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a quarter of the import share of german exports at just under 41 Β½ %. fundamentally, germany β s surplus is not due to distortions, but the result of market processes. as the european commission pointed out in its recently published in - depth review, the surplus is the result of an interplay of various factors and developments in germany as well as globally and among its euro - area partners which affected savings and investment in the domestic economy. germany β s post - reunification situation was marked by high unit labour costs and high unemployment. to bring real wages down to a market clearing level, a period of wage moderation ensued. this, combined with the realisation that demographic developments would require greater private savings to ensure a comfortable retirement, has caused the saving rate of households to rise gradually over the last decade. a similar picture holds for the development of corporate savings. at the turn of the millennium, german companies were highly leveraged. at the same time, regulatory and tax incentives made equity more attractive by comparison. both developments led companies to scale back investment and bolster their equity positions by retaining earnings β to a point where savings actually exceeded investment, an oddity as far as the corporate sector is concerned. while both household and corporate savings rose, overall investment remained subdued β germany went from being a capital importer in the 1990s to a capital exporter, and so from posting a current account deficit to a surplus. the low level of overall investment is attributable to numerous factors. residential investment fell markedly in the aftermath of the real estate bubble of the 1990s. business investment has been muted on average as well. the overall investment ratio was 16. 7 % in 2013, compared with 22. 3 % in the year 2000. following the sharp downturn induced by the financial crisis, corporate investment rebounded at first, but then fell a second time, as uncertainty due to the crisis in the euro area started to weigh on growth prospects. finally, the consolidation of public finances was accompanied by a fall in public investment. overall, cyclical factors feature prominently when trying to explain the low levels of investment over the last 10 to 15 years. looking ahead, some of these effects can be expected to abate. residential investment has gone up markedly in recent years, fuelled by pent - up housing demand and low interest rates. demographic trends suggest, however, that this development should slow down over the medium term. corporate investment should follow an upward trajectory as well, as uncertainty surrounding the euro area
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size in the banking sector. this needs to change. i am convinced that we need to strengthen the principle of proportionality in banking regulation. now some of you might want to stop me at this point and ask : how do you reconcile that with the full and consistent implementation of basel iii that you just advocated? to answer this, let me point to the original idea of the basel rules. the task of the basel committee was, from the outset, to create globally harmonised rules for large, internationally active banks to ensure that they are stable and operate on a level playing field. over time, and especially with basel iii, this resulted in an increasingly complex regulatory framework β a reflection of the mounting complexity of the global banking business. this complexity is warranted for large, interconnected banks, and the sector β s global players are certainly in a position to get to grips with the complex rules. but in actual fact, the bulk of these rules, especially in europe, apply not only to major multinational institutions but to every single bank including small savings banks and the majority of cooperative banks. and that has turned out to be quite a problem. because small and medium - sized institutions do not benefit from the same economies of scale that their larger rivals can harness. for example, small institutions face much heavier costs, relatively speaking, when they invest in itinfrastructure or hire additional employees for their compliance department. the implementation of the basel framework in european regulation today already takes account of proportionality to a certain degree. but in practice, i repeatedly encounter situations where, in my view, the existing gradations are inadequate. so the proportionality principle is nothing new, but it hasn β t been anchored deeply enough yet. i am very convinced that proportionality is important β for several reasons : it ensures fair competition on a level playing field. it prevents the unwanted side - effect of structural policy through regulation. it strengthens the principle of risk - oriented supervision. it prevents regulation from unnecessarily hampering efficiency. all in all, i think that proportionality is necessary to safeguard the original goals and spirit of the basel framework. 5. addressing proportionality in europe the european union is acknowledging this, and we are taking action. the process started back in 2016 with an initiative launched by the finance ministers from the uk and germany. as we at the bundesbank also felt strongly about the topic, we went public with the first set of specific proposals for addressing proportionality in
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habit. β strict and consistent application of the stiffened rules is therefore important. here, the commission has a special responsibility. in this context i am worried that the fiscal policy rules have become ever more complex and, in turn, so has monitoring compliance with them. it has now become almost impossible for experts, let alone the general public, to determine whether or not countries are complying with these budget rules. this naturally reduces the binding force of the rules. the binding force of the rules can also be diminished if there is the impression that they are not being strictly interpreted by the bis central bankers β speeches commission. and the assessment procedure gives the commission greater and more discretionary leeway. metaphorically speaking, we need to make sure that the commission does not go beyond its role as a referee and move the goalposts mid - game. based on past experiences it is clear to me that stiffening the rules alone won β t suffice to enforce the principle of individual responsibility. at its core, this principle requires that sovereigns, banks, and investors bear the consequences of their decisions. this implies that it is primarily up to the respective government and its citizens to come up with the revenue required for repaying public debt. this holds, in particular, since high levels of public debt often go hand in hand with substantial private assets. but it also implies that the risk of non - repayment ultimately lies with the investors, since they are the ones who reap the return when things go well. and if the fiscal limit has been reached for real, public debt needs to be restructured without posing a systemic threat to financial stability. the introduction of collective action clauses into sovereign bonds was a first step in that direction. but more steps are needed. the bundesbank has put forward a proposal for sovereign bonds to include an automatic maturity extension of three years in case a sovereign accesses the european rescue mechanisms. this automatic maturity extension would allow the sovereign in question to tackle its fiscal challenges while preventing investors from bolting. liability and control would be brought better into balance. the amount of official financial support would be reduced, and time is bought to figure out if the problem is one of temporary illiquidity or insolvency. but ultimately, all these questions boil down to the quip of american economist allan meltzer : β capitalism without failure is like religion without sin. it doesn β t work. β for the above proposals to work, we need to make sure that the ins
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a disturbance in one market segment or one country is likely to be transmitted far more rapidly throughout the world economy than was evident in previous eras. in earlier generations information moved slowly, constrained by the primitive state of communications. financial crises in the early nineteenth century, for example, particularly those associated with the napoleonic wars, were often related to military and other events in faraway places. an investor β s speculative position could be wiped out by a military setback, and he might not even know about it for days or even weeks, which, from the perspective of central banking today, might be considered bliss. as the nineteenth century unfolded, communications speeded up. by the turn of the century events moved more rapidly, but their speed was at most a crawl by the standard of today β s financial markets. the environment now facing the world β s central banks - - and, of course, private participants in financial markets as well - - is characterized by instant communication. this morning i should like to take a few minutes to trace the roots of this extraordinary expansion of global finance, endeavor to assess its benefits and risks, and suggest some avenues that can usefully be explored in order to contain some of its potentially adverse consequences. a global financial system, of course, is not an end in itself. it is the institutional structure that has been developed over the centuries to facilitate the production of goods and services. accordingly, we can better understand the evolution of today β s burgeoning global financial markets by parsing the extraordinary changes that have emerged, in the past century or more, in what we conventionally call the real side of economies : the production of goods and services. the same technological forces currently driving finance were first evident in the production process and have had a profound effect on what we produce, how we produce it, and how it is financed. technological change or, more generally, ideas have significantly altered the nature of output so that it has become increasingly conceptual and less physical. a much smaller proportion of the measured real gross domestic product constitutes physical bulk today than in past generations. the increasing substitution of concepts for physical effort in the creation of economic value also has affected how we produce that economic output ; computer - assisted design systems, machine tools, and inventory control systems provide examples. offices are now routinely outfitted with high - speed information - processing technology. because the accretion of knowledge is, with rare exceptions, irreversible, this trend almost surely will continue into the twenty - first century
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lorenzo bini smaghi : western democracy and its discontents β economic and political challenges speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the aspen transatlantic dialogue : β western democracies under pressure β, rome, 14 october 2010. * * * the theme of this conference, especially this first session, which concerns the ability of democratic systems to cope with the challenges of economic and financial crisis, has been addressed in the past by distinguished scholars such as ralf dahrendorf. he observed that : β to stay competitive in a growing world economy [ the oecd countries ] are obliged to adopt measures which may inflict irreparable damage on the cohesion of the respective civil societies. if they are unprepared to take these measures, they must recur to restrictions of civil liberties and of political participation bearing all the hallmarks of a new authoritarianism... the task for the first world in the next decade is to square the circle between growth, social cohesion and political freedom. β 1 this comment was written in the mid - 1990s, but the current crisis makes it even more pertinent. it β s an expression of doubt about the ability of ( so - called ) advanced countries to be able to take unpopular but necessary measures to overcome the crisis that is prompting financial markets to disinvest, or even bet on those countries β bankruptcy, resulting in an outflow of capital that prolongs the crisis. what lessons can we draw from this crisis in respect of the functioning of democratic systems, and in particular their ability to meet the challenges of the global economy? let me try to provide some answers, starting with three thoughts on the current crisis. the first one concerns the causes of the crisis. reams of commentary have been produced on the factors that unleashed it. some commentators have focused on the shortcomings of the financial regulations, or on the ineffective supervision of markets and market participants. others have pointed to the excessive monetary expansion in some countries. others still have remarked that the lack of international coordination has generated large global imbalances. there is a grain of truth in each of these analyses. but if we stay at this level of detail we risk missing the essence of the problem and not finding a remedy for it. we have to ask why the regulations were inadequate, why monetary policies were so loose, why international cooperation was insufficient. were they simple human errors, or
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luis de guindos : the euro area - current status and the monetary policy stance remarks by mr luis de guindos, vice - president of the european central bank, at deusto business school, madrid, 11 february 2019. * * * recent economic developments euro area data have been weaker than expected in recent months. in fact, industrial production growth fell in the second half of 2018 and the decline was widespread across sectors and most major economies. business investment weakened. on the external side, euro area trade disappointed, with noticeable declines in net exports. as a result, economic growth turned out to be weaker than expected : euro area real gdp increased by 0. 2 % quarter - on - quarter in the last two quarters of 2018, down from 0. 4 % in the first two quarters ( on the basis of preliminary figures ). factors of idiosyncratic nature have been pulling growth down as well. these relate to temporary issues in the automotive sector due to new regulation, street protests and weather conditions. while there is uncertainty about the magnitude and persistence of these factors, near - term growth in the euro area is likely to be weaker than previously anticipated. turning to the global environment, global growth is showing signs of a maturing economic cycle. global activity is still expanding, but growth in important euro area trading partners, such as china, has been moderating. this has been feeding through to lower euro area exports. indeed, a large part of the growth slowdown in the third quarter of 2018 came from a weaker contribution from net exports. moreover, geopolitical uncertainties, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility have proven to be more persistent than initially foreseen. in europe in particular, the state of play of the brexit negotiations is adding to the uncertainty. all these elements have increasingly weighed on economic sentiment and are now reflected in moderating business and consumer confidence. headline inflation figures have also been declining : hicp inflation decreased to 1. 4 % in january, from 1. 6 % in december, mainly due to falling energy prices. looking ahead, headline inflation is likely to decline further over the coming months on the basis of the financial market β s outlook for oil prices. sound factors of resilience are however in place. the euro area expansion is expected to continue, supported in particular by favourable financing conditions, further gains in employment, rising wages and lower energy prices. in fact, bank
