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its interest in effective markets and responsibility for financial stability β is committed to supporting the adoption of near risk - free rates as alternatives to libor. put simply, we want to see a transition to a less libor - centric world. what is the bank doing? we have taken two important steps to support the implementation of a sterling risk free rate. we have taken on the administration of sonia, the sterling unsecured overnight interest benchmark, and instituted a reform process to strengthen it. all speeches are available online at www. bankofengland. co. uk / speeches and we have set up the sterling risk free rate working group to forge a market consensus on the appropriate near risk - free rate and to coordinate wider adoption. sonia reform the bank β s aim in reforming sonia has been to strengthen a benchmark which is already critical for sterling financial markets, but which is currently based on a market for brokered deposits which has limited transaction volumes. a key change is to broaden the input data to include all overnight unsecured deposits, not just brokered deposits. the bank was uniquely placed to undertake this reform because we have the necessary data, collected under statutory powers. indeed that is why we took it upon ourselves to reform sonia. we started collecting daily data on money market transactions in february 2016 from over 50 banks, building societies and investment firms. these data give us a much clearer picture than we have previously had of what is going on in sterling money markets. a subset of the data will be used for reformed sonia. the reformed rate will be much more robust, with daily transaction volumes three to four times greater than current sonia. any change in sonia β s properties will be minimal β so far the reformed rate has been around one basis point lower than on the current methodology. another key reform is that the bank has consulted on and will implement a changed definition for sonia. the new definition will allow the methodology and input data of sonia to evolve if material changes to market structure or functioning threaten to undermine the integrity of the rate. this unique feature will ensure the robustness of sonia over the long term, giving users confidence that their contracts will not be disrupted. let me emphasise that, from the perspective of a user of sonia, implementing these reforms should be seamless. however, one operational consequence that users should be aware of and prepare for is that the publication time for sonia will move from the evening of the day in question to the morning of the following day. the bank
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be no fixed template. there is a need for supervisory bodies to design and understand structures and approaches that are best suited to their needs. 1 / 2 bis central bankers'speeches it is my sincere hope that all of you, participants, will use the experiences gathered here to assist your respective institutions and countries with the implementation of forward - looking and smart risk - based supervision policies and frameworks. at this juncture, i take the opportunity to express our sincere appreciation to the esaamlg for the opportunity provided to the central bank of seychelles to host this workshop, on a subject of utmost importance. i would also like to give a special mention to our facilitators who have done a wonderful job of setting the scene and steering the discussions, allowing for a stimulating environment for rich exchanges. last, but certainly not least, i would like to thank all the participants for your active participation ; the learning experiences and innovative ideas shared by all has contributed to the success of our deliberations over the past four days. this workshop has undoubtedly given more impetus to work already being done locally, as we move towards adopting a more forward - looking approach to supervision. i would recommend that such workshops be replicated in our respective jurisdictions, thus providing more opportunities for professionals at the institutional and sectoral level to be exposed to such learning experiences. on this note, i would like to thank you for your attention and active participation. to our visiting participants, i wish you all a safe trip back home. thank you. 2 / 2 bis central bankers'speeches
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decided to use the model proposed by banco de mexico for its new, ground breaking system, dali. today, we are very fortunate to have the first securities settlement system that offers multilateral netting and near real time settlement, with significant advantages for our financial market. we now have an outstanding securities settlement system that offers excellent services to investors, issuers and intermediaries, and generates trust in our financial system. we believe that the effort we all put into the design, development, and testing of dali was well spent. i congratulate indeval, and the staff from itam and banco de mexico who participated in this project. thank you very much for your attention. bis central bankers β speeches
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is of course one factor for the economy, and hence also for inflation ; in this context, the exchange rate is an important element but not the objective of our monetary policy. what β s more, we haven β t seen any major change in the euro exchange rate for some time now. 4 / 6 bis central bankers'speeches but the announcement of asset purchases put the euro under massive pressure in 2014 β¦. β¦ after it had risen sharply prior to that. this was a correction of a previous overvaluation. seen overall, the euro area has generated a trade surplus over recent years. that would normally strengthen the euro in the long run. experience suggests that such an impact does exist, but it is very, very long term. it develops over decades rather than years. let β s turn again to the core of monetary policy β the inflation aim. for a number of months now, the ecb has been speaking of symmetry in its aim. at the same time, though, it is maintaining that inflation should remain below, but close to, 2 %. how does that fit together? first and foremost, it means that we combat deviations above that aim and below that aim with the same determination. if inflation is above our aim of inflation at levels that are below, but close to, 2 %, we try just as hard to get it there as when inflation is below the aim. but isn β t it foolish to set such precise targets? surely the ecb is not able to steer inflation that accurately. we β re aiming for this in the medium term, not for a specific year. which gives us some room for manoeuvre. how long exactly is the medium term? that depends especially on the source of the shock. a demand shock requires a shorter horizon for the policy response, that is policy should be less patient, whereas a supply shock may call for a longer horizon, and hence more patience. wouldn β t it make sense to allow more downward scope in the inflation aim? the aim must be crystal clear, especially when inflation is low. the closer it is to zero, the more pressure we find ourselves under to act. some critics think that a temporary bout of deflation would not be a disaster. if it comes from a boom in productivity and higher real incomes, and ends foreseeably quickly, then no, it β s not. but it must be certain that inflation can be anchored above zero again. close to 2 %, to be precise,
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motives were only slightly less important for cutting consumption than reasons linked to the pandemic. moreover, high - income households especially piled up their savings. varying consumption behaviour across households is also highlighted in a study by jeanne commault and her co - authors, which she will present in the ο¬rst session of our conference. [ 7 ] looking at consumption ο¬uctuations in old age, they ο¬nd, for example, that the overall response of consumption to an income shock is twice as large for low - wealth households as it is for the older population in general. such heterogeneity of households in their propensity to consume can inο¬uence, for instance, the effects of ο¬scal transfers, as sotirios saperas will argue, [ 8 ] or the transmission of monetary policy. [ 9 ] heterogeneity also has a bearing on the question of what will happen to the additional savings created during the pandemic. as this saving is not necessarily desired by households but rather induced by the pandemic, one can imagine at least a certain part of it will be spent when the health crisis is over. however, high - income households have a comparatively low propensity to consume. most of their additional savings are therefore likely to contribute to a build - up in wealth, which could aggravate wealth inequality to some extent. in line with this, our projection from december 2020 foresees that the saving rate will fall only slightly below its long - run average for some time. [ 10 ] still, this would be [UNK] to fuel rapid growth in private consumption, making it a major engine of the economic recovery, once the pandemic has been brought under control. 3 potential long - term effects of the coronavirus crisis overall, the economic outlook is highly dependent on the course of the pandemic and, thus, very ncertain the baseline scenario of o r december forecast ass med that a medical sol tion s ch as a uncertain. the baseline scenario of our december forecast assumed that a medical solution, such as a successful vaccination campaign, would allow all containment measures to be lifted by early 2022. in this scenario, the crisis will have only relatively little impact on potential output in germany. importantly, such an outcome also hinges on the success of extensive policy support in averting second - round effects. for instance, a broad wave of corporate insolvencies could crush functioning structures and cost a
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are worth noting : ( i ) first, the traditional preferences for bananas and sugar are now practically at an end and the region still finds itself unable to compete with lower - cost producers ; ( ii ) second, foreign aid flows to the region ( with the exception of haiti ) have all be dried up ; ( iii ) third, while caribbean tourism continues to be a viable brand, the region is facing stiffer competition from asian destinations and will experience even greater competitive pressure when cuba is fully opened up ( as it could in the not too distant future ) ; and ( iv ) fourth, the prospect of continued high unemployment in the us and the uk for the next 2 β 3 years will have implications for workers β remittances which are very important to some caribbean economies. bis central bankers β speeches to add to these exogenous factors, most countries in the region already have unsustainably high debt burdens, which limit the extent to which government spending could lead the recovery. one could argue that trinidad and tobago represents an exception from this theme, given our energy resources, our stronger public finances and our much lower public debt burden which gives us more room to manoeuvre. we should be careful however of pushing that argument too far since ( i ) our proven energy reserves are fast dwindling ( though some experts think that prospects for new discoveries are high ) ; and ( ii ) our fiscal space is being steadily reduced, the more the private sector activity remains subdued and government steps in to lead the recovery. while public sector indebtedness is still at a comfortable level, it too is increasing rapidly to meet the high cost of the clf / clico bailout. let me put our ( trinidad and tobago β s ) challenge in another context which further underscores the problem. in the period 2002 β 2006, real gdp increased at an annual rate of close to 10 per cent based on an annual growth of 16. 7 per cent in the energy sector and 5. 6 per cent per year in the non - energy sector. energy sector growth was based on higher oil production and on the expansion of the downstream production capacity β particularly atlantic lng trains 2, 3 and the m5000 methanol plant. the current prospects are for a continued decline in oil production ( until there are new finds ) and except for planned melamine plant ( the aum ), no significant increase in downstream capacity is envisaged over the next few years, this would imply
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the assumption of higher oil prices. in the view of the governing council, risks to this outlook for price developments remain on the upside. they include further increases in oil prices, a stronger pass - through of past oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and β more fundamentally β stronger than expected wage developments. against this background, it is crucial that the social partners continue to meet their responsibilities, also in the context of a more favourable environment for economic activity and employment. regarding prospects for inflation over medium to longer horizons, our assessment that upside risks to price stability prevail continues to be confirmed by the monetary analysis. the rates of monetary and credit expansion remain rapid, reflecting the still low level of interest rates in the euro area. in particular, loans to the private sector continue to grow at double - digit rates on an annual basis, with this rapid growth remaining broadly based across the household and corporate sectors. the moderation of annual m3 growth observed in the past two months β to 8. 5 % in june and 7. 8 % in july β may possibly reflect the impact of previous increases in interest rates. however, it also needs to be viewed against the high growth rate witnessed in may, which represented one of the highest annual rates of m3 growth seen since the introduction of the euro. more generally, recent monetary developments should be assessed with the appropriate medium - term perspective, and thus against the background of the persistent upward trend in the underlying rate of monetary expansion observed since mid - 2004. on this basis, liquidity in the euro area remains ample by all reasonable measures. continued strong monetary and credit growth in the context of already ample liquidity points to upside risks to price stability over the medium to longer term. monetary developments therefore require careful monitoring, especially against the background of improved economic conditions and strong property market developments in many parts of the euro area. to sum up, annual inflation rates are projected to remain elevated in 2006 and 2007, with risks to this outlook continuing to be clearly on the upside. given the ongoing dynamism of monetary and credit growth in an environment of already ample liquidity, a cross - check of the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability prevail over the medium term. it is essential that inflation expectations remain firmly anchored at levels consistent with price stability. accordingly, strong vigilance is warranted in order to ensure that risks to price stability
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initiative also enhances our role as a regional risk management centre. 9. in may last year, mas published a consultation paper on amendments to the code on collective investment scheme. among other things, there are proposals to introduce a number of measures to address counterparty risks. for instance, mas has proposed that managers may only enter into otc financial derivative transactions with counterparties subject to prudential supervision. if the financial derivative transaction is performed on an exchange where the clearing house performs a central counterparty role, the counterparty risk can be taken as zero. mas will be publishing its response to the consultation paper in due course. 10. singapore is also a key risk management hub for the commodities business. we are asia β s leading otc commodity derivatives trading hub, accounting for more than 50 % of asia β s volume. there is also a confluence of users and suppliers of commodities risk management solutions in singapore. apart from the critical mass of global commodities traders, many global banks have also based their asian commodities business in singapore. these banks provide sophisticated risk management and hedging services to the regional corporates. 11. let me now turn to how to enhance transparency. sound corporate governance is fundamental to a successful disclosure - based regime. the financial crisis has highlighted the importance of risk management oversight at the board level and sparked increased global discussions on the need for better corporate governance practices. in december last year, mas published its response to the consultation feedback on corporate governance regulations and guidelines. the enhanced rules and guidelines underscore the important role played by the board in overseeing the soundness of the financial institutions. 12. mas has also been promoting improvements in the disclosure and quality of information available to investors. since the third quarter of last year, financial institutions are required to provide product highlight sheets when offering investment products to retail investors. this will provide brief highlights, including an overview of product features and risks, and applies to products that are accompanied by prospectuses, including exchange traded funds, asset - backed securities and structured notes. since january 2010, real estate investment trusts ( reits ) have also been required to hold annual general meetings ( agms ). these mandatory agms provide an important channel for communication between reit managers and investors. this will also increase transparency and raise the accountability of reit managers to investors. bis central bankers β speeches 13. last but not least, we remain committed to building diversity in singapore β s financial markets. we will continue to provide a conducive business
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am convinced that restoring market mechanisms where they have so far been impeded is crucial for strengthening the euro area β s institutional framework as well. a constitutive element of any functioning market monti, mario ( 2010 ) : a new strategy for the single market. bis central bankers β speeches economy is the principle of liability. or, as walther eucken put it, β he who profits must also bear the losses. β when it comes to two of the biggest economic actors in the monetary union, this principle applies only to a limited extent. banks and sovereigns being a priori deemed systemically important, since turbulence on either front threatens the stability of the financial system, would not bode well for the future stability of the monetary union. a framework in which two of the biggest players are at least partially exempt from the disciplining forces of the market would invite future aberrations and lack resilience. if we are to put monetary union on a sounder footing, such vulnerabilities need to be addressed as a matter of urgency. and, as both problems are so closely intertwined, any attempt to tackle one of them in isolation would be likely to fall short of what is required. let me first take a step back and look at why the close link between banks and sovereigns has proved to be so problematic in this crisis. if many banks get into trouble at the same time, possibly because of a large asset bubble bursting, financial stability as a whole is put at risk. the government then often has no option but to step in if it wants to prevent a meltdown of the real economy. but such a rescue rewards excessive risk - taking and can place a huge strain on government finances β which is what happened in ireland, where the need to support the financial system pushed the deficit above 30 % of gdp in 2010. conversely, weak government positions can destabilise banks β directly through their exposure to sovereign bonds, and indirectly through worsening macroeconomic conditions. breaking the link between banks and sovereigns is important for making the euro area more stable. a banking union can be a big step in that direction β but again, we need to harness the disciplinary forces of the market, not do away with them. core elements of a comprehensive banking union therefore have to be not just an effective single supervisory mechanism, but also a comprehensive bail - in of bank creditors, and a cap on exposure to individual sovereign as well as an adequate risk - weighting of
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andreas dombret : the importance of being competitive speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the esmt ( european school of management and technology ) open lecture, esmt, berlin, 20 february 2013. * 1. * * introduction dear professor rocholl ladies and gentlemen i am delighted to have the opportunity to speak to you today here at the esmt. at the time, the decision to set up a private business school in an academic landscape dominated by public institutions met with a certain degree of scepticism. in this regard, esmt was no different from most start - ups. but ten years later, the esmt is doing rather well, and that is much less common among start - ups. failure rates are high among young enterprises, but once the initial phase has been survived, a long period of robust health can be expected. optimism is therefore warranted, and not just because the esmt is entering its teens. one of esmt β s main fields of study is in european competitiveness. the results of this research will hardly suffer from a lack of attention. it is now widely agreed upon that persistent gaps in competitiveness were one of the root causes of the current crisis. recognising that fact certainly constitutes progress. nevertheless, although a consensus appears to have emerged concerning how the crisis developed, views still differ on how it should be resolved. that might seem somewhat paradoxical at first. if there really is a consensus that restoring competitiveness is key to overcoming the crisis, how is it that prescriptions for remedying the euro area β s woes differ so starkly? in my remarks, i wish to argue that such differences of opinion have their origin largely in a constant tug - of - war between two competing economic objectives : efficiency, in particular motivated by the proper incentives, on the one hand, and distributional issues, on the other. or, to put it more bluntly, one line of argument has to do with how emu β s growth engine should be fixed and how it should be made to run more reliably, while the other line of argument is more about who is going to foot the bill β for past and future burdens alike. i do not want to disregard concerns about the scale of such burdens or the social and political costs of bearing them. rather, based on a diagnosis of how the crisis came about, i would like to stress that
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present debate some conclude that the current policy framework should be relaxed, which is normally expressed as saying it should become more flexible. i have difficulty understanding this view. on the contrary, i think the developments in recent years have strengthened the arguments in favour of a regulatory framework. from the start there were concerns about β free riders β. these concerns were confirmed sooner than expected. there was also some unease that small countries could be affected if the larger ones did not maintain discipline. here, too, developments have given cause for concern, at least as regards the implementation of the regulations. allow me to add a third argument. during the decades before the start of monetary union, economic policy in the eu was dominated by germany. this was because of germany β s size, of course, but it was also due to germany β s economic success over several decades and its stable economic policies. there was almost a moral dimension to germany β s actions. i still remember the meeting in the monetary committee when it became clear that germany β s public finances in the coming years would be as weak as italy β s. the dynamics in the room changed as if by magic. since then no country has been able to take over the leader β s mantle. in such a situation peer pressure can easily turn into peer protection. let me now turn to the future. in doing so i have tried to be constructive and limited myself to proposals i believe to be politically feasible. i will be happy to return to any of the subjects i will bring up. i. my first point concerns the division of labour and the cooperation between fiscal and monetary authorities. this is firmly established in the treaty. the only uncertainty relates to the responsibility for exchange rate policy. of course all parties must respect the existing rules. the demands that fiscal authorities can impose on the ecb are that the bank conducts a clear, consistent monetary policy aiming at price stability for the union as a whole, which can be understood and predicted. in the same way the authorities responsible for monetary policy should be able to count on a clear, predictable and long - term fiscal policy targeted at achieving balance over the economic cycle ( after taking account of the demographic changes that now lie ahead ). more generally, i think that we in europe should model our approach on cooperation between the monetary and fiscal authorities along the lines of the relationship between the fed and the treasury during the clinton years. europe would also be better off if the finance ministers followed the advice of my british colleague at a recent meeting
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support to young researchers by funding five lamfalussy fellowships every year. thomas philippon β s contributions represent an excellent example of policy - relevant research. i will consider two main areas of his research which i find particularly interesting : the design of optimal interventions and the efficiency of the financial sector. in his 2012 paper, published as the lead article in the american economic review, thomas and his co - author vasiliki skreta study the design of optimal public interventions in debt markets. the intervention aims at restoring an efficient level of investment when productive investments are forgone because firms face unfairly high interest rates due to adverse selection. 2 the topic of the paper was β and still is β very timely since asymmetric information played a crucial role in the collapse of the financial markets in the autumn of available at https : / / www. ecb. europa. eu / events / pdf / conferences / 140623 / mars _ report. pdf. philippon, t., and v. skreta, ( 2012 ) β optimal interventions in markets with adverse selection β, american economic review, 102 ( 1 ), 1 β 28. bis central bankers β speeches 2008. 3 thomas philippon β s paper identifies some of the key issues associated with the intervention. in particular, he analyses the interaction between the intervention and the conditions that firms face in the market. decisions by firms to participate in a support programme are influenced by these conditions β how difficult it is to raise funds from the market. at the same time, a firm β s acceptance of public assistance may be perceived as a β bad β signal, thus limiting its incentive to participate. this is the problem of the stigma attached to support programmes. the paper spells out two clear implications for policy. first, it provides robust conceptual support to the idea that the choice of intervention depends crucially on the nature of the frictions and that it should resemble the contract used by market participants. for example, in the case of a freeze in a debt market due to adverse selection, the optimal intervention requires debt instruments, such as direct lending or debt guarantees. second, it highlights that the stigma associated with the intervention can be a relevant issue and the design of a programme should take this into account. the ecb had to deal with this issue, for example, in the context of the first two longer - term refinancing operations announced in december 2011. when some bankers raised concerns that there might be stigma attached to the ec
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in norway also implies that we should lag behind other countries in setting interest rates at a more normal level. at its monetary policy meeting on 3 november, the executive board decided to leave the sight deposit rate unchanged at 1. 75 per cent. at this meeting, the executive board did not see any clear alternatives to leaving the interest rate unchanged. in reaching its decision, the executive board has weighed the objective of bringing inflation back to target against the risk that output growth may eventually be too high.
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that petroleum revenues are phased in at a steady pace. the guideline specifying that only the real return on the petroleum fund is to be used, means that the capital in the fund is not depleted over time. norges bank has no set target for the level of the exchange rate. nevertheless, developments in the krone are of considerable importance to interest - rate setting because the exchange rate has an impact on inflation and output. an important channel for monetary policy is the foreign exchange market and the krone exchange rate. although the krone fluctuates, the krone exchange rate is not particularly unstable compared with other countries β currencies. the krone exchange rate is the price of our currency measured in a foreign currency. developments in other countries are just as important for the krone as developments in the norwegian economy. capital flows freely and flows can change rapidly. this can spill over to exchange rates and interest rates as well as output and employment. there is a cost involved for businesses in hedging against fluctuations in the krone. a krone that is stable - but too strong - also entails social costs in the form of low activity. likewise, a krone that is stable - but too weak - is a source of high inflation. norway is running a current account surplus as a result of sizeable oil and gas exports. owing to high oil prices, the current account surplus is rising this year. an increase in the current account surplus will normally result in higher net demand for the domestic currency. in norway, however, the additional foreign exchange revenues that accrue to the norwegian state as a result of high oil prices will be invested in foreign securities through the government petroleum fund. as a result, they will not have a direct impact on the balance in the norwegian foreign exchange market. oil companies hold a large share of their financial capital in foreign currency, and higher revenues in these companies therefore results in an increase in capital outflows. the effects of changes in the current account on net demand for the norwegian krone can be illustrated by adjusting the basic balance for transfers and earnings to the petroleum fund and oil companies β estimated cash surplus. even though the current account surplus is increasing from 2003 to 2004 as a result of high oil prices, the adjusted basic balance is falling. in isolation, this is contributing to a decline in demand for the norwegian krone. the decline is due to high import growth, which is reducing the current account surplus. in the government β
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to operate counter - cyclically without threatening market access. the second possibility is some form of deeper fiscal union at the euro area level. economic union clearly, the political economy of deeper fiscal integration is difficult, especially given the preferences expressed at the recent european parliament elections in some reform - resistant countries. thus, we should focus our efforts for now on making the new equilibrium work. but here again we need consistency. if the current fiscal rules are to be credible, we need higher growth, and that means looking deeply at how we coordinate structural policies across europe. on our current reform - resistant course, i see a distant but distinct probability that growth in the euro area begins a secular downward drift. with inflexible markets, downswings are likely to deeper, as adjustment has to happen slowly through quantities β i. e. unemployment β rather than quickly prices. and with low productivity and investment, upswings might be shallower as growth is driven only by cyclical rather than structural factors. indeed, most estimates find that potential growth in the euro area has diminished during the crisis. this is why moving ahead with structural reform is essential. the best way to raise real growth in the euro area is to open up product and services markets and to reallocate resources to the most productive industries. when i see that most countries in the euro area bis central bankers β speeches periphery have a revealed comparative advantage in services, 7 and yet these markets are the least integrated in europe, it strikes me as a missed opportunity. implementing structural reforms is of course mainly a national responsibility. but so far we have not done enough at the european level to help gather momentum behind them. some might argue that the european elections will make this harder still, but i would tend to disagree. first, the reasons for extremism in some countries have more to do with national governments than with europe. second, what is causing some people to turn against the eu, in my view, is not a dislike of european governance per se ; it is a lack of delivery on jobs and growth. if european policy - makers can find better ways to get the most out the european project, i strongly doubt the voters as a whole would be against that. 4. conclusion let me conclude. what i have tried to underline today is that a well - functioning market depends on getting the rules, institutions and instruments that govern it right. and the source of the euro area β s difficulties, in my view, is that policy -
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of course the debate was about the law of god taking precedence over the law of kings. but fittingly, his motto was β ich dien β β german for β i serve β. and indeed, this notion of money as β public service β was exported and lived on : the same phrase appeared on british two pence coins until 2008. thus, there is a long intellectual tradition linking rule of law and sound money to functioning of free markets. but this connection found perhaps its clearest expression in the ordoliberal school that developed in germany in the 1930s. conceived at the university of freiburg by walter eucken and franz boehm, the central understanding of ordoliberalism was that a stable and well - functioning market economy required a strong legal and institutional β moneta debt esse quasi quaedam lex et quaedam ordinacio firma β. nicolas oresme, traite de la premiere invention des monnaies ( ca. 1355 ). bis central bankers β speeches framework. pure laissez - faire capitalism was unstable and liable to capture by monopolies. collectivist central planning, on the other hand, led towards waste and totalitarianism. thus, as the ordoliberals saw it, the role of government was to frame markets in such a way that actual outcomes would approximate the theoretical outcome in a perfectly competitive market. achieving such outcomes could imply de - regulation, if government was interfering too much in market processes, or re - regulation, if market failures were apparent β a feature that distinguished it from a laissez - faire approach. in other words, the role of government was both to untie the β invisible hand β, and to keep it firmly cuffed to the rule of law. at the same time, ordoliberalism recognised the crucial importance of monetary and economic stability to a well - functioning market. this implied an economic framework built around price stability, competition regulation and budgetary discipline β in eucken β s words, the perfect β economic constitution β. 2 this thinking had a strong influence on the design of the post - war social market economy in germany, and is seen by some as the foundation for german economic success in that period. interestingly, as many developing countries transitioned from planned to market economies in the 1980s and 1990s, there was something of a large - scale social experiment of the ordoliberals β views outside of germany. several transition economies followed the macro
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ignazio visco : accounting for the long - term costs of the recession remarks by mr ignazio visco, governor of the bank of italy, at the iea - isi strategic forum 2014, final roundtable β accounting for the long - term costs of the recession β, rome, 23 september 2014. * * * 1. the legacies of the great recession are many and multifaceted ; they not only affect current cyclical developments, but may also have permanent bearings on our economies. however, today β s difficulties and opportunities, as well as tomorrow β s prospects, are the result of deep underlying forces that were already reshaping the functioning of the world economy well before the great recession began. a. crisis legacies for economic growth 2. in advanced countries such as the us and the uk, gdp ( imperfect an indicator as it may be, especially in the face of the increasing role of digitisation ) has now overtaken its pre - crisis level : however, the growth rate remains lower than before 2008. in the euro area as a whole, current gdp still remains below its pre - crisis level, to which it might return late next year. it should also be underlined that the weak recovery is no longer confined exclusively to stressed countries of the area. 3. what is more worrying is that the crisis may have left lasting scars. the high correlation between the increase in estimated output gaps since 2007 and the fall in the ( estimated ) growth rates of potential output suggests that lower investment and higher unemployment ( or under - employment ) may have had an impact extending well beyond the current cycle. 4. this is particularly worrisome for countries with high public debts, whose sustainability requires a return to steady economic growth, and which may also suffer, as is presently the case in the euro area, from excessive disinflation. and this is why structural reforms and accommodative monetary policy are so much in demand these days. 5. that the legacies of the crisis go well beyond the short term is best epitomized by ongoing talks about risks of hysteresis ( the extent to which cyclical developments affect an economy β s longer - term dynamics ) and the revival ( by larry summers ) of alvin hansen β s 1930s hypothesis of secular stagnation. in essence, this hypothesis relates to factors that generate permanently higher savings and lower investment, in a context where monetary policy is unable to reduce the real interest rate to the required
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about and understanding regulatory and tax policy. but incentives also help motivate people in a variety of other settings, such as encouraging students to do their best in school, helping reduce traffic jams, or even nudging someone to save more or to exercise regularly. economics is a practical and powerful tool for understanding how we relate to each other. and that β s why what you do for your students is so important. like all teachers, you are helping prepare them for success in life. the knowledge you impart and the intellect and talents you help develop are tools that your students can use to achieve that success. economics teaches analytical and critical thinking skills useful to anyone. part of your students β success is their economic success as capable, creative, and productive members of the workforce and as consumers adept at managing their finances. your students benefit from this education, but so does everyone else in society. we all benefit when better - educated citizens support economic policies that help our nation prosper. we all benefit from the capability, creativity, and productivity of our workforce, because nothing is more important to a healthy and growing economy. responsible consumers skilled in managing their finances are better prepared to weather bad 1 / 2 bis central bankers'speeches times, and stronger household finances overall can help sustain economic growth and mitigate a downturn. stabilizing growth and mitigating a downturn, of course, are aspects of the federal reserve β s mission. monetary policy can be a powerful tool to achieve these ends, but, in truth, its powers are dwarfed by larger forces, such as the productivity of the american people and the strength of their finances. by educating students and supporting their future contributions to the economy as workers and consumers, all teachers, especially economics teachers, are furthering our goals at the fed, so let me offer my further thanks for making our job easier. to help support your work as teachers, the federal reserve board and the 12 reserve banks conduct programs, organize events, and publish books to spread knowledge of economics, financial literacy, and the role of the fed in promoting a healthy economy and financial system. you can find some of those resources at our websites : federalreserve. gov and federalreserveeducation. org. each of the reserve banks has community outreach and educational initiatives, and the outreach to economics teachers is coordinated by the system economic education group, which has been chaired by princeton williams. at the board of governors, for some years we have
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european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, helsinki, 6 may 2004. * * * ladies and gentlemen, it is a pleasure to welcome you to our press conference here in helsinki, where the governing council of the european central bank met today for the ninth time outside frankfurt. i would like to thank acting governor matti louekoski for his invitation and very kind hospitality, as well as the staff of suomen pankki - finlands bank for a perfectly organised meeting. we deeply regret that mr matti vanhala had to resign from his position and we wish him all the best. let me now report on the outcome of today β s meeting. on the basis of our regular economic and monetary analyses, we continue to expect that price stability will be maintained over the medium term. accordingly, we did not change our assessment of the monetary policy stance and left the key ecb interest rates at their current low levels. the low interest rates across the entire maturity spectrum are also supporting the economic recovery in the euro area. as always, we will continue to monitor carefully all developments that could affect our assessment of risks to price stability over the medium term. allow me to elaborate on our decision, turning first to the economic analysis. regarding the current situation and the very short - term outlook, the conjunctural indicators available still provide mixed evidence. all in all, they suggest that the recovery of real economic activity in the euro area has continued into 2004, albeit at a modest pace. most recent information has been more encouraging, with the latest euro area survey data offering more positive signals with regard to the beginning of the second quarter. while the latest positive signals need to be confirmed by future developments, they underpin the expectation of the gradual recovery in the euro area continuing and strengthening over time. the conditions for such a recovery are in place. first, global economic growth continues to be robust and world trade has strengthened. the global economic upturn is broadly based, both geographically and across sectors, and thus provides a favourable external environment for the euro area. in this context, we expect euro area exports to grow significantly this year and next. second, favourable financing conditions, improvements in corporate efficiency and earnings and the strength of global demand should help investment. growth in real disposable income should support private consumption, especially since households appear not to face financial constraints that might impede stronger spending. over time,
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the bretton woods system collapsed. thereafter, sweden independently adopted other exchange rate regimes, all of which gave greater freedom than the bretton woods system. that resulted in less discipline in wage formation. what then does it mean to have a fixed exchange rate? a fixed exchange rate means that the central bank, with the aid of currency market interventions or its policy rate, stabilises the exchange rate around a target, e. g. a price for the dollar, gold or an average of currencies, whereas under a floating exchange rate regime the exchange rate is determined by supply and demand in the currency market. with a fixed exchange rate, you avoid some of the uncertainty in world trade when countries exchange currencies with each other. there is a limit to how much a currency β s exchange rate can vary, which is good for importers and exporters when they are forecasting income and expenditure. the fixed exchange rate can also be seen as a way to achieve price stability. with a fixed exchange rate, inflation in the long term cannot be higher or lower than the inflation rates in the countries with which you have tied your exchange rate. for example, a fixed exchange rate against the dollar would β force β us to maintain the same inflation rate in the long run as the us and the other countries whose currencies are pegged to the dollar. were that to fail, our current account balance would deteriorate and we would have to devalue. sweden devalued five times between 1976 and 1982 under a fixed exchange rate ( 1976, twice in 1977, 1981 and 1982 ). that was because sweden in the 1970s and 1980s had higher inflation than the other countries. between 1975 and 1995, swedish inflation averaged 8 per cent a year. real wages rose by only 0. 5 per cent a year. swedish companies β competitiveness deteriorated and industrial production dropped. sweden slipped from 4th place in the oecd β s standard - of - living league to 18th place β below the average for oecd countries. we became a relatively poor country in europe and the industrialised world. meanwhile, deregulation in the credit market during the 1980s resulted in a sharp expansion in credit, with an accumulation of debt among the general public as a consequence. demand increased but supply was weak and productivity growth low. the economy overheated, inflation picked up and competitiveness was eroded. in 1990, the international economy began to weaken and prices of assets and property fell. the
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otc derivatives. the culmination of the new 2002 isda agreement, 10 years after its predecessor, comes in the wake of many financial crises. legal documentation of derivative transactions has a role in mitigating risks for banks and businesses. the world has changed considerably in this recent 10 years - financial liberalization driven by rapid advances in information technology is altering the financial landscape at an unprecedented pace. the legal and regulatory infrastructure must keep pace. we must continuously learn, un - learn and re - learn. the acquisition and application of knowledge must be a deliberate strategy and activity in pursuing the path of excellence. apart from the developments in the nature of financial risk due to globalization and regional integration, the ramifications of the basle ii capital accord, and the potential for developments in islamic derivative instruments, i am aware that there are many other highly technical matters that need to be appreciated and understood. i will leave this to the experts who have given their valuable time to share their knowledge with us today at this banking and law school event. i wish you an engaging learning experience. this is also a rare opportunity to develop your networks, share your knowledge with your peers and reflect upon how this learning experience will make a difference in your professional career.
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and 18 trillion us dollars classified as others. the fact that growth in financial derivatives has far surpassed the growth in the underlying real economies that generated the original transactions and risks for diversification is a matter of concern to regulators. it seems that speculators appear to have embraced derivatives as another form of investment for short - term capital gains. if financial derivatives take on a life of their own due to excessive speculative activity, the utility for risk diversification may prove illusory from a systemic point of view because the new risks introduced by derivatives may well overshadow the risks posed to the financial system by the underlying more risky financial assets. on a preemptive note, in response to a series of derivative debacles that was sparked off by the barings crisis in 1994, bank negara malaysia has taken steps to enhance prudential regulations on the derivatives business of banking institutions. in 1996, the guideline on minimum standards on risk management practices for derivatives was issued to provide a framework that outlines the minimum risk management standards for the derivatives business of banking institutions. it requires banks to ensure that risk management controls and procedures are in place before engaging in derivatives business. the guidelines also ensure that derivatives can be offered to customers for hedging purposes only. in may 2003, as a step towards a more liberalized financial market, banking institutions are allowed to embed derivatives into investment instruments to enhance yields. the investment has to be principal protected, and may be offered to high net worth or corporate clients and for a minimum transaction amount of one million ringgit. as part of the prudential requirements, no leveraging is allowed on the structure. gradual liberalization allows the banking industry and the regulator to work in a collaborative manner in developing an innovative yet stable financial system. in the context of the significant growth in otc derivatives, both in the domestic market as well as the global market, there is therefore an important need for prudential management in derivatives since speculation would itself introduce risks into otc derivatives market and could deter the principal objectives of risk diversification and risk management. allow me now to share 3 points concerning risk management opportunities in the wake of developments emerging in the international financial landscape. the first point is that regional integration offers increased opportunities for otc financial derivatives in managing financial risks. the second point is that the new basle ii capital accord must be studied carefully to ensure that the portfolio of derivative products is profitable and innovative while remaining in compliance with the riskweighted capital requirements
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gent sejko : address on remittances of the albania diaspora welcome address by mr gent sejko, governor of the bank of albania, at the high - level meeting on the remittances of the albanian diaspora, tirana, 14 december 2018. * * * your excellency, minister majko, dear guests and colleagues, it is a special pleasure to open today β s meeting, which takes place after a year of intensive coordinated effort between our institutions toward the achievement of common objectives in relation to remittances of the diaspora, and other important issues. today, a year after the memorandum of understanding was signed, i have the pleasure of noting that the materialization of these efforts has been reflected in the undertaking of a number of commitments and projects in pursuit of the objectives set out below. the importance of remittances to the albanian economy, to family welfare and to development in general is highlighted in many communications of the bank of albania. in this context, during 2018, the bank of albania engaged its resources in developments aimed at creating the necessary prerequisites for an efficient channelling of such incomes into the albanian economy. international initiatives in the field of remittances underline the importance of reducing the costs and increasing the efficiency of remittance services, thus implying the need to intervene in the retail payment market, in both remittance - sending and remittance - receiving countries. for this reason, the bank of albania, as we have pointed out at the beginning of this cooperation, has engaged in a series of projects aimed at analysing the domestic market with a view to identifying and addressing the needs for intervention. these projects are assisted by the world bank and funded by the seco. i take this opportunity to once again thank these institutions for their contribution and support. moreover, the bank of albania and the national payment systems committee has already adopted and is implementing the national strategy for the retail payments market. this strategy aims to create a contemporary and comprehensive market of retail payments, supported by secure and efficient infrastructures, as well as by a wide range of payment instruments and services that meet the needs of financially capable individuals to make payments across the country. incorporating financial inclusion into the bank of albania β s objectives, this strategy has set ambitious quantitative targets aimed at doubling the number of bank account holders ( from 38 % in 2014 to 70 % in 2022 ) and increasing the number of electronic payments per capita ( from 4.
