optimal level of risk taken by tbtf banks from a private perspective can be higher than the socially [UNK] level of risk : owners of banks fully reap potential proο¬ts but only partially bear potential risks due to the expected government bailout in case of distress. excessive risk - taking implies costs for society : if risks materialize, taxpayers may face additional costs related to the need to rescue the bank. regulatory reforms aimed at internalizing the external costs through, for example, higher loss absorbing capacity and provisions to facilitate the orderly resolution of tbtf banks thus have the potential to increase social welfare. but these reforms may come at a net private cost for the affected banks as they will incur costs to comply with the new regulation and are likely to face higher funding costs. in an ongoing evaluation conducted in 2019 and 2020, the financial stability board assesses whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks ( sibs ). [ 9 ] the evaluation will also examine the broader effects of the reforms to address tbtf for sibs on the overall functioning of the ο¬nancial system. this project focuses on a core objective of the g20 ο¬nancial reforms : to address the systemic and moral hazard risks associated with systemically important ο¬nancial institutions ( sifis ) ( fsb 2011 ). beyond resolution regimes, policy measures to address the β too - big - to - fail ( tbtf ) β problem include a more intense supervision of sifis and higher requirements for their loss absorbing capacity. the project will assess whether perceived implicit funding subsidies have changed ; how much progress has been made regarding the resolvability of systemically important banks ; whether this has affected bank behavior ; and
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whether there have been broader effects of the reforms on the real economy. the fsb published its work plan, invited feedback on it, and solicited supporting evidence of reform effects from respondents. this is in line with the fsb β s aim to be open and transparent and engage in a dialogue with a broad range of stakeholders. to put the evaluation on a ο¬rm methodological foundation, the project is conducted with input from academic advisors. there are further opportunities for interaction with the fsb evaluation teams : external stakeholders will engage with the team in workshops and roundtables, and a consultation report will be published in june 2020. the role of macroprudential policy in a monetary union credit booms and a potentially resulting debt overhang are crucial determinants of the likelihood of ο¬nancial crises, their severity, and the strength of the recovery that follows. this is why monitoring debt levels and macroprudential policy are particularly important in a monetary union with a joint responsibility for monetary policy but national responsibilities for key policy areas potentially affecting ο¬nancial stability. most central banks relate the stability of the ο¬nancial system to its ability to cushion shocks so as to mitigate the costs of ο¬nancial distress for the real economy. the bundes β bank β s deο¬nition is in line with this notion. it follows the idea that the ο¬nancial system should constantly be able to fulο¬l its key macroeconomic functions : financing investment, providing savings opportunities, allocating risks, and maintaining the payments system. a stable and resilient ο¬nancial system fulο¬ls these functions and does neither amplify nor trigger an economic downturn. it should consistently be in a position to absorb losses from both ο¬nancial and real economic shocks. consider a negative shock to the economy and to the net worth of ο¬rms. this may trigger a negative spiral, causing credit defaults, and a reduction in banks β capital. capital ratios will decline, potentially leading to the breach of regulatory capital requirements. at the same time, market participants will revise expectations and require higher levels of capital over and above the regulatory minimum. how can banks react? in theory, they could accumulate additional equity capital internally through retained earnings or by raising fresh capital on markets. in practice, however, this route will be blocked in a crisis. hence, banks can restore required levels of capital only by divesting assets and deleveraging. this adjustment, in turn
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. yen ratio to total assets, % large enterprises ( left scale ) small and medium - sized enterprises ( left scale ) ratio to total assets ( large, right scale ) ratio to total assets ( small and medium, right scale ) fy - end 85 note : based on the financial statements statistics of corporations by industry, annually. excluding " finance and insurance. " large enterprises are defined as enterprises with a capitalization of 1 billion yen or more, and small and medium - sized enterprises are defined as enterprises with a capitalization of less than 1 billion yen. source : ministry of finance. chart 10 qqe with yield curve control yield curve control inflation - overshooting commitment inflation rate 1. 2 % 1. 0 0. 8 2 % 0. 6 0. 4 jgb yield curve short - term policy interest rate " minus 0. 1 percent " target level of the long - term interest rate " around zero percent " 0. 2 0. 0 - 0. 2 - 0. 4 expansion of monetary base continues source : bloomberg. 0 1 2 3 4 5 6 7 8 9 10 15 20 year residual maturity chart 11 fiscal conditions in japan amount outstanding of government debt fiscal balance and primary balance ratio to nominal gdp, % points y / y % chg. acceleration in the pace of fiscal austerity ( decline in fiscal deficit ) ratio to nominal gdp, % ratio to nominal gdp, % - 1 - 1 - 2 - 2 - 3 - 3 gross government debt ( left scale ) fiscal balance ( y / y chg., left scale ) - 4 primary balance ( y / y chg., left scale ) - 5 - 6 fy 08 - 4 - 6 note : the primary balance is boj staff calculations. sources : cabinet office ; imf, etc. net government debt ( right scale ) - 5 real gdp ( right scale ) cy 08 chart 12 fiscal conditions in the euro area amount outstanding of government debt fiscal balance, primary balance, and structural balance y / y % chg. ratio to nominal gdp, % points acceleration in the pace of fiscal austerity ( decline in fiscal deficit ) - 1 - 1 - 2 - 2 - 3 fiscal balance ( y / y chg., left scale ) - 3 - 4 primary balance ( y / y chg., left scale ) - 4 - 5 gross government debt ( left scale ) cy 08 note : the structural balance is the year - on - year rate of change in the
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the available evidence, i tend to give less weight to the questions concerning the financial situation of households than i do to the risks of continued uncertainty in the business sector. a third question bearing on the outlook for the u. s. economy regards prospects for a pickup in activity among our major trading partners. concerns about the strength of the global economy remain, and the emergence of sars poses a threat to the economic prospects of several emerging - market economies in asia. to date, however, we have no evidence that the new disease has affected u. s. economic activity. nonetheless, continued slow growth abroad could have a damping effect on our recovery here. to summarize, the recent news from oil and financial markets and about consumer confidence clearly suggests that the reduction in risks associated with the situation in iraq has had a number of favorable effects. at the same time, the available indicators of production and employment suggest that the pace of economic activity may remain slow for a while longer, likely restrained by lingering uncertainty about the timing of economic recovery. looking ahead, however, it seems likely that, at some point the combined effects of a fundamentally solid financial sector, sustained consumer spending power, and improving consumer confidence will demonstrate sufficient demand potential to stimulate increased levels of capital investment.
