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would be substantial. as the proposal describes, federal reserve staff estimates these changes to result in an aggregate 20 percent increase in total risk - weighted assets across bank holding companies subject to the rule, although some commenters have projected much greater effects on some firms. 3 while the actual impact on binding capital requirements will see, e. g., financial services forum, american bankers association, bank policy institute, and securities industry and financial markets association, β comments on regulatory capital rule : large banking organizations and banking organizations with significant trading activity β ( december 22, 2023 ), r1813 _ 122223 _ 156400 _ 337982526593 _ 1. pdf ( federalreserve. gov ) ( noting that for the largest u. s. firms, the proposal would result in a greater than 30 percent increase in capital requirements, and a greater than 33 percent increase in risk - weighted assets ). - 5vary by firm, it is apparent even with the incomplete information available today that this will represent a large increase in capital requirements. in october of 2023, the federal reserve launched a data collection to gather more information from the banks affected by the basel iii capital proposal. 4 the purpose of this quantitative impact study was to help better understand the estimated effects of the proposal. my understanding is that the federal reserve will release its analysis of those findings and some aggregated information for comment. and just as for the initial proposal, stakeholder feedback on this quantitative impact study and staff analysis will be very instructive as we seek to analyze and understand the expected impacts of the proposed capital reforms. based on the information available, increasing capital requirements as initially proposed could result in significant harm to the u. s. economy through the impact on u. s. businesses, while failing to achieve the intended goals of improving safety and soundness and promoting financial stability. much of the public feedback and concern focused on the calibration of the proposal and the corresponding impact across a number of industries. farmers, ranchers, and agricultural producers that use derivatives to hedge price risks in agricultural supply chains have noted that the increased costs of providing these services from the proposal could lead banks to limit their availability in the marketplace. 5 small - business owners ( including builders, manufacturers, see board of governors of the federal reserve system, β federal reserve board launches data collection to gather more information from the banks affected by the large bank capital proposal it announced earlier this year, β press release, october 20, 202
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all types of shocks and can at times be misleading about what is happening to the underlying rate of overall inflation. and if increases in headline inflation prove more persistent than initially expected, central bankers must be vigilant to ensure that they do not become embedded into expectations and thereby generate substantial second - round effects on inflation. finally, because price stability ultimately involves control of overall, headline inflation, which after all is the inflation measure that households really care about, central bankers should and do pay attention to headline inflation as well as to core inflation measures. a core inflation measure should not be seen as a substitute for thorough and careful analysis of the forces that are driving our economy and the inflation process. more details on inflation forecasting at the board are in bernanke ( 2007 ). references aoki, kosuke ( 2001 ). " optimal monetary policy responses to relative price changes ", journal of monetary economics, vol. 48 ( august ), pp. 55 - 80. armour, jamie ( 2006 ). " an evaluation of core inflation measures ", bank of canada working paper 2006 - 10 ( ottawa : bank of canada, march ). bagliano, fabio c., and claudio morana ( 2003 ). " measuring u. s. core inflation : a common trends approach ", journal of macroeconomics, vol. 25 ( june ), pp. 197 - 212. bean, charles ( 2006 ). " commentary : impact of globalization on monetary policy ( 40 kb pdf ) ", speech delivered at the federal reserve bank of kansas city 30th annual economic symposium, jackson hole, wyo., august 26, www. kansascityfed. org / publicat / sympos / 2006 / sym06prg. htm. bernanke, ben s. ( 2007 ). " inflation expectations and inflation forecasting ", speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10, www. federalreserve. gov / newsevents. blinder, alan s. ( 2006 ). " monetary policy today : sixteen questions and about twelve answers ", in s. fernandez de lis and f. restoy, eds., central banks in the 21st century. madrid : banco de espana, pp. 31 - 72. bodenstein, martin, christopher erceg, and luca guerrieri ( 2007 ). " optimal monetary policy in a model with distinct core
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prudential measures such as specifying exposure norms and pre - emptive tightening of risk weights and provisioning requirements. but these measures are not always costless. for instance, tightening of risk weights arguably tempers the flow of credit to certain sectors, but excessive, premature or unnecessary tightening could blunt growth. similarly, exposure norms offer protection against concentration risks ; however, such limits could restrict the availability of credit for important growth sectors. thus, as in the case of price stability, central banks face the challenge of managing the trade off between financial stability and growth. 34. it needs to be recognized that after a crisis, with the benefit of hindsight, all conservative policies appear safe. but is there a risk of throwing away the baby with the bathwater? excessive conservatism in order to be prepared to ride out a potential crisis could thwart growth and stifle innovation. the question is what price are we willing to pay, or put another way, what potential benefits are we willing to give up, in order to cope with a black swan event? experience shows that managing this challenge, that is balancing the costs and benefits of regulation, is more a question of good judgement rather than analytical skill. this judgement skill is the one that central banks, especially those of developing countries such as india, need to hone as they simultaneously pursue the objectives of growth and financial stability. fifth challenge : managing the balance between the autonomy and accountability of central banks 35. finally, let me turn to the fifth challenge, as i see, which is to do with managing the balance between the autonomy and accountability of central banks. this is a broad spectrum topic that draws from several issues that i have touched upon earlier. 36. the seventy odd years since the great depression saw a famous rivalry between fiscal and monetary policies for influence. historically central banks suffered from fiscal dominance since they had to acquiesce in governments β borrowing as much as required at as low a cost as possible β. this state of affairs started changing in the 1980s with a wave of support for central bank independence. the support was largely in response to the damage inflicted by the stagflation of the 1970s and the clear lesson that high inflation is detrimental to sustainable growth. so, fiscal dominance gradually yielded to independent central banks targetting largely, and in some cases exclusively, price stability, free of short term political imperatives. empirical work shows that in the two decades during which central bank independence gained ascendancy, there was
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rakesh mohan : recent financial market developments and implications for monetary policy valedictory address by dr rakesh mohan, deputy governor of the reserve bank of india, at the institute of international finance β s inaugural asia regional economic forum, mumbai, 20 september 2007. assistance of m. d. patra and indranil bhattacharya in preparing the speech is gratefully acknowledged. * * * shri bhatt, mr horiguchi, ladies and gentlemen, i am honoured to be invited to deliver the valedictory address at the asia regional economic forum. the relationship between india and the institute of international finance ( iif ) goes back a long way to the early 1990s. therefore, it is only befitting that the iif has chosen to inaugurate the asia regional economic forum in mumbai as an opportunity for the informal exchange of ideas and views on the region and the global economy, with emphasis on key issues relating to india. i observe from the proceedings of the forum that there has been a timely focus on and comprehensive coverage of developments in global and regional financial and commodity markets, the financial system at large and issues relevant for emerging asia. over the last two months, a good deal of our collective attention has been focused on the turmoil in financial markets in the united states and europe and the sudden plunge in credit market confidence triggered by emerging risks to exposures to the us sub - prime mortgage crisis. even as every passing day unravels a little more of the underlying forces at work β the complex nature of the derivatives used ; the high degree of leveraging on poor, light or even absent collateral ; the underestimation of risk pervading financial markets ; the surprisingly sizeable exposures of large financial institutions to some of the debt instruments and derivatives in question ; and the speed of contagion β i believe that we still have to travel much further before we understand the full import of these recent events in terms of both information and analysis. consequently, there is considerable uncertainty surrounding both debt and credit markets as of now. quite justifiably, regulators, monetary authorities and finance ministries are all engaged in containing the risks posed by these developments. in my address, i thought i would take this opportunity to stand back from the actual play of events and try to gain an understanding of the nature of the turbulence, why it happened, where it happened, and the implications for central banks. in the rest of my address, i will reflect on some over
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explain developments in the financial markets and the monetary aggregates. two topics merit particular attention : the development of credit and money supply and the exchange rate. in addition to long - term interest rates and exchange rates, loans β among other things β play an important role when changes in key interest rates are transmitted to the economy. what information can we derive from the development of lending activity? loans are registering constant growth. mortgage loans, which account for the great majority of all bank loans, have grown at a rate of more than 5 % since 2003. this is a reflection of the clearly expansionary monetary policy at that time. the growth rate of mortgage loans has gradually slowed, however, and is now slightly below 5 %. this is nevertheless still a high growth rate. other loans, however, are witnessing stronger growth and are currently expanding by 6 %. unsecured loans, in particular, are rising substantially. during phases of favourable economic development, there is greater willingness to grant unsecured loans. this was the case in 1999, when the economy found itself in a similarly robust state. there is a long - term correlation between loan volume and the m3 aggregate. loan development typically lags behind the development of money supply. monetary aggregates have grown only moderately for the past three years. the m3 monetary aggregate is currently growing at a modest 2 %, while m1 and m2 are even registering a decline. the measured development of the monetary aggregates suggests a slowdown in lending. the development of the swiss franc attracted considerable attention as it has weakened vis - a - vis the euro since the beginning of the year, although it has firmed against the us dollar. to gauge the effects of exchange rates on the economy, we need to make use of the inflation - adjusted exchange rate that is also weighted to take account of the importance of individual trading partners. measured by this real, effective exchange rate, the swiss franc today is at the same level as it was in 2000. in what way do exchange rate developments enter into our decision - making process? the exchange rate is important to the extent that it influences inflation, either directly via the prices of imported goods or indirectly via the business cycle. volatility of the swiss franc against the euro has been negligible as of late. this relative calm should not, however, deceive us. it is not necessarily going to last. experience has shown that phases of a weaker swiss franc can be followed by periods in which the
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news conference 15 december 2022, 10. 00 am introductory remarks by martin schlegel i am pleased to give you an assessment of current developments with regard to cash. since june, after many years of strong growth, we have seen a significant decline in banknote circulation. to contextualise this decline of approximately 10 %, let me first say a few words about the above - average growth in recent years. in the period since the 2008 financial crisis, the value of banknotes in circulation grew, on average, more than twice as fast as in the two preceding decades β by around 6 % instead of 2. 5 % per year ( cf. chart 1 ). between mid - 2008 and june 2022, the value of banknotes in circulation more than doubled overall, from around chf 41 billion to chf 91 billion. this sharp increase was driven in particular by the desire of companies and private individuals to hold cash as a store of value. there was particularly strong demand for the large denominations, such as the 1000 - franc and 200 - franc notes ( cf. chart 2 ). we see two reasons for the increased demand for cash as a store of value over the last 15 years or so. first, there were multiple periods of high uncertainty, notably the financial crisis and the coronavirus pandemic. cash tends to be popular as a secure store of value during such times. second, the general decline in interest rates β and negative interest rates in particular β also contributed to the increased demand for cash. when interest rates are low or negative, it is relatively attractive to hold cash ( as opposed to bank deposits, for example ) as a store of value. the increase in interest rates since june has meant that there is once again less of an incentive to hold cash. against this backdrop, the value of banknotes in circulation fell by around chf 10 billion to chf 81 billion between june and october. returns of the 1000 - franc notes in particular were substantial, totalling chf 7. 7 billion. we expect this decline to continue. nevertheless, demand for cash as a store of value is likely to persist. companies and households consider such a safety net to be important. page 1 / 2 berne, 15 december 2022 martin schlegel news conference of course, cash is not only used to store value, but also to make payments. small denominations in particular play an important role here. the decline in banknotes in circulation observed since
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some flexibility to production and working arrangements. on one hand, the increase in the immigrant population has sustained the thrust of domestic spending, while on the other, the resulting greater supply of labour has increased the spanish economy's productive capacity, enabling increases in output more closely tailored to the buoyancy of demand to be attained. furthermore, the presence of this additional labour β which has a comparatively higher degree of mobility β has contributed to restricting potential sectoral bottlenecks and the wage pressures that usually characterise situations of notably vigorous expenditure, such as that seen in recent years. the composition of growth in 2005 evidenced few changes in relation to previous years, in step with the continuity of the impulses received by the economy. indeed, the growth pattern became slightly more unbalanced, as national demand grew by 5. 1 %, outpacing the related increase in 2004, while foreign trade gave rise once again to a substantial negative contribution to gdp growth. household consumption and housing - related spending continued to be the main underpinning of the increase in demand, supported in turn by the sound growth of disposable income and of employment, and by the generosity of financial conditions in the economy. as a result, households continued to reduce their saving ratio and to increase their net demand for financing. the principal new development in 2005 was the marked recovery in corporate productive investment expenditure, which focused particularly on the acquisition of capital goods. this pick - up was accompanied by a strong increase in credit, favoured by accessible financing conditions. credit was directed especially at small β and in principle more dynamic β companies, and it spread to all sectors of the economy, including manufacturing industry. public - sector demand also quickened last year, driven by the rise in investment that characterises the initial years of a legislature and by the increase in government consumption. as stated, the unbalanced features of this growth pattern were manifest again in 2005, especially in the behaviour of the external sector. flat goods exports, despite the burgeoning growth of foreign markets, combined with a fresh and significant increase in imports to give rise to a further deterioration in the negative contribution of net external demand, which had already been very marked in 2004. a mix of factors was involved here : first, the increase in the energy bill and the greater buoyancy of demand in spain compared with its eu neighbours, which partly reflects spain β s different cyclical position ; and further, the losses in competitiveness that have built up in recent years
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29. 11. 18 opening remarks 2nd annual meeting cebra international finance and macroeconomic program pablo hernandez de cos governor ladies and gentlemen, it is a great pleasure for me to welcome you all to the second annual meeting of the cebra ( central bank research association ) international finance and macroeconomics program, hosted by the banco de espana. let me first thank our colleagues from cebra for their efforts in co - organising this conference. cebra is an association that seeks to encourage applied and theoretical research on relevant topics for central banks, among other institutions. its research programmes foster interaction among researchers at central banks and in academia. in this vein, the international finance and macroeconomics program ( ifm ) led by galina hale provides an excellent forum to discuss key policy questions that are also relevant to academia. the title of this conference is : β risk, volatility and central bank policies β. allow me to briefly share with you β from a central banker β s perspective β some of our current concerns in relation to the three items highlighted in this title. starting with risks, in recent months some institutions β including the banco de espana through its financial stability report β have stressed that, although the financial stability environment remains favourable, global near - term risks have increased or have begun to materialise. in recent years the global economy has experienced a period of sustained and across - theboard growth, supported by unprecedented expansionary and unconventional monetary policies around the world. but this context has also been conducive to the accumulation of certain financial vulnerabilities. in particular, it has led to a β search for yield β by investors who have been seeking more profitable and riskier investments. this is evidenced at least by three facts : increasing leverage, the high share of debt at risk and the relatively high valuations of certain assets. now the current phase of ultra - loose monetary policy is coming to an end. in the us, after seven years of interest rates around the zero lower bound, monetary policy is being normalised. other advanced economies, such as the uk or canada, have also started to raise interest rates. regarding the euro area, the ecb governing council anticipates that, subject to incoming data confirming the medium - term inflation outlook, net asset purchases will come to an end in december 2018. in this context, two main developments in international financial markets warrant attention as, in my view, they might currently pose key threats to financial stability and global growth. first
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accountability and transparency enhances its potential as a stable form of financial intermediation. there is also a growing recognition that the inherent tenets of islamic finance are aligned with the sustainable dimensions of ethical finance and responsible financing. as the new financial landscape emerges, it has also been accompanied by the development of ancilliary support services that include legal, accounting, taxation and shariah advisory. in addition, there is the development of islamic indices, information repositories and consultancy services. in the areas of human capital development there is a proliferation of programmes and certifications that focus on islamic finance. malaysia is committed in this pursuit and has put in place a comprehensive talent infrastructure in islamic finance with the aim of meeting the increased demand for practitioners by the global islamic finance industry. dedicated institutions of learning such as the international centre for education in islamic finance ( inceif ) and the islamic banking and finance institute ( ibfim ) have been established to focus on education in islamic finance. increased international connectivity and islamic finance despite the continued strains experienced in the economy and the international financial system, it is important to recognise the fundamental long - term global transformation that is taking place. in this recent decade, the concurrent rise of the emerging economies is resulting in a fundamental realignment in the global landscape. this transformation is characterised by the shifting balance of global economic strength to the emerging economies, with its significant implications on the global economic and financial flows. the international financial landscape will also be inevitably transformed with the distribution of financial centres becoming more dispersed. increasingly, new centres of financial activities will likely to emerge. in addition, financial system inter - linkages β particularly among the emerging economies β will deepen, supported by the increased global trade and investment that is already taking place. with considerable capacity to meet large investment requirements, opportunities therein lie in the more effective and efficient channelling of the bis central bankers β speeches sizeable surplus funds towards the vast productive investment opportunities within and across the emerging economies. these trends are being reinforced by the rapid expansion of financial institutions in emerging economies that have ventured beyond national borders. financial institutions from the emerging economies have grown significantly in size and strength in this recent decade to now account for almost half of worldwide financial industry market value. eight out of the twenty largest global banks, including the top two, are emerging market financial institutions. as the emerging market financial institutions continue to regionalise and internationalise, their role and importance can be expected to further expand. another key development is the
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are able to and work towards a sustainable future. planting trees may seem like a small gesture, but in the long run, we believe, it has a significant impact. each tree we plant today is an investment in the wellbeing of our community and generations to come. the benefits of our efforts today will contribute to cleaner air, improved biodiversity, and a more resilient ecosystem. distinguished guests, allow me to reflect a little further on the importance of planting trees. trees are the lungs of our planet which provide us with oxygen. as antonio guterres, the united nations secretary general, once said " forests are lungs of our planet which draw in carbon dioxide and breathes out oxygen. " trees play a critical role in maintaining ecological balance. we need to cultivate a culture of planting trees to mitigate the effects of climate change. consequences of deforestation are many and dire. these include soil degradation, water conservation and ozone layer depletion, an increase in the atmospheric level of carbon dioxide and extinction of plant species, among others. distinguished guests, since trees play an important role in human life, they must be preserved at all times. failure to do that will result in climate change continuing to impact negatively on human survival. it has been observed that cutting down of trees is not only rampant here in mumbwa, but in many other parts of the country as well. good corporate citizenship calls for a conscious alignment of business operations with social, environmental and economic responsibilities to the benefit of both society and the business. i would like to urge everyone, individually and collectively, to develop a culture of planting trees. this is an important way we can contribute to the health of our planet. for us as an institution, the concept of csr requires us to raise our social consciousness in the communities we operate in. through this awareness, underpinned by our values, we hold ourselves accountable for the impact our operations have on the environment, seek ways to uplift our society and promote sustainable development. distinguished guests, i am happy to inform you that the bank deliberately chose to partner with the national heritage conservation commission ( nhcc ) knowing that the saplings we are planting today will be nurtured - taken care of and provided with an environment to grow into mighty trees that will stand for years to come. 2 / 3 bis - central bankers'speeches distinguished guests, you may also wish to note that the bank was presented with a number of sites to be considered for support. the
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indicators which, together with timely economic analysis, should help detect sufficiently in advance those situations of vulnerability that may endanger financial stability in the euro area and give form to the measures needed to correct them. progress in designing a permanent crisis - management mechanism has been considerable but clearly insufficient. first, temporarily, the european financial stability facility was introduced, and later, now on a permanent basis, the european stability mechanism was set up, which it is assumed should start operating next july. the complexities involved in the design of these devices are evident, since they must combine strength and flexibility to provide financial assistance to ailing countries, while ensuring that incentives are maintained to pursue the ambitious fiscal consolidation and structural reform programmes needed for laying the foundations for sustained growth in the medium term. bis central bankers β speeches but exiting the crisis will not be possible unless a stronger european governance framework is accompanied by a far - reaching revision of national economic policies, enabling them to be fully adapted to the conditions under which a monetary union can operate. it is imperative that the authorities and economic agents should fully assume the consequences derived from sharing a single monetary policy. the soundness of public finances and the flexibility of economic structures are vital requirements in this framework. taking a shorter - term perspective, the need to lower the high levels of public and private debt accumulated in the past makes improving competitiveness the key to restoring confidence and the growth of output and employment. with no possibility of currency devaluation, internal devaluation, i. e. the adjustment of prices and remuneration, along with productivity gains stemming from better work management, is the only alternative available in the immediate future to promote and restore lost competitiveness. almost 12 years back, angel rojo marked his departure from the banco de espana with his speech on the 1999 annual report. in a climate of exuberant optimism, he made a warning about credit growth which, he said, β continues to rise at very high rates β, the result being β a heightening of demand pressure on trend output, with worrying effects β. our problems now are not excess demand or a surfeit of credit, but how to correct these β worrying effects β rojo warned us about. let me close my address with his recommendations, as i am sure they will be of interest to you : β under these conditions, the spanish economy needs to restrain the expansion of demand and increase the degree of flexibility in labour and product markets in order to sustain high, stable growth rates in the future
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european project : a single currency, the euro ; and a single monetary policy, with its own institution, the european central bank. this is the epitome of cooperation among countries : a supranational agency that takes into account the well - being of the whole area instead of nations exercising their powers in a disorderly fashion. as a reward, the contribution of monetary policy to the economic stability of the union has been decisive, particularly during the sovereign debt crisis and, crucially, in the current health crisis. in addition to monetary policy, during this crisis, there has also been a genuine, common fiscal european response to the pandemic, notably including the creation of the next generation eu ( ngeu ) recovery fund. this fund adds key elements to ensure the burden of the economic recovery effort is shared. some are unprecedented, such as the large - scale issue of supranational european public debt to finance reforms and investment in those member states most affected by the pandemic. however, ngeu cannot and should not be seen as the cyclical stabilisation mechanism the euro area needs to complement our single monetary policy. a true macroeconomic stabilisation mechanism should be a multilateral institution in itself, of a permanent nature and with sufficient size, taxation power and borrowing ability. an additional important step that itΒ΄s still missing is related to the need to conclude the process of financial integration that was key to resolving the sovereign debt crisis. this is, namely, the banking union, through the agreement on a fully mutualised european deposit insurance scheme. it would contribute decisively to guaranteeing financial stability in the euro area and avoiding problems of financial fragmentation, both in the short and medium - term. in parallel, capital markets in europe remain relatively under - developed and under - integrated. hence the need to move resolutely 3 / 4 bis central bankers'speeches towards implementing all the measures that are necessary to create a true capital markets union. it was jean monnet who said that β europe will be forged in crises, and will be the sum of the solutions adopted for those crises ". letΒ΄s do not waste the opportunity that this new crisis has offered to us. forging requires sufficient temperature to mould, but not so much as to melt. there has been much work on how to avoid reaching melting temperature in the last few years. now is the time to mould both the european project and the multilateral institutions. our aim is that, when
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t measure credit risk although they represent a crude proxy for such risk within broad categories of banking assets. * finally, the capital standards give insufficient consideration to hedging or mitigating risk through the use of credit derivatives or effective portfolio diversification. these shortcomings of the regulatory capital standards were beginning to be understood even as they were being implemented, but no consistent, consensus technology existed at that time for invoking a more sophisticated standard than the basle norms. to be sure, more sophisticated standards were being used by bank supervisors, during the examination process, to determine the adequacy of capital at any individual institution. these supervisory determinations of capital adequacy on a bank - by - bank basis, reflected in the camel ratings given to banks and the bopec ratings given to bank holding companies, are much more inclusive than the basle standards. research shows that camel ratings are much better predictors of bank insolvency than β risk - based β capital ratios. but, a bank - by - bank supervision, of course, is not the same thing as the writing of regulations that apply to all banks. it is now evident that the simple regulatory capital standards that apply to all banks can be quite misleading. nominally high regulatory capital ratios - - even risk - based capital ratios that are 50 or 100 percent higher than the minimums - - are no longer indicators of bank soundness. meanwhile, however, some of our largest and most sophisticated banks have been getting ahead of the regulators and doing the two things one must do in order to properly manage risk and determine capital adequacy. first, they are statistically quantifying risk by estimating the shape of loss probability distributions associated with their risk positions. these quantitative measures of risk are calculated by asset type, by product line, and, in some cases, even down to the individual customer level. second, the more sophisticated banks are calculating economic capital, or β risk capital, β to be allocated to each asset, each line of business, and even to each customer, in order to determine risk - adjusted profitability of each type of bank activity. in making these risk capital allocations, banks are defining and meeting internal corporate standards for safety and soundness. for example, a banker might desire to achieve at least a single - a rating on his own corporate debt. he sees that, over history, single - a debt has a default probability of less than one - tenth of one percent over a
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cannot simply be done by observing market indicators. for example, we cannot easily use the public ratings of holding company debt. the ratings, after all, are achieved given the existence of the safety net. the ratings are biased, therefore, from the perspective of achieving our stated goal - - to impose prudential limits on banks as if there were no net. in addition, i am sure that there would be disagreement between market participants and regulators over what should be acceptable debt ratings. the solution may be for the regulators to use the analytical tools developed by the market participants themselves for risk and performance assessment. regulators already have begun to move in this direction. for example, beginning in january 1998, qualifying large multinational banks will be able to use their internal value - at - risk models to help set capital requirements for the market risk inherent in their trading activities. the federal reserve is also conducting a pilot test of the pre - commitment approach to capital for market risk. in this approach, banks can choose their own capital allocations, but would be sanctioned heavily if cumulative trading losses during a quarter were to exceed their chosen capital allocations. these new and innovative methods for treating the age - old problem of capital adequacy are likely to be followed by an unending, evolutionary flow of improvements in the prudential supervisory process. as the industry makes technological advances in risk measurement, these advances will become imbedded in the supervisory process. for example, the banking agencies have announced programs to place an increased emphasis on banks β internal risk measurement and management processes within the assessment of overall management quality - - that is, how well a bank employs modern technology to manage risk will be reflected in the β m β portion of the bank β s camel rating. in a similar vein, now that var models are being used to assess regulatory capital for market risk, it is easy to envision that, down the road, banks β internal credit risk models and associated internal capital allocations will also be used to help set regulatory capital requirements. regulation and supervision, like industry practices themselves, are continually evolving processes. as supervisors, our goal must be to stay abreast of best practices, incorporate these practices into our own procedures where appropriate, and do so in a way that allows banks to remain sufficiently flexible and competitive. in conducting prudential regulation we should always remember that the optimal number of bank failures is not zero. indeed, β market - based β performance means that some institutions, either through poor management choices,
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, complex organizations, this is an exceedingly difficult task and much more so than when i spoke about it 15 years ago. this crisis, in fact, confirms that even the senior management, boards, and financial experts at our largest banks failed to assess adequately the risks they were taking, even though they were involved with such issues on a constant basis and had their reputations at stake. also, as i previously stated, the substantial incentives that large organizations have to take on more risk, with the government expected to pick up the losses should they incur, unfailingly lead to undue risks throughout the balance sheet. in the hands of any banker, the combination of competitive pressures and perverse incentives are almost certain to result in noticeably higher risk exposures. against these odds, we cannot expect examiners to have a 100 percent success rate. factoring in the political power of the largest institutions, we cannot expect even a modest success rate during the upswing in the cycle. higher capital standards. i also support stronger capital standards, especially in the form of a maximum leverage ratio based on equity capital. basel iii and the dodd - frank counter cyclical capital provisions may provide some constraint on excess risk in firms if they are implemented successfully. but again, we must be cautious in what we can expect from this step by itself. basel i and ii were supposed to provide a better means for linking a bank β s capital to the amount of risk it assumed. along the way, we found that risk was very difficult to measure and that capital needs determined during normal circumstances were not enough for tail events or shocks that create financial crises. it is a fact that the largest financial firms easily met their risk based capital requirements just prior to this crisis. in addition, too big to fail incentives have provided an irresistible motive for large banks to game any capital system, particularly since their uninsured creditors do not count on capital but on a bailout for protection. there were several notable signs of this β gaming β of capital standards leading up to the crisis, including the growth of off - balance sheet activities and the construction of subprime mortgage - backed instruments that marginally met the standards for aaa credit ratings. even with firmer leverage standards, the incentive is for these organizations to increase balance sheet risks. resolution policy for too - big - to - fail institutions : a third option is to establish a framework for resolving systemically important institutions. i would add that this framework β to be successful β must convince
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, we would need to make such a change slowly but systematically. allowing maturing mortgage backed securities to roll off, the federal reserve β s balance sheet would shrink gradually, with relatively small consequences for financial markets. second, we should take the first early steps to normalize interest rate policy. this is not a call for high rates but a call for non - zero rates. in 2003 the fomc delayed our efforts to raise rates. in that period we reduced the federal funds rate to 1 percent and committed to keeping it there for a considerable period. this policy fostered conditions that let to rapid credit growth, financial imbalances and the eventual financial collapse from which we are still recovering. had we been more forceful in our action to renormalize policy then, it β s likely we might have suffered far less in 2008 through 2010. also, any effort to renormalize policy would include signaling a clear intention to remove the commitment to maintain the federal funds rate at 0 to ΒΌ percent β for an extended period β. as the public adjusts to this, we should then turn to determining the pace at which we return the funds rate to 1 percent. once there, we should pause, assess and determine what additional adjustment might be warranted. a 1 percent federal funds rate is extremely accommodative, but from that point we could better judge the workings of the interbank and lending markets and determine the order of policy actions that would support sustained long - term growth. other concerns regarding zero rates these are difficult times, no doubt, and it is tempting to think that zero interest rates can spark a quick recovery. however, we should not ignore the possible unintended consequences of such actions. zero rates distort market functioning, including the interbank money and credit markets ; zero rates lead to a search for yield and, ultimately, the mispricing of risk ; zero rates subsidize borrowers at the expense of savers. finally, it is important to note, that business contacts continue to tell me that interest rates are not the pressing issue. rather, they are concerned with uncertainties around our tax structure ; they are desperate to see this matter settled. they need time to work through the recent healthcare changes ; and they are quite uncertain about how our unsustainable fiscal policy will be addressed. they are insistent that as these matters are addressed, they will once again invest and hire. qe2 cannot offset the fundamental factors that continue to
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guidance on the key ecb interest rates. in any event, the governing council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council β s inflation aim in a sustained manner. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp increased by 0. 4 %, quarter on quarter, in the second quarter of 2018, following growth at the same rate in the previous quarter. despite some moderation following the strong growth performance in 2017, the latest economic indicators and survey results overall confirm ongoing broad - based growth of the euro area economy. our monetary policy measures continue to underpin domestic demand. private consumption is supported by ongoing employment gains, which, in turn, partly reflect past labour market reforms, and by rising wages. business investment is fostered by the favourable financing conditions, rising corporate profitability and solid demand. housing investment remains robust. in addition, the expansion in global activity is expected to continue, supporting euro area exports. this assessment is broadly reflected in the september 2018 ecb staff macroeconomic 1 / 3 bis central bankers'speeches projections for the euro area. these projections foresee annual real gdp increasing by 2. 0 % in 2018, 1. 8 % in 2019 and 1. 7 % in 2020. compared with the june 2018 eurosystem staff macroeconomic projections, the outlook for real gdp growth has been revised down slightly for 2018 and 2019, mainly due to a somewhat weaker contribution from foreign demand. the risks surrounding the euro area growth outlook can still be assessed as broadly balanced. at the same time, risks relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently. according to eurostat β s flash estimate, euro area annual hicp inflation was 2. 0 % in august 2018, down from 2. 1 % in july. on the basis of current futures prices for oil, annual rates of headline inflation are likely to hover around the current level for the remainder of the year. while measures of underlying inflation remain generally muted, they have been increasing from earlier lows. domestic cost pressures are strengthening and broadening amid high levels of capacity utilisation and tightening labour markets, which is pushing up wage growth. uncertainty around the inflation outlook is receding. looking ahead, underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium term, supported by our monetary
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few cases where hard rules were supposed to apply. we had assumed that countries had sufficient incentives to β keep their house in order β and thereby contribute to the common good of the euro area. an overly narrow interpretation of the principle of subsidiarity also shielded national economic policies from what was seen as undue european interference. the experience of the first twelve years of emu suggests that the limits of de facto soft policy coordination have largely been exhausted, with the interdependencies inside a monetary union calling for a stronger euro area dimension. let me now take a closer look at the two emu pillars separately. the β m β of the emu the β m β of the emu, or the monetary pillar, has performed well. the ecb has a clear assignment : to deliver price stability, which is defined as an annual inflation rate below but close to 2 % over the medium term. and over the 12 years since the launch of emu, the average annual inflation rate in the euro area has been 1. 97 %. this is the best result of a major central bank in the euro area for any such period of 12 years, over the last 50 years. bis central bankers β speeches we achieved this during challenging times. over the years, we have had to cope with the bursting of the dot - com bubble, the aftermath of the events of 11september 2001, the jump in oil prices to $ 147 per barrel in 2008, rising prices of food and commodities, and then of course the worst financial and economic crisis since the great depression. yet throughout these very different economic shocks β which could have had either inflationary or deflationary consequences β citizens and market participants in the euro area have remained confident in our commitment. inflation expectations have been firmly anchored in line with our definition of price stability. the β e β of the emu it is the β e β of the emu, where progress is needed. already the 1989 delors report stated that β an economic and monetary union could only operate on the basis of mutually consistent and sound behaviour by governments and other economic agents in all member countries. ( β¦ ) uncoordinated and divergent national budgetary policies would undermine monetary stability and generate imbalances in the real and financial sectors of the community. β what does this mean in practice? it means improving economic governance. it means strengthening the rules to prevent unsound policies. and it means to prohibit individual countries from pursuing policies that can
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to achieve those objectives ; while at the same time making sure that the structure functions to maintain the organization's integrity, reputation, and accountability to its relevant constituencies. enforcement alone cannot guarantee good corporate governance. whilst measures to enhance corporate governance are primarily aimed at boards of directors, who are seen as the agents responsible for protecting shareholder value, the internal audit fraternity is another industry group that is of particular importance. it is evident that the significance of internal auditing as a key contributor to corporate governance has emerged as a theme. this new paradigm in internal auditing will see the profession becoming a front player in ensuring good corporate governance structures. in this demanding environment, boards and senior management need quality advice from sources that can be trusted and that can offer an objective viewpoint. much of the focus of sarbanes - oxley in the united states and basle committee has been on the external audit function. equally, however, there is a need to ensure that internal audit is organised, resourced and empowered so that it can provide competent, impartial and fearless advice. in contrast to external auditors, however, our sense is that internal audit is still evolving as a profession and has further to go in promoting its own professional standards and profile in papua new guinea. we in bpng observe that internal audit in our supervised institutions is not based on widely utilised standards, recognised by audit committees for example, and it is not always focused on the same set of issues. internal audit functions vary from a narrow concern with compliance or financial accounts to a broader remit reviewing efficiency and effectiveness or acting as an internal consultant. my address today offers a prudential perspective on the role of internal audit. it starts with the separate roles of internal audit in the corporate governance framework. specific references will be made to the internal audit setup in the bank of png. it then sets out the expectations of internal audit held by prudential regulators at the international level and how the regulator assesses whether internal audit in the institutions it supervises meets these expectations. finally, i discuss some regulatory issue, the problems and challenges. my comments are offered in a constructive spirit to encourage debate within the internal audit profession. i will start by borrowing the definition of internal audit approved by the board of directors of your institute : β internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation β s operations. it helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and
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improve the effectiveness of risk management, control, and governance processes. β as we see it, the basic function of internal audit is independent appraisal of an institution β s internal controls, including controls over financial reporting. simply put, it is about reviewing activities to ensure that they are carried out as intended. of course, a by - product of internal audit will be recommendations on internal control and process improvements that could be made, an important role for internal audit at large and complex financial institutions in particular. the bank of png internal audit charter was drawn up with the assistance from the imf technical advisor and reviewed periodically β by the internal audit department ; it was approved by senior management ( governor ) and subsequently confirmed by the board of directors as part of its oversight role. in the charter, the bank β s senior management gives the internal audit department the right of initiative and authorises it to have direct access to and communicate with any member of staff, to examine any activity or entity of the bank, as well as to access any records, files or data of the bank, including management information and the minutes of all consultative and decision - making bodies, whenever relevant to the performance of its assignments. the charter states the terms and conditions according to which the internal audit department can be called upon to provide consulting or advisory services or to carry out other special tasks and the charter is communicated throughout the organisation. to perform their role effectively, internal audit requires organizational independence from management to enable unrestricted evaluation of management activities and personnel. to ensure independence, manager internal audit reports directly to the governor and also has direct access to the audit committee on matters considered of significant importance to the functioning of the bpng. audit committees require the help of internal auditing departments in order for them to be able to effectively fulfill their obligations to the board, the shareholders, and other outside parties who have a stake in the organisation. the contribution of internal auditors as business advisors or consultants to the organisation and their role in ensuring compliance with various statutes, policies and procedures cannot be overemphasized. these new challenges that are faced by internal auditors require them to acquire the necessary skills and competencies on a continuous basis. this makes it necessary for them to place them on a learning path so that they could update themselves with new developments. he / she should know all aspects of the operations in order to perform an effective job as an internal auditor. in this respect, the work done by the institute of internal auditors in
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, consumers, and government. moreover, to allow us to regulate more effectively, we will also coordinate and cooperate with other regulators here and abroad. this is because fintech market players include non - financial firms that operate across borders. we are specifically exploring a possible information sharing and referral system specifically focused on fintechs. the bsp is also piloting regtech solutions to strengthen our own risk - based regulatory and supervisory activities. the bsp partnered with regtech for regulators accelerator ( r2a ), a pioneering project that provides technical assistance for financial sector regulators to develop and test the next generation of digital supervision tools and techniques. ladies and gentlemen, we, in the bangko sentral, encourage you, distinguished members of ecop, not only to adjust to financial technnology, but to leverage on its opportunities. our goal is not just to survive but to thrive. the democratization of technology enables efficiencies and scale in financial service delivery. mobile devices are cheaper and now within many β s reach. social media is pervasive. rather than a hindrance, digital technology is fast becoming a strategy enabler. moreover, with rapid digital innovation, new business models and market players will continue to emerge, changing the nature of competition. digital innovations may also be applied to organizational strategy to improve culture and human resource skills. the fourth industrial revolution has the potential to empower individuals and communities and bring about new opportunities for economic and social development. while leveraging on technology will involve financial and investment commitment, cost - effective approaches such as outsourcing and cloud - based services may be explored. to drive down the cost of it requirements, strategic industry partnerships, and market utility arrangements can also be considered. we in the bangko sentral assure that we shall remain committed to fostering an enabling macroeconomic environment, so that you, our stakeholders β industry players can make the first and necessary steps in our shared digital transformation journey so we will not only survive but thrive and enjoy sustained economic growth over the medium to long term. thank you and mabuhay ang pilipinas! 3 / 3 bis central bankers'speeches
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recognize the importance of overseas employment in helping ease the pressure of unemployment and in boosting the national economy by helping increase the foreign exchange reserves. there are of course second - order effects of higher foreign exchange inflows, including the impact on the domestic currency and external competitiveness. but to me, it is fundamental to first address the current challenges and measurement issues that have very important analytical and policy bearings. this conference will hopefully help pave the way to clarify such issues. first, let us look at the statistics on the number of ofws. our theme for today, β ofws : bagong bayani, ilan ba talaga kayo? β, suggests that we are not yet certain exactly how many are our ofws, and more generally, how many filipinos are overseas. accuracy in this aspect may really be a challenge because what we want to monitor are people who are always on the move. at present, there are various agencies producing ofw - related statistics. the philippine overseas employment administration ( poea ), the overseas workers welfare administration ( owwa ) and the commission on filipinos overseas ( cfo ), on the one hand, maintain statistics based mostly on administrative records as an offshoot of their functions. on the other hand, the bureau of labor and employment statistics and the national statistics office, have data based on labor force surveys and census of population and housing. we need to understand how these data from various agencies are interrelated. the first key question is : is there a uniform definition of what an ofw is?. for instance, in the census of population of housing, overseas workers are defined as those who had been away for not more than five years from date of last departure. do the other agencies producing ofw statistics adopt the same definition?. is it possible to integrate and reconcile these sets of data from various sources to come up with one, uniform, comparable set of data on ofws and overseas filipinos?. the next question is : how are the definitions linked or reconciled with definitions in other macroeconomic statistical frameworks such as the 1993 system of national accounts ( 1993 sna ) and the 5th edition of the balance of payments manual ( bpm5 ), which adopt a one - year residency criterion for determining who are the residents of a particular economy?. what are the implications of adopting different sets of definition in our economic statistics and in economic analysis?. while there are efforts in the inter - agency technical working group (
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and constraints include shareholders and market analysts, regulators, prosecutors, elected officials, the media, and the public. market conditions and the actions of competitors can also be significant. nature of risk management financial risk - taking is arguably the fundamental activity of financial intermediaries. 1 unlike most non - financial firms, a financial institution more or less continually makes risk decisions, whose implications can vary significantly based on the nature of the asset involved, market conditions, counterparty identity, and many other factors. the processes by which risk appetites are set and activity managed so as to conform to these risk appetite decisions are central to determining outcomes, and thus the firm β s near - term profitability and longer - term stability. for these reasons, there is considerable regulatory interest in these processes, an interest that has been formalized in the federal reserve β s annual comprehensive capital analysis and review ( ccar ) and informs the emphasis of our supervision throughout the year. each year, in conjunction with our supervisory stress tests, we provide an assessment to every participating firm of their risk - management and capital planning processes, indicating where specific improvements are needed. the interactions between supervisors and firms on these matters are extensive, focused, and consequential. for this reason, i think we have gained considerable insight into, if not precisely the β culture β of the firms, then at least the attitudes of senior and mid - level management toward these risk functions. in some firms the attitude we perceive is one of a mere compliance exercise. the firm proceeds to address the deficiencies identified by the fed in a discrete, almost check - thebox fashion. to oversimplify a bit, i would say that our sense is that management at these firms wants the hurdle to capital distribution removed, but once the specific problems have been remedied, they want to move on. if this is the attitude we perceive, i suspect the working level employees of such firms do the same. the supervisory reaction in such cases is quite likely to be an inclination toward greater scrutiny. intermediaries without sizeable balance sheets of their own, such as mutual funds, may not themselves be assuming risk, but they are creating it for their investors. bis central bankers β speeches other firms, by contrast, seem to have internalized the aims of the risk - management processes and systems that we expect of them. in these firms the dialogue can be quite different, with supervisors observing that, even as a specific problem is addressed, such as deficiencies in est
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risks in proposed transactions or products. in order to be effective signals, though, the fact of these rewards, and the standards under which they were granted, need to be transparent. punishment systems provide the complement of negative incentives to the positive incentives created by compensation and promotion practices ( even where qualified by clawback or similar provisions ). here the role of the government differs. with respect to positive incentives, regulators affect individuals only by way of requirements or expectations for firms. when it comes to disincentivizing egregious bad behavior, however, the government can play a more direct role. because of the required standard of proof and other constitutional protections, criminal prosecutions of individuals are harder to bring successfully institute of international finance ( 2009 ), compensation in financial services : industry progress and the agenda for change ( washington : iif, march ). see board of governors of the federal reserve system, office of the comptroller of the currency, office of thrift supervision, and federal deposit insurance corporation ( 2010 ), β federal reserve, occ, ots, fdic issue final guidance on incentive compensation, β press release, june 21. bis central bankers β speeches than criminal prosecutions of firms. but, as i think was learned decades ago when individuals were criminally prosecuted and imprisoned for antitrust law violations, it is difficult to imagine a more effective deterrent to such conduct. banking regulators do not have criminal enforcement powers, of course. but we can, and do, require dismissal of employees as part of our enforcement actions against firms. and we do have the authorities to remove malefactors from their positions in any institution that we regulate and to prohibit them from working in the banking industry. somewhat like criminal prosecutions, these are not easy cases to make. but it is important that we be willing to expend the resources to initiate such actions in appropriate cases. for quite some time, large banking organizations usually dismissed employees who had engaged in significant misconduct or exercised very bad judgment in a quiet, almost surreptitious way. this was particularly true of someone in a responsible position, who would be ushered out the door discreetly, with no recognition internally or externally of the fact of dismissal, or the reasons behind it. frequently, this person would turn up at another financial firm not long thereafter. the dismissing firm β s reasoning was that any public awareness of the dismissal could hurt the reputation of the firm and perhaps cause customers or counterparties to rethink
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the early years of the introduction of the euro. our strategy rests on two g. alogoskoufis, r. portes and h. rey, β the emergence of the euro as an international currency β, 1997, as discussed in a. benassy - quere, b. mojon and a. d. schor, the role of the euro, cepii, document de travail no. 98 - 03, january 1998. β pillars β : a prominent role for money as expressed by the announcement of a reference value for the annual growth of m3 and a broadly based assessment of the outlook for price developments, and the risks to price stability in the euro area as a whole. in the context of the first pillar of the monetary policy strategy, the governing council of the ecb has announced a quantitative reference value for the growth of a broad monetary aggregate ( m3 ), which has been set at an annual rate of 4Β½ %. under normal circumstances, substantial deviations from the reference value would tend to indicate future risks to price stability. however, monetary policy does not react to deviations of monetary growth from the reference value in a β mechanistic β way. in the first instance, such deviations will be thoroughly analysed to infer any signals which they may send about the prospects for price developments. if this analysis points to a threat to price stability, monetary policy will react in a manner appropriate to counter this threat, rather than attempt to eliminate the deviation of monetary growth from the reference value in the short term. although monetary data contain information which is vital for monetary policy decision - making, monetary developments alone will clearly not constitute a complete summary of all the economic information necessary to enable appropriate policy decisions to be taken. that is why it is important to monitor simultaneously a wide range of financial and other economic indicators, including economic forecasts. this broadly based assessment constitutes the second pillar of our monetary policy strategy. all in all, the combination of the two pillars of the eurosystem β s strategy ensures that monetary, financial and economic developments are closely monitored and analysed. on the basis of this thorough analysis, the interest rate will be set in a way that best serves the maintenance of price stability. ensuring the benefits ( ii ) : stability - oriented non - monetary policies let me now turn to the importance of prudent and stability - oriented non - monetary policies in order to reap the fruits of the single currency. i should
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##metric shocks, there was no compensation by other countries. it is a problem that is quite difficult to solve, but it is a fact that emu hasn β t functioned very well in this respect. one worry is that the fundamental reflection about how to make emu work better is not advancing sufficiently. not all is negative, of course. we have managed to set up better mechanisms to deal with sovereign debt crises, but you are still in an unclear position when dealing with issues of sovereign debt. and we have banking union, we are especially advanced in terms of supervision, but we have not finished it. the fact that banking union is not finished, doesn β t that lead to small banks in small countries being bought by big banks from big countries? i know this is a big discussion here in portugal. i always have problems in understanding why that would be a problem. i experienced the crisis in belgium with fortis, and that bank represented a huge risk for that country. now, it is part of bnp and this has been absolutely instrumental in avoiding a catastrophe. for europe, this is an important question. you see the banking systems are in general more national than they were. not in portugal, but in many countries. the banks, even when they have subsidiaries, are tending to manage by way of separate entities more and more. banks today are exposed to country risk because most of the assets are related to the country. this means that, if you have a shock in the country, the banking system is not diversified enough. of course, the fact that we are in a monetary union limits the room for manoeuvre : you don β t have the exchange rate instrument, you have a single monetary policy. so it is absolutely vital to evolve towards pan - european banks, banks that are geographically diversified and also that would be backstopped by emu as a whole. so what you are saying is that, in a monetary union, if small countries want to have safe banks, they have to forget the ownership question? i think what matters in banks is good governance, not national ownership. you can always have local banks, that β s not the problem, but having the whole banking system exposed to the local economy in a monetary union like ours is a dangerous combination. we have two problems in the euro area : a fragmented banking market and the lack of common backstop. it cannot be done in one day, but you have to spell out how you make the transition to it
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within the direct accountability of bank executive management. liquidity provisioning must begin in good times. it is critical that sufficient liquid assets be held. only first - class securities are suitable for this purpose. these can be sold in the markets or mobilised via repo transactions, even in difficult conditions. in an acute crisis situation, the availability of sufficient liquidity, together with a strong equity position, is absolutely crucial. fourth and finally, i would like to mention that, in the swiss franc money market, repo business via the swiss value chain has proved to be a crisis - resistant source of liquidity, thanks to the consistent minimisation of risks. the repo market allows participants to undertake rapid refinancing in the interbank market, independent of credit limits, thereby making a major contribution to the stability of the financial system. that is why it is important for the snb that all swiss and foreign banks operating in the swiss franc money market join the swiss repo system.