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sabine lautenschlager : confirmation hearing for the vice - chair of the ssm supervisory board introductory statement by ms sabine lautenschlager, member of the executive board of the european central bank, at the confirmation hearing for the vice - chair of the ssm supervisory board, strasbourg, 3 february 2014. * * * madam chair, honourable members of the committee on economic and monetary affairs, it is a pleasure for me to be back here only three weeks after you had supported my candidacy as member of the ecb executive board. the fact that i am back here after such a short period of time reflects the central role that the european parliament plays in holding the ecb accountable for its supervisory tasks. it also demonstrates that the banking union project is rapidly moving forward. the governing council has proposed that i become vice - chair of the supervisory board of the single supervisory mechanism ( ssm ). i am honoured by this proposal and glad to be here today to demonstrate that i am ready to take up this challenge. as you already know, i have been a banking supervisor for almost two decades, at the bundesanstalt fur finanzdienstleistungsaufsicht ( bafin ) and as vice - president of the deutsche bundesbank. i have also been closely involved in international cooperation on financial sector supervision and regulation in various bodies. these responsibilities have provided me with first - hand experience in the very field in which europe is currently undergoing its most significant institutional overhaul since the introduction of the single currency. during my last visit here, i said that good supervision cannot be achieved solely at the national level. but that does not mean that simply raising supervision to the european level will automatically make everything run smoothly. in order to make common supervision a success, we need to do things right from the very start. that is what i want to help achieve as vice - chair of the ssm β s supervisory board. doing things right from the start has been the guiding motif of the comprehensive assessment, and it will also be the benchmark for our new supervisory model. i will go into both of these aspects in my remarks today. comprehensive assessment let me start with the structure of the comprehensive assessment exercise. following an initial risk assessment, the comprehensive assessment will comprise an asset quality review ( aqr ) and a stress test. the asset quality review covers point - in - time risks. that means it takes into account the current state of a bank and does not consider any
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future developments. a rigorous selection of portfolios that should be reviewed is currently under way. the national competent authorities ( ncas ) have submitted proposals for these portfolios and the ecb is currently studying these proposals before a final selection is made. the stress test will address forward - looking risks. for this component of the comprehensive assessment, the ecb is using the methodology defined by the european banking authority ( eba ). we published a first set of details today. bis central bankers β speeches the objective of this stock - taking exercise is to ensure that banks β balance sheets are sound before the ecb takes over their direct supervision. the comprehensive assessment is intended to boost transparency, and thus foster confidence. but this will only work if it is credible and of high quality. in my opinion, two things are crucial for ensuring this : β’ an impartial and objective methodology that fosters comparability ; and β’ transparency of the process, as well as of the results. for the asset quality review, an impartial and objective methodology means, for example, that we need to apply, and will apply current accounting rules as consistently as possible. the vast majority of the banks undergoing the assessment report their accounts in line with the international financial reporting standards ( ifrss ). for the others, we are devising methods that allow national accounting standards to be used and still facilitate a high degree of comparability. but this is only one aspect of achieving comparability. the stress test will cover credit, market and funding risks. it can only deliver a credible indication of the resilience of european banks to the market if it is based on tough stress scenarios. this means that the scenarios will also have to include stressed sovereign bond markets. in addition to impartiality, transparency with respect to both the process and the results is key for the assessment to live up to expectations. in the first instance, transparency means informing the general public about the underlying methodologies and the thrust of the exercise. that is why we have issued a press release today, in which we provide information on the progress of the asset quality review and confirm that we will use the stress test parameters announced by eba last friday. the ecb will not publish intermediate results, but only the final outcomes, because we feel that only those will be robust. the supervisory model for the ssm the second issue i want to highlight in my introductory remarks today is the implementation of the ssm β s supervisory model.
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not only as production bases for the leading economies but also as a huge market for the latter's own products. given this increased presence in the global marketplace, emerging economies are now faced with a marked decrease in internal demand due to declining exports reflecting a downturn in the u. s. and western european economies and downward pressure from the financial side as a consequence of financial crises in the united states and western europe. with the widespread use and popularization of advanced information and communications technologies, these developments are taking place at a speed not imaginable in the past. as a manager of a manufacturing firm has stated, " demand has evaporated in a market where, until recently, supply could not keep up with the increase in demand. " with the clear deceleration in growth of emerging economies, exports to them from the united states and western europe are decreasing, adding further downward pressure on economic activity there. and this is causing in turn a further decline in exports from emerging economies, subsequently decreasing internal demand in these economies. currently, there are two adverse feedback loops operating globally and leading to a sharp deterioration in world economic conditions : one where a decrease in production, income, and expenditure takes place in a spiral with a decrease in exports as a starting point, and another where negative developments in financial and economic activity mutually reinforce each other. confronted with a sharp global deterioration in financial and economic conditions, governments and central banks have taken various measures. to alleviate the economic downturn, considerable monetary easing and fiscal stimulus have been enacted in many countries. to alleviate the financial crisis, central banks in various countries are providing funds not only in their own currency but in u. s. dollars as a concerted action. governments are placing troubled financial institutions under their control, injecting public funds, expanding their deposit insurance schemes, and insuring the liabilities of financial institutions. in spite of these successive expeditious measures taken by governments and central banks, there are still uncertainties as to how the financial crises in the united states and western europe will be resolved and how the world economy will recover. with the adverse feedback loop operating between financial and economic activity, losses incurred by financial institutions and the amounts of capital that need to be raised tend to increase as time passes, and it is not clear whether the actions taken so far are sufficient to deal with the problem. for the financial system to regain stability, the amount of losses that financial institutions will incur needs to be clarified and the institutions need to
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around 2003, rose at a rapid pace from around the end of 2007 reflecting increases in the prices of petroleum products and food due to the surge in commodity prices, and reached 2. 4 percent last summer. thereafter, it began to decline at a rapid pace reflecting a significant drop in commodity prices, and recorded 1. 0 percent in november 2008. looking ahead, it is expected to continue its sharp downtrend and turn negative due to increasing slackness in domestic supply and demand conditions in addition to the declines in the prices of petroleum products and the stabilization of food prices. the cpi inflation rate is projected to record a decline of around 1 percent in fiscal 2009. thereafter, the rate of decline is expected to diminish gradually through fiscal 2010 as the economy returns to a sustainable growth path. given that the cpi inflation rate will likely remain negative through fiscal 2010, one question that may be raised is whether this decline in prices will lead to a deflationary spiral β a situation in which a decline in prices induces a further decline, thereby accelerating the pace of decline and at the same time adversely affecting economic activity. if households expect wide - ranging price declines, they will reduce consumption, and this in turn will accelerate the decrease in demand. if firms expect their competitors to reduce prices on a broad range of products, they have no choice but to reduce their prices, and this may decrease firms'profitability further. however, the most important factor in assessing whether a deflationary spiral will materialize is not the short - term inflation expectations, which have been affected by the rapid changes in commodity prices, but developments in the medium - to long - term inflation expectations of households and firms. during the last twelve months, they have remained mostly unchanged, little affected by last year's rise or the recent rapid decline in the inflation rate. if the inflation rate remains negative for a protracted period, however, there is a risk of a gradual decline in medium - to long - term inflation expectations. future developments in medium - to long - term inflation expectations should therefore continue to be monitored closely. iv. conduct of monetary policy next, i will talk about the bank's conduct of monetary policy. as i said earlier, economic conditions in japan have deteriorated significantly. in response to the economic situation and its weaker prospects, the bank reduced its policy interest rate to 0. 3 percent from 0. 5 percent at the end of october 2008, and reduced it again to 0. 1 percent in december
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replaced over time by new firms exporting new goods and services. as a consequence, the composition of canada β s exports has also changed since the crisis. exports of services in categories such as technical, travel, financial and management services, have taken the lead, while some traditional goods, such as motor vehicles and parts, have seen their shares decline. by mid - 2016, non - energy exports had fully recouped their previous drop, and today, total exports are almost 10 per cent above their pre - crisis peak. monetary policy has played a key role in this adjustment. we estimate that if we had not lowered our policy rate in 2015, the economy would be roughly 2 per cent smaller today β a difference of almost $ 50 billion β and there would be about 120, 000 fewer jobs. government fiscal stimulus measures also contributed importantly to growth, and this has meant a better mix of monetary and fiscal policy. without this fiscal stimulus, interest rates would have had to have been even lower than they were. all things being equal, this would have meant even more household debt and an increased longer - term vulnerability for the economy. as we look ahead, we project that business investment will be a key driver of economic growth. business investment has also been slower to materialize than we expected, but it has been strong across the board over the first half of this year. further, in our most recent bos, our regional staff found that companies were more focused on expanding capacity than they were previously. indeed, businesses across an increasing range of sectors say they expect sales growth to improve further, and hiring intentions have reached a record high. given all this evidence, we could see by the beginning of summer that the economy β s adjustments to lower oil prices were essentially complete. to be clear, the impact of the shock was still visible in energy - intensive areas of the country. but this was being offset at the macro level by greater strength in other areas. so, in july, and again earlier this month, we raised our key policy interest rate. between those two rate hikes we saw a long string of stronger - than - expected economic data, culminating in the gdp report at the end of august that showed an annual growth rate in the second quarter of 4. 5 per cent. as we noted in our most recent interest rate announcement, this pace is unlikely to be sustained, and recent data point clearly to a moderation in the second half of the year. still, the expansion is becoming more