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30. 08. 2022 central bank money for the digital age : reflections on the new paradigm keynote address / central bank research association ( cebra ) annual meeting margarita delgado deputy governor it is with great pleasure that i take up the opportunity of addressing such a distinguished audience tonight with a topic that i very much feel falls within cebra β s remit. in that respect, given the turbulent times we are living in, leveraging a space where an open and constructive dialogue between us and the academia can take place is sure to prove even more instrumental now than it has been the case in the past. yet, over and above the daunting challenges of inflation, climate change, macroeconomic stability and many others which you are touching upon in this year β s conference programme, in the next few minutes i would like to turn my attention on to something very different. i am talking about the so - called central bank digital currencies, one of the most prominent examples of financial innovation. being digital is no longer a prophecy awaiting realization as nicholas negroponte 1 once forecasted in his now renowned examination of the frontiers of digital technology and its effects on the future of our society. instead, it has already become an all - encompassing phenomenon which the pandemic helped expedite by a few decades. being digital in the financial industry means new opportunities for incumbents to acquire new clients, to expand their current share of the wallet and to obtain efficiencies unheard of. nonetheless growing digitalization also entails the emergence of new competitors and value propositions that will likely erode their status quo in the industry. technology certainly holds a significant transformational power enabling promising developments but, per se, technology is by no means the ultimate answer to existing risks in economics and finance, as my colleague sir jon cunliffe recently pointed out 2. against this light, it makes more sense for central banks to consider the need for a speedy action. this action need to be based on the exploration of a wide set of tools that help to ensure the safeguarding of financial stability as well as the preservation of the critical role of money in the economy. while many responses are indeed possible, there β s no denying that introducing a new form of public money appears to be gaining traction, at least from a more conceptual point of view. in fact, one of the reasons why we, at the eurosystem, are looking into cbdcs in depth is to evaluate their potential to ensure easy
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access to central bank money in the digital age as a foundation of our currency. in other words, a digital euro is seen as the best way to secure that public money remains an anchor for the whole payment system and, in achieving this goal, that trust in both private and public money is strengthened while further protecting the currency β s function as a single unit of account. deploying a digital euro can also be strategically important in order to preserve our monetary autonomy. in effect, the mere existence of a digital euro would offer a fallback solution in the event of geopolitical tensions. moreover, when carefully designed, a digital euro could be a catalyst for innovation at a wider scale in that it could support intermediaries β role in developing new types of services on top of it while enjoying pan - european reach. negroponte, n. ( 1995 ). β being digital β, vintage international. random house, new york. cunliffe, j. ( 2022 ) β some lessons from the crypto winter β ( https : / / www. bankofengland. co. uk / speech / 2022 / july / joncunliffe - speech - on - crypto - market - developments - at - the - british - high - commission - singapore ). a digital euro does, however, exhibit a number of non - trivial risks as well. if, for example, anonymity was to be allowed as a means to provide the highest possible level of privacy, we would be compromising our commitment with fighting money laundering and the financing of criminal activity. what β s more, this setup would put into question the effectiveness of the tools to limit the use of digital euro as a store of value, a point on which i will come back later. in that respect, a balance needs to be struck between minimizing the eurosystem β s and intermediaries β involvement in the processing of users β data and still ensuring compliance with the law. a digital euro is likely to increase as well the eurosystem β s general operational responsibilities over the payments channels irrespective of the role it ultimately intends to play in the settlement of these transactions. thus, by promoting a digital euro we must acknowledge that the eurosystem is potentially putting its reputation at stake in that it remains liable for the overall functioning of the digital euro architecture whether it decides to rely on third parties for its distribution and operation or not. that said, the biggest source of
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systems and to prevent or minimize the impact of global financial crises. canada's financial system is recognized worldwide as being sound and efficient. to keep it that way, those of us charged with promoting financial stability will have to stay one step ahead of today's rapidly evolving financial markets. the bank of canada will continue to work closely with its domestic and foreign partners to strengthen financial stability here in canada and around the world. this completes my brief overview of the bank's role in promoting monetary and financial stability. i now propose to turn to the current economic situation. recent economic developments let me start with the external environment in which canada operates. the sharp easing in the pace of economic expansion in the united states has caused most forecasters to scale back their projections of world economic growth for 2001. compared with an average projection of just over 4 per cent last fall, we are now looking at something a little over 3 per cent β not spectacular, but still quite respectable. this forecast assumes that, after a weak first half, economic activity in the united states will strengthen in the second half. some of the recent u. s. data ( such as housing, motor vehicle sales, and industrial production ) indicate that the economic situation there may be stabilizing. the bank expects that, with stable or lower energy prices and with the inventory adjustment process well advanced, u. s. economic growth should strengthen during the second half of the year. the reductions in interest rates by the u. s. federal reserve should underpin this recovery. but of course, its exact timing and precise strength are difficult to predict. here in canada, our economy was, by last summer, beginning to press against capacity limits. thus, somewhat lower growth was anticipated for 2001. but, with the abrupt slowing of the u. s. economy, growth in canada began to slow significantly in the final quarter of 2000. and by mid - 2001, the canadian economy will probably be operating somewhat below potential β that is to say, below what it is capable of producing over the long run without adding to inflation pressures. this slowing in economic activity has not been uniform. some high - profile sectors such as the automotive, electronics, and telecommunications equipment industries have been affected the most. and the prices for many non - energy commodities have been weak. it is this weakness that has had an important effect here in british columbia. but to keep a sense of perspective, let us not forget that there is still considerable underlying strength in other areas of
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have also decided to formally make an inflation target the nominal anchor of turkey β s monetary policy beginning in the fourth quarter of this year. the effects of the mexican, asian and russian crises spread from one country to another in a process commonly known as contagion. but in this case, the available evidence indicates no broad - based contagion from argentina and turkey to emerging markets in general at this stage. however, according to the imf, the potential for broader - based contagion still remains. concerns about argentina did spill over into the region, notably to brazil, which is also suffering from domestic difficulties. i once again appeal to our markets to judge south africa on its performance and not on the basis of emerging market perception. and once again, my heartfelt thanks to you.