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viewpoints, professionally and personally. we do live in a global society, where financial developments take place at a rapid pace. therefore, central banks should possess strong and reliable mechanisms of coordination and communication, which may prepare our institutions to cope with such situations. a proverb says : β no matter how long the journey is, one has to take the first step to start off. β this philosophy was made concrete through this twinning project, which along with the assistance in the afore - mentioned areas, was also the first step on the path of our institution to eu standards, as one of the priorities of the stabilization and association agreement. i would like to extend my sincere thanks to the banca d β italia and the banque de france for the outstanding cooperation we have had during the project implementation. i commend the efforts of both honoured institutions and hope that the successful implementation of this project will provide us with an example to involve more in such initiatives in the future. also, i want to extend my thanks to the delegation of the european union for its ongoing assistance and prudence throughout the project performance. i am deeply confident that these are only the first steps towards a close cooperation. i would like to conclude by bringing to your attention a statement of mr. shimon peres, who, listening to his advisor, agassi, who was speaking about developing alternative oil sources in the absence of oil, interrupted him by saying : nice speech, but what are we going to do? in light of this, we should think about what to do in the future. i think that the political coverage of this approximation process is important, with which i mean brussels β probable acceptance of albania β s application for membership in september. this is an important step that would provide additional room for the country β s rapid convergence and for bank of albania β s rapid and irreversible development in line with the models of its european counterparties. bis central bankers β speeches
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average euro area cumulative increase of around 14 %. in spain, unit labour costs grew in total by around 26 % over this period, compared with less than 2 % in the case of germany and around 4 % in the case of austria. differing developments in unit labour costs across the euro area countries from 1999 to 2007 appear to be largely the result of differences in the growth rates of compensation per employee. however, in a few countries, including spain, the cumulated productivity growth rate over the nine - year period of reference appears to have been outstandingly low, also contributing to above average increases in unit labour costs. persistent differences in labour cost developments have important implications for the price and cost competitiveness of individual countries and, therefore, an impact on a country β s current account balance through labour costs per unit of output, which are usually computed as compensation per employee divided by labour productivity. the export channel. most of the euro area countries that experienced a sizeable loss in price and cost competitiveness over the period 1999 - 2007 appear to have also seen a worsening in their current account positions. in particular, in spain, the current account reached a deficit of 10 % of gdp. three main factors can explain relatively strong cumulated labour cost or price increases in individual countries. first, there are factors that can be linked to the real convergence and economic integration process of a country. in practical terms, however, it is extremely difficult to disentangle the portion of the price and labour cost differentials that may reflect an adjustment to a new equilibrium level. second, a lack of flexibility in product and labour markets can create, in the case of adverse shocks, persistent relative price and cost increases in the countries affected. the close link between the persistence of wages and inflation may be related to institutional features, such as the presence of some form of automatic price indexation of wages which continues to exist in some countries, including spain. and third, an economy can suffer a long period of strong demand pressures. these pressures may initially be related to either country - specific demand shocks or an excessive reaction to common shocks, which are then exacerbated by overly optimistic expectations on the part of consumers or firms regarding future income prospects. this situation may be further intensified by an insufficiently tight fiscal stance. such a situation is likely to lead to an inflationary process and cumulated losses in competitiveness. moreover, the impact may be seen not only on goods and services prices but also on asset price inflation, notably
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as we move into 2007. canada had a sound financial system, but we still ran into trouble. during the summer, the more - than - $ 32 billion market for canadian non - bank asset - backed commercial paper ( abcp ) froze. companies that relied on this market for funding were hurt, along with investors, including some of quebec β s largest firms, which suddenly had no market for the paper. while there were some doubts about the assets behind the paper, the shortage of liquidity undoubtedly worsened the crisis and spread it to other markets. a lack of transparency about the assets and a poorly designed liquidity backstop didn β t help. ironically, even though some said that abcp was backed by just about anything, the underlying assets in the canadian d. w. diamond, and r. rajan, β liquidity shortages and banking crises, β journal of finance, 60, no. 2 ( 2005 ) : 615 β 47. bis central bankers β speeches paper ultimately turned out to be relatively sound, and the losses felt by the investors were largely the result of the market freeze. the affected companies, the provincial and federal governments, and the bank of canada worked hard to negotiate the montreal accord. this included a standstill agreement and rescheduling of payments, along with protection for smaller investors. i chose this example because we β re in montreal, but there are plenty more that show that liquidity can evaporate quickly for reasons that aren β t immediately obvious. 2 but it was clear in 2008 with bear stearns and lehman brothers that, when liquidity disappears, everybody can feel the consequences, and they are very expensive. 3 the fallout from the crisis because of credit and liquidity issues is estimated to have cost the global economy more than us $ 10 trillion in lost output. the response a lot has been done, both in canada and globally, to respond to the lessons taught by the crisis. the goal is to strengthen the world β s financial system so that it functions well, reducing the costs and chances of any future crisis. 4 it β s also to make sure taxpayers won β t be on the hook for the cost of any future turmoil. let me mention some of the most important reforms. internationally, policy - makers gathered at the basel committee on banking supervision to establish new regulatory standards. the basel iii package, as it β s called, is perhaps best known for its regulations that determine how much capital banks need to have, while taking into account
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agencies propose that only the most advanced approaches under basel ii be offered for banking organizations in the united states : the advanced internal ratings - based approach for credit risk, known as a - irb, and the advanced measurement approach for operational risk, known as ama. as indicated in the anpr, the standardized approach and the foundation irb approach to basel ii would not be permitted for credit risk. nor would the basic indicator approach or standardized approach be available for operational risk. the banking agencies took considerable time to develop the advanced proposals, which we believed would clearly be the best option for the u. s. banking system. the complex operations of the largest banks have outgrown the existing capital regime, and for them basel i has become less and less effective. indeed, in the view of u. s. supervisors, an overhaul of the regulatory capital system for our largest banks would be worthwhile only if the most advanced approaches were used. because of the heterogeneous nature of the u. s. banking system, some balance in the application of basel ii would be necessary. on the one hand, the size, scale and complexity of the internationally active u. s. banks requires, in the opinion of the u. s. supervisors, that these entities operate with the best feasible risk measurement and management procedures, and these procedures are most consistent with the advanced versions of basel ii. on the other hand, the u. s. agencies do not want to impose the higher costs of the advanced version of basel ii on institutions for which it is clearly not suited. in the end, the u. s. banking agencies tried to allow as much choice as possible, while ensuring that banks are still meeting domestic regulatory obligations, avoiding private - sector costs that do not produce some clear and convincing level of benefits, abiding by the evolving basel ii agreement, and, most important, maintaining a safe and sound u. s. banking system. the u. s. banks that would be required to adopt basel ii, as well as those that we expect to choose or opt in to the new regulatory capital rules, are those that, because of size and complexity, should operate with the most sophisticated risk - management practices. the anpr lays out objective criteria, including asset size and foreign exposure, to identify the large, internationally active banks that would be considered mandatory banks. naturally, there are also thousands of banks in the united states that do not qualify as large and internationally active and for which the advanced
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. to illustrate, banks with under $ 100 million in assets devote about 9 percent of their assets to small business lending on average, whereas banks with over $ 10 billion in assets invest only about 2 percent of assets in these loans. while such a simplistic analysis may sound appealing on the surface, it is clearly incomplete. it neglects the fundamental nature of mergers and acquisitions as dynamic events that may involve significant changes in the business focus of the consolidating institutions. that is, banks get involved in mergers and acquisitions because they want to do something different, not simply behave like a larger bank. the simplistic comparison of the lending patterns of large and small banks also ignores the reactions of other lenders in the same local markets. other existing or even new local banks or nonbank lenders might pick up any profitable loans that are no longer supplied by the consolidated banking institutions. these other institutions may also react to m & as with their own dynamic changes in focus that could either increase or decrease their supplies of small business loans. thus, even if merging institutions reduce their own supplies of small business loans substantially, the total supply of these loans in the local market need not decline. there have been a number of recent studies of these dynamic effects of bank mergers and acquisitions, some of which we heard about this morning. the results suggest that the dynamic effects of mergers and acquisitions are much more complex and heterogenous than would be suggested by the increased sizes of the consolidating institutions alone. for example, mergers of small and medium - sized banks appear to be associated with increases in small business lending by the merging banks, whereas mergers of large banks may be associated with decreases in small business lending by the participants. on average, mergers appear to reduce small business lending by the participants, but this decline appears to be offset in part or in whole by an increase in lending by other banks in the same local market. these other banks may pick up profitable loans that are dropped by merging institutions, or otherwise have dynamic reactions that increase their supplies of small business lending. moreover, these results do not include the potential for increased lending by nonbank firms. the bottom line is that small business loan markets seem to work quite well. creditworthy borrowers with financially sound projects seem to receive financing, although they sometimes have to bear the short - term switching costs, such as temporarily higher loan rates and collateral requirements, of changing banks after their institutions merge. on - going technological change in small business lending
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##pate a dynamic job market, diverse career paths, and the opportunity to work on groundbreaking projects that will shape the future of finance. i've highlighted the opportunities arising from the growing demand for fintech talent, and the market potential stemming from the gba area. the next question is, how can our younger generation, including the students here today, seize these opportunities? the fintech ecosystem has undergone remarkable growth and development in the last few years. as the financial services industry embarks on the next phase of digital transformation and innovation, there is a pressing need to unlock the full potential of fintech. 2 / 3 bis - central bankers'speeches at this critical juncture in our fintech journey, the younger generation will be a vital source of fresh ideas, driving further breakthroughs and advancing more innovation. here, i would like to offer three pieces of advice for you. first, you need to stay curious, keep learning and remain adaptable. things are changing fast, and you need to ensure that you stay up - to - date with the latest trends and developments. secondly, you need an entrepreneurial mind - set to think creatively about applications and explore innovative business models that can bring benefits to the real economy. it is essential to remember that innovation is not an end in itself, but it is really about using technology to make our life better, to make financial services either faster, more efficient, or more accessible. my third advice is that you need to stay open - minded about new, or even radical ideas, and to stay global on fintech trends, so that you can find inspiration to turn them into new ideas for local applications. in closing, i would like to extend my best wishes for the success of this summit, and my appreciation for the dedication of every partner and participant in this initiative. let's continue to grow our fintech talent together for a sustainable ecosystem. thank you. 3 / 3 bis - central bankers'speeches
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##udential instruments for the real estate market ; germany, by contrast, does not have the requisite legal basis as yet. to close this gap, the fsc submitted a recommendation to the federal government on 30 june 2015 proposing the creation of new macroprudential instruments for the residential real estate market. i would expressly point out, however, that this step does not mean that these instruments will be deployed or activated. the fsc is recommending four instruments : a cap on the loan - to - value ( ltv ) ratio, a cap on the debt - to - income ratio / debt - service - to - income ratio as well as an amortisation requirement. an ltv ratio, for instance, specifies a minimum amount of equity capital which a debtor must contribute to a residential real estate financing transaction. these instruments have two objectives. one is to reduce the likelihood of overindebtedness and thus of crises. the other is to stem the effects of crises, should they occur anyway, by means of larger risk buffers. if these instruments are activated in the future, an ex post impact analysis should be carried out. that calls for sound data, which is why the committee β s recommendation asked for the creation of a legal basis for the collection of granular data and a mandatory ex post impact analysis. 3. how do data fit into the equation? but what are β sound data β? the lessons learned from the us experience tell us that a loosening of credit standards for subprime households can be one of the major root causes of financial crises. a development of that kind can only be identified if granular data are to hand. the bundesbank has responded to the need for higher - quality and above all granular data by establishing its research data and service centre ( rdsc ). 1 a new project has been launched to administer and link microdata and macrodata, and to make them available to both bundesbank and external researchers. at present, ten members of staff are busy capturing, compiling and maintaining these data, which are being used in 120 projects. internationally, too, a host of initiatives have been kick - started in an effort to close data gaps. for instance, europe β s central banks will, in the coming years, be setting up anacredit, a comprehensive database which will help them to link loan - level data and banks β balance sheet data. that kind of data pool would open up a wealth of
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banking system and the credit crunch that led the u. s. economy to the great depression. he also deeply studied the particular issues of monetary policy under stress such as the zero nominal interest rate case. ben has insightful knowledge on how liquidity constraints in the banking system could translate into problems in the real economy. he thoroughly acknowledges the boundaries of monetary policy that only have interest rates as a tool. i discussed this with him many times for the case of emerging markets. this background helps to better understand the wave of liquidity injections that the fed has adopted since mid - 2007. this view can also explain the recent disagreement between the foms members at the time of voting changes in rates. however, the jury is still out there. there is no guarantee that credit will be restored soon as we are clearly facing a solvency problem. also, credibility is at stake. the shift away from β market β measures to a β rescue β kind of approach may encourage reckless behavior in the future. it may also undermine the β inflation fighter β track record of the fed. the aggressive moves are going far beyond than the so - called β greenspan put β that was behind the scenes over the last years. in the euro area the β re - coupling β story seems very reasonable to me. growth prospects are rapidly deteriorating and the risk of recession should not be underplayed. the european downturn could take longer to run its course than the u. s., but it will probably also last longer. in fact, borrowing costs for consumers and firms have already increased as banks ran up losses on investment tied to u. s. mortgages. further losses in the banking and financial system could soon be disclosed, impairing bank lending and hitting corporates in particular. a reversal in the capital flows of banks from subsidiaries in the emerging world to meet liquidity and solvency requirements in their main houses in europe is something to closely monitor. on the other hand, persistent inflation and budget deficits may prevent policy makers from moving aggressively to stall the vicious circle of mounting financial losses and recession. today intervention is a β worldwide β phenomenon. in the uk, mervyn king is prepared to adopt a β long - term resolution approach β, which includes acquiring illiquid assets from banks to improve their financial condition and cutting interest rates to provide liquidity. we have seen all across the developed countries the kind of β unconventional policymaking β that was very much condemned in the emerging world : policies that, at
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stage compared to the current situation in other latin american countries. hasty diagnosis and simplistic comparisons among the various countries β situations may lead to inappropriate policy recommendations. under these circumstances, a sustainable and long - lasting reduction of inflation depends on the comprehensive, joint and coordinated action of the monetary policy, the fiscal policy, the wage policy, and the competition policy during the transition phase. the path is a sequential one while we build the traditional monetary tools as effective policy instruments. within this framework, today β s monetary and financial strategy is based on three main pillars : first, a robust and consistent monetary policy that ensures the equilibrium between supply and demand in the monetary market. this system is the most appropriate for an economy that still makes intensive use of relatively liquid means of payment and has a relatively low bank penetration. for the first time after the crisis, money supply is growing below the growth of nominal gdp, reflecting the prudential bias of our approach. the control of the growth in m2 is based upon a deep sterilization policy, which its key element is the issuance of bills and notes of the central bank and the development of a repo market. and these securities are by no means straight public debt ( the central bank is not using them to finance itself ). they reflect postponed liquidity ( they will be monetized when circumstances require so as it happened in the second half of 2007 ). second, a managed floating exchange rate regime that enables us to weather situations of financial stress β that is, a regime that provides predictability. we do not want to prevent variables from converging to their long - term values, but we would rather avoid excessive volatility as a source of unnecessary disturbances in economic decisions. on the other hand, we do not want to provide any sort of insurance that favors speculative flows. third, countercyclical policies to prepare the economy against shocks. these include the accumulation of foreign reserves and a sound financial system that buffers turmoil, instead of spreading it. i cannot find a more telling proof of the reasons why we have pursued antyciclical policies β such as foreign reserve accumulation β during these years : the recent external shock we faced can be compared to the β tequila effect β in terms of the magnitude of the outflows, but had a mild impact on domestic variables. the monetary and financial system truly protected it against financial contagion. another example of our risk management approach is the recovery of banking liquidity and solvency
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, is still building only half the number of dwellings it was at the peak in 2006, and in fact is producing at two - thirds of the rate of 20 years ago. at present there are welcome signs that the queensland housing sector is now lifting off the bottom. but this has been a long cycle. the price of brisbane dwellings was historically about 60 β 65 per cent of those in sydney. at their peak some years ago they reached about 85 per cent of sydney levels. now they are back to about 60 β 65 per cent of sydney levels again. the cycle has taken about a decade. that the cycle can be so drawn out is a salient lesson, including for those outside queensland. even if a full - blown crisis does not eventuate, as was true of australia, overdoing it on housing on the way up is usually followed by a fairly extended period of working off the problems. we have heard much of the effects of severe weather on the us economy over the recent northern winter, with these impacts complicating the task of assessing the strength of the us expansion. weather events have also been important in queensland in recent years, and some of them have been very costly. not so long ago, the problems were those of floods ( and indeed some areas of south - east queensland experienced flooding over the weekend ) bis central bankers β speeches but at present much of the state is in the grip of drought. crops have been substantially reduced and the livestock industry will take a number of years to recover from reduced herds. farm incomes are estimated to be falling to their lowest levels for at least three decades. i don β t think this will complicate our task of reading the pace of the national economy as much as in the us case, but these are nonetheless significant effects in regional economies. our discussions with tourism operators, on the other hand, suggest that conditions have started to improve, partly as a result of the depreciation of the exchange rate since its peak. over the year to september 2013, visitor spending in queensland increased by more than 4 per cent, which is a little higher than its average historically. tourism operators have also been tailoring their services to suit rapidly growing segments of the market, including the chinese market, which grew by 25 per cent over the year to september 2013. speaking of tourists, there are some rather high - profile visitors coming here later in the year. for a few days in mid november, the city of brisbane will be the focus of the
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and the european economies β lack of flexibility and real mobility in the labour force. the conclusion was that the euro would never exist! the facts have disproved this conclusion. but the very same arguments are sometimes deployed to suggest that the euro - area economy contains some inconsistencies that could endanger its prosperity. what can we say, from an economic standpoint, on this very important question? firstly, that monetary union per se, and wherever it takes place, does not necessarily imply that, at any given point in time, all the participating countries will experience the same rate of inflation or of growth, even though the move to the euro was based on the successful completion of a convergence process. let us focus, for example, on inflation. present differentials do not appear to be very large, in comparison with the experience of the united states, a long - established monetary union of comparable size. data on major cities of the us shows that inflation differentials have been at times very substantial, with divergences of 7 percentage points being recorded in the early 1980s. in the euro area, long - term convergence to a common level of prices gives naturally rise to differences in inflation rates across emu countries. the convergence of productivity and living standards creates a trend towards price convergence, as a consequence of the commonly known balassa - samuelson effect. according to the imf, this effect is estimated to have contributed 1. 5 - 2. 0 percentage points per annum to inflation for eu countries catching up on productivity. the recent statistics available for the united states also confirm that wage and salary differentials within the euro area are by no means atypical in a monetary union : for example, in 2000, in the us the average weekly earnings in the non - durable goods sector stood at usd 546 at the national level, while standing at usd 437 in mississippi and usd 644 in new jersey. i am convinced that we can be reasonably confident in the increasing integration of european countries, and in the fact that economic developments are becoming more and more correlated in the area. it has been highlighted, in the academic field, by several empirical investigations that business cycles are becoming more synchronous across europe. secondly it has often been questioned whether emu can be a success without some form of enhanced political union. certainly, for emu to function well, all member states must be aware of the spill - over effects of all their national policies, especially their budgetary policies. in
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. banks have responded to the loss of confidence in the financial markets, and the deterioration in economic prospects more generally, by tightening the terms and availability of credit so as to bolster their weakened balance sheets. that threatens to generate an adverse feedback loop : the worse the outlook becomes, the lower the chance of a loan being repaid and the more cautious the banks become about extending new loans, making the outlook yet bleaker. we hear many stories of businesses finding credit harder to get, though i understand that a recent nfu survey found that farmers β relationships with their bankers remained fairly good. the only bright spot β at least for most of us, if not for you β has been the collapse in commodity prices as the slowdown spread to the emerging market economies. oil is back to $ 45 a barrel ( see chart 2 ), while the economist food index has fallen by over 30 % ( in dollar terms ). last week, we published our latest inflation report, laying out our current assessment of the outlook. it does not make for pleasant reading. global demand fell sharply in the fourth quarter of 2008 and most forecasters expect a contraction in the advanced economies this year and negligible overall growth ( see chart 3 ). here in the united kingdom, gdp is estimated to have fallen by 1. 5 % in 2008 q4. business surveys point to a similar contraction in the first quarter of 2009. household spending is declining. investment intentions have fallen sharply. credit availability has continued to worsen. and the four - quarter rate of growth of overall money spending in the economy has fallen to its lowest since 1959 ( chart 4 ). a sharp contraction in activity, both here and abroad, is already baked into the cake for the first half of this year. but there are grounds for thinking that conditions may start to improve later in the year, as there is a substantial economic stimulus already in the pipeline. first, since october, the mpc has cut bank rate by four percentage points to 1 %, the lowest level in the bank β s 315 - year history. the dysfunctional credit markets mean that a given reduction in bank rate has less impact on the economy than in normal times. even so, it still represents a powerful stimulus, which will take much of this year to work through. of course, since interest rates cannot fall below zero, we are running out of room for further cuts. but it must not be forgotten that even if bank rate remains where it is, the recent cuts
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the uk has enjoyed since the new monetary framework was put in place. but a fairer measure of the mpc β s success is perhaps the fall in inflation expectations since may 1997 ( which can be derived from prices of government bonds ) which has brought the cost of long - term borrowing down to historically low rates. i think that this provides some measure of the growing credibility of the monetary policy framework ; and the expectation that we have moved into an era where we can expect low and stable price conditions. core purpose : financial stability i will say more later about the current position of the uk economy, but first i would like to say something about the other functions of the bank which are perhaps less familiar than the mpc. the bank β s second core purpose is maintaining the stability of the financial system. the bank is no longer responsible for the supervision of individual firms but has a clear interest in ensuring the financial system functions smoothly. as the asian crisis in 1998 and the problems in japan show, dislocation of the financial system can impose significant economic costs and it is the bank β s role, looking at the system as a whole, to identify potential threats and vulnerabilities. in some respects this interest is integral to the bank as a central bank. for example, secure and efficient payment and settlement systems are an essential condition for economic growth, providing the means for money to flow between individuals, businesses and government. like other essential services - electricity, water - it is easy to take payment systems for granted. but the amounts involved are huge : 30mn transactions are processed every day in the uk clearing system, the value of which totals over Β£800bn every week. these payments ultimately result in transfers between settlement banks across accounts which they maintain at the bank of england. a failure in the payment system could have an immediate impact on the economy and the bank has worked with clearing banks to reduce the risk to the financial system, first by the introduction of real - time gross settlement and now by moving towards delivery versus payment in securities markets. less esoteric, perhaps, is our interest in the financial stability of individual firms and the structure of the financial system as a whole. while responsibility for individual firms lies with the fsa, the bank takes a close interest in the impact on the wider economy of the regulatory structure and the links between individual institutions and markets. the bank also has a direct role as lender of last resort. in the event that a bank has liquidity difficulties that might
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lucas papademos : economic outlook in the euro area statement by mr lucas papademos, vice - president of the european central bank, at the 2008 asia - europe ( asem ) finance ministers β meeting, jeju, korea, 16 june 2008. * * * introduction it is a great pleasure for me to participate in the asem finance ministers β meeting. in my statement, i will focus on the economic outlook in the euro area, with special emphasis on inflation prospects and risk, the monetary policy stance of the european central bank ( ecb ), recent financial market developments and our assessment of the outlook for financial stability. economic outlook the pace of economic activity in the euro area is expected to decelerate in 2008 and 2009 from the robust 2. 7 % gdp growth rate recorded last year. the eurosystem staff projections, published on 5 june 2008, foresee annual real gdp growth in the range between 1. 5 % and 2. 1 % in 2008, and between 1. 0 % and 2. 0 % in 2009. recent growth forecasts for the euro area by the european commission, international institutions and organisations and the private sector are broadly in line with the eurosystem staff projections. all in all, our latest assessment, based on the macroeconomic projections produced by the staff of the eurosystem, and our analysis of the most recent information, from data and survey indicators, confirms the expectation of moderate but ongoing economic growth. both domestic and foreign demand are expected to support gdp growth in 2008. the resilience of global economic growth, which benefits from the robust economic activity in emerging market economies, should support euro area exports. domestic factors, however, are expected to contribute the largest part of euro area growth in both 2008 and 2009. in particular, non - residential private investment is expected to provide support to economic activity, as capacity utilisation remains high and profitability has been sustained in the nonfinancial corporate sector. this outlook for economic growth is surrounded by continuing high uncertainty and downside risks prevail. the financial market turmoil could have a more adverse impact on the real economy than currently anticipated. in addition, further unanticipated increases in energy and food prices could have dampening effects on consumption and investment. there are also risks stemming from the possible emergence of protectionist pressures and from the still large, though declining, global imbalances. turning to price developments, the outlook for price stability in the euro area has deteriorated
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. technological innovations can greatly improve the quality of medical care and can, in some instances, reduce the costs of existing treatments. but because technology expands the set of treatment possibilities, it also has the potential to add to overall spending - in some cases, by a great deal. other sources of uncertainty - for example, the extent to which longer life expectancies among the elderly will affect medical spending may also turn out to be important. as a result, the range of future possible outlays per recipient is extremely wide. the actuaries'projections of medicare costs are, perforce, highly provisional. these uncertainties - especially our inability to identify the upper bound of future demands for medical care - counsel significant prudence in policymaking. the critical reason to proceed cautiously is that new programs quickly develop constituencies willing to fiercely resist any curtailment of spending or tax benefits. as a consequence, our ability to rein in deficit - expanding initiatives, should they later prove to have been excessive or misguided, is quite limited. thus, policymakers need to err on the side of prudence when considering new budget initiatives. programs can always be expanded in the future should the resources for them become available, but they cannot be easily curtailed if resources later fall short of commitments. i fear that we may have already committed more physical resources to the baby - boom generation in its retirement years than our economy has the capacity to deliver. if existing promises need to be changed, those changes should be made sooner rather than later. we owe future retirees as much time as possible to adjust their plans for work, saving, and retirement spending. they need to ensure that their personal resources, along with what they expect to receive from the government, will be sufficient to meet their retirement goals. addressing the government's own imbalances will require scrutiny of both spending and taxes. however, tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. the exact magnitude of such risks is very difficult to estimate, but, in my judgment, they are sufficiently worrisome to warrant aiming, if at all possible, to close the fiscal gap primarily, if not wholly, from the outlay side. in the end, i suspect that, unless we attain unprecedented increases in productivity, we will have to make significant structural adjustments in the nation's major retirement and health programs. our current, largely pay - as - you go social insurance system worked
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, there are several large ucbs with a wide network of branches, large number of depositors and borrowers, many of whom are medium / large corporates. in the latter kind of ucbs, the cooperative structure remains only as an organizational arrangement and their business model and goals are more akin to commercial banks. the extent of heterogeneity can be gauged by size - wise, region - wise and grading - wise analysis of the ucbs. size - wise distribution the frequency distribution of ucbs in terms of deposits and advances their relative share is shown in table 3. it is observed that at the lower end of the spectrum, 36. 2 % of the ucbs have a deposit base of less than rs. 10 crore and account for only 3. 0 % of deposits. at the same time, at the top end, only 14 banks had a share of 23 % in the total deposits. more than 50 % of the ucbs ( 962 banks ) fell in the deposit base range of rs. 10 crore to rs. 100 crore and accounted for 29. 5 % of total deposits. region - wise distribution the distribution of urban cooperative banks across the country is skewed, with significant concentration in southern and western regions. table 4 gives the region - wise distribution of number of ucbs and share of deposits of each region. grade - wise distribution as part of its on - site inspection exercise, reserve bank has a system of categorizing banks into four grades based on objective parameters relating to capital adequacy, asset quality, earnings, compliance with crr / slr requirements and adherence to rbi guidelines and / directives. while grade i covers banks with no major supervisory concerns, the other three grades would indicate existence of supervisory concerns in increasing degree. table 5 gives the grading - wise distribution of banks as on march 31, 2006 ( as per provisional data ). it is seen that 37 % of ucbs in the country, accounting for 25. 60 % of total deposits, were in grades - iii and iv signifying weakness / and sickness, while the remaining major portion ( 63 % ) of ucbs, accounting for 74. 40 % of total deposits, were in grades - i and ii, indicating good / satisfactory performance / financials. dual control urban co - operative banks are regulated and supervised by both, the state governments, through the registrars of co - operative societies, and by the reserve bank of india. the registrars exercise
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in hong kong. for example, the securities and futures commission ( sfc ) announced its strategic framework for green finance in september last year and published guidance on enhanced disclosures for green or esg funds earlier in april. the hong kong stock exchange also launched a consultation in may on enhancing esg reporting and disclosure. with these ongoing efforts, we hope to bring sustainable finance in hong kong to the next stage. concluding remarks 23. finally, i would like to emphasise that this is just the beginning of a very long journey. while developments in sustainable finance have been encouraging, we are still at the initial phase of development and a lot more still needs to be done. today β s forum is a most welcome opportunity to help prepare for the future. i look forward to working closely together with all of you in our common effort to develop the sustainable finance market. 24. thank you. 4 / 4 bis central bankers'speeches
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democracy needs to move with it. this is not just because democracy is a core value of the eu. it is because making policy without adequate representation and accountability does not work. so we need to deepen our economic union and our political union together. and this means strengthening the channels for genuine european democratic legitimacy, like the european parliament. inevitably european democracy will be different. voters in any one country may initially fear that they have less influence over decisions than at present. but it is my belief and certainly what has happened in the monetary policy area that in giving up some formal sovereignty, people will gain in effective sovereignty. they will empower institutions with euro - wide responsibilities able to tackle the pressing problems of jobs and growth β and so their votes may in fact make more of a difference to their lives than they do today. in this way, i trust, we can reconcile those who feel left out, including many of the protesters gathered in frankfurt this week, with a process of integration that has already generated so many benefits for three generations of europeans. let me conclude. this building is a credit to all those who have worked to bring it to fruition. it is a landmark for the city of frankfurt. and it provides the ecb with an impressive new home to pursue its mandate. but it also stands as a powerful symbol of what european integration is about. it reminds us of where we have come from and where we have come to. of the horrors that can happen when we split apart, and the huge steps forward we can make when we work together. so let us not undo what has been achieved. let us not hanker for the past. let us draw on the past to unite us in the present β to build a complete union that can deliver the stability and prosperity we need. we as the central bank will do our part in this process by ensuring the integrity of our single currency. our shared money is the most tangible sign of the trust we place in one another. as the ecb β s first president, wim duisenberg, put it at the launch of the euro more than 16 years ago : β a currency is far more than just a medium of exchange β¦ a currency is also part of the identity of people. it reflects what they have in common, now and in the future. β thank you for your attention. bis central bankers β speeches
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currently around $ 522 million. this liquidity stems from growth in reserves coupled with weak demand for credit from the domestic economy. this can be seen in low annual growth rates in commercial bank lending. we have however seen some pickup in recent months. foreign reserves are currently around $ 1. 5 billion, sufficient to cover nearly 5 months of imports of goods and non - factor services. in view of the relatively comfortable reserves position, the reserve bank has further reduced some exchange controls and will continue to work with banks and other key stakeholders to reduce uncertainties considered as hindrances towards increasing investment. ladies and gentlemen, the reserve bank maintains an open door policy in regard to new entrants to the financial system in fiji, provided that potential licensed entities meet relevant legislative and regulatory requirements. it was in this spirit that we approved the acquisition of the former colonial national bank by bank south pacific limited, and we will continue to approve other players into the market to allow for healthy competition. such competition will benefit us all. bsp has again today demonstrated its confidence in fiji by further putting in new capital to expand its branch network. i would urge all of us here this evening to make a difference to raise investment, and ensure that fiji β s economic growth is sustainable. official opening once again, i thank mr. mccarthy for his kind invitation. i wish him and his team at bsp every success in their operations in fiji. i now have much pleasure in declaring the bsp westfield, lautoka branch open. vinaka. bis central bankers β speeches
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group peer learning program on financial inclusion. the united nations now has her majesty queen maxima of the netherlands as their special advocate for inclusive finance for development and she is also honorary patron for the g20 global partnerships for financial inclusion. the alliance for financial inclusion held its latest annual global policy forum in malaysia in september. major regional and donor organisations such as the oecd, cgap, adb, ausaid and giz have been organising workshops and bis central bankers β speeches discussions on financial inclusion and there have been inter - regional country meetings such as those in africa and in asia. at the highest global levels, there is the clear recognition that deliberate financial inclusion measures and initiatives are essential if we are to reach the 2. 5 billion people who do not have access to any form of financial services and products and who remain in poverty. regional coverage in our own pacific region, we have come to also recognise the importance of embracing financial inclusion. in 2005, the united nations development programme estimated that around 6. 5 million pacific islanders and 80 percent of low income people1 did not have access to formal financial services, making it one of the most neglected regions in the world in terms of banking services. i am glad that the microfinance pasifika network took on the advocacy role in the pacific. in its vision statement, it says that β β¦ the network shall be committed to improving quality of life through the provision of inclusive and sustainable micro financial services, such as savings, credit, remittances and payment services and insurance, to the economically disadvantaged... β however, i am also glad to say that our own central banks and authorities together with other committed stakeholders, have also taken on the baton theme of forum β importance of access and impact ladies and gentlemen, our theme, β microfinance in the pacific β increasing access, enhancing impact β, brings a number of questions to mind. how do we reach the unbanked or those that do not have access to microfinance or any form of financial service and how do we make a difference to their lives? technological innovation such questions require the capacity to think outside the box. the problems and the difficulties are such that one cannot approach and derive a solvable position in many cases unless one takes a non traditional and non conventional approach to problem solving. this calls for innovative thinking. our problems in the pacific are fairly similar. we are small island countries that are dispersed over a wide area of sea. our economic growth rates
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not there, and this in my view will become more and more clear as marketbased finance continues to grow to a huge size. the approach will need to become much more intrusive, and will be a return to the past in that respect. what will that entail? controlling the excesses of finance cannot be achieved only with monetary policy interest rates. we need to expand the concept of leverage to other segments of the financial system, particularly synthetic leverage. i mean leverage which is not easily seen in the balance sheet, because it β s built up with derivatives. it β s not seen but it β s very relevant for banks and for the economy, as we saw during the crisis. 5 / 8 bis central bankers'speeches the obstacles to regulating markets, and not just banks, are not so much technical ; the obstacles are more political or ideological. it requires more regulation and supervision by not only central banks, but also in some cases governments. it is politicians that often need to enforce macroprudential measures, and in some countries some governments do not want to use them. another aspect that is different now is that we have in our economies too much finance. there is a strand of literature showing that after certain limits there are diminishing returns in the expansion of finance. and to tame these imbalances we will also need macroprudential measures. you have talked about the need to reform economics too. what do you have in mind? big changes are happening, we are going in the right direction, but in my view we are not there yet. the joke in the american camp at the beginning of the 1980s was that macro is just bad micro, meaning that the models had become dominated by the idea that agents make optimal economic decisions over infinite horizons into the future and that markets therefore tend to be selfequilibrating towards a single steady state. central banks β standard models β dgse [ dynamic general stochastic equilibrium ] models β have been transformed in many ways, but the 1980s view has still not fully disappeared. this has to change. economic agents clearly have finite horizons, which impact on their consumption decisions. people do not optimise and plan their lives up to their death. nor does the financial sector play as important a part in models as it should. the possibility of multiple equilibria has also to be introduced ; there are fallacies of composition, there are coordination failures. all these elements have to become part and parcel of macro
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and financial stability department, which is state of the art. and i am proud of course of having participated actively in all of the policy decisions that happened since i came here in 2010, especially those that put a 7 / 8 bis central bankers'speeches stop to the existential crisis over the future of the euro. is there any decision that the ecb took that in hindsight you regret? the rate hike in 2008 was an overreaction. there seemed to be some justification at the time for the increase in rates in 2011, though in hindsight it was clearly premature. that β s it, i already said it in the speech. will you stay in germany or are you going to go back to portugal? i β m going back to portugal. in june, i will be at the ecb conference in sintra. normally we invite former members of the executive board, so i hope they will continue to invite me. particularly as i don β t intend to go and work for any private financial institution. i will do some postgraduate teaching in madrid. i always hoped i would have the opportunity to be a free intellectual. in my career i never had that luxury. i always thought and dreamed about it, and i hope to have a sufficient number of years to satisfy that ambition. i am going to have a blog. it β s usual in the united states ; in other places, not so usual. i will comment on general questions about the future, about europe, about macroeconomics. what will your first post be about? i am still hesitating. it could be about the future of monetary policy and the points i left out in my recent speech, from neutral interest rates to yield curve control. are there any rules that bind you in terms of what you can write about? beyond the ecb rules what will bind me is european decorum. 1 the role of central banks in prudential supervision 2 see funke, m. schularik, m. and trebesch, c. ( 2016 ) β going to extremes : politics after financial crises, 1870 - 2014 β in european economic review, 88, 227 - 260. 8 / 8 bis central bankers'speeches
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sabine lautenschlager : european banking supervision - towards a common culture statement by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, at the eurofi financial forum 2018, vienna, 6 september 2018. * * * since 2014, we have made huge steps towards establishing a truly european system of banking supervision and embracing a common supervisory culture. does this mean nothing more needs to be done? not quite. for a fully - fledged common culture you need to have three things : first, you need a truly unified legal basis. you simply cannot build a comprehensive common supervisory culture if you have to apply a different set of rules in each of the 19 countries. just think how we need to treat fit and proper assessments differently from one country to the next. second, you need harmonised administrative practices. and here, we have made good progress in the last four years β wherever the legislator granted us scope. we established practices for all the major areas of supervision, such as the srep, the treatment of npls, stress tests, the icaap, the ilaap, and so on. third, you need time and cooperation. after all, staff from 19 countries and 26 authorities have to be persuaded to leave their cultural comfort zone and align how they think, assess and act. i measure how far we have come by the frequency with which banks ask about changes in supervisory actions. in other words : how often do banks complain about changes in the way they are being supervised? they complain a great deal, i can tell you. and we keep pushing forward. let me give you just a few examples : we strive to increase the number of cross - border on - site missions, with even more on - site supervisors working on banks outside their home country. the success of this initiative will largely depend on the number of on - site supervisors the national authorities are willing to send. we have established a rotation scheme for members of our joint supervisory teams. this too will help to spread a common culture. at the same time, it helps to avoid supervisory capture. we foster exchange between supervisors from across the euro area. we bring them together in many different working groups to devise training manuals and supervisory guidance. but the ecb cannot create a common supervisory culture by itself. the national authorities can and should contribute, too. i understand, of course, that it is difficult to let
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go of traditions that have been honed over decades. culture is a sticky thing. but national authorities should embrace the european idea. and they should seize the opportunity to contribute to a new, common supervisory culture. they should let more of their staff come to the ecb, for a while at least. let them work in a european environment and carry this culture back to their home countries. 1 / 2 bis central bankers'speeches and the idea of a european supervisory culture should be reflected in how we deal with banks. for example, national reporting requirements should be dropped ; instead, we should aim for a single european reporting framework. to sum up : a common supervisory culture is emerging, but it still needs to be nurtured and nudged. thank you for your attention. 2 / 2 bis central bankers'speeches
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growth across all canadian regions. canada is not the only economy that has coped better with recent shocks. to varying degrees, other countries have as well - which partly explains why world economic growth has held up better this time around. clearly, many national economies have been able to respond more flexibly than in the past to unexpected developments. and this has helped to mitigate the impact of shocks, advance the adjustment, and support continued strong economic performance. this increased flexibility has been the product of economic policies and structural reforms that many countries, including canada, have undertaken over the years to strengthen their economies and make them more resilient to shocks. but this does not mean that we have nothing to worry about as we look ahead. we live in an era of rapid change, and we operate in a global environment that is constantly shifting. uncertainty, risks, and shocks are a constant feature of the economic landscape. for canada, this is particularly relevant given how open our economy is to international trade and capital flows. at the bank of canada, we believe that world economic prospects remain favourable as we look out over the medium term. but while this reflects our central expectation of how the world will unfold, there are important upside and downside risks around this scenario. on the downside, persistent global imbalances immediately come to mind, as does the lack of success in the doha round of trade talks. these risks could result in significantly slower global economic growth. at the same time, we cannot rule out the possibility of stronger growth, especially in asia. of course, we know that events can turn out very differently from our expectations today. so we must plan accordingly. in terms of potential risks and sudden developments, the best approach is to constantly ask ourselves what steps we can take to make our economy and domestic markets more flexible and thus better able to adapt. and we need to recognize that the pursuit of such an approach is a shared responsibility among firms, workers, and policy - makers. firms and their workers need to be able to respond quickly to technological advances and to various shocks that require significant changes in the way they conduct business, the type of goods and services they produce, and the markets they choose to develop. a well - functioning market - based economy and clear relative price signals are critical in this context. at the same time, policy - makers need to be wary of barriers to adjustment, such as labour regulations that inhibit the movement of workers from one type of job, or from one sector
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regulations and standards by early 2009. another example is the agreement, earlier this year, between ontario and quebec to allow some further, albeit limited, movement of construction workers between the two provinces. earlier this month, two temporary " foreign - worker units " started operating in vancouver and calgary to facilitate the entry of skilled foreign workers into canada. and just last week, the committee of ministers responsible for internal trade agreed on an action plan that embraces efforts across a range of internal trade issues. all this is encouraging because considerably more needs to be done to enhance the flexibility and functioning of our internal markets from coast to coast. business regulations and standards, including those for the financial sector, need to be harmonized across canada. dispute resolution and enforcement under the ait need to be strengthened. and, to make our labour markets more flexible, trades and professional designations should be recognized and fully transferable across the country. based on a recent survey, more than one - third of all workers and about half of all foreign - trained workers still have problems getting their credentials recognized across canadian jurisdictions. 1 how flexible is the canadian economy? the good news is that, despite the challenges that we still face, overall, our economy fares well in international comparisons of flexibility and adaptability. in a 2005 study, the international monetary fund ( imf ) concluded that " canada is characterized by a relatively high degree of flexibility, of a magnitude comparable if not larger than many other industrialized countries, with the likely exception of the united states. " 2 for purposes of this study, the imf looked at different indicators of economic flexibility β with uniform results. for example, the reallocation of production resources across sectors, in response to changing economic conditions over the 1980 - 2000 period, was quite high in canada compared with other major industrialized countries ( except the united states ) - indicating a high degree of economic flexibility. the imf also compared rates of firm turnover, and of job creation and destruction, across countries. both of these measures were relatively high for canada - again suggesting a high degree of flexibility. other measures of the way in which our economy responds to macroeconomic disturbances also point in the same direction. as of the first quarter of 2006, interprovincial migration has shown a marked increase over the past two years to 333, 000 individuals, representing over one per cent of the total canadian population. not surprisingly, the two provinces with a net positive inflow over this period are alberta and british columbia. and a
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across the economy. what is more, government measures are helping people remain attached to their jobs. this will be absolutely critical for supporting the recovery. finally, as i noted in this speech, there are clear signs that credit is flowing and the financial system is working well. this will be another key piece underlying the strength of the recovery. despite the positive signs, though, many risks and uncertainties remain. a lot will depend on whether we as a country are successful in managing the risk of possible future waves of covid19, and the pace at which containment measures are lifted. this applies to the global economy as well as canada β s. we will be paying close attention to how the pandemic is affecting growth and demand in key markets for canadian exports. as we get more data, we will have a better sense of the impact of the containment measures. these data will also help us answer a number of important questions. what β s going to happen with business and consumer confidence? will the pandemic lead to lasting changes in household saving and spending habits? how many companies will be unable to reopen their doors, and how many job losses will be permanent? how quickly will those people who lose their jobs be able to find other work? how will companies adjust or rebuild global supply chains? and so on. ultimately, the stance of the bank β s monetary policy will depend a lot on what happens to the balance between what the economy can supply and what people demand, because this will affect the outlook for inflation. it is possible, for example, that economic supply could recover faster than demand if businesses reopen quickly but consumers remain cautious. in the lead up to our july mpr, and beyond, it will be key for us to understand how the pandemic has affected demand, employment and the economy β s capacity to produce goods and services. as market function improves and containment measures ease, the bank β s focus will shift to supporting the resumption of growth in output and employment. the bank maintains its commitment to continue large - scale asset purchases until the economic recovery is well underway. any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target. thank you very much for your attention. now, i would be happy to respond to some questions. i would like to thank tamara gomes for her help in preparing this speech. 1 g. zhao, β confidence, bond risks, and equity returns, β
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david dodge : bank of canadaaβ¬β’s views on the canadain economy and its monetary policy objective opening statement by mr david dodge, governor of the bank of canada, to the house of commons standing committee on finance, ottawa, 1 may 2007. * * * good morning, mr. chairman and members of the committee. we appreciate the opportunity to meet with your committee, which we usually do twice a year, following the release of our monetary policy report. we believe that these meetings help us to keep members of parliament and, through you, all canadians, informed of the bank's views on the economy and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before the finance committee last october, we noted then that the outlook for growth in the canadian economy had been revised down slightly from earlier expectations. in our latest monetary policy report, which we released last thursday, we noted that canada's economic growth did indeed slow, but recently, inflation has been higher than expected. after considering the full range of indicators, the bank now judges that the canadian economy was operating just above its production capacity in the first quarter of this year. we expect that, over the projection horizon, domestic demand will continue to be the main driver of growth in canada. with the u. s. slowdown now expected to be somewhat more prolonged than previously projected, net exports should exert a slightly greater drag on canada's growth in 2007. the canadian economy is now projected to grow by 2. 2 per cent in 2007 and 2. 7 per cent in both 2008 and 2009. this would return the economy to its production capacity in the second half of 2007 and keep it there through 2008 and 2009. core inflation should remain slightly above 2 per cent over the coming months, given pressures on capacity and the impact of higher core food prices. but with the economy projected to return to its production capacity in the second half of this year and with further easing of pressures from housing prices, upward pressure on core inflation is expected to moderate, bringing the core inflation rate back to 2 per cent by the end of 2007. total cpi inflation is projected to rise above the 2 per cent inflation target in the second half of this year, peaking below 3 per cent near the end of 2007 before returning to the target by mid - 2008. we at the bank continue to judge that the risks to our inflation projection are roughly balanced, although there is now a slight tilt to the upside
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the other hand, because central banks confront a constantly changing world, in practice, they often face difficulties that cannot be explained by existing theories. when the bank introduced large - scale jgb purchases and yield curve control, it took the limitations and issues suggested by theory into account, carefully investigated the merits and demerits of addressing those issues, and arrived at the current policy framework. i believe that such new steps in practice eventually will lead to new theoretical developments in the future. although there remain issues to be resolved to achieve the price stability target of 2 percent, the environment surrounding prices in japan has improved steadily compared to five years ago. i am convinced that this shows that the bank's efforts based on the economic theories underpinning qqe have been going in the right direction. going forward, with the output gap improving steadily, firms'stance is likely to gradually shift toward raising wages and prices. if further price rises come to be widespread, inflation expectations are likely to rise steadily. the bank will continue to persist with powerful monetary easing to ensure that such positive developments are not cut short. thank you for your attention. kurt lewin, " the research center for group dynamics at massachusetts institute of technology, " sociometry, vol. 8, no. 2 ( 1945 ) : 126 - 136. quantitative and qualitative monetary easing and economic theory speech at the university of zurich in switzerland november 13, 2017 haruhiko kuroda governor of the bank of japan chart 1 consumer prices and policy interest rates % cpi ( all items less fresh food ) policy interest rates - 1 - 2 - 3 cy 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 notes : 1. the cpi figures ( y / y % chg. ) are adjusted for changes in the consumption tax rate. 2. for the period when no target interest rate was adopted, figures for the policy rate are the interest rate applied on excess reserves. sources : ministry of internal affairs and communications ; bank of japan. chart 2 potential growth rate y / y % chg. total factor productivity capital input labor input potential growth rate - 1 - 2 fy 85 note : based on boj staff estimations. figures for the first half of fiscal 2017 are those for 2017 / q2. source : bank of japan. chart 3 monetary policy responses and developments in real gdp after the global financial crisis real gdp
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2008, while the european central bank announced it would keep its main rates at current or lower levels at least through mid - 2020. this should sustain favourable financial conditions for longer than expected, as well as capital inflows to emerging markets. as monetary easing by leading central banks appeared more certain and positive macroeconomic developments at home continued, the national bank of serbia decided to lower the key policy rate in two instances, july and august, by 25 bp each, to 2. 5 %, i. e. its lowest level in the inflation targeting regime yet. thus, in conditions of subdued inflationary pressures, the national bank of serbia continued to provide additional support to economic growth and a sustainable rise in employment. as so far, monetary policy decisions will continue to be made in consideration of the effects of past monetary easing on the future inflation profile, as well as of the effects of other domestic and external factors. given that the key risks to the projection are still mostly associated with the international environment, the national bank of serbia will keep a close eye on developments in the international commodity and financial markets and assess their impact on economic movements in serbia. as before, monetary policy will be predictable and consistent in delivering low and stable inflation in the medium term. this will at the same time help maintain macroeconomic and financial stability and contribute to sustainable economic growth. owing to this, there is a constant rise in the number of domestic and foreign investors who are investing at a longer horizon, having recognised the stability and prospects of our economy. current economic trends and the results achieved thus far are a good basis for further sustainable and dynamic economic growth. this is confirmed by our latest projections and key macroeconomic developments, which will now be presented to you in detail by our colleagues from the economic research and statistics department.