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on its way home. and although we are confident that the economy has made significant progress, we cannot be certain of exactly how far there is left to go. the economic progress we have seen tells us that the moves we took to ease policy in 2015 were the right thing to do. at a minimum, that additional stimulus is no longer needed. but there is no predetermined path for interest rates from here. monetary policy will be particularly data dependent in these circumstances and, as always, we could still be surprised in either direction. we will continue to feel our way cautiously as we get closer to home, fostering economic growth and keeping our inflation target front and centre. 5 / 5 bis central bankers'speeches
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, 000 members, is the second largest accounting institution in the world. it is not sufficient that the institute merely responds to and adopts global standards. it should, in fact, go further and actively participate in the formulation of these standards. 14. i am happy to learn that the president of icai has recently been elected as a member of the board of the international federation of accountants ( ifac ) and that there is an indian member on the iasb. i also want to commend the institute for its active participation and involvement in several international committees and projects aimed at improving accounting systems and processes. i would only urge that going forward, icai should proactively take the lead in the formulation of accounting standards in areas where we have specific concerns as an emerging market economy ( eme ). 15. another task the profession needs to address in regard to managing globalization is how it will select, from within its membership, persons of the requisite competence to participate in the global forums, and how it will provide them both financial and professional support to make this participation rewarding to them individually and to the profession more broadly. needless to say, the process of selection of persons for representing the institute in international forums should be strictly meritocratic and transparent. information technology ( it ) 16. next on my list is the challenge of information technology. in the past, one of the main objectives of audit was ensuring the arithmetical accuracy of financial statements. with the advent of it, this task has now been taken over by machines. this has both nudged and facilitated the profession to move up the value chain. the main task of the profession has now shifted to judgments of value, and to discharge this task, auditors have to demonstrate much higher levels of maturity, integrity, independence and balanced judgment. the development of these qualities will be a major challenge in the future. 17. let me make a comment with regard to it in banking. over the past decade, most commercial banks have successfully implemented core banking solutions. this has created both opportunities and challenges for auditors. challenges come by way of lack of visible evidence, risk of undetected system errors and bugs and frauds hidden in a labyrinth of data. retrieving information in the computerized environment and assessing the implementation of computer related processes will also be critical to the audit process. opportunities come by way of increasing use of computer assisted audit tools ( caats ) to access databases beneath the accounting software to create queries, write
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need to have skilled and qualified persons on the acbs to make them truly effective. accordingly, in september 1995, we advised banks to ensure that there is at least one non - executive director who should be a chartered accountant on the acb. acbs have since been contributing immensely by providing direction and also by overseeing the internal control function in the bank. we have kept the ceo of the bank outside the acb to keep it independent. however, the second in command, the executive director concerned is a member of the acb to bring the insider perspective to bear on the committee β s deliberations. however, the presence of an executive director may be seen on compromising the independence of the acb. i will be interested in your views on this. 36. returning to the larger issue of a value system, the challenge before the profession is therefore to demonstrate by its own conduct, its concern for upholding a value system within itself and consequently within its clientele as also to initiate programmes which create sensitivity to the need for greater ethical conduct. in this context i would only like to reiterate that you have a significant role as the conscience - keeper of the business world. conclusion 37. let me now sum up. i have started with briefly identifying the shared professional domain of the auditing profession and the reserve bank. i have alluded to the uniqueness of the reserve bank β s balance sheet, or indeed balance sheets. i then went on to indicate, what in my view, are some of the key challenges that the profession has to address in order to remain effective and to add value to the real sector. where relevant, i have given contextual references and illustrations from the reserve bank, particularly stemming from its role as the regulator and supervisor of the banking system. 38. i wish your deliberations over the next two days all success. bis central bankers β speeches
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, the domestic provision of liquidity via refinancing operations and asset purchases combined with liquidity inflows from other countries led to a considerable increase in deposits during the past year : liabilities related to monetary policy operations were up by β¬458. 5 billion compared with the end of 2019, hitting β¬1, 018. 8 billion β in other words, nearly doubling. euro - denominated balances of domestic and foreign depositors reported in liability items 3, 4 and 5 were likewise higher on the back of larger general government and foreign central bank holdings, rising by β¬202. 4 billion to β¬474. 0 billion. just under one - third of all deposits of credit institutions throughout the eurosystem continue to be held with the bundesbank. the value of banknotes issued by the bundesbank also rose further, climbing by β¬71. 5 billion to β¬821. 0 billion, an increase of 9. 5 %. the revaluation accounts are also worth taking a look at. this item increased by β¬17. 5 billion year on year to β¬161. 8 billion. the revaluation reserve for gold rose by β¬20. 4 billion to β¬159. 0 billion. the price of gold in euro as at the end of 2020 exceeded the previous year β s figure by around 14 %. viewed over the long term, there is a sustained marked increase in the revaluation reserve for gold. compared with its starting balance at the launch of monetary union ( β¬21 billion as at 1 january 1999 ), this revaluation reserve is, with a current balance of β¬159. 0 billion, around eight 1 / 2 bis central bankers'speeches times as large as it was at the start of january 1999. the revaluation reserves for foreign currencies shrank by over half due to the stronger euro, year on year, with the bulk of the decrease, totalling β¬3. 1 billion, being attributable to the us dollar. the exchange rate of the euro against the us dollar rose from us $ 1. 1234 to us $ 1. 2271. allow me to conclude with a brief overview of the profit and loss account. the main component of the profit and loss account is net interest income, which recorded a β¬1. 8 billion decrease from β¬4. 6 billion to β¬2. 9 billion. this is notably down to the β¬1. 4 billion increase
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in interest expense incurred in connection with refinancing operations due to the coronavirus pandemic. owing to the topping - up of provisions for general risks β which my colleague dr weidmann has already explained β the net result of financial operations closed the year with a net expense of β¬1, 557 million, following net income of β¬2, 281 million in the previous year. at β¬0. 6 billion in 2020 versus β¬0. 5 billion in 2019, there was little year - on - year change in income from participating interests. expenditure from the pooling of monetary income rose by β¬0. 6 billion owing to the allocation of the monetary expense arising from tltro - iii operations in the eurosystem according to capital share. staff costs fell by β¬0. 3 billion to β¬0. 6 billion due to lower transfers to staff provisions. figuring in at β¬0. 7 billion, administrative expenses including banknote production services and depreciation of tangible fixed assets remained virtually unchanged on the year. the profit and loss account for financial year 2020 closed with a balanced annual result, following profit for the year of β¬5. 8 billion in 2019. distributable profit is zero. 2 / 2 bis central bankers'speeches
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njuguna ndung β u : promoting private sector credit and mortgage finance in kenya keynote address by prof njuguna ndung β u, governor of the central bank of kenya, at the launch of metropol consumer and sme bureau scores, nairobi, 24 july 2014. * * * mr. peter kebati, chairman, board of directors, metropol credit reference bureau ; mr. sam omukoko, managing director, metropol credit reference bureau ; board members ; representatives of commercial banks, microfinance banks and other financial institutions ; distinguished ladies and gentlemen : it is a great honour for me to join you this morning to witness the roll - out of another innovative financial product, metropol β s consumer and sme bureau scores. at the outset, i wish to express my gratitude to the directors and management of metropol credit reference bureau ( crb ) for inviting me to this auspicious occasion. ladies and gentlemen : the roll - out of full file banking sector credit information sharing effective february 2014 is already yielding positive results. we are gathered here today for the inauguration of consumer and sme bureau scores, which has been made possible by the expanded credit information sharing ( cis ) mechanism. i take this opportunity to congratulate metropol crb for quickly seizing the opportunity to develop a customer β s scoring mechanism, that will contribute to the growth of the credit market in kenya. introduction of credit scoring by metropol crb will not only enrich the value of its credit reports to the lenders but will greatly improve the lenders credit risk management. ladies and gentlemen : when the cis mechanism was launched in 2010, the viability of the licensed crbs hinged primarily on the volume of credit reports accessed by the lenders. however, with the introduction of full file credit information sharing, crbs are now well positioned to introduce value add products such as credit scoring that will not only propel their success but will contribute to the development of the financial sector ; especially the dynamic and changing profile of collateral technology and pricing credit in our financial market. as you are aware, a high level committee was established under the leadership of the cabinet secretary to the national treasury in january 2014 to explore ways of increasing private sector credit and mortgage finance in kenya. the formation of the committee that comprised of representatives from the national treasury, central bank of kenya, kenya bankers association and other private sector representatives and market players, was informed by the government β s desire pursuant to vision 203
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revision. a consequence of this is that the official cash rate ( ocr ) may be less predictable simply because the world in which we are making our decisions is less predictable. another challenge of uncertainty and low investment both globally and domestically is the downward pressure this creates on the global and domestic neutral interest rate. as a small open economy, our neutral interest rate is heavily driven by the global rate and we cannot escape this. a falling neutral interest rate will increasingly push the reserve bank to the limits of conventional monetary policy space, as we need to lower rates by a greater degree in order to achieve the same amount of stimulus as when the neutral rate was higher. so, what can monetary policy do to offset the effects of global uncertainty and support our long - term prosperity? monetary policy response to uncertainty the reserve bank can contribute to a stable economic environment by continuing to focus on fulfilling its dual - mandate. firstly, maintaining low and stable inflation enables organisations and individuals to carry out meaningful financial planning, by reducing overall uncertainty. this is something that is nearly impossible when prices are high and volatile or falling uncontrollably. secondly, when employment is near its maximum sustainable level, firms have a stronger incentive to make productivity - enhancing investments that raise their capacity. 5 this is hard to identify precisely, but is partly associated with the ongoing shift from manufacturing to services within the economy, with services contributing relatively lower measureable investment. 6 see nolan, pomeroy, and zheng ( 2019 ). uncertainty can affect the monetary policy response through the execution of this dualmandate. in particular, it is now more suitable for us to take a risk - management approach. in short, this means we look to minimise our regrets. we would rather act quickly and decisively, with a risk that we are too effective, than do too little, too late, and see conditions worsen. this approach was visible in our august ocr decision when we cut the rate by 50 basis points. it was clear that providing more stimulus sooner held little risk of overshooting our objectives β whereas holding the ocr flat ran the risk of needing to provide significantly more stimulus later. we can also address uncertainty through our communication and forward guidance, which are broad - ranging. we reveal our assessment of the economy β good or bad β to the public, so they can make decisions based on the best possible information amid the prevailing uncertainty. we voice the types of policies we believe may be needed to sustain long and prosperous growth β
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and the service sector. imports are expanding at a brisk pace. there are prospects of continued strong growth in petroleum investment in 2005. employment is rising, albeit still at a moderate pace. monetary policy influences the economy with long and variable lags. there is always uncertainty surrounding inflation developments. a very high oil price may also have an impact on the krone exchange rate. historical deviations between projected and actual developments in the cpi - ate provide an illustration of the uncertainty surrounding the inflation projections. the fall in the value of the krone through 2003, low interest rates and solid growth in the real economy will gradually push up inflation. price developments in recent months have, nevertheless, increased the risk that inflation will remain low for a longer period. thank you for allowing me to make the introductory statement at this hearing.