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the uk β s political turmoil. as we know from international negotiation theory, a leader can use domestic dispute as a negotiation resource, arguing that she cannot move any further because she has no room for manoeuvre at home. that β s why it was necessary for eu leaders to call for the uk to deliver soon in order to move on to phase two in december. in sum, then, the state of negotiations has to be taken seriously β but there is no reason to panic. why not?, you may ask, as the outlook seems quite dramatic. there are two reasons. first, the process we are witnessing is not that unusual for complex political negotiations β they take time, and in the beginning both sides typically weigh up their options and their opponents first. thus, it is often the case in such negotiations that concrete results only become visible shortly before the deadline. that it takes time is also quite sensible, seeing as a lot is at stake. the decisions taken will influence uk - eu relations for decades ; moreover, they will have a lasting impact on global supply chains and geopolitical constellations. the second reason why we need to keep calm is that the uk government is apparently ready to compromise. while prime minister may β s speech in january was widely perceived as indicating a hard brexit β ( quote ) β no deal is better than a bad deal β ( unquote ) β her tone and stance have softened in the meantime. this was clearly signalled in her florence speech. we now know that the uk government aims to strike an ambitious free - trade deal and reach a customs agreement. in exchange, they are prepared to offer permanent residence for eu citizens and a clear budgetary commitment regarding their liabilities. overall, therefore, the chances of reaching a deal might be better than they appear at the moment. 4 hope for the best, but prepare for the worst given this calm assessment of mine, some may conclude that firms could simply sit back and wait. nothing could be farther from the truth. let me explain why, by focusing on the financial services sector. what will the impact of brexit be on financial institutions? financial institutions should prepare for the worst case β that is, a β no deal β scenario β with a disorderly exit of the uk in march 2019. as daunting as it seems, this β no deal β scenario is β if we take a positive view β luckily, quite clear ; there will be no surprises. wto rules
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and businesses have to prepare meticulously. today i will talk about the current challenges on the road ahead. i will begin by outlining the consequences of brexit and explain why a disorderly brexit may mean substantial losses for the uk. the disorderly exit, as i will go on to show, is unfortunately not that improbable given the difficult current state of negotiations. that β s why firms and politicians must prepare for a disorderly exit, too. i will focus on the financial sector to highlight what that means. nevertheless, i will close with an optimistic outlook on the terms of our future cooperation 2 what if we don β t work it out? 1 / 4 bis central bankers'speeches but, first let β s take a look at what β s at stake. what are the economic consequences if we don β t work it out? well, economic impact analysis is anything but an exact science, but we can sketch some likely scenarios. seeing the writing on the wall, the uk government has apparently begun to realise that a hard β that is, a disorderly β brexit without a new agreement would have serious repercussions for the uk economy. this impact will come via two main channels. the first is the trade and investment channel. exporters will lose out as a result of the restricted access to the single market, and supply chains may suffer substantially. the second channel is the migration channel. the uk β s access to highly skilled workers from abroad could take a severe hit. i recognize that migration has played a big role in the brexit vote β but, especially today a failure to attract highly - skilled workers via migration could have a detrimental impact on future uk growth. the economic impact on europe will be limited by comparison. take germany for instance. the uk is an important export market, accounting for 7 % of german exports. but that β s only 2 % of value added to the german gdp. therefore, brexit will most likely not result in a major setback for the german economy. bundesbank simulations confirm that even a hard, disorderly brexit would be manageable from germany β s viewpoint. to sum up : the costs of brexit will most likely be much higher for the uk than for the remaining eu, though a disorderly exit would, without doubt, substantially disrupt economic cooperation on both sides β just think of the transnational supply chains. and these consequences were not transparent to those who
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morning's session is all about the status quo for banks β the smaller institutions and the big ones. big or small β they all find themselves operating in a fundamentally altered environment. one that is characterised by the reversal of interest rates and by economic prospects that are not just gloomy but exceptionally uncertain as well. i'd like to begin by briefly outlining those prospects. you will notice that the theme of uncertainty is a leitmotif running throughout my remarks. 2 economic activity and inflation 1 / 4 bis - central bankers'speeches germany's economy was still in good shape going into the summer. economic output was almost back at its pre - pandemic level in the second quarter. and in the third quarter, too, pandemic - related re - opening effects were probably still shoring up economic activity. however, high inflation and uncertainty surrounding the energy supply and the costs thereof dragged increasingly on the german economy. retail trade suffered real declines. activity in the construction sector slowed down. in view of the high gas prices, efforts were made to save gas, particularly in industry. in some sectors, production was cut back and, in part, relocated. despite these headwinds, gross domestic product still posted a slight increase in the third quarter, climbing by 0. 3 % on the quarter according to the federal statistical office's flash estimate. however, sentiment deteriorated sharply as the third quarter progressed : at enterprises across all sectors and among consumers. indeed, the consumer climate index fell to a new record low. the gas supply situation is currently better than expected β gas storage facilities are well filled, i'm pleased to say. at present, our bundesbank experts are leaning towards not expecting outright rationing in germany this winter. it could still be a close call, though, depending on how the weather and consumption patterns play out. incentives to save gas are therefore still as important as ever. high energy costs may, however, cause output to decline further, particularly in industry. the recent downbeat production plans and export expectations in industry are consistent with that view. moreover, the considerable losses in purchasing power and households'subdued mood for spending are likely to lead to a drop in private consumption. service providers whose businesses are heavily dependent on private consumption will probably bear the brunt of this. economic output could fall significantly overall in the final quarter of 2022 and first quarter of 2023. this would mean we would be faced with a recession, i. e. a