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philipp hildebrand : the challenge of sovereign wealth funds speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the international center for monetary and banking studies, geneva, 18 december 2007. i would like to thank signe krogstrup for her valuable support in drafting this speech. i also want to thank rita kobel, urs w. birchler, daniel heller and bertrand rime for helpful comments and discussions. * 1. * * introduction i am very pleased to be in geneva. the international center for monetary and banking studies ( icmb ) provides a wonderful platform to discuss a wide range of economic and monetary policy challenges. on behalf of my icmb foundation board colleagues, i would like to thank charles wyplosz for his successful and long - standing stewardship of the icmb. tonight, i want to talk about sovereign wealth funds ( swfs ). broadly defined, swfs are government - owned investment corporations. for the most part, they invest their funds in foreign currency assets. swfs are usually managed separately from central bank reserves. unlike other publicly owned pools of capital, such as social security funds or public pension funds, swfs have no explicit liabilities. as you can see in slide 1, the estimated assets currently managed by swfs exceed the combined pool of assets managed by hedge funds and private equity firms. total assets held by swfs remain small, however, in comparison to the combined assets managed by pension funds and mutual funds worldwide. the rise in swfs is closely linked to the global macroeconomic imbalances that have characterized the world economy since the mid 1990s. since these imbalances are unlikely to unwind in the near term, swfs are likely to keep growing disproportionably for some time. the rapid rise of swfs has undoubtedly brought a number of benefits. one of them has recently become particularly evident. against the backdrop of the current market turmoil, swfs have been a welcome source of capital, strengthening the vulnerable balance sheets of some of the world β s largest financial institutions. i will return to this important point at the end of my lecture. but the investments made by swfs have also given rise to considerable political controversy and media coverage. slide 2 provides a sample of some of the most pertinent recent headlines. the political controversy does not derive from the fact that swfs are new. they are not. political leaders are anxious because the
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wilder and wilder. that might not matter were the consequences limited to the party - goers. but they are not. when the party ends, some innocent bystanders may lose their homes altogether. moreover, the party - goers aren β t just deposit - taking banks. a wide range of financial institutions, including investment banks, monoline insurers, even hedge funds, have the potential to cause significant damage to the rest of the economy in the wake of their demise. are they all to be helped to get home safely when the party ends? if so, will they all be regulated in the same way as banks? if not, how can we limit the potential cost to the taxpayer? add to this the problem that many of these institutions are global in scope, but the responsibility for both regulation and rescue remains firmly at national level, and you can see why policy - makers get headaches as bad as the party - goers β. no individual bank, or indeed the authorities, can easily find a way out of this because their incentives are to continue in the same manner. there is, therefore, no point blaming anyone for the outcomes. but together we have to find an answer. of course, excessively strict and detailed regulation would mean that there were no parties worth going to and the economy as a whole would suffer from a suppressed and inefficient financial sector. that is why requiring financial institutions to hold more capital to act as a shock absorber, while reducing the procyclical nature of existing capital requirements, may offer a balance between excessively burdensome regulation and excessive risk - taking. the proposals in the banking bill, and the other changes i have discussed today, will take us an important step forward in the creation of a framework for financial stability. but they will not be the final answer to a difficult, at times seemingly intractable, problem of how to change the incentives of both private and public actors to reduce the frequency and cost of financial crises. for that we will all need to do a lot more thinking. it is important that we do find the right solution. an efficient and thriving banking sector which can intermediate saving and investment, both domestically and internationally, is essential to our economic prosperity.
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mervyn king : banking and the bank of england speech by mr mervyn king, governor of the bank of england, to the british bankers association, london, tuesday 10 june 2008. * * * after a decade or more of economic stability, we are now facing a period of rising inflation and falling economic growth. part of the reason for this change of economic weather is that we are passing through the most prolonged period of financial turmoil that most of us can remember. whether, as the imf has argued, it is the worst period of financial stress since the 1930s is too early to judge. after all, the crisis is not yet over. since last august there has been a great deal of soul - searching about what we all might have done differently, both before and after 9 august when the crisis hit. and in circumstances where livelihoods are at risk it was inevitable that the β blame game β was played. unfortunately, although such a game helped to fill newspaper columns, it generated more heat than light. so today i want to step back. financial crises have been a regular, and disturbing, feature of our and other developed economies for as long any one can remember. they are as frequent now as in the nineteenth century, when henry thornton and walter bagehot were developing their ideas about how central banks could prevent instability in the banking system. are these repeated crises the inevitable result of human nature at work in financial markets, with greed and fear alternating as sentiment swings from irrational optimism to irrational pessimism? or is it the failure over many years to find the right incentive structure for banking markets? or is it a mixture of both? i don β t pretend to be able to offer a complete answer to those questions. but i do want to focus on the relationship between the bank of england and the banks because it helps to explain why crises occur and what we can do about them. let me start by saying that, although i do think the role of the bank needs to be enhanced, it would not be right for the bank to take back banking supervision from the fsa, as some have suggested. we should remember that the period before 1997, when fsa and the β tripartite arrangements β were set up, was not seen at the time as a golden age of official oversight of banks. before 1997 the relationship between the treasury and the bank of england in respect of banking supervision was often fraught. remember too that the experience which shaped the design of the 1997 settlement was that
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macroauthorities. prudential authorities would step in and impose ( or relax ) constraints whenever they come to the conclusion that dangerous imbalances are building up ( or unwinding ). we probably cannot dispense of this second approach. the difficulty to date cycles makes it dangerous to rely purely on automatic mechanisms, which cannot be precisely calibrated. financial cycles, in particular, are driven by changes in risk appetite which are impossible to predict. actually, one essential objective of macroprudential supervision may be to " regulate " ( not in the legal sense, but economically ) the aggregate level of risk appetite inside the financial system. this unavoidably involves some degree of discretionary judgement and intervention. combining the two components of macrosupervision ( systemic and macroeconomic ) with the two approaches ( automatic and discretionary ) produces an interesting classification, which is presented in the table below : purpose systemic risk adjustment to macroconditions mechanisms β’ buffers ( capital and / or liquidity ) β’ loan to value ratios automatic β’ accounting framework β’ stress tests discretionary β’ pillar ii of basel 2 β’ time varying ratios capital β’ dynamic provisioning β’ discretionary adjustments to capital ratios, provisions or margin requirements institutional challenges the discretionary approach to macrosupervision raises important institutional issues. first, who makes the judgment? and should that body be independent or not? there is a good case for putting central banks in charge. if one takes an historical perspective, it is striking that the mandates and missions of central banks have taken major turns following financial crises. central banks have an informational advantage ( or at least no disadvantage ) in judging the cyclical position. they have an incentive to act, because macroprudential supervision alleviates the burden on monetary policy, and because they need monetary transmission mechanisms to work. so they clearly should have a pivotal role in the process. but they are not alone in caring about financial stability. and experience has shown that price stability β their primary mandate β does not always coincide with financial stability and the avoidance of bubbles. furthermore, in an integrated financial system, judgments have to be made on a worldwide basis. another alternative is the imf. but the imf is mostly controlled by governments and decisions are made according to voting shares. implementing macrosupervision will involve delicate decisions ( like strengthening lending standards in good times ) to which governments may not spontaneously agree. a fully independent body would certainly be necessary. second, how is that judgment
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or counterparty risk problems for banks. such situations are also a matter of concern from a systemic liquidity viewpoint, and may take two extreme forms : market liquidity could temporarily dry up or individual funding liquidity problems may affect a significant market player. 9 such liquidity problems are typically lowprobability events, but the potential loss to the financial system if they were to materialise is great. in today β s financial markets, the fear is that a large proportion of market participants may have become excessively complacent ; a situation which may well have been exacerbated by high levels of liquidity, the stability of which is difficult to predict. what then can be done to enjoy the advantages of credit derivatives, while simultaneously minimising the systemic risks they could generate? first, we need to understand what the main problem is. here, it should be acknowledged that the opacity of the credit derivatives market, and especially of structured synthetic instruments, is a potential source of concern. the complex interaction between cash instruments and credit derivatives has made it increasingly difficult to monitor where different, possibly sizeable, positions are taken and where risks are concentrated. it is similarly difficult to monitor whether and when simultaneous attempts by market participants to unwind their positions could have an impact on market prices and systemic liquidity. 10 it is therefore becoming increasingly important for risk managers, in both the private and the public sectors to understand which risks are being accumulated by what financial entities. second, since there is no simple solution to the problem of opacity, what is the right direction to take? the challenge is to work towards an adequate transparency framework. more and improved data on net credit risk exposures and on the concentration of positions β which tend to build up easily in highly leveraged and opaque markets β could help to mitigate sizeable shortcomings in both see, for example, imf gfsr ( 2005 ), geithner fed of ny ( 2006 ). see lagana et al. ecb ( 2006 ) and ecb financial stability review, box 9, december 2006. see institute of international finance ( 2007 ) and joint forum ( 2006 ) for further details and definitions. ecb financial stability review, june 2006. counterparty and systemic liquidity risk management. in fact, such data could help market participants and competent authorities to value, price and manage more effectively the increasing risks posed when investors behave in a homogenous way. however, it is important
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we are also watchful of geo - political risks that could pose challenges to the country β s trade, remittances, and foreign direct investments. recently, the depreciation of the peso has been a cause of some market unease. such concern is overdone. the peso β s moderate and controlled depreciation mirrors bullish economic growth indicated by strong imports demand, residents β increased direct and portfolio investments abroad for expansion and risk diversification ; as well as public and private sector debt prepayments to manage foreign exchange risks. there is also outflow of hot money. we see these as healthy adjustments. 1 / 5 bis central bankers'speeches the peso is expected to be broadly stable over the medium - term, backed by strong underlying economic fundamentals, ready market access, and robust international reserves. our foreign exchange reserve buffer, as of end - october 2017 stands at us $ 80. 6 billion. this is equivalent to more than 8 months β imports of goods and services and is greater than our foreign exchange liabilities. we have additional liquidity buffer as well from our regional safety net arrangements. sustained inflows from overseas filipino remittances, business process outsourcing, tourism receipts, and the strong recovery in exports further support the peso. we can likewise look forward to increased foreign direct investments that are attracted by our growth prospects. with the country β s external debt on a sustainable downtrend and ample fiscal space, there is scope to pursue high quality investments in physical and human capital that will expand potential output. at the current range, the peso β s competitiveness has improved back to 2008 levels as measured by the real effective exchange rate ( reer ) index. the philippine banking system is very stable and very dynamic, with good asset quality, sustained profitability, and adequate capitalization. for the third quarter of this year, total banking system resources expanded by 14. 1 percent year - on - year, to p14. 6 trillion. this was funded by sustained deposit inflows which grew by 15. 3 percent, to p11. 3 trillion. the non - performing loan ( npl ) ratios further improved to 1. 9 percent, with adequate and prudent provisioning for credit losses. bank capital is being beefed up by strong earnings from core income sources particularly lending activities. capital adequacy ratio, recorded at 16. 0 percent on consolidated basis, is well above the bsp and international
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procedures for low - risk clients to facilitate frictionless customer on - boarding. more recently, the monetary board approved the cyber security risk management framework under circular no. 982. finally, we are pursuing digitization of the payment system as part of our firm commitment to the national strategy for financial inclusion. the bsp is actively working to make universally available to all a basic transaction account in a bank or regulated non - bank financial institution, to be able to send and receive payments via any electronic device. at the same time, we are working with other government agencies and congress to establish a biometric national id system. these two β universal transaction accounts and a digital id system β are key foundations of a robust and inclusive digital financial system. we are one step closer to achieving the vision of a cash - lite economy with the recent launch of the philippine electronic fund transfer ( eft ) system and operations network, also called β pesonet β last november 8, 2017. this is the first automated clearing house ( ach ) under the national retail payment system ( nrps ). it supports batch payment credit transactions and will eventually replace paper check payments for most applications. early next year, we will launch β instapay β, the ach for low - value real time push payments ideal for mobile payments in support of e - commerce. 4 / 5 bis central bankers'speeches conclusion ladies and gentlemen, the heightened convergence of the global and the domestic economy, fuelled by ict revolution, is a force to reckon with. one has to catch opportunities created by these big changes and adapt to manage new risks. as economic agents seek novel ways of doing things, the role of bsp becomes more critical. in this regard, we assure of our commitment and capability to foster an enabling environment so we are ready in the age of the great convergence. thank you for your kind attention. manyika, j. et al. ( 2013 ). β disruptive technologies : advances that will transform life, business, and the global economy β. mckinsey global institute, may 2013. 5 / 5 bis central bankers'speeches
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the executive chain, especially in financial services, with a persistent pay gap of 20 - 30 % and low levels of representation at executive level. on ethnicity, as john parker β s report last week made clear, we are scarcely out of the for further details please see haldane ( 2014 ) β central bank psychology β. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx starting blocks. and on disability, physical and mental, much the same could be said. whatever else we do, we must not let up in continuing to make progress along these dimensions of diversity. second, notwithstanding that, i do think we need to do a much better job of understanding and measuring the more subtle, cognitive and socio - economic dimensions of diversity. they are harder to identify and measure, as the information exists between our ears rather than on our faces. but that is precisely why unconscious biases may be largest and most in need of redress. as experience with gender and ethnicity illustrates, measurement and, ultimately, publication of diversity metrics can be important first steps towards creating a more socio - economically and cognitively diverse workforce. metrics hold a mirror up to us all. sometimes that casts a reflection none of us much like β a reflection that then prompts us to do better. and the measurement task is far from impossible. simple metrics of socio - economic background already exist, however imperfect, and are being used in some organisations to help recruitment. psychometric and neuroscientific tests are being developed at pace which help paint a picture β sometimes quite literally, through mri scans β of an individual β s cognitive skills. in this respect, i applaud the diversity project β s intention to develop multiple metrics of diversity and to share this information among its membership. third, recruitment. the filters applied in many of our standard recruitment procedures are, to my mind, a big barrier to building a diverse workforce. filters such as academic prowess ( grades at school and university ), work experience ( internships and voluntary activities ) and social skills ( team - building and networking ) are standard recruitment filters and sound perfectly sensible. yet these filters may, inadvertently but unhelpfully, disadvantage certain cohorts of society. those whose parental incomes, and hence school choice, may have held back their academic scores and work experience opportunities. those whose personality - type or brain circuitry means they are not as
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socially skilled or who dread interviews or team interactions. let me take a specific example - autism. it is also well - known that, despite their social challenges, many with autism have powerful intellectual skills β for example, in pattern recognition. that it is why it has been estimated that as many as 50 % of silicon valley innovators may have asperger β s syndrome, a type of autism. yet how easy would it be for those with autism to thrive in our organisations? the facts rather speak for themselves. only around 12 % of high - functioning individuals with autism are in work. another aspect to recruitment which inhibits diversity - building is that it tends to be judged with individual, rather than the organisational, attributes in mind. let β s take a simple example to illustrate. consider two candidates for a job sitting a test. the first scores 8 out of 10, the second 4 out of 10. the first person is clearly the best person for the job. but are they the right person for the organisation? see the economist ( 2016 ) β beautiful minds, wasted : how not to squander the potential of autistic people β. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx that is not so clear. what if the second person answers correctly the two questions the first candidate gets wrong. and what if the same is true of most of the existing employees in the company β likely, as they will have probably helped set the test. in this situation, the second candidate may well be the better one for the organisation because they bring organisational strength through diversity, despite being individually weaker. yet, hand on heart, how many of the organisations in this room have recruitment procedures which would choose the second candidate over the first? i suspect few. fourth, social mobility. the evidence on entrenched barriers to progress among those from socially disadvantaged backgrounds is discouraging. recent work by economic historian greg clark has shown that social status has remained a strongly inherited characteristic through the ages, even more so than physiological features such as height. that high degree of inertia in social status has, moreover, scarcely changed over the course of centuries, despite decades of attempts to broaden educational and work opportunities. on some measures, social mobility in england today is little greater than in the 17th century. there are few signs of this pattern having improved over recent decades. a report last year by
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was in turn a major factor in precipitating the stock market crash. this interpretation of the events of the late 1920s is shared by the most knowledgeable students of the period, including keynes, friedman and schwartz, and other leading scholars of both the depression era and today. these and subsequent data are from board of governors ( 1943 ). monetary tightening was also motivated by concerns about outflows of gold to france, which had recently stabilized its currency ; see for example hamilton ( 1987 ). john maynard keynes ( 1930, p. 196 ), writing at the time, was quite explicit : β nevertheless the high market - rate of interest which, prior to the collapse, the federal reserve system, in their effort to control the enthusiasm of the speculative crowd, caused to be enforced in the united states - and, as a result of the sympathetic self - protective action, in the rest of the world - played an essential role in bringing about the rapid collapse... thus i attribute the slump of 1930 primarily to the deterrent effects on investment of the long period of dear money which preceded the stock - market collapse, and only secondarily to the collapse itself. β the early monetarist lauchlin currie ( 1934 ) expressed similar views. more recently, milton friedman and anna schwartz, in their monumental study of monetary policy in the united states, ( 1963, p. 290 ) wrote : β nonetheless, there is no doubt that the desire to curb the stock market boom was the major if not dominating factor in [ federal ] reserve actions during 1928 and 1929... in the event [ the fed ] followed a policy which was too easy to break the speculative boom, yet too tight to promote healthy economic growth. in our view, the board should not have made itself an arbiter of security speculation or values and should have paid no direct attention to the stock market boom, any more than it did to the earlier florida land boom. β in his classic study of the stock market crash of 1929, economic historian eugene white came to similar conclusions. he wrote ( 1990, p. 179 ), β fearful of financial and economic dislocations, the federal reserve tried to restrain speculation first by direct pressure [ that is, on the banks ] and then by raising interest rates. these efforts had no discernible effect on the boom. it did however produce a general rise in interest rates that slowed the american economy and induced foreign central banks [ who were constrained by gold standard
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or, alternatively, whether they only exist on paper. although i recognize that many other countries do not conduct on - site examinations for legal and other reasons, the federal reserve concurs with the position taken by the basle committee β s core principles that it is important for supervisors to perform some on - site supervision. ii. need for sound accounting and financial transparency the federal reserve believes that sound accounting and transparent financial information is a fundamental pillar of a strong banking - - and, indeed, financial - - system. transparency is essential for the market to be able to make decisions on an informed basis. the arms - length negotiations of informed investors and issuing banks provide the strongest market basis for the issuance and pricing of equity and debt securities, as well as loans. banking supervisors should strongly advocate transparency to aid effective supervision and market discipline. indeed, they can encourage the process directly through appropriate regulatory reporting requirements and even making all or part of those reports public. it is important for governments to allow market forces to reward prudent behavior and penalize excessive risk - taking. sound, well - managed firms can benefit if better disclosure enables them to obtain funds at risk premiums that accurately reflect lower risk profiles. inadequate financial disclosure, on the other hand, could penalize well - managed firms, or even countries, if market participants do not trust their ability to assess firms β or countries β fundamental financial strength. regulatory structures that overly protect banks from market forces, or that allow lax accounting and disclosure to disguise firms β financial problems, remove market discipline on banks and permit them to operate less efficiently. deposit insurance systems and the public safety net are examples of regulatory interference with market forces, despite their public benefit. they create a moral hazard by allowing institutions to take on what might be excessive risk without proportional fear that their ability to raise funds at favorable rates will be impaired. this is illustrated by the costly us savings and loan crisis of the 1980s. lax accounting and capital standards allowed economically insolvent institutions to continue operating and attracting insured deposits at attractive rates because the deposits were government insured. this, in turn, delayed government and public recognition of the scope of the problem and tremendously increased the cost of its resolution to the deposit insurance system and the american taxpayer. to be credible to global investors, accounting standards should be established by independent professional organizations and enforced by a combination of market discipline and national oversight authorities. particular to banking and the credibility of banks β financial statements is the establishment of prudent levels
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our requirements with this global baseline in order to build consistency and reduce greenwashing risks. in terms of green definition, we are developing a local green classification framework to align with the common ground taxonomy to provide clarity to the market. secondly, on data and capacity. data are essential for a robust sustainable finance ecosystem as they form the basis for accurate risk assessment and investment decisions. to this end, the casg has launched a repository which serves as a 1 / 3 bis - central bankers'speeches centralised source of climate - related data to provide consistent datasets for the public. we have also developed a questionnaire together with the cdp, which seeks to facilitate sustainability reporting for non - listed companies. going forward, we hope to close more data gaps to facilitate effective climate risk management and reporting efforts in hong kong. we also strive to enhance the capacity of the financial industry. besides locally focused efforts such as the government's pilot green and sustainable finance capacity building support scheme, we also partner with various international organisations such as the international finance corporation ( ifc ) to contribute to the region's capacity building in green and sustainable finance, as well as exchange of knowledge and best practices. these efforts all contribute to enriching our ecosystem for supporting asia's efforts in tackling climate change. a third area of work is raising market awareness. here, the hkma plays two key roles. on the one hand, we assist the government in issuing green bonds to create demonstrative effect, with around us $ 24 billion equivalent worth of bonds issued so far, including the world's first tokenised government green bond. on the other hand, we lead by example as a responsible investor. as the manager of the exchange fund, we have set a target to achieve net - zero emissions for the investment portfolio by 2050. we started investing in green bonds seven years ago, and since then, we have been growing our esg and green assets across both public and private markets. so, what lies ahead of us? in my view, a pressing challenge for asia is transition. this region faces a steep transition pathway, with a real trade - off between economic development and sustainability. for some hard - to - abate sectors, which are also key economic players in this region, options to decarbonise may be limited. to address this challenge, we need to be pragmatic β we cannot simply cut off financing to " brown " or even " not so green " sectors right
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eddie yue : building back greener - addressing climate change in asia welcome remarks by mr eddie yue, chief executive of the hong kong monetary authority, at the centre for asian philanthropy and society ( caps ) conference " building back greener : addressing climate change in asia ", hong kong, 5 december 2023. * * * let me begin by thanking the centre for asian philanthropy and society for inviting me here today to speak at this event. today's event is about addressing climate change in asia. this is an urgent matter. asia's carbon emission accounts for around half of the global emissions. if we can move asia onto a more sustainable growth path, it would make a meaningful contribution towards the global effort in addressing climate change. at the same time, this is also an effort that requires substantial investment. based on market estimates, some us $ 66 trillion over the next three decades is needed. china alone will require more than 100 trillion yuan. such substantial funding need cannot be met by the public sector alone. this is where climate finance comes in, to mobilise private capital to help fund climate actions. hong kong as an international financial centre and a green finance hub is wellpositioned to harness the power of finance to support asia's efforts in tackling climate change. we are the leading arranging hub for green and sustainable bond issuances in asia, capturing more than one third of the region's issuances in 2022. last year, over us $ 80 billion worth of green and sustainable bonds and loans were issued in hong kong, representing a growth of more than six times in just two years. the hkma, its fellow regulators and government agencies work hand - in - hand under the green and sustainable finance cross - agency steering group ( casg ) to further enhance the vibrancy and competitiveness of the green and sustainable finance ecosystem in hong kong. our work revolves around three key areas β standards, data and capacity, as well as awareness. first, on standards. having clear and consistent standards could enhance comparability and boosts investor confidence, which in turn supports the scaling of sustainable finance. in terms of sustainability disclosures, hong kong aims to align with global frameworks. for example, we are the first asian jurisdiction mandating climate - related disclosure across relevant sectors to specifically align with recommendations of the task force on climate - related financial disclosures by 2025. with the recent launch of the issb sustainability disclosure standards, we are also aligning
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christine lagarde : lessons from ljubljana in uncertain times speech by ms christine lagarde, president of the european central bank, at the official dinner of bank of slovenia, ljubljana, 16 october 2024. * * * it is a pleasure to be here this evening. not far from here, tucked away in the national and university library, lie copies of the abecedarium and the catechism. these two texts, written by the religious reformer primoz trubar in 1550, were the first ever books to be printed in slovenian. 1 at a time when german was the language of the ruling classes, trubar's pioneering act was fundamental in helping to establish the national identity of slovenians. 2 today, his portrait graces the β¬1 coin in slovenia, framed by the famous words found in the catechism, " stati inu obstati " β " to stand and withstand ". 3 it is telling that both books β one a primer for the slovenian language, the other guidelines for religious observance β were designed to teach, for there is much that europe can learn from slovenia in the uncertain world we now face. the global order we knew is fading. open trade is being replaced with fragmented trade, multilateral rules with state - sponsored competition and stable geopolitics with conflict. europe had invested considerably in the old order, so this transition is challenging for us. as the most open of the major economies, we are more exposed than others. so, in this new landscape, we too must learn " to stand and withstand ". and we can do so by drawing on two valuable lessons from ljubljana. opportunity in times of uncertainty the first lesson is that uncertainty can create opportunity. while many in europe are anxious about the future, slovenians are no strangers to uncertainty. within a single generation, slovenia made a success of the extraordinarily difficult transition from a planned economy to a market economy. policymakers defied the odds by implementing tough structural reforms to first join the eu and, later, the euro area. today, slovenia is a success story. it is a developed, stable and high - income economy, with the highest gdp per capita at purchasing power parity of central and eastern european countries ( ceecs ). 1 / 4 bis - central bankers'speeches the nation's success owes much to the creativity and vigour of its people and their innate ability to seize economic turning points and transform them
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into opportunities. for example, when slovenia joined the eu, it was exposed to greater levels of competition from other member states in the economic bloc. but slovenia quickly capitalised on its skilled workforce to develop a new business model based on deep integration in the single market. today, every single car produced in europe has at least one component that is made in slovenia. 4 for europe, the changes in the global economy today represent a similar turning point. but if we approach it with the right spirit, i believe it can be an opportunity for renewal. a less favourable global economy can push us to complete our domestic market. fiercer foreign competition can encourage us to develop new technologies. more volatile geopolitics can drive us to become more energy secure and self - sufficient in our supply chains. for slovenia, the transformation of the automotive supply chain will be a particular challenge. but the economy is already adapting. for example, in july this year slovenia secured a major investment in domestic electric vehicle production. 5 for many slovenians, striding into an unpredictable future may seem like second nature. one of your most famous paintings, " the sower ", hangs on display here at the national gallery. depicting an agricultural labourer at the crack of dawn hard at work sowing seeds in a field, the painting represents slovenians'resolute determination in the face of uncertainty. the rest of us in europe will need to draw on this example in the uncertain times ahead. if we do so, we can also turn uncertainty into opportunity. the importance of sharing the benefits of change the second lesson from slovenia is that the benefits of change can β and should β be more widely shared. the path of renewal for europe is inescapably linked with new technology, especially digitalisation. but new technologies can sometimes lead to uneven labour market outcomes. slovenia has undergone remarkable technological change over the past 20 years. today, the country's level of digital development is 7 % above the ceec average and it can compete with some of the most digitally developed eu countries in certain areas. 6 2 / 4 bis - central bankers'speeches yet slovenia's gini coefficient β a measure of income inequality β is the second lowest in the oecd. 7 the country also benefits from high levels of gender equality. female labour force participation is higher than the eu average and nearly equal to that of men. many in europe are worried about the challenges ahead, such as the effects of artificial intelligence on social inclusion.
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close linkage to the economy as it directs the overall intermediation function towards economic production and wealth creation. this therefore requires the continuous development of financial products and services that manifests the value propositions of islamic finance. in providing the comprehensive range of the whole spectrum of financial products and services that are in accordance with these principles, islamic finance has been able to provide the total financial solution to consumers and businesses. the recent growth of islamic finance has been fuelled by a sustained phase of innovation. the scope of financial business has also increased in sophistication, particularly in the areas of private equity, project finance, sukuk origination as well as fund and wealth management. to sustain this trend, further in - depth applied research is needed to develop more financial products that create such links with the real economy in terms of the operating models, risk management and supporting infrastructure. the second value proposition of islamic finance lies in its merit as a potent tool for enhancing financial inclusion and for being beneficial to all members of society. its immense potential in advancing social - economic development is mirrored by the continuing efforts to introduce islamic finance offerings in emerging economies, particularly in asia, the middle east and bis central bankers β speeches african nations in recent years. in bringing unserved communities into the economic mainstream through the financial intermediation process, it can contribute towards poverty alleviation, job creation and more equitable economic growth. a recent study has however revealed that, despite being a promising financial segment, the availability of microfinance in muslim - majority economies is either non - existent or still at very early stages. islamic financing instruments currently comprise only a small fraction of microfinance business in the organisation of islamic cooperation ( oic ) countries. while there are success stories on the application of islamic finance principles in microfinance programs, there is potential to have better models for islamic microfinance. in addition, it should also integrate with other financial products such as microtakaful and other social welfare tools such as waqf to create a viable and impactful microfinance initiative. there are also immense opportunities for islamic finance to leverage on the productive potential of small medium enterprises ( smes ) through greater application of equity - based structures in such financing structures. there is seemingly a natural fit between islamic finance and smes financing in that both strongly promote entrepreneurship and value - creating activities. the third value proposition of islamic finance refers to its emergence as new vehicle in bridging economies and contributing to increasing
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to see ourselves as a single economy our economic and corporate rules and legislation will need to be more closely harmonised. in a sense, we are fortunate, in that the basis of our system is british β though in recent years many countries have modelled themselves on canadian legislation - that is, the english - speaking caribbean. however, harmonisation within the french and spanish - speaking caribbean will be a little more complex. the implications of the csme for employers as human resource professionals are many. it will be important that hr departments work within their organisations to ensure that high standards are set and that excellence is rewarded, for it is through this process that the good candidates show their worth and the entire level of performance is lifted. rewarding mediocrity in the same way that we reward high performance, breeds complacency and leads to low levels of productivity. we have to keep on lifting the bar so that employees know what is expected of them. in this way, our workforce will be able to hold its own and retain their jobs against the competition in the face of free movement of labour. it is a well - known fact that those who emigrate are usually those who are willing to work hard. barbadians must be aware of this, and instead of trying to keep them out, they must be prepared to work harder. i take the opportunity here to speak of training. in the context of csme, our training must be futuristic. we need to look not only at where our firms are today, but where they wish to be and how they get there. if productivity requirements mean greater state - of - the - art equipment, then we must train persons in these fields. i constantly say that we are technologically challenged. when the high - tech gadgets which we buy fail β there seem to be a few people who can fix them. hr trainers must therefore be conscious of the training requirements which will make us globally ready β if we are globally ready we will be csme ready. we will need to use the internet more, use journals - find the right areas where training is being delivered, and encourage investment in training. this is the one sure way in which our labour force can be prepared to compete in csme. if you aim for the skies you may land in the treetops. aim or the treetops you not may get off the ground. i am aware that employers and especially human resource professional will wish to focus on the issue of culture assimilation within enterprises, and
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sharon donnery : welcoming # irelandeu50 and commissioner mairead mcguinness opening remarks by ms sharon donnery, deputy governor of the central bank of ireland, before a recording of the european movement ireland's podcast series # irelandeu50, dublin, 24 april 2023. * * * good evening. a dhaoine uasile, agus a chairde go leir, is mor an pleisiuir dom a bheith in bhur dteannta annocht agus failte isteach go leirchuig banc ceannais na heireann. ba mhaith liom failte speisialta a thabhairt do choimisineir mairead mcguinness ata anseo inniu chun caint linn. it is a pleasure to be able to welcome you all here tonight to the central bank of ireland's campus on behalf of the european commission representation in ireland, in co - operation with european movement ireland for an evening with commissioner mairead mcguinness to mark and celebrate the 50th anniversary of ireland's european union accession. we are joined by representatives from embassies across the european union, my own colleagues from the central bank as well as guests of the european commission representation and european movement ireland from across ireland's business and public sectors. and while we will have another occasion to mark its launch, the bank will also commemorate the importance of our european union accession through the launch of a special commemorative coin later this year. entry into the european community, and later the european union, has had a profound effect on the development and modernisation of the irish economy and wider society over the last 50 years. one of the most visible effects β and closest to the work of the central bank β has been in the financial sector. ensuring the free movement of goods, services, capital and people through membership of the single market has encouraged the irish financial sector to grow enormously over the decades, allowing us to far outperform in the global economy what would be expected of our relatively small population. our ability to trade freely in financial services with other nations in the european union and beyond has in turn opened up many further business and economic opportunities for the country. global financial services firms from international banks, investment managers and insurers are domiciled here. 1 / 2 bis - central bankers'speeches the insurance market in ireland is the sixth largest in the european union
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##1 and we host the third biggest funds jurisdiction in the world and the second biggest funds jurisdiction in europe2. global regulatory and supervisory standards are critical for effective oversight of the sector. this means we have very close financial relationships across the european union. we must lead and influence regulatory policy at both european and global levels. in this context, it gives me enormous pleasure to welcome european commissioner for financial stability, financial services and capital markets union, mairead mcguinness, who will be speaking shortly as the highlight of the evening. ireland and indeed europe is fortunate to have such a strong and influential leader at the helm of the financial services portfolio. in the uncertain and complex economic environment that has prevailed over the last few years, ireland's membership in the european union and its institutions has been a critical to the development of our economy and society. as we enter our sixth decade as a member of this union, i expect the bonds we have with our european peers to deepen further and the impact of our membership in the european union to continue to have a hugely positive impact on our economy and society. thank you for listening and i hope you will enjoy the discussion with commissioner mcguinness. i will now hand you over to the head of the european commission representation of ireland, barbara nolan to open proceedings. barbara, over to you. 1 insurance ireland 2 irish funds 2 / 2 bis - central bankers'speeches
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interests are at risk. banking in this country is, in most areas, highly competitive, and the industry has proven itself to be highly resilient. to survive and be effective, banks must be willing and able to take risk. revenue, shareholder equity, and if necessary the bank insurance fund are there to deal with mistakes. put differently, while public policy needs to limit the financial and social costs of bank failures, we should not view every bank failure as a supervisory or regulatory failure. it is not our role to prevent all failures, let alone to guard against every earnings decline. indeed, to do our jobs well, we should understand that the essential economic function of banks is to take risk, and that means mistakes will sometimes be made. a perfectly safe bank, holding a portfolio of treasury bills, is not doing the economy or its shareholders any good. the experience of the early 1990s illustrates the process of recovery after a period of excessive risktaking. a decade ago, many regional and money center banks were reeling from excessive commercial real estate lending and still - substantial holdings of weak foreign country loans. meanwhile, many agricultural banks were only then recovering from their own bout with problem credits that had proved too heavy for hundreds of other banks to bear. the fdic was reporting that the bank insurance fund was nearly drained, while the general accounting office was saying that, in substance, it already was. banks nationwide were tightening their credit standards and cutting access to credit for many firms, producing a β credit crunch. β it was clear that change was needed. the industry needed to resolve its problems, improve its risk management practices, and construct new strategies that would provide more stability in lending markets and more competitive, long - term returns to investors. for their part, bank supervisors needed to pay more attention to emerging weaknesses and deal with them more quickly. solving the immediate problem of weak asset quality and improving the industry β s overall profitability was, of course, the first priority, and fortunately that was accomplished sooner than anyone expected. by the mid - 1990s, u. s. banks were enjoying stronger portfolios and higher earnings than they had seen in recent memory, attesting to the underlying strength and resiliency of our banking system. during the past decade, the industry β s profitability has arguably climbed to its highest level ever, as large banks finally joined small ones in achieving annual returns on average assets in excess of 1 percent. to be sure, no one wants to repeat the experience of the
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, what and how the funds were spent ( according to budget or if there is a case of misuse of funds ). finally, the society can be the vehicle, at the least, for us get to know each other in our profession and exchange views and ideas, and socialize. networking is an important element of every professional β s working life today. i as the governor of the central bank of png welcome very much the birth of this society and encourage all who are eligible to become members. i have asked all my economics graduate staff to join. the bank supports this course as evident by it being the very first entity to make a financial donation to the society, under the former governor. this fund has enabled the society to set itself up and eventually arrange this launching. i encourage other employers of economists to assist the society in its endeavours so it can grow and meet its strategic objectives, and for the enhancement of the profession in the country. i note and appreciate all the efforts by the four interim executives in initiating and ensuring the birth of this society through the formal incorporation of the society by ipa under association incorporation act on 19th december 2007 and in organizing the launching. it has taken this long to have the society formally launched but the important thing is the moment has arrived and it is happening now. thank you very much for that. i am also pleased to note that the society will hold its first full meeting in one month time to elect the first full office bearers. i encourage all you potential members to pay up your membership fees so you can be able to vote on that day and support the society to see it mature through time from this birth. let us take pride in our profession and in this moment β the launching of the ekonomic society of papua new guinea. with all these words, i hereby declare that the ekonomic society of papua new guinea is launched. thank you.