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, hong kong and australia, to name a few. and we have also seen the credit markets in these economies freezing up. we haven β t come to this yet and we will make sure that we don β t. how shall we manage that? the bsp can contribute by : 1. calibrating monetary policy to ensure that there is ample liquidity in the system. the trend decline in inflation and our within - target inflation outlook have given the bsp room to be accommodative. we will, therefore continue to look for opportunities to be supportive of economic growth. 2. keeping our banking system safe. our banks have benefited from the series of reforms implemented in recent years, which have included cleaning up of banks β balance sheets, the strengthening of bank capitalization through basel ii, and the improvements in governance structures. we will continue to enhance our macrosurveillance capabilities and further improve supervisory oversight of risk management. to operationalize these, the bsp recently approved the guidelines for internal capital adequacy assessment process ( icaap ). the icaap provides a prudent framework that would force banks to consider their own assessments of business lines and the prospects for these, determine their risk profile and then actively decide the appropriate level of capital to hold. this formalizes the requirement for banks to have a more - forward looking approach to risk management and make them directly link risk to capital. this would improve accountability on the part of banks for their actions and hopefully avoid the situation of poor appreciation of risk that was at the heart of the financial turmoil in the us. 3. creating a stable macro environment, i. e., stable interest rates and exchange rates. this would encourage long - term business planning and lending by banks. economic agents and banks need to continue to be keen to seize opportunities during this downturn and be ready for the upturn. 4. continuing to encourage financial innovation and capital market development. i am often asked whether the bsp would clamp down on financial derivatives and financial innovation, given pundits are pointing to their proliferation as one of the reasons for the current financial turmoil. my answer to that is this β i believe there is a place for financial innovation in market development. its presence provides avenues to address varying risk requirements of investors and users of funds. what i always emphasize, however, is that embracing financial innovation must be coupled with appropriate prudential regulation, including appropriate disclosure and transparency standards. these would ensure that
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andrew bailey : the uk bank resolution regime speech by mr andrew bailey, executive director for banking services and chief cashier of the bank of england, at the institute of chartered accountants in england and wales ( icaew ) financial services faculty breakfast, london, 26 november 2009. i am grateful to peter brierley, victoria cleland, iain de weymarn, geoff davies, tony foster, andrew hauser, orla may and paul tucker for their comments and assistance. * * * the uk bank resolution regime thank you for inviting me to speak this morning. one of the characteristics of bank resolutions, to which i will return later, is that they have to be done quickly to a fixed deadline and involve working through the night. they also require extensive involvement by accountants and lawyers, so, i have had some experience with spending nights and early mornings with accountants. the only, but important difference, is that i don β t get to choose when to spend my early mornings on resolutions, whereas you did choose to listen to me early this morning, for which i am very grateful. some history the 2009 banking act, passed in february, created the new bank resolution regime in the uk. in its first nine months it has been used once, at the end of march for the dunfermline building society. there is a long history of involvement by the bank of england in dealing with the problems of banks in the uk in order to underpin the stability of the financial system, much longer than the history of banking supervision. the history of the bank in the nineteenth century features quite a few such interventions. more recently, although none came amid conditions comparable to those which occurred last autumn, the bank was extensively involved in resolving problems in the secondary banking crisis of the 1970s, in johnson matthey bankers in the 1980s, and then in the early 90s with a number of smaller banks. my own first involvement with resolving banks came at that time, with the resolution of national mortgage bank. we now face a much bigger challenge in terms of building a more robust financial system. there are three parts to this task : regulation, structure and resolution. today, i am going to talk about the last of these. in the past, our resolution toolkit was limited. we could use the bank of england β s own financial resources, as we did with johnson matthey bankers and national mortgage bank. or, we could determine that it was not necessary to provide financial support on grounds of a threat to
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positions within a 60 - day period after being notified by the authorities to do so. the rule was only introduced earlier this year but it will be worth considering a similar approach in the uk. finally, there is a large missing piece to what i have said about the resolution regime, namely how it would deal with banks that operate with branches or subsidiaries in other countries, and likewise how foreign banks operating in the uk would be sorted out. there is now a great deal of attention on this issue, in the g20, in the eu and via the fsb working group on cross - border crisis management chaired by paul tucker, and rightly so. i think it is fair to say that the regimes in the us, canada, japan and the uk come closest at present to meeting a kite - mark standard, but more needs to be done in continental europe. i therefore support the recent european commission consultation calling for eu countries to adopt resolution regimes. also, i think that we are much more likely to make progress in this field by agreeing on how national regimes can fit together to deal with international banks, rather than trying to devise an international resolution regime. the key issue then is burden - sharing, and that together the national regimes provide for equitable treatment of creditors whatever their domicile. a robust set of resolution regimes should not allow for bias in favour of domestic creditors. the uk, i should stress, is not one of those countries, but we are keen to work to produce a framework of resolution regimes that allows bias in favour of domestic creditors to end. thank you for listening to an account of the uk resolution regime. it is an important development as part of making our banks more robust to failure. it sits alongside enhanced regulation and supervision, and whatever structural changes may take place in the industry. but it remains work in progress, and in an important respect always will be because it needs to be ready to respond to threats that will evolve as well. and, finally, i should tell you my motto as head of the resolution unit, namely that i am happiest when we don β t need to perform a resolution.
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- asset activities perform functions and, hence, carry risks, that strongly resemble those of traditional financial activities. think, for example, of the similarities between staking and deposit - taking, or between crypto - lending and securities financing transactions. and so, we believe they should be regulated as such. a number of our recommendations have to do with the vulnerabilities of centralized crypto - asset intermediaries. and i stress'centralized'because, however'de - centralized'the crypto - asset ecosystem claims to be, economic reality tells a different story. in fact, some of these intermediaries already seem to play a systemic role within the cryptoecosystem. that is why we recommend that authorities require a number of things from these entities. for instance to have in place robust governance frameworks and to set up risk management practices. of course, i know that implementation takes time. but i also know it's high time β as i have often heard my british colleagues say β to'crack on '. so, let's prioritise the full and consistent implementation of our high - level recommendations. because in the meantime, people investing in crypto - assets continue to run serious risks. in the meantime, linkages between the crypto - ecosystem and traditional finance may very well continue to grow. so, in the meantime, risks to financial stability can still escalate. 2 / 4 bis - central bankers'speeches there are several ways through which we can prevent crypto - asset volatility from spilling over to the traditional financial system. one important way to do this, is with the full and consistent implementation of the bcbs prudential framework for the treatment of banks'crypto - asset exposures. putting this global framework into practice limits the chance that crypto - volatility reaches banks and hence becomes a threat to financial stability. to keep a close eye on the progress made, the fsb will start monitoring implementation. our first review should be finalized by the end of 2025. and the fsb will not only monitor progress. if we are serious about regulating what is essentially a cross - border phenomenon, we also need to be serious about cross - border cooperation. about information sharing. about working together. this also means that we need to venture outside of the fsb jurisdictions. because several jurisdictions with material crypto - asset activities are not members of the fsb. nevertheless, global financial stability ties all of us together
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along these lines could be linked to the supervisory reporting requirement on shareholding in financial firms, for which the threshold could be lowered. finally, an additional option is to register the operating managers of hedge funds. it should be kept in mind, however, that these managers are often already registered elsewhere and operate internationally, making such registration on a national level less useful. in a nutshell, hedge funds have enriched our financial system, but they also pose some systemic concerns. the job of the supervisors is to ensure that appropriate checks and balances are in place. further transparency and disclosure could be helpful in facilitating this process, as it would enhance market surveillance. conclusion i spoke to you about recent trends in the financial industry and the challenges these pose to supervisors. i believe that a further convergence of financial supervision in europe is desirable and indeed already progressing. in this respect, as dnb believes that the interests of market participants should be carefully weighted when deciding upon the architecture of european supervision, the lead supervisor model is a possibility. regarding hedge funds, i stress that indirect supervision is a necessary but not sufficient condition for mitigating the risks they could pose to financial stability. for that reason, further transparency and disclosure by hedge funds is essential in limiting risks of market integrity and uncompromising behaviour that potentially could damage the stability of financial firms. in addressing these important challenges, co - operation amongst market participants and supervisors is key. thank you for your attention.
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, who, according to the reserve bank of india guidelines, are those who do not repay deliberately despite having sufficient funds and a solid net worth. the public sector banks have even started publishing photographs of the borrowers in newspapers. maybe it is high time that we start considering to bring amendments to our own law to disclose the name of the top defaulters. or even consider the coordinated efforts of the four banks, with or without the blessing of the central bank so as to ensure a favourable and rapid outcome. the bad experience of our bankers sheds light on the fact that however meticulous they may have been, banking remains a risky business. the bank has lately been considering a system of information - sharing on cross - border loans although we do recognize the difficulty of accessing information on foreign clients. a good reputation requires conscientious regulatory compliance. the rapidly evolving financial landscape is keeping the regulator on its toes to ensure that we are up to the mark bis central bankers β speeches when it comes to international best practice. we champion a proactive and thorough approach to fraud risk management which includes among other things, putting in place a whistleblowing procedure and where it already exists to review it, and educating staff about fraud. we need to be alert to the growing impact of the prevalence of gambling in our country for it is l β appat du gain which motivated the public to invest in placements that offered unrealistically high returns. over the years, the bank of mauritius and the mauritius bankers association have developed a strong partnership. more than ever, we need to consolidate this partnership and live up to the four rs of a sound banking sector β regulation, reputation, results and resilience. together we can continue facing the daunting challenges that await the financial sector when it comes to the next - generation regulation. thank you. bis central bankers β speeches
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##it for illicit activities. it is a matter of focusing on the β know your customer β principles and applying them to your internal customers as well. it should not be just a β tick - box β approach but rather a β judgmentbased β approach. most of the time, it is at the level of the front - liners that the application of this β judgment - based β approach starts. the front - liners need to be well - versed in compliance legislation, manuals and procedures and be able to detect suspicious transactions at an early stage, thus minimising the risks of fraud. it is important that ongoing reviews of bank personnel are conducted at all levels as bank officers may be involved in promoting such schemes. our investigation has revealed that some banks have not been abiding scrupulously by anti - money laundering laws and guidelines. five of them would be imposed hefty fines with the concurrence of the director of public prosecutions. recently four of our banks made a very bad deal with indian corporates. rs2. 7 billion out of total facilities of rs3. 5 billion turned out to be impaired. they represent 0. 9 % of the total assets of the four banks and if we take into account provisioning already made, this ratio comes down to 0. 3 % only. this is only a drop in the bucket and there is no need for the public to be alarmed. depositors β money is not at risk. this bad deal sends a warning signal to the banking sector about the level of non - performing loans ( npl ). historically the npl of the segment b business has been low, dragging down the overall npl of the banking sector. banks need to be extra careful when extending crossborder credit. they need to have a proper understanding of the legal infrastructure, the banking and regulatory landscape and the debt recovery processes of the country with which they intend to do business. in india, the cumbersome process of crystallizing collateral led some banks to resort to naming and shaming their non - performing corporate customers. in the midst of growing protest, the central information commission of india β is convinced that the benefits accruing to the economic and moral fabric of the country far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed β. the naming and shaming of bad borrowers apply to wilful defaulters of public sector banks