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my view there are also merits in facilitating the carve - out of substantial portions of bank balance sheets. but this assumes, of course, that workable solutions exist for the transfer of legacy assets at sensible prices to investors able and willing to manage them. it also assumes decisive action to kick - start the market for loans in those jurisdictions where npl ratios are the highest β that is, in cyprus and in greece. second, banks with perceived business model risks need to do more to mitigate uncertainty by reshaping their business mix and their operational models. asset carve - outs could be catalytic here as well : streamlining their balance sheets by disposing of assets can allow banks to concentrate on developing new business, as opposed to managing legacy assets β in other words, it can save them from β zombification β. beyond that, banks with weak profitability need to find ways to increase non - interest income and, where possible, to reduce further their operating costs. there appears to be scope for this too. 4 on the earnings side, for example, we have already observed a trend among banks to compensate for lower interest income by increasing fees and commissions. there is some evidence that banks are offering fee - based products to clients as substitutes for interestbased products. on the cost side savings are more challenging given the extensive rationalisation efforts of recent years, but there is still one obvious β low hanging fruit β to be picked : consolidation within the sector. indicators of market concentration suggest some over - capacity in the european banking sector, especially in countries with more fragmented banking systems. for example, the herfindahl - hirschman index for the euro area, though rising in recent years, still stands below 750. as a general rule, a figure below 1000 signals low concentration. 5 cost - income ratios in some banking sectors also remain high. that implies there would be efficiency gains from consolidation without exacerbating β too - big - to - fail β problems. the fact that we now have a european supervisory and resolution regime presents the ideal conditions for banks to capitalise on new cross - border m & a opportunities. what our economy needs is european banks operating in a european market : large enough to operate across borders and diversify risks, but small enough to be resolved with the resources of the single resolution fund. this would reap the full benefits of banking union and improve the terms of the trade - off between financial stability and economic efficiency. 6 for that to happen
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scaling up green finance can be a driver for a carbon neutral economy, financial integration and stability in the euro area. strengthening the capital markets union ( cmu ). the strengthening of the cmu is necessary for the completion of european economic and monetary union because it will reduce market fragmentation and encourage diversification of financial resources. the development of a green cmu can support the move to a cmu by adding depth and diversification to the financial instruments available, also enhancing the risk sharing capacity of the eu financial system. green capital markets are dynamic and relatively well integrated in europe. they provide a rapidly growing market and are the location of choice for green bond issuance and esg investment. important elements of a green cmu include corporate sustainability disclosures, green financial products with official eu seals, such as the eu green bond standard, and harmonised regulation and supervision for sustainable finance. a green cmu would both make the eu economy more resilient and more environmentally sustainable. but what role can central banks play in tackling climate change? 1 / 3 bis central bankers'speeches climate - related risks are a source of instability and financial vulnerability. physical and transition risks, like more frequent and more extreme weather events or a late and abrupt transition to a low - carbon economy, could affect the transmission of monetary policy and pose risks to price, financial and economic stability. it is therefore within the mandate of central banks to prevent risks to price stability, and, along with bank and insurance companies β supervisors, to ensure that the financial system is resilient to these risks ; this urgently needs to be translated into concrete measures, both on monetary policy and supervisory fronts. although the main responsibilities remain with the governments, with their tax subsidies and investment policies, central banks can undertake an active role in tackling climate change. central banks have already started considering how the physical and transition impact of climate change can be included in macroeconomic forecasting and financial - stability monitoring. also, central banks have been undertaking work to integrate climate - related risks into prudential regulation and supervision, engaging with rating agencies and financial firms to ensure that climate - related risks are understood, disclosed and incorporated in risk assessment and in credit provision decisions. until recently, most central banks had focused mainly on raising awareness around climate change risks and considering the impact of these issues on their own operations. yet, central banks can and are committed to do more than that. at the governing council of the european central bank ( ecb ), we agreed
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yannis stournaras : climate crisis - action in central banking keynote speech by mr yannis stournaras, governor of the bank of greece, at the cop26 eu side event, 4 november 2021. * * * it is a great pleasure to be here with you and share my thoughts on addressing the climate crisis, ΞΏne of the world β s top threats to humanity according to the united nations, while also harnessing the opportunity this presents to the economy. from a central banker β s perspective, this challenge translates into concrete opportunities, such as rebooting the economy, increasing financial integration and stability in the eu through green finance, advancing the creation of the capital markets union ( cmu ) and fostering a green cmu. let me elaborate. rebooting the economy. the global policy response to the covid - 19 crisis presents an excellent opportunity to adopt a coordinated approach to tackling climate change β to re - design a more inclusive, sustainable and carbon neutral development pathway, aligned with the un agenda, the sustainable development goals, the paris agreement and our duty towards the next generations. climate policies toward net zero emissions, climate adaptation and resilient infrastructures can all be pursued as the world recovers from the pandemic, in a manner that supports economic growth, employment and income equality. over the next years, the world will invest heavily to recover from the fallout of covid - 19. along these lines, the next generation eu programme has already assigned 30 % of the funds on fighting climate change, in addition to the resources made available in the framework of eu cohesion policy. these initiatives should become sustainable features of our response to climate change. what we decide today will help determine the future of our societies. strengthening financial integration. encouraging green finance is an excellent way to strengthen financial integration. the transition to a carbon neutral economy will require adequate green financing. for example, the achievement of european climate and energy targets will require an estimated β¬330 billion annually by 2030. financial integration across euro area countries will generate investment opportunities and diversification of financial risks across national borders. currently, green bonds are more likely to be held cross border than other european bonds ; environmental, social and governance ( esg ) funds appear more stable, as investors are less likely to withdraw funds following negative performance than investors in other types of funds ; and there is evidence to suggest that equity funding could help incentivize green innovation and greener activities. in short,
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bojan markovic : why foreign analysts and investors view serbian macro prospects so differently from domestic public speech by mr bojan markovic, vice governor of the national bank of serbia, at the icap β s 1st credit risk management conference, organised by icap serbia, belgrade, 30 november 2011. * * * i should like to thank mirko djukic for comments and suggestions. ladies and gentlemen, recent turbulences in world financial markets have led to a rise in risk premia in many countries. in case of serbia, these pressures were moderate relative to regional peers, but one cannot be too cautious and should be prepared to act swiftly in order to minimize negative impacts of current turbulences. improving or maintaining serbia β s sovereign credit rating in these turbulent times is a challenge of a great importance. this is because it ensures sustainable sources of financing at a lower cost, not only for the government, but also for all other market participants β businesses, households, and banks, alike. the government and the central bank can best contribute to improving credit rating by pursuing policies that ensure long - term macroeconomic stability, such as : maintaining public debt at sustainable level, ensuring price stability in the medium term, and providing stable and resilient financial system. any attempt to β stimulate β the economy in an unsustainable way would jeopardize these goals, leading to a rise in the country β s risk premium and eventually hurting the very economy it was meant to help. over the past years foreign market participants and credit rating agencies recognized an improvement in serbia β s macro prospects. serbian press, however, has been even more deeply than usual flooded with doom - and - gloom commentaries of serbian economic performance during the crisis and especially its macro prospects for the future : β we are facing inconsistency and incoherency of domestic economic policy daily observed by investors β ( djordje djukic, biznis i finansije, june 2011 ), β knocking on the imf doors is a proof of a complete defeat of the domestic economic policy β ( zarko ristic, pravda, september 2011 ), β domestic economy is currently in a position of titanic β sending sos signals β ( sasaΔogovic, nacionalni graΔanski, september 2009 ), β economic collapse looms large β ( branislav grujic, novosti, august 2011 ). but at the same time, serbia saw its credit rating upgraded