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the global financial system.
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around calibration, statistical quality and profit and loss attribution β and qualitative β around independent validation, documentation, model governance and the use test. the pra has approved 24 uk insurers to calculate capital requirements using a model, which is by some way the highest number by eu country. that gives us the advantage of peer comparison. we challenge hard where we think model calibrations are weak based on either comparison with other insurers β models or our own view of a risk. at the same time, though, we recognise that every insurer β s risk profile is different. insurers are many and varied. the standard formula cannot be flexible enough to work well for all of them. for this reason, internal models are an important element of the solvency ii framework. part of the reason for our intensive review of insurer models is that the interests of management and shareholders do not necessarily align with our own. financial performance is measured by return on equity. especially in a highly competitive trading environment, lowering regulatory capital requirements may seem a more achievable way to boost return on equity than increasing underlying profits. one legitimate approach is to reduce underlying risks. if an insurer β s internal model is well designed, lower risks should lead to a fall in all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx capital requirements. we become concerned when genuine risk reduction tips over into weakening of assumptions or more aggressive modelling of risks. it is one thing we look for when reviewing material model changes proposed by insurers. another is selectivity. insurers might seek to make changes to their models in areas where risks are reducing or they have overestimated them but neglect areas where risks are increasing or they have underestimated them. model drift model drift is the risk that the capital requirements calculated using an internal model may gradually weaken over time such that they no longer reflect the risks to which the firm is exposed. no measure of model drift is perfect. the pra tracks movements in internal model capital compared to the standard formula and the net best estimate of liabilities. 2 the first benchmarks the tailored risk calibrations in an insurer β s internal model against the β off the peg β measures of risk specified in solvency ii. the second compares them to the size of the insurer β s balance sheet β a sort of insurance β leverage ratio β.
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jean - claude trichet : views on recent economic developments in the euro area and international financial architecture address by mr jean - claude trichet, governor of the banque de france, at the institute of international finance spring membership meeting held in hong kong on 1 june 2001. * * * ladies and gentlemen, it β s a great pleasure for me to share some views with such a distinguished audience on two topics of great importance : the first one deals with recent economic developments in the euro area and the motivations of the last 25bps rate cut by the ecb on its 10 may β s meeting. the second point deals with the very important question of international financial architecture. let me start with the first topic. the global outlook for 2001 continues to be characterised by sizeable uncertainties, amid the readjustments taking place in the american and japanese economies, and their impact on the rest of the world. in the united states, however, while the gdp growth estimate for the first quarter of 2001 indicates that the slowdown has been substantial, the economy is still driven so far by firm consumer expenditure. economic activity in the euro area in 2000 expanded at an annualised rate of 3. 4 %, the strongest growth since 1990, driven by buoyant domestic and foreign demand. the general outlook for this year and next one remains positive, even if, clearly, some impact of the american slowdown is already visible. private investment and consumption are expected to continue growing at a sustained pace, whereas the impact of slower world economic growth is expected to weigh on exports, with also a transitory impact on inventories. indeed, economic activity in the euro area is largely determined by domestic factors such as long - term financing costs and disposable income developments, which have remained favourable. furthermore, the still high rates of capacity utilisation in the manufacturing sector, the ongoing growth in employment and continued declines in unemployment should help maintain positive growth in private investment and consumption. employment in the euro area is estimated to have increased by 0. 6 % in the first quarter of 2001, compared with the previous quarter, confirming continued solid job growth creation over the recent months. notwithstanding sustained reductions in the aggregate unemployment rate and relatively rapid employment growth, wage increases in the euro area have so far remained moderate. per capita nominal compensation of employees grew by 2. 0 % in 1999 and by 2. 4 % in 2000, while unit labour costs increased by 1. 3 % and 0. 9 %, respectively
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randal k quarles : brief thoughts on the financial regulatory system and cybersecurity speech by mr randal k quarles, vice chairman for supervision of the board of governors of the federal reserve system, at the financial services roundtable 2018 spring conference, washington dc, 26 february 2018. * * * thank you very much for having me here at the financial services roundtable β s spring meeting. i am pleased to speak with you all about our financial regulatory system : both the broad principles that have been directing my approach to evaluating the regulatory system, as well as cybersecurity, which is a topic of great import to financial system participants and their regulators. efficiency, transparency, and simplicity of regulation as i have said before, we have an opportunity to improve the efficiency, transparency, and simplicity of regulation. we have spent the past decade building out and standing up the postcrisis regulatory regime, and as a result we have made critical gains. the financial system is undoubtedly stronger and safer. we have robust capital and liquidity levels, an effective stress testing regime, and improved resolvability of our largest firms. but at the same time, it is our responsibility to ensure that those rules are effective. and if we identify rules that are not working as intended, we should make the necessary changes. with the benefit of hindsight and with the bulk of our work behind us, now is a natural and expected time to evaluate the effectiveness of that regime. our efforts toward implementing those principles are underway. federal reserve board staff members continue the review that i have previously outlined. the goal is to consider the effect of past regulatory initiatives on the resiliency of our financial system, on credit availability and economic growth, and more broadly, their costs and benefits. i am confident that that review will reveal some clear ways that we can improve the core post - crisis reforms. cybersecurity let me now turn from regulation to supervision, and more specifically, to the topic of cybersecurity, which continues to be a high priority for the federal reserve. the federal reserve is committed to strategies that will result in measureable enhancements to the cyber resiliency of the financial sector. given the dynamic and highly sophisticated nature of cyber risks, collaboration between the public sector and private sector toward identifying and managing these risks is imperative. while we know that successful cyber attacks are often connected to poor basic information technology hygiene, and firms must continue to devote resources to these basics,
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make judgements in situations that are not always well - defined. taken in this context, the work of the fspb serves as an important anchor for decisions and actions that will engender trust in the financial industry. in a fast moving world, a strong commitment to a professional code of conduct provides the assurance that the public seeks β that financial institutions and employees are held to and will consistently demonstrate high standards of professional and ethical conduct. i hope that the industry will continue to lend its strong support to the fspb β s work. following today β s launch of the professional code, the bank would urge financial institutions and professional bodies to reflect the standards set out in the code in the values and conduct that you demand of your staff, agents and members. this needs to move beyond symbolic gestures, to the diligent implementation of policies and programs that promote the desired culture. the bank is confident that the fspb will continue to play an important role in supporting these efforts β including through its work to identify implementation challenges, develop solutions and introduce improvements to reflect emerging issues. the financial industry has demonstrated leadership in so many areas β surely none can be as important as leadership in something as fundamental as professional and ethical conduct. on that note, let me once again commend and congratulate the fspb on this important, and certainly most relevant initiative. 3 / 3 bis central bankers'speeches
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jessica chew cheng lian : launch of fspb professional code for the financial services industry welcome address by ms jessica chew cheng lian, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the launch of fspb professional code for the financial services industry, kuala lumpur, 24 may 2018. * * * i am delighted to be here to witness the launch of the financial services professional board ( fspb ) professional code for the financial services industry. thank you for allowing me an opportunity to offer some brief remarks this morning on the importance of this initiative from bank negara malaysia β s perspective. let me begin by saying that the launch of the code comes at a time when issues of culture and conduct in the financial industry have become an important focal point for financial regulators. after a hive of activity largely focused on strengthening prudential rules and standards, there is an acknowledgement that behaviour is ultimately regulated by something that runs deeper than rulebooks. it is not an easy thing to put your finger on. regulators have talked about β the way things get done β in an institution, or β the human element in everyday decisions β. we like to think of it as how one behaves when no one is watching. on this score, the financial industry could do better. despite much publicity and widespread efforts to tackle the issue, incidents of misconduct continue to cast a dark shadow over the financial services industry across the world. this is worrying, because misconduct erodes trust in the system. if investors, depositors and policy holders stop believing that their interests are being safeguarded, the entire system quickly comes unraveled at significant costs to society. these costs can arise from failures of financial institutions, a misallocation of economic resources, or simply steep fines that destroy shareholder value and employment prospects for affected workers. since the global financial crisis, banks have paid more than usd320 billion in fines and legal costs and have been the subject of numerous government financial inquiries due to misconduct. in malaysia, in the last 5 years, bank negara malaysia has imposed fines on financial services providers to the tune of rm116 million. a survey conducted by the bank revealed that almost twothirds of reported losses by banks in 2016 were associated with internal fraud, regulatory noncompliance and operational lapses. we have examined these incidents in some depth. our observations lead us to conclude that behaviour is very much influenced bycontextual factors such as organisational values, incentives and
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. nevertheless, the currency depreciations have not been a unifying story in the developing world. in fact, according to the january 2014 world bank report, over 60 % of developing countries witnessed appreciation throughout the taper - talk period ( april β august 2013 ). 19 in many emerging countries, e. g. chile, malaysia, and mexico, the depreciations were much more pronounced. the diversity of responses to tapering across different countries, even those within the same geographic region, suggests that domestic factors are the key in amplifying or absorbing these foreign shocks. one clear aspect is the degree of leverage in the banking sector, which has been on the rise in many asian countries since early 2000s. 20 it remains a valid question whether and to what extent can the potential negative effects of tapering be spared. the way of implementing the tapering may play a role per se. there are two aspects of this problem. the first is the degree of commitment to policy announcements. 21 the second is the potential for policy synchronization and cooperation. the mandate of all major central banks is focused solely on domestic policy objectives. nevertheless, the interconnectedness of global financial markets means that domestic policy decisions which are harmful abroad may ultimately backfire at home. the financial crisis has proved that the interpretation of the legal mandate can be subject to some interpretation, depending on the severity of circumstances. it can also be noted that international coordination of monetary policies is not without precedent. one example is the plaza accord in 1985, a joint intervention to weaken the us dollar. also, in october 2008 four major central banks cut their key policy rates in a coordinated fashion. at this junction it is not clear if tapering is going to have clear negative effects in emerging economies. the world bank documents made negative forecast revisions of gdp growth internationally after may 2013. on the other hand, for financially stable economies, moderate calvo g., leiderman l., reinhart c. ( 1993 ), β capital inflows and real exchange rate appreciation in latin america β, international monetary fund staff papers, 40 : 1, march 1993. aizenman j., binici m., hutchison m. ( 2014 ), β the transmission of federal reserve tapering news to emerging financial markets β, nber working paper no. 19980, march 2014. eichengreen b., gupta p. ( 2013 ), β tapering talk. the impact of expectations of
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reduced federal reserve security purchases on emerging markets β, mimeo, december 2013. world bank global economic prospects, january 2014. forbes k. ( 2014 ), β capital flow volatility and contagion : a focus on asia β, reserve bank of india β asian development bank volume on managing capital flows, forthcoming. woodford m., β methods of policy accommodation at the interest - rate lower bound β, paper presented at the jackson hole symposium, august 2012. bis central bankers β speeches depreciations may turn expansionary. 22 finally, unwinding unconventional monetary policy is ultimately a signal of us recovery and should therefore be interpreted as good news. another piece of good news might be that, at the end, the spillover effects of policies like qe seem to work through standard, well understood channels, i. e. through exchange rate movements and interest rate differentials. from this perspective it is hard to say what makes these unconventional policies distinct. 23 cespedes l., chang r., velasco a. ( 2004 ), β balance sheets and exchange rate policy β, american economic review, vol. 94, no. 4, september 2004. chinn m. ( 2014 ), β global spillovers and domestic monetary policy. the effects of conventional and unconventional measures β, paper prepared for the 12th bis annual conference β navigating the great recession : what role for monetary policy? β, 20 β 21 june 2013, luzern, switzerland. bis central bankers β speeches
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nexus fails to consider that this is primarily sustained through channels other than direct exposures. the main channel is the real economy ; a sharp rise in the perceived risk of one state β s debt can quickly trigger a recessive spiral, kindling social tensions with unpredictable results. the blow to the banking system would be severe, irrespective of its capitalization and direct exposure. nor is there any evidence that the benefits associated with a reform of the prudential treatment of sovereign exposures outweigh the costs, or that the associated reduction in risk could be achieved by simply shifting the public debt securities from banks to other holders. only a combination of prudent budgetary policies and credible, growth - oriented structural reforms can simultaneously drive a sustained increase in lending and a reduction in public sector securities on banks β balance sheets. the governor β s concluding remarks annual report 2018 banca d β italia the euro summit held last december reached an agreement on strengthening the european stability mechanism β s role in managing and preventing crises in euro - area member states. the conditions that countries must respect to access the esm β s precautionary funding instruments were specified and cooperation procedures agreed between the esm and the commission for monitoring the public accounts of the member states. to reduce uncertainty as to how and when a sovereign debt can be restructured, the summit also decided to introduce β single limb β collective action clauses ( cacs ) in euro - area government bonds by 2022 and that, if requested by the member state, the esm could facilitate the dialogue between that state and private investors. this uncertainty, however, only contributes to a small extent to the cost of a possible insolvency crisis. given the close economic and financial ties between the euro - area countries, the effects of a crisis of this kind would be serious and unpredictable not only for the country directly involved, but also for the others. europe should seek ways to support the efforts that must be made by member states to reduce their debt. rigorous and prudent budgetary policies are indispensable, but the lowering of the debt - to - gdp ratio is a necessarily long process, which could be disrupted by events outside the control of individual governments ; this is why some form of supranational insurance is needed, for example through the creation of a european debt redemption fund financed by dedicated resources of the participating countries. the heated debate on npls and sovereign exposures tends to overlook other significant risks to which banks
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. to make the transition to the new rules easier for banks, the bank of italy will set up a help desk to explain how the rules are to be interpreted and to ensure that intermediaries implement management policies consistent with achievement of the new requirements. basel iii will make the banks stronger, but it does not address the question of the risks posed by systemically important financial institutions ( sifis ), whose size or presence in the most important financial nerve centres means they would be rescued at any cost if they were about to fail. at the next g20 summit, the financial stability board will submit a set of proposals for the creation of an institutional and regulatory environment within which sifis will be better able to absorb very large losses without going into a full - blown crisis and governments can allow them to fail when necessary. these proposals, endorsed by g20 finance ministers and central bank governors at the recent meeting in seoul, are based on four pillars : i ) institutional arrangements should be adopted in all countries that will allow sifis to be resolved without the global financial system running severe risks and without having recourse to taxpayer money, as happened for the desperate rescues of the last few years. the national laws that hinder international cooperation today must be amended ; agreements between home and host authorities must be drawn up, with roles and responsibilities clearly defined. under italian law the bank of italy already has sufficient instruments at its disposal ; only a few adjustments will be required to transpose the international recommendations. in particular, the supervisory authority must be empowered to set up bridge banks to which the assets and liabilities of a troubled institution can be temporarily transferred, to ensure continuity of operations pending its disposal on the market. ii ) sifis, especially those operating at global level, will need to have capital or other instruments equally capable of absorbing losses available in amounts greater than those laid down by the basel iii standards. shareholders β and in some cases bondholders as well β must be asked to shoulder some of the losses in difficult times ; among other things this would strengthen both market discipline and investor scrutiny of management decisions. it is therefore possible to envisage the introduction of more severe capital requirements than those imposed on non - systemic intermediaries, debt instruments that would automatically convert to capital when banks β ratios fall below a certain safety threshold ( contingent capital ), reductions ( haircuts ) for some creditors in the face value of debt during a crisis ( bail - in ). iii ) supervision of si
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executive management department an address by lesetja kganyago, governor of the south african reserve bank, at the launch of the mpc schools challenge, pretoria 21 july 2017 good morning ladies and gentlemen decisions whether to cut, increase, or keep interest rates unchanged are of enormous importance to the economy general, and they affect most people, either directly or indirectly. this often raises the question : how do central banks make these decisions, and specifically, what factors do they take into account in making these decisions. one of the channels that many central banks use to explain how they make these decisions and what factors they take into account is to run a competition for high school learners. typically, these competitions involve a group of learners forming themselves into a monetary policy committee and making a case either to cut, increase, or keep interest rates unchanged. the south african reserve bank began a pilot in 2012 in partnership with the gauteng department of education to : offer learners the opportunity to enhance their understanding of monetary policy and how it relates to the economy as a whole ; help learners understand better how the economy works ; assist learners to better understand how the sarb β s monetary policy committee makes decisions ; improve broad economic literacy in the country ; create an opportunity for learners to put the classroom economic theory into practice and thereby enhancing their understanding of economics ; stimulate interest among learners in a career as an economist ; and raise awareness and understanding of the role and responsibilities of the sarb. the mpc schools challenge has since been expanded to cover 7 provinces. we have also since partnered with the department of basic education and the provincial departments. we have had 450 schools participate in the challenge since 2012, involving 1 340 learners. by participation we mean schools whose team submitted an essay. a requirement of the programme is that participants take a combination of economics and mathematics subjects, excluding maths literacy. certain schools therefore do not qualify as they do not provide this learning combination. next year, the challenge will become national with the addition of kwazulu - natal and the western cape provinces. hence, today β s launch of the mpc schools challenge. the way the competition works is that each school must constitute a team of four learners who model themselves on the monetary policy committee ( mpc ). the team presents its case to a panel of sa reserve bank economists. representatives of the department of basic education moderate the outcome. to ensure that all entrants have access to the same basic data, the sarb provides learners with relevant economic data
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. accessing data is perhaps the easy part. the first hurdle is deciding how the outlook for domestic and global economy impacts on future inflation. to clear this hurdle requires the team to interpret current economic conditions and events, and to apply judgement about the likely future path of the economy. there are many factors that the team must consider, and they are often moving in different directions, making judgment on how they will affect future inflation that much more difficult. at the end of it all, committees rely on judgement in making the call whether to cut, increase, or keep interest rates unchanged. monetary policy decisions in the sarb are made by the monetary policy committee ( mpc ). the mpc currently comprises six members, being the governor, the three deputy governors, and two other senior officials of the sarb. every decision of the mpc is an outcome of in - depth discussion and debate. even a'no change'decision is a policy decision. i should also note that the monetary policy decision is not a one - off event ; it is a continuous process which culminates in the mpc meeting where decisions are finally taken. we are constantly talking to each other, discussing what we see and how we interpret what we see. there is a sizeable literature on the relative efficiency of committee - based decision making. a committee tends to pool information and ideas from a group comprising different skills and views, and it also provides insurance against extreme preferences and outcomes. so, there is an additional benefit that participation in the mpc schools challenge potentially offers learners. and that is that those learners get an opportunity to develop or put their social skills into practice. by social skills i mean the ability to interact with fellow human beings. literature shows that the ability to interact with fellow workers, successfully working as a team remains among the most important skills in the modern economy. this is because technology has yet to successfully simulate human interaction. the ability to listen to the views of your colleagues, question or debate the issues they raise and attempt to persuade them otherwise has a broad societal benefit, way beyond application in policymaking. in that sense, the ability to engage with the ideas of fellow workers and collaborate with them will, for a long time to come, remain one of the prized skills by employers. the mpc schools challenge is therefore a contribution by the sa reserve bank towards improving the understanding by young south africans of how the economy works, why high inflation is bad for an economy and how the monetary policy committee makes
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mohd razif bin abd kadir : islamic finance and the collaboration between malaysia and bahrain special remarks by mr mohd razif bin abd kadir, deputy governor of the central bank of malaysia, at the signing ceremony of memorandum of understanding between bursa malaysia β bahrain financial exchange, manama, 24 january 2010. * * * it is my great pleasure to be here today on this occasion of the signing ceremony of the memorandum of understanding between bursa malaysia berhad and the bahrain financial exchange. the signing we are about to witness today will lay the foundation for the collaboration by the two exchanges on bursa suq al - sila β. i wish to thank the two exchanges for inviting me to give some remarks at this auspicious occasion. i also wish to applaud this commendable effort by the two exchanges which marks another important milestone in the development of the global islamic financial services industry and in bridging further our two countries. maintaining the stability of islamic financial system this effort takes place at a time when the global economy is entering into a period of improved international economic and financial conditions. the global financial crisis has highlighted several structural weaknesses and drawbacks in the international financial system. while islamic finance is not insulated from the effects of the current environment, the shariah principles and values that are inherent in islamic finance provide an important underlying foundation. the islamic financial system has continued, during this period, to become increasingly integrated with the international financial system. however, as this interconnectivity intensifies, the exposure to risks arising from financial and economic developments from other markets will increase. indeed disruptions in the functioning of financial markets have brought the focus of attention on financial stability issues. in addition, this recent financial market turmoil has demonstrated the consequences of liquidity constraints. this has accentuated the importance of a strong and well developed liquidity management infrastructure. essentially, international islamic financial transactions will require the development of the supporting financial infrastructure, in particular, the systems and structures for the management of liquidity. several key measures are required to improve the ability of the islamic financial system in managing such disruptions and ensure its stability. a well functioning markets and liquidity management framework are vital for islamic financial institutions to effectively manage funding of islamic financial transactions. these would also facilitate cross border capital flows and help expand the islamic financial markets as well as manage liquidity risks in a shariah compliant manner. this current global financial crisis has prompted a
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, it requires an enabling and conducive environment to innovate new products and try out the various shariah concepts in islamic finance. however, going forward, there are some challenges that may impede our efforts in developing the islamic financial system. a rigorous and well developed shariah framework is needed to govern market practices of the islamic financial institutions. to achieve consistency in the development of islamic finance, all stakeholders involved in islamic finance must work in a concerted manner on interpretation issues. nonetheless, there has to be a check and balance between the need to have innovative and advanced products and the need to uphold the shariah requirements. efforts, time and resources must be pooled among the islamic finance community to expand the industry and compete healthily with the larger conventional finance markets. as such, mutual recognition and understanding of different practices are essential in allowing islamic finance to grow. for instance, bursa suq al - sila β could also be used as a unifying application of tawarruq practices by adopting acceptable best market practices for the islamic financial institutions and at the same time observe the shariah principles. in malaysia, we adopt a stance of mutually recognising the various shariah interpretations. this is because the interpretations have been derived from the quran and sunnah and accomplished through rigorous juristic reasoning or ijtihad by the learned shariah scholars based on religious knowledge and norms. let me conclude my remarks. awareness and appreciation of the inherent strengths of islamic finance and its vast potential for progress have generated interests amongst the global financial community. needless to say, the islamic finance community should take advantage by increasing the role of islamic finance in linking with the different parts of the world. today, the signing of the memorandum of understanding between bursa malaysia berhad and the bahrain financial exchange, marks an exciting future in islamic finance. i would encourage you to fully exploit the opportunity presented through this memorandum of understanding. islamic finance has a potential role in contributing not only to global financial stability but also towards a more balanced global growth of our countries and the islamic world at large. indeed, both malaysia and bahrain can pave the way towards bridging islamic financial markets between our regions, while we prepare ourselves for the next phase of development of the global economic and financial system, insyaallah. on that note, let me congratulate both the bahrain financial exchange and bursa malaysia berhad on the signing of the memorandum of understanding
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t t mboweni : transparency and the public understanding of monetary policy address by mr t t mboweni, governor of the south african reserve bank, at the annual banquet of the institute of bankers, johannesburg, 6 march 2001 * 1. * * introduction good evening ladies and gentleman. i thank you for inviting me here this evening to speak at this prestigious event. the institute of bankers is an important organisation and encompasses an industry that is, as i am sure you are well aware, crucial to the south african reserve bank as a partner in our commitment to maintain and enhance the stability of the country β s financial sector. my remarks this evening centre on " transparency and the public understanding of monetary policy ". the public understanding of what we aim to do at the reserve bank is something that concerns us deeply. it is something that should go hand in hand with the work of the bank and it is central to the bank β s commitment of making monetary policy transparent to the people affected by it β the citizens of south africa. first i will discuss the reserve bank β s monetary policy framework and the developments that have occurred in this area recently. i will then move onto the institutional arrangements for the conduct of monetary policy, the work of the monetary policy committee and the bank β s modelling and forecasting activities. finally, i will say a few words about the central objective of the south african reserve bank. 2. the monetary policy framework we announced the adoption of the inflation targeting monetary policy framework in february just over a year ago. the formal adoption of an inflation targeting framework indicated a shift from the previous informal policy framework. in the past, monetary policy had embraced an eclectic approach in which recognition was formally given to a medium to longer - term stance of monetary policy by monitoring developments in a number of financial aggregates and not only money supply and bank credit extension. the eclectic approach to monetary policy was applied during the 1990s, against the background of explicitly articulated guidelines for money supply growth. this framework recognised that the reserve bank had to combat inflation, as outlined in the constitution and the reserve bank act. however, since the bank β s policies had their most direct impact in the area of money and credit, intermediate guidelines were set for growth in money supply. it was argued that if money supply growth could be contained, too much money would not be chasing too few goods, and inflation would be brought under control. while formally it was stated that broad money supply growth should fall in the range of 6 to 10 percent
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that stable conditions prevail in the financial sector when there is a high degree of confidence that the financial institutions and financial markets are able to meet their contractual obligations. these stable conditions, however, do not preclude the failure of individual financial institutions. a financial institution can fail and be allowed to fail even under stable financial conditions. it is only when there is the threat of systemic risk and an important part of the financial sector is at risk that the situation can be described as financially unstable. since inflation is our main focus, you may question where the exchange rate of the rand fits into the monetary policy framework? targeting inflation does not mean that the exchange rate of the rand is ignored. on the contrary, the impact of the exchange rate on inflation is what concerns us and this is what we closely monitor. the impact of the fluctuations in the exchange rate on inflation is carefully considered when we go about the daily task of managing domestic liquidity and determining the repo rate. if signs do emerge of increased inflationary pressures arising from a depreciation of the exchange rate of the rand, in the absence of any other counterveiling factors referred to above, then monetary policy would have to respond in the appropriate way. this, however, does not imply that the reserve bank will defend a specific level of the exchange rate. 3. institutional arrangements for monetary policy our commitment to transparent monetary policy goes hand in hand with the attempts we have already made in communicating both our intentions and the outcomes of our meetings to the public. the monetary policy committee was set up shortly before south africa adopted the inflation targeting framework for monetary policy. the 14 - member - mpc, as it is known in short, meets seven times a year. it first met on 13 october 1999. the task of its meetings is to decide on the monetary policy stance, with a focus on the inflation targets that must be met in the target year. a press conference is held after the two - day meeting has been concluded and the committee releases a statement fleshing out the developments in the international and domestic economy and the reasons for its monetary policy stance relating to these prevalent developments. the reserve bank has also convened monetary policy forums, which as the name suggests, provide a forum for open discussions on monetary policy and general economic developments. the mpfs are held twice a year in the major centres of the country and engage with labour, business, community and other organisations. the forums also ensure that the views of interested parties are taken into account when
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similar financial firms also highly reliant on short - term funding? if so, are the sources of short - term funding heavily concentrated? is the market for short - term funding likely to be stable in a period of high uncertainty, or is it vulnerable to runs? if shortterm funding were suddenly to become unavailable, how would the borrowing firms react β for example, would they be forced into a fire sale of assets, which itself could be destabilizing, or would they cease to provide funding or critical services for other financial actors? finally, what implications would these developments have for the broader economy? the analysis of risks from a systemic perspective, not just from the perspective of an individual firm, is the hallmark of macroprudential regulation and supervision. and the remedies that might emerge from such an analysis could well be more far - reaching and more structural in nature than simply requiring a few firms to modify their funding patterns. implementing the macroprudential approach in the united states let me be more concrete and talk about the implementation of the macroprudential approach in the context of the evolving u. s. regulatory system. the first required element of macroprudential oversight is a system for monitoring evolving risks to financial stability. beyond assigning individual regulatory agencies this responsibility, the dodd - frank act took the additional step of setting up a new body, the financial stability oversight council, as i mentioned earlier. the council is charged with monitoring the u. s. financial system, identifying risks that threaten the stability of that system, and promoting market discipline and other conditions that mitigate excessive risk - taking in financial markets. the council is made up of 10 voting members β including the federal reserve β and 5 nonvoting members, who serve in an advisory capacity. 1 the secretary of the treasury serves as the chairman of the financial services oversight council. other voting members include the heads of the office of the comptroller of the currency, the securities and exchange commission, the federal deposit insurance corporation, the commodity futures trading commission, the federal housing finance agency, the national credit union administration, the bureau of consumer financial protection, and an independent insurance expert appointed by the president. the latter two seats are not yet filled. bis central bankers β speeches the regulatory agencies represented on the council oversee a wide range of participants in the u. s. financial system. the broad membership of the council is intended to limit the tendency of regulators to focus narrowly on the institutions and markets within
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and the commission for help, and they also asked the ecb to contribute its expertise at a time when europe needed it most. this setup was codified in the esm treaty and by the co - legislators in the two - pack ; the ecj confirmed its legality. in line with this, the ecb has since provided its advice in programmes in five member states. but we should not forget that the respective national governments are responsible for programme implementation, while the final responsibility for programme design and the disbursement of financial assistance lies with the eurogroup. since 2010, three countries have now successfully completed their programmes, and ireland is a particularly good example of how such programmes can deliver the necessary adjustment and restore financial stability, economic competitiveness and fiscal sustainability. it has shown that a country which takes strong ownership of its programme can come out of it with robust growth and a more stable financial system, and that eventually employment will also rebound. there is no doubt that the adjustment process was painful. but we should keep in mind that the adjustment would have caused significantly more hardship in the absence of financial assistance. the programmes had to address excessive macroeconomic imbalances which had accumulated over several years in the run - up to the crisis, often reflecting misguided national economic policies. as we have said before : don β t blame the fire damage on the fire brigade. throughout the programmes in ireland and elsewhere, the ecb has played the role assigned to it under the treaty β to be the central bank for the euro area and to provide liquidity to financial institutions, including those in programme countries, when warranted. at times, this meant that risk - management considerations made it necessary for us to consider the progress of programme implementation when deciding on provision of further liquidity if the soundness of the domestic financial sector was intimately linked to programme success. we did so in full accordance with our rules and legal framework and in full independence. this was the case for ireland. and this continues to be the case for greece and cyprus. please allow me to conclude. bis central bankers β speeches five years ago, the programme framework came to life. it is certainly part of our path toward a genuine economic and monetary union to integrate the european stability mechanism and the related programme work fully into the legal framework of the european union ; we again called for this most recently in the five presidents β report. but it is even more important that we take decisive steps to avoid a member state needing a programme in the
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understanding of climate risk, seeking to address those risks through upskilling, identifying useable tools and frameworks, raising awareness, and taking leadership applies to all participants in the financial system β including regulators β and we are supportive of many of the recommendations. i am particularly drawn to the new industry narrative recommendation, which proposes to articulate a coherent story on what role the industry is playing in support of wider climate goals. in my view, the establishment of the climate forum and the publication of this report is a substantial first step in building that narrative. but there is no doubt that we are very much in the early days of this journey. and while we can expect the regulations and industry best practices for meeting those regulations to evolve β there is a need to further embed climate risk and sustainable finance within our organisations and that can only happen through building capacity. as i have said before while the path toward a net - zero economy is a difficult one, it is nevertheless one that we must all walk together. my thanks again to the working group for making a substantive contribution in that journey with this report and i look forward to the rest of the event this morning. 2 / 2 bis - central bankers'speeches
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affecting internal practices, and vice versa. from a strategic perspective, bank directors must examine their current and future funding situation in light of recent deleveraging, its nearterm prospects, and the state of overall liquidity in financial markets. financial institutions rely on external funding in some fashion β either through retail deposits, interbank lending, or debt offerings. therefore, they must understand that their funding can be subject to the vagaries of the market, such as sudden shortages of market liquidity or rapid swings in investor sentiment. for example, banks may benefit in the near term in attracting deposits and thereby improve their funding positions, but they also may experience more difficulty securing other sources of funds and find that situation persisting for some time. additionally, counterparty reactions to changes in the business mix or risk profile of an institution ( or even the perceived change in its risk profile ) could suddenly hamper the ability to find funding. in recognizing the inherent leverage in the business of banking, institutions must examine longer - term implications of funding and liquidity, and begin to build those into the overall strategic plan for their organizations. the market for external funding is an international one, so liquidity troubles in one market can have repercussions in others. accordingly, banks should be prepared for a range of adverse situations related to funding and market liquidity that can be precipitated by a range of sources. bank directors and senior management need to anticipate potential difficulties in funding the bank, and demand that solid contingency plans are in place β and are regularly updated β for a variety of funding and liquidity problems. such plans should include the potential for external factors to generate a funding squeeze for the institution, even if its own positions and risk profile have not materially changed. preparing for sudden changes in the pricing and availability at any price of funding sources is something that, leading up to the current turmoil, most banks did not fully consider. instead, their managements focused mostly on building market share, growing revenues, and realizing the short - term profitability of their activities β a telling example of banks not properly including risk management in their overall corporate strategy. as the senior supervisors group survey of major financial institutions pointed out, there have been numerous examples of failures of strategic risk management and these must be rectified going forward. finally, strategic risk management for funding and liquidity needs to consider potential liquidity problems on both sides of the balance sheet. we saw such examples recently when there
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tiff macklem : opening statement before the house of commons standing committee on finance opening statement by mr tiff macklem, governor of the bank of canada, before the house of commons standing committee on finance, ottawa, ontario, 23 november 2022. * * * good evening. i'm pleased to be here with senior deputy governor carolyn rogers to discuss our recent policy announcement and the bank of canada's monetary policy report ( mpr ). in october, we raised the policy interest rate by 50 basis points to 3. 75 %. this is the sixth consecutive increase since march. we also expect our policy rate will need to rise further. how much further will depend on how monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding to this tightening cycle. our decision reflected several considerations. first, inflation in canada remains high and broad - based, reflecting large increases in both goods and services prices. inflation has come down in recent months, but we have yet to see a generalized decline in price pressures. second, and related, the economy is still in excess demand - it's overheated. job vacancies have declined from their peak but remain high, and businesses continue to report widespread labour shortages. third, higher interest rates are beginning to weigh on growth. this is increasingly evident in interest - rate - sensitive parts of the economy, like housing and spending on big - ticket items. but the effects of higher rates will take time to spread through the economy. fourth, there are no easy outs to restoring price stability. we need the economy to slow down to rebalance demand and supply and relieve price pressures. we expect growth will stall in the next few quarters - in other words, growth will be close to zero. but once we get through this slowdown, growth will pick up, our economy will grow solidly, and the benefits of low and predictable inflation will be restored. to put this in numbers, growth in gross domestic product ( gdp ) is projected to decline from about 3aΒΌ % this year to just under 1 % next year and then rise to 2 % in 2024. and inflation is expected to hover around 7 % in the final quarter of this year, fall to around 3 % by the end of next year and return to the 2 % target by the end of 2024. finally, we are trying to balance the risks of under - and over - tightening. if we don't do
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19 / 05 / 2021 governor β s speech at the presentation of the inflation report β may 2021 ladies and gentlemen, esteemed members of the press, dear colleagues, allow me to bid you welcome to the presentation of the may inflation report after more than a year, with a sincere wish that as of august we return to our usual way of holding press conferences and answering all your questions live. this time again, we shall present to you the latest macroeconomic developments, our new macroeconomic projections, as well as monetary policy decisions in the period since the previous report. as you all know, behind us is the period during which we faced unprecedented health and economic challenges. in 2020 most advanced economies experienced economic downturns multiple times more severe than in the last global economic crisis, which negatively affected the labour market and other economic indicators in many countries. although today much more integrated in global production and trade chains, serbia β owing to the responsible conduct of economic policy in the past period and coordinated and timely measures of the nbs and the government β managed to minimise the economic fallout from the pandemic. not only have we preserved the existing production capacities, but we also built the new ones, and we continued with our investment cycle, launched in 2015. we thus reduced the fall in gdp to only 1 % in 2020, and we managed to reach its pre - crisis level already in q1 this year β a quarter earlier than we expected. β what were the key preconditions for such a result? β, is the question we often receive both from your colleagues and international financial institutions and the professional public. we answer this question always in the same way : the most important factor, which is most frequently and most quickly forgotten and is often taken for granted, is the preservation of macroeconomic and financial stability at all costs, underpinned by the relative stability of the exchange rate. owing to this, we managed to do what was the most important β we prevented a major fall in business and consumer confidence during the first wave of the pandemic, and thereafter we ensured that confidence be maintained at a high level. as a result, we achieved the pre - crisis level of industrial production and exports already in q3 2020, when we were assured that serbia would be one of the rare countries capable of truly achieving a v - shaped economic recovery. despite numerous shocks emanating from the international environment and from the changed conditions of doing business and spending in serbia, inflation remained firmly under control
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on this issue, but this concern has receded recently. lending practices have been tightened considerably and many lenders have become quite risk averse. the demand for credit has also slowed due to the changed dynamics of the housing market and slower income growth. so the risks on this front look to be less than they were previously. this brings me to the second question : are interest rates going to be reduced further? the answer here is that the board has not yet made a decision, but it is not unreasonable to expect a lower cash rate. our latest set of forecasts were prepared on the assumption that the cash rate would follow the path implied by market pricing, which was for the cash rate to be around 1 per cent by the end of the year. there are, of course, a range of other possible scenarios and much will depend on how the evidence evolves, especially on the labour market. if you accept the argument that a sustainably lower rate of unemployment in australia is achievable, the question that we should all be thinking about is : how do we get there? it is possible that the current policy settings will be enough β that we just need to be patient. but it is also possible that the current policy settings will leave us short. given this, the possibility of lower interest rates remains on the table. monetary policy does have an important role to play and we have the capacity to play that role if needed. in saying that, i also want to recognise that monetary policy is not the only option. there are certain downsides from relying just on monetary policy and there are limitations on what, realistically, can be achieved. so, as a country, we should also be looking at other options to reduce unemployment. one option is for fiscal support, including through spending on infrastructure. this spending not only adds to demand in the economy, but it also adds to the economy β s productive capacity. so it works on both the demand and supply side. another option is structural policies that support firms expanding, investing, innovating and employing people. all three options are worth thinking about. from my perspective, the best option is the third one β structural policies that support firms expanding, investing, innovating and employing people. a strong dynamic business sector is the best way of creating jobs. structural policies not only help with job creation, but they can also help drive the productivity growth that is the main source of improvement in our living standards. so, as a country,