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policy. this analysis provides a useful case study on the use of inflation targeting in a small open economy, like new zealand β s. an analysis of the drivers of the business cycle was published in the bank β s march bulletin while a discussion of monetary policy over the business cycle will be published in the bank β s june bulletin in a few weeks. in summary, that analysis notes that the new zealand β s economy expanded from 1998 to 2007 and then had a six quarter recession in 2008 β 09. from 1998 to 2007 there were a number of significant shocks that determined the shape of the business cycle ( figure 2 ). first, there was a strong and unexpected increase in population growth from net immigration in 2002 / 03. second, there was a significant boost to the economy from a rising terms of trade from 2000, which accelerated late in the period. third, oil prices roughly doubled from mid2007 to mid - 2008. fourth, government spending rose rapidly from 2005. this came at a time of pre - existing excess demand in the economy. in new zealand, the inflation targeting framework is founded on the reserve bank act 1989 ( the act ) and the policy targets agreement ( pta ). the act makes price stability the primary function of monetary policy and gives the reserve bank independence in operating monetary policy, subject to an agreement between the minister of finance and the governor ( the sole decision maker ) specifying the functional target. the pta defines price stability in the form of an inflation target, currently future annual cpi inflation β... between 1 per cent and 3 per cent on average over the medium term β. the pta says that in pursuing price stability monetary policy should β seek to avoid unnecessary instability in output, interest rates and the exchange rate β. for details of the dating for new zealand β s business cycles see hall, v b and c j mcdermott ( 2009 ) β the new zealand business cycle β econometric theory, 25, 1050 β 1069. bis central bankers β speeches figure 2 net permanent and long - term migration real dubai oil prices ( 1998 prices ) source : statistics new zealand source : reuters, haver analytics, rbnz calculation terms of trade government spending ( consumption plus investment, percent of annual gdp ) source : statistics new zealand source : statistics new zealand, rbnz calculations in setting monetary policy we had to take a view both on how these shocks would unfold and how they might change the inflationary pressure in the economy, as summarised
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. and k. kiyota ( 2006 ), β exports, fdi, and productivity : dynamic evidence from japanese firms β, review of world economics, 142 ( 4 ), pp. 695 β 719 ; and arratibel, o., f. heinz, r. martin, m. przybyla, l. rawdanowicz, r. serafini and t. zumer ( 2007 ), β determinants of growth in the central and eastern european eu member states β a production function approach β, ecb occasional paper no 61. 10 see, for example, kee, h. l. ( 2015 ), β local intermediate inputs and the shared supplier spillovers of foreign direct investment β, journal of development economics, vol. 112, pp. 56 β 71. 14 / 16 bis central bankers'speeches 11 see, for example, bas, m. and v. strauss - kahn ( 2014 ), β does importing more inputs raise exports? firm - level evidence from france β, review of world economics, vol. 150 ( 2 ), pp. 241 β 275 ; and bustos, p. ( 2011 ), β trade liberalization, exports, and technology upgrading : evidence on the impact of mercosur on argentinian firms β, american economic review, vol. 101, no 1, pp. 304 β 340. 12 see chiacchio, f., k. gradeva and p. lopez - garcia ( 2018 ), β the post - crisis tfp growth slowdown in cee countries : exploring the role of global value chains β, ecb working paper no 2143. this research also suggests that sectoral tfp growth in cee countries depends roughly equally on technology creation at the global value chain frontier and on the ability of national firms to absorb the new technology. 13 see cΕure, b. ( 2018 ), β trade as an engine of growth : prospects and lessons for europe β, speech at the nbrm high level international conference on monetary policy and asset management, skopje, 16 february. 14 see also cΕure, b. ( 2018 ), β monetary policy and climate change β, speech at a conference on β scaling up green finance : the role of central banks β, organised by the network for greening the financial system, the deutsche bundesbank and the council on economic policies, berlin, 8 november. 15 see also united nations conference on trade
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common european objective of creating a truly transparent and integrated european financial market in line with the single market agenda. the eurosystem will continue to play an active role in the payment industry by offering several types of service and infrastructure to the financial market. it has proven that it is capable of managing large - scale facilities and now provides a borderless core infrastructure for real - time settlement in central bank money with target 2. furthermore, a medium - term project for the next generation of collateral management has been launched under the name of β collateral central bank management β ( ccbm2 ), the objective of which is to consolidate and enhance the efficiency of the eurosystem β s collateral management systems to the benefit of eligible counterparties. currently, there is a public consultation on the draft ccbm2 user requirements under way, in which market participants have been invited to provide their comments by 5 may 2008. let me also elaborate on the new target2 securities ( t2s ) project. the t2s project is the eurosystem β s proposal for making cross - border securities settlement transactions in central bank money as secure, efficient and cheap as domestic settlement transactions are today. t2s will build on and benefit from the newly released target2 system thereby combining cash and securities settlements β in real time β within a single european infrastructure. this will be europe β s single β pipeline β settlement system, a system similar to those that have already been implemented by other economic areas. i firmly believe that t2s will contribute to speeding up market integration and fostering the necessary competition in europe, to the benefit of financial participants and the citizens of europe. the t2s project will act as a driver to remove even more barriers of the kind already identified by the giovannini group, as well as help users to identify the irreducible costs of unresolved barriers in the new efficient borderless settlement environment. this project will also advance the european harmonisation process, creating opportunities for further cost savings and allowing market participants to easily select and choose post - trade partners irrespective of their location within the single market. the impact of t2s on harmonisation is already being felt, building on the valuable work carried out by the csds. the harmonisation process goes far beyond pure settlement activities and will increase the pressure for swift action to harmonise practices, especially in relation to corporate activities, taxes, laws and regulations. the dynamic and second - round effects of t2s will pass through the
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gertrude tumpel - gugerell : high - level panel : improving the efficiency and integration of post - trading arrangements in europe speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the joint ecb / european commission conference β the safety and efficiency of post - trading arrangements in europe β, frankfurt am main, 21 - 22 april 2008. * * * ladies and gentlemen, i am delighted to open the high level panel on improving the efficiency and integration of post - trading arrangements in europe and to share with you our visions for a more integrated financial post trading market. queen victoria once said : β change? why do we need change? [ things are quite bad enough as they are ] β. well, a few years ago the post trading community was facing the question whether to follow queen victoria and not to change the post trading environment. so i am delighted when i look at today β s post trading environment to see a dynamic change environment with a lot of activity and initiative. an important question β that we will address in this panel β is how we can further shape and contribute to the future post trading environment. as members of the panel, we have the pleasure of welcoming mr eddy wymeersch, chairman of the european committee of securities regulators ( cesr ), ms pervenche beres, member of the european parliament and chairperson of the committee on economic and monetary affairs of the european parliament and mr jeffrey tessler, chief executive officer of clearstream international. i am especially happy to open this panel because the post - trading segment of the financial market plays a particularly important role in ensuring the safety and efficiency of allocating and attracting funds within a globalised financial market. to put this into perspective, the securities trading volumes for the eu stood at approximately β¬150 trillion in 2006, as compared with β¬196 trillion in the united states and β¬72 trillion in japan, and keeping in mind at the same time that the settlement volumes could be as much as three times as high. in the light of these significant and increasing volumes, it is evident that today β s challenges are best tackled by involving market participants in the definition of concerted efforts to foster innovative and operative actions to enhance the safeguarding and integration of the currently too fragmented european post - trading market. the eurosystem takes its responsibility and is accountable for acting as a market operator, facilitator and catalyst for new initiatives as part of the
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has affirmed its commitment to the european union and its single currency union on numerous occasions. and the leadership is working harder than ever to achieve greater coordination in areas such as fiscal policy. a more robust and resilient european union would be a welcome development for the united states. three recent developments are especially encouraging in that regard. first, liquidity concerns have eased significantly following the european central bank β s ( ecb ) long - term refinancing operations in december and february. through this program, the ecb provides three - year loans to european banks at low rates, accepting a wide array of collateral in return. hundreds of banks accessed the program in each operation, and the ecb lent nearly β¬1 trillion in total. as a result, the cost of funding throughout europe has bis central bankers β speeches declined since the program began, the euro has stabilized, and the sovereign bond market has improved. changes in the ecb β s collateral rules and reserve requirements have also had a positive impact. second, earlier this month, the greek government worked with european leaders and its largest creditors to restructure the bulk of its β¬206 billion of outstanding privately - held bonds. this not only reduced greece β s total indebtedness, it helped calm persistent worries that a disorderly greek default could become the trigger for a global economic crisis. shortly after the debt restructuring, the eu approved a β¬130 billion aid package for greece. together, these measures will provide key support to greek leaders as they pursue the difficult fiscal reforms that are essential over the long term. third, leaders in most euro area countries have approved a new treaty designed to increase fiscal coordination. the new rules already appear to be making a difference. both spain and italy recently completed 2012 budgets that move their deficits closer to eu targets. further, spain and italy took their fiscal actions in close consultation with finance ministers from other countries in the euro area, demonstrating a healthy ability to work together. while difficult work still lies ahead, countries in the euro area have made meaningful progress toward achieving long - term fiscal sustainability. looking to the future, the difficult work that remains also presents special risks β both for europe and the united states. if europe fails to chart an effective course forward, this could have a number of negative implications here. in particular, there are three areas of potential risk that i would like to highlight for the subcommittee today. first, if economic conditions in europe were to weaken significantly, demand for u. s
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dimitar bogov : promoting macedonia β s cultural and historical values opening speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the opening of the exhibition titled β wall paintings from the episcopal basilica in stobi β on the occasion of the international museum day, skopje, 18 may 2012. * * * honorable minister kancheska - milevska, your excellency, ambassador wohlers, distinguished guests, this year we celebrate the twentieth anniversary of the monetary independence of the republic of macedonia, recalling with respect the period of creation of the macedonian denar and the processes that led to the proclamation of the monetary sovereignty of our country on april 26, 1992. undoubtedly, this is an opportunity when it is necessary to say that in the past twenty years, the main carrier of these processes β the national bank of the republic of macedonia, with all its capacity has adequately served the new democratic society, as an institution that is responsible for maintaining the stability of the macedonian national currency and its monetary and financial system. besides its primary activity, in the past 10 years, our institution has sought to continuously and systematically contribute to the preservation, care and promotion of cultural and historical values of macedonia. as it is actually typical for most central banks in the world, through the work of its museum, the national bank has gradually established itself as an important cultural treasury of the numismatic cultural legacy of civilizations that existed in this region, thus giving its contribution to the enrichment of the macedonian society with permanent and irreplaceable values ; those without which common knowledge is doomed to poverty, without which we would not be able to recognize and understand the universal values of civilization that have been mounting for centuries in the long civilization pace of human existence. the national bank of the republic of macedonia, together with the national institution stobi, have decided to approach the macedonian public exactly on may 18th β the international museum day, jointly organizing this important exhibition, where for the first time an extremely valuable cultural heritage is presented to the public. it includes 19 unique fresco - fragments from the inner walls of the old episcopal basilica in stobi, dating from the 4th century bc, which the history of art considers an exclusivity of paramount importance, given that this kind of artistic creation is not present in the wider range of the european mainland. within the exhibition, the curators from the national institution stobi enabled us to closely look at the details of
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allocates project risks among participants. such risks should be well - mitigated at the outset to make projects bankable. thirdly, participation in infrastructure projects by banks would also be constrained by legal and prudential limits on the proportion of banks β lending as a share of their core capital. given the considerable financial outlays involved in infrastructure projects, commercial banks would need to enhance their capital base to participate in ppps while remaining compliant with regulatory requirements. finally, given the increased investments in infrastructure and the environmental implications, i do hope that the studies lined up for discussion in this conference will give consideration to the green economy ( green growth ) aspects. this proactive discussion by the kenyan banking industry will no doubt contribute towards adopting sustainable finance principles as per the commitments of the addis ababa financing for development summit earlier mentioned. in view of the large size, huge cost and complexity of infrastructure projects, i would urge banks and other financial institutions to build the requisite legal and technical capacities to evaluate the value for money of ppps relative to traditional asset classes. this will assist in identifying the potential risks and the risk mitigation to be put in place in advance before the commitments are undertaken. i take that the engagement you will have for the next two days will be an on - going conversation and the research work arising from this conference β s theme will inform future research in the area. i am optimistic that the banking industry will continue to play an important role in supporting the various sectors of the economy and in particular, the challenge to address the nation β s infrastructure gap. the central bank is committed to creating an enabling regulatory environment that facilitates the banking sector to effectively execute its intermediation function. with those remarks, it is my honour to declare the 4th kba annual banking research conference officially open. i wish you fruitful deliberations. thank you. bis central bankers β speeches
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especially the most needy, and writing a more exciting chapter in that history book. β i look forward to the deliberations and the outcomes over the next two days as we reimagine the future of the african banking sector. thank you!
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alberto g musalem : international spillovers and policies remarks by mr alberto g musalem, executive vice president of the integrated policy analysis group of the federal reserve bank of new york, at the people β s bank of chinafederal reserve bank of new york joint symposium, hangzhou, zhejiang, china, 15 mach 2016. * * * good morning. thank you for the opportunity to speak here in hangzhou about the important theme of international spillovers. by exchanging perspectives and experiences we can forge relationships and a shared understanding that can lead to better economic outcomes. i will focus mostly on the interaction of international spillovers with policy frameworks within and across countries. i will do this from the vantage point of a domestic economy experiencing foreign spillovers. i will then briefly turn to considerations from a u. s. perspective. as always, my remarks reflect my own views and not necessarily those of the federal reserve bank of new york, the federal open market committee ( fomc ), or the federal reserve system. 1 international spillovers encompass a broad topic with respect to their sources and channels. before narrowly focusing on monetary sources and associated channels, it seems appropriate to first take a broader view of the various sources. foreign spillovers can emanate from monetary, fiscal, regulatory, currency or trade policies. spillovers can also arise from endogenous productivity changes, from financial stability developments, and from a global financial cycle. 2 the mundell - fleming logic remains relevant for thinking about policy options of open economies. it provides lessons on channels of transmission, basic tradeoffs across objectives, and the effectiveness of policy responses. 3 the channels of macroeconomic and financial transmission among open and interdependent economies occur through the current account of the balance of payments, the capital account, or both. from the vantage point of the domestic economy, there are three main channels of transmission : the exchange rate ; the external demand ; and the interest rate or risk - premia channel. the last can be more broadly defined as the financial conditions channel. the intensity of transmission of spillovers will depend on the monetary policy, currency policy and the real and financial openness of the economy being affected by external developments. other relevant characteristics include the flexibility of labor and product markets ; the depth, safety and soundness of the financial system ; and the economy β s position as an international creditor or debtor. the mundell - fleming framework suggests that a country with a high degree of capital mobility and
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. 538 ; and watch for two forthcoming liberty street economics blog posts on january 30 and february 1, 2012. bis central bankers β speeches
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interest in its dual role as regulator and shareholder. towards the end of this presentation i shall briefly return to the question of how we intend to set about disposing of this portfolio. before i do that, i should first like to update you on the state of our economy as the painful adjustment process draws to a close and as clear signs of economic recovery emerge. i should also like to address some of the concerns β unnecessary ones, in my view β that still seem to be clouding the view of hong kong from outside. the recovery those of you who heard me in june last year may well be a little sceptical about any advice from me on the outlook for the hong kong economy. although i was under no illusion about the less prosperous times that lay ahead, like many at the time i was perhaps a little too sanguine in my assessment about the impact that the asian crisis would have on hong kong. however, the temptation now for many is to go to the other extreme : to be very cautious in making predictions about the future and to acknowledge signs of recovery only very reluctantly. this is understandable when we are still only just moving out of our sharpest recession on record. yet even the pessimists would now, i think, acknowledge that the storm signals are down, the clouds are thinning out, and there are shafts of sunlight in the distance. i speak only metaphorically, of course. as those of you who have been in hong kong recently will know, this has been a very stormy summer from a meteorological point of view : we have just had the worst typhoon in sixteen years and the wettest typhoon since records began more than a hundred years ago. economically, the most recent figures suggest that our wet and windy summer has brought with it a distinct turn for the better. chart 1 gross domestic product ( % ) - 2 - 4 year - on - year change - 6 quarter - on - quarter change, seasonally adjusted - 8 q1 / q2 q3 q4 q1 / q2 q3 q4 q1 / q2 q3 q4 q1 / q2 β’ gdp β a rebound in the second quarter ( in excess of 3 %, quarter on quarter ) after six consecutive quarterly declines ( chart 1 ) chart 2 external trade ( hk $ bn ) ( % yoy ) overall trade balance imports of goods exports of goods - 5 - 7 - 10 - 14 - 15 - 21 - 20 - 28 - 25 - 35
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, cooperation and knowledge exchange. today we have the presence of 300 leaders from various sectors including finance, architecture, building and construction engineering, project management and consulting, project development and operation as well as professional services, many of you being the senior management of your leading organisations in the field. indeed, hong kong possesses a critical mass of financial professionals which can support the operations of aiib in areas such as project financing, bond issuance, investment, financial management and foreign exchange management. moreover, hong kong has expertise in project negotiation, works contracts preparation and management, international law as well as professional arbitration services, enabling us to take part in the planning, implementation and operation of such projects. the steadfast implementation of the belt and road initiative also creates opportunities for hong kong to make best use of its strengths as the global offshore rmb business hub and an aspiring infrastructure investment and financing platform. the setting up of iffo would provide a platform for pooling the efforts of investors, banks and the financial sector to offer comprehensive financial services for various infrastructure projects. 1 / 2 bis central bankers'speeches since the launch of iffo by the hkma in july 2016, work has progressed very quickly and significant progress has been made on all fronts. just last week, our list of partners expanded from 41 to 54, bringing in new additions from the insurance, banking and legal sectors, as well as international business council and corporation which are experts in the infrastructure development field. iffo is also an active participant at various industry forums promoting the use of hong kong β s platform for infrastructure investments and financing both locally and overseas. this morning, president jin will share with us his views on aiib β s operations, project planning and management. this seminar will be a useful platform for constructive dialogues among the financial industry, infrastructure - related business sectors, and aiib, to exchange views on the latest infrastructural development trends, and how we can harness the opportunities arising from the establishment and projects under aiib. i shall now hand over the time to president jin for his most anticipated speech. thank you. 2 / 2 bis central bankers'speeches
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tom alweendo : the exchange rate speech by mr tom alweendo, governor of the bank of namibia, during a breakfast meeting of the namibia economic society, windhoek, 17 august 2004. * * * i have been asked to talk to you this morning about β the exchange rate β and against my better judgment i agreed to do so. specifically, the question everyone is asking is whether it is not high time that the monetary authorities do something to depreciate the exchange rate through monetary policy operations. at the center of the argument for action to depreciate the exchange rate is the negative effect a high exchange rate has on the export sectors of the real sectors. at the risk of stating the obvious, let β s all establish and agreement that an exchange rate is a price of one currency in terms of another currency. therefore, like other prices, exchange rates are determined by the interaction of supply and demand. this interaction will sometimes results into a depreciation or appreciation of a currency. intervening in this process is in itself an interference with the free market concept, where the market is supposed to be efficient, guided by an invisible hand. i am, however, happy that there are now a number of market players who understand that the market is not always perfect and that there is sometimes a justifiable need to intervene in order to correct the market. in order for us to appreciate the exchange rate today, let us look at the movement in the exchange rate over the last fourteen years. in 1990, the average nad / us $ exchange rate was nad2. 59 and the average inflation was about 15 %. by 2000 the exchange rate has depreciated by more than 100 % to nad6. 87. in 2002 the exchange rate reached a record low of nad10. 52. during 2003 the exchange rate started to appreciate and most people were not expecting an appreciation, but were expecting depreciation. because of this mismatch in expectation and what transpired, the effect of the appreciating exchange rate is made to sound much worse than it really is. those who argue that the monetary authority should do something to depreciate the currency, suggest two methods. firstly they say that the central bank should reduce interest rate and secondly the central bank could buy us $. with the first method, the local currency will become less attractive and there will be less funds flowing into the local economy and hopefully this will translate into a weaker exchange rate. this
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practice. the code shall set out the banking industry β s key commitments and obligations to customers on standards of practice, disclosure and principles of conduct in relation to banking services. director of ceremonies, in terms of the best practices, the code shall provide that contract between the commercial banks and customers shall have a clear, plain and simple terms, for the understanding of which no special knowledge is required. a very good example to draw from is when president obama signed the new credit card bill of rights into law, he challenged the industry to create a simple, easy to understand credit card agreement that you β don β t need a law degree or a magnifying glass to understand. β this means eliminating provisions and confusing terminology used by lawyers for reasons of tradition or habit, replaces the legalistic with plain - language, and introduces information design to enhance readability and comprehension. it is thus the intention of the bank that contracts should be simple, short, and preferable designed to fit on one or two pages. the other key aspect of this code will be to enforce good lending practices by banks to avoid over - indebtedness. banks will, therefore, be expected to act in the best interest of its customers by ensuring that they know and understand the customer β s needs, only offer them products and services that are suitable to such needs, and provide them with information to enable them to make informed choices. the code will further require banks to have in place effective complaints handling procedures and appropriate timelines within which complaints should be dealt with. this also means that banks will be directed to be the first β port - of - call β to offer redress for customers, by having dedicated complaints desks to handle customer grievances. at this juncture i wish to inform you that the bank of namibia, together with the industry, will issue the said draft code of good banking practice, during the course of this year for public comments. therefore, director of ceremonies, i humbly request the audience present in this room to spend time and do justice to all consumer protection initiatives, which we bis central bankers β speeches all agree are close to our hearts by providing extensive comments to the bank on the draft consultative paper. director of ceremonies, ladies and gentlemen, the other initiative being pursued by both the bank of namibia and our sister regulator, the namibia financial institutions supervisory authority, is the establishment of financial services ombuds office, in terms of the draft financial institutions and markets bill. this office will be financed and
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the new... β as tennyson intoned in la morte d β arthur, and with foresight warned : β lest one good custom should corrupt the world. β there was once a time when we spoke of the promise of a stable state and an end to poverty. even development economics followed a set of well - established principles ; and 163 / 2009 banking never hit the headlines. now banking seems daily to be front page news. and over the last fortnight we at the bank of mauritius are contributing our fair bit as well. you know i β m not really one for conspiracy theories. but last year, when they made another james bond film, i was reminded of the advice of goldfinger to bond, in that eponymous thriller : β mr bond, they have a saying in chicago β once is happenstance ; twice is co - incidence ; the third time it β s enemy action. β obviously, we must not become paranoid and see enemies and conspirators everywhere. but, maybe we bankers here should be heeding such advice, don our flak jackets and reexamine, with our economic partners, what banking is about, and what its future role should be in the real world. what exactly is the business we are in? i think the crisis has given some useful pointers. as bankers, we are not in the business of making money : that is where we have gone astray, giving too much latitude to the young man in barings, or the young man in societe generale, or the army of bonus - seekers playing hard and fast with other peoples β money like leeson and kerviel. the business of banking is business. it is doing business with you, the operators in the real economy, to promote more business, and through that to secure economic and social welfare and sustainable development. the money is not an end in itself. the bottom line matters β¦ but so does the top line. that is why i have been keen to explore another model here which brings the money closer to the action in the real economy β islamic banking. some of you may know i was not here last week. a pity, because they tell me there was a bit of street theatre that i missed. last week, i was away in the gulf states, as for some time i have been concerned that the champion we were counting on to support our move in islamic banking, dubai, was looking a bit wobbly and weak at the knees.
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practices in the banks concerned and a lack of computerbased systems for screening for fraud. in particular, the rbi report was critical of the high proportion of large transactions in cash handled by the banks for these companies without this alerting them to the fraudulent activities. in addition, there had been strange events involving alterations in the status of the directors of the fraudulent companies, changes in bis central bankers β speeches company names which the banks had ignored, and no checks had been made on whether the companies had appropriate licences for the activities in which they were involved. the rbi report in its recommendations called for extension of the powers of the bank in line with those of the financial services commission under the financial services act of 2007. this would allow it to take legal proceeding against such fraudsters and to freeze their assets. the rbi report considered that β the quantum of financial penalties imposed by bom on banks is paltry and does not provide effective deterrence. there is a need to substantially increase the same. moreover, imposition of these penalties also should be disclosed in the public domain. β part of the radical improvement we are introducing is that the bank has made it mandatory for all financial institutions to put in place an internal whistleblowing policy. financial institutions have a special position of trust in the national economy, and employees working with them have an individual and collective responsibility regarding their conduct and practices. we believe that there should be a proper framework in place for people to report any irregularities or unethical practices within financial institutions where they work, without fear of recrimination. we have also extended our programme of customer education, our checks on hiring employees, and their in - service training to prevent ponzi schemes going undetected in the future. in addition, the bank has set up a market intelligence cell which has been mandated to collect information from formal and informal sources to help detect any existing or potential financial crime and fraud, and carry out investigations. in the wake of the ponzi scams and financial frauds, proposals were made to amend the existing memorandum of understanding between bank of mauritius and the financial services commission to include a framework for handling exigencies, such as the ponzi scams. we expect amendments to be agreed and implemented in 2014. could these frauds have been prevented? there is no easy answer to this question. however, lessons have been learnt. i believe that one key way of preventing the recurrence of ponzi schemes is through financial literacy programmes
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thomas jordan : central bank independence since the financial crisis - the swiss perspective summary of a speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the cfs presidential lectures, goethe university, frankfurt am main, 9 november 2017. * * * the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). the financial crisis presented central banks with significant challenges. they resorted to unconventional monetary policy instruments and expanded their field of operations. as a result, central banks have faced growing criticism. in particular, the question has arisen as to whether their independence is still justified. the experience of the swiss national bank ( snb ) since the financial crisis has shown that independence continues to be sensible and necessary ; central banks can best fulfil their mandate of ensuring price stability and contributing to the stability of the financial system if they are protected from political pressure. central bank independence will only endure as long as politicians and the public are convinced of its benefits. to this end, central banks must fulfil their mandate to the best of their knowledge and ability, while retaining a sense of proportion and a long - term perspective when implementing measures. not every short - term deviation from an objective requires an activist response. moreover, central banks must be conscious of their limits and avoid an accumulation of tasks. for an independent central bank to be perceived as legitimate in a democracy, it must be granted a clear mandate against which its performance can be assessed. however, the environment in which central banks operate is highly complex, and conditions can change rapidly. for this reason, mandates usually only sketch out a framework for central banks β operations. this gives them much - needed flexibility in difficult situations. as a counterweight to its independence, a central bank has a duty to report on its actions, and the results. indeed, the snb has regularly provided detailed reports on matters relating to both monetary policy and financial stability. for example, it has explained the rationale behind deciding to discontinue the minimum exchange rate or introduce the negative interest rate, and how these measures have helped it to fulfil its mandate. as regards financial stability, the fact that macroprudential instruments often have powerful distribution effects speaks against handing over the entire responsibility for such instruments to the central bank. in contrast to monetary policy, these measures are sometimes targeted at specific sectors and groups, and thus also have fiscal implications. in switzerland, macropr
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seen in this perspective, the growing complexity of financial regulation is in itself a source of concern. as andy noted, under basel i a bank could calculate its capital requirements with pen and paper. that is inconceivable with the current rules. since the establishment of basel ii, which allowed banks to compute their own capital requirements through internal models, the complexity and granularity of such models has exploded. model complexity and uncertainty, coupled with shortseries of data, make calibration difficult and robustness questionable. an issue the framers of basel ii did not, in my opinion, get quite right concerns incentives. they thought that using the banks β own models to compute capital requirements would align banks β and supervisors β incentives, and improve both the banks β risk management practices and the risk sensitivity of prudential requirements. such a mechanism does exist, but it is of the second order. the first - order incentive for bank model - builders is to save costly equity capital. it would be unfair to say that regulators at the time were blind to this fact ; they just thought that supervisory validation would easily fend off abuse. well, maybe, but not easily. the dark side of granularity and sophistication are complexity and opaqueness, which make validation a daunting task. despite all supervisory activity, in fact, the regulatory risk density of banks β assets came to vary wildly across banks. it was not always obvious that variation in risk density related to variation in actual risk. 13 plus a few minor islands. haldane ag, madouros v, the dog and the frisbee, jackson hole symposium, 2012. haldane ag, multi - polar regulation, international journal of central banking 11 ( 3 ), june 2015. italian irb banks have typically been in the high range of risk density. this depends partly on the fact that their business models are largely oriented to credit risk, which especially under basel ii was penalised vis - a - vis market risk in terms of risk weights ; and partly on the liberal use of output floors in the bank of italy β s supervisory practices, already under basel ii. the use of output floors, set at adequately high levels, has been recognized as a useful tool to address the variability in the capital requirements for credit risk. see, e. g., basel committee on banking supervision, reducing variation in credit risk - weighted assets β constraints on the use of internal model approaches, march 2016. as i
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of policy committees, but it can make it challenging to arrive at a clear, consistent public explanation of a policy decision, because policymakers can arrive at the same policy position based on different rationales. good communication must also take into account uncertainty. understandably, market participants want to know what is going to happen next β to the economy and to policy. but we cannot say more than we know, and we should strive to avoid giving people the impression that we know more than we do. i'll touch on a number of these themes as i review recent federal reserve communications. before i do, i have one last comment : our communication strategy is a work in process β we are constantly looking for additional steps that could reasonably be expected to improve public understanding and policy effectiveness. however, we move slowly in changing what these views are my own and not necessarily those of my colleagues on the federal open market committee. we say in part because ill - conceived communication policy has the power to harm the economy, and, even if that harm were to be realized, the policy could be difficult to alter. enhanced economic projections as already noted, i believe that the additional information in the enhanced projections the fomc announced in november should be a substantial step forward in increasing public understanding of monetary policy decisions. 2 the enhanced projections give more information about the fomc's medium - term outlook for the economy. that's particularly important, because the lags in the effect of policy on economic activity and prices mean that policy decisions are necessarily based on a view of the likely path for the economy over several years, relative to the federal reserve's legislated objectives of maximum employment and stable prices. in that regard, one of the most significant aspects of the initiative is the lengthening of the forecast horizon from 1 - 1 / 2 to 2 years previously to about 3 years. shorter - term forecasts tend to be dominated by the interpretation of how recent shocks to the economy will play out. by lengthening the projection horizon, fomc members will also be giving a sense of their assessment of a number of important structural characteristics of the economy that influence the conduct of policy. for example, given the starting point for the outlook, the forecasts will trace out a path for the economy to preserve or reestablish maximum employment and price stability that will reflect fomc participants'views of the relative variation in output and inflation that is possible in the short run. in addition, fomc
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participants'projections of growth and unemployment in the third year of their forecasts will be influenced significantly by their interpretation of maximum sustainable growth and resource utilization, given their understanding of the likely growth of productivity and structure of labor markets. and our projections for inflation in year three will depend importantly on our sense of what inflation rate is consistent with our mandates for employment and price stability. that projection, along with the path to year - three inflation, should help the public differentiate short - term shocks to price stability from the longer - term price trends it should use for planning purposes. over time, as actual inflation tends toward the year - three forecasts, inflation expectations may well become even more firmly anchored than they are today. in another change, the committee included total consumer inflation in its forecasts along with the core measure it had been using. we have always recognized that " price stability " was not intended to apply to a subset of prices that people paid. however, we have also found that excluding volatile food and energy prices generally gives a better sense of underlying inflation pressures that are likely to persist and dominate total inflation over time. hence, core inflation has been the most useful guide to the factors affecting policy when our forecast horizon was relatively short. because the final year or so of the longer horizon is heavily influenced by our longer - term objectives, a more comprehensive measure is now also useful and appropriate. fomc members will be making their forecasts quarterly, thereby adding two rounds to the semiannual forecasts keyed to our monetary policy reports and chairman bernanke's testimonies. economic circumstances, and thus the appropriate path for policy, can change rapidly, and we will continue to address those changes in our policy announcements and the the policy regarding enhanced projections was announced in board of governors of the federal reserve system ( 2007 ), press release, nov. 14. also, the new policy was discussed in a speech given by chairman bernanke that day ( ben s. bernanke, 2007, " federal reserve communications, " speech delivered at the cato institute 25th annual monetary conference, washington, nov. 14 ). and the first set of projections under the new policy was prepared in conjunction with the oct. 30 - 31, 2007, fomc meeting and released in the minutes of that meeting ( board of governors of the federal reserve system, 2007, press release, nov. 20 ). minutes for our meetings. however, the increased frequency of forecasts will give us more
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shaktikanta das : journey towards inclusive growth in india opening remarks by mr shaktikanta das, governor of the reserve bank of india, at the third suresh tendulkar memorial lecture by mr tharman shanmugaratnam, senior minister, republic of singapore, and chairman of the monetary authority of singapore, mumbai, 7 january 2020. * * * on behalf of the reserve bank of india, i am delighted to welcome mr. tharman shanmugaratnam to deliver the professor suresh tendulkar memorial lecture, the third in the series. we are also deeply honoured to have smt. sunetra tendulkar, the wife of late professor tendulkar and his daughter smt. saee sapre with us. a hearty welcome to all the distinguished invitees of the reserve bank. about prof. suresh d. tendulkar 2. prof. suresh d. tendulkar was a great teacher, economist and policy analyst. his seminal work on the measurement and analysis of living standards in the country will remain his enduring legacy to public policy formulation. in fact, a defining feature of prof. tendulkar β s life as a professional economist was his deep sensitivity to poverty and a commitment to data - based research to understand poverty. 3. with a formidable academic record of great distinction, he joined the indian statistical institute in 1968. this was followed by a prestigious two - year assignment at the development research centre of the world bank. from 1978 onwards, he served with great distinction in the delhi school of economics in different capacities until his retirement in 2004. he served on numerous working groups on the design and conduct of the national sample surveys and was the chairman of the governing council of the national sample survey organisation ; chairman of the national accounts advisory committee ; and chairman of the national statistical commission. he was a member of the lakdawala committee for estimation of poverty in 1993, which recommended state specific consumption baskets for estimation of poverty. he became a member of the prime minister β s economic advisory council in 2004 and in 2008 he was appointed the chairman of the council. 4. prof. tendulkar served as director on the central board and the chairman of the eastern region local board of the reserve bank from 2006 till his sad demise on june 21, 2011. this lecture series was instituted in his honour in 2013 in recognition of his contribution to the economics profession and his association with the reserve bank. about mr. tharman shan
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policymakers only have non - standard instruments in their arsenal, they can also make do with waiting a little longer for inflation to return to a path that is consistent with the definition of price stability. after all, the ecb governing council stipulated quite intentionally its inflation target of below, but close to, 2 % is its medium - term objective that need not be achieved at all times, whatever the cost. particularly in the aftermath of a severe crisis, there β s a good case for seeing patience as a virtue. 5 conclusion ladies and gentlemen i would like to bring my speech to a close by saying that you have truly been brave souls for staying with me this far. given the colourful range of professions gathered here at this reception, the occasionally gloomy topics covered by my speech and, above all, the festive carnival - themed decorations here at this venue, i think i will round things off with an entertaining anecdote after all. a doctor, an architect and an economist meet and start arguing over who out of the three has the most honourable profession. says the doctor, " it β s obvious. god used adam β s rib to create eve β he must have been a surgeon. " says the architect, " well, before adam and eve, order had to be brought out of chaos to create the universe. who other than an architect would have been capable of doing such a thing? " says the economist, " that β s all well and good, but who do you think created all that chaos? " i do hope that my speech has helped to bring a little order to the chaos, and i thank you for being such an attentive audience. 9 / 9 bis central bankers'speeches
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in recent years the question has become topical again. one reason for this is a growing insight that the distribution of income and wealth may have considerable significance for the effects of monetary policy on the economy as a whole. and it is therefore important to understand the relationships better. another reason why this has become topical again is the rising asset prices and the effect that monetary policy has on the distribution of income and wealth. we have gone through a long period where inflation has been low and central banks around the world have struggled to bring inflation back up to their respective target levels. one might therefore think that the question of monetary policy β s distributional effects has become topical because inflation has been higher than expected, which has benefitted some groups at the cost of others. but this is not actually the main reason ; instead it is the efforts the central banks have made to increase activity in the economy and to bring up inflation. low interest rates have contributed to a rapid rise in prices of shares and other assets, both financial assets and real assets. this effect in itself should be inconspicuous. asset prices normally rise when interest rates fall, which occurs in periods when monetary policy stimulates the economy. however, recent years have been special in many ways. apart from policy rates being low for an unusually long time, the riksbank and other central banks have also used other methods to further push down the general interest rate level, for instance purchases of government bonds. the monetary policy measures have affected asset prices in a more direct and visible manner than the conventional policy of interest - rate cuts. this has contributed to more discussion of the distributional effects of monetary policy. the distributional effects of the central banks β asset purchases have been in focus in, for instance, the united states, the united kingdom and in germany, where there has been considerable discussion of the effects of low interest rates for savers. 1 in sweden, the riksdag committee on finance has included distributional effects in the questions that are to be included in the ongoing review of the monetary policy framework and the sveriges riksbank act β in the terms of reference for the review it says that the committee making the review shall consider in particular whether the riksbank should give consideration to the consequences that conventional and unconventional monetary policy may have on, for instance, the distribution of income in the economy. 2 explaining why the distribution of income and wealth changes is a challenge that is not made easier by the fact that the statistics in some
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as i have argued elsewhere, 2 this function of financial markets is critical to a well - functioning economy ; without it, countries, and their populations, cannot get rich. enabling financial markets to effectively perform this essential function is by no means easy ; financial markets must solve information problems to ensure that funds actually go to those with productive investments, so that they can pay back those who have lent to them. financial development involves innovations or liberalization of financial markets that improve i thank andreas lehnert for his excellent assistance and helpful comments. my remarks reflect only my own views and are not intended to reflect those of the federal open market committee or of anyone else associated with the federal reserve system. frederic s. mishkin ( 2006 ), the next great globalization : how disadvantaged nations can harness their financial systems to get rich, princeton : princeton university press. the flow of information. unfortunately, however, financial liberalization and innovation, often have flaws and do not solve information problems as well as markets may have hoped they would. when these flaws become evident, financial markets sometimes seize up, often with very negative consequences for the economy. i would argue that we have been experiencing exactly such a cycle in recent years. advances in information and communications technology have allowed for faster and more disaggregated mortgage underwriting decisions. a mortgage broker with an internet connection could quickly fill out an online form and price a loan for a customer with the help of credit - scoring technology. the same technological improvements would allow the resulting loan to be cheaply bundled with other mortgages to produce mortgage - backed securities, which could then be sold off to investors. advances in financial engineering could take the securitization process even further by aggregating slices of mortgage - backed securities into more complicated structured products, such as collateralized debt obligations ( cdos ), to tailor the credit risks of various types of assets to risk profiles desired by different kinds of investors. as has been true of many financial innovations in the past, the benefits of this disaggregated originate - to - distribute model may have been obvious, but the problems less so. the originate - to - distribute model, unfortunately, created some severe incentive problems, which are referred to as principal - agent problems, or more simply as agency problems, in which the agent ( the originator of the loans ) did not have the incentives to act fully in the interest of the principal ( the ultimate holder of the loan ). originators had every incentive to
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while people β s faith in the currency is an essential precondition for successful monetary policy, organising public lectures on religion may seem a little farfetched. however, allow me to reassure you that ben has also published over 150 academic articles on monetary policy, macroeconomics and financial markets. he is therefore a most logical candidate to give the karl brunner distinguished lecture, even on a topic that may seem unusual at first sight. born in louisville, kentucky, benjamin friedman went to harvard university with the intention of studying law, but soon realised that economics suited him better. he pursued his studies at harvard and at cambridge university in england. early in his career, ben worked for various entities of the federal reserve system and at morgan stanley. in 1972, at the age of 25, he was appointed assistant professor of economics at harvard university. ben has remained a loyal faculty member at harvard for five decades, including a three - year spell as the chairman of the economics department. page 2 / 4 when ben recently celebrated 50 years as a professor at harvard, many of his former students travelled from all around the world to attend the occasion. the interaction with his students has been of utmost importance to ben, and he would remain in contact with them for decades following their graduation. a number of these former students today occupy leading positions in academia, central banking and government. this shows that ben has been not only an outstanding researcher, but also an influential teacher of economics. spending 50 years in the same place is not as unusual as one might think, at least not when we consider some of the great enlightenment thinkers ben so deeply admires. take immanuel kant, who developed his philosophy without ever leaving his hometown of konigsberg. according to legend, kant became such an integral part of the city that people would set their watch by the time he left his house for his afternoon walk. whether ben β s daily routines have the same effect on the people in cambridge, massachusetts, we do not know. what we do know is that, fortunately for us, ben is not quite as averse to travelling as kant was. most importantly, he lets his mind travel, exploring not only the world of economics but many other disciplines as well. but let me say a few more words about ben β s contributions to monetary economics. his research covers all aspects of monetary policy. it spans everything from the technical details of how central banks steer short - term interest rates in money markets to fundamental questions about the mandate
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lawmakers should give to central banks. doing justice to this vast body of work in a few sentences is impossible. i will therefore limit myself to a few key elements. characteristic of ben β s work is the critical analysis of ideas that have become fashionable in the profession. in the 1970s and 80s, when monetary targeting was in its heyday, ben argued that central banks were too focused on the money supply and did not pay enough attention to other variables. in a number of influential papers, he showed that the amount of outstanding credit in the economy may be a useful predictor of future output and prices. ben concluded that credit should play an important role in central banks β decision making. the extent to which central banks should pay attention to credit aggregates remains a hotly debated question to this day. ben was among the first to highlight their potential significance for monetary policy. another example of ben β s tendency to go against the mainstream is his critique of the use of rational expectations in macroeconomic models. when the rational expectations revolution transformed the field of macroeconomics in the late 1970s, ben remained sceptical. he criticised the assumption that economic agents form their expectations based on a perfect understanding of how the economy works. these models did not address the question of how economic agents derive this knowledge in the first place. more recently, the literature has begun to develop models with forward - looking agents that have a limited understanding of how the economy works. this research programme is very much in the spirit of ben β s early criticism. page 3 / 4 a final example of ben β s willingness to challenge the accepted wisdom of the day is his reservations about inflation targeting. when one central bank after another started to adopt inflation targeting in the 1990s, ben became one of the most prominent critics of this new monetary policy strategy. his concern was that inflation targeting would lead central banks to focus single - mindedly on price stability. in doing so, ben feared, they might lose sight of their ultimate goal of promoting economic well - being more broadly. ben is widely recognised as one of the world β s leading macroeconomists. however, his research interests go far beyond that. ben is a polymath, something that has become rare in modern academia. his writings cross academic boundaries between economics, philosophy, history and religion. an excellent example of ben β s interdisciplinary work is his book β the moral consequences of economic growth β, published in 2005. economists have written countless papers on how to increase growth.