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29. 03. 2011 09. 05. 2011 13. 06. 2011 27. 07. 2011 negative 16. 03. 2010 b + new rating 19. 04. 2010 stable 19. 04. 2010 credit rating ( long - term ) bbb bb + bbbbbb bbb - type of change downgraded 28. 9. 2011 date of outlook change * rating as of 31. 8. 2008. bis central bankers β speeches
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and remain resilient against calamities, not just for their own survival, but in the interest of employees and the community that depend on them. role and prospects of the insurance industry in advancing risk management the cost associated with negative tail - risk events will only escalate as business networks grow in complexity. the use of insurance continues to be an important way in which companies can reduce this cost by transferring risks to insurance providers. insurers are well - placed to assume such risks given their long standing history in risk analytics which enables them to effectively exploit the law of large numbers and benefit from risk pooling. among emerging economies, however, there is still a sizeable protection gap in spite of the increased frequency and severity of weather related disasters and other natural catastrophes. in 2014, insured losses in asia only covered about 10 percent of total losses incurred as a result of natural and man - made disasters. combined insurance premiums written from emerging markets accounted for only 18 percent of global premiums in 2014, against 82 percent recorded from the advanced economies. given the concentration of growth and development in emerging economies, going forward, the extent of underinsurance is a concern. in many of these economies, efforts are being aggressively pursued to increase awareness of the importance of insurance protection in helping one manage risks, and to develop an effective insurance market to meet these needs. the insurance industry in malaysia currently stands at crossroads of implementing important reforms being introduced by bank negara malaysia both in the general and life insurance sectors. the objective of the reforms is to further enhance the competitiveness of the industry, ensure its continued resilience, and encourage greater innovation in solutions offered for households and businesses to better manage risks. to this end, two aspects of the reforms are significant. the first is the progressive strengthening of prudential standards that aim to improve underwriting and risk assessment capabilities within insurance companies, while substantially strengthening incentives for insurers to differentiate themselves in the market. the second is the structural changes that are being introduced to reduce market distortions and drive efficiency improvements. beyond domestic borders, the bank also continues to pursue further liberalisation in the cross border provision of insurance in certain sectors, such as the marine, aviation and goods in international transit ( mat ) sector, both to enhance capacity and reduce costs for businesses. this is primarily being advanced under regional integration plans, focusing in particular on asean. taken together, the reforms are expected to result in wider product offerings and delivery channels, service quality
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view it as appropriate β to act within their existing mandate to mitigate climate - related financial risks β that β could potentially impact the safety and soundness of individual financial institutions and could pose potential financial stability concerns for the financial system. β see basel committee on banking supervision, bank for international settlements ( 2020 ), climate - related financial risks : a survey on current initiatives ( basel : bcbs, april ), https : / / www. bis. org / bcbs / publ / d502. pdf ; see also nick robins, simon dikau, and ulrich volz ( 2021 ), netzero central banking : a new phase in greening the financial system, ( london : grantham research institute on climate change and the environment at the london school of economics and political science, march ), https : / / www. lse. ac. uk / granthaminstitute / wp - content / uploads / 2021 / 03 / net - zero - centralbanking - 1. pdf. for overviews of climate change and economic damage, see, for example, maximilian auffhammer ( 2018 ), β quantifying economic damages from climate change, β journal of economic perspectives, vol. 32 ( fall ), pp. 33 β 52 ; solomon hsiang and robert e. kopp ( 2018 ), β an economist β s guide to climate change science, β journal of economic perspectives, vol. 32 ( fall ), pp. 3 β 32, https : / / pubs. aeaweb. org / doi / pdfplus / 10. 1257 / jep. 32. 4. 3 ; and solomon hsiang, robert kopp, amir jina, james rising, michael delgado, shashank mohan, d. j. rasmussen, robert muir - wood, paul wilson, michael oppenheimer, kate larsen, and trevor houser ( 2017 ), β estimating economic damage from climate change in the united states, β science, vol. 356 ( june ), pp. 1362 β 69. see federal reserve bank of new york ( 2021 ), β kevin stiroh to step down as head of new york fed supervision to assume new system leadership role at board of governors on climate, β press release, january 25, https : / / www. newyorkfed. org / newsevents / news / aboutthefed / 2021 / 20210125. see lael
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to turn down. to elaborate, the marked deterioration in the irish fiscal position in recent years reflects in part the effects of strong growth in public spending first during the boom years, and then resulting from the demands imposed by the jump in unemployment. but a much more significant driver has been sharp collapse in tax revenues. the scale of the latter has been remarkable. the tax take, having averaged over 24 per cent of gdp in the first seven years of the new millennium, collapsed to barely 20 per cent of a greatly reduced gdp by 2009. this reflected a fundamental weakness in the tax structure and, in particular, an excessive reliance on revenues related to the value of property transactions. looked at more broadly, this was the continuation of a trend that has been evident over the past two decades, which has seen a systematic shift away from more stable and reliable revenue sources such income tax, vat and excise taxes, towards more cyclically sensitive taxes. the result was more and more dependence on corporation tax, stamp duties and capital gains tax as sources of revenue ; the contribution of this group of taxes grew from about 7 per cent of total tax revenue in 1987 to over 35 per cent two decades later. the buoyancy of these taxes during the boom period facilitated both a reduction in the income tax burden and the numbers in the tax net. it also financed a strong and persistent rise in public spending. while reliance on β boom time β taxes made these developments possible for a time, it left the fiscal position particularly exposed to a downturn. it also meant that fiscal policy was effectively operating in a pro - cyclical manner during this period and was itself stoking the boom. ( indeed, it has recently been estimated that the contribution of the residential property market to total tax revenue through vat, stamp duty and capital gains alone more than doubled to over 12 per cent in the seven years to 2006, addison - smyth and mcquinn, 2009 ). there is also the issue of the extent to which the nature and design of the tax system itself partly fuelled the construction boom. tax incentives for developers and homeowners have long been a feature of the irish taxation system and must have contributed significantly to the oversupply of houses which now exists, especially in parts of the country where underlying demand is likely to remain weak for many years to come. the impact of the subsequent collapse in what were in reality largely windfall revenues can be gauged from the fact that, since 2007, total tax revenues