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of the programme. if the programme did fail to restore market confidence, that would have to be dealt with when the time came : holding out for better terms at the outset would have been self - defeating. as the programme proceeded, the severity of the three risk factors that i mentioned dissipated. the interest rate was sharply reduced ; the tail risk on bank losses did not materialise as much as many feared, and the additional cost of rapid deleveraging turned out to be less severe than it might have been. the two successive irish governments β firm adherence to the programmed fiscal adjustment was a key element : without it, external official and market confidence in the policy path would not have been restored. ( it is worth recalling that fiscal adjustment was already well under way for more than a couple of years when the programme began. ) close attention to the details of implementation and a solid record of working closely with troika officials to tweak programme conditionality in order to avoid self - defeating actions also helped in delivering this outcome. ( examples relating to the banking sector included small but important operational adjustments to the deleveraging path and the timing of stress tests ). while the programme β s aggregate story thus ends well, it is instructive to consider in some detail how it might have been better designed. i will focus on some of the financial aspects, which, after the fiscal component, were indeed the programme β s centre - piece. the bank bond issue much has been made of the issue of β burning bondholders β, and rightly so. just as the scope of the two - year blanket guarantee of september 2008 had been criticised, the idea that the newly - unguaranteed remaining bondholders in the failed banks anglo and inbs might now receive government largesse was rightly repugnant to many observers at home and abroad. the irish government was very interested in seeking some form of bail - in to undo some of the damage caused by the original guarantee, especially if done as part of an international assistance programme. it was unclear how much burden - sharing could in practice be this is especially true, given the prevailing reluctance in official europe to rely to a greater extent on keynesian reasoning which, in the interests of maintaining higher levels of economic activity and employment, might have tolerated a more gradual fiscal correction path in the post - crisis adjustment phase. bis central bankers β speeches achieved for the going - concern banks ( discussions in the corridors around during the negotiations included suggestions that some form of
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in that paper is why external consultants such as blackrock had not been used in the 2010 capital adequacy exercise. the answer to that is that several high profile international firms had indeed been engaged by the irish authorities during 2008 and 2009 with a view to finding out how big the capital hole was. each of these firms had proposed what soon proved to be absurdly low numbers, an experience which encouraged the more home - grown approach of march 2010. actually, as noted in honohan ( 2012 ) much of the additional capital called - for in the march 2011 exercise relates to the higher capital ratios and projected added costs of the faster deleveraging required by the programme. in the event, the deleveraging was achieved with lower costs than projected at march 2011. as it had already been doing for over two years before the programme. bis central bankers β speeches shared the view that this debt overhang was holding back the recovery and needed to be dealt with quickly. why did that not happen? there is room for different views as to why this situation has persisted. i think that both the troika and the irish officials began with the presumption that, once sufficiently capitalised, and when appropriate amendments had been made to the legislation on insolvency and on repossession of the security on defaulted mortgages, the lenders would proceed speedily to deal with the arrears, efficiently making the triage between those loans that should be restructured ( potentially with a sizable npv concession ) and those that needed to be foreclosed on. the programme thus relied mainly on capitalisation and these pieces of legislation. the fact that there were delays in finalising the legislative changes, allowed this belief to persist. by late 2011 however, the central bank realised that most of the banks had not developed sufficiently effective policies or operational capacity to deal with the arrears situation given the still growing number of cases involved. it took more than a year for this challenge to be adequately met. even then, and with the legislation fixed by early 2013, progress has remained slow β and not just because court proceedings entail substantial delays. to be sure, although on the official side there has been consistency in wanting the problem to be addressed quickly, there has also been a wide divergence between those who see the problem as chiefly one to be resolved through repossessions and improved payments discipline, and those who argue for greater use of concessionary restructuring of loans. in my
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to be in a range of usd6 - 7 billion. to put that number into perspective, this would have been more than enough to offset our negative net outflows in 2023. and sure enough, these efforts are paying off. we see consistent conversions of foreign income as well as repatriation and conversion of retained foreign income and assets. since we did this, the ringgit has performed much better, holding its own against the us dollar despite the recent developments that have seen a further adjustment and delays to potential us rate cuts. it has also strengthened 1. 8 % against our major trade partners since february, when we started these efforts. the foreign exchange market volume and two - way flows have improved significantly, indicating a higher level of liquidity. the average daily fx turnover has risen from usd15. 5 billion in 2023 to over usd17 billion year - to - date. these are not one - off gains, either. investment income and export revenue are recurring in nature, so there will be consistent and regular flows back into ringgit and we can expect the ringgit's performance and strengthening to be sustained. thirdly, we continue to look at how we can further encourage our corporates and businesses to bring back their foreign currency balances. we heard, for instance, that many corporates found it more expedient not to bring foreign currency balances back, to avoid the approval process for reinvesting abroad. one initiative that we are working on because of this is to pilot a fast - track pre - approval framework for corporates who bring back foreign currency funds and convert to ringgit, to enable them to re - invest abroad when the time comes. for the few corporates that we have engaged on this, the response has been very encouraging, with some even bringing back and converting immediately. add to this the eventual albeit delayed turn in global interest rates, and the outlook for the ringgit is looking strong. where do we go from here? having said that, it is never a done deal when it comes to the evolving market outlook. new risks could emerge to derail us or present new challenges. or simply, what we're doing now is still not enough. i assure you that we can still do more. but let me assure you as well that using the opr or introducing capital controls like we did during the asian financial crisis is not among our options. our monetary policy is determined based on the growth and inflation outlook, and we do
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in good faith. those repayments were funded at least partially with deposit accumulation in foreign branches. early in october, two icelandic banks received sizeable margin calls from the ecb. the ecb demanded that they be met immediately, which would have driven the banks to collapse. the news of these margin calls spread widely. for reasons that were not explained, the ecb withdrew the margin calls at the last moment, in spite of the fact that the central bank of iceland had been informed that such decisions by the ecb were irrevocable. in retrospect, perhaps the safest way to prevent the collapse of the icelandic banks would have been, at the outset, to place more stringent limits on their operations than were placed on financial institutions in other eea states ; in other words, to deny them the rights conferred by the eea agreement. had this been done, iceland would not have been a full participant in the internal market of the european union. i will leave it to others to answer the question of whether political support would have been forthcoming for the imposition of such restrictions on the banks at that time. on the other hand, in view of recent developments, it is obvious that the banks took advantage of extremely favourable conditions to expand more rapidly than was sustainable for the long term as things developed. because of their relative size, the icelandic banks were more vulnerable than many other businesses even to moderately adverse developments, not to mention the catastrophic events that have shaken the global financial environment in the past year. the question of when it would have been right to intervene β and how β is extremely difficult to answer, however. no one has perfect foresight. many lessons will doubtless be learned from the experience of the past few years, including lessons about capital and liquidity requirements, concentration of financial company ownership, financial links between owners and financial companies, and financial companies β ownership of other businesses, to name a few. but those lessons are outside the scope of my talk today. conditions in the global financial system are at their worst since the great depression, particularly after the collapse of lehman brothers. it is virtually an unprecedented crisis. perhaps it is possible to say after the fact that the fall of lehman sealed the fate of iceland β s banks. once lehman had failed, nothing could have saved them. assets had become almost impossible to sell due to the crisis of confidence and the global credit squeeze the icelandic banks faced a much harsher operating environment and could expect that strict limitations would be
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but to unlock its true value for businesses and consumers, we as regulators have a role to play. in this context, clear example is the payment services directive 2 ( psd2 ) that opened up eu payments market to higher competition, by establishing a level playing field for traditional players and new entrants, while providing higher protection for consumers. the new concept of open banking was conducive to richer payment landscape with numerous new entrants ( third party providers ) and numerous new customer - centric services. thus, payments enabled by new providers have just started to take off, but it looks promising to become a new normal as they are expected to improve the user experience. how fast this segment of the financial system in the eu is developing can be witnessed by the approximately 300 new providers operating by midseptember this year, which is just two years since the application of the new regulation - relevant regulatory technical standards under the psd2 ( open banking report, 20212 ). most of the companies that offer these innovative services are fintechs, but open banking also 1 / 3 bis central bankers'speeches offers a possibility for traditional banks. in fact the survey conducted by accenture3 finds that three quarters ( 75 % ) of the banks see payments modernization as being driven by changes in the national payments infrastructure and regulation, which include improving bank - to - bank payments systems, new industry standards and open banking. the rapid move to digital payments has put additional pressure on banks, with three - quarters ( 75 % ) of bank executives saying that the pandemic has increased the urgency of their plans to modernize payment systems. pressures are felt by the central banks as well. in response to changes in consumer payments preferences, the need to further increase efficiency of payments, as well as the disruption caused by covid - 19, the interest in central bank digital currency ( cbdc ) has also increased. in fact, last year was the launch of the first β live β digital currency in the bahamas. a recent bis survey4 of central banks found that 86 % were actively researching the potential for cbdcs, 60 % were experimenting with the technology and 14 % were already deploying pilot projects. the central bank digital money, intended to be digital equivalent to cash, could further increase consumer choice, competition and accessibility with regard to digital payments, thus supporting financial inclusion and making cross - border payments faster and cheaper. in addition, some central banks see the preservation of monetary sovereignty in
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- wide impact : money market rates decrease and rate dispersion increases at quarter - ends. [ 27 ] focusing on the regulatory environment in the aftermath of the global financial crisis, the conference paper by correa, du and liao ( 2020 ) investigates how u. s. global systemically important banks supply dollar liquidity in repo and foreign exchange swap markets. in reaction to the covid - 19 pandemic, the ecb provided temporary regulatory relief to banks. the most relevant measures for money market functioning included the relaxation of the lcr requirement and the temporary exclusion of central bank reserve holdings from the leverage ratio. the relaxation of the lcr requirement enables banks to use their liquidity buffers under stress, even if this implies that their lcr falls below the required minimum level of 100 %. this measure thus allows for more flexibility in banks β liquidity management. the temporary exclusion of central bank reserve holdings from the leverage ratio alleviates bank balance sheet constraints and contributes to reducing the quarter - end effects in money markets. it also ensures that bank participation in monetary policy operations is not unduly affected by the regulatory requirements. the introduction of these temporary regulatory relief measures is expected to support the functioning of money markets beyond the year - end. this also has positive ramifications for the smooth transmission of the eurosystem β s monetary policy decisions to the real economy. conclusion i would now like to conclude my remarks. i have shown that, since the global financial crisis, money markets have experienced important structural shifts. these changes likely supported the functioning of money markets during the covid - 19 pandemic. money market activity remained comparatively resilient. most importantly, the decisive policy response by the eurosystem prevented localised tensions from turning into a broader liquidity crisis, thereby ensuring the smooth transmission of our monetary policy. looking ahead, three developments deserve careful monitoring. first, the availability of collateral in secured markets will remain decisive for market functioning, particularly against the backdrop of ongoing central bank asset purchases, even if collateral scarcity is mitigated by the broad fiscal policy response to the covid - 19 pandemic. second, a high level of excess liquidity may further reduce cash - driven activity in some market segments, potentially raising challenges for setting money market benchmark rates. and third, non - bank financial institutions play an increasingly important role in money markets. their market activity has a bearing on the formation of some money market rates, including the β¬st
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unnoticed or be considered as inadequate. i would suggest the same philosophy to the business community. for objective reasons, the concept of free money belongs to the past. by that i mean that a bank loan should be earned, which means unconditional and honest cooperation within the legal and regulatory framework approved by the country β s authorities. of course, banks are established to lend money, but first and foremost we need to bear in mind that the public deposits β stability is more important than an individual business loan or bank portfolio. moreover, the business community needs to recalibrate its position in relation to recent developments both in the national and global economy context. it must aim a higher productivity, primarily through identifying comparative advantages in the framework of global changes. in that regard, it is necessary to adopt new business administration philosophies on capacity building and investment in human resources, governance, internal control, financial and legal expertise, and risk management. besides a legal relation, the bank - client relation is a human relation, one of trust. when a business delays the payment of a bank loan instalment, it should consider its judgement on the bank if the bank delayed the payment of the matured interest to that business. dear ladies and gentlemen, on behalf of the bank of albania, i would like to invite the communities present in this event to strengthen their communication bridges, which is of benefit not only to them but also to the economy in general. bis central bankers β speeches
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ardian fullani : recent developments in the albanian banking system speech by mr ardian fullani, governor of the bank of albania, at a meeting organised by raiffeisen bank with business representatives and its major clients, tirana, 14 june 2011. * * * dear minister of finances, dear mr. lennkh and mr. hodell, dear mr. canacaris, dear ladies and gentlemen, today β s meeting organised by the raiffeisen bank with the business community is very significant. firstly, it shows a well - defined strategy of the raiffeisen group to increase its market share in albania through dialogue with business partners. secondly, such forums serve also as a platform to generate development ideas and projects of national, and why not, regional importance. thirdly, i think that today β s meeting is indicative of the maturity and rising awareness of the banking system and the business community. personally, i would wish that such meetings be intensified in the future : they should also be more structured, oriented towards a constructive debate, and involve the entire system and all sectors of the economy. in short, banks and businesses need to sit together for the best. dear ladies and gentlemen, we are in mid - 2011 now, which is a complex year in terms of its challenges for objective reasons owing to the international financial dynamics of the past 3 β 4 years. whilst our economy has posted positive growth, it continues to operate below its potential. the international setting is filled with uncertainty for a group of advanced economies, while agricultural products and raw materials prices remain high. despite last year β s narrowing current deficit, albania β s external position remains a constant structural weakness. the albanian banking system is considered to have adapted commendably to this complex situation. i would like to underline that we have done an immense amount of work so far. therefore, i take this opportunity to congratulate all central and local managing units of banks operating in albania. during this period, the albanian banking system has continued to expand its activity and lending to the economy. financial soundness and profitability indicators have improved and system β s activity capitalization is in a good position. the banking sector remains the main actor of financial intermediation in albania, whose financing continues to rely mainly on public deposits. the main problem of the banking system has been the growing non - performing loans share, which has also reflected the active policy of the bank of albania to enhance the transparency of banks β balance sheets. credit risk
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largest five euro area countries, the gross input share of services in the production of final services has increased by 5 percentage points, to 81 %, from 1995 to 2011. for goods, it has increased by 2 percentage points, to 38 %. 33 see also masuch et al. ( 2018 ), β structural policies in the euro area β, occasional paper series, no 210, ecb 16 / 16 bis central bankers'speeches
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albania has always been and remains frontrunner of change. 3. bank of albania, an evolving institution throughout the transition history, the bank of albania has shown able to change and embrace better contemporary and most effective practices. the nature and functions of the institution were fundamentally transformed in 1992, when the albanian economy started the transition process towards a free market economy. within a short period of time and in the presence of a shortage of an institutional heritage, the bank of albania succeeded to establish the contours of an independent monetary policy, being empowered in the presence of a free - floating exchange rate, regulate and supervise a private banking sector that functions based on the market principles. the qualitative transformation of the bank of albania towards a modern central bank evolved further with the approval of the new law on the bank of albania in 1997, which lays down the primary objective β to achieve and maintain price stability β. this law sets out the decision - making, financial and operational independence of the central bank in the pursuit of its objectives, in line with the best international practices. in addition, it is encouraging that this institutional independence enjoys a broad social consensus. during these years of transition, our monetary policy has marked a notable progress towards : developing a theoretical framework ; building up the completion of our knowledge with empirical studies ; perfecting the instruments for its implementation ; and the transparent communication with the public. since 2015, we have formally adopted β the inflation targeting regime β. this regime provides the adequate incentives, discipline and flexibility to the maximisation of the longterm social welfare. in parallel with the evolution of the monetary policy, the bank of albania, in years, has built on a modern and effective regulatory banking framework, in line with the best international practices. from time we have implemented the regulatory standards incorporated in basel i, ii and iii. then, we have helped the establishment of the albanian deposit insurance agency ( adisa ) and the resolution framework. these two elements are crucial for the stability of the financial system. in addition, we have been working in collaboration with other public authorities, on the development of the complete supervisory and regulatory architecture. i would like to mention in this regard the establishment of the financial supervisory authority ( fsa ) and the financial stability advisory group ( fsag ). in the light of such a historical background of development and evolution, the bank of albania has shown itself an institution able to be adapted and change to keep up with the times. in parallel, the gradual, well -
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denis beau : financial supervisory and coordination - new issues and challenges regulatory policy contribution to the panel discussion by mr denis beau, first deputy governor of the bank of france, at the salzburg global finance forum, 22 june 2021. * * * regulatory policy and supervisory coordination has always been fraught with challenges. i remember panel discussions with market participants about this very topic at the bis twenty years ago. no surprise for me that it is still a topic today, because there is a deeply rooted reason for it : the inevitable tension between market forces on the one hand, which push for a borderless financial system in many of its layers, despite step backwards, as we have seen since the global financial crisis, and on the other hand the jurisdictions in which regulators and supervisors operate, are accountable and must discharge their obligations, which at best are regional for some and most often are national. this observation does not mean that we have not made progress in addressing this tension over the last decades. nevertheless, i would differentiate between coordination issues to manage large - scale crisis and to prevent those crisis. regarding the former, i think it is fair to say that the covid - 19 pandemic acted as a test of the resilience of our global coordination framework, which has improved with a strong g20 dimension after the gfc. international organizations, among which the financial stability board, and standard setting bodies have played a very important role in gathering and disseminating information, as well as ensuring adequate coordination among major public authorities. i would also point out that monetary policy has not been the only tool we have used to increase resilience and defuse the shock. different authorities have worked hand in hand, under a lot of time pressure, including financial regulators and supervisors, to deliver a very comprehensive and largely consistent set of measures to maintain the core functions of the financial system in these unprecedented events. comprehensiveness and consistency have been key elements in our collective ability to foster resilience. so the test regarding coordination in crisis time has been passed rather well so far. however, it β s not over yet and good coordination should be maintained for the exit phase of support measures, generally speaking. in the field of financial regulation and supervision, there were variations in approaches, see for instance the leverage ratio for credit institutions, which was okay for the duration of the crisis, but led to divergence in the implementation of standards that should not last. getting out of the crisis and unwinding support measures will require further coordination
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to offer. thank you. 3 / 3 bis central bankers'speeches
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zdenek tuma : statistics β investment in the future welcome address by mr zdenek tuma, governor of the czech national bank, at the international conference β statistics : investment in the future β, organized by the czech national bank together with the czech statistical office and the prague university of economics, prague, 14 september 2009. * * * dear prime minister, distinguished guests, ladies and gentlemen, dear colleagues, i am very pleased that the czech national bank can host this conference in its premises. it is also our great pleasure to co - organize the conference together with the czech statistical office and the prague university of economics β it is the evidence of good, i even would say, above - average relationships between these three institutions. the international conference β statistics : investment in the future β we are opening by this plenary session is the second conference of this kind, organized five years after the first one. but this year β s venue is held in a rather different economic and financial environment compared to the previous conference. the whole world has been affected by the global financial crisis. let me say a few words about the impact of the financial crisis on our economy. in autumn last year the first signs of the global financial crisis were detected in the inter - bank market. the main cause was a lack of confidence among banks spreading from abroad, resulting in their preference to keep more liquidity than usual. in spite of the fact that there has long been a significant surplus of liquidity in the czech money market, this lack of confidence caused a deterioration of the proper functioning of the market. the czech national bank launched the liquidity - supplying facility in october 2008. czech government bonds were made eligible as collateral in these operations. this technical measure was aimed at limiting the potential spreading of problems from foreign financial markets to the czech financial sector. the situation calmed down at the end of 2008. overall, the financial crisis itself has had only a limited primary impact on the czech financial market due to its low exposure to toxic assets and focus on domestic business in local currency. nevertheless, the country was affected by an increase in risk aversion to the whole of central and eastern europe, due mainly to the problems of some countries which needed financing from abroad. the czech republic is among the countries that provide loans to some of them or participate in lending schemes organised by international institutions. the financial crisis has led to a significant decrease in global economic activity. as the czech economy is very open and export - oriented, the loss
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the newspapers saying that such and such banks, finance companies and leasing companies are regulated by the central bank. do you know that immediately after our advertisements, we get many calls? the callers say, β we have deposited our money in such and such institution. but, we don β t see its name in your list. is that institute regulated? β when we say that such organization is not regulated, many get frightened. so you see, people take regulation seriously. people believe that if something is regulated, then there is some element of order that is brought into that system. we are well aware of this and therefore we take a lot of pains to fulfil the regulating task. we have a deputy governor in - charge who looks into all these aspects. we have the department of supervision of non - bank financial institutions that supervises finance companies. they take their jobs seriously. that is why they are organizing a seminar of this nature. today, the business world is continuously looking at risk and trying to figure out how to manage risk and hedge against risk. sometimes, unfortunately, some directors of finance companies think that they are immune from this risk. some of them say : β we have a highly respected chairman ; we have a super ceo. we have entrusted the entire management to those wonderful persons ; they are very good ; they are well known ; they know their subject ; so therefore we can take it easy and relax. β that appears to be their philosophy. if you think so, you may do that. but remember, you would be doing that at your own risk! you must realize that you are also fully responsible. it is the collective board that will be held accountable. recently, you may have recently seen some advertisements that were placed by the failed finance companies commission, summoning all the directors, in the course of their inquiry. they have not said, β we will summon only the chairmen and ceos of the failed finance companies β. no. they have summoned all. that is perfectly correct because every director is responsible. so, each one of you too, will be responsible in the future with regard to your company. that is why we have invited eminent professionals to come and explain to you, your duties and responsibilities. sometimes, directors may not really appreciate their responsibilities and they may be quite comfortable about leaving key decisions to their colleagues, whom they trust implicitly. maybe, you may comfortably place your trust in them, and indeed you may think you are entitled to do
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product, and sell it at a premium price, to a discriminating clientele. effective policy coordination is needed in all foreign exchange activities, between government and private sector, with respect to objectives, financing, monitoring, and feedback. we have to monitor how new initiatives are being implemented, and whether the intended goals are being reached. there must be feedback to ensure corrective action if results are not being achieved. for this purpose we may use existing institutions, such as the barbados chamber of commerce and industry and the social partnership, through information sharing and minor reorganisation in some cases. barbados is rich in institutions, and it is therefore better to bend existing institutions to our purpose, than to create new ones. growth is not about starting with a clean slate, but rather about building on the foundations that have proved to be solid. we do have to develop new products and services, and to explore new markets, but we should use the things we know well as a point of departure. surely we should have learned by now that if you can β t make a success of business that you know better than others, chances are pretty slim that you will succeed with something that other people have been doing for years, and know far more intimately than you. we have everything we need to revive the economy : β’ we have at our disposal innovation and entrepreneurship, at home, in the diaspora, and among those who have chosen to make their homes here ; β’ we have examples of success in tourism, international business, agro - processing and alternative energy ; β’ we are in the top 1 / 3 of global competitiveness, as measured by the global forum ; β’ barbados has become legendary as a tropical resort destination ; and β’ government and the well established private enterprises have access to domestic and foreign funding. we know where improvement is needed, and what we must focus on in order to improve our competitiveness : β’ we must intensify efforts to identify the sources of government inefficiency, and to devise practical ways of achieving lasting gains in efficiency ; β’ appropriate financing arrangements are needed for innovators. this is the one area where we need greater clarity on what may be the best way forward. many of our previous notions clearly cannot work, and we must seek out alternative arrangements, rather than flogging the old dead horses. bis central bankers β speeches β’ every worker and every business owner must focus primarily on what each of us can do to give unsurpassed service and excellent value for money,
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the dollar, in southern africa the rand, in the indian sub - continent the rupee. it is the notion of flexible exchange rates that is ridiculous, not the acceptance of the superiority of pegged exchange arrangements. we should remember that the notion that flexible exchange rates are an acceptable way to manage the international economy has risen to ascendency only in the last 3 decades or so, a period i believe will be seen by history as a dark age of economics. prices have not been set by markets since the end of the agrarian economy a second example of economists β misrepresentation of the world is the notion that prices are determined by an equilibrium of supply and demand in a market. this notion is so fundamental to economics that it is accepted without question, and not only by economists. a visitor from mars would find this quite strange, because when he looked around him, he would be hard pressed to find anything resembling a market in which buyers and sellers negotiate the price of things bought and sold. in real life retail prices are always predetermined by the seller, and wholesale, producer and other prices are determined by contract. this was not always the case. economic history is not my specialty, but my understanding is that in the agrarian economy economic transactions typically took place via markets. the farmer would till his fields and raise his livestock five days a week, and on the sixth day he would load his produce on some form of transportation and take it to the nearest market town, where he would trade it with artisans, fishermen and other farmers who had products that he needed and that his household did not produce. in many african societies, i am told, the marketing is done by women. the seventh day was often the day of rest and recuperation, at least in the western societies from whom we draw our traditions. in this economy, sellers will adjust their prices over the course of the market day to ensure that they dispose of the entire supply that they have brought to market. this was the world in which the early economists like adam smith grew up, and these were the arrangements which they reflected in their models of the economy. it was a quite literal description of the behaviour they experienced every day. the overwhelming proportion of the populations lived in villages in the countryside, their daily activity for most of the week was production and consumption. trading, that is, economic exchange, took place only on a single day, in a discrete space, for a specified time. it made sense to think of
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measures in meeting their objectives during the autumn. be prepared, but prepared to act the variety of these macro - prudential tools provide flexibility that may be required in response to many shocks, domestic or global. standing alone, a disorderly brexit would argue for accommodative policies, for example allowing the automatic stabilisers to work and targeted fiscal measures for the most severely affected sectors. if any of the more global risks were to crystallise and have a significant effect on the domestic economy, they would likely pose different challenges. whether it be dealing with the effects of storms blowing in from abroad, or having protection from the sun on those warm irish summer days, the central bank stands ready to adjust the ccyb ( buffer ) in either direction as the risk environment evolves, in order to support a sustainable supply of credit to the economy. we can β t control the weather. but we must ensure the system is resilient, and continues to function into the future, come rain, hail or shine. finally, i hope you will allow me take the liberty of speaking at an event like macgill to briefly look beyond the central bank tool kit. as policymakers, we serve the irish public, the risks we face often overlap. and it is beneficial for all when our policy responses are in tune. while the domestic economy is doing well, we have the opportunity to boost our resilience to future shocks and risks. prudent management of the public finances are needed. interest payments on national debt are lower than expected and corporate tax receipts are high, but neither situation should be regarded as permanent14. these funds should be put to work to buffer against the next downturn or crisis and not to finance current expenditure or to boost an economy which is close to capacity. a clear strategy guiding the use of unanticipated revenue inflows should be promptly established. moreover, the reduction of public debt ought to remain a key priority given its very high level. to somewhat labour the analogy, we must β fix the roof while the sun is shining β. final points finally, as i said at the beginning, the global environment is uncertain, and with brexit looming, we should be ready to respond if these risks materialise. but it is imperative that we are nimble and ready to cool the warming economy if these risks dissipate. we must not only be prepared, but prepared to act. 1 i would like to thank caroline
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mehigan and micheal o β keeffe for their contribution to my remarks. 2 donnery, sharon : risks and resilience in uncertain times, address to the institute of international and european affairs ( 8 march 2019 ). 3 central bank of ireland : financial stability review ( 2019 : 1 ). 4 donnery, sharon : the departure of the uk from the eu β implications for the irish economy and financial system. internal dinner address to visiting staff from other central banks ( 5 march 2019 ). 5 / 6 bis central bankers'speeches 5 central bank of ireland : brexit task force reports. 6 national institute of economic and social research : the economic effects of the government β s proposed brexit deal ( 26 november 2018 ) assume that sterling would depreciate against the euro by ten per cent while in a worst case stress scenario published by the bank of england it is assumed that sterling could fall by 30 % against the usd in a disorderly brexit. bank of england : stress testing the uk banking system : key elements of the 2019 annual cyclical scenario ( march 2019 ). 7 conefrey, o β reilly, walsh : box b : the macroeconomic implications of a disorderly brexit central bank of ireland, quarterly bulletin no. 1 ( 2019 ). 8 birmingham & conefrey : the irish macroeconomic response to an external shock with an application to stress testing, technical research paper, central bank of ireland ( 2011 ). 9 byrne, stephen and tara mcindoe - calder : quarterly bulletin 2019 q2, central bank of ireland ( 2019 ). 10 ibid. 11 the revenue commissioners : corporation tax 2018 payments and 2017 returns ( may 2019 ). 12 lane, philip : tail risks and the irish economy ( 2019 ). 13 central bank of ireland : financial stability review, 2019 : 1 ( 2019 ). 14 irish fiscal advisory council : fiscal assessment report ( june 2019 ). 6 / 6 bis central bankers'speeches
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now struggling to keep up with the more radical innovations by its extra - european competitors. 4 in the united states, instead, the companies and sectors that spend the most on research and development have changed over time. twenty years ago it was car manufacturers ; the percentage is broadly the same both in terms of purchasing power parity and as a ratio of gdp. the gap is even greater, as shown in figure 3. a, at current monetary values, which are affected by exchange rate fluctuations and differences in price dynamics. at purchasing power parity, the ratio fell from 62 per cent in 2013 to 50 per cent in 2023. e. nindl et al., the 2023 eu industrial r & d investment scoreboard, publications office of the european union, 2023. the figures relate to the 2, 500 companies that invest the most in research and development worldwide. c. fuest, d. gros, p. - l. mengel, g. presidente and j. tirole, eu innovation policy : how to escape the middle technology trap, econpol policy report, 2024. today it is digital economy and technology - intensive companies, with new players continually emerging that are capable of achieving significant growth and capitalization in a short period of time. there are three main reasons for the predominance of middle technology sectors in europe. to begin with, the innovation gap that has been building up since the end of the last century, when europe's production system failed to make the most of the opportunities provided by the spread of the internet and of information and communication technologies. then came the us tech giants ( google, apple, facebook, amazon, and microsoft ), whose access to massive datasets, scientific know - how, financial resources, and extensive customer bases, has ensured them a dominant position today as digital service providers and in cutting - edge fields such as artificial intelligence. the european economy β s capacity to innovate is also limited by the fragmentation of research and development activities among firms, universities and research centres based in different countries. this hinders the transfer of knowledge and ideas, and hampers the undertaking of projects with high funding requirements. finally, the lack of integration between the scientific and business worlds and the rigidity of the eu administrative and regulatory framework stand in the way of transforming research results into competitive products and services for the global marketplace. ai is an eminent case in point. 5 although european research centres have produced highlev
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foundations for the development of the internet as we know it today. darpa β s activities rely on the interaction between academia, the corporate sector and government agencies. creating a common fiscal capacity to finance public goods would help europe overcome this anomaly. to be clear : this proposal does not imply the creation of a β fiscal union β, and would require neither an eu finance minister nor mechanisms for systematic transfers between countries. 14 the idea, instead, is to set up a common spending programme to finance investments that are indispensable for all european citizens, through a continent - wide productivity compact. to paraphrase keynes, what matters is not to do better or worse those things which the member states are already doing, but to do the things that are not being done at all. 15 here is an example that may help illustrate my point. if the eu issued debt securities to fund up to 25 per cent of an investment plan worth β¬800 billion a year for six years, by 2030 the european common debt would reach 6 per cent of the eu β s gdp. taking into account ngeu bonds and other programmes managed by the european commission, it would reach 10 per cent of gdp ( figure 5 ). 16 let me only mention in passing the other important functions that a common fiscal capacity could perform. as well as mitigating the impact of local shocks that affect only some member states ( a form of mutual insurance ), a common fiscal capacity would enable the better management of aggregate demand. this way, the european fiscal policy would no longer be the mere sum of national fiscal stances, but could be made consistent with the cyclical conditions of the euro - area economy as a whole and with the monetary policy stance. β the important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse ; but to do those things which at present are not done at all. β keynes made the point in his 1926 essay the end of laissez - faire, referring to the best way to allocate tasks between the public and private sector within a single country ( j. m. keynes, the end of laissez β faire, london, hogarth press, 1926 ). the macroeconomic assumptions underlying the simulations are that : the interest rate on the productivity compact will be 3 per cent ( equal to the weighted average of the yields on the ten - year bonds of the eu member states ) ; real gdp
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know - your - customer ( kyc ) requirements, distributed ledger has the potential to address de - risking. robo - advisers could potentially be adapted to increase financial literacy and support customers in less accessible locations. the adoption of open application interfaces ( api ) facilitates a sharing environment whereby improvements build on existing innovations could shorten the time to market for more offerings. these are just a hint of many more examples that can be examined. what is needed is a rethinking of today β s most promising financial innovations for applications and new gains in financial inclusion. or to put it another way, we need to look at not just innovative financial inclusion, but inclusive financial innovation! identifying and working on our blind spots : driving efficiency gains to promote sustainable financial inclusion the reduction of poverty and greater social empowerment through financial inclusion has been one of most enduring achievements of our era. building on this momentum, our ambitions to pursue deeper financial inclusion over the next decade must be rooted in a deep understanding of the unique circumstances faced by the 2 billion people who remain excluded from the formal financial sector. this involves increasing the arsenal of financial inclusion tools that can overcome both the geographical and cultural barriers to deliver meaningful financial services to this segment. ultimately, the provision of financial services to the underserved and unbanked must be economically viable for providers. in this aspect, the smart usage of technology can be a game changer in lowering the cost of financial intermediation. bis central bankers β speeches this in turn will unlock opportunities to progress from the single, narrowly - focused products which are typically offered by traditional financial institutions today, to a broader range of relevant products and services tailored for the underserved segments. the ability to clearly demonstrate and consistently track efficiency gains over time can attract more providers into this space, while driving continuous efficiency improvements in delivering financial services to the underserved. great strides have been made in developing better measures of financial inclusion. we have moved beyond measuring access, to including measures of the usage and quality of financial inclusion services. we need to go further to include measurement on how efficiently we are increasing financial inclusion. such measures do not exist widely, if at all, and have yet to be systematically propagated. this blind spot ignores one of the most important aspects of innovative strategies for financial inclusion, which is the potential to drive down the costs of delivering financial inclusion initiatives. a framework for evaluating financial inclusion efficiency can provide powerful incentives to harness technology in the most optimal way. this should drive lower
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pandemic has yet to peak in some countries, others including malaysia are heading towards periods of recovery while continuously managing the risk of virus resurgence. as this phase commences, islamic finance has significant potential and role to play. three attributes, at least, come to mind on how islamic finance can respond and contribute meaningfully towards sustainable and inclusive growth : first, islamic finance must be value - driven and impact - focused to deliver maqasid shariah ( the objectives of shariah ). the intrinsic values of islamic principles are aligned with a vision of economic growth that is balanced, sustainable and inclusive. shariah advocates for balance between wealth creation and wealth circulation. this in turn promotes fairness and ihsan in promoting the attainment of benefits as well as preventing harm. this crisis has indeed created a wealth of opportunities for islamic finance. shariah contracts can deploy a diverse range of capital that is risk - absorbent, patient and philanthropic in nature using instruments such as risk sharing, waqf and sadaqah to support inclusive finance. the flexible nature of such capital encourages allocation of resources towards entrepreneurial ventures and social impact projects that can improve and rebuild well - being of society. it can also to some extent help smoothen structural adjustments in the economy. globally, we have seen a silver lining in the response to the pandemic. in malaysia, the nation has rallied closer together to become more socially conscious not just in aspects of public health and welfare, but also in supporting the local economy. the islamic financial institutions in malaysia, in particular, have risen to the call to generate more positive impact through the β value - based intermediation β ( vbi ) agenda. participating islamic financial institutions have endeavoured to refine their products and services offerings in response to the need of their customers. eight islamic banking institutions ( half the total number of islamic banks in malaysia ) are offering microfinancing facility, utilising the micro enterprise facility established by the bank to increase access to finance for microenterprises with viable business. in terms of financial protection, more than 50, 000 participants have benefitted from various microtakaful products that provide affordable or free protection for the hard core poor and individuals with special needs. islamic financial institutions also continue to steward efforts towards building a greener financial system. in august 2020, the vbi community of practitioners in collaboration with the bank issued three sectoral guides on energy efficiency, renewable energy and palm oil for public consultation
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in a manner that is easy to understand, using a multimedia bis central bankers β speeches approach. charts and illustrations visualise the content, while short films provide a more in - depth insight into the snb. the associated app presents detailed information and the brochure summarises the key points in a succinct form. 1 these new products are currently available in german and french ; from autumn 2016, they will also be available in english and italian. all this information may also be accessed via our main website, www. snb. ch. β our national bank β helps us to fulfil one of our statutory tasks β informing the public about our activities. the new platform replaces β the world of the national bank β, which has provided the general public with information until now. we hope that this new resource will prove useful to you, too, in one way or another. ladies and gentlemen, thank you for your attention. it is now my pleasure to give the floor to fritz zurbrugg, who will present this year β s financial stability report. the our national bank brochure can be accessed in the form of a pdf file at our. snb. ch or ordered through library @ snb. ch. bis central bankers β speeches