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##ise yourselves with our city and its surroundings. for those able to spare a little time, please visit at least one of the unique tourist attractions for which the country is renowned. as the brand goes : botswana is our pride ; please make it your destination. please enjoy the dinner and the rest of the evening. i thank you for your attention. bis central bankers β speeches
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to long term. turning to wage developments, it is notable that government recurrent expenditure included a 3 percent salary increase for the public service, which, as a matter of practice, guided parastatal and private sector wage adjustments. thus, in 2016, wages increased, generally, by 5. 2 percent, therefore, with a modest impact on demand and inflation. on credit developments, growth in commercial bank credit fell from 7. 1 percent in 2015 to 6. 2 percent in 2016 in the context of subdued economic activity and restrained growth in personal incomes, which influenced both the demand and supply side. the bank also recognises challenges in the transmission of the prevailing policy rates to lower lending interest rates. the challenges relate partly to structural issues, such as uncertainty about sustainability of funding sources and associated balance sheet restructuring as well as tighter lending criteria by banks. against this background, the annual expansion in lending to households fell from 12. 8 percent to 7. 6 percent and included lower growth for personal loans and mortgages. in contrast, growth in business credit increased to 4. 2 percent, from a contraction of 0. 3 percent in 2015, but with varying performance across sectors. overall, the moderate increase in bank lending supports economic activity and it is broadly consistent with growth of nominal gdp. monetary policy implementation in 2016 honourable minister and esteemed guests : monetary policy was predominantly accommodative in advanced economies, with low levels of interest rates ; in some instances, interest rates are negative, while liquidity support to the financial sector was maintained. in this regard, notable developments include the reduction of interest rates in the united kingdom aimed at mitigating the adverse impact of the decision to leave the european union ( brexit ) and the second increase in interest rates in the united states of america since 2008, given progress in attaining full employment and price stability. for emerging market economies, the direction of policy changes was mixed, invariably reflecting differing macroeconomic circumstances. closer to home, the south african reserve bank increased the policy rate by 75 basis points to 7 percent during 2016 in order to anchor inflation expectations around the country β s target range of 3 β 6 percent. domestic monetary policy implementation for its part, the bank continues to conduct monetary policy through a forecast - based policy framework that informs the appropriate response to deviations of inflation from the desired objective range. the analysis also involves assessment of divergence of actual output ( gdp ) from potential output ( technically known as the β output gap β ), which
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be beneficial in implementing reform priorities identified in the european semester. if euro area economies had a greater level of resilience, they would also be more likely to react to a common shock in a similar way, thus reducing costly macroeconomic divergences which cannot be addressed by our single monetary policy. developing sound economic structures and institutions would also lift potential output. second, as recently advocated by the ecb in its opinion on the establishment of a european investment stabilisation function1, the euro area needs a fiscal instrument to help maintain convergence in the face of large exogenous shocks, thereby also supporting the single monetary policy. a fiscal stabilisation function should focus on cyclical developments, and it should be conditional on economic and fiscal policies being sound and fully respecting the eu β s governance framework. this would in turn contribute to macroeconomic stability both at the euro area level and, crucially, in each of its member states. and it would allow action to be taken before recourse to the esm needs to be made. for situations where market instability materialises, the esm remains essential to credibly address the causes of financial instability and contagion. it is important that the esm is provided with the financial instruments necessary to achieve its objectives and to support the banking union. i thus welcome the ongoing discussions on making the esm more effective, as also advocated in an ecb opinion on the subject2. last but not least, completing the banking union and building an ambitious capital markets union are essential. if we want to avoid repeating the mistakes of the past, it is crucial to strengthen the resilience and integration of the financial sector, thereby also improving the transmission of our monetary policy. of course, the policy agenda i have just outlined would support the ecb β s monetary policy. however, its benefits would not end there. the main motivation for these policy initiatives would be to deliver the tangible benefits of the common currency for all europeans. their support for the euro has increased as emu has recovered from the crisis, and it now stands at a record high. we need to ensure they are not disappointed. conclusions i would like to end by saying that the coming days, weeks and months until the end of this legislature will be decisive in making concrete steps on emu reform. this institution has repeatedly played a crucial and constructive role in ensuring that such discussions focus on a truly european dimension and on building effective common institutions. we know that such a shift from
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than $ 62 trillion within 8 years. in 2004, outstanding mortgages held in non - agency mbs in the us were just us $ 670 billion. it tripled to over us $ 2 trillion within 2 years. it is a similar story with the origination of subprime mortgages. in the same period, global cdo issuance more than tripled from us $ 157 billion to about us $ 550 billion. these assets were held in banks and non - banks globally. when the financial crisis struck, the world was shocked not only by its severity, but also by the speed in the transmission of shocks throughout financial markets. there is no better illustration of how new sources of systemic risk can build up rapidly. 6. in a similar vein, the sharp deterioration of the fiscal positions of many governments has also led to a re - assessment of sovereign risks. about 10 years ago, investors were concerned that the strong budget surplus of the us federal government might lead to a severe reduction in the supply of us treasuries. today, bond vigilantes are focusing attention on not just the short term fiscal health of governments, but on the impact of demographic changes, large entitlement benefits and unfunded pension liabilities on the longer - term fiscal health of these governments. 7. my third observation is the speed of structural changes in emerging economies and transformation in the patterns of global trade and investment. as these are superimposed on cyclical changes, it is often difficult to disentangle the two. emerging markets, especially asia, have weathered the crisis relatively well, and recovered quickly. this year, the imf expects emerging asia to grow by nearly 7 %, almost double the rate forecast for the global economy as a whole. many analysts expect the differential in growth rate to persist in the coming decade. the global economy went through stagflation in the 1970s, disinflation in the 1980s, and a roaring decade in the 1990s. in 2000s, we had the dotcom bubble, and a severe financial crisis. how the coming decade will turn out, especially for emerging economies, will change many of the risks and return assumptions on a wide range of asset classes. dealing with the implications 8. the growing complexity and interconnectedness in financial and economic systems, the increasing speed of change, as well as the ongoing structural changes in emerging markets will have profound impacts on all sectors of the global financial industry. these driving forces will shape the evolution of the financial
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this opportunity to underline that the authorities are fully committed to have the upper hand in the combat against money laundering and terrorism financing. i also take this opportunity to once again thank the eu aml / cft global facility for the ongoing assistance and guidance. our journey with the eu global facility will be sustained in the long term for further building resilience across our sectors on aml / cft matters. one such forthcoming project with the eu global facility covers correspondent banking. i look forward to yet another successful project together. we also look forward to our continuous engagements with respect to the exit of mauritius from the eu list of high risk third countries in the near future. with these words, ladies and gentlemen, i wish you all fruitful deliberations in this workshop. i hope that it will enhance your knowledge and bring added value to your work. i thank you for your attention. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - end of script - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - governor harvesh seegolam le meridien hotel, mauritius
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with fast moving traffic, it β s a different story, and safety demands that pedestrians wait until they are confident they can make it to the other side. the same holds true for central bank governors. β the introduction of the euro, the september 11 attacks that impacted seriously on the us economy which is an importer of the last resort, the ever growing instability in the middle east, the disagreements over trade policies and tendencies for countries to resort to protectionist measures in one form or the other, volatility in the exchange rates of major currencies in the international exchanges as well as the weak performance of most economies across the world have not made monetary policy making here and abroad a plain sailing endeavour. successive years of uncertainties intensified by events beyond the control of central banks have increasingly blurred visibility. central banks have to constantly chart a safe way forward in this world of unexpected twists and turns of events. five years ago, substantial capital outflows triggered by a loss of confidence in the rupee had brought down the foreign reserves of the bank of mauritius to unacceptable levels. the rapid weakening of the euro in the international exchanges following its introduction in january 1999 translated into a significant appreciation of the rupee. and that appreciation of the rupee was a quick reversal of the preceding three years of rapid depreciation of the rupee. the mood of pessimism that emerged in the wake of the september 11 attacks brought down the world economy to the throes of deflation. central banks around the world effected a series of cuts in interest rates in a bid to revitalize their respective economies. notwithstanding the policies adopted by central banks, the leading world economies entered a period of balance sheet recession in recent years. in the wake of drastic fall in equity prices, many companies the world over could no longer afford to maximize profits. they chose to restructure their balance sheets for corporate governance so demanded. however, the household sector continued to save money and the business community almost stopped borrowing money even at low rates of interest. this is a peculiar situation or rather a fallacy of composition problem that exacerbated the recessionary trend in the world economy. monetary policy becomes much less effective when only few companies are willing to borrow in this type of a recession. fiscal policy takes over as an absolutely important instrument to boost up aggregate demand as well as to keep money supply from shrinking. in such troubled waters the navigational hazard is impaired visibility, which is quite often the case. monetary policy
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. for now, the growth perspectives remain strong in the us, as confirmed by recent robust labour market data, and option - implied distributions of inflation expectations show upside risks to inflation. in that context, markets expect the fed to cut interest rates less this year than previously anticipated. the expectations component is estimated to account for about two - thirds of the increase in the 10 - year treasury yield since mid - september. page 4 sur 6 the macroeconomic picture is different in the euro area. the disinflation trajectory is more clear - cut and the macro outlook is weaker. the contagion to european yields from higher us interest rates has thus been limited so far : monetary policy perspectives could and should rightly decouple. but spillovers on the bond markets operate also through the global risk channel. in a more uncertain global environment, investors require higher compensation for lending long term, which results in higher term premia. the contribution of the term premium to the change in ois 10 - year rates since mid - september is almost 15 bp. the impact of this rise in the term premium on financial conditions in the euro area is however mitigated by the depreciation of the euro / dollar exchange rate which has occurred during the same period. c ) the role of unwinding qe shouldn β t be overstated some commentators argue that the end of qe has contributed to the rise in long - term yields. this interpretation goes back to the initial objective of qe. asset purchase programmes were launched in times of crisis and when rates were at the effective lower bound ( elb ) for two reasons : 1 ) to preserve an effective monetary policy transmission when specific market segments were under strain β which is not relevant today, and 2 ) to provide additional policy space when required ( i. e. monetary stance purpose ). in that latter case, purchases of long - term bonds aimed at compressing the term premium and therefore the long term yields, to stimulate aggregate demand. in principle, β quantitative tightening β, i. e. the full unwinding of all large scale asset purchases would drive the market back to the status quo ante. but there page 5 sur 6 are two reasons to discount this ; and the wording itself of β qt β is somewhat misleading. first, passive and bounded β qt β is not the symmetric of active and open - ended qe : qe ramped up quickly but unwinds much more slowly. recent research i finds
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education changes lives β it definitely changed mine! the strength of st mark β s is the alumni association of st mark β s college in jane furse. addressing their 20th anniversary fundraising dinner in december 2005, i was impressed by the effort and remarked that it was indeed rare for former pupils of a black school to honour their school and commit themselves to raising funds for the institution. while education remains primarily a responsibility of government, private financial commitment is indispensable. strong alumni associations in the us, for example, contribute substantial sums of money to their institutions. in south africa, especially among blacks, there seems to be little interest among alumni to look back and support their old institutions. i do, however, acknowledge the nascent pockets of alumni associations of former black schools that are emerging in some parts of the country. this is a culture that we should endeavour to nurture. the relationship with a school does not and should not end with matriculation. we must seek to inculcate in learners that when they proceed to higher education, join the world of work or business, they remain representatives of their former schools in the community, country and the world at large. it is therefore heartening to be part of this fundraising drive, particularly because the friends of st mark β s have opened their hearts and wallets to deepen and widen an existing initiative by former pupils of st mark β s who have taken it upon themselves never to allow their alma mater to die. these are alumni who are proud of, and seek to build an everlasting relationship with their alma mater β a relationship to be treasured, nurtured and cultivated. these are men and women who value so much what they got out of st mark β s that they have developed a sense of community around the ownership of the st mark β s brand. they have decided that the st mark β s brand will be preserved and enhanced for current and future generations. the importance of building strong alumni associations cannot be overemphasised. the continued involvement and support of alumni have proved to be the hallmarks of long - term success and sustainability of schools and colleges in many parts of the world. as pressure on education budgets mounts the world over, fundraising events like these are no longer intended to raise supplemental income to fund β extras β, but have become essential components of schools β budgets. fundraisers are the financial lifeline for st mark β s college β a matter of life and death. while alumni associations may be instrumental
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swaminathan j : safe banking practices β protecting the young speech by mr swaminathan j, deputy governor of the reserve bank of india, at the global money week 2024, paris, 18 march 2024. * * * mr. yoshiki takeuchi, deputy secretary general, oecd, ms. mairead mcguiness, european commissioner for financial services, ms. magda bianco, chair of oecd infe and g20 gpfi, mr. connor graham, youth representative from enactus, assembled regulators from across the world, ladies and gentlemen. a very warm good morning to all of you. it gives me immense pleasure to speak to you today on a highly relevant topic - safe banking practices and protecting the young. as we are all aware, the covid - 19 pandemic accelerated digitalisation in financial services, prompting a swift transition to online mode by service providers and customers. accompanying this surge in digitalisation was also the proliferation of fintech platforms. often operating outside the regulatory envelope and unconstrained by legacy systems that typically encumber traditional banks, fintech companies exhibit remarkable agility and adaptability in offering customised financial products. these developments are indeed welcome. however, while they offer immense benefits such as accessibility and hyper - personalization, they also heighten the risk of misuse and fraud. they can expose consumers to risk of cyberattacks, data breaches, and often times, some financial harm. consumers may struggle to resolve disputes or obtain compensation due to lack of transparency on the part of such players. these new risks must be addressed through robust regulatory frameworks, enhanced cybersecurity measures, and increased consumer awareness initiatives. in this context, i would like to share some of the approaches adopted in india through regulation, supervision and most importantly, enhanced consumer awareness. regulation and supervision in india, regulated entities are required1 to implement multi - factor authentication for all payments through electronic modes and fund transfers, except for some explicitly exempted small value transactions. at least one of the authentication methodologies should be generally dynamic or non - replicable such as one - time password, mobile device binding, biometric, etc. regulated entities are required to put in place security controls for internet banking, mobile payments application and card payments security. regulated entities are also required to conduct risk assessment of the safety of digital payment products as well as suitability and appropriateness of the same vis - a - vis
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narayana kocherlakota : economics at the federal reserve banks opening statement by mr narayana kocherlakota, president of the federal reserve bank of minneapolis, at the panel discussion, american economic association annual meeting, philadelphia, pennsylvania, 4 january 2014. * * * i thank dave fettig and sam schulhofer - wohl for their helpful comments. i β d like to use this opportunity to talk about the role of economic research and economists within a reserve bank. my main theme is that, to be successful at their host of responsibilities, reserve banks need economists with a wide range of perspectives and skills. conversely, economists in a variety of fields can enjoy fulfilling and successful careers at reserve banks. i β ll illustrate my points by using examples from my own institution, the federal reserve bank of minneapolis. the views that i express today are my own and not necessarily those of others in the federal reserve system, including my colleagues on the federal open market committee. my first observation is that, just like economists who work at universities and colleges, many economists within reserve banks spend a great deal of time on independent research. many reserve banks β including the minneapolis federal reserve bank β have found that, especially over the longer term, this self - directed research has the power to create valuable new insights into important public policy questions. for example, back in the 1990s, harold cole and lee ohanian β then at the minneapolis fed β developed an exciting and important new way to think about the slow recovery during the great depression. 1 this work in economic history has turned out to be a valuable resource for many who are thinking about the current slow recovery. over the past four decades in minneapolis, we have found that, to be effective, independent research should follow the usual rules of academic economics. more specifically, economists must be free to pursue any question, use any available tools and arrive at any answer. the quality of those answers is ultimately measured by rigorous academic peer review, not by internal managerial judgment. so, university and reserve bank jobs are not all that different in terms of the role of independent research. what distinguishes academic jobs from reserve bank jobs for economists is how they spend their non - research time. economists with academic jobs spend most of their non - research time teaching. economists with reserve bank jobs spend most of their non - research time supporting public policy work. as i stated at the outset, my main theme today is that public policy work in a reserve bank relies on a much wider variety
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, published a new vision and strategy document ( vision 2010 ) for the nps in april this year. the purpose of this document was to provide high - level strategic guidance for the payment system up to 2010. finally, there appears to be a general misunderstanding that the bank has a " hands off " approach to the oversight and regulation of the nps. i would remind all nps stakeholders that section 10 ( i ) ( c ) of the south african reserve bank act states clearly that the bank, " perform such functions, implement such rules and procedures and, in general take such steps as may be necessary to establish, conduct, monitor, regulate and supervise payment, clearing or settlement systems β. furthermore, as i noted earlier, the 2004 amendment to the nps act makes provision for the bank to issue directives pertaining to the nps. we raise this issue as the bank will soon be issuing directives in terms of the nps act which will regulate non - bank participants in the nps for the first time. we have noticed that the number of nonbank participants has increased to the extent that the risk associated with their operations and the risk that they bring to the clearing and settlement environment requires some formalisation. of particular relevance in this regard are system operators and third party service providers, who mostly operate in or on behalf of the retail sector. we want to make it clear, particularly to the banking sector, that strict regulation will be applied as far as the nps is concerned. this should not be perceived negatively, nor do we wish to stifle innovation or competition in the industry. however we need to apply strict supervision and regulation to both bank and non - bank participants in the critical area of the nps and avoid the risk of turbulence that may emanate from a hands - off approach to regulation. this may require some adjustment to current structures in the nps and the bank will have to start playing a far more prominent role in areas such as supervision, regulation and licensing of participants. we also need to ensure that these newly regulated entities have channels to engage with the bank and other stakeholders, including pasa, in a fair and transparent way. the bank has already initiated discussions with various international central banks and consulted with nps stakeholders with a view to adopting a model which will facilitate such engagement. this may take some time but i can assure you that the bank will continue with the collaborative approach it has used for nps matters in the past before making any final decisions in
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- operation between the members of pasa and the bank. while the bank supports the consultative and collaborative approach, we have observed on occasion that competitive issues between the banks themselves, and the banks and other stakeholders, can impede the collaborative process and sometimes cause unnecessary delays in the implementation of certain initiatives. it should be remembered that collegiality, co - operation and inter - operability are vital elements of a world class payment system. to achieve this does sometimes require an above average effort from stakeholders. in this regard, the bank is committed to ensuring that new developments or any response to problems in the nps will always be taken in the interest of the system as a whole, and not in the interest of individual participants. 3. achievements in the nps over the past 10 years collaboration between the bank and the banking industry, particularly with pasa, has resulted in the south african payment system being recognised as an example or model for development initiatives in the region and internationally. much has been achieved during the past ten years and although i do not want to go into detail of any particular achievement, there are a few major milestones which are worth highlighting tonight. the first major milestone was reached on 9 march 1998, when the south african multiple options settlement ( samos ) system was implemented, enabling banks to settle their obligations on a real time gross settlement basis ( rtgs ). various changes and upgrades to the samos framework have been implemented since 1998, including facilities for the south african financial markets to conform to international best practice with the introduction of the principle of delivery versus payment ( dvp ) for settlement of equity, bond and other financial market transactions. the second milestone was reached with the promulgation of the nps act in october 1998. the act provides the sarb with the mandate to oversee and monitor the payment system and provides the objectives and rules for the payment system management body. it also provides for the final and irrevocable settlement in the samos system. the oversight function of the bank was extended in the amendment of the act in 2004 when the bank was given the power to issue directives to any person regarding a payment system or the application of the provisions of the act. i will return to the role of the bank in the nps later on. the third highlight relates to risk - reduction initiatives in the retail payment environment. the blue book identified several risk - reduction measures to be implemented in the retail environment. although risk reduction is an ongoing process in the
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##2 set an average wage increase for 2023 almost 1 pp higher than those agreed during the third quarter, while an indicator of wage growth in new online job openings 11 declined for two consecutive months to 4. 9 % in december ( from 5. 2 % in november and 5. 3 % in october ). however, looking ahead workers β pressures to regain lost purchasing power might be significant, especially since upcoming wage negotiations will take place in a context of a tight labour market. the unemployment rate remained at 6. 6 % in december, its lowest level since the euro was launched, and firms β perceived degree of labour shortage has also stabilised at very high levels in historical terms. thus, we should monitor wage and mark - up development to identify the potential emergence of second - round effects on inflation. this depreciatio n increased the co st o f euro area pro ducers, given that mo st impo rted inputs are deno minated in do llars, resulting in so me expo rt market share being lo st ( estimated at aro und 2. 5 % in 2022 ). leiva - leo n, d., j. martinez - martin and e. ortega ( 2022 ). β exchange rate sho cks and inflation co - movement in the euro area β, international journal of central banking, 18 ( 1 ), pp. 239 - 275 data fro m indeed, an emplo yment website that aggregates jo b listings fro m tho usands o f websites, including job bo ards, staffing firms, asso ciations, and co mpany career pages. the global context and the reopening of china weaker global demand, particularly in key advanced economies, is contributing to the moderation of commodity prices on international markets and easing inflationary pressures. economic growth in the united states continues to slow due to tighter financing conditions. however, it remains stronger than expected, mainly supported by private consumption, with households continuing to spend their stock of savings, strong and widespread jobs growth and unemployment at very low levels. in addition, the inflation path may be conditioned by the end of the zero - covid policy in china and the subsequent reopening of the chinese economy. once the surge in infections has passed, the chinese economy will foreseeably regain dynamism supported by consumption, amid a recovery in mobility and the more contact - intensive activities, along with the release of pent - up demand. although
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credit impulse β is already evident. we should expect to see the latter link to real activity assert itself soon. third, as regards the cash flow channel of monetary policy, we have seen a significant shift of funds between overnight deposits ( with very low remuneration ) and time deposits ( whose remuneration is more sensitive to market interest rates ). furthermore, in net terms, money supply is decelerating rapidly, with m3 growth slowing from around 9 % in september to 4 % in january. fourth, the housing sector is a key area to watch given the turnaround in financial conditions, as well as the sharp increase in house prices in some economies over the last decade. there was significant evidence of exuberance in this market in some countries before the pandemic, as has been repeatedly emphasised by the european systemic risk board. 16 all in all, it is therefore crucial that we monitor how all these elements may affect monetary policy transmission in the next quarters. conclusion in sum, recent data on euro area inflation and some of its key determinants are somewhat encouraging, but the overall situation still requires caution. the evidence so far is very preliminary and there are several areas that require careful monitoring : the residual pass 15 huennekes, f., and p. ko hler - ulbrich ( 2023 ). β what information does the euro area bank lending survey pro vide on future lo an develo pments? β, ecb eco no mic bulletin, issue 8 / 2022, box 7. esrb repo rt " vulnerabilities in the residential real estate secto rs o f th e eea co untries β. through of past inflationary shocks and the symmetry of the pass - through of recent energy price declines to core inflation ; labour market and wage developments ; the possible effects of the chinese reopening ; the resilience of the euro area economy and the transmission of ecb monetary policy decisions. all these will have to be assessed as part of the full projections exercise under way in the run - up to our march meeting.
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, although the rate of pass - through of higher energy and other commodity prices to core consumer price inflation appears to have remained relatively low in the current episode - reflecting the inflation - fighting credibility built by the fed in recent decades the cumulative increases in energy and commodity prices have been large enough that they could account for some of the recent pickup in core inflation. in addition, some survey - based measures of longer - term inflation expectations have edged up, on net, in recent months, as has the compensation for inflation and inflation risk implied by yields on nominal and inflation - indexed government debt. as yet, these expectations measures have remained within the ranges in which they have fluctuated in recent years and inflation compensation implied by yields on government debt has fallen back somewhat in the past month. nevertheless, these developments bear watching. in conclusion, energy prices have moved up considerably since the end of 2002, reflecting supply and demand factors. in the short run, prices are likely to remain high in an environment of strong world economic growth and a limited ability to increase energy supplies. moreover, prices are likely to be volatile in the near term, given the small margins of excess capacity to produce crude oil or natural gas that traditionally have buffered short - run shifts in supply and demand. however, in the long run, market forces will respond. the higher relative prices of energy will create incentives for businesses to create new, energy - saving technologies and for energy consumers to adopt them. the market for alternative fuels is growing rapidly and will help to shift consumption away from petroleum - based fuels. government can contribute to these conservation efforts by working to create a regulatory environment that encourages the growth in energy supplies in a manner that is consistent with our nation's environmental and other objectives. given the extraordinary resilience of the u. s. economy, i am confident our nation will be up to this challenge.
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population of firms and consumers to 1, the equilibrium will occur when the demand equals the supply ( y = d ). in equilibrium under rational expectations, product must be equal to expected product, or : y = d ( y, Ο ) now, with a couple more assumptions we can find the equilibrium ( figure 2 ). the equilibrium is unique in a. for this, the demand is assumed to be concave, that is, any additional demand for goods is smaller as income increases. to ensure a unique equilibrium we assume that, for ey = 0, the demand for the good is positive. this can be understood as the individual having another source of income and expenses, and always wanting to devote part of the other income to consume this good. another simple way of seeing it is to think that the individual will want to borrow to acquire this good, even if her income is very low, presumably because she always expects to have the funds available in the future to repay. as we will see, however, it is possible that multiple equilibria exist, with low and high output, as a result of coordination failures. uncertainty and the value of waiting decision making under uncertainty has always been a complex thing to study. often to simplify, we turn to quadratic specifications in order to use certainty equivalence. surely this this exercise is based on an mit class exercise which, despite having saved my notes and after a number of inquiries with friends, i have been unable to find. the original model was somewhat more complex because it assumed strategic interactions among firms, and here the demand is only taken as given. more formal models were developed in cooper and john ( 1988 ). for a thorough review of this literature, see cooper ( 1999 ). note that because this is only an illustration, many aspects were left out of the analysis. in this case we are assuming that there is some friction in the price - setting mechanism that prevents firms from selling all they want at a given price. this friction may come from firms deciding how much to produce before they know the demand, which would lead us to incorporate the producers β decisions to this story. analytically, however, it would not change much. falls short of describing the much more complex reality ; for example, when the analysis considers decisions to invest or consume ( durables ) in the presence of irreversibilities. 3 when a decision is irreversible, there is no chance to back out ; for example, an investment
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three considerations stand out. first, as i have mentioned, the policy stance has been accommodative and has moved closer to neutral. but we have to treat neutral rate estimates with some scepticism. the available methods produce divergent results. it is clear, however, that we are not like brazil, where rates were recently cut for the first time in several years, but from the very high starting point of 14. 25 % ( and a real rate of nearly 9 % ). had we raised rates by 700 basis points, for example, the inflation outlook today might justify easier monetary policy. in our case, a cumulative increase of 200 basis points to 7 per cent translated to a real repo rate of just over 1 per cent. this compares to a potential real gdp growth rate of about 1. 5 %. second, the way we exited from the global financial crisis and its accompanying drop in growth currently limits the impact of our accommodative policy on growth. the standard macroeconomic justification for lower interest rates is to address a demand shortfall caused by excessive saving. south african saving habits can rarely be described as excessive. household debt levels remain high in comparative perspective. government debt is closer to international norms at about 50 % of gdp, but the pace of debt accumulation has been unusually rapid. our current account deficit is expected to remain over 4 % of gdp for the foreseeable future, and we have to keep on importing foreign savings to make up for domestic shortfalls. the financing cost of debt remains quite low, but our debt stock, counting both the public and private sectors, is uncomfortably high. private sector credit extension has been muted through much of the post - crisis period, reflecting both an ongoing reluctance to borrow and supply constraints related to regulations to limit the growth in household debt burdens. rapid credit growth has been seen in some sub - sectors, such as unsecured lending, but the larger credit aggregates for households have not moved significantly. this has been true both before and after we started raising rates. for these reasons, proponents of lower interest rates irrespective of the inflation rate remind me of the proverbial dogs chasing cars. the dog is unlikely to catch the car, and will be in trouble if it does β credit extension may continue to be weak while inflation rises. this characterises the 2011 to 2014 period well. there are, of course, some forms of credit growth we would like to see, particularly those
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patrick honohan : additional capital requirements for four irish banks remarks by mr patrick honohan, governor of the central bank of ireland, at the publication of capital and liquidity results for the banking sector, dublin, 31 march 2011. * * * today the central bank announces additional capital requirements for four banks covered by government guarantee, namely bank of ireland, allied irish banks, irish life and permanent and ebs building society. this is part of what has been envisaged, since last year β s initial effort, as an annual capital adequacy exercise for the banks to get to grips with the scale of losses and the challenge of rebuilding the irish banking system. but the present exercise is on an exceptionally intensive and elaborate basis, and is designed to respond to market scepticism about the banks. this scepticism means that the banks have to hold more capital than would otherwise be needed, in order to convince international lenders of their solidity under all circumstances. this is being done as part of the eu - imf programme designed to restore market confidence to ireland, and in particular to its government finances and to its banks. the capital requirements being announced form part of what we are calling the financial measures programme, which represents the banking part of this two - pronged strategy. as you will hear, it involves not just a capital increase, but also a schedule of deleveraging and asset sales and some structural reorganization ( on which the central bank has been closely involved in advising, and which will be announced by the minister for finance ). all of these elements are interrelated. the overall increase in capital required is sizable. the main underlying reason for such a large increase is the need to restore market confidence. it is a prerequisite to the banks returning to normal functioning that they should have ample capital to meet even the market β s gloomy prognostications. the european commission, ecb and imf have endorsed the rigorous approach used. this year β s exercise has involved a detailed drilling down to the loan - by - loan level, including an intensive data integrity exercise and asset quality review. the central bank engaged blackrock solutions, an international firm with a strong reputation in the market for its capabilities in assessing losses in credit portfolios to conduct as comprehensive a review of the loan portfolios as was possible in 3 months, with an emphasis on determining the potential scale of loan losses in an adverse and unlikely macroeconomic scenario. reality is therefore not
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with respect to unconventional monetary policy tools, let me first step back just five years in time, by quoting former fed chair ben bernanke. he famously quipped that balance sheet instruments, such as qe, work in practice, but not in theory. 2 indeed, central banks implemented unconventional monetary policy instruments at a time when the workhorse macroeconomic models could not be used to assess their expected impact. the models typically had a zero lower bound on interest rates, excluding the possibility of a negative nominal policy rate. modelers struggled with a β forward guidance puzzle β, which implied that communication on future policy rates had implausibly large effects on the economy. and last but not least, financial transmission channels like the ones that pass - through the banking sector were poorly modelled. since bernanke β s quote, a burgeoning academic literature has increased our understanding of them. we now typically talk about the effective lower bound of policy rates, which can be below zero. models with incomplete information now show that forward guidance is useful, although not almighty. the modelling of the financial sector is more advanced. furthermore, academic research has mapped out the circumstances in which balance sheet policies can have an impact on the economy. so we can now conclude that they can have an impact in practice and in theory. that being said, the exact circumstances in which balance sheet instruments are effective warrants some further detail. in the last decade many different types of balance sheet instruments have been implemented by central banks. the literature tells us there is one feature that binds them : frictions in financial markets that imply imperfect asset substitutability or market segmentation. these frictions are crucial for these instruments to have an impact on financial conditions. such imperfections can be thought to exist between any two types of assets, giving rise to different risk premia, such as a term premium on long - term bonds, a risk spread on corporate bonds and a liquidity or safety premium on liquid and safe bonds. these frictions shape the impact of central bank interventions on financial conditions. the main message from the theoretical literature on central bank balance sheet policies is that central banks can alleviate financial frictions by intervening directly in financial markets. by increasing its role as an intermediary, a central bank can effectively suppress risk premia, which leads to an easimngof financial conditions for households and firms. 3 this is actually what we have observed in practice. however, there is an important catch : the relevant friction
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addition, many of the borrowers used to be companies with close ties to the government. as a result, there were few incentives for risk control and return enhancement. instead, some banks used to generate profits by exploiting certain privileges which no longer exist. what is necessary, and what has been done to some extent in some countries, but not all, is privatizing state - controlled banks and promoting free market entry. this will provide bank managers with the right incentives to make risk / return assessments. adequate bank supervision and financial markets oversight are required to ensure that sufficient weight is given to risk control. foreign ownership may help to transfer certain specific banking skills to candidate member states, even though i do not favour a big january sale of financial institutions in the countries concerned. the current problems in certain asian countries show that a bad loan overhang can severely impede the functioning of the economy. balance sheet restructuring in countries in central and eastern europe may require intervention by the competent authorities in some cases. it may be necessary to let some banks fail. it may be necessary for governments to take over bad loans inherited from the communist era. this would enable some credit institutions to conduct business more effectively. in order to prevent moral hazard, the rescue of selected credit institutions can only take place under certain conditions, most likely including the lay - off of those responsible for making these loans. importantly from a macroeconomic point of view, any debt restructuring involving government money should find expression in official figures for government debt. this would provide a better insight into the actual financial situation in the countries of central and eastern europe. reducing uncertainties in this respect is likely to build up confidence and attract rather than deter foreign investors. β 5 β concluding remarks i have spoken on the monetary relations between the euro zone and the countries of central and eastern europe. let me conclude by presenting some ideas about the relations between the european system of central banks ( escb ) and the central banks of the candidate member states. although candidate member states obviously cannot take part in escb meetings before their accession to the european union, it could be useful to invite the governors of the central banks of the β fast - track β countries once a year to attend a special meeting of the general council of the ecb. this would be similar to the current practice for the council of economics and finance ministers ( ecofin ). apart from that, the ecb staff could be asked to make a yearly assessment of the state of progress in applicant countries. finally,
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the governing council as part of a healthy decision - making process, it is also very important to us to preserve the collegiality of its deliberations. this is why we have chosen to publish accounts of our monetary policy discussions rather than minutes. decision - making by committee reflects more than the sum of the pre - established views of its individual members. views during the discussion can be β fluid β β which is after all exactly the purpose of discussing. moreover, once a decision is made, what matters is the shared commitment of the governing council, in its entirety, to fully implement all decisions that have been taken. we did not want the publication of the accounts to detract in any way from these two crucial aspects of collegial decision - making. in our view, providing a fair and balanced summary of the main arguments put forward was the best way to achieve this. and indeed, from this perspective our first attempt was successful. as the account of the january discussion shows, the final decision taken in the light of the discussion slightly modified the initial proposal under consideration. the council decided to accelerate and frontload the impact of asset purchases by increasing the monthly asset purchase volume to eur 60 bn, from the eur 50 bn considered initially. you will have noted that the language we use reflects our collegiate, consensus - oriented mode of discussion and decision - making. this includes qualifiers such as β broadly agreed β and β widely shared β which convey in broad terms the balance of opinion behind the assessment and arguments put forward. there is however no information to be extracted from the particular form of words used. the language should not in any way be construed in quantitative terms or linked mechanically to our policy decisions. bis central bankers β speeches finally, why do we not provide a vote tally? in line with our collegial approach, the governing council has an established tradition of taking monetary policy decisions by consensus, without recourse to formal voting and without qualifying the decisions in any particular way. there are of course occasions when forging a consensus is not possible, and then the council can take decisions by majority, be it small or large, as was the case with the january decisions. nevertheless, not publishing a voting record allows members to support the decision of the committee, even if they may have personally preferred a different course of action. conclusion let me conclude. enhancing transparency is a logical step for central banks facing an increasingly uncertain environment. in different ways all major central banks have moved
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##s. our monetary policy must now be guided by confidence and patience : confidence that we are making steady progress in bringing inflation down towards 2 % by 2025 ; and patience that interest rates will remain stable at their current level for the time still needed to pass them on in full. page 2 of 12 1. 1 enhanced profitability and solvency there can be no doubt that european banks are generally benefiting from higher key interest rates, although there is a certain time lag for french banks due to their business model. the predominantly fixed interest rates on their assets ( 97 % of outstanding housing loans are granted at fixed rates ), and on regulated savings on the liabilities side, mean that financial conditions take longer to adapt in france. an automatic catch - up is expected over the next few quarters, as french banks continue to renew their assets and liabilities. this time lag has been attenuated by the decision to stabilise the interest rate on livret a passbook accounts, which was kept at 3 % on 1 august and should remain stable at this level until at least 1 february 2025. this is a very favourable decision for bank interest rate margins ; the counterparty, i should recall, is the accelerated growth in popular savings passbook accounts ( leps ), which were held by as many as 10. 3 million savers in september 2023, a number which should climb to over 12. 5 million next summer. this stabilisation of interest rates on the livret a passbook account is also intended to ensure the sound financing for the french economy β i'll come back to this point later. the financial results of the french banking sector have remained very robust : the 2023 half - year on half - year pre - tax earnings of the six largest banking groups grew by 2. 5 % to stand at eur 21. 7 billion and net banking income ( nbi ) has been trending upwards since early 2022. consequently, french banks'solvency ratio has improved once again, rising to 15. 6 % at 30 june 2023, compared with 15. 1 % at the end of 2022, well above minimum regulatory requirements. the results published by the four main french banking groups in the third quarter of 2023 ii point to a more mixed performance, with french retail banking revenues sometimes impaired by interest rate hedging strategies that can prove costly in the current interest rate environment. iii page 3 of 12 the rise in interest rates is also
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conflict when the real and financial cycles are in opposite phases. while lvrs have a financial stability goal, they have been an important consideration in our monetary policy assessment. we believe the dampening impact of lvrs on house price inflation and credit, and the diminished β wealth effects β on spending associated with it, have reduced consumer price inflation pressures by an amount similar to a 25 β 50 basis point increase in the ocr. in essence, the reduction in housing pressures allowed us to delay the tightening in interest rates, thereby reducing the incentive for any additional capital inflows into the new zealand dollar in search of higher yields. we have seen little financial sector disintermediation to date, and have indicated that the lvr speed limit is not intended to be permanent. it will be removed once housing market pressures have moderated and when we are confident there will not be a resurgence in bis central bankers β speeches house price inflation. we will be reviewing these criteria and their implications for lvr restrictions in next month β s financial stability report. my final comment is on liquidity risk liquidity risk and rollover risk are often the two major financial shocks that hit economies, and especially smaller economies, during episodes of financial market contagion. unsurprisingly, given current yield curves, debt issuance almost everywhere has shifted towards longer - term funding. we still have much to learn around liquidity risk and the emergence of β black holes β in funding and asset markets. liquidity risk is a key concern for countries with large external borrowing needs, especially if investors become skittish, trading volumes begin to thin and some price gapping occurs. left unabated, liquidity problems can mutate into solvency problems. the reserve bank introduced a prudential liquidity policy in april 2010. this policy includes minimum liquid asset requirements, and a minimum core funding ratio. like the basel iii net stable funding requirement scheduled for 2018, the policy requires a minimum proportion of total lending to be funded by more stable β core funding β instruments such as retail deposits and long term borrowing ( beyond one year ). in new zealand, the commercial banks β core funding ratios fell to around 60 percent prior to the gfc. today the banks β core funding ratios stand at around 85 percent ( against a minimum of 75 percent ) and the vulnerability of new zealand banks to developments in offshore wholesale funding markets has been substantially diminished. concluding comments one of the eight lucky signs of buddhist philosophy, dr
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strong housing demand can add to financial stability risks, especially when accompanied by high household indebtedness. housing market exuberance can be particularly problematic when interest rate responses are not warranted because economic growth is well below potential, and inflation in factor and product markets is benign. macro - prudential policies can be helpful in addressing financial stability concerns in such circumstances. but the introduction of macro - prudential policy requires policy makers to be clear about its goals, the duration of the measures, and how such measures might interact with monetary policy. the reserve bank introduced macro - prudential policy in the form of speed limits on loan - tovalue ratios ( lvrs ) in the residential housing market, on 1 october 2013. house prices β which were already significantly overvalued based on historical and international indicators β were accelerating rapidly in our two largest cities ( that account for around half of the national market ). in addition, household debt was at high levels, and banks were competing aggressively for mortgage lending to borrowers with small deposits. at the time, annual consumer price inflation was running at 0. 7 percent, the exchange rate was strong, and the economy had a negative output gap. it was not appropriate to raise interest rates, but the potential for further rapid house price inflation was considerable as sizeable supply - demand imbalances seemed likely to continue for several years. we introduced a requirement that banks reduce their high lvr lending ( defined as lvrs over 80 percent ) to an average of no more than 10 percent of their mortgage commitments, and made this a condition of bank registration. the measure led to a significant reduction in high - lvr lending, a decline in house sales, and fall in house price inflation. while other factors, such as subsequent interest rate increases over the period march 2014 to july 2014 are also helping to constrain demand, annual house price inflation fell from around 10 percent to 5 percent currently, despite high levels of net immigration. we established clear and separate primary objectives for monetary policy and macroprudential policy. these primary objectives are price stability and financial system stability respectively. there is an appropriate role for coordinating the use of monetary policy and a macroprudential policy instruments provided they both affect outcomes relevant to the achievement of both policy objectives. this condition is likely to be met when the real and financial cycles are in sync and each policy can allow for the complementary effects of the other. the two policies will be in greatest potential
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benoit cΕure : towards the retail payments of tomorrow - a european strategy speech by mr benoit cΕure, member of the executive board of the european central bank, at the joint conference of the european central bank and the national bank of belgium on β crossing the chasm to the retail payments of tomorrow β, brussels, 26 november 2019. * * * europe has made important progress towards a true banking union in recent years. we now have a single banking supervisor for significant institutions, a single framework for resolving failing institutions, a single fund to finance those resolution activities, and we will soon have a single backstop for that fund. there are also renewed hopes that political negotiations could soon begin on a european deposit insurance scheme. the european commission has also launched an ambitious agenda for creating a capital markets union. although the pace at which co - legislators, and member states in particular, have progressed on individual commission initiatives has often been sluggish, the recent establishment of a high - level expert group might help overcome the remaining impediments and reinforce efforts to make european capital markets deeper and more liquid. 1 step by step, we are improving our financial structures to support a single market of half a billion consumers, underpin the stability of our single currency and channel savings towards financing sustainable growth. one area that has received less attention from policymakers in recent years, however, is the european retail payments market, in particular point - of - sale and online payments. it is true that a lot has been achieved at the back - end of european retail payments systems, most notably under the umbrella of the single euro payments area, or sepa. sepa allows payments to be processed across borders at the same cost, and as efficiently and safely, as national payments. more recently, the eurosystem has also introduced target instant payment settlement, or tips. this service, which was launched a year ago, enables payment service providers to transfer funds to their customers in real time, around the clock, every single day of the year. and it settles the payments in central bank money. but progress at the back - end has not translated into similar progress at the front - end, which remains fragmented, with no european solution emerging for point - of - sale and online payments. national providers in particular have not been able, or willing, to act in a pan - european manner. 20 years after the introduction of the single currency, we still do not have a european card scheme. ten european countries currently have
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for price developments are broadly balanced. our monetary analysis paints a picture consistent with price stability. in particular, the underlying pace of monetary expansion remains subdued. loan dynamics are also subdued as a result of weak demand for credit but also restrictions on the supply of credit in some euro area countries. bis central bankers β speeches 2. outright monetary transactions ( omts ) let me now explain the decision announced by the ecb β s governing council in september on outright monetary transactions. the impact on financial and monetary conditions of past reductions in key ecb interest rates differed considerably within the euro area. for example, in some countries, following cuts in key ecb interest rates, the rates charged by the banking system for credit to the real economy have declined only a little, if at all. in other countries, ecb rate cuts have been fully passed through. one reason for this difference is that the cost of bank credit to firms is inevitably linked to the cost of market funding for the banks themselves. if there are fears about potential destructive scenarios, the cost of funding for banks can be affected asymmetrically across the euro area. this means that two firms that are otherwise identical and have the same creditworthiness have benefited to a different extent from past cuts in key ecb interest rates, merely because they are located in different countries. it is that distortion in financing costs that hinders the smooth functioning of credit markets and the transmission of monetary policy. it is that distortion which keeps some countries in what i have previously described as a β bad equilibrium β. and it is that distortion which falls clearly within our mandate to address. to counter the impairment of monetary policy transmission and to preserve the singleness of the ecb β s monetary policy, the governing council decided to undertake outright monetary transactions. omt interventions in government bond markets provide a fully effective backstop to avoid destructive scenarios that might threaten price stability in the euro area. the aim is to ensure that the ecb β s monetary policy stance is transmitted more evenly to the real economy across euro area. the ecb will conduct omts if and as long as countries comply with strict and effective conditions attached to an appropriate programme via the european financial stability facility and the european stability mechanism. conditionality preserves the primacy of our price stability mandate and ensures that omts will not compensate for a lack of fiscal consolidation. conditionality in particular preserves the incentives for governments to continue with economic and fiscal adjustments. and only if conditionality is fulfilled will the omts be