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patrick honohan : the intertwined recent experience of the irish and uk economies address by mr patrick honohan, governor of the central bank & financial services authority of ireland, to the british - irish parliamentary assembly 40th plenary conference, cavan, 22 february 2010. * * * introduction i can think of no better topic for an address to the british - irish parliamentary assembly than the similarities and contrasts between the performance of our intertwined economies before and during the global economic crisis. economic activity and employment have contracted sharply and property prices have plunged. our economies have been hit hard by the global financial crisis but in addition, for all of us, the crisis has served to expose strikingly similar pre - existing vulnerabilities in our economies β not shared by most others in europe β which would sooner or later have led to trouble even if it had not been for the global meltdown, notably : β’ the wide - ranging imbalances created by a credit - fuelled property boom ; β’ the growing dependence of the financial sector on wholesale market - funding, increasingly in the form of foreign borrowing, and β’ the extent to which the credit and property booms significantly boosted transitory windfall tax revenues, which came to be relied on to finance strong growth in public spending. while the economy of the republic of ireland was the more vulnerable, and has been hit much harder, i think that these parallels are no coincidence. indeed, the involvement of banks from each side in funding the property boom of the other is an interesting dimension of the pre - crisis bubble. this of course reflects the fact that our economies have long been intertwined on a broader front. as we begin to recover, though, there is one important emerging contrast. inflation has been persistently negative in the republic for over a year, reflecting the unwinding of the bubble against the background of a strong currency. but uk prices have been rising and the international value of sterling has been at historic lows. the contrasting exchange rate, price and wage environment presents its own difficulties, not least for irish businesses struggling to remain cost - competitive, especially when wages had edged up to uncompetitive levels in the last years of the boom. fiscal policy even before the global crisis metastasized in september 2008, ireland β s fiscal position was coming under pressure, not just because of an accelerated expansion of spending in the previous few years, but especially because of the sharp fall in tax revenues which began soon after the property prices started
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make sure that a firm β s approach to risk management is sound and that their policy holders are adequately protected. i believe solvency ii will help to do this. it will introduce greater risk - sensitivity ; co - operation across jurisdictions ; and consistency in approach. being a risk - based regime means that insurers should be able to evolve and adapt to capture all risks they are exposed to and the qualitative risk assessment introduced under pillar ii will further support this move towards a more responsive, reflective and adaptable solvency regime. this in turn will mean that insurers will need to think carefully about the risks they are exposed to and how this is captured and managed. this does not mean that solvency ii should dictate firms β business models. rather, market forces and expectations of policy holders will inform insurers β pricing and strategies. as referred to earlier, there is much we can do to prepare for the future by learning from mistakes of the past. one such area where this should be borne in mind is in the use of risk models which will play a huge role in solvency ii for the larger, more complicated firms. firms need to be able to understand their models and their limitations, and be able to challenge them. as the governor said last year : β the dangers of using poorly designed models were made all too clear in the banking sector. so the bank won β t hesitate to withhold approval of inadequate or opaque models β. there are many things i could say about solvency ii, but i want to concentrate on what it means for the future. one particular aspect is that it sensibly allows for a smooth transition, over a period of 16 years in some cases. it is recognised that for insurers ( particularly life insurers ), solvency ii with the introduction of a β going concern β regime, is a considerable shift. in particular, firms will have to hold a risk margin to ensure that the insurance liabilities reflect the value for which they could be transferred to a third party. to allow for the gradual introduction of the risk margin, firms will be able to make a transitional deduction from their bis central bankers β speeches technical provisions. together, the various transitional measures within solvency ii should ensure a smooth progression, avoiding the market dislocation, volatility and increased costs that could result should a number of firms have to augment their capital base at the same time. they rightly recognise that the underlying risks have
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effects of the great financial crisis are still being felt across the global economy. one of the things we appreciate very well at the pra is that insurance business is very different to banking, and i have seen that at first hand over the past six months or so. i have also seen that there are lessons to be learnt from the banking crisis that can directly read across to the world of insurance. let me express a clear personal opinion ; financial crises of the past were often, in large part, created by the people at the top making poor decisions β people not possessing the right information ; not having due regard for risk ; not being properly incentivised. significant failures have often had their roots in poor governance with insufficient checks and balances to the decisions of powerful individuals. strong, effective systems of oversight and risk management are paramount in meeting the pra β s objectives for the safety and soundness of firms and insurance policyholder protection. not surprisingly, governance issues are consistently at, or near the top, of the pra β s agenda whether for banks or insurers. i can safely predict that this focus is not about to lessen any time soon. firms in tomorrow β s world need to aim for governance best practice. bis central bankers β speeches the recent banking crises further illustrated that one of the most obvious ways in which financial stability can be undermined is through disorderly firm failure and the consequent disruption of financial services. the pra β s stance is that unsuccessful business models need to be allowed to fail, but that failure should be in an orderly manner so as not to disrupt the provision of core financial services. and i think we would all agree that the taxpayer should not be asked to bail out a failed firm. one difference from banking is that failing insurers usually do exit in an orderly manner. actually, about a third of the pra β s authorised firms are in run - off. but that is in part a testament to the successful regulatory regime that the uk has been running for the insurance sector. and, whatever the regime, we cannot be certain this will be the case in every conceivable circumstance. for this reason, the pra continues to place the resolution arrangements for insurers on both the domestic and international agendas. the banking crisis further taught us all that we need to be looking at potential storms ahead and not to be misled by periods of fair weather. for the pra this means it will assess firms not just