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is not that everyone must be in paid employment. many people are outside the labour force for good reasons, for example because they are in full - time education, caring for children or other relatives, or doing volunteer work by choice. productivity and innovation that leaves us with productivity, arguably the most important of three ps, but unfortunately also the hardest to measure. it is also an area where distributions and firm - specific decisions really matter. some recent international evidence shows that the firms at the global productivity frontier can be several times more productive than the average firm in their industry ( andrews, criscuolo and gal 2015 ). [ 6 ] this research also finds that firms tend to adopt a new technology only after the leading firms in their own country have adopted it. that is, the national productivity frontier first has to catch up to the global frontier, by adapting the new technology to local conditions. so the average productivity of firms in an economy depends on three things. 1. how quickly the leading firms in that country adopt the technology and match the productivity levels of the globally leading firms in that industry. 2. how large the leading firms are in the national economy. 3. how quickly the laggard firms can catch up, once the national leading firms have adopted a particular technology. the findings of this research suggest that this last factor β the rate of technology adoption β has slowed down since the turn of the century. the policy implications of these findings are subtle, and depend on whether you want to affect firms near the frontier, or the firms that are lagging far behind. for example, a more flexible labour market might make it easier for the leading firms to grow faster. average productivity would rise because those leading firms account for a greater share of output. but then you would have an economy dominated by β superstar firms β ( autor et al 2017 ). the implications of that are not necessarily benign. for a start, inequality could be greater. median living standards might not rise. the drivers of innovation, like the drivers of creativity more generally, are hard to pin down. but the literature does provide some pointers to them. first and perhaps most important is simply to grow : growth is more conducive to innovation than recession is. recessions do not engender β creative http : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 11 - 15. html 12 / 16 16 / 11 / 2017 where is the growth going
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- term inflation expectations become poorly anchored or become anchored below the stated inflation goal. 17 in part because of that concern, some economists have advocated β makeup β strategies under which policymakers seek to undo, in part or in whole, past inflation deviations from target. such strategies include targeting average inflation over a multiyear period and price - level targeting, in which policymakers seek to stabilize the price level around a constant growth path. 18 these strategies could be implemented these risks could be exacerbated if households and businesses expect monetary policy to be insufficiently accommodative because of proximity to the elb. for related discussions, see reifschneider and williams ( 2000 ) ; adam and billi ( 2007 ) ; nakov ( 2008 ) ; and hills, nakata, and schmidt ( 2016 ). eggertsson and woodford ( 2003 ) provide an early discussion of how optimal monetary policy at the elb entails a commitment to reflate the price level during the subsequent economic expansion. nessen and vestin ( 2005 ) discuss the relationship between average inflation targeting and price - level targeting. there is a dearth of empirical evidence on strategies seeking to make up for inflation deviations. central banks that pursue an inflation goal generally seek to achieve a specific rate of inflation by some time horizon β typically a couple of years ahead or over the β medium run β β without regard to past inflation deviations. one exception is the reserve bank of australia, whose inflation goal is specified as a range of β 2 β 3 per cent, on average, over the medium term β and thus might embed some notion of history dependence. however, ruge - murcia ( 2014 ) argues that the drift in the price level in australia is comparable with the drifts observed in economies with purely forward - looking specification of the inflation goal. the only known historical example of price - level targeting occurred in sweden from 1931 to 1933 when the country abandoned the gold standard and attempted instead to maintain its price level. the temporary adoption of price - level targeting is credited with helping sweden avoid deflation, an outcome that contrasted with that in countries that stayed on the gold standard. see berg and jonung ( 1999 ). - 8either permanently or as a temporary response to extraordinary circumstances. for example, the central bank could commit, at the time when the policy rate reaches the elb, to maintain the policy rate at this level until inflation over the elb period has, on average
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relevant, accurate, timely and sufficient data β including positive β collected on a systematic basis from all reliable, appropriate and available sources, and should retain this information for a sufficient amount of time. achievement of this principle will call for the collective contribution of all parties here today. the governing council and the secretariat will need to work together to support various credit providers who sign up to share data. good quality data will guarantee that the risk management tools and models developed from the data trends are robust and reliable. this way, the credit granting process will become more refined and more efficient. lenders will soon move away from mere use of β gut feeling β or other rudimentary forms of information gathering that are unreliable and costly to assemble. by paying attention to maintaining high quality data in the credit reference bureaus, the players will also minimise contentions by borrowing customers as every effort must be made to address customer complaints on data accuracy. all lenders need to appreciate that the bis central bankers β speeches first port of call in resolving customer complaints must always be within the lending institution itself. where disputes cannot be settled internally, institutions must bring them to the attention of an industry mediation process. in this connection, i am pleased to note that the akcp secretariat has put in a lot of work towards developing a cis dispute resolution handbook. the akcp secretariat will soon be ready to conduct a public launch of its alternative dispute resolution mechanism and create awareness on the out - of - court settlement process. this will mark an important step towards adding credibility to the cis process. central bank is ready to provide required support needed to make this launch a success. ladies and gentlemen : i now wish to turn to the important role of akcp in contributing to policy and legal reform. the 4th of the general principles for credit reporting states that : the overall legal and regulatory framework for credit reporting should be clear, predictable, non - discriminatory, proportionate and supportive of data subject and consumer rights. the legal and regulatory framework should include effective judicial or extrajudicial dispute resolution mechanisms. while we recognise that the role of formulating a robust legal and regulatory framework remains with the regulators, the central government and parliament, we would like to forge a partnership with industry players in achieving this important function. we therefore encourage you to form relevant committees that will consult with, and make proposals to, the regulators in matters of cis. due to the multiplicity of regulators involved, i urge the secretariat of akcp to liaise with the
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speech at the presentation of the annual financial stability report for 2017 dr jorgovanka tabakovic, governor belgrade, 30 july 2018 ladies and gentlemen, members of the press and dear colleagues, welcome to the presentation of the annual financial stability report for 2017. today we have the pleasure to present a report about a year marked by exceptionally positive developments, in serbia and the international environment alike, as well as by the results we have achieved. owing to this, financial stability has not only been maintained, but also reinforced, which is reflected in a financial system that is to a large degree resilient to any potential future shocks. global economic growth stepped up in 2017, which reflected positively on the growth prospects of central, eastern and south - eastern european countries and pushed their risk premiums down. on the other hand, risks in the international commodity and financial markets persisted, primarily those associated with volatile movements in global oil prices and divergent monetary policies of the ecb and fed. thanks to improved structural characteristics and favourable growth prospects, coupled with the enactment of well - timed measures and regulations and full coordination between monetary and fiscal policies, serbia is now more resilient to potentially adverse effects from the international environment. this was confirmed in 2017 by credit rating upgrades by all three rating agencies, successful completion of the three - year stand - by arrangement with the international monetary fund and a decline in the country risk premium to its historic low. the national bank of serbia remained cautious in the conduct of monetary policy in 2017 due to uncertainties in the international financial and commodity markets. as inflationary pressures were running low, the key policy rate was cut by 0. 25 pp on two occasions, feeding through into lower cost of borrowing for the government, corporate and household sectors. favourable interest rates are one of the key drivers of credit growth, which means that by easing its monetary policy the national bank of serbia encouraged the increase in investment and private consumption and supported sustainable economic growth. in 2017 the national bank of serbia achieved its key objectives β it ensured monetary and financial stability. throughout the year inflation was low and stable, moving within the new target band, which was lowered from 4 % Β±1. 5 pp to 3 % Β±1. 5 pp as of early 2017. the fact that inflation stood at the 3. 0 % target in december only confirms that the decision to lower the inflation target was correct. at the same time, inflation expectations of the financial and corporate sectors have been anchored within the target band for quite
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james mcandrews : credit growth and economic activity after the great recession remarks by mr james mcandrews, executive vice president and director of research of the federal reserve bank of new york, at the economic press briefing on student loans, federal reserve bank of new york, new york city, 16 february 2015. * * * accompanying tables and figures can be found at the end of the speech. good morning and let me welcome you to our press briefing focusing on developments in the student loan market. my remarks will concentrate on the role of credit markets more generally during this economic expansion. as a reminder, these remarks reflect my own views, and not those of the federal reserve bank of new york or of the federal reserve system. first, let me say a few words on the current economic outlook. real gdp grew 2. 4 percent over the course of 2014. as new york fed president dudley noted earlier this month, despite what appears to be a soft first quarter, we expect that real gdp growth will continue over the next couple of years at a similar rate, supported by solid underlying fundamentals and accommodative financial conditions. unemployment should continue to decline and approach 5 percent by late this year. because of the recent sharp fall in oil prices and the appreciation of the dollar, inflation will be very low over the coming months. however, as these temporary factors dissipate, economic slack declines further and inflation expectations remain stable, inflation should slowly move up toward the federal open market committee β s longer - run objective of 2 percent. using data from the national income and product accounts, this expansion so far has exhibited unusual features compared to previous long expansions. most notably, the pace of growth during the early years of this expansion was well below that of the early years in previous long cycles ( table 1 ). among the factors for the slower growth were unusually low contributions from residential investment and from nondurables and services consumption. in contrast, the contribution from durables consumption, particularly for motor vehicles, was similar to that observed in previous expansions. even though real gdp growth has picked up some in the past two years, these patterns are still evident ( table 2 ). the slow growth during the current expansion, what we might call the long shallow recovery, is likely a result of a confluence of many factors including constrained monetary and fiscal policies, demographic factors and economic and financial developments abroad. today, i β d like to consider developments in credit markets in the context of this
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their retained earnings, the banking sector is still by far the largest source of funds for the corporate sector and is likely to remain so for many more years. thus, a dysfunctional banking sector can surely threaten to undermine the strength of the economic recovery. in the near term, non - performing loans ( npl ) as well as non - performing assets ( npa ) must be reduced more speedily, and indeed this has been one major focus of my work at the bank of thailand. of the remaining 773 billion baht of npl in the banking system at end - june 2003, over 400 billion are either in the court process or have completed the court process and in the legal execution process with assets awaiting to be liquidated. to speed up the process of asset sales and liquidation, we have proposed to the ministry of finance to carve out this portion of the npls from the banks by an independent body that would be assigned the task of asset sales and liquidation. this proposal could become effective by early next year and the approach would greatly assist a speedy resolution of npl problems. the remaining npl of approximately 350 billion baht would not be a difficult problem for banks to handle, given the current low interest rate environment, the ongoing economic recovery, and improving bank profitability. as for the longer term, it is important that the banking system diversifies its services and reaches out to meet the needs of the rural population currently considered under - serviced by the industry. this will ensure that financial constraints will not remain as an obstruction to a broad - based economic prosperity of thailand. the financial sector master plan, which has been drafted by the bank of thailand and is currently under the ministry of finance β s review, has looked closely at this important issue. and last but certainly not least, even when the thai economy can manage to sustain growth, we are not immune from new challenges and risks brought about by globalization. outstanding export performance, strong domestic fundamentals, and continued gdp growth will unavoidably attract foreign capital into the country and, as in the recent months, exert upward pressure on the currency. while the economy now enjoys a more flexible adjustment mechanism compared with the past, a huge influx of foreign capital relative to the size of domestic financial and capital markets can nevertheless cause substantial market volatility and, if persists, can even lead to the emergence of asset price bubbles. regarding the upward pressure on the baht, the bank of thailand has been monitoring the currency movements
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that the eu is indeed an important export market for thailand, and export to the united kingdom in particular comprises around 3 - 4 percent of thailand β s total export value. the good news is that even with keener competition in the world market, thailand β s export growth to the eu remains quite high at around 18 percent in the first half of this year, thanks in part to the contribution of chambers of commerce like yours. regarding export of services, we are all aware that the thai tourism industry was hit hard by the outbreak of sars in the second quarter. the number of foreign tourists in may dropped by as much as 50 percent year - on - year, a magnitude that dwarfed the impact of 911 by comparison. however, the severe impact was quickly over by the end of the quarter, and external income from services started to return to normalcy by july. for august, the number of foreign tourists indicated positive year - on - year growth, and the service account was in strong surplus for the second consecutive month. favorable conditions for the export of goods and improving environment for the export of services have allowed for a continued current account surplus and a reduction in external obligations. steady external debt repayments, both by the public and private sectors, have resulted in a remarkable decline in the external debt stock, from the peak of 112 billion us dollars in june 1997 to only 52 billion us dollars at the end of july 2003. even with the last portion of loan prepayment to the imf two months ago, it is good news that our international reserves position continues to remain at a comfortable level of 39 billion us dollars. looking ahead, barring any unusual market developments, export should do well for the rest of this year. we have already seen in recent months sizeable raw material import in preparation for export at end year. beyond that, the momentum is likely to benefit from encouraging signs of economic improvement in the us and japan. ladies and gentlemen, the other important engine of growth in this recovery has been private consumption. on the one hand, strong household spending has been induced by a strengthening of consumer confidence, especially confidence on future income as farm income and non - farm employment continue to expand favorably. on the other hand, consumers have benefited much from lower interest rates and greater access to loans from financial institutions, leasing firms, and other non - bank institutions. this pick - up in consumption is most clearly seen in the double - digit growth rate of durable consumption such as passenger cars and motorcycles,
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i cannot subscribe to. the only thing i can say is that sometimes i think people in the financial markets have to brush - up on their english lessons to understand when we say nothing yet has been decided for march. it is not our communication which is flawed, it is the hype that is being provoked by people with vested interests. if you would look at what we communicate, i think this is quite clear. the situation has changed since december, we will reexamine and reassess and possibly, if needed, also correct. and we are fully determined to fulfill our mandate. this has been communicated by the ecb and it should be taken for what it is : a strong commitment. but to construct out of this already individual measures, that is speculation. why has the situation changed since december? you highlighted a lot of positive things in the economy. there are several factors which have intensified. one is the oil price, which since december was at one point down close to 40 %, now it β s only 20 %. that is something to assess β the volatility β whether you look through it or whether there is a risk of it becoming entrenched. the second is china and other emerging market economies. if we only had the domestic economy, i would not say that downside risks have increased. from the domestic point of view we might be at neutral. what would buying bonds or cutting rates even more into negative territory do for the economy? you ask exactly the questions that we will discuss in march. everything is on the table. is unconventional monetary policy becoming conventional? unconventional measures play an important role. they have been effective, but in a specific circumstance of a very prolonged recessionary and deflationary environment. i do not consider that this is the new normal. if you ask me about secular stagnation, it β s a theory that we obviously take very seriously. but to say we accept it as the new normal would not be in line with what the ecb - president has said at his last press conference : β we continue to fight. β normally you don β t fight the normal, you fight the abnormal. are financial markets becoming too dependent on central banks coming to the rescue every time there is a drop in equity markets? what is moving us is not to support one sector or asset class over another. our mandate is the overall health of the economy. but we need financial markets as a transmission channel. bis central bankers β speeches if you
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invest. private sector investment has also been lacking. but government does have an important role to play in providing the environment conducive to private sector investment. for example, a notable area where private sector investment has been severely lacking is in the mining sector. this may be due in part to uncertainties created by the regulatory environment, and lack of investment in rail infrastructure which has impeded the ability of the mines to get the ores to the ports. this also illustrates how government investment does not necessarily crowd out private sector investment. to the contrary it can also crowd in investment, as in this example. michael spence sums it up appropriately as follows : β put bluntly, growth requires investment, and that means present sacrifice for future gain. the job of leaders is in part to get everyone on board, to build a consensus behind a forward - looking vision, underpinned by a growth and development strategy that is credible. multiple classes of participants and organized stakeholders need to be willing participants. these include labour, unions, businesses and entrepreneurs, civil society organizations, and households at various levels in the income distribution. β it is not only investment in fixed capital that is essential. human capital is as important, if not more so. it is generally recognised that south africa β s schooling situation is seriously lacking in various respects, but of equal concern is the lack of training for technical skills. it is an indictment, for example, that south africa needs to import skilled artisans such as welders. germany has a very well established system of apprenticeships, but south africa has gone backwards in this respect. not only does an undertrained and undereducated workforce constrain economic growth, it reinforces the cycle of unemployment and widening bis central bankers β speeches inequalities. as michael spence has noted, in a world in which knowledge and connectivity are increasingly the basis for value creation, failures in the educational system are the surest form of exclusion there is. it would be inappropriate for me to conclude without saying something about monetary policy and inflation, and the contribution monetary policy can make to the growth and employment trajectory. we know that unemployment has serious socioeconomic consequences, but so does high inflation. it is difficult to find examples in history where sustained economic growth and high inflation went hand in hand. but it is easy to find glaring examples of high inflation contributing to socioeconomic dislocation. the inter - war years in germany, latin america in the 1980s, and closer to home
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##ity needs in the period spanning the second and fourth quarters of this year will increase as a result of the pandemic by almost 10 pp, to 70 %. the information on bank lending shows that firms are resorting to this source of financing to cover a sizeable portion of their liquidity needs. specifically, the outstanding balance of nfcs β borrowing from national credit institutions increased at a record - high pace, shifting from an annual contraction of 1. 1 % in february to an annual expansion of 8. 1 % in june. that said, this increase eased to 7. 2 % in july. one of the key factors behind the rise in credit over these months was the progressive activation of the official credit institute β s guarantee facility for nfcs and individual entrepreneurs, which proved particularly favourable to smes. in fact, of the β¬174 billion lent to nfcs from december 2019 to june 2020 via new lending business, β¬71. 5 billion ( 41 % ) corresponded to guaranteed loans. as a result, the sector β s aggregate debt - to - gdp ratio has risen for the first time since 2010, to 82 % in 2020 q2 ( the highest level since 2017 ), owing both to the increase in debt and to the decline in gdp. true, the intensity of these rises will be corrected to some extent when the gdp data for the coming quarters are incorporated. but the simulations by the banco de espana also suggest a deterioration in the financial position, measured as each firm β s net debt relative to its net assets. this would be greater in the sme segment and in the sectors most affected by the pandemic. as was the case with firms, households β financial position improved significantly following the previous global financial crisis. at the same time, mortgage - related lending standards have been much more prudent, although consumer credit has been growing at high rates in recent years and certain groups of households have remained in a situation of vulnerability. however, household income has been considerably cut in the current crisis, owing to the reduction in hours worked and the increase in unemployment. households β gross disposable income fell by 8. 8 % year - on - year in the first half of 2020. in parallel, lending to households has fallen off in recent months as a result of the decline in new lending business. the reduction has been more marked in the consumer credit segment, while new financing for house purchases fell less sharply. overall, although the moratoria on loans,
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in certain services such as hospitality, which is particularly affected by the social distancing measures. moreover, in absolute terms, the sizeable fall in actual registrations in this sector is indicative of the importance of tourism for spain β s economy. see box 1 ( β macroeconomic scenarios for the spanish economy ( 2020 - 2022 ) β ) in the β quarterly report on the spanish economy β, economic bulletin, 3 / 2020, banco de espana. in the coming quarters employment, in terms of hours worked, is expected to follow a very similar path to that of economic activity, showing declines of over 10 % in 2020 and a subsequent recovery. meantime, the increase in unemployment is being contained in the short term by the resort to furlough arrangements. in annual average terms, the unemployment rate is expected to rise significantly this year ( to 17. 1 % of the labour force under the first scenario and to 18. 6 % under the second ) and also in 2021, before starting to descend in 2022 ( when, in annual average terms, it would stand at 18. 2 % and 20. 2 % under the respective scenarios ). both scenarios forecast inflation to hold at a moderate pace over the projection horizon. core inflation has slowed notably in recent months as a result of the weakness of demand stemming from the pandemic. looking ahead, the persistence of a high degree of cyclical slack will mean inflation in non - energy industrial goods and in services will continue to run at relatively low - though growing - rates until end - 2022. the risks underlying the scenarios for economic activity published by the bank remain tilted to the downside. and more unfavourable developments than those contained in the second scenario, i. e. the harsher of the two considered, cannot be ruled out. in particular, in light of the recent course of the pandemic, we cannot preclude the resort to more severe lockdown measures than those envisaged in the scenarios. moreover, there is much uncertainty over how long will be needed before we have an effective medical treatment, and there are some risks that it will be delayed beyond mid - 2021. lastly, uncertainty remains on the external front, especially concerning the possibility of the brexit negotiations concluding without an agreement at the end of the transition period or of us - china trade tensions worsening. however, as i shall set out later, the launch of the next generation eu ( ngeu ) european recovery fund, which was
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to the interaction of economic policies. the readiness of governments worldwide to fight an exceptionally deep economic contraction with large fiscal stimulus packages was certainly a major reason why the recession was overcome so quickly. this swift return to positive β although moderate β growth was, in many cases, instrumental in avoiding worse and self - reinforcing negative effects on structural unemployment, consumer confidence and risk aversion. budget deficit in selected countries general government gross debt in selected countries % of gdp % of gdp - 5 - 10 - 15 - 20 - 25 source : european commission. 2012 : forecast. czech rep. ireland portugal greece austria spain italy france germany uk u. s. a. japan czech rep. portugal ireland austria greece spain italy france germany u. s. a. uk japan euro area - 35 euro area - 30 source : european commission. 2012 : forecast. however, this strong fiscal reaction also came at high costs. budget deficits exploded and debt - to - gdp ratios reached record levels. in some highly indebted european countries, this translated into a veritable debt crisis. markets that, for years, had failed to adequately price fiscal imbalances, rediscovered risks associated with high debt levels. when markets react late, they tend to overreact. thus, bond spreads and the price for credit default insurances soared. rising refinancing costs further aggravated fiscal consolidation. as recourse to market funds is currently not possible, the highly indebted countries need international financial assistance to tide them over until fiscal consolidation starts to be effective and markets regain confidence. but even if markets will have stabilized, debt stabilization will require many years of substantial primary surpluses. bis central bankers β speeches β the fourth lesson to be learned from the crisis is therefore that we need to improve fiscal policy frameworks. we need a long - term commitment to fiscal stabilization at the national level and effective warning and supervisory mechanisms at the european level. we need to make sure that β once the worst is over β good economic times are used for fiscal consolidation so that fiscal margins are there when the next recession approaches. an exceptional crisis calls for exceptional measures. while it was commonly accepted prior to 2008 that rules - based fiscal approaches and the free operation of automatic fiscal stabilizers are best suited for ensuring long - term sustainability, the severity of the recession and the high level of uncertainty has led to a renaissance of fiscal discretion. quick and determined action was certainly a key factor in keeping the recession short. however, long implementation la
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and steel production, which was a natural sector to start with, given the strategic importance of these industries for arms production. the crucial achievement of the european coal and steel community was that, for the first time in history, european governments ceded part of their sovereignty, albeit only in a limited and wellspecified area, to a joint, supranational authority. this pragmatic, step - wise approach - to pick out a special area and find a common solution for that specific area, leaving other things for later - was to become known as the " community method " of integration. you can trace this approach up the most recent steps in european intergration and, i would expect, it will continue to form the basis also for the next years to come. a guiding principle in this context was to become the idea of " political integration through economic integration ". let me elaborate a little bit. against the backdrop of the rise of the soviet union and the outbreak of the cold war, the next obvious areas of integration in the early 1950s would have been a common defence policy, which would, in turn, have required a political union. however, as it turned out, this was simply beyond what some countries, notably france, were prepared to go along with. so an alternative strategy was needed. at the conference of foreign ministers in messina on 1 june 1955, it was decided to start negotiations on two further areas of integration. the outcome was the signing on 25 march 1957 of the treaty of rome, which established the european economic community and the european atomic energy community. again, integration was carried forward in selected fields - i. e. the establishment of a customs union and a common market, on the one hand, and a joint policy on the sensitive area of nuclear energy. ladies and gentlemen, by now, you will have noticed that european integration does not happen following a once - approved long - term strategy, but happens through a series of initiatives, often represented by outstanding personalities, with periods of stagnation in between. further important examples of such initiatives, which exert their influence up to now, are the single market program of 1985 and the maastricht treaty of 1992. the european communities had been experiencing an extended period of economic and political stagnation since the second half of the 1970s, for which the term " eurosclerosis " had been coined. one of the cornerstones of continued integration at that critical point in time was the single european act of 1985.
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. according to jse statistics, the share of companies with dual listings increased from 14 per cent of all companies listed on the jse in january 2006 to about 24 per cent in july 2016. as such, harmonising settlement cycles across regions will help with better cash flow and treasury management, and thus facilitate better and more efficient allocation of capital. reducing systemic risk and contributing to broader financial system stability in addition to its primary mandate of price stability, the sarb is also responsible for protecting and enhancing financial stability. we consider financial stability to exist when we have a financial system that is resilient to systemic shocks, facilitates efficient financial johannesburg stock exchange t + 3 project overview and frequently asked questions, august 2016. bis central bankers β speeches intermediation and mitigates the macroeconomic costs of disruption in such a way that confidence in the system is maintained. the focus on financial stability is in line with the global trends where the regulatory community, in reaction to the global financial crisis, has been dedicating more effort and resources to reducing risk, achieving greater transparency and accountability, and improving efficiency in order to establish a safer market environment. a shorter - settlement cycle will foster a reduction of settlement risk and counterparty exposure by reducing the time period between trade execution and settlement. the faster delivery of cash and stock to the seller and buyer, respectively, allows for a reduction in the risk of financial loss, especially during times of financial stress. the level of interconnectedness or network structure of the various agents of our financial systems, within and across borders, speaks directly to the potential risks that may arise from poor or outdated risk management practices. however, if risk is reduced and continuous risk reduction strategies are being pursued, such as will be the case with the shorter settlement period in the equity market, then systemic financial crises are less likely to occur. increased market credibility and operational efficiency improving the attractiveness of south africa to international investors other benefits that this initiative promises to unlock relate to the improvement of the credibility and operational efficiency of the local market. these benefits should help boost south africa β s status in the global competitiveness rankings of the world economic forum ( wef ). the competitiveness rankings are informed by a number of pillars which are organised into three main stages of development, factor - driven, efficiency - driven and innovation - driven. each stage focusses on different market structure issues, i. e. basic requirements, efficiency enhancers and innovation and sophistication factors. financial market development,
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for which south africa is ranked an impressive 12th out of 140 countries, falls under the second stage of development. 2 this initiative, together with various other initiatives that are currently under way in our markets, will help improve the process of more efficient and safer intermediation of capital, enhance our competitiveness and contribute to the attractiveness of our markets for foreign investments. as a country that runs both budget and current account deficits, that are being predominantly financed by short term foreign capital flows, this becomes rather crucial. the sophistication and depth of our capital markets also play an important role when the country β s credit ratings are being assessed. contributing to south africa β s delivery on its g20 commitments before i conclude, let me briefly touch on how this initiative also helps south africa to meet its g20 commitments. south africa as a member of the g20 was invited to join the bank for international settlements ( bis ) committee on payment and market infrastructures ( cpmi ), and it is also a member of international organization of securities commissions ( iosco ). as a member of the bis cpmi, the sarb contributed to the development of the principles for financial market infrastructures ( pfmis ). the pfmis update, harmonise and strengthen the international risk management and associated standards applicable to systemically important payment systems ( pss ), central securities depositories ( csds ), securities settlement systems ( ssss ), central counterparties ( ccps ) and trade repositories ( trs ). these principles were published in 2012 and g20 member countries were expected to adopt them and also apply them in their jurisdictions. south africa embraced these principles and issued a position paper to drive their application by identified fmis in the payment system. once the financial sector regulation bill has been enacted, followed by other consequential legislative amendments, we will be able to fully adopt the pfmi. it is, however, also encouraging to note that with assessments of compliance on south africa as a jurisdiction by the global competitiveness report 2015 β 2016, world economic forum. bis central bankers β speeches the bis cpmi / iosco, we have been scored quite favourable overall when it comes to the expected outcomes. furthermore, we have requested our recognised payment fmis ( including strate ) to conduct self - assessments, which were reviewed by our national payment system department prior to engagement with the fmis on appropriate action going forward. in conclusion, let me reitera
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government approach to recovery, we expect the philippines to move back to our pre - covid development path soon. the worst is behind us. the recovery phase has begun. now, the philippines is starting to write its post - covid narrative, which in the near future will speak of a remarkable rebound. as an active member of the international community, we are happy to share the things that we do to thrive, as much as we are willing to learn from and work with the rest of the world. thank you very much for listening. i wish everyone a productive conference. 3 / 3 bis central bankers'speeches
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performing loans ( npls ), albeit slightly higher, remain manageable. the npl ratio stood at 3. 2 percent as of october 2020, way better than the double - digit npls we saw in the aftermath of the asian financial crisis. meantime, we have embarked on a reform momentum toward the β new economy. β this is our way of helping ensure the crisis β which has given a sense of urgency for reforms β is put to good use. our legislative agenda include : ( i ) a bill that will expand the list of sectors that banks can lend to, in compliance with the mandated lending for agriculture development ; 2 / 3 bis central bankers'speeches ( ii ) a bill that will lift secrecy of bank deposits, which will help efforts against tax evasion and money laundering ; ( iii ) a bill meant to enhance accessibility of credit to msmes through a comprehensive credit database, and ( iv ) a bill that will improve the protection of consumers of financial products and services. the bsp also has stepped up efforts toward financial digitalization β side by side our efforts to improve cyber security supervision. last october, we launched the digital payments transformation roadmap. this will aid faster economic growth and usher an era of a more financially inclusive philippines. with financial technology ( fintech ), credit, as well as savings, investments, and insurance products become accessible to more people. also, since it hastens payments, fintech increases the velocity of capital turnaround, thereby boosting income growth. also, we have issued frameworks for open banking, for the creation of digital banks, and for enhanced risk management. with our efforts, the philippines is recognized for having one of the best regulatory environments for financial inclusion. prior to the pandemic, the philippines had made significant strides in the economic and social fronts. poverty incidence had fallen from 23. 5 percent in 2015 to 16. 7 percent in 2018. unemployment rate had dropped to 5. 1 percent in 2019 from 7. 5 percent in 2009. and, we were about to become an upper - middle income economy. the covid - 19 crisis has caused setbacks for us. to return to our growth trajectory, medical and macroeconomic interventions should go hand in hand to protect public welfare, which is crucial to boost consumer and business confidence. having enough monetary space and tools, the bsp will continue to coordinate with the other government agencies as it shares in the heavy lifting to quicken economic recovery. with our whole - of -
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be more suitable for, or may have been calibrated to be more applicable in, developed markets ; they may not always be fit - for - purpose in emerging markets such as south africa. the large banking groups regulated by the sarb mainly have operations on the african continent and / or in other emerging markets. some supervisors on the continent and in other emerging markets where south african banks have operations have yet to implement the regulatory reforms. this imposes an obligation on the sarb, which is the only african member of the basel committee on banking supervision, to effectively supervise the subsidiaries of south african banks in the rest of the african continent and other emerging markets. failure to do this creates inconsistencies in how regulatory capital and other risks are measured, and in how supervisory standards are applied. another example of an inconsistent application of international standards is different supervisory expectations in africa of the same international standards relating to the use of risk models under the advanced measurement approaches. although there is a need for more standardisation and comparability of risk - weighted assets across banks and jurisdictions, the sarb believes that there remains a need for banks to be able to apply quantitative risk models to adequately measure risk across portfolios and / or risk types. if the expectation is to reduce the use of risk models in measuring regulatory capital, then banks will become less inclined to invest in the use of test requirements imposed under basel ii. the sarb believes that the use of test requirements has made a significant positive contribution to the way in which banks measure and manage risk, and that this has led to improved risk management and pricing of risk across the regulated entities. the sarb supports the risk models under the advanced measurement approaches to be used. the regulatory framework is beginning to succeed in meeting its objective of addressing the β too big to fail β problem as g - sibs are in general adjusting their balance sheets and evaluating their complex business models to meet strengthened regulatory demands in many areas, especially in respect of higher - quality capital ratios and the difficult economic environment we are currently facing. as you know, these developments have spilled over into south africa when a g - sib headquartered in the uk2 announced its partial withdrawal from a domestic systemically important bank, or d - sib, mainly due to global regulatory pressures. as a result, we might face various policy considerations going forward as we need to carefully assess the effect and potential impact of home regulatory requirements on local markets and if we are not perhaps importing structural instability ( uncertainty
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a six percent target, then interest rates will be exactly three per cent higher in the country with the higher target. if that country raises its target to nine per cent, then interest rates will end up rising another three percent. and if that country simply stops trying to control inflation at all, then it will become harder to borrow in its currency, with lenders switching to some other currency with more predictable inflation. in the short run, you can get lower interest rates by page 8 of 10 surprising people with higher inflation. but once they wake up β and investors aren β t slow to see higher inflation β interest rates have to rise. for this reason, one of the most effective ways for lowering interest rates is to keep inflation low and predictable. looking around the world, the evidence is very clear that low inflation countries have low interest rates and high inflation countries have high interest rates. in the extreme cases, such as sweden, inflation is so low they even have negative interest rates. sweden β s repo rate, for example, is currently at - 0. 5 per cent. by contrast, in countries with much higher inflation, like argentina or nigeria, policy rates are much higher. nigeria β s is currently 14 per cent. argentina β s is 26. 25 per cent. 12 so although it is the case that interest rates typically rise in response to higher inflation, on average interest rates are lower because of lower inflation. this is why inflation targeting is a way to get lower rates over time. this sets the context for our current policy settings. inflation in south africa has moderated in recent months. we now have a good chance of getting inflation down well within the middle part of the target. inflation is likely to move in this direction because of declining food inflation, our policy communications, the stronger exchange rate, and the sensitivity of price and wage setters to weak economic conditions. if we can keep inflation lower, anchoring inflation expectations, that should in turn generate a lower rate of interest to support the economy. unfortunately, we also have to worry about higher inflation if things go wrong β that is, if the exchange rate begins depreciating again, if wage settlements are excessive, or if our monetary policy communication isn β t heard, loud and clear. these factors limit our policy space. 13 the ratings agencies have been clear that the effectiveness of the central bank is one of the strongest pillars supporting this economy β a claim that speaks to both our price and financial stability mandates. we will
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, to foster meaningful collaborations, leveraging on the activation of business linkages through the mifc leadership council's strategic partnerships with counterparts in other countries ; second, to elevate the role of centralised shariah authorities forum in building stronger connections between shariah authorities to foster mutual respect and knowledge sharing in addressing common shariah issues ; and third, future - proofing islamic finance talent through collaborative initiatives that enhance talent mobility. this can be achieved through the exports of malaysia's expertise via talent development institutions such as inceif university, isra, ibfim, asas, and the multitude of other talent or capacity - building providers we have. these efforts will enhance malaysia's connectivity with various markets and reinforce malaysia's leadership in islamic finance at the global stage. ladies and gentlemen, in conclusion, building on kliff's decades of experience, i look forward to the actions that will be set in motion once the curtains close, on this year's kliff - bringing to life the theme of'revitalising the economy via islamic finance '. the discourse and initiatives launched here are the building blocks to real, impactful changes in driving forward the islamic finance industry. on that note, i hereby officiate kliff 2024 and wish everyone an engaging and insightful forum ahead. thank you. 1 sunan ibn majah 2443 2 as at 1h 2024 3 surah ali -'imran ( 3 ), ayat 200 4 vbi financing and investment impact assessment framework 4 / 5 bis - central bankers'speeches 5 / 5 bis - central bankers'speeches
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bank since 2005 with the establishment of bnmlink at the bank β s six offices ; the bank β s call center, bnmtelelink ; as well as bnmlink mobile counter services in semi - urban areas to provide access of financial information and consumer redress mechanisms. the introduction of mobilelink also provides a platform for enhancing financial literacy and financial capability of consumers to make well informed and responsible financial decisions and thus participate meaningfully and effectively in the financial system. akhir kata, saya ingin merakamkan penghargaan kepada semua hadirin sekalian yang memberi sokongan kepada inisiatif β mobilelink β ini. kami berharap inisiatif ini akan dapat merealisasikan usaha bank dalam mencapai rangkuman kewangan yang menyeluruh. bagi mencapai objektif ini, kerjasama pihak yang hadir pada hari ini dengan bank negara malaysia adalah dialu - alukan bagi memastikan usaha yang lebih bersepadu dan berkesan dapat digembleng bersama. bis central bankers β speeches
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or disorderly in financial markets. and whether if asset markets were disorderly, that would feed back into the financial system in ways that both seriously amplified the adjustment and created serious threats to systemic stability. i fear that the answers are unknowable. but the task for central banks is nevertheless clear enough. working with our partners in regulatory organisations and in other central banks, we must seek to understand today β s global banking system and capital markets well enough to tell the difference, if and when called upon to do so, between a problem requiring solely a macroeconomic policy response and a more complex financial stability problem. and, most important of all, central banks must strive to maintain the medium - term credibility of monetary policy, as an essential pre - condition for the stability in which both the real and financial economy can thrive. not pretending that the world is simpler or safer than the reality is one small part of that endeavour. see, for example, the us brady report, and the report of the hong kong securities review committee, 1987. table 1 : macroeconomic and asset price annual volatility uk gdp us gdp 1951 - 59 1960 - 69 1970 - 79 1980 - 91 1992 - 2005 1. 5 1. 6 2. 2 2. 3 0. 9 3. 3 uk inflation percentage change between 60 - 69 and 92 - 05 - 41. 8 percentage change between 80 - 91 and 92 - 05 - 59 1. 7 2. 5 2. 5 1. 1 - 36. 4 - 56 1. 5 5. 5 3. 4 1. 0 - 34 - 72 us inflation 1. 8 1. 2 2. 0 2. 3 0. 5 - 55 - 76 s & p 500 14. 0 15. 7 19. 1 12. 0 15. 2 - 3 20. 4 43. 3 12. 1 15. 2 - 25 5. 4 7. 8 15. 4 9. 6 - 38 3. 1 11. 2 7. 7 4. 9 - 36 Β£ eri 6. 9 4. 5 2. 3 - 49 $ eri 5. 4 4. 4 2. 9 - 34 yen eri 9. 9 4. 3 4. 0 - 8 β¬ eri 1. 8 3. 0 3. 0 - 3 ftse all share ( 2 ) 10 - year ust 3. 4 10 - year uk gilt ( 2 ) notes : 1. uk inflation is consumption deflator inflation ; 1960 - 69 includes
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philipp hildebrand : financial stability summary of a speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the institut des hautes etudes commerciales de lausanne, lausanne, 16 september 2008. the complete speech can be found in french on the swiss national bank β s website ( www. snb. ch ). * * * during the period of financial market turbulence, central banks have gone far with their interventions to stabilize the financial system, taking into account the high costs that can be imposed by a banking crisis onto the real economy. central banks by themselves, however, cannot guarantee financial stability in the long term. in particular, we cannot exclude that their interventions create incentives for banks to be less cautious in the future. the first line of defence therefore consists of banks having sound risk management practices and holding appropriate levels of capital and liquidity. the financial stability forum has made a series of recommendations in this respect. given the size of the big swiss banks in relation to our national economy, we should be especially prudent. for this reason, the swiss national bank supports the project undertaken by the swiss federal banking commission ( sfbc ) to strengthen capital adequacy requirements and to revise the liquidity requirements for the big banks. as the sfbc has pointed out on several occasions, these measures have to be implemented gradually β to ensure that banks have sufficient time to adapt. these measures will contribute to the solidity and credibility of the swiss financial centre. this will strengthen its position as a global leader in wealth management.