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. similarly, ensuring competition also requires that the national commission on markets and competition be equipped with sufficient human and technical resources. this is especially important in a context of accelerated technological change that can increase market power at some firms. go pinath et al. ( 2017 ) and garcia - santana et al. ( 2020 ). albrizio et al. ( 2023 ). bardhan ( 2002 ), mora - sanguinetti and perez - valls ( 2020 ), de lucio and mo ra - sanguinetti ( 2021 ), de lucio and mo rasanguinetti ( 2022 ), mo ra - sanguinetti ( 2022 ) and mo ra - sanguinetti et al. ( 2023 ). almunia and lo pez - ro driguez ( 2018 ). 3 human capital the level of human capital has proven a crucial factor in driving innovation and business growth. for example, r & d & i investment in european countries with a higher level of human capital ( based on the numeracy scores under the programme for the international assessment of adult competencies ) is on average 1 pp higher than in spain. this is not surprising, since the quality of the workforce and their technological and digital skills are essential foundations for the absorption of knowledge and the innovative capacity of any economy. despite a notable improvement in recent decades, the educational attainment level of employers, the self - employed and employees in spain is lower than the euro area average. according to eurostat data, in spain, 35. 5 % of the self - employed, 34 % of employers and 29. 6 % of employees had a low educational attainment level in 2023 q2. these figures are well above those observed in the euro area as a whole ( 20. 1 %, 19. 4 % and 18. 6 %, respectively ). the recent increase in interest in pursuing vocational training after secondary education is encouraging, but the new vocational training law, which established the dual model, poses a challenge. in particular, the new law is aimed squarely at increasing the proportion of in - company work experience, tasking firms with offering a significant number of apprenticeship opportunities. the success of this initiative will depend on effective collaboration between the business sector and educational institutions. turning to universities, the relatively low share of graduates in science, technology, engineering and mathematics continues to stand out. according to eurostat data for 2021, 24 % of spanish students in tertiary education are enrolled in a
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prompting firms to increase their investment and productivity. our estimates suggest that the greater the complementarity of public investment with private investment, the greater the economic impact, such that over a period of five to ten years, the impact on activity may be 1. 5 to 2 times greater compared with a lower level of complementarity. 11 see, fo r example, the assessment o f the effectiveness o f tax incentives fo r r & d & i in the united kingdo m ( guceri and liu, 2019 o r dechezlepretre, einio, martin, nguyen and van reenen, 2023 ), canada ( agrawal, ro sell and simco e, 2020 ) and the united states ( rao, 2016 ). blo o m et al. ( 2019 ) o n the general design o f public measures, and akcigit et al. ( 2021 ) o n the appro priate allo cation of grants fo r basic research, co nsidering the co mplementarities with applied research. alo nso and matea ( 2023 ). do minguez - diaz, hurtado and menendez ( 2023 ), banco de espana wo rking paper, fo rthco ming. analysing the private sector tenders linked with the ngeu programme so far, the allocations are comparatively more biased towards relatively large firms. 12 large firms tend to be more productive, so this should have a positive economic impact in the short term. but there is also an opportunity cost, since supporting smaller firms could speed up their development and make a positive contribution to aggregate investment in the long term. moreover, the available evidence suggests 13 that structural reforms that lower the barriers to competition in product markets and ease certain labour market rigidities can magnify the expansionary effect of the european funds ( fiscal multiplier ) in the medium and long term. overall, according to the european commission, by mid - 2023 almost 60 % of the reforms scheduled in spain had been deployed, but the investment implemented was less than 10 %. in this respect it would be desirable for the time frame to be extended, so as to ensure the optimal effectiveness of the ngeu programme. moreover, optimising the impact of ngeu requires undertaking real - time assessment that would enable identification and correction of any possible shortcomings that might arise, in terms of project selection and execution and of the design
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economic governance and establishing the european stability mechanism, the single supervisory mechanism and the single resolution mechanism. these are important first steps in improving our toolkit for crisis prevention and crisis management, but further progress is needed. in the nearer term, we should move towards completing europe β s banking union through a common backstop for the single resolution fund as well as a roadmap towards a european deposit insurance scheme. both are essential for creating a truly single banking system to mirror our single currency. both are also crucial for underpinning the credibility of the banking union and achieving its initial promise of breaking the bank - sovereign nexus, making the financial system more resilient and protecting taxpayers β interests. in addition, we must look beyond the banking sector and make progress in developing a capital markets union to enhance further the scope for cross - border private risk - sharing. it is also essential to prevent imbalances from developing into future crises. we need a new convergence process based on the capacity of our economies to withstand shocks and recover from them quickly. this implies not only establishing a more robust financial system ; it also requires stronger governance of structural reforms and tighter control of national fiscal policies. to ensure that member states can adjust to economic shocks, whatever their size, once we achieve greater convergence we will also need to add a layer of fiscal stabilisation at the european level. taken together, these steps towards completing europe β s economic and monetary union would help the euro area not only to survive, but also to thrive and prosper. bis central bankers β speeches
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well. recent estimates of international institutions point out a prolonged period of recession in developed economies and a sharp slow down in growth rates of developing economies. addressing these challenges, g - 20 summit held in brazil on 8 - 9 november 2008, issued a communique that included the following statement : β we affirmed our determination to take all necessary steps to foster non - inflationary growth in a stable and sustainable manner according to the needs and available instruments in our respective countries, including through monetary and fiscal policy. β distinguished guests, as concerns over inflationary pressures have subsided all over the world, maintaining the smooth functioning of financial system and efficiency of credit markets has become the main priority of policy makers. it will be proper to evaluate the recent developments in turkish economy in this perspective. in turkey, the banking system has been relatively prepared for the current crisis in terms of foreign exchange liquidity. its foreign exchange short position is also well contained. foreign exchange position of the public sector is almost negligible. the household sector is net creditor in terms of foreign exchange, while real sector is net debtor. since securitized products are rarely used in the turkish banking sector, the ongoing financial turmoil has not put a marked pressure on local banks through that channel. current account deficit, historically a source of vulnerability for the turkish economy, is likely to experience a sharp drop in the upcoming period due to correction in commodity prices, slow down in economic activity and depreciation in new turkish lira. still, extraordinary fluctuations in global liquidity conditions have adversely affected turkey like other countries, which are sensitive to international financial developments. at this point, i would like to emphasize that we will continue to take the necessary measures to contain the adverse effects of the global financial turmoil on the domestic economy, provided that they do not conflict with the price stability objective. the general framework of the central bank β s liquidity management is fairly flexible and wellstructured to fulfill its lender - of - last resort role and meet both new turkish lira and foreign exchange liquidity requirement of the banking system effectively. we will not allow any setback in new turkish lira money markets and will ensure smooth operation of payment system. in this context, judging that inflation will display a more rapid fall than envisaged before, the monetary policy committee has decided to lower the borrowing rates by 50 basis points on november 19, 2008. in addition, the margin between the lending and borrowing rates was reduced by a further 50 basis points
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. but to set a higher requirement if we have doubts about : the home resolution strategy, the availability of a surplus at the top of the group or a lack of reciprocity in mrel - setting in other jurisdictions ( that is others all set at the 90 % end of the range ). we expect to say more about surplus mrel and the form it should be held in to be readily available when we come to finalise our internal mrel policy next year. another important objective for us in setting policy on internal mrel is to avoid any distortion in the sequence of loss absorption between operating companies ( opco ) and the group holding company ( holdco ). we require uk banks to issue external mrel out of their holdcos, structurally subordinated to liabilities at the opco. the issuance proceeds are then onlent to the opco as internal mrel broadly mirroring their external form, for example : tier 2 could be onlent as tier 2, at1 as at1 and senior debt out of holdco would be downstreamed as an internal debt instrument sitting senior to capital instruments but junior to operating liabilities in the opco. we need to be sure that as losses are incurred in the operating company they are absorbed in an order that follows the opco creditor hierarchy and does not bypass certain instruments. the aim with a single point of our starting point for calibrating internal mrel for ring - fenced bank sub - groups would be 90 %, with the possibility that this could be scaled down if there are sufficient readily deployable resources. all speeches are available online at www. bankofengland. co. uk / speeches entry bail - in strategy, as the name suggests, is only to put one entity at the top of the group into resolution, preferably a holding company which is only used for issuing capital instruments to the market and otherwise has no or limited operating liabilities. write down or conversion of internal mrel instruments via contractual triggers will then allow operating companies lower down the group to be recapitalised automatically without putting them into resolution. but legacy non - equity capital instruments in opcos without the requisite contractual triggers could cut across this. we do not want these to be spared bearing losses for want of a trigger. and so, we are clear that such instruments should not count as mrel beyond 31 december 2021 and if not matured by then we will work with firms to remove them if they represent a barrier to the
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collective participation in fx markets. and that is where we need more of you sign up to the global code. i mentioned earlier that there were over 950 public commitments to the code on the global index. but only 85 of those are from the buyside β and only a handful more represent platform, infrastructure or technology operators ( chart 6 ). the gfxc has recognised some of the practical challenges faced by smaller firms when signing up to the code, and has prepared new material to help ease this process. 17 but we need more of the largest firms too : 17 of the largest 30 global asset managers are still not signed up ( table 2 ). that β s $ 22 trillion of investors β funds without a voice in the use and development of the code. chart 6 : public commitments to the fx global code18 source : global index of public registers as of 9 september. signing up to the foreign exchange global code should be high on the agenda for the ceo of every major asset management firm. it deepens trust : between you and your clients, your counterparties and your regulators. it strengthens corporate governance : providing a ready - made blueprint for best practice within your firm. that is especially true for uk firms, which will fall under the senior managers regime from the end of 2019. behaviour that is in line with the code will tend to indicate a person subject to the regime is meeting their obligation to observe'proper standards of market conduct.'and the code empowers your trading teams to demand the best from others in the market, even β or perhaps especially β when fx is not your core business. all of that means a stronger foreign exchange market. but it also means better returns for your investors β so it β s good for the bottom line. https : / / www. globalfxc. org / education. htm? m = 71 % 7c433 β buy - side β category includes : asset managers, corporate treasury departments, pension funds, insurance companies, quasisovereign or supranational institutions, and sovereign wealth funds. all speeches are available online at www. bankofengland. co. uk / news / speeches conclusions let me conclude. in many ways, the fx market is in great shape. it β s informationally efficient, resilient, and a cauldron of technological innovation. that technology is bringing many new benefits : wider access, cheaper prices, better services. but we need to ensure those benefits
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corporates, on their part, have shown a greater sense of responsibility in the use and repayment of the borrowed funds. a noteworthy aspect is that 4 / 6 under current guidelines relating to external commercial borrowings, indian corporates have been able to borrow significant amounts from overseas directly, based on their own credit standing. in this context, it would be useful to recall some of the important policy initiatives of the rbi relevant to bank - corporate relationship. dr. rangarajan β s monetary policy of april 1997 announced a package of measures permitting multiple banking arrangements for the corporates and providing greater operational freedom to the banks. dr. jalan β s policy pronouncements followed through this initiative with development of the money market, move towards universal banking and above all, urging the banks and corporates to put in place sound risk - management systems β particularly for market risks. in 2003, rbi issued a fair practices code to be followed by the banks which aimed at making them more responsive to the borrowers and enhancing the confidence of borrowers in the banks as a source of funds. the procedure for declaring borrowers as " wilful defaulters " has been streamlined so as to afford full opportunity to the corporates to present their viewpoint before so classifying them. recent developments that warrant a careful redesign of the bank - corporate relationship include financing by multiple banks, through several instruments including investments, and access to a wider choice of sources of finance for corporates such as capital markets and external financing. since such choices nudge towards transaction - based banker - customer relationship, these could impinge on the access to the information required by the bankers for financial assessment as also on the ability of corporates to get an assured and appropriately priced financial package. perhaps there is a need for supplementing transaction - based relationship between banks and corporates with a more active and meaningful dialogue between them. i am sure such meetings do take place even now, but it is worth exploring whether the process needs to be strengthened. in this regard, there may be an advantage in industry bodies like ficci and iba embarking upon a review of the existing practices of dialogues between the banks and their corporate borrowers to ensure and enhance trust, transparency and timeliness β the three " t " s of banking. such a review could perhaps also promote healthy competition amongst banks and add to the comfort of the corporates too. the corporate debt restructuring mechanism ( cdrm ), which became operational since march 2002, is another platform for banker -
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##ed economists until john maynard keynes offered an explanation that was to influence policy practitioners for generations to come. he argued that, contrary to the tenets of smith and his followers, market systems did not always converge to full employment. they often appeared to settle at an equilibrium in which significant segments of the workforce were unable to find jobs. in the place of smith's laissez - faire approach arose the view that government action was required to restore full employment and to rectify what were seen as other deficiencies of market - driven outcomes. a tidal wave of regulation soon swept over much of the american business community. labor relations, securities markets, banking, agricultural pricing, and many other segments of the u. s. economy became subject to the oversight of government. the apparent success of the economy during world war ii, which operated at full employment in contrast to the earlier frightening developments during the depression years, led to a considerable reluctance to fully dismantle wartime regulations when the hostilities came to an end. however, cracks in the facade of government economic management appeared early in the post - world war ii years, and those cracks continued to widen as time passed. at the macro level, the system of wage and price controls imposed in the 1970s to deal with the problem of inflation proved unworkable and ineffective. and at the micro level, heavy regulation of many industries was increasingly seen as impeding efficiency and competitiveness. by the early 1980s, the long - prevalent notion that the centrally planned economy of the soviet union was catching up with the west had begun to be discredited, though it was not fully discarded until the collapse of the berlin wall in 1989 exposed the economic ruin behind the iron curtain. 1 / 6 starting in the 1970s, u. s. presidents, supported by bipartisan majorities in the congress, responded to the growing recognition of the distortions created by regulation, by deregulating large segments of the transportation, communications, energy, and financial services industries. the stated purpose of this deregulation was to enhance competition, which had come to be seen as a significant spur to productivity growth and elevated standards of living. assisting in the dismantling of economic restraints was the persistent, albeit slow, lowering of barriers to cross - border trade and finance. as a consequence, the united states, then widely seen as a once - great economic power that had lost its way, gradually moved back to the forefront of what joseph schumpeter, the renowned harvard professor,
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assets is another challenge for regulators given the risks they pose for consumer protection and anti - money laundering. to address these risks adequately, the digital and global nature of crypto - assets calls for an international approach. * * * cooperation is all the more necessary as the major financial centres, including paris and hong kong, are highly interconnected. i believe that paris today has all the attributes necessary to become the pre - eminent financial trading and financing hub for continental europe. some of the world β s biggest banks, asset managers and insurers are already preparing for life after brexit and steering their european operations away from london to our capital. paris is already home to four of the eight 1 / 3 bis central bankers'speeches global systemically important banks in the euro area, in addition to being number one in the region in insurance and asset management. recent regulatory initiatives have made paris even more dynamic. capitalising on the reform of negotiable european commercial paper ( neu cp ) in 2016, a number of very innovative projects have been launched : for instance, the french telecoms company orange and the fintech setl have jointly set up a new central securities depository ( csd ) called id2s for the neu cp market, using blockchain technology. paris is also at the heart of cross - border initiatives, making the european financial market more integrated. the market exchange operator euronext is continuing to expand its federal model and in november 2017 acquired the irish stock exchange. the csd euroclear is also committed to fostering common infrastructures, and is even looking beyond europe with partnerships in the united states with dtcc or in asia thanks to bond connect. building on this comprehensive financial ecosystem, paris has also been one of the principal supporters of the renminbi β s move towards internationalisation. as of today, paris is indeed the leading continental european centre for deposits and bond issuances in rmb. this support was embodied and exemplified as early as 2014 with the signature by the banque of france of two memorandums of understanding with the hkma and the people β s bank of china. * * * cooperation will also prove invaluable in the face of the uncertainty caused by structural challenges. a first structural challenge is the digital revolution. the digital revolution is being fuelled by a wave of cutting - edge technologies, but also by the surge of new players. this new competition is being driven by fintech start - ups, but
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##ully and successfully in so many β battlefields β. wim was not only a great central banker. he was not only a great president of the european central bank, making history in launching the single currency. he was a great friend, a great european friend. the dutch writer cees nooteboom says in β the question of brussels β : β how to become a european? in starting by being one, a quality that we can acquire, for instance, in being born in the netherlands. the same result could be obtained, according to some, in sicily, in east prussia, in lapponia or in wales, but being myself a european of the dutch kind, i prefer to stick to this particular kind of european ( β¦ ). in fact if i am a european, it probably means that the european wealth of different cultures influences my dutch specificity β. wim was a great european, fully open to our common cultural wealth. fluent in english, german and french, as well as dutch of course, he was a man of culture, a man of great intellectual and moral elegance. among his many friends, his extreme kindness, his wit, his humour, his smile were legendary. his openness to others and his simplicity were always appreciated by all, particularly by the staff of the ecb. he gave a lot to colleagues and friends only out of the goodness of his heart. gretta, i am particularly fond of one memory of wim, an event which i must relate because it says so much about him. the two of you were in aachen when wim was to receive the charlemagne prize. there was he, that tall fellow with his magnificent mop of hair and there were you, a picture of supreme elegance. but you had a problem walking on the cobblestone streets of aachen β so wim gave you his shoes, carried yours and walked in his socks through the streets with his prize around his neck. simplicity, imagination, humour and great kindness are the best words to define our dear friend wim, who will be with us, with all of us, forever, as chateaubriand said, β not defeated, only invisible β. i would like to give the last word to wim himself. at his farewell celebration on 22 october 2003 he said : β all in all, i had the privilege of being part of history. being responsible for the introduction of a new currency is the dream of any central banker, i believe. a
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a common diagnostic tool to help us improve corporate governance standards. each country in the region is expected to build on these standards to create their own corporate governance framework, which should clearly articulate expectations on ( among others ) the fitness and propriety of the board, checks and balances, and transparency. the fundamental principle is that the tone of good governance should be set and come from the top. it should remain the highest priority as it emphasizes the importance of having β fit and proper β standards for individual board members. these standards, we believe, should put as much weight on integrity, as on knowledge, expertise and competence. fitness and propriety are also displayed in the exercise of independent and objective judgment. the β state β of independence is defined by parameters on term limits, a cap on the number of concurrent independent directorships and the challenge of a seemingly limited number of qualified independent directors. systems of checks and balances should likewise be deeply embedded across all levels in the company. unquestionably, an environment that fosters transparency should be the new norm. a system for cooperation and collaboration among government bodies, regulators, and supervisors should be in place to ensure reasonableness of disclosure requirements. we must display the will and capacity to implement standards and take enforcement actions, if needed. a business model that often draws discussion and one that is almost always associated with our region β is related party interest. while we recognize that such a corporate structure has inherent risks, we must also be mindful that synergies can lead to success of individual companies. it would therefore be beneficial to set higher oversight and control standards. this, to address conflict of interest concerns and propriety of related transactions. our own efforts at the bangko sentral ng pilipinas with respect to our supervised entities follow the global thrust closely, while at the same time being mindful of emerging domestic industry concerns and unique situations in our legal and regulatory environments. however, regulation chris razook, corporate governance challenges facing southeast asia, the ethical boardroom, spring 2015. in www. ifc. org last accessed 11 november 2015. gianni de nicolo, luc laeven, and kenichi ueda, corporate governance quality : trends and real effects imf working paper series wp / 06 / 293. december 2006. oecd, reform priorities in corporate governance in asia : taking corporate governance to a higher level ( 2011 ), http : / / www. oecd. org / corporate / ca
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program. i hope therefore to see more banks and other institutions support this crucial undertaking not only as a matter of corporate social responsibility, but as a legitimate and sustainable business opportunity that should make our economy stronger. we also know that an inclusive financial system makes for greater stability. ladies and gentlemen of the banking community. i also call on you to make sure that your banks and all your branches serve the public by exchanging old banknotes identified for demonetization with new generation banknotes even if they are not your regular clients, even if they are sidewalk vendors exchanging just a handful of old banknotes. this is financial inclusion at its best. the bsp also pins its hope on gaining mileage on its financial inclusion targets with the launch of our national retail payments system project. the nrps is envisioned to provide an accessible, inclusive and safe electronic payments system using inter - operable payments network that financially links the country β from batanes to sulu β 24 / 7. amid all these exciting developments, we have also introduced the financial consumer protection framework to ensure that new participants to the financial system are provided sufficient guidance and protection. this calls for pro - active programs for consumer education, transparency and providing necessary information for redress mechanisms. i look forward to the active participation of banks in this activity. indeed, we have a full agenda that will help maintain the strength and stability of our banking sector. β how central banks influence interest rates β speech by mr ΓΈystein olsen, governor of norges bank ( central bank of norway ), at the centre for monetary economics ( cme ) / bi norwegian business school, oslo, 1 october 2015. http : / / www. bis. org / review / r151002b. htm bis central bankers β speeches in this connection, the entry of new foreign banks under our liberalized regime should further enhance the quality of competition among our banks and nurture innovations that will ultimately benefit the general public. this reminds me that during our co - chairmanship of the financial stability board consultative group for asia, then vice minister masamichi kono of the japan fsa, advised that we should enjoy a cup of matcha or green tea to get us going through the day and that we should take mugicha at night to relax. in the same spirit, we can all enjoy ginseng tea or maesil cha from south korea, oolong tea from taiwan or teh tarik from singapore. all of these are said to
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individual short runs in which pressures in labor and product markets help to shape price dynamics. in the world in which we live, it seems natural to expect, as others have argued, that the greater integration of product and financial markets would have exerted some downward pressure on inflation. i cannot look back at the experience in the united states over the past decade without discerning the imprint of such forces. the opening up of china and india, in particular, represents a potentially huge increase in the global supply of mainly lower - skilled workers. and it is clear that the low cost of production in these and other emerging economies has led to a geographic shift in production toward them ; from a u. s. perspective, the ratio of imported goods to domestically produced goods has risen noticeably in recent years. however, the extent of the disinflationary forces let loose by this shift in the pace of globalization is less obvious. the united states is more open, but it is also large in size and scope. many u. s. goods and most services are still produced domestically with little competition from abroad. in addition, the significant expansion of production in china and elsewhere has put substantial upward pressure on the prices of oil and other commodities, many of which are imported for use as inputs to production in the united states. while we can point to types of goods for which prices are restrained by forces from abroad, the net effects of globalization on domestic inflation of all goods and services need not even be negative, especially in today β s environment of strong global growth. one challenge in assessing the effect of increased globalization is the paucity of empirical research on this issue, which is understandable given the shortness of the span over which these forces have these views are my own and not necessarily those of other members of the board of governors and the federal open market committee. been particularly acute. nevertheless, the existing research does highlight several channels through which globalization might have helped to hold down domestic inflation in recent years. these channels include the direct and indirect effects on domestic inflation of lower import prices, a heightened sensitivity of domestic inflation to foreign demand conditions and perhaps less sensitivity to domestic demand conditions, downward pressure on domestic wage growth, and upward pressure on domestic productivity growth. let me summarize the empirical evidence from work on u. s. inflation my colleagues and i have done at the federal reserve board, as well as from our readings of other studies. in the united states, the increase in core import prices since the mid
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ms. rivlin discusses how economists might be helpful in the current and upcoming macroeconomic policy process remarks by the vice chairman of the board of governors of the us federal reserve system, ms. alice m. rivlin, at the annual meeting of the eastern economic association in washington, d. c. on 4 / 4 / 97. i am delighted to be here today with such a large group of my fellow economists. economists are a very diverse group, but they share a basic kit of analytical tools that shape the way they approach problems. economists share a useful shorthand vocabulary - - sometimes disparaged by others as jargon - - that makes it easier to communicate with each other. they share a sense of what kinds of things are known about how economies work and, far more important, an appreciation for how much is not known about the workings of any complex human system, including the economy in which we are all living and working right now. most importantly, economists share a sense of excitement that others often find hard to fathom, about unraveling the many puzzles that abound in economic analysis. at the moment, as a relatively new governor of the federal reserve, i am particularly glad to be in a group of economists, because i can be quite sure they don β t share the popular stereotype of a fed governor. this stereotype has several elements : any fed governor or central banker is an inflation freak who thinks reducing inflation should be the only objective of monetary policy and a zero inflation economy would be heaven. any central banker has a firm view of exactly what growth rate the economy ought not to exceed and how high the unemployment rate ought to be to avoid inflation - - that something called the nairu is engraved on a stone tablet somewhere high on a mountain top and all we have to do is find it. moreover, this stereotypical central banker knows exactly what monetary policy ought to be in order to keep the economy on the desired track. this stereotype leads otherwise quite intelligent members of the press to believe that if central bankers don β t reveal this secret blueprint, it β s because they are being deliberately obscure and inscrutable. the media β s sacred calling is to interpret what central bankers really meant but out of sheer perversity did not choose to say. so it β s a pleasure to be in a room full of economists who know that : while the fed has access to all the latest statistics and an excellent staff to analyze them, it has not
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and capacity to act in cases of market turbulence. but i duly recognize there are other proposals on the table as well. one is to change the name of the esm to european monetary fund, emf. would this be justified? to my mind the nameplate is less important than the substantive improvements in the functioning of the esm. besides, the esm has become a positive, solid brand, based on the high integrity and professional quality of the institution and its staff, under the competent leadership of its managing director, klaus regling. another reform proposal relates to the institutional dimension. to increase accountability, the european commission has proposed to transfer the esm into the eu treaty and put it under parliamentary control of the european parliament, in a rather similar way as the ecb is β mostly focusing on the full right of demanding and receiving information. on the other hand, the commission proposal would maintain the key policy decisions and executive functions in the hands of the board of governors. this includes the decisions to approve of conditional financial programmes and the appointment of the managing director. hence the commission proposal is actually less of a great federalist leap forward than some fear and others wish. in principle, there are two alternative ways of making progress in european cooperation, either by the well - tested community method or by the intergovernmental method, which some years ago was described as the union method. for the eu to continue making legitimate progress in integration, in my view it is necessary to take good care of the community method, since it is able both to provide the effective capacity to act and the legitimacy to take decisions. it is based on the commission β s right of initiative, its independence and professionalism, the qualified majority rule in the council and co - determination by the european parliament. it enables the union to take decisions and keeps all member states β including the small states β on board. revisions of fiscal rules : the expenditure rule let me turn to my third and final subject : the revision of fiscal rules, in particular by introducing the expenditure rule into the eu fiscal rules. in the future, the economic and monetary union can work smoothly only if the public finances of all member countries are credibly on a sustainable footing. a combination of fiscal policy rules and market discipline related to government borrowing is necessary to ensure this. fiscal rules should be sufficiently simple to ensure that, in normal circumstances, we can be certain in advance that they will be adhered to when budgets are prepared. the expenditure rule can
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terms of macroeconomic policy, the tide has now turned. after a decade of low inflation, we moved last year very quickly to a period of high inflation. the inflation surge was driven by multiple factors : quicker than anticipated recovery from the covid19 pandemic, global supply chain bottlenecks exacerbated by renewed china lockdowns and, in the case of energy and food, russia's illegal war in ukraine. the ongoing monetary policy normalisation is a response to the dramatically changed inflation outlook. in the united states, the tightening of monetary policy began in march. so far, the fed has conducted two 75 basis - point hikes, placing the fed funds target range between 2. 25 % and 2. 5 %. it has also started to reduce its balance sheet. the ecb, in turn, announced in june its intention to raise interest rates in two instalments, first in july and again in september. in july, we raised the key ecb interest rates by 50 basis points. this was more than had previously been signalled, because the june inflation figures showed an even greater increase than we had anticipated, and so we determined that it 2 / 5 bis - central bankers'speeches was appropriate to take a bigger first step on the normalisation path. going forward, the ecb's interest rate decisions will be data driven, aiming for 2 % inflation in the medium term, in line with our strategy. let me next turn to central bank digital currencies. at the ecb, as in a number of other central banks across the world, we are looking into the possibility of introducing a cbdc, a digital euro. the investigation phase started in late 2021 and is expected to be concluded in october 2023. once the investigation phase is completed, we will decide whether to embark on actually building a digital euro. it is important to note that a digital euro would complement cash β not replace it β by allowing central bank money to be used in digital form also for retail purposes. we will continue to safeguard citizens'access to and the usability of cash across the euro area, even though its role as a medium of exchange has been diminishing rapidly, at least in some countries. a digital euro would give people an additional choice about how to pay and would make it easier to do so in an increasingly digital economy. it would expand the availability of digital central bank money beyond transactions between banks to include everyday peer - to - peer payments
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to help both authorities and financial institutions assess the impact of climate risks over the next 30 3 / 4 bis central bankers'speeches years. conclusion when we announced the pepp one year ago, the governing council declared that it would do everything necessary within its mandate and explore all options and all contingencies to support the economy through this shock. looking back at the past year, i think we can affirm that we have delivered on this commitment. but there is no room for complacency β the ecb will continue to deliver on its mandate and support the recovery with all appropriate measures. i now stand ready to take your questions. 1 see β ecb staff macroeconomic projections for the euro area, march 2021 β, ecb, 11 march 2021. 4 / 4 bis central bankers'speeches
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benoit cΕure : interview with radio classique interview with mr benoit cΕure, member of the executive board of the european central bank, and radio classique, conducted by mr nicolas pierron on 23 january 2017. * * * mario draghi, president of the european central bank, is to be investigated by the ombudsman of the european union, following a complaint from an ngo. he is suspected of entrusting the private sector with insider information in the context of a group called the g30. how do you respond to these allegations? the mere fact that those questions are being asked shows that we are transparent, since all meetings of the members of the executive board of the ecb with representatives of the private sector, whether bankers or not, are made public. as a matter of fact, my calendar, my diary, is published every month on the ecb β s website. as for the substance of your question, for us to be able to understand what is happening in the economy we have to meet private sector actors, including bankers. and yet, this has to be done in a transparent way, which is the case with the g30. so this won β t go any further? the ombudsman of the european union is pursuing the matter, she β s doing her job and we shall see what she has to say. but the same ombudsman, ms o β reilly, acknowledged that the ecb had made significant progress in its transparency and its communication policy, notably with the publication of the minutes of governing council decisions and also, as i said, with the publication of our calendars. so the ecb has made great efforts to be more transparent and to make its contacts with the private sector public. this is not a matter of pride, it β s completely normal. donald trump was sworn in on friday in the united states. his programme includes a sizeable fiscal stimulus, which is already pushing up interest rates in the us, bond rates. will this have an impact on europe? it is undoubtedly too early to judge the decisions of the new administration as it is only just beginning, but i would draw two conclusions. the first is that it is very important for us that financial conditions in the euro area remain appropriate for the euro area economy, i. e. that the euro area is protected from external financial shocks. for example, the rise in long - term interest rates observed since the end of last year has had a fairly
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both their short and long - term effects on banks and the real economy. repeated fears have been voiced from within the financial industry that the stricter basel iii regulations combined with the more far - reaching requirements for sifis will have the effect of restricting the credit supply. the basel committee has looked into this question and come to the conclusion that the drawbacks are outweighed by the advantages, namely the gain in stability and the reduced likelihood of future crises. a moderate increase in the cost of lending and minor losses in growth will thus not put at risk the supply of credit to the economy. pressing ahead with work on the various elements of the reform agenda in parallel harbours the risk that individual measures might conflict with each other. in our closely interlinked financial system, focusing on sector - specific measures can easily lead to unintended bis central bankers β speeches interactions occurring or even conflicting incentives being set. such a lack of consistency might lessen the desired effects of the new regulations or even negate them entirely. one possible instance of unwanted interactions is the combined effect of european banking regulation and the eu solvency regime for insurers. this is because banking regulation aims to place bank funding on a stable, that is a long - term basis, while, under certain conditions, the solvency regime gives preference to bank bonds with short maturities. capital requirements increase relatively sharply given longer duration of the bank debt securities held by insurance companies β at least when the standard formula is used. the outcome might be that insurers change their asset allocation to the detriment of bank debt securities. as insurers are among the most important investors in bank bonds, this could ultimately lead to an increase in banks β funding costs. within a single sector, too, different regulations can set conflicting incentives. one example of this might be the interplay between the eu crisis management directive and the scheduled liquidity ratio requirements. this is because the draft proposals of the directive provide for short - term liabilities being excluded from bail - in, thus setting incentive for short - term funding. this is diametrically opposed to the aim of regulating liquidity, which is to safeguard the maintenance of liquid funds even under unfavourable circumstances and for longer periods of time. of course, a final judgement on the effects of each of the regulatory initiatives can only be made when their precise details are known and as soon as robust empirical evidence is available. in the end, for the regulatory reforms to have their desired
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joachim nagel : the bundesbank perspective on the pfandbrief market speech by dr joachim nagel, member of the executive board of the deutsche bundesbank, at the tokyo pfandbrief investor seminar 2011, tokyo, 26 january 2011. * 1. * * welcome ladies and gentlemen first of all, i would like to thank the association of german pfandbrief banks for giving me the opportunity to present the bundesbank perspective on the pfandbrief market to you. the motto of this event, β the pfandbrief 2011 β return on investment in volatile times β, suggests what is going on in financial markets. from my point of view as a central banker it is too early to give the all - clear, but nevertheless measures were set in motion to overcome the financial crisis. when the us subprime crisis disrupted the global capital markets in 2007, the european securitisation markets were also affected. that is why the pfandbrief and other covered bonds played a central role in european monetary policy, not only as collateral but also during the covered bond purchasing programme. but first of all, i will comment briefly on the special role of the pfandbrief on the european covered bond market. 2. pfandbrief in comparison with european covered bond products european covered bonds are very heterogeneous. the reasons for this are different legal systems and different market standards or traditions in certain financing segments. though there is a trend towards separate covered bond laws in most european countries, there are significant differences in terms of scope. the german pfandbrief act has the broadest scope and it is the strictest in many areas. for example, there are no derivatives in the underlying and the loan - to - value rules are the most conservative. its simplicity and transparency make the pfandbrief the benchmark for european covered bonds. the cover pool of a pfandbrief is of extraordinary quality, since structured products are excluded and cover assets are separated in the so - called β cover pool register β. the cover assets contained in this pool serve first to satisfy the pfandbrief creditors, and in the event of a pfandbrief bank β s insolvency do not participate in the insolvency proceedings. in order to engage in pfandbrief business, a specific licence is required demanding that issuers provide evidence of their intention
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##ncies. of course, if the proceeds are to be used on the mainland, the moving of funds into mainland china will have to meet the requirements there. by the same token, banks can now also offer rmb financing to their clients, including enterprises which conduct direct investments under the pilot scheme for the settlement of odi in rmb introduced in january this year. as the pool of offshore rmb funds in hong kong continues to grow, there will be huge opportunities for financial institutions to take part in rmb financing as well as in the origination, distribution, investment and trading of rmb bonds. the second dimension is rmb trade settlement. the rmb trade settlement pilot scheme was introduced in july 2009. the initial scope of the scheme was rather limited. but in less than a year, the pilot scheme was expanded to cover enterprises in 20 provinces and cities on the mainland and their trade transactions with any parts of the world can now be settled in rmb. the expanded scope has led to a rapid growth in the transaction volume of rmb trade settlement in hong kong, which was increased from a monthly average of 4. 5 billion yuan in the first half of 2010, to more than 87 billion yuan in the fourth quarter, representing an almost twenty - fold increase during the period. to date, hong kong accounts for about 75 % of mainland β s rmb trade settlement. this clearly demonstrates the strong preference of market players for making use of hong kong β s platform for rmb trade settlement. the highly efficient and reliable rmb real time gross settlement ( rtgs ) system in hong kong has played a significant role here. we are the first and so far the only place outside mainland china that has developed a full - fledged rmb rtgs system, enabling us to handle the settlement of cross - border trade between the mainland and other economies in a safe and efficient manner. china is one of the biggest trading nations in the world. the potential for further increases in rmb trade settlement is considerable given that the current volume only accounts for a small fraction of total trade between china and the rest of the world. rmb trade settlement proceeds will represent an important and sustainable source of growth in offshore rmb funds in hong kong. the third dimension is rmb wealth management business. the rmb wealth management business in hong kong took off last year after the rmb clearing agreement was revised in july 2010. the rmb clearing agreement lays down the framework for rmb business in hong kong. i will
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customer ( kyc ), we can enable businesses to access financing more efficiently, minimise duplication of effort and improve customer experience. we are committed to leveraging technology to transform banking operations. for instance, by enabling more direct access to commercial credit reference data through cdi, we can enhance the speed and accuracy of credit assessments conducted by banks, facilitate smoother trade financing, and support the growth of businesses across various sectors. the fourth element centres around digitising supply chain and manufacturing platforms while connecting these isolated digital networks. the digitisation of supply chain and manufacturing platforms is essential to optimise operations and drive productivity gains. by embracing technologies such as the internet of things, blockchain and artificial intelligence, we can create a seamless flow of information, goods and services across the entire value chain. we can also enhance visibility and traceability throughout the supply chain by integrating and connecting siloed digital networks. this will enable businesses to collaborate more effectively, reduce costs, improve inventory management and respond more swiftly to changing market conditions. to achieve this synergy, we are also exploring the possibility of connecting cdi with the supply chain 2 / 4 bis - central bankers'speeches platform developed by the fung group, hoping to further digitise trade and trade financing through the use of innovative technologies. finally, the fifth element that i would like to talk about focuses on exploring more advanced digital payment options. as digital trade continues to evolve, it is crucial to embrace innovative payment solutions. by exploring innovations such as programmable money and smart contracts, we can help businesses reduce transaction costs, mitigate risks, and develop new business models. programmable money can enable automated and secure transactions with preset conditions, while smart contracts can ensure trust, efficiency and transparency in transactions. at the hkma, we are actively exploring payment innovations such as central bank digital currencies at both wholesale and retail levels through project mbridge and project e - hkd. these advanced payment options have the potential to further enhance hong kong's competitiveness in the global marketplace. now that i have introduced all five elements in digitising trade and finance, it is important to note that they are not isolated, but rather interconnected and mutually reinforcing. at the hkma, we are working hard to connect these key components through cdi, with a focus on achieving interconnectivity and interoperability. digitalisation of government services and open government data provide the foundation for enhanced collaboration and more seamless
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and the knowledge and skills of the population. the quality of education is critical in creating opportunities for growth and increasing real income. we need to improve the evenness of our education outcomes. globalisation and technology have widened the distribution of income within most advanced economies, including new zealand, over the past three decades. in the mid - 2000s we had greater income inequality than most oecd economies, and this is unlikely to have changed. the bottom income deciles are populated by those with lesser skills, and those who experience prolonged and recurrent spells of unemployment. addressing these groups would both promote productivity and reduce inequality. our education system is well regarded internationally. we rank 7th among 65 countries in the oecd β s programme for international student assessment that tests high schoolers β performance across reading, mathematics, and science. but, we have the greatest difference in reading performance between students from different socio - economic backgrounds out of all oecd countries, and the pisa scores for maori and pacific island students are much lower than the average for students of european descent. over the past 15 years, unemployment rates for maori and pacific islanders have been three times that for the european population. how can the reserve bank best contribute to new zealand β s economic prospects? there are two main ways. bis central bankers β speeches the first is by delivering price stability and reducing the risk of inflation surprises. price stability, and expectations that future inflation will be both low and stable, contribute to economic growth in several ways. they reduce uncertainty as to future inflation outcomes and assist planning and long term contracting. they enable producers and consumers to identify relative price shifts and allocate resources in response to shifts in demand. they avoid the distortions created by the interaction of high rates of inflation and the tax system that lead to higher effective rates of taxation. and they reduce the incentive for investors to acquire non - productive assets, such as investment properties, as hedges against inflation. research by the imf suggests that in industrialised countries the threshold level of inflation above which inflation significantly slows economic growth is estimated at 1 β 3 percent. 2 in considering inflation pressures the reserve bank closely examines recent developments in the economy, and the outlook for competitiveness, demand, and output growth and employment. in setting the official cash rate we aim to avoid excessive volatility in output growth, interest rates and the exchange rate. we seek to respond to changing conditions but avoid rushing into decisions that might need to be quickly reversed and in doing so
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more problematic : that is the investment income balance. this measures incoming earnings from the very limited amount of new zealand investment abroad against outgoing earnings from the much larger stock of foreign investment in new zealand. new zealand runs a large investment income deficit of around 6 β 7 percent of gdp, which is showing little sign of enduring improvement. indeed it will be difficult to improve this metric as that would require us to get our net external debt position on to a downward trend and that would require a significant change in historic patterns of inward and outward investment. these two components combine into the current account, which has been in significant deficit in new zealand for 40 years. that is not problematic in itself, but if it is consistently funding consumption rather than investment, then that cannot continue. the deficit worsened during the housing boom years of 2005 β 2008, sitting near 9 percent, a very deep deficit by oecd standards. interestingly, throughout the crisis we experienced little sign of financial market discomfort with that position. we are now experiencing a big improvement in the current account, reducing the deficit to 3 percent, but we believe it will deteriorate again as the recovery picks up. 3. our overall external imbalance years of running these external deficit flows means that we are now significantly in debt to foreigners : in plain terms, they have more than twice as much invested in nz ( $ 290 billion ) as we have invested overseas ( $ 125 billion ). this means the country is running a sizeable net investment deficit of around 90 percent of gdp. most of the debt inherent in this position is in the private sector, not the public sector. a significant proportion of this relates to the banking system which does most of the country β s offshore borrowing, effectively on behalf of households and businesses. most of it is currency - hedged, so we do not suffer major currency risks from it. the graph shows how the position has grown over the last decade. our forecasts see this external deficit continuing to grow. financial markets and credit rating agencies use a range of indicators to form their assessment of a country β s viability or fragility. at the moment most of the focus is on sovereign debt and the fiscal accounts. however as the recent credit downgrade of the government of spain showed, overall external indebtedness can play a role in this. new zealand is one of the very few developed counties with net external liabilities so high. the ubs country risk index mentioned above rates us rather higher in terms
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narrow list of complaints to which banks and insurance companies have agreed. in thinking about the statutory backing for the ombudsman β s office, it may be necessary to have a flexible legal framework where the foundations are enshrined in law, but scope and operational arrangements are set in regulations. independent governance is a second, critical design issue. ideally, the office of the financial services ombudsman should be independent of consumers and of the financial services industry, whose disputes are being handled. in deciding cases, the ombudsman also needs to be independent of the central bank, because the ombudsman is acting as an alternative to the courts. so it is helpful for the ombudsman office to have an independent board, with a balanced membership reflecting persons with an understanding of regulation, the financial industry and consumer protection. a third design issue revolves around the coverage of financial businesses. a significant number of complaints received by the ombudsman are outside its terms of reference. the office received 409 banking complaints which were outside its terms of reference in 2003 β 2012, 179 more than the qualified banking complaints it received for review. in 2011 β 2012, the office received 1, 173 enquiries regarding complaints outside the banking and insurance sectors. many complaints which fall outside the ombudsman β s terms of reference relate to bank fees and pricing of bank products and services, lapsed insurance policies, insurance premium charged, personal injury for motor vehicle accidents, credit union shares and loans, and general pain and suffering. expanding the ombudsman β s mandate to include credit unions, the unit trust corporation, pension schemes and mutual funds would go a long way in strengthening the credibility of the scheme. finally, in order to deliver on this expanded mandate the ofso would need to be better resourced with the skill sets and talent as its jurisdiction and workload grows. the staff complement in the ombudsman β s office are currently seconded from, or approved by, the central bank. once a statutory financial services ombudsman is established the ombudsman would appoint the staff who would work for the scheme and not be seconded from the central bank. the central bank and the ofso will be reviewing the draft report. once finalized and accepted, the final report will form the basis for a proposed policy document ( ppd ) on upgrading the regime of financial consumer protection. the ppd will serve as the starting point for initial discussions and
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the ofso remains the only financial ombudsman scheme in the caribbean and is a respected member of the international network of financial services ombudsman schemes. β’ of the 230 banking complaints which qualified for review under its terms of reference, the ofso resolved an impressive 98 per cent over the period 2003 β 2012. more than 45 per cent of these complaints, which were directed toward issues related to accounts transactions, card services and loans and credit, were settled within 90 days ; β’ of the 2, 076 insurance complaints which qualified for review under its terms of reference, the ofso resolved an equally impressive 97 per cent over 2005 β 2012. at least two - thirds of these complaints, mainly relating to undue delay in settling claims, inadequate settlement and denial of claims, were settled within 90 days ; β’ creation of the ombudsman β s office has catalyzed banks and insurance companies into strengthening their own internal dispute resolution mechanisms to better address customers β complaints. more than one - quarter of the complaints handled by banks were resolved by agreement between the two parties. in the case of bis central bankers β speeches insurance companies, more than two - thirds of the complaints were resolved by agreement between the insurers and clients. the ofso has, therefore, earned the right to begin the transition to a more prominent role in the country β s financial architecture. against this background, the central bank and the ofso commissioned mr. david thomas, who served as chairman of the international network of financial services ombudsman schemes and was the chief ombudsman of the financial ombudsman service in the united kingdom, to prepare a report on upgrading the existing regime of financial consumer protection in line with international best practice. we have received the draft report entitled β financial services ombudsman in trinidad and tobago : a strategy for the future. β the study highlights several issues which we need to take into account in crafting a financial ombudsman scheme that complies with the fundamental principles of independence, fairness, clarity of scope and powers, effectiveness and efficiency, and accessibility, transparency and accountability. please allow me to elaborate on what i consider to be some of the critical design issues, going forward. perhaps the first and most critical design issue relates to changing the voluntary nature of the financial services ombudsman regime to one under - pinned by legislative authority. the voluntary nature of the ombudsman scheme has restricted the jurisdiction of the office to a
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factors now need to be brought to bear on the goal of ensuring protein security for the indian economy. once again, my best wishes to prof. parikh and thank you all for listening to me.