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destruction to the environment, there is a need to strengthen the governance of the economic returns ( revenue ) obtained from the extractive industry. this ensures that the investor, government and landowners receive a fair share of the economic return from the resource. doing so, it would also entail striking a balance between respecting traditional forms of land ownership and enabling economic development through largescale infrastructure and commercial projects. furthermore, having in place good governance structures on these extractive resources ensures the financial returns are saved and invested to benefit both the current and future generations. and if i may add, it is an opportune time for the government to explore the possibility of establishing a sovereign wealth fund or similar vehicles, to accumulate buffers and use it during the rainy days. this fund can be reinvested to earn interest. 5 / 8 bis - central bankers'speeches third, we must make good use of the most precious resource at our disposal : our people. given current demographic trends, we are at the point of entering a period of demographic dividend, in which the working - age population continues to expand relative to the economically - inactive age groups, and is increasingly able to finance both the education of our children and the caring for our elderly. this demographic gift is however easily squandered : only in the presence of appropriate employment opportunities for our youths will we be able to fully reap the rewards of our medium - term demographic destiny. the risks, as we know, are high, for example, an under - employed youth is a restless one. as our population continues to increase, we are also faced with the prospect of rising tides of rural - to - urban migration, which could easily overstretch the infrastructure in our urban centres, as currently experienced, and drain our rural communities of vitality and economic opportunities. the question of how best to leverage and employ our abundant labour must therefore be paramount in our minds, and more especially the government needs to come up with a policy to engage and cater for the working - age population as we chart a path forward. in this regard, i'd like to thank the australian and new zealand governments for providing additional employment opportunities to our working - age population through the seasonal workers scheme, the pacific australia labour mobility ( palm ) scheme and the recognized seasonal employment ( rse ). this has acted as a stopgap measure to absorb excess domestic labour, while also benefitting our country through rising remittances [ 2 ] and productivity spill - overs
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. the country is happy to supply up to 100, 000 workers for both australia and new zealand. however, it is imperative that any sustainable growth strategy for our country must rely on the expansion of domestic economic opportunities. hence, the need for economic reforms. and to do that, again it's important that the government provide a conducive environment for businesses to thrive and attract genuine investors, at the same time expand economic sectors to broaden the economic base in order to provide more employment for the working - age population. cbsi stands ready to support the government of the day in this regard by ensuring that macroeconomic conditions in solomon islands are conducive to growth and stability. ladies and gentlemen, during our consultation with the stakeholders in the private sector, two factors routinely emerged as major constraints to growth and employment : ( i ) a shortage of skilled labour, and ( ii ) the unreliability and inefficiency of domestic infrastructure. the former is of particular importance for all of us in strategic terms. growth will not magically materialize from a rising number of working - age people in our country ; rather, it will depend crucially on the skill level of that workforce, and on their ability to find suitable employment. it is therefore essential that our education system keep up with rising domestic demand for skilled labour, and that our healthcare system ensures the health and well - being of our people. we believe the government can contribute to this by continuing to step up its efforts at promoting a healthy life - style, strengthening the fight against ncds and ensuring that every individual has access to a healthy and affordable diet. 6 / 8 bis - central bankers'speeches for the infrastructure, the private - sector actors are calling on the government to step up investment in infrastructure and its maintenance, ensuring also that it is climate resilient, in order to forge more reliable domestic supply chains and facilitate intra - and inter - island movement and trade. better infrastructure would also place solomon islands more firmly onto the global tourism map. in terms of financial infrastructure, cbsi is committed to providing an ever more enabling environment for financial development, and to actively champion financial inclusion as we inch ever closer to reaching that'last mile '. recent technological advances, especially in the fintech space, have brought us closer to that goal than ever before, thanks to increasingly agile payment infrastructures and savings devices. as some of you may be aware, that cbsi recently launched the go - live solomon islands automated
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##traditional methods of promoting financial literacy. maximizing technology to improve organizational ability as an organization, the bsp has also tried to maximize the use of technology to ensure that we continue business as usual through hybrid work arrangements. i read an article about hybrid work. it says [ that ] hybrid work was " deceptively effective. " what is the meaning of that? the reason hybrid work was working [ is that ] if the people were working together before, as they separate, they can still work together. that is the key. then, how do you reduce the number of commutes while, at the same time, be able to work together and be able to cooperate better? sometimes, working together is better than just writing to each other because there are many things you do not learn unless you actually work physically in the office. the reason work - from - home and worktogether work very well is [ that ] people work together well in the office. as they separate, they are still somehow still connected. how to do that in an environment with fewer working days together is, of course, a very important question. 2 / 5 bis - central bankers'speeches as an organization, we have pursued the following [ technological changes ] : [ first, ] the [ digital ] innovation laboratory [ sandox ] which we set up in the first quarter of 2022. [ second, ] our award - winning cash service alliance was something new but was also quite effective and could be applied on a greater scale. it enables banks to draw from their own holdings and not be dependent completely on the bsp. now, technology is just one component of our broad - based digital transformation. as i already said, [ it also includes ] people and processes - people who know how to work together and, therefore, are able to adapt to changes. we envision that you, our officers and staff, will be digitally empowered, and our business processes to be digitally enabled. creation of new sectors : pcms and roas now, of course, we have grown quite a bit since i joined the mb in 2011. we used to have just three deputy governors ( dgs ), right? now, we have five, with the creation of pcms [ payments and currency management sector ] and roas [ regional operations and advocacy sector ]. in the beginning, in 2011, i thought [ that ] it would be the most boring sector because printing money in the branches, circulating it, and
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of responsibilities and powers between the single resolution board and the bnb as the national authority for resolution of credit institutions. bulgaria β s legal framework for joining the single resolution mechanism is already in place. the preparation for joining the single resolution fund, including for calculating banks β contributions to the fund, and the preparation of the bank resolution planning process after joining the single resolution mechanism are very advanced. the banks in bulgaria have an important year ahead, which we expect to be overall successful for the sector. banks β operations continue to take place in an environment of rather optimistic attitudes of enterprises and households amidst a relatively high growth of the bulgarian economy. at the same time, the external environment holds risks and insecurity that, due to the openness and international integration of our economy, could potentially affect the economic 1 / 2 bis central bankers'speeches situation in bulgaria. some adverse scenarios could exacerbate aspects of the risk profile of the banking sector. therefore, it is essential that in their behaviour banks continue to take into account the main risks, including profitability risks and asset quality risks. 2 / 2 bis central bankers'speeches
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mentioned in my speech at the previous wibc, many risks β including credit, market, liquidity, operational and reputational risks are common to both conventional and islamic finance. overly - optimistic projections of growth, or overconcentration in particular sectors, or mismatches in assets and liabilities can give rise to risks that can damage financial institutions. the crisis serves as a valuable pause from the frenzy of financial activities. this allows us to re - evaluate risk management practices in individual financial institutions, as well as the systemic linkages across institutions, instruments and markets. 13. central banks and regulators need to cooperate closely so that risk assessments can be shared and common action taken where necessary. the central bank of bahrain ( cbb ) and mas have enjoyed very good relations, and have worked to promote islamic finance. the cbb is a highly - regarded central bank and integrated financial regulator. i am pleased that the mas and cbb will be signing a memorandum of understanding later today to build on our existing strong relationship to enhance supervisory cooperation and information - sharing. 14. the third area relates to close interactions among industry practitioners and the development of ground knowledge. while there are many opportunities for trade and investment among emerging economies, the business linkages are only beginning to grow. forums such as the wibc provide a valuable platform for practitioners to build their knowledge of each region and the business leaders. at the same time, for large - scale and long - term investments such as in infrastructure, effective knowledge of partners and on - theground presence are important ways of mitigating risks. recent developments in singapore 15. let me therefore take this opportunity to say a few words about developments in singapore. as an international financial centre in asia, singapore seeks to develop islamic finance by leveraging on our existing strengths in banking, insurance, asset management 163 / 2009 and capital markets. although relatively new, we have seen steady progress. mas launched its sukuk early this year. the islamic development bank also issued a $ 200m singapore dollar - denominated trust certificate. in may, olam international, a local trading firm tied up with the islamic bank of asia to launch a commodity murabaha based on agricultural trade flows. just last month, singapore β s keppel t & t and saudi arabia β s al rajhi holding group announced an agreement to establish a joint venture asset management company to manage the world β s first shariah - compliant data centre fund. other singapore companies and real estate
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lim hng kiang : brief review of recent financial and economic developments in singapore congratulatory remarks by mr lim hng kiang, deputy chairman of the monetary authority of singapore and minister for trade and industry, at deutsche bank's 35th anniversary, singapore, 13 feb 2007. * * * distinguished guests, ladies and gentlemen, good evening, i am delighted to be with you this evening to celebrate deutsche bank's 35th anniversary in singapore. i am very glad to note as well that today's celebrations is also marked by deutsche bank's move to one raffles quay, the newest address in our financial district. it is testimony of deutsche bank's continued commitment to singapore. set up in 1972, we have seen deutsche bank singapore grow in size over the years. it has also witnessed and participated in the economic transformation of singapore, from a trading hub in the 1970s, to a major metropolis today. we are indeed heartened that, 35 years on deutsche bank continues to see opportunities to deepen its roots here. just last week, deutsche bank announced its group performance for 2006 and i must congratulate dr ackermann and your team, for registering yet another record year for deutsche bank. today deutsche bank is represented in many of asia's financial markets. we are indeed pleased that deutsche bank had made singapore the hub for your regional operations. we noted that some 1600 people are involved in a broad scope of activities including trading, treasury and investment banking here. to accommodate this, i understand that deutsche bank's trading floor in this building is one of the largest in singapore. singapore's economic growth for 2006 continues to stay strong at 7. 7 %, with almost 170, 000 jobs created last year. our market indices have breached the 3, 000 point mark and our gdp per capita has exceeded us $ 30, 000. we are also witnessing the strong growth of asia propelled primarily by the two economic powerhouses of india and china. the economies in south east asian have seen a resurgence with countries like vietnam rushing forth and is one of the fastest growing economies in the region. trade and investments among asian countries, and between regions including the middle east and asia, have increased substantially. we have also seen substantial wealth creation in the middle east and asia. asia is estimated to have about 2. 4 million high net worth individuals with assets over us $ 7. 6 trillion and comprise almost 20 % of global high new worth wealth. this is projected to grow annually by
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##6 https : / / www. imf. org / en / publications / policy - papers / issues / 2017 / 07 / 31 / pp073117 - collaboration - between - regionalfinancing - arrangements - and - the - imf 6 / 8 adhering to a plurilateral agreement in due course ( making the agreement multilateral in essence ), while maintaining peer pressure to avoid free riding. 9 furthermore, the new global governance system should recognise that both regionalism and multilateralism are compatible, as some problems are of a local nature and are better tackled locally. regionalism and multilateralism are not mutually exclusive. on the contrary, both approaches can support and complement each other, generating synergies that strengthen the global financial safety net. indeed, bilateral and regional agreements have in many cases brought about improvements in the multilateral trading system. e - commerce is a good example of this. 10 in this regard, the european union, for example, should maintain its proactive approach to preserve the rules - based global trade system. and indeed the european union is fully engaged in working, together with other members, on proposals to strengthen the wto in areas such as subsidies, e - commerce, property rights and ensuring enforceability of existing wto commitments with a well - functioning dispute settlement system that cannot be blocked by any single country. 11 at the same time, it is important that the european union should continue to negotiate trade agreements with other partners. although, as mentioned earlier, this is not a first best solution, it is time to recognise that regional and multilateral arrangements open to others can succeed where multilateral negotiations have failed to bring many countries into the international trading system. in the financial arena, the emergence of regional initiatives has generated a more robust and better resourced global financial safety net. however, coordination between the different layers should be strengthened, on the understanding that a regional system can complement, but not substitute, the role of the imf. in my view, the imf is still essential, for at least four reasons. first, it has unique expertise in crisis management. second, the participation of the imf in adjustment - programme design adds an objective view that regional institutions cannot provide, one that is respected both by domestic authorities and by the private sector. third, in cases of interconnected economies, the involvement of the imf can dissipate the potential regional concentration of risks. fourth, the imf is the only institution that can