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. yet another would be to tweak ipo prospectus requirements in a move to do away with unnecessary red tape. looking into the more distant future, it would make sense to harmonise insolvency law, company law and tax law. however, we should not focus on the institutional and legal framework to the exclusion of everything else. it would probably also be worthwhile to take into account soft factors such as cultural preferences for certain forms of financing or financial literacy levels. these are areas we will also need to address if we are to achieve our goal of establishing a european capital markets union. 6. conclusion ladies and gentlemen, the road to a european capital markets union is a long and winding one. the journey will be arduous and time - consuming. there will be challenges and resistance we must overcome along the way. so we need to be realistic about what we are setting out to achieve. and yet we have travelled this road to deeper financial integration for 16 years now β since the year, in fact, in which we launched the euro as a common european currency. and we must not falter. if we want european monetary union to be a true success, we will need to press ahead towards ever deeper integration. we took a huge stride on this path in november 2014 with the launch of the banking union. now the next major step is in order β the establishment of a european capital markets union. a capital markets union which includes not just the member states of the euro area but embraces the entire european union. on that note, i would like to bring my speech to a close with a quote that has been attributed to robert f kennedy. β there are those that look at things the way they are, and ask why? i dream of things that never were, and ask why not? β looking at the capital markets union, i believe we should take this confident and optimistic outlook to heart. thank you very much. bis central bankers β speeches
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, the question is whether it is possible to consolidate the country β s banks without seriously distorting the competitive environment. this is a question that needs to be answered without delay. to sum up β time is of the essence, especially so for greece β s banks. everyone should be aware that monday β s basic agreement marks the start of the real work. now it is up to all the parties concerned to do their jobs to make sure that five months of negotiations weren β t in vain β and the focal point here, for me, is the greek banking sector. after all, it β s not just greece we β re talking about here but the euro area as a whole. and many seem to believe that the crisis in and over greece has cast doubts over the very process of european integration. but i do not share that view. the proper response, in my view, is not less, but more, integration. and we took a major step towards deeper integration by launching the european banking union. but we need to look beyond the banking sector and train our sights on the capital markets as well. extending and integrating the capital markets can also contribute to shoring up the foundations underpinning monetary union. after all, a common currency needs integrated financial markets to thrive. this idea of a capital markets union has increasingly taken shape in recent months. back in february, the european commission presented a green paper outlining a framework for a european capital markets union. the bundesbank sees the capital markets union as a sensible project that is conducive to deepening european financial integration further still β not only in the euro area but across the european union. but how exactly do we define a capital markets union, and how can we make this idea reality? bis central bankers β speeches 3. diversification β strengthening the capital markets the european capital markets union essentially sets out to achieve two goals. first, to strengthen the role played by the capital markets in funding the real economy. second, to deepen capital market integration across national borders. the first goal sometimes prompts the question whether a financial system geared to the capital markets is superior to one built around banks. empirical research into this question can be summarised quite succinctly β we β re not quite sure. but what we do know is that both systems have their merits, which vary depending on how well a country β s economy is developed and how it is faring at a given point in time. the better developed an economy
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cent. this was a marginally smaller see carmen m. reinhart and kenneth s. rogoff, β this time is different : eight centuries of financial folly β, sns, 2010. bis central bankers β speeches improvement than we were counting on in july ( unemployment 0. 1 of a percentage point higher ). cpi inflation was 3. 3 per cent in july. cpif inflation ( 1. 6 per cent ) and cpif inflation excluding energy ( 1. 1 per cent ) were much lower. all of these outcomes were marginally ( 0. 1 of a percentage point ) lower than expected. i said at the monetary policy meeting in july that there was still a risk that inflation would increase more than we were expecting, particularly in 2012 and 2013. this was partly because inflation had recently been held back extra hard by the strengthening of the krona. i also pointed to the risk of rising energy and commodity prices in the world market, higher wage increases than expected due to pressure in the labour market, and higher inflation and wage expectations due to the high cpi inflation. but so far, inflation has been marginally lower than expected and energy and commodity prices have fallen. the outlook for 2012 and 2013 depends, for instance, on developments in international economic activity and on the result of the coming wage bargaining rounds in the labour market. the financial markets during the summer developments in the financial markets have been dramatic over the summer. share prices, government bond yields and exchange rates have fluctuated substantially. this turbulence is one factor that could have significance for future forecasts. this is essentially due to renewed concern over sovereign debt problems in the euro area and the united states. focus has primarily been on four issues : public finances in greece, the risk of problems spreading to spain and italy, potential problems in the european banks and the management of the debt ceiling and public finances in the united states. new support package for greece at the beginning of the summer there was particular concern over developments in greece. after a series of meetings of various policy - making bodies within the eu as well as a vote of confidence and a decision on budget - strengthening measures, structural reforms and the sale of state - owned companies in the greek parliament it was decided in mid - july that greece would receive a further support package from the euro area and the imf. this led to a slight fall in the yield on greek government bonds from their extremely high levels ( see figure 11 ). spain and italy in the danger zone at the
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rate with uncertainty bands per cent, quarterly average 90 % 75 % 50 % outcome forecast source : the riksbank bis central bankers β speeches 9. gdp in the usa usd billion, fixed prices earlier gdp revised gdp source : bureau of economic analysis 10. forward - looking indicators economic tendency indicator : index, average = 100, standard deviation = 10 purchasing managers β index : seasonally - adjusted index economic tendency survey purchasing managers β index note. the broken line represents the average 2000 β 2011. sources : national institute of economic research and swedbank bis central bankers β speeches 11. government bond yields 10 year maturity, per cent germany greece ireland italy spain portugal source : reuters 12. government bond yields 10 year maturity, per cent 6. 0 6. 0 5. 5 5. 5 5. 0 5. 0 4. 5 4. 5 4. 0 4. 0 3. 5 3. 5 3. 0 3. 0 2. 5 2. 5 usa 2. 0 2. 0 1. 5 germany 1. 5 1. 0 sweden 1. 0 0. 5 0. 5 0. 0 0. 0 source : reuters bis central bankers β speeches 13. stock market developments index, 1 january 2006 = 100 sweden ( omxs ) euro area ( euro stoxx ) usa ( s & p 500 ) emerging markets ( msci ) source : reuters 14. krona exchange rate, tcw index index, 18 november 1992 = 100 note. the outcomes are daily rates and the forecasts refer to quarterly averages. data are updated with new outcomes after the publication of the july monetary policy report. source : the riksbank bis central bankers β speeches