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come to next year β s annual meetings in hong kong, you will all see for yourselves the realisation of the principle of β one country, two systems β in hong kong. in addition, i believe that the 1997 world bank / imf annual meetings will be an impressive event as a result.
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industrial revolution. these shifts in concerns and preferences have also affected the expectations that many people hold with respect to central banks. in february 2020, the ecb launched its β ecb listens portal β to gather feedback from the general public as part of its ongoing monetary policy strategy review. the ( non - representative ) results of this listening exercise indicate that many survey respondents assign high importance to the ecb considering issues that go well beyond a narrow interpretation of its traditional price stability mandate. while about a quarter of respondents indicated that the ecb should focus exclusively on price stability and leave other topics to democratically elected bodies, a significant number of respondents expressed the view that the ecb ought to play a more active role in tackling wider societal challenges, with the top priority given to climate change as well as growth and employment ( chart 3 ). chart 3 β ecb listens β survey : issues that the ecb should consider beyond price stability ( survey responses, % ) source : ecb listens portal. note : estimated percentage of respondents in each category ( sample size : 3, 614 ). results calculated by using a dictionary - based approach. categories are not mutually exclusive. civil society organisations ( csos ) drew attention to the ecb β s strategy review. some of these organisations, most notably greenpeace, called on the public to submit contributions to the ecb listens portal, offering standard answers that could be copied into the survey. overall, around 14 % of all responses were copy - paste answers provided by greenpeace. another 1 % came from other csos. as such, original answers amounted to 85 % of the sample. for most people, inflation today is mainly a concern related to asset prices rather than the prices of consumption goods ( chart 4 ). our survey suggests that many respondents, especially the younger generations, are particularly concerned about house prices, which are currently not part of the consumption basket that most central banks use to calibrate their policies. chart 4 β ecb listens β survey : categories of goods and services with the most impactful perceived change in price ( survey responses, % ) source : ecb listens portal. estimated percentage of respondents in each category ( sample size : 3, 879 ). results calculated by using a dictionarybased approach. categories are not mutually exclusive. civil society organisations ( csos ) drew attention to the ecb β s strategy review. some of these organisations, most notably greenpeace, called
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at : http : / / www. jstor. org / stable / pdfplus / 1942704. pdf? accepttc = true bis central bankers β speeches fsb ( 2011 ), β macroprudential policy tools and frameworks β. report to g20 finance ministers and central bank governors. available at : http : / / www. financialstabilityboard. org / publications / r _ 1103. pdf fsb ( 2013 ), β financial regulatory factors affecting the availability of long β term investment finance β, report to g20 finance ministers and central bank governors. available at : http : / / www. financialstabilityboard. org / publications / r _ 130216a. pdf gai, p and kapadia, s ( 2010 ), β contagion in financial networks β, proceedings of the royal society a, vol. 466, no. 2120, pp. 2401 β 2423. gordon, r ( 2012 ), β is u. s. economic growth over? faltering innovation confronts the six headwinds β, nber working paper series, no. 18315. group of 30 ( 2013 ), β long β term finance and economic growth β, group of thirty. available at : http : / / www. group30. org / images / pdf / long - term _ finance _ lo - res. pdf haldane, a ( 2009 ), β rethinking the financial network β, speech delivered at the financial student association, amsterdam. available at : http : / / www. bankofengland. co. uk / archive / documents / historicpubs / speeches / 2009 / speech386. pdf haldane, a ( 2010 ), β patience and finance β, oxford china business forum, beijing. available at : http : / / www. bankofengland. co. uk / publications / documents / speeches / 2010 / speech445. pdf haldane, a and may, r ( 2011 ), β systemic risk in banking ecosystems β, nature, vol. 469, no. 7330. http : / / www. nature. com / nature / journal / v469 / n7330 / full / nature09659. html haldane, a and nelson, b ( 2012 ), β tails of the unexpected β, given at β the credit crisis five years on : unpacking the crisis
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and in relation to other countries. rbi also has been assigned with several other responsibilities. thus, the rbi manages the public borrowings of the central government and all state governments ; is a banker to the central and state governments and keeps their accounts ; regulates payments and settlements systems, and, of some direct concern to many of you, it is a regulator of the banking system. i will not spend more time describing all this but we put all information on all these matters in public domain β through publications ; press releases and sometimes speeches like this. up - to - date information is available on the rbi website in english and hindi. why do we explain in detail about our work and dilemmas? it is because rbi is a public institution and we explain to you so that you can understand, appreciate, criticise and guide us. it is not a publicity drive but it is meant to enhance our efficiency and accountability to the common public. for today, i will place before you some instances of how the rbi, as a public institution, is answerable to the government and indeed, to the people at large, and has taken steps to get closer to the common person in the recent years. we have urged the banks to be sensitive to the banking and financial needs of the common person and adopt a policy of financial inclusion, that is, to bring possibly every family β rich and poor, rural and urban β into the banking fold.'no frills'accounts with perhaps a small overdraft facility should be the easiest way for financial inclusion. we are also looking at how technology can increase the banking access to the people. general credit cards and kisan credit cards can facilitate disbursal of small credits to among farmers without much paper work each time they want to take loans or make transactions. we are also exploring alternatives, such as, satellite offices of banks, atms and use of post offices for extending banking facilities to rural areas. in urban areas, we are trying to give efficient and quick service to bank customers by extending to them facilities such as, mobile and internet banking, quick β almost minute by minute β and cost effective transfer of funds from one account to another through electronic funds transfer mechanism. we also encourage reliable, prompt and economical means of conducting day - to - day transactions, such as, bills payments, receipts of salaries, dividends and pensions directly into the beneficiaries'bank accounts, etc. to ensure that you get good quality banking services at a reasonable cost
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, we have taken several measures. while the banks can decide for themselves what services they will offer to customers and at what cost, we have asked each bank to set for itself a measurable standard or benchmark for the quality of service it would give to its customers. an independent body set up by the reserve bank, called the banking codes and standards board of india ( bcsbi ), will then assess the quality of the services given by that bank against the promise it has made. any adverse remark by the board will give us a trigger for taking corrective steps. we have also asked the banks to ensure that account holders have detailed information on the availability and cost of various banking services offered to start a banking relationship. it is your right to demand the services promised by the bank. and if you do not get the services promised by the bank, you can make a complaint against it β first to the higher authority of the bank concerned. if it does not get resolved there within a reasonable time or to your satisfaction, you can approach the banking ombudsman. the banking ombudsman is appointed by the reserve bank to provide an easy, hassle - free and less costly forum to the bank customers to resolve their banking disputes. there is one banking ombudsman in virtually each state, who can be approached through mail or even through internet for resolution of complaints against the banks. the reserve bank is also in the process of improving its own processes so that its major direct customers, namely the governments and the banks get good service from the central bank. two departments of the reserve bank are already iso certified which means that the processes in these departments are streamlined for rendering better and quicker customer service and are constantly updated. we are in the process of obtaining this certificate for the other departments of the rbi also, which deal with the public. we have consciously adopted a policy of reaching out to people, common persons so that they know what to expect, what choices they have, what rights and obligations they have in relation to banking service etc. we already have several publications through which we reach out to researchers, students and other technical audiences. now our resolution for 2007 - 2008 is to reach out to the common person through a special drive. we have, therefore, undertaken a financial education and financial literacy drive for the common man. we are doing this through banks and also directly. my talking to you like this in regional mother tongue telugu is a part of this initiative. very soon, you
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mainly due to the adverse carry - over effect from 2015. according to the elstat β s flash estimates released today, gdp shrank by 1. 3 % year - on - year in the first quarter of 2016. the necessary conditions for a gradual recovery of the economy in the second half of 2016 are a further improvement in confidence, an enhancement in the liquidity of the banking system and a further relaxation of capital controls. however, a deterioration of the refugee crisis could have negative repercussions on tourism and trade. in more detail, household consumption expenditure is expected to decline in 2016, reflecting the increased tax burden. the recent data on the volume of retail sales are alarming, showing, as already mentioned, a 6. 6 % fall year - on - year in february. on the other hand, investment and exports are expected to pick up gradually and in line with the restoration of confidence and of credit flows to the economy. the successful completion of the first review is crucial for the gradual recovery of the economy in the second half of 2016 the successful completion of the first review of the programme will definitely improve confidence and the recovery prospects of the economy in 2016. it is the key to the return of deposits to the banking system and will pave the way to : ( i ) the reinstatement of the waiver for greek government bonds by the eurosystem, which will enable greek banks to obtain low - cost funding from the european central bank ( ecb ) and ( ii ) the inclusion of greek government bonds in the ecb β s quantitative easing ( qe ) programme. the reinstatement of the waiver and the ensuing cheaper refinancing of greek banks, coupled with the inclusion of greek government bonds in the ecb β s qe programme, are expected to have a significant positive impact ( potentially amounting to about β¬400 - 500 million ) on banks β results over the next year. however, the indirect effects, such as the upgrading of the credit ratings of the greek government and greek banks, are expected to be much stronger. furthermore, the completion of the first review could lead to the implementation of the eurosystem β s commitment to pay greece the profits from greek government bond holdings excluded from the psi. this commitment has been suspended due to the non - completion of the last review of the previous programme. the so - called anfa / smp revenue available to be released, in the order of β¬10 billion up to 2020, could
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have been ineligible since the country was not β in a programme β. thus financial conditions in greece have not benefited significantly from the raft of nonstandard measures that have been introduced during the crisis. conditions, however, can be expected to improve with the passing of the 1st review and the reinstatement of the waiver. d. the response of the greek authorities, including the bank of greece i now turn to the response of the greek authorities. the role of central banks throughout the eu has been considerably increased due to the challenges faced by banking systems in the wake of the lehman brothers β failure. one manifestation of this increased role is that mandates have been amended to explicitly refer to financial stability as a core central bank task. at the same time, the toolbox available has been expanded to include macro - prudential policy tools and enhanced micro - prudential policy tools both for the ssm and the national authorities. the greek authorities are no exception to this trend. throughout the crisis, the bank of greece has been the guardian of financial stability, protecting fully all depositors ( regardless of type and size ) and supporting the economy and the public interest. initially, this was accomplished through the 2008 law which provided capital support to greek banks and allowed banks to issue government guaranteed bonds which could be used in refinancing operations. similar laws were enacted throughout the eu. with the onset of the sovereign debt crisis, however, the situation intensified requiring continuous action by the bank of greece on two broad fronts : ensuring adequate provision of liquidity and managing recapitalization, resolution and restructuring. with respect to liquidity provision, the bank has been critical in ensuring continuous liquidity provision to banks using one of the oldest macro - prudential tools available, that of the lender of last resort. on various occasions, the bank of greece has extended ela to the banking system. this has helped preserve financial stability by ensuring that liquidity problems do not turn into solvency problems. with respect to managing recapitalization, resolution and restructuring, the bank β s strategy, in the context of the adjustment programmes, aimed at strengthening viable institutions and winding down non - viable institutions whilst safeguarding financial stability. to this end, viability assessments and capital needs assessments were undertaken. those banks deemed viable were recapitalized. the first round of recapitalization, following the losses incurred from psi, was completed in june 2013. a combination of both private capital and resources from the hellenic
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implemented this framework in january 2015 with a one year transition period for the industry to be familiar with the framework before the requirements are legislated in january 2016. 13. while many financial advisors do their work professionally, it is also a reality that compensation system can shape sales behaviours, and sales - based remuneration models may not always align the interests of financial advisers with the consumers. 14. under the bsc framework, a major proportion of a representative β s remuneration will be based on whether the representative has acted professionally such as consumer needs analyses, recommendation of suitable products, and adequate disclosures. this bsc initiative will help to align the interests of financial advisers with their customers. over the longer term, the bsc framework will boost consumer confidence in the professionalism of the financial advisory industry. strengthening the resilience of the life insurance industry : rbc2 15. let me now turn to the new risk - based capital framework or rbc2. why the move from rbc to rbc2? 16. insurance regulators around the world are adopting risk - based capital and singapore has been a frontrunner with our current insurance risk - based capital ( rbc ) framework introduced in 2004. this risk framework has served us well, and our insurers have navigated largely unscathed through recent financial crises ; while the framework allowed for regulatory bis central bankers β speeches intervention in a timely and effective manner. now, i know this begs the question β if it isn β t broken, why fix it? 17. the answer is that the operating environment for global finance including insurance, has and will become increasingly complex given the more connected global markets, the vulnerability of contagion, an overall low interest rate environment that pushes investors including insurers to target more risky higher - yielding products and potential new risk areas such as in some emerging markets or in technology risks. 18. it is important that our insurance capital framework remains relevant and effective and that insurers operating in singapore are well - capitalised to weather different crises and risk forms. 19. at the global level, the international association of insurance supervisors ( iais ) has also embarked on the development of capital standards for internationally active insurance groups ( β iaigs β ) ; while the international accounting standards board is expected to finalise its guidance on insurance contracts under ifrs4 sometime this year. progress on rbc2 20. last year, mas published our second consultation paper, which outlined our key proposals for rbc
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the new capital framework to be more risk - sensitive and robust, but it should also be fit - for - purpose and not hamper well managed insurance businesses unduly. at individual firm level, the new framework does not seek to make it bis central bankers β speeches better or worse for you compared to the current rbc, but only that how much capital that you will hold in future be more sensitive to your risk profile. 28. the mas will embark on another stage of consultation and we are also targeting an additional qis in q2 2015. we will of course work closely with the lia in this regard. conclusion 29. let me conclude with a broad note on talent development for the insurance industry. 30. over the years, mas has been working closely with many of you on various manpower development initiatives. the insurance talent development framework jointly developed with the industry in particular, focuses on expanding the talent pipeline for leadership positions. last year, mas successfully rolled out the non - life track under the insurance management associate programme and is now working closely with the singapore college of insurance to launch the life track this year. 31. i strongly encourage all of you to continue with your investment in talent development. this should go beyond technical competencies but to include issues of ethics and conduct. 32. to end off, i am sure some of you may have seen the internet discussion around the chinese new year on whether this is the year of the sheep, the goat or the ram. i think many of us have settled for the goat. as one of my colleagues noted, goats are resilient and intelligent creatures ; able to maintain their balance in the most precarious of places but yet, possess a calm and unexcited exterior with a beard that conveys a certain wisdom. so may i wish everyone all these fine qualities of the goat. bis central bankers β speeches
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sciences and randomized control trials in financial inclusion research and program design β are helping us find pioneering solutions to increase access and usage of financial services by financially excluded markets. paymaya, inc. ( formerly smart e - money inc., a bsp - licensed e - money issuer ) launched the paymaya card with nsfi in mind. it is now working with dep - ed to find ways to encourage savings among k - 12 students. globe telco is also currently working with the financial sector forum β s consumer protection and education committee to facilitate information dissemination and enhance consumer protection. two weeks from now, bpi foundation and aski global ltd. ( non - profit engaged in entrepreneurship coaching for migrant workers ) will conduct a financial inclusion summit on the role of remittances and migrant workers in inclusive growth. all these initiatives were coordinated with the bsp, and purposely linked with nsfi objectives, or facilitated thru the nsfi collaborative platform. we are also pleased to share that the asian development bank ( adb ) and the world bank ( wb ) have committed resources to support various nsfi elements. for example, adb will focus its technical assistance on strengthening microfinance ngos ; deepening agricultural value chain financing ; and promoting e - payments, digital financial services and microinsurance. bis central bankers β speeches meanwhile, the wb will focus on sme finance, financial education, consumer protection, and data and measurement. in fact, the bsp and wb technical teams will meet this week to define a practical approach for monitoring and measuring progress of nsfi implementation. your inputs today in this particular area would be most helpful in that meeting. aside from the afore - mentioned initiatives, a variety of private businesses and entities have reached out to bsp, wishing to determine how they can engage in nsfi implementation. these entities include technology providers, financial education program implementers, and even a consumer goods manufacturer. their expression of interest to contribute to financial inclusion is clear proof of boundless possibilities for public and private sectors to work together. thus, we designed this event with the third objective in mind. networking opportunity this is a networking opportunity, and we encourage everyone to get to know key nsfi stakeholders and industry players. we have a good mix present β nsfi agencies, development partners and donors ; bank and non - bank financial service providers and their associations ; technology companies and other service providers. among yourselves, there is a wealth of complementary experience, expertise and resources
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coson, for this. and just recently, we learned that one of our winners was able to access a 2 million peso loan from the development bank of the philippines without collateral. other winners have become newsworthy celebrities, invited to guest in television and radio programs or featured in newspapers and magazines. clearly, moty β s value goes beyond the incentives it provides deserving microentrepreneurs ; it has also evolved as a vehicle for showcasing microfinance as a potent tool for poverty alleviation and microentrepreneurs as responsible, accountable and creditworthy bank clients. ladies and gentlemen. these milestones are the results of the collective and coordinated efforts of many institutions and individuals, the key movers of which are represented here today. indeed, moty is one tangible example of successful and meaningful cooperation among different institutions working toward a shared goal. today, as our country β s poor grapple with the challenges of rising prices of basic commodities, the call for coordinated efforts to fight poverty has never been stronger. let us therefore resolve to work more closely together to build stronger financial institutions that provide responsive service to microenterprises, sow the seeds of entrepreneurship, nurture local enterprises, and build prosperity in our country through microfinance development. i am confident this can be done. i say this on the basis of our track record. before the year 2000, for instance, there were only a handful of banks into microfinance. since then, this has grown significantly. today, 229 banks are into microfinance with a total client base of 780, 000 and loans outstanding of 6 billion pesos. significantly, our micro - borrowers have also become net savers ; their deposits with banks as of december 2007 have reached close to 2 billion pesos! not only have they been liberated from the cycle of poverty, they are attaining financial security for themselves and their families. let us therefore resolve to continue to work together to nurture and expand our base of microenterpreneurs all over the country. thank you all. mabuhay ang microfinance!
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countries the issue of choosing between either following a national monetary policy or joining a monetary union and carrying monetary policy to a supranational level. the experience of a successful realisation of the economic and monetary union in europe, as well as the experience of the countries from the area of the frank are a good practical example for all of us about the potential advantages and challenges associated with a country's participation in a monetary union. taking monetary policy to a supranational level is inevitably related to providing greater independence for the national central banks and delegating certain powers at a supranational level. in the democratic world, the independence of conducting policy on the part of central banks is inseparably linked to the higher degree of their transparency and reporting. of course, striking the right balance between these three principles is a process related to the economic and political traditions of individual countries. the issues i touched upon are important for the operation of any modern central bank. today, i am particularly happy with the fact that these issues will be discussed within the club of the francophonian central banks, where we have a very broad set of traditions, experience and knowledge. i believe that we are going to have a useful and fruitful discussion. thank you for your attention!
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process is the number of the senior managing officers in the area of finance and banking who graduated in countries from the francophonian world. of the sixteen governors of the bulgarian national bank who managed it during the period from its foundation to the second world war, eight received their higher education in economics, political science and law in belgium, france and switzerland, or specialised there. in the same period, thirty - two people held at different times the position of minister of finance, of whom nineteen graduated or specialised in these countries. today, many bulgarians continue studying the french language and culture in our schools or receive their education in francophonian countries. they are part of the 175 - million french - speaking community and in addition to the common language they are part of a common culture, which extends to all spheres of our life. i am proud that part of these people work in the bulgarian national bank and contribute a lot to the success of our institution. the increased economic and financial interrelatedness and interdependence of the countries call for ever - greater co - ordination of the economic and financial policies of the individual governments. the establishment in the 90 - ies of the past century of the principles of free movement of goods and capital increased the interdependence of the financial systems across countries, so that financial stability is no longer a national but a global issue. the significant participation of foreign capital in the banking system of a country and the massive movement of capital, largely contributing to the formation of serious imbalances, changes significantly the understanding of systemic risk and the approaches to its assessment. the above process of interrelatedness of the banking systems of individual countries necessitated the adoption of new principles of surveillance over the banking sector, as well as analysis and control of the risks arising from the ever - increasing interrelatedness between the banking sector and the other segments of the financial market. the implementation of basel ii will pose a challenge to the entire financial community, while for the newly emerging economies this process will be a serious test since their banking systems are very much open. the discussion of the common supervisory framework also brings forward the question as to what extent the high rates of growth of credit for the private sector, globally, and in many of the dynamically developing countries, in particular, poses a risk to financial stability and how much supervisory policy could be used as a tool for solving this problem. the process of financial sector globalisation, which i already mentioned, raised for many
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has continued to decline. the vix index, which measures implied volatility on the us stock market, and which is based on option prices, is virtually back down to the level last seen prior to the outbreak of the financial crisis in 2007. a very similar picture emerges from implied volatilities on the foreign currency and bond markets. the low volatilities are due to comparatively low demand for options to hedge price movements. this suggests that market participants β misgivings about prevailing uncertainties have dissipated somewhat, which is likely not least of all a consequence of monetary policy measures by major central banks. in addition, some investors appear to expect that central banks will continue to pursue expansionary monetary policies for the foreseeable future, with low interest rates and an ample supply of liquidity. in switzerland, interest rates remain at a very low level. the yield on ten - year swiss confederation bonds declined to a new low at the beginning of december, at 0. 39 %. no other government has ever recorded nominal ten - year financing costs at such a low level. bis central bankers β speeches money market rates also continue to be very low. interest rates on the repo market are predominantly negative. at 1 basis point, the three - month libor lies only just above zero. based on libor futures contracts, the interest rate expectations of market participants are that the low rate environment will continue for the foreseeable future. management of foreign currency investments our foreign currency purchases in early summer to enforce the minimum exchange rate have resulted in high inflows to the snb β s foreign currency holdings. these holdings have increased by chf 167 billion since the beginning of the year to chf 425 billion at the end of november. this is a direct consequence of our monetary policy. in the event that foreign currency purchases are necessary to implement the minimum exchange rate, our foreign currency reserves increase, and the balance sheet expands. monetary policy requirements also have highest priority when it comes to managing the foreign currency reserves. this is reflected, on the one hand, in the conditions on which we base our investment decisions, namely security, liquidity and performance. on the other hand, the primacy of monetary policy is also evident in the way we implement our investment policy. we proceed here with great caution to avoid causing distortions in the markets. we take account of the security and liquidity requirements for foreign currency investments by ensuring that a substantial part of our portfolio comprises high - quality government bonds
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will facilitate real - time processing of financial transactions. these bsp objectives hinge on a triad of critical pillars that are seen to build an environment conducive to digital transformation. one of the pillars relates to the development of payment streams. at present, instapay serves as the instant payment stream, while pesonet is a batched payment stream. the next pillar relates to the establishment of digital infrastructure which facilitates interoperability of payment services. interoperability allows seamless transaction processing which is necessary for achieving efficiency. the last pillar is the implementation of digital governance standard. the goal is to maintain public trust in the payment systems. this will be done by protecting the integrity of consumer data and ensuring appropriate management of digital products and services. aside from the establishment of the digital payments transformation roadmap, we are set to pursue more digital payment initiatives in the near term. we want to extend the qr ph use case. from only person - to - person or p2p when it was launched in november 2019, qr ph will soon include person - to - merchant or p2m payments. since accepting payments via qr is simple and affordable, it is expected to benefit not only large business organizations but also the small unbanked vendors such as peddlers, sari - sari store owners, and other entrepreneurs. another initiative is the one bills payment facility, which aims to remove the inefficiencies associated with the current fragmented bills payment mechanisms. the billers will be capable of collecting from their customers even if the payment service providers of the billers are different from those of the customers. we will also provide a more flexible way for businesses and consumers to make payments through the request to pay service. the payee will only need to send an electronic request for payment to the payer, showing how much is being requested for payment and when it falls due. a fourth initiative in the pipeline is the direct debit use case. here, the payer sends the payee an electronic authority or mandate to draw funds directly from the payer β s account on a regular basis. this case is ideal for recurring payments such as monthly rentals, periodic loan amortizations, and quarterly insurance premiums. 3 / 5 bis central bankers'speeches aside from the establishment of the digital payments transformation roadmap, we are set to pursue more digital payment initiatives in the near term. we want to extend the qr ph use case.
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##4 ) ( 3. 145 ) ( 1. 041 ) 88. 955 84. 720 source : bank of greece. hence, despite the genuine effort on the part of greek commercial banks, more drastic solutions are needed in the foreseeable future with a handson approach. the speed up of efforts by both greek banks and authorities is more than essential for a rapid convergence of the domestic npl ratio to the european average. looking at the various strategies put forward for the effective resolution of the greek npl issue, from my point of view, securitisation schemes are probably the silver bullet for the greek npl problem. it β s an attractive, market - friendly idea because it converts bad quality assets to marketable securities, which could be of interest to a larger set of buyers, ` 12 including foreign institutional buyers. the advantage of securitization is that there is significant diversification of risk away from a single credit name, and with the issue of tranches, investors can choose the riskreward combination that best reflects their preferences. securitisation also generally achieves a lower average cost of funding and, if guarantees are provided to the securitised assets, can result in higher npl prices than direct sales. recently, two proposals are under discussion in order to address the issue of npls, one by the bank of greece and the other by the hfsf, which have both as a common ground, the ideas of securitisation and a systemic approach to the problem. they could be seen as complements, rather than substitutes. more analytically : the bank of greece β s proposal - main characteristics the proposed scheme envisages the transfer of a significant part of non performing exposures ( npes ) worth of around β¬40 billion along with part of the deferred tax credits ( dtcs ) worth of around β¬8 billion, which are booked on bank balance sheets, to a special purpose vehicle ( spv ). subsequently, legislation will be introduced enabling to turn the transferred deferred tax credit into an irrevocable claim of the spv on the greek state with a predetermined repayment schedule. to finance the transfer, the spv will proceed with a securitisation issue, comprising three classes of notes ( senior, mezzanine, and junior ). it is anticipated that private investors will absorb part of the upper class of securities ( senior ) and the vast majority of the intermediate part
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george provopoulos : international financial turmoil and its impact on the greek economy key remarks by mr george provopoulos, governor of the bank of greece, at the meeting with the presidency and members of the hellenic federation of enterprises, athens, 14 july 2008. * * * the international financial system it will take some time until normality is fully restored... 1. the international financial turmoil, which began almost a year ago, is still ongoing and continues to affect financial markets and macroeconomic aggregates. extreme situations have been avoided, thanks to the action taken by major central banks ( in the form of finetuning operations to restore normal liquidity conditions ) and by governments, in particular those of the united states and the united kingdom, aimed at averting the risk of a broader systemic crisis. 2. however, it remains uncertain how long it will take before credit markets return to normal conditions. Οhis continued uncertainty is reflected in, at times, strong tensions in money and credit markets ( which are more sensitive to risk factors β whenever these appear ) and in equity markets ( where there are occasional swings of investors'risk aversion and, thus, liquidity preference, as well as of their uncertainty regarding the macroeconomic outlook of the united states or other countries ). 3. due to globalisation, uncertainty in the global economy also affected the greek economy and the economies of the wider se european region, although these economies have proved quite resilient. impact on the real economy : despite the slowdown, the economic fundamentals of the euro area are sound. greece needs to intensify, rather than simply not relax, efforts to address structural weaknesses and macroeconomic imbalances β¦ 1. the uncertainty surrounding the global economic outlook remains higher than usual. it seems that the adverse effects of the financial turmoil on world economic activity will be stronger and more protracted than initially thought. this is the case in particular with the us economy ( where the housing crisis is serious and is spilling over to other sectors ). any prolongation or deepening of the economic slowdown in the united states could have repercussions on the euro area and thereby on the greek economy. 2. i should clarify that by " uncertainty " i mean the possibility that downside risks to the growth projections made until recently could materialise. according to these projections made by international organisations, the growth rates of the global economy and of the european economy are slowing down, but growth is continuing, despite the
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- term value. 12 fluctuations and inflation, see figure 7. when the krona weakens, i. e. when the kix - index increases, inflation also rises. figure 7. inflation and exchange rate fluctuations, 27 - month time lag annual percentage change 2. 5 2. 5 inflation 1. 5 1. 5 0. 5 0. 5 - 10 - 5 exchange rate fluctuations note. moving averages over 12 months. sources : statistics sweden and the riksbank of course, the correlation between the exchange rate and inflation is neither clear - cut nor straightforward. it depends, for example, on what has caused the exchange rate to fluctuate and how long it is expected to last. 6 but the fact that there is a correlation, insofar as a weakening of the exchange rate tends to result in rising inflation and vice versa, is obvious. finally, it should be emphasised that monetary policy has of course been important in this development. from the ongoing debate, the impression can sometimes be that monetary policy does not play such a major role and that economic activity had been just as strong and inflation had been on target regardless of the policy conducted by the riksbank. this is of course not the case. no causal relationship between wages and prices what then does the fact that inflation has risen but not wages actually signify? to begin with, and for the sake of completeness, we can also plot inflation against wage increases ( see figure 8 ). as we see, there is a tendency towards a positive correlation, at least periodically. see for instance the articles β the impact of the exchange rate on inflation β in the december 2016 monetary policy report and β the exchange rate and inflation β in the april 2018 monetary policy report. 13 figure 8. inflation and wage increase annual percentage change 2. 5 2. 5 inflation 1. 5 1. 5 0. 5 0. 5 2. 0 2. 5 3. 0 3. 5 wage increase 4. 0 4. 5 note. moving averages over 12 months. sources : national mediation office, statistics sweden and the riksbank but what about the causal relationships? there sometimes appears to be a tendency to see wage increases as the source of all inflation. the perceived chain of events is that an increase in inflation is always preceded by a tighter labour market pushing up wage increases and companies then passing on the increased costs in the form of higher prices. can we therefore expect modest wage increases to push down inflation going forward?
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urban backstrom : the swedish economy speech by mr urban backstrom, governor of the sveriges riksbank and chairman of the board of directors and president of the bank for international settlements, to the swedish shareholders β association, orebro, 30 october 2001 * * * first a word of thanks for the invitation to come to orebro and discuss matters to do with the swedish economy with you. it is now a fortnight since the riksbank presented this year β s third inflation report. some more statistics have been published in the meanwhile but the information they contain does not point to anything particularly new. so today one can hardly arrive at an assessment of economic developments in sweden one to two years ahead that differs all that much from the picture outlined in the report. those of you who want to know more about our assessment should consult the riksbank β s website, www. riksbank. se. the whole report can be downloaded, as can all the figures on which the tables and charts are based. diagram 1 : the β new economy β concept in swedish media. ( number of hits ) 2001 jan. oct. sources : mediearkivet and presstext. there are, however, a couple of questions concerning the swedish economy and the outlook in the somewhat longer term that i should like to dwell on here today. diagram 2 : β the it - bubble β affarsvarlden : it - index index nasdaq : nasdaq : composite dow jones : industrials usa dow jones industrial average, close daily [ index 1996 - 01 - 02 ] sources : hanson & partners ab. usa nasdaq composite index, close daily [ index 1996 - 01 - 02 ] one is what has happened to the discussion about the β new economy β. swedish media are mentioning the subject less and less ( diagram 1 ). i believe that mirrors how people β s interest in general has waned. and considering how rapidly and extensively prices have fallen for it and telecom shares, one is inclined to the view that all the talk about the third industrial revolution was really something of a dead end ( diagram 2 ). that leads on to my other question, namely the part that technological breakthroughs play for corporate profits and thereby for the return on equity. where did the β new economy β go? concerning my first question, perhaps it is not so surprising that we now hear less and less about the β new economy β than we did last year. share prices for it and telecom
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getting a liberal education far beyond the required curriculum of college. eventually i returned to nyu, took additional courses at night, and completed my doctorate. over the past six decades i followed a type of career path that many of you will follow, but with a twenty - first - century cast. i had two careers and four jobs - one as a musician, one as a private consultant, and two in government. but the world has changed since i was your age, and the pace of change has quickened. today it is rare that one will finish school and then engage in the same job until retirement, which was the general experience of generations past. many of you will switch professions once, possibly many times. almost all of you will have several jobs, some many jobs. to succeed, you will soon learn, as i did, the importance of a solid foundation in the basics of education - literacy, both verbal and numerical, and communication skills. but beyond that you will need to acquire the on - the - job skills that you will need as you move from one job to another. at some point, almost all of you will lose a job and will want to be reemployed as quickly and as productively as possible. that means you will need the capability of learning a wholly new activity. the current workforce is increasingly turning to community colleges to prepare for new professions and new jobs. today, almost a third of those enrolled in community colleges are thirty years old and older. so - called adult education was a rarity in my youth ; today it is widespread. most of you probably will be engaged in some form of learning through most of your working lives. already numerous corporations have regularly scheduled classes in basic and advanced subjects directly and indirectly related to job requirements. such corporate universities, as they are called, are growing rapidly, and i suspect that, as you join the workforce, you will have the sensation that you never left school. that is why it is so critical that you productively employ your current learning experiences to create the base capabilities necessary for continuing your education into your mature years. learning, of course, need not be formal. you can engage in it on your own. in generations past, much learning occurred outside a classroom. i am fascinated by the eloquent and literate letters written by some civil war enlisted personnel, who i doubt had formal schooling beyond the age of ten. many of these soldiers obviously learned to read and discovered a whole new world of ideas
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the quality and quantity of research and analysis produced by the fed β s research staff. conclusion gpra provides the opportunity for a major improvement in the management and effectiveness of federal agencies. it provides the impetus for agencies to clarify their missions and objectives, measure their performance better and improve their efficiency and effectiveness. it must, however, avoid the risk of becoming, like some previous efforts to improve government management, largely a paper exercise which produces many numbers and reports but few real results. the federal reserve welcomes the opportunity to participate in the gpra process. we will work hard to fulfill the vision of the framers of the act and avoid the pitfalls. we will have to respond in ways that are appropriate to the federal reserve β s diverse missions and decentralized structure. i believe we have made significant progress toward the gpra - type strategic planning and are on the track to making more in the immediate future.