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is to say claims with a maturity of more than five years β at german banks has risen from 60 % in 2007 to just under 70 %. the ratio among institutions in the savings bank and cooperative bank sector is especially high. at 83 %, it is significantly higher than the 47 % ratio for commercial banks. thus, we are in a situation in which banks and savings banks are holding many long - term, lowyielding investments in their books. moreover, valuations for many investments are extremely high. by contrast, risk provisioning in the german banking system is very low, at 0. 6 % of total assets. this makes banks vulnerable to unexpected macroeconomic developments, such as an abrupt hike in interest rates or an unforeseen deterioration in economic activity. at the same time, they have shortened the maturities of their liabilities. the ratio of overnight deposits to total liabilities towards non - banks has risen within ten years from 36 % to around 60 %. an important aspect in this context is that customers are parking their funds in deposits because interest rates on investments are so low. it is difficult to predict how these funds will be shifted as soon as more attractive investments become available. historical experience gives us a rough idea, but in view of the extreme situation of the current low - interest - rate environment it is of only limited use as a guide for the future. the bottom line here is that we see an increased vulnerability of banks to changing interest rates. this is why we have been keeping a very close eye on the topic of interest rate risk. our low - interest - rate survey 2017 focused on this very issue, simulating the implications of possible shocks for small and medium - sized banks and savings banks. one scenario entailing an abrupt rise in the yield curve by 200 basis points highlights banks β short - term vulnerability. in such a scenario, profits would initially plummet by around 55 % before staging a recovery in the medium term. this means that the speed at which interest rates are raised is crucial. the stress test carried out as part of our low - interest - rate survey combined several risks at once. besides an abrupt rise in the yield curve of 200 basis points, it simulated a simultaneous increase in credit and market risk. on aggregate, in such a case the tier 1 capital ratio would drop from around 16 % to around 13 %, which is to say by some three percentage points. yet a more detailed look reveals the positive impact of substantially improved capital levels
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depends a lot on global developments. if necessary, we stand ready to use all of the instruments at our disposal. that includes the key interest rates and the size, composition and duration of our securities purchases. we will take a decision on this in march. how will the ecb ever manage to move away again from its expansionary monetary policy? technically speaking, it β s not hard to do. the us central bank is currently demonstrating how it β s done. what is more important is that our environment β and by that i mean government policies β should support us sufficiently in generating more growth. if this does not happen, we will have to keep rates low for a very long time. so it β s not just up to us whether the low interest rate phase can be brought to an end, it also depends on the pace of reform in euro area countries. but the refugee crisis means that we β re also facing a new challenge right now. is this going to affect economic developments? it is a huge challenge, not only in germany, but for europe as a whole. but the refugee crisis is also a great opportunity for europe if the refugees can be successfully integrated into the labour market. the more europe stands together in the refugee crisis, the greater is the likelihood that it can be overcome. as a european citizen, i believe that we are now at a historic moment when the eu must demonstrate that it is able to reach a european solution. bis central bankers β speeches is that realistic? europe has already overcome similar situations, for example during the debt crisis. in this case, given that we are talking about millions of people who are fleeing to europe, i personally believe that the eu has a moral obligation to find a joint european solution. the european project is not first and foremost a financial project. europe always was, and will continue to be, about bringing people together, not about dividing them. the euro area countries cannot even agree on whether or not there should be a common limit on payments in cash. what would you advocate? this is a matter for the eu finance ministers to decide on, not the ecb. there are countries in europe where cash is very important, and there are others where cash plays a lesser role. but the ecb is responsible for withdrawing the β¬500 note. we have direct responsibility for this because of course we print the banknote. the ecb β s governing council is currently considering very carefully the question of whether or not to withdraw the β¬500 note
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caroline abel : counterfeit banknote detection remarks by ms caroline abel, governor of central bank of seychelles, at the counterfeit banknote detection seminar, mahe, 7 october 2019. * * * esteemed facilitators from de la rue, seminar participants representing various stakeholder organisations, central bank colleagues, good afternoon, on behalf of the central bank of seychelles, it is a pleasure for me to welcome you to this fourday seminar on counterfeit banknote detection. i would like to take this opportunity to thank our partners from de la rue, a company having extensive knowledge and expertise on the subject matter, for joining us in this endeavour. i am equally delighted that our local stakeholders have responded positively to be part of this knowledge sharing experience. currency counterfeiting is a long - standing and global phenomenon, and seychelles has also recorded its share of reports on the circulation of forged banknotes over the years. as the sole authority that issues banknotes in seychelles, the central bank has taken steps to prevent counterfeiting and maintain public confidence in our local currency. as recently as 2016, we issued a new family of banknotes into circulation, embedded with new and improved security features. nevertheless, we are mindful that there is a need to be more vigilant and proactive, as counterfeiters are also keeping pace with new technologies for their criminal activities. it is for this reason that i commend the initiative of the banking services division, through its currency function, for putting together this multistakeholder seminar to stimulate discussion and engagement on this important subject. the issue of counterfeiting should be a matter of concern not only for us as the currency issuing agent, but also for the commercial banks, other financial institutions, as well as other partners, such as the law enforcement and regulatory authorities, and the public at large. the ability for criminals to gain access to equipment that can produce counterfeit banknotes β including the ability to replicate the security features, as well as difficulties relating to investigation of counterfeiting activities, are but some of the challenges with which we are currently faced. i am hopeful that the seminar will not only highlight the extent of the counterfeiting problem globally and in seychelles, but also create a platform for the sharing of ideas and expertise on how to tackle such challenges. while it is important to keep abreast of developments with regards to enhancing the security features of banknotes and attempts by criminals to forge currencies, it is equally
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nets and the nature of the financial systems. as incomes have risen in asia, average savings rates in the region have fallen a little in recent years, but they remain higher than in most other parts of the world. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 10 - 29. html 8 / 18 10 / 30 / 2019 some echoes of melville | speeches | rba graph 5 a third factor affecting savings outcomes in many economies is the high level of borrowing in previous years ( graph 6 ). while the experience differs across countries, at the global level, the stock of debt outstanding relative to gdp has steadily increased for the past 50 years, and is now around a record high. the big shift has been in private debt, particularly in the advanced economies, but public debt has also trended higher over recent decades, after declining following world war ii. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 10 - 29. html 9 / 18 10 / 30 / 2019 some echoes of melville | speeches | rba graph 6 one probable consequence of high levels of debt is that people are more careful with their spending and are less inclined to take on yet more debt. this is especially so when income growth has disappointed, as it has over recent times. in a number of countries, both government and households feel constrained by their previous decisions to borrow and are seeking to put their balance sheets on a sounder footing. one way they can do this is by spending less and saving more. so these are some of the factors that are influencing global saving outcomes. i would now like to turn to the investment side of the equation. this is important as you might recall that melville argued that at zero interest rates there would be an almost unlimited number of things to invest in. today's reality, though, is somewhat different. here again i will point to three inter - related factors. the first is the high level of uncertainty. the second is slower population growth. and the third is some pessimism about future productivity growth. it is well understood that there has been a high level of global economic policy uncertainty over recent times. this is evident in measures of policy uncertainty calculated from news stories in https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 10 - 29. html 10 / 18 10 / 30 / 2019 some
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caleb m fundanga : winning with leasing speech by dr caleb m fundanga, governor of the bank of zambia, at the β winning with leasing β seminar, lusaka, 21 - 23 february 2007. * * * β’ mr chairman β’ chief executives and representatives of banks and leasing companies β’ representatives of businesses organizations ; β’ distinguished ladies and gentlemen let me first express my sincere gratitude for being invited to officiate at this important regional leasing seminar. it is my hope that this interaction will give us a better understanding and appreciation of the important contributions that the leasing sector has made and continues to make to the economic growth of this country. as the title of the seminar β winning with leasing β suggests, it is only by winning in all our efforts that we will provide meaningful contributions to the development of this country. mr chairman, before i talk about your role in the growth of the economy, allow me to first give a brief account of the macroeconomic developments in zambia in the recent past. i know that many of you have been following the economic developments in the country. the economy has performed relatively well in recent years, with positive real gross domestic product ( gdp ) growth and inflation as well as interest rates coming down. during the period 2001 - 2005, growth in real gdp averaged around 5 % per annum. more recently, in 2006, it is estimated that the economy grew by close to 6 %, marking the eighth consecutive year of positive real growth in output. this positive economic growth has been broad - based, extending beyond the recovery of the mining sector and has withstood adverse shocks, such as, droughts and increases in oil prices. for example in 2006, real gdp growth was largely driven by the mining, construction, and transport sectors. other sectors that registered positive growth were agriculture, tourism, manufacturing, wholesale and retail trade and the services sectors. ladies and gentlemen, bringing inflation down to single digits has been government β s goal for a long time. therefore, it is pleasing to note that last year inflation fell to its lowest level in 30 years. at end december 2006, the annual rate of inflation had fallen to 8. 2 % compared to the annual target of 10 % and the 15. 9 % outturn in 2005. in january 2007, it remained in single digit level of 9. 8 %. these unprecedented developments in inflation have been due to continued implementation of prudent monetary and fiscal policies, coupled with increased food supply. in line with lower inflation and yields on government
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##ntial bis central bankers β speeches supervision. it will be particularly important to strike the right balance between ensuring fair competition by treating the same risks equally and, at the same time, allowing for varying market and banking structures as far as these cater for the heterogeneous needs of the real economy. however, this supervisory approach must not exist only on paper, but must also be infused with life. i see ese as playing an important role here. ese can support us supervisors in conveying the new supervisory standards and thus make a crucial contribution to consistent and high - quality supervisory practice in the ssm. as supervisors in a system currently encompassing 17, and soon 18 countries, however, we need not only technical expertise but also communication and teamworking skills. we need not only specialists but also first - class networkers. this corresponds to ese β s approach, which from the beginning was aimed at creating a joint european supervisory culture. and this is why there has always traditionally been a social event at each ese seminar. this conference is no exception, and i am already looking forward to an evening of exciting and stimulating conversation. 5. conclusion ladies and gentlemen, ese can look back upon a successful history, and i am convinced that the ssm will make good use of ese β s expert knowledge and experience. i wish the organisers of the european supervisors education initiative and all their helping hands every success for the coming challenges. there are two thoughts i want to leave you with before i invite you to help yourselves at the buffet and look more closely at the works of art under the motto of β frankfurt, goethe, money β. the first thought is : the banking union can succeed only if every single one of us, supervisors and supervised alike, is ready to take action and welcome the new. the second thought is β and this is addressed not only to the ese seminar participants, but to all parties involved in the banking union β we must be willing to keep learning, to open ourselves to new ideas and experiences, and to bring along the β doubting thomases β, the hesitant ones, for the ride. the bundesbank will make every effort to support this process β with words, and with deeds. thank you for your attention. bis central bankers β speeches
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##udential factors play an important role in determining the size, nature, and propagation of systemic risk. therefore, it is essential to establish an effective framework for macro - prudential supervision that will ensure a systematic analysis of risks, as well as the formulation of policies to address such risks. let me say a few words about the framework for macro - prudential supervision envisaged for the e. u. following the publication of the report of the de larosiere group in february 2009, the commission issued a package of draft legislation in late september with the aim of creating a european systemic risk board β or esrb. the main task of the esrb will be to identify and assess risks to the stability of the eu financial system and issue risk warnings when the identified risks appear significant. several features of the proposed framework are important. β’ first, the european system of central banks will play a key role in the functioning of the esrb. the voting members of the esrb β s general board will include the 27 governors of the eu β s national central banks and the president and vice president of the ecb. β’ second, the ecb will be assigned the task of ensuring sufficient human and financial resources for the esrb β s secretariat. β’ third, the esrb will not be responsible for the implementation of macro - prudential policies. that responsibility will remain with national authorities and national supervisors. β’ fourth, since the esrb will not implement macro - prudential policies, the effective monitoring of the follow - up to its warnings and recommendations and the consistent and timely implementation of the recommendations will be crucial for the performance and the credibility of the new macro - prudential supervisory framework. the creation of the esrb will, in my view, constitute a historic step forward, putting in place an important building bloc of an eu financial - stability framework that is consistent with the objectives of creating a single market. challenges for southeastern europe some of the policy challenges facing the euro area also need to be addressed by the countries in southeastern europe. moreover, many of the countries in southeastern europe are confronted by additional challenges. let me mention some of these challenges, as well as some questions that we may wish to consider during the course of this conference. β’ first, prior to the crisis many countries in the region ran large current - account deficits underpinned by capital inflows. as the crisis demonstrated, however, capital flows can be subject to abrupt and sharp reversals. what
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circular business models, managing related risks and exploring opportunities, such as the redesign and manufacturing process of products and services, digital solutions, waste management models, etc. at the moment though, financial institutions lack awareness of circularity and still need to develop expertise, products and services to harness opportunities. of course, there is also an important role for governments and policy makers that need to provide incentives, policies and frameworks in order to integrate circularity into financial products and services alongside current planning for the transition to a carbon neutral economy. there is no question that climate change is today one of the most pressing sustainability challenges we are currently facing. in this context, the process of addressing climate change can undoubtedly be accelerated if established growth models are adjusted in order to ensure long - term sustainability. it is therefore important in tackling climate change to plan for a double transition, to a carbon neutral and circular economy. in this double transition, there are indeed certain risks. for example, transition risks as assets may become stranded or businesses that may incur costs and disruptions. yet, a careful and timely transition will also open up opportunities, associated with innovation and new technologies, circular and renewable energy products, new processes, new infrastructure and new jobs. although methodologies for calculating climate - related risks are still being developed, estimates suggest that the impact of these risks is likely to be significant. for example, the ecb has estimated that, on average, 15 % of significant institutions β exposures are to the most carbon - intensive firms and an abrupt transition to a low - carbon economy could have severe impact on climate - sensitive economic sectors. [ 3 ] regarding physical risks, around 30 % of the credit exposures of euro area banks are to businesses with high or increasing exposure to at least one source of physical risk. in this context, central banks and supervisors are progressively looking into playing an active role in the debate and working with banks to prepare for and manage climate risks. indeed, as part of the strategy review the ecb is already exploring ways of taking the risk of climate change into account. it is clear however that since climate change poses risks to price stability, central banks could, within their traditional mandate, advance their efforts to support the transition to a sustainable economy and a resilient future. central banks can help by considering how the physical and transition impact of climate change can be included in macroeconomic forecasting and financial stability monitoring. also, central banks can help by integrating climate - related risks into prude
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risk independently. enterprises worldwide are, therefore, now putting in place an integrated framework for risk management which is proactive, systematic and spans across the entire organisation. banks in india are also moving from the individual silo system to an enterprise wide risk management system. while the first milestone would be risk integration across the entity, banks are also aware of the desirability of risk aggregation across the group both in the specific risk areas as also across the risks. banks would, therefore, be required to allocate significant resources towards this endeavour. 7. capital efficiency : basel ii prescriptions have ushered in a transition from the traditional regulatory measure of capital adequacy to an evaluation of whether a bank has found the most efficient use of its capital to support its business i. e., a transition from capital adequacy to capital efficiency. in this transition, how effectively capital is used will determine return on equity and a consequent enhancement of shareholder value. in effect, banks may adopt a more dynamic approach to use of capital, in which capital will flow quickly to its most efficient use. this revised efficiency approach is expected to guide the return - on - equity strategy and influence banks β business plans. with the extension of capital charge for market risks to the afs portfolio this year and the coming into force of basel ii norms in march 2007, banks would need to shore up the capital levels not only for complying with these requirements but also for supporting the balance sheet growth. with a view to enhancing the options available to banks for augmenting their capital levels, the reserve bank has recently permitted banks to issue new capital instruments, including perpetual instruments. a notable feature of these instruments is that these are designed to help banks in not only managing their capital effectively but also efficiently. enhancing corporate governance 8. the issues related to corporate governance have continued to attract considerable national and international attention in light of a number of high - profile breakdowns in corporate governance. this becomes all the more relevant for banks since they not only accept and deploy large amount of uncollateralized public funds in fiduciary capacity, but also leverage such funds through credit creation. banks are also important participants in the payment and settlement systems. in view of the above, legal prescriptions for ownership and governance of banks in banking regulation act, 1949 have been supplemented by regulatory prescriptions issued by rbi from time to time. 9. in view of the importance of the banking system for financial stability, sound corporate governance
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four options to choose from : they can build a new system themselves, or buy best of the modules, or buy a comprehensive solution, or outsource. in this context banks need to clearly define their core competencies to be sure that they are investing in areas that will distinguish them from other market players, and give them a competitive advantage 6. a further challenge which banks face in this regard is to ensure that they derive maximum advantage from their investments in technology and avoid wasteful expenditure which might arise on account of uncoordinated and piecemeal adoption of technology ; adoption of inappropriate / inconsistent technology and adoption of obsolete technology. capacity building 17. as dictated by the changing environment, banks need to focus on appropriate capacity building measures to equip their staff to handle advanced risk management systems and supervisors also need to equally equip themselves with appropriate skills to have effective supervision of banks adopting those systems. in the likelihood of a high level of attrition in the system, banks need to focus on motivating their skilled staff and retaining them 7. skill requirements would be significantly higher for ubs ag, the bank for banks industry challenges. august 2004 ms. k. j. udeshi, financial system stability and basel ii - way forward, sri lanka, august 2005. banks planning to migrate to the advanced approaches under basel ii. capacity building gains greater relevance in these banks, so as to equip themselves to take advantage of the incentives offered under the advanced approaches. 18. a relevant point in this regard is that capacity building should be across the institution and not confined to any particular level or any particular area. the demand for better skills can be met either from within or from outside. it would perhaps be worthwhile to first glean through the existing resources to identify misplaced or hidden or forgotten resources and re - position them to boost the bank β s efforts to capitalise on available skills. this does not undermine the benefits that a bank may derive by meeting their requirements from the market, but is only intended to prioritise the process. conclusion 19. the global challenges which banks face are not confined only to the global banks. these aspects are also highly relevant for banks which are part of a globalised banking system. further, overcoming these challenges by the other banks is expected to not only stand them in good stead during difficult times but also augurs well for the banking system to which they belong and will also equip them to launch themselves as a global
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. blanchard, β the medium run β, brookings papers on economic activity, no. 2, 1997, pp. 89 - 141. market. in particular, setting minimum wages at levels which are not in line with productivity reduces the employment chances of less skilled workers and of the unemployed. as seen in germany following unification, the period of adjustment can be painful, but reforms and unit labour cost moderation are finally paying off and they are contributing to robust growth. i remember some observers arguing several years ago that much stronger wage increases were needed in germany for higher growth. the recent evidence does not confirm this view. on the contrary, the increased competitiveness seen in the german economy β thanks to moderate unit labour cost developments β has been an important prerequisite for the very strong job creation observed in recent years. not only in germany, but also in the euro area as a whole, employment growth has been impressive in the eight and a half years since the euro changeover. employment growth amounts to 14. 9 million persons in the euro area, as opposed to only 3. 8 million in the previous eight and a half years. reforms are also needed in product markets. let me first stress the importance of fully completing the single market, particularly in services and network industries. a deeper integration of markets would stimulate price flexibility by fostering competition and open product markets. greater cross - border competition and the integration of markets across the euro area countries would contribute to lower prices. it could also enhance the adjustment processes in the individual countries in the event of asymmetric shocks or differing cyclical developments. it is also important to promote further financial market integration and the development of readily available opportunities for portfolio diversification. this would help to attenuate the impact of country - specific shocks, as i mentioned earlier. national authorities can make a substantial contribution to ensuring the proper functioning of adjustment mechanisms within the euro area by conducting a well - designed fiscal policy. as i have stressed on many occasions, the best contribution fiscal policy can make to the proper functioning of the euro area is by being sustainable and medium - term oriented, fully in line with the orientations of the stability and growth pact. moreover, fiscal policy can and should also focus on increasing the effectiveness and efficiency of the public sector itself through high quality expenditure and tax policies. large and inefficient public sectors are putting a brake on growth by imposing a high tax burden on the economy and channelling resources into unproductive uses. in this
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, the government adopted a socioeconomic strategic assessment, and then approved a series of government decisions to adopt directions of action in response to various issues, and to integrate them into the detailed work plans of the ministries, and into their budgets ( decision 145 ). the strategic issues that were defined were : cultivating and maximizing human capital, productivity and competition, financing infrastructure, housing strategy, regional economic development, preparedness for the aging of the population, and β digital israel β. an analysis of the performance of all items in the government decisions in the various fields, which was done by the national economic council in the past few months, shows a positive picture in the performance of most of the decisions. these are mainly decisions to create the frameworks and processes, such as establishing teams, presenting and formulating programs, and progress reports to various forums. of course, the most important test will relate to the formulation and implementation of detailed plans, and achieving the targets over time. at this stage, it is too early to assess the extent to which they will be realized. examples of issues that require a strategic plan that were included in the government decision in 2015 human capital β as early as the israel 2028 plan, the area of education and professional training was identified as a main component in providing the basic values and skills required in the modern labor market. this is one of the areas where the importance of a strategic plan is clear β a plan that formulates targets, defines work plans for achieving them, and allocates budgets is essential in order to achieve an education system that is tasked with providing values, abilities and skills that will enable its graduates to deal β as workers and in 2 / 6 bis central bankers'speeches general as citizens β with the challenges of a changing labor world, for many years to come. the low achievements and the gaps in scholastic achievement and in the abilities relevant for the labor market are constantly being raised by the findings of pisa and piaac tests. despite the increase in the average number of years of schooling, literacy, numeracy and functioning in a digital environment among the adult population in israel β at all levels of education β are lower than those in most of the advanced economies, and the situation is no better among students. the need to deal with low abilities and skills is also shown by an analysis of labor productivity trends in israel relative to the other advanced economies, and by productivity and wage gaps between various groups. improvement is needed in the education system and in professional training
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bank capital it has set aside to provision for losses on its assets, i. e., on its non - performing loans, made primarily to the industrial sector. 3 what does it mean to have little bank capital as provision for losses? i like the following analogy. a bank not keeping adequate capital buffer to absorb losses on its loans that are more or less 4 / 7 bis central bankers'speeches known to be arriving soon is akin to not preparing to rescue with emergency a person who has slipped off the terrace of a skyscraper, and instead in the midst of his almost surely fatal descent, hoping that the laws of gravity would somehow freeze and work differently this time. while such under - provisioning problem extends to some of the private banks too, the scale of the problem is three to four times magnified in case of public sector banks. by and large, this scenario meets the adverse conditions of the narrative i provided about banking and banking panics. but in our context, several questions immediately come to mind : why should i worry about whether i can bank upon my bank when my deposit is insured by the government? more so, if my deposits are with a state - owned bank? why should i bother about my bank β s asset quality? the double - edged sword of deposit insurance and state ownership of banks answering these questions is crucial to understanding how our banking sector problems are likely to play out. a moment of reflection reveals that as long as i trust the deposit insurance and the guarantee of the state behind the public sector banks, i have no good reason to run and pull my deposit out of an insured deposit or a state - owned bank. the catch is this. when banks are in poor health, it does affect the potential borrowers. once a bank β s asset quality is adequately impaired, the bank does not grow its lending book much with fresh loans. bank management of a thinly capitalized bank is interested in primarily making two kinds of loans. first, ever - greening of existing bad debt β throwing more money after the bad, so as to help the borrower repay past loan, not acknowledge its true quality, and simply kick the can down the road. second, risky loans that give banks high returns so that it can make a last - ditch effort to rebuild capital quickly β doubling up bets in a casino when first round of gambling has all gone sour. faced with such borrowing prospects, healthy borrowers who have access to alternate forms of finance may be able to switch
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out of their savings, but they do own a property against which they would like to borrow. these potential borrowers can visit the bank branch to meet such financing needs. the bank makes loans to these individuals and families, assessing their ability to repay the loans, signing appropriate agreements to claim repayments in due course, and attaching the property and other assets as collateral that it can have access to in case the repayments fall through for some reason. such loans are bank β s assets. they typically earn a higher rate of interest than bank deposits and make banking activity an attractive proposition. demand deposits are short - term ; bank loans are long - term this way, a bank takes shape. it has liabilities, the right - hand side of its balance - sheet, in the form of deposits that must be repaid when depositors so demand ; it has assets, the left - hand side of its balance - sheet, in the form of bank loans that have some fixed points of time at which the bank can command repayments. by being so organized, the bank is performing the economic function of maturity transformation. a deposit, which is potentially demandable at any instance, has effectively been lent out through financial intermediation in the form of a longer - term bank loan that is not making repayments at each instance. and yet β¦ the beauty of the arrangement is that most of the time, this works out. the day my health expenses arise and i take out money from the bank, my neighbor and others have likely received monthly paycheques, a part of which remain deposited in the bank, or that same day some loan repayments have been made, extending the savings pool of the bank and allowing it to meet my deposit withdrawals. in background, financing has been made available to new entrepreneurs, first - time home buyers and aging parents. their undertakings are creating a whole second - round of economic activity, in the form of job creation at new enterprises, construction and cement industry, and medical services and hospitals. those involved in these activities have their own saving and borrowing needs, and will in turn deal with their banks. banking, in this manner is the life - blood of an economy, channels savings in the form of demand deposits into borrowings in the form of bank loans or bank credit, fuels and lubricates growth, and improves everyone β s welfare. 2 / 7 bis central bankers'speeches all of our lives would be easy, including of central bankers, if
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banks β balance sheets. democratically elected politicians, ie parliaments and governments, should be the ones who decide whether liability risks should be mutualised. and it is important to remain within the bounds set by the european treaties when making these decisions. furthermore, monetary policy must be wary of playing second fiddle to fiscal policy as this could make it increasingly difficult for monetary policymakers to ensure price stability. as you are no doubt aware, the eurosystem resumed its purchases of euro - area government bonds in march this year, this time on a very large scale as it is planned that these purchases will continue until at least september 2016. unlike in the case of the previous purchase programmes, the national central banks are now restricting their government bond purchases to securities issued by their home country ; any profits or losses arising from the purchases are not distributed within the eurosystem. this approach does at least, to a certain extent, take account of the concerns that were previously voiced, also by me, in connection with the previous purchase programmes. and yet, these purchases still blur the boundaries between monetary and fiscal policy. after all, the eurosystem central banks are becoming the biggest creditors of their respective countries. that is why, in my opinion, government bond purchases are not a monetary policy instrument like any other and should therefore purely be used, if at all, as a contingency instrument. as a result of a difficult weighing - up process, i therefore took a sceptical view of the recent decision of the ecb governing council to purchase government bonds. nevertheless, i cannot deny that in 2015 we are now in a completely different monetary policy situation than we were at the beginning of the sovereign debt crisis back in 2010. we are not expecting very dynamic price developments, also in the medium term, and interest rates have already been reduced to zero. our definition of price stability states that the inflation rate in the euro area ought to be just under 2 % in the medium term. however, much like at the beginning of the year when the most recent government bond purchase programme was adopted, the inflation rate currently stands at just above zero. this is due to the sluggish growth in the euro area, the adjustment processes in the crisisstricken countries and above all the sharp decline in crude oil prices. factoring this effect out of the inflation rate, price inflation currently stands at around 1 %. particularly, the dampening effect which the decline in energy prices is having on the inflation rate should be
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, unfortunately. first, the fiscal rules of the stability and growth pact were tightened and a fiscal compact was agreed upon. the aim is for the fiscal rules to become more stringent and binding again in order to build confidence. second, a procedure for identifying macroeconomic imbalances at an early stage was established, in which the european commission regularly examines whether private sector debt or member states β current account balances, for example, are a source of harmful imbalances. third, a crisis mechanism was set up β a temporary one at first, then a permanent one β which is designed to serve as a β firewall β, safeguarding the stability of the financial system in the euro area. fourth, a banking union was resolved, introducing a single supervisory mechanism under the aegis of the ecb and a single resolution mechanism for ailing banks. after all, it had become clear that banks β difficulties have knock - on effects across national borders, but that national supervisors are all too keen to put on β rose - tinted spectacles β when it comes to β their institutions β. and fifth, financial market regulation was intensified. here, too, it was important to enforce the liability principle more rigorously once again. of course, merely putting stricter regulations in place is not enough ; these actually have to be applied. as far as fiscal regulations are concerned, a certain degree of doubt about the consistent implementation thereof is not entirely unwarranted. the leeway and discretion accorded for interpreting these regulations are immense and being used time and time again to delay budgetary consolidation. bis central bankers β speeches wolfgang schauble, germany β s finance minister, recently reiterated just how important it is for the european commission to strike the right balance between its political function and its role as guardian of the treaties. as a result of this double mandate, the commission often leans towards compromises to the detriment of budgetary discipline. by instead entrusting budgetary surveillance to an independent fiscal authority, the regulations could be interpreted more stringently. yet a stricter interpretation of the fiscal regulations alone is still not sufficient to safeguard sound public finances. we must also strengthen the disciplining function of the financial markets. the β no bail - out clause β simply lacks credibility. this is one key reason as to why there were next to no risk premiums on government bonds of highly indebted member states prior to the financial crisis. investors quite rightly assumed that the euro - area
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value from a communications perspective is a clear statement of the substantive reasons for a policy decision. that statement is the press release announcing our decision. four times during the year, the announcement is supplemented two weeks later with the publication of our semi - annual monetary policy reports ( in may and november ) and updates to the full report ( in february and august ). these publications, which are finalized as of the policy announcement date, elaborate in greater detail the governing council β s assessment of the factors that shaped the interest rate decision. another challenge revolves around the fact that the bank ` s communications are with different audiences that may have different degrees of interest in what the bank says and does. the general public, for example, is generally interested in inflation, the value of the dollar, and whether or not interest rates are going up or down β those developments that have an impact on their daily decision - making. financial markets, on the other hand, are intensely interested in both the direction and the intricacies of monetary policy and tend to be highly sensitive to any bank action or comment bearing on these issues. they scrutinize bank publications and speeches by senior bank officials for any shade of meaning about where monetary policy might be heading. this makes communicating monetary policy a difficult task, because some of the subtleties and complexities related to the direction of monetary policy simply can β t be reduced to a few words. the challenge is in tailoring messages that communicate as clearly as possible the bank β s assessment of the economy and the direction of policy, while bearing in mind the specific concerns and information needs of different audiences. this challenge is all the more difficult when it comes to the media, an audience that is instrumental in whether or not we communicate successfully. there are no two ways about it. the bank relies heavily on the media to get our message to the public, whether it is via tv and radio, newspapers and magazines, or the various wire services that feed financial institution trading rooms as well as news outlets across the country. we also recognize that the media act as a filter for what we say and often determine which of our statements will be reported. it is part of the media β s job to interpret our decisions and perspectives and to comment on how they see the bank executing its mandate. it is also their job to reflect the views of third parties on what we say and do. that is healthy for democracy, healthy for our accountability, and can be healthy for raising public awareness of monetary policy issues.
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underserved areas. a number of methods have been derived for evaluating the effectiveness of community development projects. the one with which i am most familiar, through my work on the board of neighborworks america, is the success measures data system. this system uses more than forty indicators and a variety of data - collection tools - including surveys, interviews, and focus groups - to quantify the effects of housing, economic development, and community building programs at the personal, organizational, and community levels. this array of tools allows neighborworks to measure success not just quantitatively but qualitatively, looking beyond the numbers to detect sustainable positive change. the underlying philosophy is that a community development initiative cannot be judged successful just because it puts a family in a home ; rather, it must be able to say that, by doing so, it has improved the community, the family β s quality of life, and the family β s economic potential. these data are also useful to corporate partners insofar as they demonstrate business performance against internal goals and commitment to the community. businesses recognize that demonstrable success enhances their reputation, increases brand recognition, and improves their ability to compete successfully for future partnership opportunities. thus, being able to determine the return on a business β investment in a community development initiative in both quantitative and qualitative terms is the next logical step in attracting further private investment. but the social and economic needs of our inner - city neighborhoods extend beyond business investment. effective partnerships with local officials and community leaders are another key element of the revitalization process. at the state and local levels, public officials contribute to the attractiveness of investment conditions by maintaining sound fiscal policies. these policies allow local officials to take the lead from social compact and begin to market local neighborhoods using the analysis that demonstrates the buying - power residing within these more challenging neighborhoods. their willingness to address other neighborhood needs, such as housing, infrastructure, education, health care, and other social supports will also be important to investors. in general, when community development is a cooperative effort, it can lead to more sustainable outcomes along both economic and social dimensions. while the return on investment can be a sufficient gauge of their economic success, success in broader terms can be viewed by assessing the commitment of all segments of the community to the goal of revitalization. moreover, the benefits of such cooperative actions are not always readily measurable in dollars and cents. greater opportunities in local neighborhoods evidence themselves through better schools and stronger ties forged within the
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downward pressure on the real economy. i would like to elaborate on this later. ii. conduct of monetary policy a. enhancement of monetary easing in light of the impact of covid - 19 let me now turn to the bank's policy conduct. global financial and capital markets were unstable from late february through march 2020 due to the spread of covid - 19. investors'risk sentiment deteriorated sharply, stock prices declined significantly, and credit spreads on cp and corporate bonds widened, while the costs of funding u. s. dollars as a safe asset rose rapidly. in addition, financial conditions have become less accommodative in terms of corporate financing, as seen in the deterioration in firms'financial positions due to declining sales and profits. given these developments, at the regular monetary policy meetings ( mpms ) held in march and april and at an unscheduled mpm held in may, the bank decided to take measures to enhance monetary easing with a view to doing its utmost to ensure smooth financing, such as of financial institutions and firms, and to maintaining stability in financial markets. these consist of three monetary easing measures, namely, ( 1 ) the special program to support financing in response to the novel coronavirus ( covid - 19 ) ( the special program ), ( 2 ) an ample provision of yen and foreign currency funds, and ( 3 ) active purchases of exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ) ( chart 7 ). i will next explain each of these measures. the first is the special program to support financing. the program consists of the bank's purchases of cp and corporate bonds within about 20 trillion yen and introduction of funding measures of about 100 trillion yen to encourage lending by financial institutions. the latter includes a scheme in which the government takes the credit risk of lending by financial institutions to small and medium - sized firms and the bank provides funds to those financial institutions on favorable terms. the second measure is an ample provision of yen and foreign currency funds. the bank decided to purchase a necessary amount of japanese government bonds ( jgbs ) without limit, with a view to maintaining stability in the bond market and stabilizing the entire yield curve at a low level. it has also decided to provide a large amount of u. s. dollar funds based on cooperation with five other major central banks. the third measure is active purchases of etfs and j - reits. the aim is to prevent firms'and
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, as they have been actively supporting their client firms with various measures taken by the bank and the government to support financing. nevertheless, financial institutions themselves are also facing a severe situation. according to the international monetary fund ( imf ), in 2018 the proportion of global systematically important banks that had a return on equity ( roe ) below 4 percent was less than 10 percent, but this is projected to increase to around 50 percent by the end of 2020. 2 furthermore, the imf points out that, if the impact of covid - 19 persists, many banks in advanced economies may fail to generate profits above their cost of equity ( coe ) in 2025. if roe does not exceed coe, financial institutions'profitability will gradually decline. this may be attributed to three factors : a narrowing of loan spreads ; a decrease in investment income ; and an increase in credit costs. i will now explain the situation surrounding these three factors in japan. let me first touch on the narrowing of loan spreads. japan has been confronted with both limited demand for new loans, due to a decline in population and the number of firms across regions, and with prolonged low interest rates. in this situation, financial institutions'average contract interest rates on new loans and discounts have reached extremely low levels, owing in part to intensified competition among institutions. as a result, there has been a narrowing of net profit margins - - calculated by deducting overhead cost ratios from the interest rates. imf, global financial stability report, april 2020. for example, the average net profit margin for regional banks - - specifically, member banks of the regional banks association of japan - - was around minus 2 basis points for fiscal 2019 ( chart 9 ). 3 when considering the net profits of financial institutions, it is also necessary to deduct credit cost ratios - - the amount set aside for potential loan losses ( chart 10 ). in this situation, if lending rates decline further from the current level, financial institutions will not be able to generate profits unless they procure funds at negative interest rates. it is difficult, however, for deposit rates - - which account for the majority of financial institutions'funding costs - - to fall into negative territory. for this reason, we may be approaching a situation in which, even if market interest rates decline, lending rates do not fall, or the provision of loans does not increase. in addition, the amount of effectively interest - free loans expected to be provided to small and medium - sized firms
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critical service providers. to this can be added the greater exposure to cyber risk. greater interconnections in the financial system increase the surface for cyber attacks, which have escalated during the covid pandemic. enhancing operational and cyber resilience will therefore remain an important item on the fsb agenda. next to digitalization, we face the ever - present challenge to address risks to financial stability from climate change. these risks reflect the particular nature of climate change : it is global in its causes and its implications, and it is pervasive, affecting all kinds of financial assets and contracts. if we want to safeguard financial stability and ensure the financing needed for the transition to net zero, it is key that climate related financial risks are adequately priced in financial contracts. this is crucial because financial contracts price the future, and that future is about to undergo fundamental change. the fsb β s roadmap for addressing climate - related financial risks aims to ensure that climate risks are properly reflected in all financial decisions. it covers disclosures, data, vulnerability analysis, and regulatory and supervisory approaches. because there are no international standards in place yet, not least relating to disclosures, we have an enormous opportunity to get this right from the start. we should not miss it. it is important to act early to address these big transformational issues in the global financial system. experience has taught us that global financial stability risks, like so many other global issues, are often best dealt with using a globally consistent approach. not because one size fits all, but because this makes national policies more effective, provided that the global approach leaves room to be tailored to country - specific circumstances when it comes to implementation. because of their history, to us europeans, this is second nature. from the treaty of rome to the treaty of maastricht, now 30 years ago, the process of european integration has always been about europeans working together to pursue common interests. that β s why we have always been a strong partner in fostering international cooperation and high - quality minimum standards. indeed, european countries have been key contributors to the international financial architecture. from the bretton woods agreement back in 1944 to the establishment of the financial stability board in 2009. when it comes to financial stability, the eu itself, but also other countries in europe, has benefitted greatly from its commitment to multilateralism. the centre pieces of the european financial regulatory framework as we know it today are based on the g20 reform agenda that followed
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currencies. it will also help those countries which will not join emu right from the start to orient their policies towards convergence, in order to enable them to qualify for participation as soon as possible. to conclude......, there are reasons to believe that over time the euro could develop into an important reserve and invoicing currency. good opportunities for the euro arise from the fact that the eu economy is even larger than that of the united states. furthermore, it is the responsibility of european policy - makers to safeguard the attractiveness of the european currency by pursuing sound policies. in this respect, the stability of the euro is in the good hands of the ecb. at the same time, i would like to emphasize that the success of the euro is also in the hands of the markets. it should be borne in mind that it took the dollar half a century and two world wars to replace sterling as the international currency, despite the fact that the united states had been the major economic power since the beginning of this century. all in all, these are challenging times for europe. let me, therefore, propose a toast to the future success of the euro.