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foreign account tax compliance act. one key approach has been its strong focus on training and education β equipping member institutions with the knowledge and tools needed to effectively navigate these complex issues. in more recent years, cab has been instrumental in steering the caribbean banking sector through the challenges of digital transformation. as 1 / 6 bis - central bankers'speeches technological innovation reshapes financial services, i'm sure that cab will continue to provide essential guidance and resources, to help member institutions adopt digital solutions and maintain their competitiveness in a rapidly evolving market. today, cab remains a driving force in the caribbean's financial ecosystem. with a growing number of member institutions across the region, which total over 80 entities, the association continues to champion the interest of its members by advocating for policy changes that strengthen the banking sector and promote greater integration across regional markets. through initiatives aimed at improving financial inclusion, enhancing regulatory compliance, and encouraging cross - border collaboration, cab plays a central role in supporting economic growth, while also ensuring that financial institutions in the region are well - prepared to meet the demands of a modern banking environment. these annual conferences are therefore more than just gatherings and networking opportunities ; they are essential forums for dialogue and action. here, experts from across the caribbean banking sector and other disciplines, come together to address pressing issues, exchange knowledge, and craft solutions that will strengthen our regional banking systems. it is in these settings that we lay the groundwork for future success, fortifying our sector's resilience against external shocks and building the path for sustainable growth. indeed in 2022, i had the distinct pleasure of making a presentation at cab's annual conference in st. lucia, on the topic of south - south co - operation in the banking sector, which examined opportunities for greater collaboration among regulators in the caribbean, africa, and latin america. then in 2023, i participated in a panel that examined the adoption of environmental social and governance or esg practises in the caribbean banking sector. both of these topics are highly relevant and will have a significant impact on the various financial sectors in our region in the near - term, so i can attest to the vital role that these annual conferences play in charting the future of the banking sector in the caribbean. celebrating the 50th anniversary of cab today, as we celebrate the 50th anniversary of cab, we not only acknowledge a milestone ; we also reflect on a remarkable journey of growth and transformation. cab's leadership and commitment has greatly aided
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of models and frameworks. 8 in my view, a robust, systematic approach to policy, which is transparent and minimizes the degree to which data mismeasurement and model uncertainty affect policy, is the most promising approach to the uncertainties facing policymakers in real time. charles plosser, β output gaps and robust policy rules, β speech presented to the 2010 european banking and financial forum, czech national bank, prague, the czech republic, march 23, 2010. bis central bankers β speeches
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if the assessment is based on a fixed longterm rate of 2 per cent, it does not constitute much of a stress test. a variable rate of interest could soon rise above that level. either the credit institution should apply a more severe stress test, or it should actually grant a fixed rate mortgage loan. bis central bankers β speeches * * * the danish economy is in an upswing. growth has not been impressive, but it has been clearly visible if we adopt a slightly broader perspective than merely gdp growth. employment is picking up, house prices are rising and there is solid growth in real gdp net of oil extraction and in the gross national product, which includes the net return on external assets. we are seeing growth because the foundations are in place. denmark is competitive, so exports can begin to fuel the economy. and household finances have become more balanced after the housing bubble in the 2000s. in addition, three other factors are boosting growth strongly. firstly, interest rates have fallen by more than we had expected. at the current very low level of interest rates, monetary policy provides a strong growth impulse β globally and in denmark. secondly, the effective krone rate has weakened since the autumn in step with the weakening of the euro against the dollar. combined with the prospect of stronger growth abroad, this provides good opportunities for increasing exports. thirdly, the low oil prices entail large cost savings for firms and households. this will further stimulate growth, both in denmark and among our major trading partners. the fall in oil prices has pushed inflation down towards zero. but many prices are still rising, wage growth is accelerating and the lower effective krone rate will exert upward pressure on import prices, so we are not heading towards deflation. the oil price fall is in fact good for the economy. against that background, danmarks nationalbank β s new projection operates with growth at a higher level this year and in the coming years. gdp growth is expected to rise from 1 per cent last year to around 2 per cent this year and the next couple of years. with this growth outlook, all spare resources in the economy will have been absorbed within a few years. if we are not to face capacity problems, both the labour market and fiscal policy must be geared for this development. firstly, fiscal policy should take into account the strong expansionary forces currently at work. in this situation is it not expedient to continue to conduct fiscal policy very close to the limits, as has been the case
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exchange market. and compared with previous episodes of pressure against the krone, intervention has played a greater role this time. but it also makes a great difference whether there is upward or downward pressure on the krone. when there is upward pressure, danmarks nationalbank sells kroner. we have plenty of those. so in a situation with upward pressure on the krone, danmarks nationalbank can sell unlimited amounts of kroner. the possibility of unlimited intervention also means that assistance from the ecb is not relevant in the defence of the krone when the pressure is towards a strengthening. despite the unusual volume of intervention, danmarks nationalbank has applied a wellknown reaction function by first intervening in the foreign exchange market and then adjusting interest rates in response to the capital inflows. it has been important for us to stick to this reaction function, one reason being that in a normal situation it is the banks that carry out β stabilising speculation β. when kroner are inexpensive, the banks build up stocks of kroner, and when kroner are ex - pensive they do the opposite β they sell kroner and purchase foreign exchange. bis central bankers β speeches when the situation is not normal, the banks β position is typically around zero, and danmarks nationalbank absorbs the net shocks in the foreign exchange market. so danmarks nationalbank has applied its usual reaction function. this gives the banks a basis for gradually resuming their self - stabilising speculation as the situation normalises. since the second half of february, the foreign exchange market has been relatively calm. the very low level of interest rates in denmark means that danmarks nationalbank profits from the foreign exchange reserve : the amounts in euro included in the reserve accrue interest at a higher rate than that at which the banks β deposits in kroner are remunerated. so danmarks nationalbank is strongly positioned in a situation with upward pressure on the krone. our patience knows no limits. at the same time, we make sure that it is costly for investors to speculate against the fixed exchange rate policy. denmark has posted current account surpluses for some years and has built up substantial net foreign assets. this makes it necessary to export private capital on a current basis. viewed in isolation, this points to a lower yield spread to the euro area in future compared with what we have previously seen, but also to the possibility that situations with upward pressure on the
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