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. as long as the growth in supply keeps pace or even exceeds the growth in demand, inflationary pressures do not sustain. supply can be expanded by enhancing domestic capacity, which the indian economy has clearly done, or by tapping into global sources, which the significant liberalization in trade policy, particularly since the early 1990s, also enabled. however, while this combination of domestic and global supply responses has helped to steadily bring the inflation rate down, the indian economy has always been vulnerable to inflation shocks, which have caused uncomfortable spurts in prices across the board. slide 9 identifies some major shocks to the system, all of which required strong policy responses. as is evident from the graph, the vulnerability of the indian economy to supply shocks on the food and energy fronts is persistent. there have also been periods in which a significant fiscal expansion accompanied by an accommodating monetary stance β i. e., demand - side pressures β raised the inflation rate significantly. sharp depreciation of the rupee in the midst of an oil shock has also played a role on one occasion. while the demand driven inflation shocks can be avoided by prudent monetary and fiscal policies, the vulnerability to supply shocks in the form of a failed monsoon or a surge in oil prices will obviously remain. slides 10 β 12 display some of the characteristics of the transformation of the inflation scenario in india. on slide 10, we see how the relative contributions to inflation have changed over the decades. food has been a steady source of inflation over the entire period. energy became a significant factor during the 1970s, following the first oil shock of 1973. it has persisted in its contribution since then. adding up the two provides the overall contribution of supply - side factors, which, as the graph suggests, have persisted in one form or another through the entire period. looking ahead, it would be reasonable to argue that these pressures are likely to persist, as a result of both global and domestic imbalances between demand and supply. on the energy front, one of the fundamental drivers of high oil prices is increasing demand in emerging market economies, whose rising affluence is resulting in very rapid growth of energy - intensive activities. as relatively low - cost reserves of fossil fuels are exhausted, rising global demand is being met by exploiting higher cost sources. the cost differential between petroleum and alternative sources makes such sources viable even at their relatively high costs. steadily rising costs of production, in turn, exert inflationary pressures on the global economy,
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. genuine markets for both products and credit emerged after the reforms of the early 1990s. as slide 13 shows, the persistent inflationary conditions during the 1990s were responded to by significant monetary actions in terms of both rates and liquidity management. as the inflation rate trended lower, a process to which the monetary policy actions of the period contributed, the policy stance in turn changed to accommodate the new circumstances. in other words, monetary policy has been aimed at keeping inflation under control, which involves tightening when inflation exceeds the comfort level and loosening when it falls below. concluding remarks the current inflation scenario is a cause of concern, as the inflation rate persists well above the upper bound of the comfort zone. the fact that these inflationary pressures emerged rather quickly in a situation in which the economy was just beginning to recover from the significant slowdown of 2008 β 09 made the policy challenge more complicated. the monetary policy response to these pressures has been a calibrated one, seeking a balance between sustaining the recovery and reining in inflation, while being mindful of the risks that still remain in the global environment. recent data suggest that the approach is working, with the economy set to grow at a reasonably healthy rate during the current year and the inflation rate beginning to decline, including, significantly, in the manufacturing sector, where inflation is seen as being most responsive to monetary actions. this approach must be viewed in the context of a long - standing policy commitment to maintain a balance between growth and inflation in the short run, while fostering faster growth with lower inflation over long periods of time. the growth pattern of the indian economy over the past six decades clearly shows that accelerating growth has been accompanied by declining inflation. this is primarily because growth has been driven by expanding capacities across the board as well as, in recent years, by increasing global linkages. both these factors have helped to achieve a strong supply response to growing demand, thus keeping inflation in check. this is not to say that the indian economy is now invulnerable to inflation shocks. food and energy price shocks have been a regular part of the economic landscape and may continue to be so in the future. food prices, in particular, are now being driven by some structural imbalances between demand and supply, as increasingly affluent consumers diversify their dietary patterns away from cereals and towards protein sources. this calls for an effort to quickly increase the availability of these items, on which is contingent the longer term outlook for food price inflation. however
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observe right now is divergence or fragmentation, not convergence. the economies of the euro area countries had not converged sufficiently when the euro was introduced, and the gaps among them widened further after the bubble burst in the middle of 2000s. divergence is evident in unit labor cost growth and current account balances. yield differentials in the european bond markets have also widened. such market fragmentation has forced investors to reconsider country risks, which had been considered eliminated with convergence to a single financial market. to accomplish a greater degree of convergence, while taking into consideration strong national identities and the slow process of population movements across borders, three options are often mentioned, ones that are not mutually exclusive. the first is to carry out so - called internal devaluation in the periphery. the second is to boost productivity and create value - added industries in the periphery. and the third is to implement fiscal transfer from the core to the periphery on the grounds of mutual benefits. here i believe that the keys to success are the european people β s belief in the euro system and their β solidarity β or the common cause of β european citizenship β. although achieving any of these options will take a long time and painstaking effort, it is hoped that the euro area nations will continue to do their best on these fronts. v. a new hope : strengthening market infrastructure finally, i would like to touch briefly on the new hope seen in the strengthening of market infrastructure both in europe and japan. for many market participants, strengthening market infrastructure is important for sustained investment in europe and elsewhere. in this regard, the eurosystem has been pushing forward with target2 - securities ( t2s ), a single pan - european it platform for securities settlement. at the same time, the bank of japan is working to revamp the bank of japan financial network system ( boj - net ) to enhance the system β s flexibility and accessibility. it is hoped that both of these initiatives will succeed in making global financial markets more resilient and efficient. thank you very much for your kind attention. bis central bankers β speeches
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from european countries. the evidence is similar to the studies done with us data, and sometimes the evidence is even stronger, since in europe banks are the key source of finance for many firms. 16 for instance, italian data show that bank m & as have an adverse effect on credit, especially if an m & a is followed by the termination of a business relationship. the effect lasts for three years and by the end of that period it has been absorbed, suggesting that firms are able to compensate for the negative shock. 17 in addition, also based on italian data, contract interest rates on bank loans fall when banks with small shares in the local banking market combine. the opposite result is observed for mergers between large banks. 18 based on evidence from some countries, relationship customers of the target bank are more likely than acquirer customers to have their relationships terminated with their bank. these effects are more pronounced for smaller customers with no alternate lending relationships. 19 furthermore, mergers reduce the equity value of small publicly traded firms that are customers of the target bank and the reduction in value increases with the size of the target bank. 20 6. role of small banks all in all, the evidence from europe is very similar to that of the us. if small businesses tend to suffer from bank m & as, especially when the banks involved are not small, then it seems that there is a role for small banks. the key characteristic of lending to smes is the β softness β of the information generated in the decision - making compared with large banks that rely more on β hard β information. hard information is based on accounting data and not on personal knowledge and repeated interaction between lender and borrower. 21 because soft information is important for lending to small businesses, the supply of credit to small firms may be negatively affected by m & a activity because the resulting larger banks show a preference for transaction - based lending over relationship - based lending. in fact, evidence suggests that small banks use soft information for lending and are, therefore, key for sme lending. 22 moreover, as i said earlier, m & as between small banks increase bank efficiency and lending to smes. small banks also lend to riskier firms, which generally are smes. 23 see carow et al. ( 2006 ). see ecb ( 2007 ). see ecb ( 2007 ). bonaccorsi di patti, and gobbi ( 2007 ). sapienza ( 2002 ). degryse, masschelein, and
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volumes ] is now approaching the same volumes as the atms [ automated teller machines ], meaning people no longer withdraw cash to pay ; they just make bank - to - bank transfers. it happens very quickly and, in the case of a fast payment system, almost real - time. in 1 / 3 bis - central bankers'speeches addition, we have a system that has replaced physical cheques ; it is called pesonet. we also have a strong campaign, [ called paleng - qr ph plus ] where ordinary vendors and jeepney drivers can be paid using a cellphone. month - on - month data suggest easing inflation pressures now, i will go to most of the questions that have to do with inflation. of course, 2022 was a bad year. the average of the year - on - year inflation was 5. 8 percent, and the last print was 8. 1 percent. in addition, the inflationary expectations of private analysts are unusually higher relative to ours. in other words, there is a risk that inflationary expectations are being disanchored. the good news, of course, is by our own forecast, we should be able to go back to 2. 0 to 4. 0 percent [ inflation ] by the end of the third or fourth quarter [ of 2023 ]. by 2024, we will have inflation very close to the midpoint of our target. the reason we say that is that month - on - month inflation - for the first time - is back to normal [ for december 2022 ], which is our target divided by 12 [ months ]. of course, one month does not make a forecast, but our own models and our own analyses of data show that this is indeed a trend - unless, of course, new supply shocks happen. the point is much of our inflation is due to supply shocks - unfortunately, some are global, some are domestic - and, as the video showed, these are already being addressed through a more relaxed import policy on the things that became more expensive. taking stock of monetary actions to tame inflation what actions have we taken to do this [ bring inflation back to a target - consistent path ]? the answer is : we have been very aggressive [ in terms of tightening monetary policy ]. so, what have we done? as you can see, initially, the peso was depreciating ; it depreciated quite a bit [ in 2022 ]. indeed, by september to
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october of last year, the depreciation was around 14 percent. what happened was, partly because of the end of the strong dollar and our own [ tightening ] policies, it [ the peso ] has now actually appreciated. what have we done [ to achieve this ]? the most obvious is we raised policy rates. we are actually the most aggressive country in raising it [ compared to our regional peers ] - 350 basis points ( bps ) worth, [ part of which was from former ] governor diokno, who was governor until he became secretary of finance. i have only been governor for seven months. i have had the pleasure or pain of raising the policy rate by 325 bps. of the 350 bps, 325 bps of that was mine [ occurred under my term ], and i have been governor for only seven months, but it worked. as the growth numbers show, the economy can actually take it [ the impact of our rate hikes ]. so, the timing [ to normalize policy ] was right. maximizing the full force of expanded toolkit 2 / 3 bis - central bankers'speeches in addition, if you look at this chart, the philippines has adjusted policy rates more than anyone, including south korea, india, and so on. we also intervened in the forex [ foreign exchange ] markets. my people keep telling me, " governor, do not use the word'intervene,'say,'participate.'" no, we were not just " participating. " we were selling [ fx reserves ] heavily, but that [ level of intervention ] has ended as well. as you can see, relative to reserves, just like other central banks in asia, we sold a lot of reserves. the philippines sold 11. 6 percent of its reserves [ from end - december 2021 to end - december 2022 ]. of course, other countries did even more [ dollar sales ], like thailand, india, and vietnam, and this is actually a pattern with most asian central banks. future policy actions to remain data - dependent by and large, i think we probably have a few more adjustments [ in the policy rate ] depending on what the united states does. at any rate, the point is we have done what we can to re - anchor inflationary expectations, and the remaining ones [ future policy adjustments ] are whatever is necessary to secure it. closing messages let me end with the following points : the bsp stands ready to do whatever is
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francois villeroy de galhau : digital innovation - what role can we play as central banks? speech by mr francois villeroy de galhau, governor of the bank of france, at the singapore fintech festival, 8 november 2021. * * * ladies and gentlemen, it is always a great pleasure for me to have the opportunity to speak at the singapore fintech festival, and i wish to thank ravi menon and the monetary authority of singapore for organizing it. although i am joining from paris today, i look forward to coming back to singapore soon to continue exchanging. innovation may not be the first thing that comes to mind about central banks. after all, our institutions have been around for quite some time : mas just turned 50 β and i take this opportunity to congratulate this golden jubilee β, and banque de france is more than 2 centuries old. we are more associated with stability than disruption β¦ yet the blossoming of digital innovation has the potential to transform the financial system in its entirety. we have to embrace these changes, but there are also things that we need to preserve in this process : the stability of the financial system. innovation and stability can appear as contradictory in the short run ; but they are complementary through a common value ; a keystone : trust. trust of the public in money. to be implemented effectively, these dual principles of innovation and stability require a cooperative setting. i will focus on how these principles can be put into practice, first through how regulation can address new risks, and then how central banks can foster innovation, with the example of central bank digital currencies. i. new risks, new rules? no corner of the financial system is left untouched by digital technologies, a look at the agenda of this fintech festival tells it all : payments, decentralized finance and open banking, crypto - assets, central bank digital currency, quantum computing, etc β¦ these technologies bring competitive pressure and such innovative pressure is healthy : it challenges inefficiencies, helps improving services, brings down costs. fintechs are key players in the modernisation of the financial sector and i expect banks in particular to seize more systematically the opportunity to participate to this transformation. can i quote joseph schumpeter? he wrote that β most of the creations of the intellect or fancy pass away for good after a time that varies between an after - dinner hour and a generation. some, however, do not. β fintech has clearly made it pass the after
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cbdc is a key area of our work to foster innovation central bank digital currencies is a key area β if not the key area β where the stakes are especially high : central banks are responsible for preserving the soundness of money, whatever its forms! this is a domain where banque de france is convinced of the benefits of β learning by doing β. this is why we launched in 2020 a programme to carry out experiments on wholesale cbdc with fintechs, public and private market participants and other central banks. our objectives have been multi - fold, testing : several use cases ( securities settlement, cross - border transactions ), on different types of financial instruments ( listed and unlisted tokenized assets, sovereign issuances, payments ), with various technologies ( public or private blockchains, open - source or proprietary protocols ), and as proof of concept but also in real - life conditions. a report on the key takeaways from this experimentation programme is being published today on the banque de france website. the expertise we have gained through these experiments will be shared with the eurosystem, which launched in july an investigative work on a retail digital euro ( the decision to enter in a realization phase will be made in 2023 ). cbdcs are indeed an area where international cooperation is a must, for cross - border efficiency as well as financial stability and monetary sovereignty reasons. in particular, interoperability between cbdcs is an objective of critical importance. banque de france has explored those international aspects empirically in its experiments, by implementing various configurations for multi - cbdc arrangements. in particular with the monetary authority of singapore, where we simulated cross - border transactions involving multiple cbdcs on a common network between singapore and france. we have also been working with the swiss national bank, the bis innovation hub or the banque centrale de tunisie. 2 / 3 bis central bankers'speeches a lot of work is still necessary in this very promising field, and i am looking forward to strengthening our cooperation in that area with our partners worldwide. in particular, banque de france will be keen to follow closely the very stimulating work conducted by the bis innovation hub with mas and our fellow central banks from malaysia, australia and south africa on developing prototype - shared platforms for cross - border transactions using multiple cbdcs ( β project dunbar β ). so we have much work to achieve together. i wish you an excellent fintech festival and i look forward
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stefan ingves : the monetary policy landscape in a financial crisis speech by mr stefan ingves, governor of the sveriges riksbank, at the swedish economics association, stockholm, 31 march 2009. * * * introduction " the monetary policy landscape in a financial crisis " is the theme of my speech this time. i thought for once that i would begin by showing you a picture. the slide shows an oil painting that was done in 1842 by the english artist william turner. 1 it is called β snow storm β steam - boat off a harbour's mouth β. it is part of the collection at the tate gallery in london. the only thing you need to know about the painting just now is that turner used a very special technique. he built up the picture gradually by painting several thin, semi - transparent layers on top of each other. he then added somewhat thicker, more pastose sections. as you can see, this layer - by - layer technique gave his paintings a special lustre and a special atmosphere. we would probably say that the atmosphere in this painting is dramatic. turner's technique can also act as a starting point for a description of the situation today. reality is made up of different layers. every layer that is added or peeled away reveals a partly new landscape. we can compare the financial crisis to the snow storm in turner's painting. in order to paint the picture of the complete storm we need to begin with a layer that describes the macroeconomic preconditions, the macroeconomic landscape. then comes a layer that describes the financial landscape. this consists of financial players, institutions, markets and joseph mallord william turner ( 1775 β 1851 ), british artist most famous for his romantic landscape paintings, whose style can be said to have paved the way for impressionism. instruments. over this there is yet another layer that describes the regulatory landscape, that is the special legislation, regulations and supervisory arrangements that cover the activities of financial companies. somewhere in the middle of the picture, symbolised by the steam boat that is trying to navigate the right course through the snow storm, we have the riksbank which is fighting to both meet the inflation target and safeguard the stability of the payment system. for the riksbank, as for steam boats at sea, the room for manoeuvre is determined by the conditions in the surrounding landscape. we have to understand how the weather, visibility and other prevailing factors affect our chances of steering the boat in the right direction
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lars heikensten : on clarity and flexibility speech by mr lars heikensten, first deputy governor of the sveriges riksbank, at a center for business and policy studies ( sns ) seminar held in stockholm on 9 may 2001. * * * let me begin by saying that i welcome this opportunity for a fundamental discussion on the way monetary policy is formulated. the background to today's discussion consists of a number of contributions to the debate in which it has been asserted in somewhat differing ways that the way we have chosen to formulate monetary policy is not sufficiently flexible. our critics are of the opinion that by tying ourselves down to an inflation target of 2 per cent we risk allowing unacceptably high domestic inflation. and that we risk strengthening " bubbles " in asset prices. it has also sometimes been intimated, in so many words, that the way we have chosen to formulate policy is one explanation for the very weak exchange rate. furthermore, in this debate, it has also been suggested that we should adopt less specific inflation targets, similar to those of the european central bank ( ecb ) and its american counterpart β the federal reserve. the debate has arisen primarily in three different contexts. how deregulation should be handled, to what extent asset prices should be taken into account, and the role the krona has to play in this analysis. the mainstay of my argument is that there are no simple solutions to any of these problems. what is needed is an empirical assessment from case to case. i think that monetary policy does have the flexibility needed to deal with the problems with which we are faced. at the same time, clarity in the formulation of objectives brings advantages. the basis of the way in which the riksbank evaluates the future path of inflation and makes decisions on the repo rate is the guiding rule, which we have followed for a number of years. according to this simple rule, policy is based on an inflation forecast with a horizon of several years. if, in one or two years'time, inflation exceeds the target, we have said that there is normally a case for raising interest rates and vice versa. but there can be reasons for deviating from this rule. some of these reasons are given in the clarification issued by the executive board of the riksbank when it took office. other reasons have been presented in various speeches. perhaps i should also say right at the beginning that what i am going to
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p. 10. the writings of jean baptiste say, an early nineteenth - century follower of smith, were significant in this regard. he postulated that supply creates its own demand and concluded that marked contractions in economic activity would, with time, be unwound. 7 the widespread acceptance of say's law and the associated confidence in the self - stabilizing property of a market - based price system were dominant factors inhibiting government intervention in periods of economic distress, especially during the latter part of the nineteenth and early twentieth centuries. but the great depression of the 1930s subjected the optimistic conclusions of classical economics, especially say's law, to a much broader assault. as the economic stagnation of the 1930s dragged on, the critical notion that capitalism was self - correcting fell into disrepute. the marked increase in government intervention into markets, in effect a partial reversion to mercantilism, was perhaps an inevitable response to the distress of the great depression. at the same time, the notions of marx gained influence in the west, perhaps because the repressions of the soviet union, the major avowed practitioner of marx, were not well known before world war ii. but cracks in the facade of economic management by government emerged early in the post - world war ii years, and those cracks were to widen as time passed. britain's heavily controlled economy, a carryover from the war, was under persistent stress as it encountered one crisis after another in the early postwar decades. in the united states, unbalanced macroeconomic policies led to a gradual uptrend in the rate of inflation in the 1960s. the imposition of wage and price controls to deal with rising inflation in the 1970s proved ineffective and unworkable. the notion that the centrally planned soviet economy was catching up with the west was, by the early 1980s, increasingly viewed as dubious, though the view was not fully discredited until the collapse of the berlin wall in 1989 exposed the economic ruin behind the iron curtain. the east - west divisions following world war ii engendered an unintended four - decade - long experiment in comparative economic systems - smith versus marx, so to speak. the results, evident with the dismantling of the iron curtain, were unequivocally in favor of market economies. the consequences were far - reaching. the long - standing debate between the virtues of economies organized around free markets and those governed by central planning came to an end. there
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living standards and populations, but growth in both was glacial. in the fifteenth century, the great mass of people were engaged in the same productive practices as those of their forebears many generations earlier. smith lived at a time when market forces were beginning to erode the rigidities of the remaining feudal and medieval practices and the mercantilism that followed them. influenced by the ideas and events of the reformation, which helped undermine the concept of the divine right of kings, a view of individuals acting independently of ecclesiastic and state restraint emerged in the early part of the eighteenth century. for the first time, modern notions of political and economic freedom began to gain traction. those ideas, associated with the age of enlightenment, especially in england, scotland, and france, gave rise to a vision of a society in which individuals guided by reason were free to choose their destinies unshackled from repressive restrictions and custom. what we now know as the rule of law - namely protection of the rights of individuals and their property - widened, encouraging people to increase their efforts to produce, trade, and innovate. a whole new system of enterprise began to develop, which, though it seemed bewildering in its complexity and consequences, appeared nonetheless to possess a degree of stability as if guided by an " invisible hand. " the french physiocrats, among others, struggled in the middle of the eighteenth century to develop rudimentary principles to untangle that conundrum. those principles were an attempt to explain how an economy governed by a calculable regularity - that is, natural law and, as characterized by the physiocrat vincent de tournay, " laissez - faire, laissez - passer " - would function. the physiocrats'influence, however, waned rapidly along with the influence of other political economists as evidence grew that their models were, at best, incomplete. j. m. keynes, the general theory of employment, interest, and money, 1936, p. 383. it was left to adam smith to identify the more - general set of principles that brought conceptual clarity to the seeming chaos of market transactions. in 1776, smith produced one of the great achievements in human intellectual history : an inquiry into the nature and causes of the wealth of nations. most of smith's free - market paradigm remains applicable to this day. smith was doubtless inspired by the physiocrats
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##inancing themselves via the ecb without impairing the soundness of eligible counterparts. the member states and the commission will mobilize all necessary resources to provide exceptional technical assistance to help greece implementing its reforms. in this environment, greece can return to a path of growth and debt sustainability, provided the reform and savings requirements of the troika to be implemented. this alliance of the international monetary fund ( imf ) and eu commission in liaison with the ecb developed a program for athens that has been calculated by senior experts. two objectives are at stake : the return to growth and the sustainability of debt. 1. greece can resume growth when its potential is released. and its potential is huge. there is a vast supply of solar and wind energy which can be exported to the energy demanding states in northern europe. moreover, greece could turn into a major transport hub between europe and asia. there are plenty of superb engineers among young greeks longing for entrepreneurial challenges. last but not least, greece is one of the most attractive places in the world for tourism of many kinds. reform and effort, however, are necessary to lift that treasure. 2. debt sustainability requires a government to be able to repay its financial obligations at some point in the future. therefore the government has to run primary surpluses in the future. these have to be sufficiently large to accommodate the cost of servicing the government β s debt obligations, both at present and in the future. to put this challenge into perspective, lessons can be drawn from the experience of primary budget balances in eu member states. many of which have indeed achieved significant primary surpluses over extended periods of time. several uninterrupted episodes of high annual primary surplus stand out : bis central bankers β speeches finland maintained an average annual primary surplus of 5. 7 percent of gdp over 11 years ( 1998 β 2008 ) ; belgium sustained one at 5. 4 percent of gdp over 11 years ( 1994 β 2004 ) ; the average primary surplus for denmark was 5. 3 percent of gdp over 26 years ( 1983 β 2008 ) ; italy managed to generate an average primary surplus of 5. 1 percent of gdp over six years ( 1995 β 2000 ). overall, ten eu member states ( belgium, bulgaria, denmark, ireland, spain, italy, luxembourg, netherlands, finland and sweden ) recorded uninterrupted episodes of primary surplus for ten or more years, the lowest average annual surplus per episode being 1. 6 percent of gdp. in cumulative
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in europe was fragmented. national bodies which supposed to supervise cross - border banks had no effective tools to resolve conflicts. the eu level financial services committees could only give advice and issue nonbinding guidelines and recommendations. the new consolidated supervisory framework, in place since the beginning of this year, reflects the single market in financial services : the european supervisory authorities ( esas ) are three authorities created for the european banking sector ( eba ), insurance and occupational pensions ( eiopa ), and capital markets ( esma ) the european systemic risk board ( esrb ) is developing the tools necessary to warn and, if appropriate, make recommendations concerning systemic risk. the esrb constitutes the macro - prudential complement. it is chaired by the president of the ecb. 2. reform of the stability and growth pact the stability and growth pact ( sgp ) will be reformed to improve the surveillance of national fiscal policies and apply enforcement measures at an early stage to ensure fiscal sustainable : less room for discretionary decisions and more β automaticity β in the application of the preventive and corrective arm of the stability and growth pact ( burden of proof ) rapid strengthening of national fiscal rules β to facilitate implementation of the stability and growth pact clearer rules for the reduction of debt, especially in euro area countries earlier application of financial sanctions 3. improved economic surveillance in europe the implementation of sound macroeconomic policies is the best insurance. a new macroeconomic surveillance framework will be established to check deviant behavior at an early stage, thus preventing fiscal imbalances before they emerge. surveillance of competitive indicators is of the essence : new framework for the prevention and correction of macroeconomic imbalances early warning indicators and economic analysis of countries to identify where imbalances might emerge, the european council may make appropriate policy recommendations to the country. if serious macroeconomic imbalances are identified, the affected country must submit a plan to implement the recommendations. the application of such a plan will be monitored possible financial penalties in case of serious macroeconomic imbalances and lack of implementation of the recommendations 4. crisis management prudence and prevention are important. yet another crisis cannot be excluded for good. therefore, a permanent crisis management facility has been agreed upon, that builds on the bis central bankers β speeches ad hoc stability facilities established in 2010 to dampen contagion and preserve financial stability. current crisis mechanisms β the eu countries and the imf granted greece financial assistance of 110 billion euros. β european financial stability facility ( efs
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market, or indirect policies such as monetary, fiscal, and trade policies or regulations of capital movements, regardless of the intent or purpose, can affect the level of the exchange rate, and can be interpreted as β manipulation β. the interpretation of the articles of agreement could perhaps be broadened in scope to include a wider range of policies, which can primarily have effects on the exchange rates, and therefore beggar - thy - neighbor consequences. while the articles of agreement include members β obligations in relation to exchange rate policies, global financial stability implications of country specific policies are not touched upon anywhere in the articles. members β obligations are considered only in relation to domestic growth objectives. for example, based on the articles, a country with a weak economy can pursue loose monetary policies to stimulate output and employment. despite the implications of such policies for financial stability in other countries, the country would argue that its policies are in line with article iv, section 1 ( i ) which allows each member to β ( i ) β¦ direct its economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability β¦ β. more generally, the fund β s articles may need altering based on the discussion of the rules of the game. moreover, although broader surveillance by the fund of its members β exchange rate policies, and other policies with significant financial sector spillovers, and perhaps public statements about such policies can have signaling effects, countries are not obligated to follow fund advice unless in a program. the more pertinent question, therefore, might be what can the fund really do once its executive board determines that a particular country is in violation of its obligations under the new rules of the game? hopefully, the clear focus on the downsides of the particular country β s actions for the rest of the world will lead to political and economic pressures from around the world that make the country cease and desist. the clearer the eventual rules of the game, the more likely this outcome. conclusion given the importance of spillovers from monetary policies, especially in the face of globally low inflation, it is important we start building a global consensus on how to get better outcomes for the world. nevertheless, with economic analysis of these issues at an early stage, it is unlikely we will get strong policy prescriptions soon, let alone international agreement on them, especially given that a number of country authorities like central banks have explicit domestic mandates. this paper therefore suggests a period of focused discussion, first outside international meetings, then within international meetings
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as borrowing costs have increased due to perception of high risk associated with sovereigns. in fact, the borrowing costs in spain and italy are inching towards unsustainable levels of 7 per cent and 6 per cent respectively ( chart 1 ). bis central bankers β speeches it is important to note that a large number of banks in the eurozone stand to suffer significant losses in the event of further escalation of sovereign debt crisis which may put many banks on the verge of bankruptcy and trigger a worldwide credit crunch. another equally important aspect to reckon is the fund availability of the european financial stability facility ( efsf ) is likely to be over - stretched if bigger economies like italy and spain require bail - out funds. the latest twist to the story is news of regional governments in spain facing insolvency. recently, catalonia and valencia regions in spain sought bail outs from the spanish central government. this has made the job of policymakers even more challenging. business confidence continues to remain weak and the keynesian β animal spirits β have long been absent. any further escalation of the european problem would possibly lead to a deeper crisis with a potential recessionary impact not only in those economies under sovereign debt distress but also on other economies across the globe. the us β fiscal cliff β and the chinese slowdown another potential crisis on the horizon is the β fiscal cliff β in the us. there is a risk that government spending could fall abruptly in the us by as much as 4 per cent of gdp in 2013. the political deadlock over the budget could potentially harm the economic growth if it leads to severe fiscal austerity. with the huge unemployment rate unlikely to fall soon, the already shaken confidence of the households and businesses could be further depressed and possibly intensify the stressed housing sector, leading to foreclosures which, in turn, would put the united states banking sector at risk again. obviously, this has implications for global growth and financial stability. it has therefore been suggested that the policy - makers in the us must take steps to avoid the fiscal cliff and also raise the debt limit while devising plans to return to long term fiscal prudence β a medicine long prescribed by them to the others. china, according to the imf, is the most β central β trading power in the world, based on its extensive trade links with other economies that are themselves tightly interwoven. it is the largest trading partner for 78 countries. this makes the imf to classify china as a
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means that m. wolf, " why regulators should intervene in bankers'pay, " financial times, 16 january 2008, 11. both the basel committee on banking supervision and the international organization of securities commissions are working in this area. the bank will continue to watch developments in the real economy for their impact on inflation. developments in the financial sector will be important from a monetary policy perspective only to the extent that they are expected to influence developments in the real economy and, therefore, inflation. i do not mean to downplay the current financial turbulence β it has clearly begun to affect the u. s. economy and, to a lesser extent, ours as well. at the bank of canada, we will continue to monitor these effects, while aiming neither to favour particular market segments nor to insulate market participants from the consequences of their decisions. those consequences will continue to reveal themselves in the weeks and months ahead. this will remain a difficult process. however, the responses that i have just outlined will help the market translate uncertainty into risk, and encourage the appropriate repricing of risk so that markets can ultimately return to more normal functioning. however, this will not mean a full return to the status quo ante. while risk will still be distributed, securitization will be increasingly transparent and standardized, and perhaps eventually exchange traded. first loss will likely remain, to some degree, with the originator. liquidity and balance sheet strength will be more highly valued. volatility will be less restrained by overconfidence. in short, we will see a world in which financial institutions with sound credit judgment, effective risk management, and patient capital can prosper ; a world in which capital is allocated more efficiently ; a world that rewards the traditional attributes of canadian financial institutions. i feel very positive about canada's medium - term prospects in such a world.
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, and provision of funding at risk - free rates to trading desks that placed risky bets. all of these factors encouraged excessive risk taking. finally, it appears possible that the incentives provided by a series of regulations may have encouraged crowded trades. the so - called " cliff risk " created by the mandated use of ratings is one example. a paradox of the current turbulence is that a desire to shelter in the perceived safety of aaa - rated assets led to a dangerous explosion in the supply of synthetically created aaa - rated assets. since many of these assets were financed by excessive leverage and many participants were constrained by mandates to sell on downgrades, the rush to the exits has proven extremely destabilizing. next steps for policy - makers before addressing specific responses in detail, i would like to make a couple of general points. the first is that, while the need to restore well - functioning markets is of paramount importance, the official sector can afford to take some time to ensure that the actions they take are appropriate. this is because many of the market practices that contributed to the dislocations have stopped. at present, many financial institutions are, at best, assuming limited access to market - based liquidity and, in the extreme, hoarding liquidity. it is an understatement to say that credit exposure is once again receiving active scrutiny. the for a full discussion, see m. zelmer, " reforming the credit - rating process, " financial system review ( ottawa : bank of canada, december 2007 ) : 51 - 57. data supplied by merrill lynch u. s. see also j. kiff and p. mills, " money for nothing and checks for free : recent developments in u. s. subprime mortgage markets " ( working paper wp / 07 / 188, international monetary fund, 2007 ). demand for complex, opaque securities has dried up. with institutional memory longer than a few months, even in the financial sector, there is no need to rush to judgment or to impose hastily conceived measures. the other point is that market participants have every reason to learn the lessons of these events and to change their behaviour as required. as i will discuss in a moment, there are some encouraging signs in this regard. that said, recent events have revealed serious and widespread shortcomings that, if not addressed promptly, completely, and credibly, will demand a more activist response on the part of regulators. the ultimate response will likely be a combination
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bank to issue a retail cbdc within months of experiencing one of the strongest hurricanes, as they sought to restore financial access to areas impacted by the event. these technologies have also spawned volatile investment instruments such as crypto - assets and stablecoins whose existence may accelerate the thrust among central bankers towards retail cbdc issuance. the discussion on cbdcs raises several issues, including are they inevitable in the digital age and will they impact financial stability. our panellists will address these key issues, providing a spring board for discussions of our research papers which cover traditional areas, including growth, debt, financial sector innovation, and public sector reform. all areas worthy of thoughtful and thorough examination. we hope that by bringing our best minds together to provide their local, regional and global perspectives, we can provide solutions through our shared experience and expertise to craft practical takeaways for navigating the current global space. i encourage you, whether you are here with us in - person or joining us online, to avail yourself of this opportunity to learn from our presenters, and indeed throughout the four days of this seminar. we hope this year β s ars will be not only informative, but also inspiring, as we work to confront the many challenges we as a nation and a region face. i thank you. 3 | page
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public education is part of the cbb β s legacy remarks by governor cleviston haynes at the opening of the 42nd annual review seminar tuesday, july 26, 2022 0 | page public education is part of the central bank of barbados β legacy good morning, and welcome to the 2022 annual review seminar. this year β s seminar forms part of the events to mark the bank β s 50 th anniversary, and i am delighted to welcome phillip middleton of omfif and gerardo reyes - tagle of the idb, who have graciously joined us for this morning β s special session on emerging central banking issues. our 50th anniversary celebrations are being held under the theme " living the legacy : continuing the journey ", a tribute to what the bank has achieved as well as our commitment to build on those achievements. as we reflect on our legacy, one area in which we can be proud is public education. sir courtney blackman, the bank β s first governor, strongly believed that the bank's success in fulfilling its mission to foster a sound economic and financial environment was indelibly tied to barbadians'understanding of the economy and support for the policies that were necessary for its growth and development. over the past 50 years, the bank has invested in varied programmes that have helped to educate and stimulate discussion. for example, our long - standing quarterly economic reviews and cbb 101 series, of recent vintage, have both been well received. for more than a decade, we have partnered with the financial services commission to host the domestic financial institutions conference, which examines key issues affecting the sector. this was originally held as a one - day in - person event, but with the onset of the pandemic, we pivoted to an online format. and we have reached further afield through the caribbean economic forum, which provides avenues for people throughout the region to hear experts explain, explore, and debate topical issues that affect our lives, livelihoods, and economies. our most recent edition, which focused on the impact of our ageing populations on governments'ability to care for our citizens, has raised awareness of this issue and sparked much discussion about the need to act, and the implications if we fail to do so. the new online format that we have adopted has made it possible to reach more people, and going forward, we anticipate that these online or hybrid events will become commonplace. 1 | page this annual review seminar, now in its 42nd year, is
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exemptions from strong customer authentication. in addition to these requirements, payment service providers applying the exemptions should perform the monitoring, as stated in article 21 of commission delegated regulation ( eu ) 2018 / 389, and make the results available to bnb upon request. charges on cross - border payments in euro and currency conversion charges regulation ( eu ) 2019 / 5183 introduces the requirement for payment service providers in non - euro area member states to levy equal charges for cross - border payments in euro and for corresponding national payments of the same value in the national currency of the respective member state. such a legal requirement has existed so far only in respect to equal charges for national and cross - border payments in euro. the requirement for equal charges will become mandatory for payment service providers as of 15 december, 2019. in addition to the requirement for equal charges, the new regulation envisages requirements with respect to currency conversion charges related to card payments and electronic credit transfers which are expected to increase transparency and to ensure comparability in cases where a payment service user is faced with a choice between currency conversion alternatives f. according to the requirements concerning currency conversion charges related to card payments, payment service providers and the parties providing currency conversion services at an automated teller machine ( atm ) or at the point of sale shall provide information prior to the initiation of the payment transaction for the total currency conversion charges expressed as a percentage mark - up over the latest available euro foreign exchange reference rates issued by the european central bank. in addition, the payer must also be provided, prior to the initiation of the payment transaction, with information about the amount to be paid to the payee in both the currency used by the payee and in the currency of the payer β s account. with regard to the requirements for currency conversion charges related to electronic credit transfers, payment service providers will be obliged to inform the payer prior to the initiation of the payment transaction about the expected currency conversion charges applied to the credit transfer, the expected amount of the credit transfer in the currency of the payer β s account, as well as about the expected amount which will be transferred to the payee in the currency used by the payee. payment service providers will have to apply these requirements as of 19 april 2020. 2 / 3 bis central bankers'speeches with regard to regulation ( eu ) 2019 / 518, regulation ( eu ) 2018 / 389 and the corrigendum of directive ( eu ) 2015 / 2366,
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nina stoyanova : upcoming changes in the area of payment services publication of ms nina stoyanova, deputy governor ( banking department ) of the bulgarian national bank, in the quarterly bulletin of the association of banks in bulgaria, issue 58, july 2019. * * * over the last years we have witnessed a continuous trend of increase in cashless and online payments, dynamic development of technologies in the financial sector and new entrants in the market. in this regard, initiatives have been taken on both european and national level aiming to improve the legal framework in the area of payment services with a focus on payment security, ensuring a level playing field for market participants and improving customers β awareness. common and secure open standards of communication in accordance with the provisions of chapter 5 of commission delegated regulation ( eu ) 2018 / 3891, account servicing payment service providers that offer to a payer a payment account that is accessible online, must have in place at least one interface which enables the providers of the two new payment services to identify themselves towards the account servicing payment service provider, as well as to communicate with it securely and in a secure environment. in order to fulfil this obligation, delegated regulation ( eu ) 2018 / 389 provides two options : by enabling the providers of the new types of services to communicate with the account servicing payment service providers through the interfaces, intended for payment services users ( e. g. internet banking of the respective bank ) or by establishing a dedicated interface ( so - called application programming interface - api ). where an account servicing payment service provider chooses to use a dedicated interface allowing access ( api ), it should provide a fallback mechanism that will allow the providers of the new types of services to use the customer interface of the relevant account servicing payment service provider in case of problems with the dedicated interface. the regulation provides the possibility for the competent authorities responsible for implementing directive ( eu ) 2015 / 23662, such as the bulgarian national bank ( bnb ), to exempt an account servicing payment service provider from the obligation to set up and run such a fallback mechanism on its dedicated interface ( api ) if the conditions of the regulation, relating to availability and service level, publication of data, performance of stress - tests, design and testing facility of the interface, its wide usage, as well as problem resolution, are complied with. in the interest of clarity regarding interpretation of the conditions for exemption, the european banking authority ( eba ) has adopted guidelines on the
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##s. 2 standard economic thinking has long offered an explanation for this : if unemployment were to remain this low for this long, employers would be pushing up wages as they compete for scarce workers, and rising labor costs would feed into more - rapid price inflation faced by consumers. this dynamic between unemployment and inflation is known as a phillips curve relationship, and at times it can pose a fundamental tension between the two sides of the fed β s mandate to promote maximum employment and price stability. recent low inflation and unemployment have some analysts asking, β is the phillips curve dead? β 3 others argue that the phillips curve still lurks in the background and could reemerge at any time to exact revenge for low unemployment in the form of high inflation. my comments today have two main objectives. the first is to explain how changes in the phillips curve help account for the somewhat surprising but broadly shared current forecasts of continued very low unemployment with inflation near 2 percent. at the risk of spoiling the surprise, i do not see it as likely that the phillips curve is dead, or that it will soon exact revenge. what is more likely, in my view, is that many factors, including better conduct of monetary policy over the past few decades, have greatly reduced, but not eliminated, the effects that tight labor markets have on inflation. however, no one fully understands the nature of these changes or the role they play in the for example, there have been four periods with quarterly average unemployment below 4 percent since 1950. in an early 1950s episode, inflation ranged from below zero to 8 percent. toward the end of the 1950s, unemployment was near 4 percent for a time, dipping to 3. 9 percent for one quarter. during this low unemployment period, inflation rose steadily from under 1 percent to over 3 percent. the remaining two episodes with unemployment under 4 percent - - one each in the 1960s and 1990s - - are discussed later in the speech. this question is asked in the title of a recent editorial by alan blinder ( 2018 ), and a google search reveals many similar titles. the research on the topic is reviewed more fully later in the speech. - 3current context. common sense suggests we should beware when forecasts predict events seldom before observed in the economy. 4 thus, my second objective today is to explain, given this uncertainty about the unemployment - inflation relationship, the important role that risk management plays in setting monetary policy. i will explore the fomc β s monitoring and balancing of
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of uncertainty and misperception for monetary policy, " finance and economics discussion series 2018β059 ( washington : board of governors of the federal reserve system, august ), http : / / dx. doi. org / 10. 17016 / feds. 2018. 059. figure 6. indicators of inflation expectations quarterly percent inflation compensation households professional forecasters note : inflation compensation is the difference between yields on nominal treasury securities and yields on treasury inflationβ protected securities ( tips ), which are indexed to the total consumer price index. the series reports weekly averages of daily data and extends from january 1998 through september 2018. household expectations are median longβterm expectations from the university of michigan surveys of consumers. the data are quarterly averages and extend through 2018 : q3. the survey of professional forecasters ( spf ) values are expectations for average personal consumption expenditures ( pce ) price index inflation over the next 10 years. before 2007, expectations are for consumer price index inflation, adjusted to a pce basis. the data are quarterly and extend through august 2018. source : for inflation compensation, federal reserve board staff estimates using data from the federal reserve bank of new york ; for households, university of michigan surveys of consumers ; for professional forecasters, survey of professional forecasters ( retrieved from federal reserve bank of philadelphia realβtime data center ). figure 7. appearance of the words " shortage ( s ) " and " bottleneck ( s ) " in the federal reserve β s beige book quarterly word count note : the series is the sum of the word counts in the two beige books for each quarter. data extend through 2018 : q3. source : federal reserve board staff calculations. figure 8. indicators of labor market tightness jobs hard to fill most important problem monthly percent monthly percent poor sales quality of labor note : " jobs hard to fill " series is the share of firms reporting that they have at least one hardβtoβfill job opening. " most important problem " series is responses to the question " what do you view as your single most important problem? " all data are monthly and extend through august 2018. source : national federation of independent business small business economic trends. figure 9. realβtime assessments of the natural rate of unemployment percent 6. 00 fomc blue chip spf cbo 5. 75 5. 50 5. 25 5. 00 4. 75 4. 50 4. 25 note : the federal open market committee ( fomc
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credits generated from the verifiable reduction of emissions can improve the economic case for many transition projects. mas has published a working paper with mckinsey that outlines how highintegrity carbon credits can be generated from future emissions reduction due to the early retirement of coal - generated power and replacement with cleaner energy sources. such transition credits can potentially enable a broader market - driven financing mechanism and help to crowd - in private capital at scale. we will be sharing concrete initiatives on scaling these financing mechanisms and announcing new partnerships to take them forward. finally, resilience. with long coastlines and heavily populated low - lying areas, southeast asia is one of the world's most vulnerable regions to extreme weather and rising sea levels. singapore can play a useful role in pioneering and scaling urban solutions to build climate resilience. let me highlight some examples. to address rising temperatures, we have piloted the use of cool paint on flat facades to reduce the amount of heat they absorb in the day and emit at night. we are exploring the use of smart sensors to collect wind flow data for more robust environmental models which enables achieving cooler temperature with better ventilation. to address sea - level rise and heavy rainfall, we are strengthening local capabilities and expertise. we have set up a coastal protection and flood resilience institution ( cfi ) singapore. this is a multi - institutional and inter - disciplinary research centre to advance domain knowledge as well as explore innovative solutions. to address potential disruptions in food supplies due to climate change, we have taken steps to build a more sustainable and resilient agri - food system. for example, we have plans for a high - tech agri - food hub that can raise food production capacity to up to three times of current levels. this future hub will harness technology for efficient waste management and reduce water consumption by capturing rainwater for farming use. in short, the singapore pavilion aims to foster active partnerships across businesses, research institutes, civil society, youth groups, and government agencies. it aims to connect across countries and sectors to drive change and create impact. 3 / 4 bis - central bankers'speeches i invite you to be a part of this collaboration and wish you a fruitful experience at the singapore pavilion and at cop28. 4 / 4 bis - central bankers'speeches
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- side risks, logistics problems and bottlenecks in production chains remain a significant risk as these issues may persist longer than we estimate today. the abovementioned problem of a limited availability of labour resources is another risk, which is becoming increasingly important. moreover, this problem may become even more serious. this is equally relevant for both the russian labour market and the constraints experienced by other economies. a decline in global demand due to a slowdown in the world economy may become a disinflationary risk. this may happen, for instance, in the case of a large - scale new wave of the pandemic, accompanied by extensive lockdowns in the majority of countries. another scenario where inflationary pressure might also weaken faster in the russian economy is a quick easing of the restrictions on foreign travel for both outbound tourism and the inflow of labour migrants. there is a number of factors, the potential impact of which is uncertain today. in the first place, these are the volumes and quality of the grain and vegetable harvest this year both in russia and worldwide. moreover, it is still uncertain how steady global inflation is and how fast and extensively other central banks will respond to it. winding up, i would like to comment on our future actions. we hold open the prospect of further key rate rises at the upcoming meetings. we will assess whether it is reasonable to increase the key rate, as well as how long the key rate should be maintained at the level achieved taking into account economic developments, inflation trends, and largely the balance of risks to future inflation, including those associated with persistently elevated inflation expectations. in addition to the baseline scenario, we also consider various other scenarios of potential developments in the russian and global economies. the three scenarios describing the key possible circumstances in the external environment were released last week in the monetary policy guidelines for the next three years. monetary policy will be able to bring inflation back to the target regardless of whether the baseline or an alternative scenario materialises. thank you all for your attention. 3 / 3 bis central bankers'speeches
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howard lee : keynote speech β asifma 9th china capital markets conference keynote speech by mr howard lee, deputy chief executive of the hong kong monetary authority, at the asifma 9th china capital markets conference, hong kong, 29 november 2019. * * * riding the wave of portfolio inflows into mainland china mark ( austen ), distinguished guests, ladies and gentlemen, 1. good morning. thank you asifma for hosting this conference in hong kong and inviting me to speak. i am glad to see so many friends of the financial industry here today, from hong kong and other parts of the world. 2. as you all know, hong kong has been going through an extraordinary period since this summer. for those of you who travel to hong kong for this conference, i hope you have so far found the situation on the ground less dramatic than what you might have seen from the news. no doubt we have experienced some serious disruptions to traffic and interruptions to operations of bank branches, but overall speaking the financial infrastructures and markets in hong kong have continued to function smoothly, and they remain robust and resilient. this clearly demonstrates their ability to withstand different types of shocks, as they did multiple times in the past decades. 3. earlier this week, hong kong successfully launched the us $ 13 billion ipo of alibaba. this deal would likely put us at the top spot of the global ipo league table again this year. while that is a secondary listing, it certainly underlines the unique position of hong kong as an international financial centre that connects the fast growing mainland market to global investors. 4. i know some of you may have doubts that the chinese economy is actually slowing down in face of trade dispute and deleveraging. that is true if we compare to the days when mainland gdp was growing at double - digit every year. but let β s remember, a real growth of 6 % is still a very respectable pace compared to economies around the world. and with mainland china β s sheer size, a 6 % gdp growth means adding some us $ 1. 3 trillion nominal value to the world β s gdp in a single year. this is more than the total size of the indonesian economy, or close to that of australia. 5. with such economic expansion and its deepening capital markets, china continues to be a compelling investment theme for global investors. as an investment manager ourselves, we are among the first offshore players in the mainland β s capital markets.