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the 12 dimensions included in the report. but we know we must do even better. we therefore aim to : β’ accelerate the growth of worker productivity ; β’ upgrade the quality of services offered ; β’ enrich our product offerings and exploit market niches ; β’ selectively penetrate promising new markets, and sharpen our focus within well established markets. the main thing we need from the international community is a better understanding of our reality, and support for these policies. instead, the imf, the rating agencies, the basel bis central bankers β speeches committee and the oecd have all taken well - meaning initiatives which have in some way threatened the success of our adjustment and growth strategy. we are engaging with these bodies with a view to gaining greater voice to express the realities of economic policy making in svoes. we welcome the establishment of small states fora at the imf and world bank, the regional consultative groups of the financial stability board, and the peer reviews of the global forum. these are all fora we may use to get our message across. this regional network of central banks and finance ministries is a further opportunity to get the message across, and we express our sincere thanks for the invitation to share these thoughts with you. bis central bankers β speeches
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for release on delivery 9 : 10 a. m. est february 16, 2024 supervision with speed, force, and agility remarks by michael s. barr vice chair for supervision board of governors of the federal reserve system at the annual columbia law school banking conference new york, new york february 16, 2024 thank you to columbia university and the organizers for the opportunity to speak today. 1 it has been nearly a year since the sudden failure of silicon valley bank ( svb ) and ensuing turmoil in the banking system, events which prompted important questions about how banks manage risks and how we at the federal reserve supervise that risktaking. it is a fitting time to share some reflections on the importance of the day - to - day work of bank supervision and the steps we are taking to improve the speed, force, and agility of supervision. review of silicon valley bank let me begin by summarizing my review of the failure of silicon valley bank. this was the first major bank failure since the global financial crisis, and it necessitated a deep, unflinching review of what went wrong. so, following the failure, chair powell and i determined that it would be appropriate for me to lead a review on the conditions that led to svb β s failure. experienced and well - respected staff from around the federal reserve system who were not involved in svb β s supervision conducted the review. the review found that, first and foremost, the bank β s management failed to manage the bank β s risks, and its board failed to oversee management. 2 but the review also found that federal reserve supervisors did not identify issues quickly enough, and when we did identify risks, we were too slow to act with sufficient force to change management behavior. the views expressed here are my own and are not necessarily those of my colleagues on the federal reserve board. board of governors of the federal reserve system, review of the federal reserve β s supervision and regulation of silicon valley bank ( washington : board of governors, april 2023 ), https : / / www. federalreserve. gov / publications / files / svb - review - 20230428. pdf. - 2the svb report identified the need to improve the speed, force, and agility of supervision to align with the risks, size, and complexity of supervised banks. to do this, the report identified several areas of focus, including intensifying supervision at the right pace, encouraging timely supervisory action and escalation, and
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maxim in retail banking is that early engagement with distressed borrowers is a valuable tool for improving ultimate recoverability. in particular, emerging inability to pay instalments in full can induce a borrower to pay nothing at all, thereby risking a spiral into an unsustainable level of indebtedness. identifying pre - arrears situations and engaging with them and with early arrears cases can be very cost effective in arresting this spiral in the level of indebtedness arising from arrears. therefore, although what follows is about dealing with 90 - day plus arrears cases, efforts to address and stem the early cases should not be neglected. new legislation the new personal insolvency act offers new avenues of recourse for insolvent persons, including importantly the pia which could allow insolvent debtors to earn a β fresh start β through a period of being subject to what will likely be a relatively onerous payment plan, but without necessarily having to surrender an owner - occupied home. importantly, this avenue by construction is available only to insolvent borrowers, and therefore not to those who β can pay β. the terms of the legislation should help anchor some of the expectations of distressed borrowers and their lenders in arriving at bilateral solutions. given what international experience shows of how little is often recovered in net terms by creditors from payment plans, a well - designed loan modification bilaterally arranged between borrower and insolvent debtor can be better for both than the net outcome of a pia or bankruptcy. the different elements of the cure process there are several successive tasks for the lender in the typical mortgage arrears cure. it begins with the lender engaging with the borrower. the lender needs to assemble updated information in order to discover the customer β s current circumstances and how it has differed from the position at the original underwriting. then, taking account of current and prospective circumstances, if the contract is, or can be put on a sustainable basis, the lender needs to decide what revised schedule of payments ( if any ) should be offered. ( the attempt to cure a distressed mortgage may not always avoid repossession or voluntary surrender. ) and then the lender needs to ensure that the customer complies with the revised schedule. in the ccma, designed to provide appropriate and effective consumer protection measures and to ensure that borrowers are treated in a fair and transparent manner, the central bank bis central bankers β
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indebtedness. credit unions are unsecured creditors of many distressed borrowers ; unsecured debt on credit cards is also found to be high for many borrowers ; utility arrears are also commonly observed. a mortgage loan modification which leaves borrowers with insufficient resources to deal with their arrears with credit unions, credit cards and on utilities is unlikely to remain fully serviced. this inhibits the mortgage lender from making an effective modification proposal. therefore agreements with other creditors are likely to be an essential part of any effective and sustainable mortgage modification. it is for this reason that the central bank has been facilitating dialogue between the main creditors with a view to enabling them to arrive at an operational framework for dealing in a manner that is satisfactory to all with multiple indebtedness situations. in essence, the main creditor needs to take a holistic view of the borrower β s position including other indebtedness and ensure that the entire debt is sufficiently restructured ( a point explicitly made in the ccma ). to be sure, the main secured mortgage creditor can enforce their security, but as this is certain to leave a large unsecured amount owing to the main creditor, the main creditor still needs to have regard to the position with regard to unsecured debts of the borrower. one way of seeing the potential here is to recognise that the ultimate alternative that faces all parties, in the event that no agreement ( even pia ) can be reached, is the debtor β s bankruptcy. bankruptcy will inevitably involve deadweight losses β procedural expenses, losses through foreclosure sales, etc. the different creditors should therefore assess the possibilities of any deal relative to the position they would experience in a bankruptcy. many classic analyses of bargaining suggest that participants should generally expect to share the gains of any deal broadly proportionately relative to what each creditor would get from the bankruptcy. although this is not exactly the way in which bankers and credit unions frame arrangements that they can envisage employing for such circumstances, i expect that the restructuring β waterfalls β ( or decision trees ) that they have been discussing will in the end amount to much the same thing. furthermore, this approach can be extended to the pia. after all, a personal insolvency practitioner proposing a division of the recoverable amounts that is consistent with this framework can expect that the creditors will accept it. indeed, in cases where the unsecured creditors have not signed - up to a
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, keeping in view the operational requirements. since then, most of the banks have announced their bplrs. they are lower by 25 to 100 basis points for the public sector banks. during the first three quarters of 2003 - 04, the range of interest rate on advances above rs. 2 lakh ( other than for export credit ), at which substantial business is contracted has shown some decline. the policy review had also focussed attention on credit delivery. it has been the endeavour of the reserve bank to improve credit delivery mechanisms for agriculture, small and medium enterprises ( smes ) and other priority sectors. keeping this in view and in accordance with the policy statement, an β advisory committee on flow of credit to agriculture and related activities ( chairman : prof. v. s. vyas ) β and a β working group on flow of credit to ssi sector ( chairman : dr. a. s. ganguly ) β were constituted. the vyas committee has made systematic efforts to reach out to as many stakeholders as possible by visiting different parts of the country. in smaller groups the committee members have met with representatives of commercial banks, cooperatives and rrbs, government administrators, ngo leaders and other knowledgeable persons in 15 states of the country. on the basis of these deliberations, the committee is planning to submit its interim report shortly, covering issues such as rate of interest on agriculture credit, npa norms in agricultural financing, outreach in the context of service area approach and micro finance. the committee is also looking into institutional and structural aspects of nabard and rrbs, as also the operation of lok nayak jaiprakash fund. the ganguly working group is examining issues relating to credit flow to medium enterprises also. the group has held meetings with select ssi associations and experts. the reserve bank has set up a β committee on procedures and performance audit on public services ( chairman : shri s. s. tarapore ) β and mirror ad hoc committees have been set up by each bank. the committee set up by the reserve bank has submitted three reports. the first report covers foreign exchange transactions, the second covers government transactions and the third deals with banking operations relating to deposit accounts and other facilities. all the three reports are focused on common persons. concerned departments of reserve bank are examining the recommendations made in these reports. with the functioning of the reserve bank committee and the ad hoc committees it is expected that there would be perceptible improvement in customer services and a
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stanley fischer : recent developments in the israeli economy ; future paths of the imf and the world bank speech by professor stanley fischer, governor of the bank of israel, at the imf - world bank annual meetings, washington dc, 22 october 2007. * * * mr. chairman, distinguished governors, mr. rodrigo de rato, managing director of the international monetary fund, mr. robert zoellick, president of the world bank group, delegation members, colleagues and former colleagues, ladies and gentleman : these meetings take place not only at a challenging time in the international economy, but also at a time of unexpected changes in the leadership of both the bank and the fund. i will use this opportunity to discuss the futures of each of these two great institutions. but let me start with recent developments in the israeli economy. 1. the israeli economy the israeli economy has been growing at an average annual rate of more than 5 percent, since 2004. in 2007, inflation is expected to be within the target range of 1 - 3 percent per year. the budget should end the year close to balance. the balance of payments is in a surplus of between 4 and 5 percent of gdp, and foreign direct and financial investments continue to flow into the economy. controls on capital flows have been removed progressively over the last fifteen years, and the capital account is essentially totally liberalized. the exchange rate floats freely and the bank of israel has not intervened in the foreign exchange markets since 1997. fiscal discipline has reduced the share of government spending in gdp from 52 percent in 2003 to 44 percent this year. fiscal discipline, together with privatizations and sustained growth, has reduced the debt to gdp ratio from more than 100 percent in 2003 to a level expected to be about 82 percent at the end of this year β a level that is still too high but that is expected to continue to decline. growth has reduced the unemployment rate, from more than 11 percent in 2003 to about 7. 5 percent at present. this has been accompanied by an increase in the participation rate, which is very low in israel. the poverty rate β a relative measure in israel β is beginning to decline but more needs to be done to improve the standard of living of the poorest members of the population. the impressive achievements of the israeli economy are due in part to the global boom, but also to improved economic policies based on the understanding that the only way to sustainable growth, particularly for a small economy, is to pursue market - based policies and to embrace
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cybernetic threats and fraud. in this respect, psd2 has paid special attention to the risks involved in carrying out electronic payment operations in general and, in particular, to those conducted remotely, the aim being to provide users with an environment of maximum safety when they opt to perform these operations. by way of illustration, psd2 urges that measures be adopted that reduce the incidence of fraud and that ensure the continuity of payment services with a view to shoring up users β ultimate confidence. such measures include most notably the obligation to periodically assess the effectiveness of specific risk control and mitigation measures and the duty to notify the authorities of the serious security incidents that arise. furthermore, psd2 provides for the general application of strong customer authentication mechanisms, whether in payment or consultation operations. i refer here to the promotion of practices such as the sending of a single - use code through a mobile phone in order to be able to complete an on - line purchase transaction. while it is true that some of these measures are nothing new for many current payment services providers, their systematisation and level of granularity do indeed have a deep - seated impact in that they make it necessary for adjustments to be made to pre - existing uses. the deployment of strong authentication procedures adds greater operational complexity to the classical means of interaction with customers and here, once again, given that the situation may entail a certain level of initial confusion, it would be advisable to develop educational and assistance programmes that help accommodate users to the new reality. bank customers and financial education i cannot stress this point enough. financial and digital literacy are basic, crucial factors for the efficient use of financial technology and for lessening the level of risk implicit in its use. involuntary authorisation for access to personal information or fraud, to which i have just referred, are merely some of the examples of this implicit risk. other examples are : ( i ) the offering of complex, opaque projects that are difficult to understand and which may be wrapped up in a user - friendly fashion for the public at large through applications ( apps or similar ) ; ( ii ) the disclosure of relevant information, pre - contractual or contractual alike, through smart phones or tablets, in which the size of the screen and the immediacy of acceptance limit customers β capacity to know what they are really agreeing to ; ( iii ) limitations in obtaining direct and personalised advice from a qualified adviser ; ( iv ) discrimination linked to the use of macro - data,
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of services at the forefront. this is a healthy development, in which the rbi, government of india and members of iba have a stake. in this spirit, i will recall and share with you important issues that have been addressed by each of the three stakeholders in the recent past. of course, the narration is illustrative and not exhaustive and covers the last couple of years. reserve bank of india first, the status of pursuit of medium term objective of reducing preemptions through both crr and slr. slr has been brought down to the statutory minimum. progress in reduction in crr continues to be closely related to the pace of reduction in fiscal deficit, monetary developments vis - a - vis growth in real output, and uncertainties in forex markets. on all these fronts, greater comfort in the past could have helped more rapid reduction in crr, to achieve the medium term objective. in a structural sense, rbi has since progressed in the pursuit of the objective viz. proposal to amend the law relating to preemptions to give flexibility to rbi to bring the crr and slr even below 3 per cent and 25 per cent, as and when rendered possible. in a procedural sense, significant progress has been made in the prescribed manner of calculating and maintaining the reserve requirements. the medium term objective of reducing pre - emptions and imparting a greater flexibility and simplification of procedures continues to be at the top of the rbi β s agenda for reform. in pursuing this objective, the rbi keeps in view not only the balance sheets of the banks but also the need to move towards universal banking, and diversifying financial intermediation which is heavily concentrated now in banks rather than non - banks. reduction in refinance window and introduction of liquidity adjustment facility have provided greater flexibility in this regard, and further progress in these two areas is bound to ensure lesser recourse to preemptions in the conduct of monetary policy. second, on interest rates, the reform objectives in terms of greater deregulation and rationalisation of small savings rates etc. have been achieved to a significant degree. further progress in deregulation continues to depend on some stability in inflationary expectations, which in turn is dependent on credibility of price - stability. the emphasis in future has to be to impart greater flexibility to interest rate regimes, in an environment of reasonable price - stability and a rational tax - regime. a rational taxregime in the
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for granted. and, of course, if the assumptions we are making about the world economy turn out to be too optimistic, all bets would be off. i now come to the second part of my testimony, in which i attempt to answer the question of why we have done better than most other countries in asia or the pacific rim. in doing so, i am conscious that the story is not yet over, so this is really an interim report. i think a number of factors have been involved and i will list them in no particular order. as we go through them, it will become apparent that they are all intertwined. first, i think the asian crisis hit at a time when the australian economy was in good shape, partly for cyclical reasons. by mid - 1997, the economy was growing strongly and inflation was lower than our target. had we not received a contractionary impulse from the asian crisis, we may have been facing the need to tighten policy because of a potential overheating. no - one will ever know, but it is a possibility. i am conscious that attributing our performance over the past 18 months to our good starting point is rather superficial because it does not explain why the starting point was so good. but i will come back to that later. second, i think we have benefited from the flexibility of our exporters, who have switched from the contracting asian markets into the expanding north american and european ones, and into a number of other markets we do not usually think of as being important to us. the nature of our exports - with so much of them being commodities - has helped, but the efforts of our marketing companies and authorities should not be ignored. even so, it has not proved possible to prevent exports from falling, and over the year to the september quarter they fell by 2 per cent in volume. third, australia has benefited from a greatly improved perception of the soundness of its economic policies. the fact that the budget has moved back into surplus - where it should be in the mature phase of an economic expansion - has been important. so has nearly a decade of low inflation. also important on this occasion has been the recognition that australia scores well on such factors as its regulation of banks, other financial institutions and stock exchanges, and that its underlying body of commercial law and accounting practice is at or close to world best practice. not only have the international capital markets taken a better view of australia, but we also seem to have more confidence in
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manufacturing industry has little choice but to move up the value - added chain in order to compete. this is, of course, a lot easier to say than to do. it means difficult changes for many firms and those who work for them. it also means ongoing investment in human capital and the latest machinery and equipment and constant attention to improving productivity. one piece of evidence that things are moving in this direction is in the abs business characteristics survey, which asks firms a series of questions about innovation. in this survey the manufacturing sector clearly stands out as one where firms are actively reviewing their business practices and, over recent times, they have been doing this more frequently ( graph 4 ). no doubt, more of this will be required over the years ahead. bis central bankers β speeches graph 4 the changes within manufacturing are also evident in the export figures. while, in aggregate, exports of manufactured goods are little changed from their level in 2007, there has been strong growth in some categories including specialised industrial machinery and professional and scientific instruments ( graph 5 ). these are both areas where human capital and specialised skills are important. in contrast, exports of motor vehicles and construction materials are well down on their earlier levels. graph 5 another area of the economy where the high exchange rate is having a noticeable effect is the tourism sector. as is the case in the manufacturing sector though, the story is not uniform across the industry. indeed, the structural change that is occurring in the economy is taking place not just across industries, but within industries as well. bis central bankers β speeches the boost to real incomes from the mining boom has clearly increased australians β ability to travel. however, the high dollar has contributed to a decline in travel to the traditional domestic holiday destinations, with australians travelling overseas in ever increasing numbers. this has created quite difficult conditions for parts of the industry with, for example, room occupancy rates along the queensland coast having fallen over recent years ( graph 6 ). in contrast, conditions are noticeably stronger in the accommodation sectors in some of the large cities which are benefiting from an increase in business travel and an apparent shift in preferences by overseas tourists for city - based experiences. in sydney, for example, room occupancy rates are at quite high levels. graph 6 household spending and borrowing a second general factor that has been driving changes in the structure of our economy is the adjustment in household borrowing and spending behaviour. the rba has talked frequently about this issue over recent years, and the flow -
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guy debelle : the global code of conduct for the foreign exchange market speech by mr guy debelle, assistant governor ( financial markets ) of the reserve bank of australia, at the fx week asia conference, singapore, 31 august 2016. * * * thank you for having me here today to talk about the global code of conduct for the foreign exchange market. as you may know, phase 1 of the code was launched in new york in late may. 1 today i will reiterate the motivation for the work we are doing on the global code, then update you on where we are at with the process and outline the way forward. why is the work going on? as i have stated on previous occasions, the foreign exchange ( fx ) industry is suffering from a lack of trust in its functioning. this lack of trust is evident both between participants in the market, but at least as importantly, between the public and the market. the market needs to move toward a more favourable and desirable location, and allow participants to have much greater confidence that the market is functioning appropriately. a well - functioning foreign exchange market is very much in the interest of all market participants. this clearly includes central banks, both in their own role as market participants but also as the exchange rate is an important channel of monetary policy transmission. in a globalised world, the foreign exchange market is one of the most vital parts of the financial plumbing. the global code sets out global principles of good practice in the foreign exchange market to provide a common set of guidance to the market, including in areas where there is a degree of uncertainty about what sort of practices are acceptable, and what are not. this should help to restore confidence and promote the effective functioning of the wholesale fx market. to that end, one of the guiding principles underpinning our work is that the code should promote a robust, fair, liquid, open, and transparent market. a diverse set of buyers and sellers, supported by resilient infrastructure, should be able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behaviour. the work to develop the global code commenced in may last year, when the bank for international settlements ( bis ) governors commissioned a working group of the markets committee of the bis to facilitate the establishment of a single global code of conduct for the wholesale fx market and to come up with mechanisms to promote greater adherence to the code. 2 there are two important points worth highlighting :
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nearly $ 15 billion in the june quarter. in addition, businesses received more than $ 30 billion in jobkeeper payments to support the wages of their staff. these payments are equivalent to around 15 per cent of total household disposable income in a typical quarter. many households have used this extra income and their increased savings to put their balance sheets on a firmer footing. some of the money withdrawn from superannuation funds under the early release scheme β which is now equivalent to about an additional 10 per cent of quarterly household disposable income β has also been used to pay down debt and strengthen cash buffers. the impact of this can be seen in some of the banking data. over recent months, there have been record rates of repayment on personal credit cards and other forms of personal debt ( graph 8 ). interest - bearing credit card balances have fallen by 22 per cent since march and are now at their lowest level in around 15 years. graph 8 personal credit cards net repayments * $ b $ b * seasonally adjusted source : rba for many people with a mortgage, much of the extra savings and some of the superannuation withdrawals have been used to increase their balances in their offset accounts, with offset balances up 10 per cent since march. other people have simply paid down principal directly. combined, all forms of mortgage payments β including the additional balances in offset accounts β reached a record high over recent months, despite repayments being deferred on around 8 per cent of housing loans ( graph 9 ). graph 9 flows into housing loan and offset accounts * share of disposable income % % interest principal offset * seasonally adjusted and break - adjusted ; lighter bar is an estimate for the september quarter sources : abs ; apra ; rba the question that all this raises is : what are people going to do with this extra saving and improved debt situation? in aggregate, household income is likely to decline in the december quarter as the unemployment rate increases and government support becomes more targeted. in normal times, a decline in income would be expected to affect consumption, but these are not normal times. it is entirely possible that as restrictions ease, people will choose to draw on their accumulated buffers to sustain and increase their spending. many businesses face a similar choice to households. many have boosted their cash buffers over the past six months and face a decision about what to do with these : sit on these buffers in case something goes wrong
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prices, or combination of those. these are the parameters central banks should watch carefully. but excesses can appear in other forms, too. the challenge for central banks is that economic imbalances have a long β formative period β so to speak, spanning much longer than the normal time horizon of monetary policy implementation. therefore, if we focus narrowly on short - term movements in consumer price inflation, this could have an unintended consequence of fostering the creation of bubbles. in response to the bursting of the information technology bubble early this century and the deflation scare associated with that, monetary policy was eased on a global scale and for an extended period of time. unfortunately this has proved to be one of the contributing factors to the global credit bubbles and the resulting mess in the global financial system. central banks should not be hesitant in pursuing aggressive monetary easing when economic conditions warrant. in a severe economic crisis, policymakers have to be careful not to mistake a temporary rebound in the economy, or a false dawn i would say, for a genuine recovery. but there is no economic crisis that never ends. so central banks should also be mindful of a timely exit from those aggressive easing measures. a late exit can be an entry into something worse. finally, let me add that monetary policy alone cannot prevent the recurrence of boom - andbust oscillations. for example, a host of issues remain to be addressed in the regulatory and supervisory arena as well. closing remark since i am almost 40 minutes into my speech, i would like to finish with a final message. what we are confronting is not a garden - variety recession. this is the crisis of a truly global nature. in the early 2000s, japan was able to benefit from the recovery in the global economy. this time, we cannot count on others in getting out of the woods. but over the past year or so, we have together achieved a lot in our fight against the crisis. in that spirit, we will continue to work out both individual and shared solutions. let us move ahead together to rebuild sustainable and efficient financial systems for us and for our future generations. thank you very much for your listening.
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disposals of bad assets even more difficult. as late as in 1999, the japanese government finally infused sizable amount of capital into major banks. but even this turned out to be insufficient to revitalize japan β s banking industry. fifth, there are similarities on monetary policy front. during the crisis, the bank of japan provided ample liquidity and brought the policy rate down to zero. in so doing, the bank of japan extended the maturities of liquidity - providing operations while expanding the range of acceptable collateral and counterparties. we also introduced a special lending facility to ease funding stress in the markets. furthermore, we purchased private - label securities such as asset - backed commercial paper ( abcp ) and asset - backed securities ( abs ). in this crisis, the us authorities have implemented a variety of measures similar to those innovative steps the bank of japan took in the past. i will take up this point later. what was japan β s β lost decade β? as i mentioned at the outset, japan β s 1990s is described as a β lost decade β. this catchy phrase has a straightforward implication that japan β s economy was plagued by a long stagnation. but i do not like this characterization because it is too simplistic, misguiding us in terms of the way we address the problems and thereby formulate appropriate policy responses. so i would like to do some reality check again for a more balanced assessment of japan β s experience in the 1990s. first, it is true that japan β s economy was lackluster throughout the 1990s. in that period, japan β s average yearly growth rate was only 1. 3 % in real terms, much less than the preceding decade β s average of 4. 0 %. however, even in 1998, the worst year in the postbubble period, japan β s growth rate was minus 1. 5 %, apparently less dismal than the sharp slowdown we are facing now. also, even during the financial crisis, japan β s real gdp did not fall below the level registered at the peak of the bubble days ( 1989 ). i think this owed much to the authorities β efforts to avert financial meltdown by using all means available, including the extension of blanket guarantees for all forms of bank liabilities. second, even in the low - growth 1990s, there were some tentative recoveries in japan β s economy, which led people to hastily believe that the economy has finally regained traction. they turned out to
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by 159 b. kr. to almost 322 b. kr. at the end of the year. the main explanation is that total treasury deposits in the central bank rose by 135 b. kr. over 2006 to 211 b. kr. at the end of the year. the balance on government current accounts increased by 47 b. kr. and the deposit in the foreign currency account amounted to 94 b. kr. at the end of the year. most of the foreign currency deposit is accounted for by the β¬1 billion loan taken by the treasury towards the end of the year to boost the central bank's foreign reserves. notes and coin in circulation grew by 10 % to 14. 5 b. kr. and the central bank's liabilities towards deposit money banks by just over 10 b. kr. on the asset side, the central bank's claims on deposit money banks and other financial institutions increased by 59 m. kr., and its foreign assets by 101 b. kr. the growth in foreign assets was largely the result of the treasury's euro loan, but partly due to the impact of the depreciation of the krona on the nominal amount of the reserves denominated in domestic currency. at the end of the year, the central bank's equity amounted to 48. 2 b. kr., an increase of almost 12 b. kr. from the end of the year before. in the budget for 2007, the treasury was authorised to strengthen the central bank's capital position. the treasury borrowed β¬1 billion in international capital markets in 2006 for the sole purpose of boosting the central bank β s foreign reserves. all the proceeds from the loan were deposited in a foreign currency account in the central bank. the treasury earns interest on the deposit at a rate matching that of the foreign loan. here i have briefly summarised the highlights of the central bank β s accounts. the financial statements for the year are published in their entirety in the annual report with notes, and the bank β s results and changes in its balance sheet during the year are also described in more detail there than i have entered into here. in june 2006, jon sigurΓ°sson stepped down as governor of the central bank of iceland when he was appointed minister of industry and commerce in the government of iceland. in formal terms he was on leave from the central bank from the middle of june until the end of august. jon
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on public administration of banks. these arrangements helped to dampen the effects of the crises and prevent new ones. commercial banks were subject to separate legislation and supervised by the newly established banking and savings bank inspectorate. supervision of savings banks commenced as early as 1900, with the establishment of the position of inspector of savings banks. this was probably one reason why savings banks were not as expansive as commercial banks during world war i. nor were they as severely affected by the banking crisis. a gradual increase in the regulation and supervision of financial enterprises and the introduction of a financial safety net did not mean that the market - based system was abandoned. however, recessions and demands for more protectionism led to restrictions on international trade and capital movements. the result was that domestic investments increasingly had to be financed through domestic savings. this can be illustrated by looking at the relationship between the saving ratio and the fixed investment rate for selected countries. a strong correlation indicates a limited degree of openness. measured in this way, integration was greater before 1914 than in the interwar period. protectionism had a very harmful effect on economic developments. ecklund, g. j. and s. knutsen ( 2000 ). vern mot kriser? norsk finanstilsyn gjennom 100 ar. ( protection against crises? 100 years of norwegian financial supervision ) fagbokforlaget. jones, m. t. and m. obstfeld ( 1997 ). saving, investment, and gold : a reassessment of historical current account data. nber working paper series. after world war ii, international organisations were established to promote economic cooperation and their objective was increased integration of international trade and fixed investment. however, crossborder capital movements remained heavily regulated. the same applied to direct regulation of financial enterprises. other considerations, than returns and risk, took precedence in connection with the provision of credit and capital movements. at the end of the 1970s, direct controls were gradually removed. as a result of the emergence of new financial instruments, the controls no longer had the same effect. there was a growing realisation that the existing controls had a negative effect on the allocation of credit and capital, and hence on longterm economic growth. cross - border capital movements were gradually liberalised. it was not until the 1990s that capital was able to move between countries as freely as before 1914. because of the serious effects of financial crises, the financial industry is subject to many regulations and
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##ko sentral in defining our shared vision of the future under the principle of collective responsibility. i believe we all want a banking system that is robust, resilient, responsive and responsible. how to achieve these in the midst of a constantly shifting and changing landscape is the challenge before us. i look forward therefore to this international banking convention of the asian banker to provide some answers for us. thank you all and mabuhay! bis central bankers β speeches
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benjamin e diokno : the philippines - seizing opportunities for a better tomorrow speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at β reuters next β conference β rethink, rebuild, recover : a new vision for a better tomorrow β, 12 january 2021. * * * a pleasant day to all the participants of β reuters next. β as we start the new year, it is apt to share ideas on recovery given the unprecedented covid - 19 crisis that mostly defined 2020. the theme of this conference β β rethink, rebuild, recover : a new vision for a better tomorrow β β highlights the pursuit of a stronger world economy, which is a fitting top agenda for all nations. as an international community, we have to β rethink β the way we deal with key issues β such as inward - looking policies, equity, and climate change, among others β if we are to β rebuild β the global economy toward meaningful β recovery. β we must step up international cooperation to achieve recovery soon. as individual nations, we have to apply the lessons from the crisis that are peculiar to our respective economies to move forward. in the case of the philippines, we expect a much brighter 2021. besides government pronouncements that vaccines will be rolled out toward the end of the second quarter, the fact that the entire government, the bsp included, did our homework last year allows us to expect better days ahead. we worked hard not just to survive the crisis, but to ensure faster and smoother transition to our envisioned β new economy β, which is stronger, more technologically savvy, and more inclusive than how we were prior to the pandemic. appropriate measures were implemented to address the impact of covid - 19 on lives, livelihoods, and the economy. vital laws ( bayanihan i and ii ) to support front - liners and small businesses were passed on time. other bills critical for economic recovery are expected to be implemented soon. one will slash corporate income tax and rationalize fiscal incentives ( create ) β this is now up for bicameral deliberations by congress ; and another will help banks dispose bad assets ( fist ) β this is now with the president for signing. as for the bangko sentral ng pilipinas ( bsp ), we implemented a long list of response measures. we injected nearly p2 trillion
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and jurisdictions to international financial standards, including the identification of non - cooperative jurisdictions. the fsb indicated its interest in assisting these jurisdictions to improve their compliance and waived the threat of sanctions for non - cooperating jurisdictions. the initial focus of the initiative ( particularly for developing countries ) was on adherence to international cooperation and information exchange standards in the financial regulatory and supervisory area. the rationale was that financial markets are global in scope and that weakness in cooperation and information exchange presented risks to the global financial system. there is a considerable lack of clarity as to how the fsb and its partner institutions are expected to operate in relation to the small, developing economies including those in the region. this ignorance has given rise to a high degree of suspicion as to motives and as to whether the mandate of these institutions is consistent with the developmental aspirations of our small caribbean economies. there is a perception that the g20 is seeking to implement its reform agenda in a nondiscriminatory manner, with all jurisdictions β large or small β being asked to adopt broad, common standards. there is also the perception that failure to implement this agenda in the manner and at the speed determined by the standard - setters, could lead to marginalization. the reality is, however, that the pursuit of an exogenous agenda that lacks national β buy - in β could present serious challenges for the small caribbean economies that have fragile domestic financial systems and are short on implementation capacity. regional policy - makers, in particular, are concerned about the impact that the new reform agenda is having on their offshore financial centers, which are an important element of their diversification strategy. they see the new information - sharing requirements as being bis central bankers β speeches onerous and leading to a migration of business to other centers in europe and asia. in the absence of compensatory mechanisms, the complete elimination of these offshore centers could have a heavy toll on income and activity in the domestic economy. i noted earlier that the reforms being proposed by the standard - setters were largely targeted to the advanced countries. while the caribbean did not suffer serious direct effects from the international financial crisis, the subsequent collapse of the cl financial conglomerate and the recent failure of a few banks in the oecs should be a stark reminder of the weakness of our regional regulatory systems. several of our countries have been taking steps, on an individual basis, to upgrade their regulatory structures. however, as a region we have been slow to adopt an agreed reform agenda. perhaps this lack
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single monetary policy for the entire region. the importance of the convergence criteria is another area that has attracted much scrutiny and analysis. as you know, the criteria sets limits for the level of inflation, the fiscal deficit, the variability of the exchange rate, and a floor on the level of foreign exchange reserves. the rationale for the criteria is that a higher level of convergence facilitates the conduct of common macroeconomic policies and obviates the need for special measures to correct imbalances in individual economies. let β s examine these two issues. in my view, the diversity in regional production structures is not wide enough to present unmanageable challenges. at any rate, problems of asymmetric shocks could be addressed by capital market mobility and by fiscal cross - border transfers. in fact, the region β s approach to the establishment of the single economy is to exploit the sizable complementarity that exists to facilitate the integrated development of the main production sectors. the issue of the convergence criteria is a bit more complicated. [ incidentally, i would like to congratulate the ccms for the very good work the institution has done for the last few years in monitoring the convergence criteria ]. having said this, however it is a fact that convergence criteria are only meaningful if they serve as an anchor for each country β s macroeconomic policies and as a disciplining device. to the best of my knowledge, there isn β t any case in the region where a country β s annual budget or its medium - term development recognizes or is specifically guided by the need to meet the convergence criteria. this is much unlike the case of the eu where an institution with political clout - the european monetary institute ( forerunner to the european central bank ) - was designated to monitor the convergence criteria, where these were seen as serious performance targets and where countries were expected to tailor their economic policies to ensure that the criteria were met. in our case, the convergence criteria are only informational ; they are not a guide to policy ; they carry no sanction, not even peer pressure. challenges the ineffectiveness of the convergence exercise underscores one of the principal challenges facing the region on the road to monetary union. this challenge has to do with the willingness of regional governments to transfer authority to regional institutions. perhaps the biggest challenge in this regard will be a decision to yield sovereignty over monetary policy to a regional central bank. the indifferent record of implementation of caricom decisions, combined with a less than robust approach to an
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business and financial markets, and regulate and supervise financial activities in accordance with the law. the hong kong dollar, as the only legal tender in hong kong, shall continue to circulate, and the existing currency issue mechanism shall continue. the hong kong dollar shall remain freely convertible, with free flow of capital and no exchange controls. the exchange fund, which holds hong kong β s foreign reserves, shall be managed and controlled by the government of the hong kong special administrative region, primarily for regulating the exchange value of the hong kong dollar. the above provisions form the foundation for defining and establishing the monetary relationship between the mainland and hong kong under the principle of β one country, two systems β. under these provisions, this relationship can be best summarised as one country, two currencies, two monetary systems and two monetary authorities, under two different social and economic systems within a sovereign state. seven principles governing the monetary relationship between the mainland and hong kong i will now set out the seven principles governing the monetary relationship between the mainland of china and hong kong. the first principle concerns the relationship between the two currencies and between the two monetary systems. according to the basic law, hong kong will continue to maintain its own system of currency issuance and management after 1997. the hong kong dollar and the renminbi will circulate as legal tender in hong kong and the mainland respectively. the hong kong dollar will be treated as a foreign currency in the mainland. likewise, the renminbi will be treated as a foreign currency in hong kong. the three note - issuing banks in hong kong will continue to issue hong kong dollar bank notes, with 100 % backing by us dollars under the linked exchange rate system. the currency in circulation in hong kong is in fact backed over five times by foreign reserves. here i would like to stress that china supports hong kong β s commitment to the maintenance of the linked exchange rate system, which has served hong kong well by providing monetary stability since its introduction in 1983. corresponding to the two currencies will be two monetary systems. they possess their own characteristics, reflecting the differences between the two economies. the two monetary systems are of equal importance to china in its reform and liberalisation. one does not precede or be subsidiary to the other. they will operate in a mutually independent manner. the second principle relates to the relationship between the two monetary authorities. it follows from the two mutually independent monetary systems of the mainland and hong kong that the two monetary authorities
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out in the four state - owned asset management companies to enable them to operate on real commercial basis with hard budget constraints. fourth, when the market has not been fully developed, it is desirable to let the institutions with rich market experiences to make price evaluation so as to avoid soft constraints and set up internal incentives. fifth, efforts should be made to establish proper incentives. without incentives or with very weak incentives, it is not possible to preserve and enhance the value of the assets and make maximum recovery. without effective incentives, people may also tend to seek personal gains from the disposal of assets. sixth, it is important to have appropriate procedures and prevent any improper practices so that the assets are disposed through market competition. however, if the market is not strong enough β for example, market participants are under soft constraints or there are adverse internal incentives, improper behaviors may arise even with sound procedures, and the procedures themselves may become a shelter disguising those improper activities. seventh, it is crucial to develop market intermediaries, since the disposal of assets relies importantly on the integrity and services of the intermediaries. eighth, the objectives of setting up asset management companies are not only to dispose the nonperforming assets in a professional way, but also to make the commercial banks stronger so that they will be able to provide better financial services. so the government needs to consider how to handle the relationship between the asset management companies and the commercial banks. the asset management companies will not operate satisfactorily and there will be much criticism from the public if the above are not handled properly. the state council attaches great importance to the issues concerning the asset management companies. premier wen jiabao has said that β the asset management companies have had five years β experiences in disposing the non - performing assets, and it is time for them to carefully review the experiences and lessons and try to resolve the long - term problems β. apart from promoting more effective internal management of the asset management companies and strengthening external regulation and supervision on them, the government has much more to do. from the longer - term point of view, china will need a well - functioning capital market to enable its economy to develop soundly.
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close monitoring. we have not yet seen concrete evidence of higher investment and strong firm creation. these are some of the ingredients needed for a return to natural, selfsustaining growth with inflation sustainably on target. with that mr. chairman, carolyn and i would be happy to answer questions. bis central bankers β speeches
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little emphasis on their other features. a number of investors failed to perform their own research or due diligence and instead relied too much on credit ratings as a measure of the ultimate risk in holding these complex debt instruments. in doing so, they failed to take into account other risks such as liquidity risk. the complexity of these instruments frequently made them opaque, and too often investors put their money and confidence into investments that they did not fully understand. at the same time, u. s. policy interest rates rose, and the basic loan quality of u. s. subprime mortgages worsened through 2005 and 2006, although this worsening did not become broadly apparent until the first half of 2007. the belated realization by the rating agencies of the poor quality of these loans resulted in downgrades of structured products with exposure to subprime mortgages, often by multiple notches. these instruments were held by a variety for a further discussion of these financial market events, please see the most recent issue of the financial system review ( ottawa : bank of canada, december 2007 ). of investment funds, including many sponsored by banks. indeed, some products were directly held by banks themselves. investors in canada, as well as those in the united states, soon came to realize that highly rated structured debt instruments could fall substantially in value and were subject to severe downgrades. as a result, they began to shun almost any type of structured product, partly because the complexity of such products made it difficult for many market participants to understand these instruments and, therefore, to accurately price the risk that these products posed to financial institutions. in canada, this included instruments such as abcp. almost immediately, non - bank - sponsored abcp stopped rolling over in canada, which led to the standstill under the montreal accord. as market players observed the downgrades of structured products based on u. s. subprime mortgages and the drying up of abcp markets, two additional concerns emerged. first, there was a concern about the financial health of counterparties, particularly banks. second, there was a concern that securitization would proceed at a much slower pace than in the past, thus requiring re - intermediation that would result in a more rapid expansion of bank balance sheets and an associated need for capital. these two concerns led to a significant increase in the interest rate spreads of bank debt over government benchmarks. widening of credit spreads as time has passed, it has not
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the bank of russia β s 4 % target. 3 / 3 bis central bankers'speeches
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with our expectations. the most important factor that we analysed today is the situation in the economy. we expect that gdp growth rates will be closer to the upper bound of our forecast range of 0. 8 β 1. 3 %. the q3 results show that economic growth accelerated to 1. 7 %. industrial output keeps growing. in october, after a prolonged slowdown, we saw an increase in annual retail sales growth. this was supported by an acceleration in real wage growth largely due to inflation slowdown amid relatively unchanged nominal wage growth. starting in september, we have observed a notable increase in budget spending on national projects. in the second half of the year, government investment started to support economic growth. at the same time, we have yet to estimate the stability of higher economic growth rates. demand remains contained in general. various investment activity and business sentiment indicators show mixed dynamics. in particular, new ( especially, export ) order expectations in industry remain low. this reflects a slowdown in global economic growth, continuing global trade tensions and geopolitical risks. these are all restraining factors for our economy. regarding the three - year forecast horizon, our expectations here have not changed overall since october. we expect that the gdp growth rate will gradually increase to 1. 5 β 2. 0 % in 2020 and to 2 β 3 % in 2022. successful implementation of national projects should provide the largest contribution to the increase in growth rates. this will support internal demand while external conditions remain a factor of uncertainty in the forecast. as regards oil prices. last week, the opec + countries reached a deal to extend oil production cuts until the end of march 2020. as of now, we stick to a conservative assumption for oil prices in our forecast : their reduction to 55 us dollars per barrel in 2020 and to 50 us dollars per barrel in 2021 and further on. we will adjust this opinion depending on, among other factors, future changes in the opec + agreements and global demand for energy commodities. as to the balance of payments, we have slightly adjusted some indicators for this year, taking into account the actual data available. let me remind you that the current account balance will 2 / 3 bis central bankers'speeches gradually decrease over the forecast horizon remaining sustainably positive : approximately to 3 % of gdp in 2020 and to 1 β 2 % of gdp in 2021. this is associated with oil price trends and external demand. the financial account balance of the private sector will shrink to about 1 % of
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proposal for a corporate sustainability reporting directive comes in. the ecb welcomed this proposed directive in a legal opinion and it is now awaiting approval by the co - legislators. the current standards on sustainability disclosure are insufficient to ensure that sustainabilityrelated financial risks are properly understood and priced by market participants. the proposed corporate sustainability reporting directive is a necessary step to address the gaps that currently hinder the development of appropriate sustainability policy, risk assessment and risk monitoring frameworks for the financial sector. this is because it will not only explicitly ask large banks to disclose their transition plans, it will also ask banks β corporate clients to do the same. this last point is crucial, as it will enable banks to assess the climate - related and environmental risks in their asset portfolios. these disclosures are therefore an important element in ensuring that banks manage all material risks, in line with what we as the prudential supervisor expect them to do. the climate - and - environmental puzzle is still highly complicated, but we can now see the pieces slotting into place. against this backdrop, it is crucial that the elements included in the commission β s proposals are implemented in actual binding legislation entering into force without 1 / 2 bis central bankers'speeches undue delay. this will smooth the path to paris for all. 2 / 2 bis central bankers'speeches
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remained virtually unchanged since summer 1996 at around Β₯20, 000 - 21, 000, varying across firms. recently, however, it has weakened somewhat. in the foreign exchange market, the yen β s appreciation reversed its course and depreciated against the u. s. dollar between summer 1995 and autumn 1996. since early 1996, the yen has continued to depreciate and has recently moved at around Β₯114. meanwhile, the yen depreciated temporarily against the deutsche mark in october and november 1996, and has recently moved at around Β₯72 - 73.