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economy continues to face significant challenges and vulnerabilities. headway in correcting these is needed in order to shore up the economy β s long - term growth capacity. most notably, i would stress here high public and external debt, progressive population ageing, the high unemployment rate, the strengthening of the banking system and, as i said in my introduction, low productivity. let us take first high public debt. this stood at end - 2018 at around 97 % of gdp, over 60 pp up on 2007, and is one of the main vulnerabilities that arose in the wake of the crisis. also, the budget deficit is still high ( 2. 5 % of gdp in 2018 ) and, on available estimates, still has a significant structural component into which no inroads had practically been made in the past four years. eliminating this vulnerability of the economy requires resuming the budgetary consolidation process. cutting the deficit and public debt would, moreover, give fiscal policy greater leeway for countercyclical action in the face of any future negative shocks. 6 / 18 meeting the guidelines of the preventative arm of the european stability and growth pact should show the temporary fiscal consolidation path to follow in the future after having managed last year to cut the budget deficit to below 3 %. at the same time, a review of the composition of public spending and revenue might also contribute decisively to improving the economy β s potential growth. there is room both to increase the efficiency of public spending and steer its composition towards those items exerting greater influence on the accumulation of physical, technological and human capital, and to re - define the structure of the tax basket in order to make it more conducive to growth. the presence of high tax benefits in our tax system, arising from numerous exemptions, allowances and special low rates, which generate substantial revenue - related losses and distort the efficiency and fairness of the tax system, are a good example of the headroom existing here. secondly, despite the notable correction to date, the negative net international investment position is still at 77. 1 % of gdp. and the nation β s gross debt amounts to 166. 7 % of gdp, only slightly below the peak seen during the crisis. to bring down the debt vis - a - vis the rest of the world, spain will have to run external surpluses over an extended period of time. and that, in turn, requires maintaining the gains in competitiveness, which throughout
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sector has a leading role, no matter appraised by asset value or contribution to gdp. on the rmb front, all through the years, our country has been deepening financial reform through internationalizing the rmb. in the 12th five year plan, the strategic preparation of β enlarge the cross - border use of the rmb with a view to gradually realizing the free convertibility of capital items denominated in rmb β has been clearly stipulated. recently, the pboc and related government agencies have been implementing new ways incessantly to widen the channel of rmb recycling, enlarge cross - border use of rmb, explore rmb fdi ( foreign direct investment by overseas investors ). at the moment, the pilot area for cross - border trade settlement in rmb has been extended to cover the whole country while the scope has been extended from initially merchandize trade to services trade and other current items, and will be extended to cover some capital items. all these moves have bis central bankers β speeches propelled further development of cross - border rmb business and provided driving force in promoting the use of rmb internationally. the whole exercise has provided opportunity for further development of rmb business, motivation in the internationalization of the rmb, while macao will benefit from financial and rmb business development. as a special administrative region of the nation, macao is obliged and delighted to participate in the process of the internationalization of rmb. as a matter of fact, macao was designated as early as 2004 as one of the pilot areas for cross - border rmb business. in july 2009, the pboc and relevant ministries of the state council jointly promulgated β management of cross - border rmb trade settlement under pilot programme β, which permitted macau banks to conduct cross - border rmb trade settlement business. at the same time, the scope of individual rmb business was widened in december 2009 from the scope in the beginning. in tandem with the increasing integration of macao with the mainland, rmb notes are broadly accepted and circulated in macao. rmb business has become an important driving force behind business diversification of macao financial institutions and the healthy progress of the sector as a whole. as per the end of april 2012, the value of rmb deposit with banks in macao stood at rmb49. 8 billion ( 12 % of total deposits ), which was an increase of 85. 8 % year - on
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has been adopting free market economic system. according to the β basic laws of the macao special administrative region β, macao has no fx control policy, the msar guarantees free operation of financial markets and financial institutions and the free flow of funds into and out of the msar without restrictions. in the realm of the implementation of free market economic system, according to the heritage foundation β s β global index of economic freedom β published in january 2012, macao ranks 6th in asia - pacific while among the 179 economic systems round the globe, macao ranks 19th. in a free market economic system, funds can move without obstacles, can facilitate and provide foundation for development of cross - border rmb business. second, macao has a safe and stable banking system all along. it has developed crossborder services with other nations and regions. at the moment, there are 29 banks permitted to operate in macao. they mainly come from the mainland, portugal, hong kong, the uk, the us, singapore and chinese taipei. the biggest players are from the mainland. as per the end of april this year, aggregate assets of macao banking system stood at mop732. 8 billion, a year - on - year increase of 21. 3 % ; total loans stood at mop355. 9 billion, a year - on - year increase of 21. 8 % ; total deposits were valued at mop476. 9 billion, a year - on - year increase of 26. 2 %. non - performing loan ratio was only 0. 32 % ; capital adequacy ratio reached 15. 1 %, composed mainly of tier one capital. at the same time, liquidity in the banking system is relatively ample, as per the end of april, one month liquidity ratio of the banking system was 69. 7 %, three month ratio was 70. 4 %. there is one thing worth special mentioning ; up to this moment, direct impact of the recent international financial crisis on the macao banking system is rather limited. in business operation, apart from servicing local demand, macao bis central bankers β speeches banks make use of macao as their business development platform. through their global networks, they proactively develop services with other nations and regions, among which, a substantial part is cross - border financial business between the mainland and other nations or regions. third, macao has been an important liaison platform in the economic and commercial cooperation between china and portuguese speaking
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arrived, we need to be especially cautious about a premature scaling back of these crisis measures. that could inflict more severe damage to the economy and pose larger risks to the financial sector. the cost of winding measures down too early as yet outweigh the potential cost of leaving them in place for too long. it is important that the support measures are in due course rolled back in a gradual and predictable way to prevent cliff - edge effects. in a severe shock such as this, which originated entirely outside the sector, it is only logical for the government to absorb a large part of the shock. the netherlands can also afford a temporarily higher public debt. the fact that the government has now laid down its support measures for a longer period of time will help reduce uncertainty for firms and households. the netherlands of course also depends on what happens in other countries. our economy and financial sector are closely interconnected with those of other european countries. the creation of a european recovery fund during the summer was therefore a positive move. we must prevent this crisis from leading to even greater economic growth imbalances in europe. as for dnb, we have given banks additional leeway to continue lending and absorb any losses by adjusting the buffer requirements for the major banks. in view of the current uncertainty we will be continuing these crisis measures. at any rate, the floor for the risk weighting of mortgage loans and the countercyclical capital buffer will not come into force before the end of 2021. in summary, we are still in a historically deep economic crisis. fortunately, this has not so far sparked a financial crisis. but with the pandemic flaring up, economic uncertainty is yet again increasing. the main challenge in this next phase is therefore to limit the damage to the economy and prevent the crisis from spreading to the financial sector. this concludes my introductory statement. i would be happy to answer any questions you may have.
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introductory remarks by dnb president klaas knot at the press conference for the autumn 2020 financial stability report welcome to the press conference on the financial stability report ( fsr ). before we start taking questions, let me briefly walk you through the main elements of our fsr. as in the spring, the main focus of this report is β of course β the impact of the coronavirus crisis on financial stability. this crisis has now been going on for more than six months and the feared second wave of infections is now a reality. where do we stand in this crisis and how has the financial sector fared so far? let me say a few things about that. first, uncertainty about the economic impact of this crisis remains as substantial as before. the dutch economy has so far contracted somewhat less than we feared in the spring. but the resurgence in the number of infections has fuelled renewed uncertainty, as new measures seem necessary, but also because consumers and entrepreneurs are becoming more cautious. a proper assessment of the total economic damage will only be possible once the virus is under control. and it is important to stress once again that the economy and health are not in a zero - sum game. even without measures the economy will be hit. it is therefore of the essence that everybody contributes to containing the virus. that is in the interest of our health, but also in the interest of the economy. an important β and positive β observation is that the financial system has so far proven resilient. that is of course partly due to the fact that this crisis originated outside the financial system. in that sense it is completely different from the credit crisis, when the problems started in the financial sector itself and spilled over to the economy. we can also see that the reforms undertaken after the credit crisis are bearing fruit. banks are therefore starting in a much better position, so they are better able to dampen the impact of the coronavirus crisis. governments, central banks and supervisory authorities have introduced very large - scale measures to curb damage to the economy. it is still too early to evaluate these measures, but the interventions have clearly restored a degree of calm to the financial markets. the measures also directly and indirectly help ensure that the financial sector can continue to fulfil its role effectively. but a large part of the economic impact is yet to manifest itself. when the government measures β such as the now scheme and tax holidays β are scaled back and bank moratoria expire, bankruptcies will rise. so
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cent midpoint of a 1 to 3 per cent target range. the target has proven to be a very effective anchor. inflation has been low and stable, and we've experienced solid growth in output and employment. canada was the second major country to adopt an inflation target. today more than 20 countries have such targets. in other words, there's a good deal of international experience with inflation targeting. as in canada, this experience has been very positive : inflation targeting, working in tandem with a floating exchange rate, has generally resulted in low inflation and sustained economic growth. stepping back, and looking beyond these positive results, we can distinguish four key characteristics of a credible and effective monetary policy framework : clear objectives and effective tools ; legitimacy ; the effective use of markets ; and transparency and accountability. let me say a few words about each of these in turn. first, clear objectives and effective tools. the bank of canada's monetary policy has one clear objective - to keep inflation at 2 per cent. and it has one instrument with which to get the job done - the target for the overnight interest rate. second, legitimacy. the inflation target is not just the bank of canada's target, but also the government's. this adds legitimacy to the monetary policy objective, thereby strengthening it. but legitimacy also comes from our experience of low inflation and good economic outcomes, with the result that there is now broad support among canadians for anchoring monetary policy to a low inflation target. third, monetary policy works best when it is market based. we learned some valuable lessons in the 1970s. we learned that direct controls on wages and prices do not work beyond the short run, and that they introduce a myriad of distortions, which reduce market efficiency. we also learned that direct controls on credit expansion are difficult to calibrate and enforce. they also reduce the efficiency of the financial system as it allocates resources in the economy. today, monetary policy is implemented entirely through financial markets. by controlling the overnight interest rate, monetary policy influences interest rates along the yield curve, as well as other asset prices. these, in turn, influence spending, and, ultimately, inflation. we have found that the transmission of monetary policy works most effectively when the central bank implements policy through markets, when it maintains a credible policy goal, and when it communicates its objectives and actions clearly. this leads me naturally to the fourth characteristic - transparency and accountability. one of the most important things we have learned with inflation
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pmi ) indicate that the manufacturing sector will likely record another disappointing performance in the third quarter. the pmi remained below the 50 threshold for two consecutive months, before recovering to a level of 50, 7 index points in september 2011, while the employment index has remained below the 50 index level. according to kagiso, the pmi leading indicator, measured as the ratio between new sales orders and inventories, remained at an early - 2009 low of 0. 85 in september. this is reflective of high inventory levels, well above the demand for factory goods. furthermore, the pmi average for the third quarter was 47. 2 index points ( 55. 1 recorded in the second quarter ), which does not bode well for actual factory output and growth in the third quarter. weak conditions on the production side reflect both the poor state of the global economy, as well as the deceleration in domestic demand conditions. domestic expenditure grew by 1. 3 per cent in the second quarter of 2011, from an annualised rate of 7. 9 per cent in the first quarter. household consumption expenditure decelerated significantly and government expenditure contracted. the combined impact of rising inflationary pressures that affect households β disposable income, falling consumer confidence, the still relatively weak housing market, declines in the value of assets, high debt burdens and reduced access to credit further adds to households cautiousness in their spending decisions. strong wage inflation during 2010 is also starting to take its toll on employment creation and the unemployment rate increased to 25. 7 per cent in the second quarter of this year ( although even through the boom periods, unemployment still remained high around 22 per cent ). continued labour bis central bankers β speeches shedding is expected to weigh on consumer spending going forward, while the lower growth trajectory, in turn, does not bode well for employment creation. other indicators pointing to a slowdown in economic growth, include the weaker growth and / or in some instances a decline in retail sales, vehicle sales and house prices. against this background, policy makers and economists have downgraded their growth forecasts for the year. the bank has lowered its growth forecast, due to the lower - thanexpected gdp outcome in the second quarter, the impact of industrial action on key sectors such as manufacturing, as well as a downward adjustment to the global growth assumptions. the bank β s latest projections show growth to average 3. 2 per cent in 2011, lower than the previous forecast of 3.