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rmb bonds in april, which will attract around us $ 120 billion of inflows over the 20 - month inclusion process. but even upon completion, rmb bonds will only account for around 6 % of the overall index, leaving a big gap to fill considering that mainland china is the world β s 2 / 4 bis central bankers'speeches second largest bond market. in september, jpmorgan announced a 10 - month phased inclusion of chinese government bonds into its benchmark emerging - market indexes, starting in february 2020. market estimates suggested that the inclusion could lead to around us $ 3 billion of inflows into the onshore bond market per month. mainland china is also on the ftse watchlist for future inclusion into its flagship world government bond index, with the next review in march next year. 13. the takeaway here is that, we are just seeing the tip of an iceberg in the big wave of allocation to chinese assets by investment managers. the pace would likely continue to pick up in the next couple of years. hong kong β s unique position and what lies ahead 14. the vast opportunities in the mainland and the connect schemes offer a great example to remind ourselves hong kong β s unique value proposition. under the β one country, two systems β principle, we maintain a regulatory regime closely aligned with international norms and practices. at the same time, our close rapport with the onshore regulators ensures that we are the best place to experiment capital liberalisation initiatives. we are the only place in the world that practises an english and chinese bilingual common law system that inspires confidence from overseas and mainland investors alike. we have an ecosystem of topnotch financial institutions and professional services firms that are trusted by asset owners and asset managers to look after their investments. these unique advantages cannot be easily replicated anywhere else in the world. 15. of course, apart from providing a convenient conduit for overseas investors to enter the onshore equities and bond markets through the connect schemes, hong kong β s stock market has long been a venue for mainland companies to raise funds and for global investors to get exposure to mainland enterprises. today, over 1, 100 mainland enterprises are listed on the stock exchange of hong kong, with a total market capitalisation of nearly hkd22 trillion and an average daily trading volume of around hkd60 billion. 16. and we are not standing still. we are doubling down on our work to enhance our financial platforms, build more
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in conditions of a pandemic, there is an increasing propensity of households to invest in real estate. actually, in conditions of low interest rates, relatively stable disposable income, reduced possibilities and needs for consumption, change in the models of work, globally there is an increase in the demand for real estate and in the real estate prices. unlike most economic indicators, which collapsed during the pandemic, real estate prices are increasing. in the eu countries, in the first half of this year, real estate prices registered an average growth of nearly 7 %, compared with the growth of around 4 % in the past few years. in our country, the price growth is more moderate of about 4. 4 % during this year, but with signs of acceleration. in the entire region and in our country, housing lending is accelerating and the growth rates are more dynamic compared to the growth of consumer loans. it appears that currently in our country the real estate market developments are in accordance with the shifts in the supply and demand, and the price pressure exists, but it is not that pronounced, as it is in the european union countries. however, this " pandemic syndrome " should be carefully monitored, given that the exposure of the banking system to the real estate market is increasing more and more. hence, there is a need for enhanced monitoring also of this part of the portfolio and keeping of the banks'capacity to deal with the possible future shocks. 2 / 3 bis - central bankers'speeches the banking systems in both the region and in our country are passing the test imposed by the pandemic crisis well, and the challenge for maintaining the capacity for credit support and also maintaining stability will remain in the next period. the indicators of solvency, liquidity, profitability of banks and the quality of the credit portfolio remain stable, and some of them further improved. but, the crisis is getting a prolonged dimension and may have lasting consequences and impose a need for restructuring in some of the sectors of the economy. at the moment, the disruption of the global value chains globally and the growth of costs are creating interruptions in certain industries and are one of the major risks to the expected economic recovery. hence, timely monitoring of all risks and their timely identification is a current priority, in order to reduce the burden on the banks'balance sheets. according to the latest eib survey, some of the banks in the wider cesee region expect a certain increase in nonperforming
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loans in the period ahead. upward shifts are also possible in our country, but for the time being the stress tests show sufficient resilience of the banking system, in conditions of a strong regulatory framework, cautious behavior of banks and signs of economic recovery. the central bank's policy is currently relaxed, thereby contributing to favorable conditions of financing and economic recovery, in circumstances when we have enough comfort in the foreign reserves to respond to possible shocks. of course, given the uncertain environment, we constantly and carefully follow the trends of all indicators, relevant to the monetary policy. at the moment, almost in all countries, the growth of savings increases the sources of funding for banks and their capacity to support the economy, especially at the points that will meet the new post - pandemic requirements and will increase the growth potential. the transition to a green economy is undoubtedly one of the issues that with the pandemic has moved from the margins to the core of priorities. the preferences of both consumers and investors are changing globally and the " appetite " for the so - called green technologies and business models is growing. amid such fundamental, global structural changes, our competitiveness as an economy will also depend on the ability for rapid transition to infrastructure that will provide " green stamp " products. on the contrary, the possibility to be competitive in both the product markets and in the access to financing will be small, and the costs high. the financial support from the banking system can significantly accelerate this transition and help in increasing the competitiveness of the domestic economy. probably faster than expected, the world found itself at crossroads when it should accelerate the structural changes, accelerate the transition to a digital and green economy, enable sustainable, post - pandemic global recovery. the role of the financial sector in this respect is great, since the capacity of the entire economy to deal with the new challenges will largely depend on its stability and readiness for financial support. finally, on behalf of the national bank, allow me to congratulate the savings day, and to send special congratulations to this year's plaque winners - recognitions for achieved special results in the performance of the work tasks. thank you! 3 / 3 bis - central bankers'speeches
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regulator of one of the largest fund hubs globally has meant for us that it is important that we contribute constructively to the international debate and take direct action where required. 2 / 8 bis - central bankers'speeches in doing so, we have sought to bring our practical experience of regulating such a large funds hub, while also being an integrated regulator β with responsibilities covering both investor protection and financial stability β which means we are active in a range of european and international discussions on this important topic. last july's discussion paper represented views of both a financial stability authority but also a securities regulator. it was the culmination of significant internal debate and serves as one of the ways in which we are trying to facilitate the ongoing international discussion in this area. systemic risk and investment funds : a matter of perspective for us, it is an absolute truth that cohorts of the investment fund sector can represent a systemic risk. this is not an abstract risk, as we have witnessed episodes of stress involving parts of the funds sector. let me be clear about this : in the face of financial vulnerabilities, cohorts of funds can amplify shocks to other parts of the financial system and the real economy. this amplification follows decisions taken by individual fund managers in response to shocks. these decisions are often rational at an individual level but, when aggregated across entire cohorts of funds, can generate negative spillover effects. those decisions come from certain vulnerabilities, namely liquidity mismatch and leverage. in the case of liquidity mismatch, in response to a shock, fund managers may need to sell assets in a falling market in order to meet heightened investor redemptions. such asset disposals can amplify downward asset price movements, resulting in a spiral effect. for leverage, a shock may trigger margin calls on derivatives positions, forcing fund managers to dispose of assets to raise cash to meet margin requirements. again, these asset disposals can amplify asset price movements. as i said, these are not abstract risks. we saw these concerns play - out in parts of the funds sector during the global financial crisis, the covid - induced market shock of march 2020, and recent ldi fund issues following the uk gilt market shock. and i stress in parts because β as i'll set out later β this is a very diverse sector, and we should not be making general statements. but neither is this chain of events the result of poor
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23. 01. 2017 presentation of the book β la historia de foment del treball 1771 - 2011 β foment del treball nacional, barcelona luis m. linde governor mr. president of fomento del trabajo nacional, distinguished authorities, ladies and gentlemen : let me begin by thanking fomento del trabajo nacional and its president, joaquin gay de montella, for their invitation to take part in this event which has seen the presentation of the two books that compile the history, over more than two centuries, of this great institution. thank you to jordi gual for his opening address. and my congratulations to the authors, manuel millan and francesc cabana, and to all the managers and associates of fomento del trabajo. foment del treball nacional, the oldest employers β association in europe, remains fully active today, with a significant presence in our economic and business life. as the epilogue to the study presented today states, it is a story without an ending, and we are all happy that this should be so. the role of this private, independent and not - for - profit institution has always been to defend the interests of its associates and of all catalonian entrepreneurs. fomento has been a liaison with the authorities, but also with the representatives of civil society. its objective, the compass steering its initiatives and taking of positions, has been to maintain an environment conducive to the pursuit of productive activities and the sound functioning of companies. and this has been its major contribution to the economic development of catalonia and of spain. our constitution acknowledges the pivotal role of employers β associations. article 7 of the preliminary title recognises their role ( along with the trade unions ) as organisations key to the defence and promotion of economic and social interests, a point further bolstered in article 22 and in the freedom of association it advocates. our constitution also details specific requirements in respect of the internal structure of employers β associations, their ends and their functioning. it is emphatically important that employers β associations should be exemplary institutions, both for society and for their associates. among their obligations is, of course, to ensure this exemplary role, which includes defending the common good, good corporate governance and, in all instances, strict compliance with the law. fomento has always been open to collaboration with other employers β organisations. notable proof of this, in the none - too - distant past, was its participation and
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and severe consequences for the economy as long as monetary policy responds appropriately. whether an asset price bubble is occurring or not, as asset prices rise and boost the outlook for economic activity and inflation, monetary policy should respond by moving to a more restrictive stance. after a bubble bursts and the outlook for economic activity deteriorates, policy should become more accommodative. 8 as i pointed out in a paper that i presented at the federal reserve bank of kansas city's jackson hole conference in september, if monetary policy responds immediately to the decline in asset prices, the negative effects from a bursting asset price bubble to economic activity arising from the decline in wealth and increase in the cost of capital to firms and households are likely to be small. 9 more generally, monetary policy should react to asset price bubbles by looking to the effects of such bubbles on employment and inflation, then adjusting policy as required to achieve maximum sustainable employment and price stability. to be clear, i think that in most cases, monetary policy should not respond to asset prices per se, but rather to changes in the outlook for inflation and aggregate demand resulting from asset price movements. this point of view implies that actions, such as attempting to " prick " an asset price bubble, should be avoided. i take this view for ( at least ) three important reasons. 10 first, asset price bubbles can be hard to identify. as a result, tightening monetary policy to restrain a bubble that has been misidentified can lead to weaker economic growth than is warranted. in addition, central bank actions to influence asset prices when the central bank is uncertain about the presence or extent of a bubble can interfere with the role of asset prices in allocating resources. 11 second, even if asset price bubbles could be identified, the effect of interest rates on asset price bubbles is highly uncertain. although some theoretical models suggest that raising interest rates can diminish the acceleration of asset prices, raising interest rates may be very ineffective in restraining the bubble, because market participants expect such high rates of return from buying bubble - driven assets. 12 other research and historical examples ( which i will discuss later ) have suggested that raising interest rates may cause a bubble to burst more severely, thereby increasing the damage to the economy. 13 another way of saying this is that bubbles are departures from normal behavior, and it is unrealistic to expect that the the federal reserve's congressional mandate is actually couched in terms of three goals : maximum employment, stable prices, and
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the risks to financial stability from asset price bubbles could be made a standard part of the regulatory system and would be operational at all times β whether a bubble was in progress or not. however, because specific or new types of market failures might be driving a particular asset price bubble, some future bubbles will almost certainly create unanticipated difficulties, and, as a result, adjustments to our policy stance to limit the market failure contributing to a bubble could be very beneficial if identified and implemented at the appropriate time. earlier, i pointed out that a bubble could be hard to identify. indeed, i think this is especially true of bubbles in the stock market. central banks or government officials are unlikely to have an informational advantage over market participants. if a central bank were able to identify bubbles in the stock market, wouldn't market participants be able to do so as well? if so, then a bubble would be unlikely to develop, because market participants would know that prices were getting out of line with fundamentals. however, although i believe that stock market bubbles might be hard to identify because they are typically not driven by credit booms ( which also makes them less harmful because their collapse is less likely to lead to financial instability ), when asset prices are rising rapidly at the same time that credit is booming, there may be a greater likelihood that asset prices are deviating from fundamentals, because laxer credit standards may be driving asset prices upward. 17 in this case, financial regulators at central banks and other institutions may have a greater likelihood of identifying that a bubble is in progress ; for example, they might have information that lenders have weakened their underwriting standards and that credit extension is rising at abnormally high rates. the reasoning here suggests that a rapid rise in asset prices accompanied by a credit boom provides a signal that should lead central bankers and other financial supervisors to carefully scrutinize financial developments to see if market failures might be driving the asset price boom. the resulting analysis of financial developments might then lead policymakers to consider implementing policies to address the imperfections behind the market failures and thereby help reduce the magnitude of the bubble. some historical examples i would like to now turn to a few examples from u. s. history and international experience that highlight the interaction between asset price bubbles, financial stability, and the policy framework. the stock market boom of the 1920s the roaring twenties and the onset of the great depression present a particularly drastic example. the u. s. economy thrived during the
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fiscal position. even a notionally independent central bank could do nothing to affect it. purchases of government debt by the central bank, for example, would do nothing to depress their yields. ( indeed, if they served only to reinforce the central bank β s subservience, thereby pushing up expectations of future inflation, qe could actually raise bond yields. put another way, the policy can only work as intended to the extent the framework is credible β if it β s generally accepted that deficits are controlled by conventional fiscal measures and monetary policy is devoted to a fixed nominal objective. ) there is also the potential, in this extreme situation, of a positive feedback between inflation expectations and inflation itself, and an associated risk of hyperinflationary spirals. when inflation expectations rise, the expected cost of holding zero - interest money goes up as well. reluctant to hold on for very long to the paper the government is using to fund itself, people spend it straightaway, feeding the inflation and confirming those prior expectations. whether inflation is actually an efficient tax β whether the economic harm it causes is worth the fiscal benefit β is far from clear. certainly an extra bout of inflation that β s fully anticipated, and that therefore raises nominal interest rates and bond yields in advance, does very little to improve the government β s financial position, and even less now than in the past. that β s because the public sector has almost nothing in the way of zero - interest liabilities. if higher inflation and nominal growth pushed up the demand for physical cash the government might make a little more from that source. ( the economic value of cash is higher than the cost of producing it. the difference, known as β seigniorage β, is a source of revenue for the public sector3 ). but the sums involved are on their own, the instruments of policy are not a reliable way to discern whether there β s β monetary finance β of the government. but they may be more informative alongside other information. for example, if the central bank is easing policy in the face of clear inflationary pressure that might suggest it β s putting weight on some other objective : the joint behaviour of instrument and target can be informative. it might also tell you something if the central bank eased policy and, at the same time, the authorities introduced restrictions to limit or prevent people from selling the government β s debt. that way, the central bank might be able to reduce borrowing costs for the government alone
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change in bank rate. the first plots changes in the resulting shadow rate ( as developed by de rezende and ristiniemi ( 2020 ) ) against the growth of gdp. chart 3b uses slightly different measures for the same things β the average policy vote on the mpc and a survey measure of growth6 β but the conclusion is the same. policy is tightened when growth is strong and loosened when it β s weak. it β s no surprise to find that the government balance is similarly cyclical ( 3c ) β or, therefore, that it β s also well correlated with the behaviour of monetary policy. furthermore, the responsiveness of policy rates to economic growth seems to be necessary to stabilise inflation. certainly inflation has been very stable under inflation targeting ( more stable, in fact, than in any 25 - year period in the 800 - year history of the estimated uk series ). and you have to go back all the way to a weighted average of the composite pmi and ( to cover the distribution sector ) the headline balance from the cbi distributive trades survey. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice the pre - wwi classical gold standard, the last time the uk had something akin to a β target β for domestic prices7, to find a period when short - term interest rates were reasonably well correlated with economic growth β or in which inflation was well controlled ( chart 4 ). chart 3a : monetary policy and economic activity correlated under inflation targeting chart 3b : also apparent using mpc votes and survey measure of growth sources : de rezende and ristiniemi ( 2020 ), ons and bank calculations. 6 - month averages, combined ihs markit / cips and cbi distributive trades lagged one month. sources : ons, ihs markit / cips, cbi, bank of england and bank calculations. chart 3c : government balance also cyclical chart 4 : when the monetary regime is stable policy rates are more responsive to economic growth and inflation is less volatile sources : ons and bank calculations. based on gdp growth and inflation smoothed over 2 - year periods, and bank rate changes over 2 years. sources : thomas and dimsdale ( 2017 ), feinstein ( 1991 ), o'donoghue et al ( 2004 ), ons and bank calculations. in
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auditing framework and supportive financial market infrastructure are all pre - requisites for successful development of the industry. it is agreed that prudential supervision on banks is just as necessary in an islamic system as in conventional systems, however, the supervisory framework needs to recognize special characteristics of islamic banks in order to be more effective. state bank of pakistan ( sbp ) being the regulator of banking sector is aware of the significance of prudent and effective supervisory framework and remains committed to this end. improving market development and regulatory regimes are continuous processes in the context of changing industry needs and overall macroeconomic environment ; therefore, we regularly review and update our regulatory framework. in this regard one significant example of recent past is the issuance of shariah governance framework for islamic banking institutions which has enhanced the earlier issued shariah compliance regulations for the industry. moreover, we are working on improving regulatory and legal infrastructure by providing a balanced tax regime, enhanced disclosure requirements, strengthening of insolvency framework and standardizing page 3 of 6 practices. by taking the advantage of having global audience here, i would suggest for a dialogue at global level for harmonization and standardization of practices all across islamic finance industry. ladies & gentlemen many researches including the knowledge, attitude and practices of islamic banking in pakistan ( kap ) study issued by the state bank of pakistan indicated the concentration of demand for islamic financial industry in the category of clients who are not only faith sensitive but are also responsive to efficient operations and high quality services. this signifies that the strategy of islamic banking industry should be customer centric in its proposition, delivery and service. this demands for widening product range, improvement in operational efficiency and service quality. i would take this opportunity to urge industry to take full advantage of these centres of excellence with particular respect to product innovation and for conducting research on contemporary issues. as a system, islamic finance facilitates in stimulating economic activity and entrepreneurship towards promoting comprehensive human development and addressing poverty and inequality. under this system, not only the prevalence of re - distributive instruments such as zakat, waqf ( endowment ) and sadqaat ( charity ) can play vital role towards broad based development and poverty alleviation but characteristics like page 4 of 6 equity financing can also lead to the same objective. equity financing enables islamic finance to cater to needs of unconventional but strategic sectors like small and medium enterprises ( smes ), agriculture and low income housing. however, like many other jurisdictions, the penetration of banking industry
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key note address by ashraf mahmood wathra governor, state bank of pakistan world islamic finance forum ( wiff ) september 05, 2016 respectable senator muhammad ishaq dar, federal minister for finance, revenue, economic affairs, statistics, & privatization, justice ( r. ) muhammad taqi usmani, dr. ishrat hussain, chairman, dr. azmi omar, director general, islamic research & training institute, professor dr. abbas mirakhor, dr. farrukh iqbal, dean and director, center of excellence in islamic finance education - iba, distinguished guests, ladies & gentlemen assalam - o - alaikum it gives me immense pleasure to see global strategic players like international centre for education in islamic finance, the islamic research and training institute, international shari β ah research academy for islamic finance ( isra ) joining hands with the centre of excellence in islamic finance education, iba for organizing world islamic finance forum in the largest city of pakistan. this is a clear reflection of pakistan being a significant contributor towards the growth and development of islamic finance industry. i want to appreciate the page 1 of 6 organizers for providing this forum bringing together global thinkers and practitioners who can synthesize the work so far done and build on the core competencies of islamic finance for its sustainable growth. i wish all the best for the success of this global event and a very pleasant stay to the distinguished foreign delegates. ladies & gentlemen the ability of islamic finance to introduce greater discipline into the financial system owing to its inherent strengths indicates this system is relatively more stable and resilient. islamic banking is a growing reality which is expanding outside the traditional borders of muslim countries into western economies ; at present global islamic financial assets have reached us $ 1. 8 trillion in 2015 from us $ 150 billion in the 1990s and are expected to exceed us $ 6. 5 trillion by 2020. asia is expected to be the key driver in advancing the growth of the islamic finance industry ; according to islamic financial services board β s ( ifsb ) report, 2015, pakistan is among potential leaders of islamic finance. despite its impressive growth, islamic finance industry cannot be complacent as there still prevails huge untapped market. there are some challenges that the industry is facing in order to sustain its growth page 2 of 6 momentum. i would like to touch upon some of these challenges with respect to the theme of this event. enabling supervisory, regulatory and legal environment, a suitable accounting and
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to these targets, an investment in a danish bank or mortgage bank should yield a considerably higher return than an investment in danish government bonds. the reason for this high risk premium is not obvious to me. and certainly not if we take into account that the institutions have increased their capitalisation in recent years and are now seen as safer investments. the high targeted returns give cause for concern as they may trigger a need to increase the risks taken by credit institutions. this can be done on the assets side, e. g. via more risky lending. or on the liabilities side via higher leverage ratios. i hope that the high targets are not based on this type of strategic considerations. the credit institutions should carefully consider whether the current targeted returns are consistent with a prudent level of risk. * * * the long period of low interest rates may have had an impact on the expectations and behaviour of firms and households. the risk that interest rates may rise is disregarded. most people have clearly become accustomed to low interest rates. in relation to financial stability, this requires enhanced vigilance. if interest rates rise, this may lead to losses on the credit institutions β assets and the collateral behind their lending. for households, the costs of borrowing to purchase a home are historically low at present, even if the announced increases in administration margins are taken into account. how the administration margins are determined is no concern of ours. however, i would like to emphasise that there is a link between the very low level of interest rates, which also leads to a modest return on a credit institution β s equity, and the need for a certain level of earnings from other sources so that capital can be accumulated with a view to increasing lending. it should also be noted that improved earnings and better capitalisation of a mortgage bank benefit its customers by way of lower funding costs. this is reflected in the yield payable by the customers on the underlying bonds. combined with migration to the cities, the very low interest rates have led to a period of strong growth in house prices in some parts of denmark. adjusted for seasonal fluctuations, house prices continued to rise at a robust rate in the 2nd half of 2015 and at the beginning of this year. but there are signs of a slowdown compared with one year ago. trading activity has generally declined over the last year. this could indicate that price pressures will ease in the future. although substantial interest rate hikes are not on the cards for the time being, it is important that borrow
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lars rohde : the importance of credit institutions β capitalisation, financial regulation development speech by mr lars rohde, governor of the national bank of denmark, at the annual meeting of the danish mortgage banks β federation, copenhagen, 7 april 2016. * * * thank you for inviting me to speak at your annual meeting. today i will focus on the importance of credit institutions β capitalisation, financial regulation developments and a few significant consequences of the very low interest rates. my key messages are : it is in everyone β s interest that credit institutions are well - capitalised. the risk - based approach should be retained in financial regulation. and we must have a realistic approach to how much special danish circumstances will be taken into account in future. i will also observe that the credit institutions β own targeted returns seem to be rather high, and that a long period of low interest rates involves considerable inherent risk. * * * my first topic is equity capital and financial regulation. robust equity is of paramount importance if people are to have confidence in a financial enterprise. the financial crisis showed that many financial institutions were insufficiently capitalised. as a result, some of them were not resilient to the losses incurred in the wake of the overheating. this inability to absorb losses exacerbated the economic downturn. since then, much has been done to increase the resilience of the financial system, both internationally and in denmark. for example, capital requirements have been enhanced. the financial system has become more robust than it was before the financial crisis. the improved capitalisation of danish credit institutions is without question an advantage, whether or not it is a result of financial regulation. there is nothing to indicate that the increased capital requirements have led to a lack of lending capacity or led to lower growth in denmark. it is also in the interest of the credit institutions themselves to be well - capitalised β and even more so after the introduction of the new eu bail - in regime. it is now the owners and creditors who must bear the losses of a distressed institution. and it is at least as important to be wellcapitalised in the eyes of the market as in the eyes of the supervisory authorities. important work is underway in relation to resolution planning for credit institutions. as regards the mortgage banks, it is chiefly a question of ensuring that the authorities can handle a distressed mortgage bank. without the use of taxpayers β funds. and in such a way that the lending capacity of the institution is retained
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recent evidence, β discussion paper no. 2015 β 9, bank of canada, 2015. t. lane, β drilling down β understanding oil prices and their economic impact β ( speech to the madison international trade association ( mita ), madison, wisconsin, 13 january 2015 ). bis central bankers β speeches although we believe that β s the right decision at the present time, it would not always be the right call. there are times, as in the 1970s, when exchange rate movements are part of a broader inflationary process. in such cases, looking through the pass - through could put us on a treadmill of accommodating higher inflation. moreover, identifying pass - through depends on a combination of estimation and judgment. for that reason, we issue our estimate of the underlying trend in inflation as our own judgment in the current policy context, rather than as an alternative measure of core inflation. expectations expectations of inflation, which are based on actual inflation as well as the credibility of our target, also play a central role in the conduct of monetary policy. many economic decisions depend on expectations of future inflation. for businesses, inflation expectations influence their stance in wage negotiations and price setting, as well as in assessing rates of return for decisions on production, hiring and investing in productive capacity. for households, expectations have an impact on savings decisions as well as on their choice of alternative savings vehicles. 9 through their influence on all of these decisions, expectations tend to become self - fulfilling. it would be much more challenging to keep inflation on target if expectations were to become unanchored β or anchored at a lower or higher level. for these reasons, we keep a close eye on expected inflation. we measure business expectations with our own quarterly business outlook survey and recently began tracking household expectations with a quarterly online poll of 1, 000 canadian consumers. the poll measures both the inflation expectations of participants over various time horizons and the uncertainty surrounding those expectations. it also covers a wide array of other economic expectations that will inform the bank, and canadians in general, on issues ranging from labour market prospects to personal finances. conclusion let me wrap up. our inflation - targeting framework has stood the test of time. it has proved vastly superior to any other policy alternatives that have been tried. our periodic renewals are important opportunities to make sure it continues to serve its purpose and to suggest improvements. i have focused on one set of improvements that we are considering : how we assess the underlying trend in inflation, separating it from price movements
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and f. ohnsorge. washington, d. c. : the world bank. 3 / 3 bis central bankers'speeches
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capital guidelines of the federal banking agencies, β joint advance notice of proposed rulemaking ( august 10 ). still, it may require extension of g - m β s confidence that the regulator could adequately oversee abs ratings to confidence that it could assign ratings in the first place. i would observe that the substantial effort expended by staff at the board and the federal reserve bank of new york to evaluate the creditworthiness of a relatively small number of securitizations in the term asset - backed securities loan facility suggests the enormity of that task. furthermore, the wisdom of having a government agency β even the independent central bank β assume such a permanent, central role in credit allocation should at least be subject to debate. a final regulatory issue is raised by another g - m response to their expectation that equity returns for nfbs will be lower than for traditional banks. in place of the equity capital requirements generally applicable to banking organizations, g - m propose that nfbs would issue capital notes that are debt - like except in periods of stress, when they would convert to equity. in essence, all of an nfb β s capital would be contingent capital. while contingent capital is an item on the financial regulatory agenda, it is considered a possible supplement to common equity, not a substitute for it. in this respect, the g - m proposal moves in the opposite direction from basel iii, which has followed markets in making common equity the centerpiece of capital evaluation and requirements. 5 these inconsistencies with current law and practice in the g - m proposal do not themselves argue against its soundness. they do, however, underscore the degree to which the nfbs would require development of a new financial regulatory approach, as well as a restructuring of the abs and repo markets. more generally, the existence of costs or problems does not counsel the rejection of the proposal as such. in the face of very real flaws in the pre - crisis state of these markets, and the failure of some abs markets to recover, even where it seems they could function sensibly, there is a very good case for a policy initiative. so let me consider briefly whether variants on the basic g - m approach might retain its core benefits while addressing some of its potential problems. one possibility would be to broaden the permissible ownership of nfbs to include bank holding companies. this modification would make the most sense if one believed that the basic g - m approach was promising but
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, with careful specification of the benefits of the repo market that g - m are trying to save, weighed against the likely impact on β among other things β the securitization market and regulatory system. a second set of questions concerns how the nfbs would operate in practice. as a threshold matter, it is worth noting that policymakers may find the proposal to have a certain binary for a survey of the entire shadow banking system, see pozsar, zoltan, tobian adrian, adam ashcraft, and hayley boesky ( july 2010 ) : β shadow banking, β ( 928 kb pdf ) federal reserve bank of new york staff reports, no. 458. quality. that is, it would structurally change the entire securitization market and a large portion of the repo market essentially overnight. in effect, g - m put all securitization eggs into one basket. if the new system worked well, the benefits presumably would be significant, and perhaps quickly realized. indeed, the new system might succeed in helping to restart, on a sounder basis, various abs submarkets that remain largely dormant three years after the crisis began to unfold. 3 if, on the other hand, the new system encountered major difficulties, there might be materially reduced adaptive capacity in other financial actors, possibly for a considerable period. one obvious source of difficulty is the possibility, well recognized by g - m, that the business model mandated for nfbs might not be viable and stable. as with all forms of narrow banks proposed over the years, nfbs as a group would seem likely to generate relatively low revenues, given the low risk of the securities in which they would have to invest. g - m propose to counter this problem by granting franchise value through the statutory monopoly on securitization mentioned earlier and through access to the federal reserve β s discount window. picking up on their analogy to the creation of deposit insurance in the 1930s, the monopoly on securitization is intended to help offset the regulatory costs imposed on nfbs in the same way that the monopoly on the β business of banking β was intended to offset the regulatory costs imposed on insured depository institutions. unlike the business environment for banks in the 1930s, however, securitization and repo lending are national β if not international β activities, with little to suggest that any advantage would be derived from local knowledge. it seems quite possible that the economies
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philip r lane : drivers of change in the banking sector speech by mr philip r lane, governor of the central bank of ireland, to the banking and payments federation of ireland, dublin, 23 may 2017. * * * good morning. i would like to thank the banking and payments federation of ireland ( bpfi ) for the invitation to speak to you today. i plan to cover a broad range of topics but with one common theme β that of change and the primary drivers of change that are affecting financial services and banking in particular. i will consider three broad driving forces. first, while acknowledging that much has been done, further steps are needed to resolve the continued legacy issues remaining from the crisis period. second, banks face an evolving macro - financial environment, including shifts in the international regulatory architecture and substantial uncertainty about the future paths for the domestic and international economies. third, financial innovation is already disrupting the sector and poses both opportunities and risks over the coming years. legacy issues it is nearly a decade since the onset of the financial crisis. while the economic recovery is well established, ireland is still deeply affected by the legacy of the crisis. high outstanding debt levels and the substantial stock of non - performing loans ( npls ) pose ongoing financial stability risks. equally, consumers are entitled to fair treatment from banks and other credit intermediaries, including in relation to the management of loans that originated during the boom period. the central bank considers these issues from both systemic and firm - level perspectives. system - wide tools such as the new suite of macroprudential capital buffers and macroprudential mortgage measures are designed to increase the resilience of banks and households and reduce the risk of future financial crises, especially credit - driven housing bubbles. at an over - arching level, a fundamental protection for consumers lies in ensuring that the financial system is stable and that the firms that operate within it are financially safe and sound. in relation to firm - level supervisory strategies, our approach focuses on protecting consumers through seeking to ensure their fair treatment. we also have clear prudential supervisory strategies that aim to ensure banks operating in ireland have business models that will be capital accretive over the long term ; are well governed, with robust risk management and control arrangements ; have sufficient financial resources, including under plausible but severe stress scenarios ; and, finally, are on a path to being resolvable in the event of failure. notwithstanding the improvements that have been made across financial services, remaining issues demonstrate the need
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continues to be required, and i therefore call on all jurisdictions to intensify their commitment to achieving greater alignment. for its part, the central bank of bahrain will continue to provide its own strong support to initiatives aimed at narrowing these differences. with respect to accounting standards, the policies set by aaoifi, the accounting and auditing organisation for islamic financial institutions, provide a solid framework for islamic financial institutions. bahrain is one of the few jurisdictions to have made its standards mandatory, although others use them as guidelines. further promulgation of these standards would help increase consistency in accounting and sharia standards. similarly, in the field of financial regulation, we support the work of the islamic financial services board in developing various prudential standards, and would encourage other jurisdictions to also commit to implementing these standards over time. and finally, the third critical pillar under this heading is that of developing standard contract designs and associated documentation. progress here will help address the concerns sometimes expressed about the impact of different sharia rulings on the structuring of instruments, and the lack of certain types of instruments. it will also be instrumental in encouraging more liquid islamic capital markets. this critical third pillar, of course, is in many ways why we are here today, and i should like to pay tribute to the sterling efforts now under way within the industry, with the leadership of the iifm, to tackle these issues. i am now hopeful that real progress in this area is now within our grasp. you will hear during this conference updates on the initiatives now underway, in conjunction with the international capital market association and the international swaps and derivatives association, to develop sharia compliant hedging instruments, as well as standardized repo and commodity murabaha contracts. these will be important breakthroughs for the industry, and we very much look forward to their realization later this year. these initiatives have gained good support from the industry, but i would also call on regulators to help support these initiatives : we too can also play an important role in bringing about greater alignment, by encouraging the use of standardized contracts and documentation, where appropriate. on this positive note, i should like wish you a productive conference, and to thank you for your kind attention.
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vitor constancio : we need a coordinated european npl strategy. how to deal with europe β s market for lemons? opinion piece by mr vitor constancio, vice - president of the european central bank, 5 july 2017. * * * one of the most pressing issues for euro area banks is the nearly β¬1 trillion of non - performing loans ( npls ) on their balance sheets. while the average euro area npl ratio has declined gradually from a peak of 8 % in 2013, it still remains at 6 % and differences across countries are marked : six countries still have npl ratios of more than 10 %, significantly more in some cases. this is not just a problem for banks. the flip side of npls is over - indebtedness among households and firms, and this poses a macroeconomic challenge β banks restrict credit supply and distressed firms curtail investment, which in turn hampers economic growth. asset quality issues were exacerbated by the global financial crisis. when the crisis hit, the surge in npls blocked the ability of many banks to deal with distressed debt. npl resolution, though not a panacea for all banking problems, could bring significant benefits. it is not easy to estimate the effects of resolving npls. however, scenario - based analysis indicates that replacing npls with performing assets could increase the aggregate return on equity of euro area banks by more than 1 percentage point, with some countries β banking sectors gaining up to 5 percentage points. it is therefore essential to find a solution to the npl problem, but we must recognise that it will take time and no single instrument is likely to be a β magic bullet β. rather, it will require a comprehensive strategy involving a panoply of instruments. the ecb is already working on this and has issued clear guidance to the banks it directly supervises. but supervisory action is not enough on its own. the private sector and national and european authorities also have roles to play. several significant impediments affect the prices of npls, to varying degrees across euro area countries. the market for distressed debt can be characterised as a β market for lemons β. this is a situation where investors demand a premium to protect themselves from the uncertainty that better - informed banks will try to sell them assets whose credit quality is worse than it may seem on the surface. this results in limited market activity, as the prices that investors are prepared to pay for npls are much lower
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william c dudley : job polarization in the region remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the quarterly regional economic press briefing, new york, 30 may 2012. * * * good afternoon and welcome once again to the new york fed β s quarterly regional economic press briefing. i am pleased to have this opportunity to talk with the journalists covering our region β and through you, to the people in our district. this morning i will focus on regional economic conditions, with particular attention to job polarization, which i would define as the expansion of the number of jobs at the upper and lower ends of the wage and skill distribution and a shrinking of job opportunities for those in the middle. we will see how these trends are playing out in our region. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. national economic conditions the u. s. economy is continuing to slowly recover from the after - effects of the housing boom and bust and the financial crisis. but the recovery has been disappointing. indeed, when we look back at economic forecasts made over the past three or four years it is notable that growth has systematically fallen short of both the federal reserve and private - sector forecasts. despite what has been an unusually accommodative monetary policy by historical standards, the economy has grown at only a 2. 1 percent pace over the last four quarters and the blue chip consensus forecast only anticipates a modest acceleration to a 2. 4 percent rate over the next four quarters. the headwinds retarding recovery are well known. consumers have been deleveraging in response to the large losses in wealth generated in large part by the collapse in home prices. housing activity remains depressed for many reasons. these include the large shadow inventory making its way through the foreclosure pipeline, tight underwriting standards for new mortgage origination, and the sharp slowdown in household formation. although the corporate sector as a whole is now reasonably healthy, there still is a significant constraint on the availability of credit to small business. fiscal policy has become restrictive as state and local governments have cut expenditures in response to revenue shortfalls ; and the uncertainty about how congress and the administration will address the 2013 federal β fiscal cliff β is likely to inhibit hiring and investment by business. global economic growth has slowed as european activity has stagnated
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topics related to the covid event, including our interim findings on the lessons learned. the findings of that report, to be finalized later this month, will drive our future work agenda. let me share a few of my own views on the key lessons learned. my first takeaway is that the global financial system entered the latest crisis more resilient than the last. although extraordinary support measures were still necessary to mitigate the impact of the covid event, the implementation of the g20 - endorsed reforms from the last crisis helped contribute to our shared resilience. basel iii, which has led to a near doubling of capital ratios since 2011, positioned banks to better absorb the macroeconomic shock. in addition, derivatives markets are safer with better transparency, central clearing, and margin requirements. my second observation from the covid event is the importance of policy flexibility for each of our jurisdictions. of course, baseline consistency across standards is necessary. but indeed, one size rarely fits all. our varied policy needs and tools make coordination even more important to achieving common goals and results. the global regulatory framework, done right, is like a tightly woven piece of fabric. it can get pulled in different directions at the same time, and it won β t shred or unravel. in times of crisis, the warp and woof of policy tools across the globe need to be woven tightly enough for the fabric of our financial system to withstand the stress, but flexibly enough that it will not tear. uncoordinated regulation can create flaws : gaps, fragmentation, and arbitrage opportunities, which are the types of defects the fsb strives to prevent. but excessively granular harmonization can create regulation that doesn β t jibe with the circumstances in a particular jurisdiction. we try to ensure that our members are weaving a strong fabric in concert. a third observation is that there are instances where policy may fail to have the desired effect. i 3 / 5 bis central bankers'speeches found banks β apparent reluctance to use buffers an interesting lesson from the covid event. some evidence suggests that banks may have been hesitant to use their regulatory capital buffers to meet credit demand ( despite the stated intent from supervisors that banks should use their buffers under stress ). this may be due to uncertainty regarding potential future losses or the wider market stigma that may result if a bank were to use its buffers. perhaps the extensive fiscal and monetary support provided to borrowers averted banks β need to
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markdown on the companies'books, despite a lack of significant credit losses on these assets to date. the loss of value in the company's investment portfolios, which totaled approximately $ 18. 6 billion pre - tax, was primarily attributable to the insurance subsidiaries'holdings. this loss was a substantial contributor to aig's fourth quarter loss. the remainder of the fourth quarter loss was significantly associated with the mark to market of assets transferred to maiden lane ii and maiden lane iii during the middle of that quarter, losses due to accounting on securities lending transactions that occurred during the fourth quarter, impairment of deferred tax assets and goodwill, and other market valuation losses. at the same time, general economic weaknesses, along with a tendency of the public to pull away from a company that it viewed as having an uncertain future, hurt aig's ability to generate new business during the last half of 2008 and caused a noticeable increase in policy surrenders. in addition, these extreme financial and economic conditions have greatly complicated the plans for divestiture of significant parts of the company in order to repay the u. s. government for its previous support. would - be buyers themselves are experiencing financial strains and lack access to financing that would make such purchases possible. to address these weaknesses, the federal reserve and treasury, in consultation with management of aig and outside advisers retained by the federal reserve, announced on march 2, 2009, a plan designed to provide longer - term stability to aig while at the same time facilitating divestiture of its assets and maximizing likelihood of repayment to the u. s. government. the plan involves restructuring the current obligations of aig to the federal reserve and treasury, additional capital contributions by treasury, and continued access to federal reserve credit on a limited basis for ongoing liquidity needs of aig. under the plan, treasury will create a new capital facility that would allow aig to issue to the treasury up to $ 30 billion over five years in new preferred shares under the tarp as liquidity and capital needs arise. this brings the total equity support of the treasury to $ 70 billion. additionally, treasury will restructure the $ 40 billion in preferred equity aig issued to the treasury in connection with the actions taken to aid the company in november. this restructuring, along with the injections of capital from the new preferred shares, will bolster aig's capital position and reduce its leverage, bolstering confidence in the company
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banks have been remarkably flexible and open - minded in developing and implementing creative responses to the conditions that we have faced. we can identify four distinct areas where authorities have needed to act : funding liquidity pressures in interbank markets ; solvency risks facing systemically important institutions ; medium - and long - term measures to strengthen the system ; and the slowdown in the macroeconomy. each has featured a number of critical information gaps that have had to be overcome, and each has presented its own challenges in terms of international coordination. liquidity pressures were the primary focus of policymakers in the early stages of the crisis, starting in august 2007, and have remained a concern ever since. central banks understood at an early stage that they needed to act, and act quickly, given the sudden and rapid rise in the market β s demand for liquid funds, an asset for which they are ultimately the only source of supply. central banks initially focused on their own markets, but given cross - border confidence effects as well as the need for foreign currency liquidity in many markets, they rapidly developed a number of channels of cooperation, including coordinated policy announcements and foreign currency swap lines. after the collapse of lehman in september, the systemic nature of the crisis has manifested itself with unprecedented force. in financial markets, we have observed a rapid shift from liquidity to credit risks, from a prevalent recourse to the market and central banks to massive governments β intervention. responses have included varying combinations of deposit guarantees, debt guarantees, capital injections, and asset purchases. while these have varied with local conditions, the need for coordination is well understood, and work to make these responses consistent is well underway. what have been the lessons of the experiences of recent months in dealing with the liquidity and solvency problems that have buffeted financial systems? for one thing, we have learned that in this new global risk environment the speed of developments has increased dramatically and correspondingly reduced the time that authorities have for an effective response. this has further increased our reliance on preventative measures ahead of a crisis. second, we have learned that the international aspects of crisis response have become many times more important than before. the transmission of shocks across borders now happens through more diverse channels than even a few years ago. given the many international externalities involved in the measures that might be taken by national authorities, the mechanisms for coordinating crisis response need to be in place well in advance. plans need to be formulated and potential consequences must be thought through.
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the financial system to fully recover and adapt to the important set of reforms implemented since the onset of the crisis, before making further changes. this would be consistent with the approach chosen by the governors and heads of supervision in their recent statement that new regulatory reforms should β not significantly increase overall capital requirements β. european commission, directorate general for economic and financial affairs ( 2012 ), fiscal sustainability report, european economy, no. 8 ; imf ( 2014 ), fiscal monitor, april ; lanotte et al ( 2016 ), cit. bis central bankers β speeches note : foreign holders, alternative definition : foreign holders excluding eurosystem and round - trip foreign portfolios and funds, i. e. securities held by foreign investors net of those held by the eurosystem ( excluding the bank of italy ) and those held by foreign individually managed portfolios and investment funds but attributable to italian investors. bis central bankers β speeches
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