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earlier, a number of welcoming developments are taking place in our financial sector. but, much more can be done and need to be done to foster an ecosystem that promotes the overall sustainability β that will discourage misallocation of resources, limit corruptive practices, and help preserve our environment. adoption of best practices in sustainability is not just about making positive impacts to our society, but it can also be beneficial to financial institutions in a number of ways. first, it can help ensure long - term sustainability of financial institutions themselves. growing acceptance of sustainability practices globally has encouraged new standards and practices and raised the expectation of our society. early adopters of sustainability practices can meet society β s ever - increasing expectation ; take lead in setting new industry standards ; and make timely and necessary adjustment to their business models. these sustainability practices will help financial institutions mitigate strategic, operational, and reputational risks. second, financial institutions can better attract and retain a new generation of talents, especially the millennials, who are increasingly more attracted to firms with sustainability and philanthropic practices4. this is no surprise because these young individuals are becoming more concerned of sustainability issues and want to take part in making positive impacts. therefore, firms with strong sustainability values and practices can attract these talents by offering the additional satisfaction beyond remuneration benefits. third, adoption of sustainability can help financial institutions gain access to increasing pool of capitals, given the increasing volume of funds and investment products based on sustainability the 2017 millennial impact report. the millennial impact project, 2017. 5 / 6 criteria. it is estimated that more than a quarter of assets under management globally are now invested using the environment, social, and governance or esg principles5. ladies and gentlemen, it is now up to all of us β financial institutions, policymakers, and leaders β to embrace sustainability and incorporate its guiding principles in our daily lives and business practices. the objective of the bangkok sustainable banking forum is to raise awareness of the various issues of sustainability and identify gaps within our financial sector. seeing much enthusiasm from our high - level participants this morning, i am certain we can make positive changes for our future generations. i would like to take this opportunity to thank all of you for taking the time out of your busy schedules to be here with us. i would also like to thank the speakers, some of whom have traveled from different parts of the globe, for being here to share to with us their insights and best practices. let me, once again, urge all of us
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that the bank of thailand has maintained for the past 5 years and is now beginning to bear fruits. the accommodative monetary policy resulted in robust growth of mortgage lending as well as other types of consumer loans. consumer confidence rose to its highest level in recent years. domestic investments improved too. i agree that at the moment not much of the new business investment was yet financed by bank loans. the entrepreneurs still rely more on their internal cash. but the latest investment indicators showed an annual rate of increase at a high of 23 %. domestic demands have been helped not only by direct government spending, but also by other government schemes that injected funds directly to the grass roots. we had the bht 74 billion village fund ( approx us $ 1. 7 billion ) whereby each village had been allocated bht one million to on lend to village members, often under group mutual guarantees. we also had the micro loan scheme organised by the government savings bank, the government owned bank, which lend directly to the poor. ladies and gentlemen, the good news went on. despite the strong recovery, we have been able to keep inflation under check. headline inflation for 2002 was 0. 7 % and core inflation 0. 4 %. the adverse affect from high oil prices has not translated into much inflation. our currency was also quite stable. for the whole of 2002, the bath appreciated against the us dollar by less than 2 %, which was quite modest compared to other asian currencies. the international reserves level was also ample at us $ 38. 9 billion, allowing us to aim to pay back all the loans under the imf program by the end of july this year. moreover, three major credit rating agencies, s & p, moody β s, and fitch ratings, all assigned better outlook to the thai economy. japan credit rating agency did in fact upgrade thailand β s sovereign rating from bbb to bbb + last november. such widespread improvement in confidence among consumers, entrepreneurs, and investors helped support both consumption and investment throughout the year. we have also made a substantial progress in solving the non - performing loan problem. the thai asset management corporation, the central organization run by the government that took over bht 700 billion of npl β s from the commercial bank system has already worked through two - thirds of their portfolio. the recovery rate was 135 % of the tamc β s purchase prices, which was the banks β written down value. this means that the tamc should not add any further
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to grow by 3. 1 percent. while growth for 2014 has also been downgraded, the good thing is that it is expected to higher than this year, at 3. 8 percent. bis central bankers β speeches fiji β s major trading partners, those economies with which we have important trade and investment links, have also not been spared and are facing numerous challenges of their own. the us economy is quite fragile after facing fiscal challenges and poor confidence. across the atlantic, the euro zone is mired in a prolonged recession and is facing record high unemployment. we are talking here of numbers in excess of 25 percent, or 1 in 4 people without a job. it is worse for the youth of these countries where up to 2 out of every 3 young people between the ages of 18 to 25 years, or 66 percent, are without jobs. many member countries have needed bailouts and are struggling to contain debt in the midst of a growing backlash from the public over harsh austerity measures which are part of deals struck by their respective governments for the bailouts. closer to home, economic activity in australia and new zealand remains patchy as growth remains uneven across sectors. however, both these economies are expected to have growth in excess of 2. 5 percent. the reserve bank of australia lowered its policy interest rate this month to a new record low to assist growth. in japan, there are spurts of optimism following massive fiscal and monetary stimulus, although it is yet to be seen how this can spur sustained growth in light of the weak demand across the globe. as i alluded to earlier, the emerging economies, the main source of global growth in recent times, are losing steam as well. china β s heavy reliance on investment and credit to spur growth in the past decade has resulted in vulnerabilities in the financial sector, government finances and real estate, while india faces its own challenges, including high inflation. these, coupled with a slowing global demand have brought down their growth prospects to the lowest in a decade. the fijian economy let me now turn to the fijian economy. in spite of my earlier comment, we have been fortunate in that our economy has so far been somewhat shielded from the global slowdown. our gdp expanded by 2. 2 percent last year following a 1. 9 percent expansion in 2011. growth prospects are expected to improve further to around 3. 2 percent this year and, with the exception of the mining & quarrying sector, all sectors will contribute to this
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which can be streamlined and better managed by the relevant bis central bankers β speeches agencies. improving our ease of doing business will not only encourage local investors but also help attract the much desired foreign investors. we also must be mindful that consumption and investment led growth cannot be sustained for too long as they have heavy import content. this can be counterproductive if not matched by gains in our export and service sectors and negatively impact our fragile external balance. our export sector is small and highly vulnerable to changes in global demand and domestic supply constraints and shocks. in this regard, policies aimed at export diversification and promotion and import substitution remain as paramount as they were before. restoring the sugar industry back to its glory is also necessary given its importance as a major foreign exchange earner and the indirect spin - off activities it creates in the western and northern divisions. the government β s grants to the sugar mills to improve efficiency and the sugar action group β s strategies to improve cane yield and farm productivity are welcomed. while the government β s commitment to revitalizing the sugar industry is encouraging, it is imperative that these plans are brought to fruition sooner rather than later, so that the industry is able to sustain itself without grants, subsidies or preferential prices. however, it is well understood this can be a daunting and difficult task and cannot be achieved overnight. ladies and gentlemen, poor and inadequate infrastructure has been for many years, not only a deterrent to growth, but also a frustrating experience for all fijians. improved infrastructure can go a long way towards boosting agriculture as well as boosting the economies in our rural and maritime areas. again the government β s planned reforms in road and port maintenance and upgrade is welcomed and we hope the constraints of poor infrastructure no longer remain constraints moving ahead. i note that the $ 420 million earmarked for roads and other infrastructure projects this year appears to have already generated a lot of confidence and activity in the business community, not the least being the large investments in new trucks, utility vans and buses. keeping government debt low is another challenge, not only for fiji, but the world over. public debt has become a topical issue these days given the awful experience in europe which has required many countries to seek bailouts and adopt harsh and extremely unpopular austerity measures. small developing economies like fiji are even more disadvantaged as we cannot sustain high public debt for too long due to limited and volatile revenue streams of government and the need to maintain adequate fiscal buffers to
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meaningful manner. without doubt, it is our collective duty, as an industry whether as regulators or industry players, to advance the welfare of society through a more inclusive economic development. the success or failure to achieve this will reflect on us all as a collective. in this respect, bank negara malaysia is proud to offer undergraduate scholarships to two deserving local students. this initiative to provide educational opportunities for deserving talents is very much needed and it exemplifies how one can contribute in a tangible manner to the local community. for the offshore industry in labuan, which has benefitted significantly from labuan since its inception, it is time to give back. 1 / 4 bis central bankers'speeches there are various ways in which the industry can assist the local population, such as innovative and creatively designed technical and industrial training that can assist in uplifting the job prospects of local talents. for example, fit - for - work programmes that leverage on online courses to complement industry supported training programmes and on - the - job training will improve the job fit of the workforce. needless to say, strong commitment by industry captains to grant similar opportunities, apprenticeship and fit - for - work schemes will surely hasten the upskilling of the locals. the industry ought to come together to devise a scheme that give opportunities to locals to get good jobs. as we move forward, we need to be more focused on the outcomes we want for labuan. we want a more balanced growth. a clear step forward is to formulate clear and measurable targets, and to review them consistently. the primary performance indicators that should be applied must cover aspects such as ; contribution towards malaysia β s and labuan β s gdp, quality of job creation, training and development for the local population, investment in infrastructure, access to financing by local smes. we must ensure that the benefits we obtain outweigh the incentives given by the government such as the revenues foregone from the notional tax incentives offered. the old adage β β you can β t manage what you don β t measure β β captures the essence of this idea. transforming the economic structure to become one that is more diversified, resilient and sustainable over the past few decades, the finance and oil and gas sectors have been the main economic contributors to the island β s economy, representing more than half ( 51 % ) of the economy. however, the decline of oil prices since 2015 have revealed the vulnerabilities of labuan
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areas of economic potential and fulfilling infrastructure needs is a difficult but not insurmountable task. we may refer to the story of our country β s development for inspiration. within six decades, our economy moved from being a commodity - dependent nation to one that is successfully transformed. we subsequently elevated ourselves to where we are today, an economy that is open, diversified and competitive. this is only possible because of continuous investments in infrastructure over many decades. rationalising tax incentives to be in line with international practices on the global regulatory front, as we had witnessed, the unfolding of the global financial crisis revealed the significant vulnerability of international financial markets to market dislocations. calls for greater regulatory harmonisation and the adoption of international best practices have gathered speed, blurring the distinction between onshore and offshore regulatory requirements. offshore financial centres which remain mired in the old model and thinking are set to become part of a sunset industry. there have also been significant advancements with respect to international taxation practices. authorities are now more proactive in seeking to mitigate the distortionary effects of harmful tax competition on the allocation of resources and its negative implications on national tax bases. malaysia, until early this year, has been an observer of the oecd β s inclusive framework on base erosion profit shifting ( beps ). since january 2017, we have agreed to become a participating member in the inclusive framework. this will allow malaysia to participate in the beps related work on equal footing with other oecd and g20 countries. we will also be able to provide direct inputs to shape the content of the beps related standards. in addition to that, work has commenced on reviewing respective jurisdictions β preferential tax regimes against the standards outlined, to combat harmful tax practices. the standar4, which forms one of the four beps minimum standards, will require authorities to step up on transparency and substance rules for geographically - mobile activities, such as financial services. it seeks, for one, to prohibit the shifting away of income into preferential tax regimes where businesses have little or no economic activity. such international developments will directly influence ibfc β s business model going forward. the world that we live in, since the creation of offshore labuan in the 1990s, has drastically changed. what was relevant then is no more relevant now. we have no choice but to change with it. it is an opportune time for us to review of the current tax framework for labuan. the purpose of this review
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all strengthened, and iceland β s competitiveness and potential for expansion at home and abroad have improved enormously. the old cliche of iceland β s undiversified economy which also happened to be a fact is a thing of the past.
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29 november 2018 deputy governor rannveig sigurΓ°ardottir. introductory remarks at the 2nd annual nordic cyber in finance conference, helsinki, 29 november 2018 let me begin by saying that this conference is both timely and interesting for me, as i have only been in office for five months. given that i come from the monetary policy department at the central bank of iceland, cybersecurity has not been much on my agenda until now. it is, nonetheless, a very important topic. the central bank of iceland, and other central banks are facing several new challenges in this area, both in the financial sector generally and central banking more specifically. last week i attended an interesting macroprudential policy conference at danmarks nationalbank. the discussion paper prepared for that conference was called while the sun is shining, prepare for a rainy day. sitting there, i pondered what the discussion paper for this conference today might be called. perhaps something like the snowstorm is here β what do we wear? cybercrime is now the world β s fastest - growing type of crime. it has shot up to second place on the list of the top ten business risks worldwide, after not even making the list five years ago. the financial sector is particularly important because it greases the wheels of our economies, and cyber risks pose mounting threats to the financial system. developments since the emergence of the internet show that new technologies have brought with them new challenges. we only need to think of robotics, artificial intelligence, blockchains, and smart phones with 5g wi - fi to realize the extent of the changes that lie ahead for financial services. new technologies also bring opportunities. the austrian economist, finance minister, and banker joseph schumpeter demonstrated in the 1920s that successive waves of technological change raise productivity, income, and living standards. however, we know from long experience that technological change often results in costs involving new risks that must be addressed in order to optimise the net benefit. so while fintech will broaden consumers β range of choices in financial intermediation, it also brings new risks, both to the security of transactions and to privacy. to maintain financial stability and real economic activity, we need payment and settlement systems that are secure. as a result, cybersecurity has moved from being a technical issue to a central bank issue. that is why the nordic central banks have set up this forum for discussion and cooperation so as to foster closer cooperation on cyber resilience and cyber
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effect of emu membership would be the transaction gains as a result of the currency borders disappearing. these are the costs and the inconvenience of exchanging currency when one visits or trades with different countries in the euro area. another concrete advantage is that the administration costs companies have been forced to bear to safeguard against undesirable fluctuations in exchange rates would disappear. it is probably of greater significance for the economy that a single currency would promote competition to the advantage of consumers, who would meet lower prices and thereby have more money left in their purses. when all parties use the same currency unit, it is possible to make price comparisons between countries. competition also facilitates the work on holding back inflation. the emu has particular importance for the scope of the trade. many economists have tried to estimate this gain by looking at the way fixed and floating exchanges respectively affect trade, and they have found very little difference. however, a single currency is not the same as a fixed exchange rate. there are considerable practical and psychological differences. professor andrew k. rose at berkeley in the usa, together with some other economists, has instead compared trade within monetary unions with trade between countries outside of the monetary union, and made adjustments for facts such as monetary unions often sharing the same language, culture and other regulatory frameworks. when professor rose presented such a study for sweden some time ago, he claimed that emu could increase trade and integration by as much as 30 - 50 per cent over the course of a few decades. this could lead to an increase in swedish welfare of over ten per cent in the long term. rose himself admits that the figures are uncertain and other economists believe in much lower figures for trade gains. so what about the disadvantages? giving up one β s own currency entails also giving up some of the right to self - determination in economic policy. the instrumental rate would no longer be set in stockholm, but in frankfurt and would reflect the economic situation in a large monetary area. the criticism of a swedish membership of the eurosystem has often concerned the possibility of being able to conduct an independent stabilisation policy under these circumstances. this is based on a supposition that the swedish economy could for some reason become out of synch with the economic developments in the euro are, what is termed an asymmetric shock. an independent monetary policy and currency, in addition to fiscal policy, gives us the opportunity to stabilise our economy ourselves a form of shock - absorber that will
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share prices prompted households and the financial institutions that invest households'money to seek out investment alternatives that appeared safer. the downward adjustment of the future outlook itself also resulted in uncertainty. this in turn was compounded by the uncertainty caused by international terrorism and the attempts to deal with this by putting pressure on iraq. this contributed to an increase in the spreads between corporate and treasury bonds as well as to greater volatility in the markets. to counteract the effects of balance sheet and income statement adjustments on the real economy, monetary policy was eased in several countries around the world. at the same time, fiscal policy became more expansionary. the short - term interest rate fell while more subdued inflation prospects and a flight to " safe " investments caused a drop in long - term rates as well. the low interest rates together with the search for safe investments spread to other asset markets. the price of gold increased, and there was a rise in housing prices in several countries as households took advantage of the low level of interest rates to boost their housing consumption. the rising property prices counteracted the fall in the value of households'financial assets. this in turn has led to households in several countries continuing to increase their indebtedness, particularly to finance housing. however, these historically large changes in the asset and debt markets have thus far proceeded smoothly. in spite of the fact that we have seen the biggest decline in share prices since the 1930s, the largest suspension of national debt payments in history ( argentina ), the biggest corporate bankruptcies ( enron, worldcom ), one major terrorist attack and a wave of small ones, the financial markets have been strong enough to handle this. risk diversification and the emergence of new financial derivatives are two explanations for the preserved stability in the financial system. while developments in the real economy have been affected by the balance sheet and income statement adjustments, the business cycle bottomed out at a higher level of growth than was feared, given the considerable imbalances that existed at the height of the bubble in 2000. the economy is now undergoing a slow recovery, driven by the normal cyclical course of events but subdued by balance sheet adjustments and geopolitical uncertainty. balance sheet adjustments will continue, however, as there are still substantial savings imbalances between different regions of the world. at the same time, the risk of war has caused flight to safer assets and thereby resulted in low interest rates. recently, there has been an improvement in earnings and a slight fall in credit
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. for over a decade, following a joint agreement with the federal government, the bank has operated with a system of inflation targets. we aim to keep the trend of consumer price inflation at the 2 per cent midpoint of a 1 to 3 per cent range. because we have managed to keep inflation inside the target range through most of the past decade, canadians'expectations for inflation have become firmly anchored around the 2 per cent target. right off the top, let me assure you that the bank of canada will continue to pursue a monetary policy focused on returning inflation to that 2 per cent target, should it deviate in either direction. canada's inflation - targeting framework operates symmetrically ; that is, we minimize the chances of both a sustained upward drift in inflation and the threat of deflation. recently, rates of inflation in canada have come in higher than expected. at the same time, a weak global economic environment, the huge drop in equity prices, and declines in the prices of some manufactured goods are raising fears of deflation in other countries. let's look at both these risks. the upside risk : inflation first, let's consider the upside risk of accelerating inflation. it has been more than a decade since canada has experienced prolonged high inflation. since the targeting system was put in place, both the trend of inflation and inflation expectations have come down to near 2 per cent and stayed there. in recent months, cpi inflation has risen substantially, for several reasons. we've seen higher oil and gas prices, higher home and auto insurance premiums, higher tobacco taxes, and, in ontario, higher electricity prices. there has also been the " echo effect " of temporary price discounting in late 2001, following the 11 september terrorist attacks. at the same time, stronger demand in canada has been pushing up prices in some sectors, such as housing and some services. these pressures are starting to show up somewhat more broadly in the cpi data ; and, without offsetting declines in other components of the cpi, these pressures are having an impact on all our measures of trend inflation. this suggests to us that demand conditions may be strong enough now to make it easier to raise prices and widen profit margins. the bank's policy aims to maintain total cpi inflation at 2 per cent, or to return it to that point within 18 to 24 months. with that horizon in mind, we need to look through any short - term volatility β and there's been a lot of short -
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t know how the situation in the middle east will be resolved. so, we have made an assumption that the related uncertainties will dissipate in the second half of 2003. our projections for the global and canadian economies are based on this assumption. so, let me now turn to the canadian outlook. after growing significantly faster than potential during the first half of 2002, canada's economy slowed to a growth rate close to potential in the second half of the year. even with this slowdown, the level of demand has remained near capacity since the middle of last year. as we look forward, we foresee below - potential growth in the first half of the year. but we anticipate increased demand pressures in the second half of 2003 and into 2004, as global uncertainties diminish. however, with an appropriate reduction in the amount of monetary stimulus, we see the level of output remaining close to capacity during 2003 and into 2004. as i said earlier, recent inflation rates have come in somewhat higher than expected. this reflects certain one - off price increases, such as higher insurance premiums, but also some broadening of price pressures as a result of stronger demand. the one - off factors will hold the core rate of inflation well above the 2 per cent target in the first half of this year. in the second half and into 2004, we expect the core rate to ease, as the effect of the one - off factors diminishes and the removal of monetary stimulus keeps demand pressures in check. the outlook for total cpi inflation this year will continue to be importantly affected by developments in crude oil prices. with oil and gas prices where they are now, we could see cpi inflation rates between 4 and 4. 5 per cent in the first quarter. if oil and gas prices decline in the second half, as futures prices suggest they will, then total cpi inflation would move back down in line with core inflation. let's remember that the stance of monetary policy remains stimulative. to return inflation to the 2 per cent target over the medium term, we will need to remove some of the stimulus. in other words, we will need to raise interest rates. a number of elements will come into play in determining the pace at which we will reduce monetary stimulus. let me reiterate them. first, although much of the recent run - up in inflation was the result of special factors, we can't rule out the possibility that demand pressures are becoming more prominent
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eased somewhat β and β eased considerably β. the net percentages for responses to questions related to contributing factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing. β cost of funds and balance sheet constraints β is the unweighted average of β banks β capital and the costs related to banks β capital position β, β access to market financing β and β liquidity position β ; β risk perceptions β is the unweighted average of β general economic situation and outlook β, β industry or firmspecific situation and outlook / borrower β s creditworthiness β and β risk related to the collateral demanded β ; β competition β is the unweighted average of β competition from other banks β, β competition from non - banks β and β competition from market financing β. the net percentages for β other factors β refer to an average of the further factors which were mentioned by banks as having contributed to changes in credit standards. the latest observations are for the fourth quarter of 2023. the restrictive stance of our monetary policy has contributed to the stagnation of euro area real gdp in the last six quarters. given that monetary policy operates with a lag, it will continue to exert a negative impact on economic activity, with growth projected to remain anaemic in the first quarter of 2024. in particular, private consumption in the euro area has been subdued. euro area retail sales were broadly unchanged at the start of the year, pointing to continued weak dynamics in spending on goods, and consumer confidence remains below its long - term average ( chart 10 ). chart 10 retail sales, consumer confidence and business expectations in the euro area retail sales and sales by type of good in specialised stores consumer confidence and business expectations ( indices : q4 2021 = 100 ) ( panel a ) : standardised percentage balances, panel b : percentage balances ) sources : left - hand panel : eurostat and ecb calculations ; right - hand panel : european commission and ecb calculations. notes : right - hand panel : panel a ) : standardised over pre - covid period ( standardised over april 2019 - january 2024 ), expectations over next 12 months ; panel b ) : demand for services and retail trade business situation over the next three months, motor vehicles refer to sale and repair, contact - intensive services are an aggregation of food, accommodation and travel services based on hicp weights
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from 4. 5 % in 2022 ), slightly below headline inflation, which stood at 5. 4 % ( down from 8. 4 % in 2022 ). in 2024 compensation per employee is projected to increase by 4. 5 % and annual average headline inflation is projected to be 2. 3 %. 8. based on findings from the price - setting microdata analysis network ( prisma ). see dedola, l., henkel, l., hoynck, c., osbat, c. and santoro, s. ( forthcoming ), β what does new micro price evidence tell us about inflation dynamics and monetary transmission? β, economic bulletin, ecb. 9. arce, o. et al. ( 2023 ), β how tit - for - tat inflation can make everyone poorer β, the ecb blog, 30 march. 10. with inflation projected to remain too high for too long, the ecb had to prevent a de - anchoring of inflation expectations. this danger warranted substantial policy rate increases to safeguard against the materialisation of upside risks. 11. the pace of decline in our balance sheet has been driven by maturing and early repayments under the third series of our targeted longer - term refinancing operations. we also brought both the full and partial reinvestment phases of our asset purchase programme to an end and, at the end of 2023, announced the gradual phasing - out of reinvestments under the pandemic emergency purchase programme. 12. longer - term inflation expectations were revised down by 0. 1 percentage points to 2. 0 % in the latest survey of professional forecasters ( first quarter of 2024 ). expectations for long - run expected hicp inflation also remained unchanged at 2. 0 % in the most recent survey of monetary analysts ( march 2024 ). 13. specifically, since may 2023. 14. empirical analysis by ecb staff shows that core inflation is not a timely indicator of medium - term inflation and that using current core inflation to forecast future headline inflation does not produce substantial gains compared with a simple autoregressive model, especially over short horizons. see also lenza, m. and reichlin, l. ( 2011 ), β should the ecb use core inflation as a signal for medium - term inflation? β, voxeu column, 24 june and panetta, f. ( 2023 ), "
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euro area bank lending survey for the third quarter of 2016 indicates some further improvements in both supply and demand conditions for loans to the non - financial private sector. furthermore, banks continued to report that the ecb β s asset purchase programme and the negative deposit facility rate had contributed to more favourable terms and conditions on loans. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to preserve the very substantial amount of monetary support that is necessary in order to secure a return of inflation rates towards levels that are below, but close to, 2 % without undue delay. monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. as emphasised repeatedly by the governing council, and as again strongly echoed in both european and international policy discussions, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the european level. the implementation of structural reformsneeds to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. structural reforms are necessary in all euro area countries. the focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation. the enhancement of current investment initiatives, including the extension of the juncker plan, progress on the capital markets union and reforms that will improve the resolution of non - performing loans will also contribute positively to this objective. in an environment of accommodative monetary policy, the swift and effective implementation of structural reforms will not only lead to higher sustainable economic growth in the euro area but will also make the euro area more resilient to global shocks. fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the european union. full and consistent implementation of the stability and growth pact over time and across countries remains crucial to ensure confidence in the fiscal framework. at the same time, all countries should strive for a more growth - friendly composition of fiscal policies. we are now at your disposal for questions. 2 / 2 bis central bankers'speeches
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##dition for a stable and long - term growth. it also serves to anchor the inflation expectations and guarantee the adequate monetary support to the economy at this stage of development. the bank of albania remains committed to act in concordance with the actual and expected performance of economic indicators. the shift of the inflationary risk balance downward, the strengthening of financial stability and inflation expectations in economy will be carefully considered in the future decision - making of the bank of albania.
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supervisory issues. i hope that the presentations that will take place today and tomorrow will stimulate and provide further ideas for the insurance community in further developing insurance markets and products in the gcc countries. all that remains is for me to wish you an interesting and productive forum, and to thank the organizers, once again, for putting on a stimulating program. thank you.
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rasheed mohammed al maraj : financial sector education and training in bahrain address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the signing ceremony : bibf - sii mou, manama, 20 february 2008. * * * good afternoon lord mayor, mrs. ruth martin and other members of the sii team, colleagues from the bibf, ladies and gentlemen, as governor of the central bank of bahrain ( cbb ) and in my capacity as chairman of the bibf, i would like to welcome you all to the launch of a new partnership between the bibf and the securities & investment institute ( sii ). i am delighted to note that the sii is the largest and most widely respected professional body for the securities and investment industry in the uk and that its vocational courses attract over 37, 000 candidates a year. the cbb welcomes and, indeed, supports the bibf - sii strategic partnership which will further deepen the scale and scope of internationally recognized qualifications and training courses offered by the bibf. in bahrain, we recognize and appreciate the value of education and training, so it is no surprise that fostering and nurturing a vibrant training institute, such as the bibf, has been an integral element of bahrain β s success as an international financial centre. through the provision of high quality training and education programmes catering specifically for the financial sector, the bibf has helped create a talent pool for banks and other financial institutions to draw from. today, bahraini nationals account for over 70 % of total financial sector employment, which has continued to accelerate over the years. in fact, bahrain β s financial sector continues to see the highest value - added per worker. the sector employs 2. 7 % of bahrain β s civil service and private sector workforce, while contributing over 25 % of gdp. however, as you are all aware, the financial services industry is one of the most rapidly growing and evolving segments of the global economy. this means that people working in this industry have to keep upgrading their expertise if they are to compete effectively in the market for financial sector jobs. the bibf, with the support of the cbb, is committed to fulfilling its mandate of continuously growing bahrain β s talent pool and β shaping tomorrow β s financial leaders today β. from its modest beginnings, the bibf has grown into a highly respected institution, which delivers a wide range of degree and diploma programmes, professional qualifications and short
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of the euro area. also, at a regional level outside europe, progress is ongoing in asia towards strengthening the asian financial safety net, known as the chiang mai initiative multilateralisation ( cmim ), with the doubling of the cmim fund to usd 240 billion. in parallel, important steps have been taken to mitigate the spreading of risks within a highly interconnected global financial system, making it more resilient to unexpected events : bis central bankers β speeches systemically important financial institutions, which contribute to the spreading of risks given their high level of interconnectedness, will be subject to stricter capital requirements under the basel iii agreement ; financial infrastructures have been made more resilient. first, the financial stability board is working on safeguards aimed at promoting global clearing in order to facilitate access to, and the use of, global clearing houses. second, regulators and overseers have just finalised a new set of regulatory principles for financial market infrastructures aimed at ensuring that any such infrastructures, whether domestic or global, will be better able to withstand shocks and unforeseen events. moreover, regulators and overseers are required to adopt regimes for effective cooperation with each other. 2. further improvements to global financial stability nets while all these measures have undoubtedly made an important contribution to stabilising the global economy, many observers have argued that gaps remain in the current global financial safety nets. existing mechanisms for dealing with crises have been seen as being deficient in three respects : ( i ) insufficient amount of financial fire - power ; ( ii ) insufficiently flexible or fast decision - making and ( iii ) insufficient coordination with respect to both financing and surveillance. these deficiencies have been seen as leading countries to increase their foreign exchange reserve holdings. for the holders, the great attraction of reserves is that they provide instantaneous and unconditional liquidity. however, the accumulation of a large stock of reserves is not only based on precautionary motives. moreover, even at the level of the individual holder, there are downsides as reserves come with a quasi - fiscal cost. 1 how can we go forward and what can be done differently? overall, there is widespread agreement about what a global mechanism should do : ( i ) reduce the demand for selfinsurance through reserves accumulation ; ( ii ) provide fast - disbursing financial assistance in large amounts to the β innocent bystanders β ; and ( iii ) reduce global imbalances. 2 however, it is clear
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- 222 ; and galΔ±, j., gertler, m. and lopez - salido, j. d. ( 2003 ), β european inflation dynamics β, european economic review, vol 47 ( 4 ), pp. 759 - 760. 7. more accurately, inflation depends on the gap between marginal costs and a frictionless optimal level. 8. ratner, d. and sim, j. w. ( 2022 ), β who killed the phillips curve? a murder mystery β, finance and economics discussion series 2022 - 028. washington : board of governors of the federal reserve system ; see also stansbury, a. and summers, l. h. ( 2020 ), β the declining worker power hypothesis : an explanation for the recent evolution of the american economy β, nber working paper, no 27193. 9. other factors explaining the secular decline in the labour share relate to technology and globalisation. for an overview, see dao et al. ( 2017 ), β drivers of declining labor share of income β, chapter 3 of the april 2017 imf world economic outlook. 10. see also galΔ± et al. ( 2003, op. cit. ). 11. real wages are defined as compensation per employee deflated by the hicp. 12. see battistini et al. ( 2022 ), β wage share dynamics and second - round effects on inflation after energy price surges in the 1970s and today β, published as part of the ecb economic bulletin, issue 5 / 2022. 13. for example, the lowest quintile of the income distribution spends around 35 % of their income on utilities and transport services ( i. e. energy - intensive consumption ), while the top quintile spends less than 10 %. 14. schnabel, i. ( 2022 ), β the globalisation of inflation β, speech at a conference organised by the osterreichische vereinigung fur finanzanalyse und asset management, vienna, 11 may. 15. jorda et al. ( 2022 ), β wage growth when inflation is high β, frbsf economic letter 2022 - 25, 6 september ; and carstens, a. ( 2022 ), β the return of inflation β, speech at the international center for monetary and banking studies, geneva, 5 april. 16. overall, however, only around 3 % of private sector
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feel they need to be supplemented by securities infrastructure which embodies an integrated approach at the european level. the infrastructure gap is mainly in the post - trading sector as there seems to be no shortage of new trading platforms which aspire to operate at the european level. the eurosystem operates as a catalyst, facilitator and operator in relation to europe - wide infrastructures. it provides a borderless and neutral infrastructure for settlement in central bank money, via target2. looking forward, the eurosystem will provide the next generation of β collateral central bank management β ( ccbm2 ). still more significantly, the eurosystem will deliver target2 - securities ( t2s ) no later than 2013, to make settlement of securities against central bank money at least as secure, efficient and cheap as domestic securities settlement are in any european market today. my understanding is that these projects need to work in harmony with other integration projects, especially harmonisation. i expect to see significant progress in harmonisation throughout the securities life cycle, through the catalytic effect of the target2 - securities. the eurosystem will initiate work together with market participants to develop action plans for harmonising both settlement - related processes and processes related to corporate actions. we expect that market participants will constructively contribute to this work and the key issue is to ensure that harmonisation solutions are implemented. the second area which i would like to address relates to the growing importance of cross border banking operations and the internationalisation of the wholesale market, which requires changes in the way national supervisory authorities operate. since systemic risks extend beyond national borders, we need to strenghten effective co - operation arrangements among national authorities. the task is complex, and i think the answer requires us to develop common practices for consistent supervisory structures in financial services, including common reporting and risk management standards. the third area relates to the greater interdependencies between trading and post trading partners. in consequence, the operational processes, risk management policies and procedures of each system are related to those of other systems. while these interdependencies between market users and systems generally improve the resilience and efficiency of markets and their payments and settlement processes, they may also allow financial disruption to pass, like a virus, across systems and their participants, with second round effects to other market activities. i feel that the risks inherent in these growing interdependencies throughout the european and cross - atlantic value chain require systems, market users and service providers
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, oecd economics department working papers no 1309. 5 german council of economic experts ( 2017 ), β towards a future - oriented economic policy ". 5 / 5 bis central bankers'speeches
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top - of - the - line professionals continue to work at the nbu to promote the macroeconomic and financial stability of ukraine and the institutional capacity of its central bank. however, it is crucial that their work goes on uninterrupted. it is imperative that the president, government, and political forces finally begin to work effectively with the central bank. after all, the nbu has made tremendous efforts to speed up the development of the economy and financial markets and to advance the welfare of all ukrainians, and can do a lot more if not interfered with. let me focus only on what has been accomplished during my term as governor since march 2018. we have finally curbed inflation. every year, we broke our own records in terms of bringing inflation closer to a level that is optimal for the economy. in 2018, inflation stood at 9. 8 %. in 2019, it was down to 4. 1 %. through its consistent monetary policy, the nbu has 1 / 4 bis central bankers'speeches achieved an inflation target of 5 % Β± 1 pp sooner than expected, and inflation has since remained low. our ability to be consistent in maintaining price stability in the face of political cycles was widely recognized by the international community last year, when the nbu received the globalmarkets award. for the first time since ukraine gained independence, the key policy rate has been reduced to 6 %. two years ago, when the parliament appointed me to lead the nbu, the key policy rate stood at 17 %. today the central bank pursues a stimulating monetary policy aimed at reviving economic growth. but we have not stopped there. we have introduced completely new tools to support the economy. those include refinancing loans for banks for up to five years, an interest rate swap for banks, and an fx swap facility with international institutions. we have made single - digit loan rates a reality. yes, it will be some time before low inflation and the low key policy rate have their full impact on the cost of debt. but it will definitely happen. of course, if creditors β rights were better protected, it would happen sooner, but this is beyond the nbu β s purview. we have strictly adhered to a market - driven, flexible exchange rate regime, while at the same time ensuring that the hryvnia is stable. moreover, we have worked to develop the fx market. as a result, today the exchange rate is set transparently on leading international
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platforms, where all players participate anonymously. we have come under criticism for strengthening the hryvnia last year. those criticizing us said that the nbu should have been more active in the fx market, when in fact the nbu was active enough that last year alone it added to international reserves a record usd 8 billion, having purchased it in the fx market. yes, if we had bought more dollars, we would not have heard complaints from exporters. but we would have heard complaints from importers and, most important, from ordinary people who earn and spend hryvnias. therefore, we kept the balance and, as befits a central bank, pursued a neutral policy, rather than playing into the hands of individual market participants. another category in which the nbu set a new record every year is international reserves. this time we hit a new high. while i was in office, ukraine β s financial safety cushion increased by usd 10 billion, from usd 18 to usd 28 billion. last year, ukraine was popular among international investors. although this provided good financial support to the government, this was used to criticize the central bank. at the same time, our critics ignored the fact that international reserves grew, not least due to foreign exchange inflows from nonresidents. this enabled us to overcome, reasonably painlessly and quickly, the fx market turbulence in march caused by the coronavirus pandemic. in 2019, the nbu embarked on a large - scale liberalization of the fx market. this was a truly revolutionary event, for which ukrainian businesses and households had been waiting for a quarter of a century. the nbu has already lifted about 40 fx restrictions, which had for years hampered business development and investment inflows, while also limiting the rights of ukrainians to freely engage in fx transactions. the banking system is healthy, highly liquid, and profitable. since november 2018, not a single bank has been removed from the market. the general public knows who owns each and every bank. this is reviving confidence in the banking sector. this is evidenced by deposit growth β since the start of 2018 hryvnia household deposits have risen by one - andhalf times. moreover, thanks to years of continuous preparation of the banks for potential problems, the banking system entered the coronavirus crisis stronger than ever. it is now an outpost of financial stability and a lifesaver for the economy. 2 / 4 bis central bankers'speeches cashless
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mortgages and personal loans. it can be concluded from the results that there is less knowledge of savings products than of debt or insurance products. shares and pension schemes are well known ( around 90 % have heard of them ), but only 73 % of interviewees have heard of savings accounts and term deposits and only 78 % of fixed income, while the percentage of those who have heard of life and medical insurance, credit cards, mortgages and personal loans is, in all instances, higher than or equal to 95 %. in the case of savings vehicles, moreover, significant differences are observed on the basis of educational level ( primary, secondary or university ) and the level of income which, generally, are less marked in the case of debt and insurance products. secondly, as regards whether interviewees have or have recently acquired any of these financial products, a notable 97 % have a current account, 43 % have some type of savings vehicle and 41 % have debt of some sort. the commonest saving product is the savings account, followed by pension schemes. once again differences are observed on the basis of educational level and level of income, more markedly so in the case of savings vehicles than in that of debt products. among the international patterns identified in respect of the holding of financial products, it is worth mentioning that while in spain holding a current account is more generalised than in the oecd and eu countries, holding savings products stands slightly below the average for these countries. it should be borne in mind, however, that the results on the comparison of the holding of savings products should be viewed with caution since the list of products considered as savings vehicles may vary from country to country. 4 / 7 as to the recent acquisition of financial products, the survey shows that 38 % have acquired some type of saving or insurance vehicle, a means of payment, or have incurred debt over the past two years. this percentage is lower than the average observed in the oecd countries ( 54 % ) and eu members ( 50 % ). the most frequently acquired product in spain is the credit card, followed by personal loans. here, too, there are significant differences in the acquisition of savings products based on educational level and on the level of income, which are less marked in the case of debt products. thus, in the case of interviewees with a university education, 32 % acquire savings products, while in the case of those with primary schooling, only 8 % acquire them. by level of income, 43 %
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robust fundamentals of the saudi economy have prepared an appropriate environment for banks to adapt to successive, regional and international changes during the previous period. banks operating in the kingdom have been able to overcome the crises that hit other economies, and have been able to benefit from banks β experiences and modern banking technology. this is reflected in the diversity of banking services and products offered in the kingdom and their highly advanced level. currently, 15 banks are operating in the kingdom with a network of 1, 251 branches at the end of the first quarter of 2006, including the branches of gulf and foreign banks such as the gulf international bank, the emirates bank, bnp paribas and deutsche bank which was opened last week. in addition, licenses were granted to several gulf and foreign banks to open branches in the kingdom. also, the establishment of a saudi bank with a paid - up capital of rls 15 billion has been approved. preparations are currently underway on finalizing the procedures of its establishment under the name of β bank alenma β. on this occasion, i congratulate the nbk on the commencement of its operation in the kingdom, and i wish the bank and its staff good luck and success.
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