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put under an imf programme as we were in a position to meet and repay all our foreign obligations. we have since emerged from this turbulence much strengthened and on a solid and steady growth path. indeed, this is one debt that the country will not be able to repay. malaysia will always be indebted to you, yang amat berhormat, for your leadership and your vision. ladies and gentlemen, the financial sector in our region has now reached a new stage of development. over the years, the role of the financial system has evolved, facilitating the various stages of development and growth. increasingly, the financial services industry is also becoming a source of growth, especially as several countries in the region are moving towards a knowledge - based and services - led economy. in the process, the dynamic changes taking place are also being driven by technological advances and an increasingly competitive environment. as financial restructuring and reforms progress to a more advanced stage, financial institutions are also moving on to make the necessary adjustments to become more productive, innovative, and strategically more focused. efforts are now focused not only on the creation of a sound and resilient financial sector but towards institutional development and capacity building of the financial sector to elevate it to a higher level of performance, efficiency and excellence. this represents an important phase in the development of the financial sector as highlighted in our 10 - year financial sector master plan that was released almost three years ago. it represents an important development prior to moving towards a more deregulated and liberalised environment. in this context, we are envisaging forward - looking financial institutions that will be able to face the challenges of financial liberalisation and globalisation as we progress into our next stage of development. in this context, leaders need to be visionary to see future trends focused on organisational vision, to stay competitive and be able to adapt rapidly to changes. in addition leaders need to take into account the corporate social responsibility so that the profit mindset is balanced against the objective of longterm sustainability. when we talk about enhancing leadership capability we are talking about leaders who are continuous learners, who are on the cutting edge of excellence, leaders who have strong convictions and beliefs, and yet having humility and recognising the need to reinvent themselves and inspire their organization to adapt to the new challenges and changes. this is vital if the financial services sector is to forge ahead and remain at the forefront of new innovations, an element that is critical to securing long - term
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prepared according to international best practise, such as the ifrs 9, which will become mandatory in uganda, as in the rest of the world, from the beginning of 2018. a common set of internationally recognised standards for financial reports allows everyone to understand precisely what the information contained in them means. we also require high calibre professional accountants with the requisite expertise to prepare financial accounts to the highest standards. in this regard, i would like to commend the institute of certified public accountants of uganda for their efforts to uphold the highest standards of accountancy and financial reporting in this country. finally, let me conclude by congratulating all the companies which have won financial reporting awards this year. thank you for listening.
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on conservative modelling assumptions. but there is a remaining task : a case - by - case re - underwriting, involving where possible recovery and where necessary restructuring, of troubled loans. this is crucially important for a number of reasons. while the banks still have uncertainty about the granular performance of their loan portfolios, they will be unsure of the exact capital buffer that is in place and the extent to which they have adequate capital for extreme loss developments. to my mind, this encourages an attitude of hoarding capital and provides disincentives to lending. at the end of the summer, there was much debate around a widely reported central bank analysis of lending to the small business sector, where we found that loan rejection rates were significantly higher than other eu jurisdictions, excepting greece, and which to our mind pointed to supply constraints in the banking sector ( in addition to problems over credit quality ). uncertainty about the current loan book and the exact losses that will crystallise ( and therefore consume capital ) are likely a factor in constraining lending. absent an exercise of even further recapitalisation, the best option is more specificity and understanding of the performance of the legacy loan portfolios β and an exercise in facing up to losses and modifying loans as necessary. bis central bankers β speeches the banks β mortgage portfolios are a case in point and have involved close attention by the central bank. at this event last year, i explained how we were initiating a project to require mortgage arrears resolution strategies from all lenders in ireland. we received these in november of last year and provided feedback to the banks, highlighting the need for more effort on a number of fronts. one major area of concern was the lack of operational capacity in the banks to deal with customers in arrears so we required senior management to commit to a step change improvement in that capacity. the plans we received showed significant improvement and we are continuing to monitor progress closely. we also pressed the banks to work harder to develop specialist strategies for their buy to let portfolios. and, crucially, we insisted that the banks develop a broader range of techniques to deal with loans in arrears, drawing on the ideas of the so - called keane group. in a slight simplification of the position, the banks were relying heavily on the provision of interest only arrangements or the capitalisation of interest arrears, even though these techniques were clearly unsuitable for a sizeable group of customers with unsustainable mortgage
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in methods to lay off risk when a problem occurs β through, for example, credit derivatives and collateralisation β be as ready to contribute to solutions predicated on the give and take of long - term relationships? and will the increasing complexity and size of large complex financial institutions deter previously willing possible participants? since the fsf β s creation, there has been further consolidation of international banking groups and globalisation of markets. our vulnerabilities are more concentrated : although the firms and capital markets in which they are concentrated are probably more resilient, we have bigger and potentially more complex points of failure. this concentration has brought efficiencies, and has been supported george, e ( 1994 ) β the pursuit of financial stability β, bank of england quarterly bulletin, february. by enhanced oversight of global firms and the capital markets they operate in. but the price we pay is more complicated ( and therefore potentially more costly ) crisis resolution. a practical way forward so how can we make more progress? i have spoken about drawing up a shared framework or set of principles but i am only too aware how easily that could become a drafting exercise in which difficult issues are evaded rather than dealt with. clearly initiatives such as this workshop are a useful way to bring relevant policymakers together β and i am encouraged by the shared commitment to make progress that you have shown by being here today. my suggestion is that probably the best way of making further progress on a genuine and useful common approach is to work together on practical examples ; to consider some of the operational problems that we would face if particular sorts of crises arose. and thus establish a shared fact base and understanding of what we might expect from each other in a crisis, and how we should go about handling it. this idea of informal groups of relevant authorities is not new. in a sense, it is borrowed from the supervisory world, where colleges of regulators have existed for some time, with the aim of devising ways of pooling knowledge and developing common approaches β to supervise firms efficiently and to reduce the supervisory burden for them. the groups to discuss crisis management issues would need to bring together supervisors and central banks. both are likely to have day to day information which is relevant in a crisis, and both will also have control of tools which can be used to handle the problem. at the same time, the number of participants would probably need to be smaller than in a regulatory college if these group are to be effective. to remain focused, the core group might
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in argentina, the monetary policy transmission channels are only just being rebuilt, since credit to the private sector accounts for 10 percent of the economy, still far below the latin american average. therefore, patiently rebuilding the power of monetary policy tools is a great step towards consolidating growth and stability. meanwhile, monetary and financial policy should be conceived under a general equilibrium approach, where fiscal solvency, the monetary balance and external sustainability are mutually determined. against this backdrop, a sustainable and long - lasting reduction of the inflation rate depends on the comprehensive, joint and coordinated action of the monetary policy, the fiscal policy, the wages policy, and the competition policy. thus, we see that the current regime of control over the money supply and the demand for money combines the necessary doses of monetary prudence ( as shown by sixteen running quarters of compliance with self - imposed monetary aggregate growth targets ) and flexibility ( which has enabled us to weather the recent turbulence ). through this scheme, by trading in the repo market, issuing central bank notes and bill, and collecting in advance the rediscounts granted during the crisis, we eliminated any potential excess money supply. in fact, in the first half of the year we sterilized 80 percent of foreign exchange purchases β up to almost ars 25 billion. and this did not affect the bank β s positive balance sheet. the monetary program sets indicative targets for all monetary aggregates. however, the achievement of these targets is linked to the change in the means of payment, since in an economy where financial normalization has not yet been achieved, it would be healthy for savings β time deposits β to be more rapidly channeled back into the financial system. deposit performance has not been affected by financial uncertainty and time deposits keep growing above the average. this is another eloquent example of the strategy developed in the past few years to face contingencies : the recovery of banking liquidity and solvency, which allows us to have a sound financial system today that acts as a β turbulence buffer. β in turn, improved profitability, together with capitalizations, strengthen the solvency of the system. just as reserves play the role of liquidity insurance to the monetary authority, banks β cash is the first defense line against unexpected events. for this reason, banking regulations fostered the recovery of liquidity, equivalent to almost 40 percent of total deposits, one of soundest of the region. we should not forget about the growing dynamism of banks in getting
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mercedes marco del pont : the certainties and uncertainties in the world economy speech by ms mercedes marco del pont, governor of the central bank of argentina, at the money and banking conference 2010, central bank of argentina, buenos aires, 2 september 2010. * * * this 2010 conference is very special to all argentineans because this year is our country β s bicentennial and the 75th anniversary of the central bank. we are celebrating this money conference in the framework of a world economy with abundant uncertainties. during the early morning session, the possibility of developed countries entering a final, sustainable and balanced growth phase was discussed. there is also uncertainty as to what is going to happen to the weakest european economies that are implementing the fiscal consolidation and adjustment programs imposed on them to settle their debt issues, which most of us think will probably stress europe β s current structural issues. there is also uncertainty in the international financial regulation arena and its new engineering. after the onset of the crisis when rock bottom was hit, there were some signs of a possible exit to the crisis with the emergence of positive indicators in a number of developed economies ; now the most critical positions concerning a substantial reform of the international financial architecture are starting to fade away. the idea of making changes so that everything at the structural level remains the same seems to be consolidating. there are many more uncertainties that could be discussed, but i would rather speak to you today about some certainties we have in developing countries, especially in argentina. we have one clear certainty : for the first time in our short - and long - term history, countries in the region, in general, and argentina, in particular, are going through this global crisis β one of most severe since the great depression β with very low economic and social costs, without having faced a cyclical and structural external sector crisis or been immersed in recession crises leading to job and wealth destruction. in fact, it was quite the opposite : as we faced this crisis, activity levels were preserved, macroeconomic imbalances, avoided and, at the same time, income levels were intended to be distributed, both in argentina and in many countries in the region. this is not by chance. it is the result of our countries β consistent economic models, which gave up old conventional theories that furthered our nations β underdevelopment, and drove attention back to domestic market growth supported by wage corrections and redistribution policies, where public investment acts as a source of wealth and social inclusion
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##osable household income in the coming years. total disposable income, according to our forecast, will continue to grow at a healthy rate in the years to come, despite rising interest rates. surveys from the national institute of economic research indicate that households expect rising interest rates in line with the riksbank β s repo rate forecast. this is probably one reason why saving among households is at a historically high level. that said, however, there are a number of uncertainty factors to consider. β¦ but major differences among different groups the aggregated figures conceal vary large differences among different households, a fact substantiated by the riksbank β s analysis of data on individual households β debt. 13 we can categorise households based on their indebtedness. figure 8 shows how much an interest rate hike of 1 percentage point will subdue disposable income expressed as a percentage for all borrower households and for the most indebted. 14 for borrower households as a whole, disposable income will slow by just under 2 per cent. for the 10 per cent most indebted households, disposable income will slow by more than 6 per cent. the repo rate will be raised by about 1. 5 percentage points during the three - year forecast period. see k. blom and p. van santen, β the indebtedness of swedish households β - update for 2017 β, economic commentaries no. 6, 2017, sveriges riksbank. the calculations only capture the dampening effect of rising interest expenses on disposable household income, as the data material does not contain details on households β interest - bearing assets. see p. gustafsson, m. hesselman, and b. lagerwall ( 2017 ), β how household cashflows and consumption are affected by higher interest rates? β, staff memo, sveriges riksbank. 10 figure 8. major variation between different groups cashflow effect on disposable household income of a rate increase of 1 percentage point all borrower households ( dti β 2. 6 ) 10 per cent most highly indebted ( dti β 8. 7 ) note. per cent. refers to the average for each group. within each group, the figure in paranthesis refers to the average debt - to - income ( dti ) ratio. source : the riksbank this variation among households can also have a bearing
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target for inflation, which the central bank then tried to attain by using the policy rate to affect aggregate demand. sweden also jumped onto this bandwagon and it proved to be a much more enduring solution than most people expected at the time. we have now lived with inflation targeting for almost twenty years. i am convinced that most people today would say that it has worked well on the whole β that it has fulfilled its purpose, and perhaps even exceeded expectations. but when one has got used to a particular system over a long period of time, it is fairly natural to start looking for faults and begin to question whether it might not be possible to make some modifications and improvements. and i do have the impression that inflation targeting in sweden has recently been criticised somewhat harder and somewhat more often than usual. for an interesting account of the situation at the riksbank at this time, see andersson, krister ( 2003 ), β utformningen av inflationsmalet och den penningpolitiska analysramen β ( the shaping of the inflation target and the framework for monetary policy analysis ), in lars jonung ( ed ), pa jakt efter ett nytt ankare ( looking for a new anchor ), sns forlag. bis central bankers β speeches today i intend to discuss and respond to three types of criticism that have been put forward. the first is the claim that the riksbank has an inbuilt tendency to set the interest rate too high and has thus caused unemployment to be unnecessarily high. the second criticism suggests that the target for monetary policy should be revised, by raising the inflation target and giving the riksbank a numerical target not just for inflation, but also for employment or unemployment. the third type of criticism is that monetary policy has recently been unclear and difficult to understand. inflation targeting β s most important contribution but before i move on to the different types of criticism, i would like to dwell a little longer on the situation twenty years ago. when analysing the inflation - targeting regime, i believe that it is important to remind oneself of the situation when it was introduced. why was there such strong support for defending the krona, even though it meant high interest rates in the middle of a recession? what were the problems policymakers were so anxious to resolve? as i have already mentioned, the recession in the early 1990s can be regarded as a setback following an excessive credit expansion, similar to the
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in the current environment : is our operational resilience keeping up with the faster pace of digital developments? when it comes to fintech, i think covid - 19 has also accelerated existing trends there too. the future development of fintech is a function of technological innovation and changing consumer preferences. covid - 19 did not immediately bring new technology, but it may have moved consumer preferences more towards digital. people kept contact with each other via zoom and face time and skype. school children all over the world followed online lessons. online retail went through the roof. from there, it may only be a small step to paying with whatsapp, or getting a mortgage from quicken loans. so covid - 19 may have influenced digitalization in many different ways. if there is anything the covid - 19 pandemic has taught us here, it is that adoption of new technology is non - linear. when technology is already available, sometimes it takes only one event to cause a sudden and decisive shift in consumer preferences. this adds all the more urgency to the big questions already on the table before the pandemic. 1 / 3 bis central bankers'speeches how will fintech impact the business model of traditional banks? what role will bigtech firms play? when the lines between banks and technology firms become more and more blurred, who is responsible for security and financial stability? do we understand the algorithms that are being applied increasingly in banking? how do new technologies influence cyber and financial crime? are supervisors sufficiently equipped, in terms of knowledge and staff, to keep up with developments? where are the holes and obstacles in regulation? what does it mean for the level playing field when regulated and unregulated entities compete on the same markets? how can supervisors themselves use the new technologies to improve supervisory practices? and last but not least, there are social issues involved in digitalization. not everyone can keep pace with the current tempo of digitization. digital exclusion of vulnerable groups of consumers, like the elderly or people on a low income, is a serious issue nowadays. this is only a subset of a vast area of questions that are relevant to the stability of the financial system. but i have total confidence this panel of eminent experts will be able to answer these questions shortly. this brings me to the last issue i would like to raise. how should supervisors respond to these changes? there used to be a time when financial supervision was viewed as basically reactive. the idea was that, by nature,
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supervisors are always at least one step behind the market, and that we should aim to keep the gap as narrow as possible. i think supervisors that still adhere to that view are missing the demands of the new times. if ever, in the current landscape, with fast but fundamentally uncertain changes, supervisors should be forward looking and adaptive. by forward looking i do not mean supervisors like me can predict the future. we can β t. and we are probably worse at it than the industry. but we should stay on top of developments, think in terms of scenarios, and broaden the dialogue from the financial sector to important tech and infrastructure players. and i think this also a good approach when it comes to the development of new regulation, notably the european commission proposals on the regulation of the use of cloud services by the financial sector, and it digital strategy. and when i say supervisors should be adaptive, what i mean is to acknowledge the fact that existing regulation was often drafted with a different world in mind, that this regulation cannot always be literally applied to the new digital world. adaptive then means to act from a set of core principles. to apply them in a way that fits the new environment and leaves space for innovation. while continuing to protect customers and financial stability. to give you an example, two months ago we published a discussion paper called β general principles for the use of artificial intelligence in the financial sector β. to sum it up in one sentence : firms should pay due attention to the soundness, accountability, fairness, ethics, skills and transparency aspects of the applications they develop. we are using this discussion paper, and the comments received, to engage in a dialogue with the dutch financial sector about the use of ai. finally, new technology also creates opportunities for supervisors to improve their own effectiveness. in 2018 de nederlandsche bank set up a dedicated supervision innovation department to coordinate and accelerate the implementation of its digital strategy. the strategy β s purpose is to adopt a more data - driven approach and deploy technology to support the supervisory process. the ultimate goal is to transform dnb into a β smart supervisor β. also, when it comes to supervision, covid - 19 has increased the awareness of the potential of digitalization. digital processes are not susceptible to the impact of reduced staff availability during a lockdown. it also increased the broad mindset that digitalization is the new normal and boosted acceptance of working with new digital tools throughout the entire workforce. so to sum up, covid - 19 has
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economic outlook, volume 2016, issue 2. ricardo, david ( 1817 ), on the principles of political economy and taxation, london : john murray. sachs, jeffrey and andrew warner ( 1995 ), economic reform and the process of global integration, brookings papers on economic activity, 1995 ( 1 ), pp. 1 β 118. world trade organization ( 2017 ), world trade report. page 9 / 9 protectionism complicates monetary policy thomas j. jordan chairman of the governing board swiss national bank volkswirtschaftliche gesellschaft des kantons bern berne, 31 october 2018 chart 1 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank chart 2 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank chart 3 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank chart 4 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank chart 5 greater uncertainty / appreciation of the chf 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank chart 6 31. 10. 2018 volkswirtschaftliche gesellschaft des kantons bern | thomas j. jordan | Β© swiss national bank
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speech embargo 31 october 2018, 6. 15 pm protectionism complicates monetary policy volkswirtschaftliche gesellschaft des kantons bern thomas j. jordan chairman of the governing board β swiss national bank berne, 31 october 2018 Β© swiss national bank, zurich, 2018 ( speech given in german ) β the speaker would like to thank claudia aebersold szalay and alexander perruchoud for their support in drafting this speech. he also thanks simone auer and carlos lenz as well as snb language services. page 1 / 9 ladies and gentlemen switzerland owes much of the prosperity it enjoys today to open markets and thriving trade with many countries across the globe. in recent decades, free trade in goods and services, coupled with advancing technological progress, has delivered growth and prosperity, not just in switzerland but in many other parts of the world, too. recognising the advantages of international trade, most countries remained true to the principles of free trade even amid the outbreak of the financial crisis almost exactly ten years ago. they resisted the temptation of knee - jerk isolationist responses and refrained from sweeping protectionist measures. the onus was on not repeating the mistakes made in the great depression of the 1930s, when such interventions served only to accelerate the economic decline rather than bringing the hoped - for respite. as we now know, and as chart 1 clearly shows, the consequences were disastrous. recovery from the great depression was painfully slow, whereas world trade returned relatively quickly to its previous levels following the most recent crisis. holding firm during the financial crisis has paid off. the economic recovery may have taken some time in many areas, but the global economy is now back in fairly good shape. but it is at this very moment, when a lot of countries are able to post respectable economic growth, that protectionism appears to be rearing its head again. trade disputes between several countries are jeopardising the global upturn. burgeoning protectionism also entails considerable challenges for central banks β and thus for the swiss national bank ( snb ), too β as it brings with it the threat of negative consequences for monetary policy. free trade as a scapegoat before i come to the actual subject of my speech, namely the relationship between protectionism and monetary policy, i would like, if i may, to take a step back for a moment and look at where the calls for protectionism stem from. numerous academic and empirical studies 1 have
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##ly with the banking industry to produce the best practices for the nfc mobile payment, which was released in 2013. 20. this common set of technical standards has laid the foundation for achieving security and interoperability among different m - payment services. in concrete terms : i ) consumers can use a smartphone to download not just one payment service, but different payment services of their choice ; ii ) consumers can switch to a new network or change to a new smartphone without disrupting the continuity of the existing m - payment services ; and iii ) all m - payment service providers are required to comply with common security and data protection measures that are in conformity with international standards. β hard β infrastructure β market - driven approach 21. the second recommendation of the consultant was about the β hard β infrastructure. the consultant recommended that the hkma should, based on the agreed standards, encourage and facilitate the market to develop a robust infrastructure to drive its growth. 22. international experience indicates that the hard infrastructure to support nfc mobile payment can be achieved through a market - driven approach or a government - led approach. after careful consideration, we decided to adopt a market - driven approach, for several compelling reasons. i ) first, emerging payment technologies are fast - evolving. payment service providers are closer to the market and are therefore able to make fast business decisions to develop infrastructure and services that would respond to the market needs in a timely manner. ii ) second, the success of new retail payment products and services hinges on personal experience of the individual user. here, again, market players, who know better than anyone else the tastes of their customers, are in a good position to develop payment products and services that truly fit their customers β needs and therefore have better chance of success. iii ) third, a domestic card association had indicated early on that it would build a shared nfc platform for its member banks, which is able to support over 20 banks based on statistics from octopus, hkicl, hkma. bis central bankers β speeches to provide nfc payment services. the project would to a large extent achieve the objective of having a piece of interoperable infrastructure. 23. so far, the market - driven approach has served us well. one stored value card company has launched such services, so have four other banks, in partnership with two major card associations. by the end of this year, the shared nfc payment platform i mentioned should be ready for operation. iv. sound regulatory framework 24. while hong kong is well - positioned to
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hamad al - sayari : corporate governance for banks in the kingdom of saudi arabia speech by his excellency hamad al - sayari, governor of the saudi arabian monetary agency, at the high - level roundtable discussion for bank executives on corporate governance for banks in saudi arabia, institute of banking, riyadh, 22 - 23 may 2007. * * * dear distinguished audience it is a great pleasure for me to welcome you, and i am delighted by your participation at this important conference on " corporate governance " organized jointly by the institute of banking and the ifc. corporate governance is popularly defined as a structural organization and executive procedures used to direct and manage business to achieve the objectives of the company and ensure its financial stability. in the past decade, this subject has taken increasing worldwide prominence because of its importance and relevance for the enhancement of macro - economic development and growth and the stability of the national financial systems in particular. in spite of the scarcity of books issued in arabic on this subject, it is worth referring to two books ; the first entitled " corporate governance " issued by mr. abdulmajeed al - bastati in 2004 and the second entitled aβ¬Εthe way towards a governing system for corporations " issued by dr. ibraheem al - muneef in 2006. the latter refers to a third book, which i have not read, issued by mr. saleh ali husein in 2003 under the title " practicing and managing the authority in business organizations ". dear distinguished audience, effective board and management leadership in any financial institution is the key pillar that would enable the institution to achieve its objectives and guarantee its development and growth for the service of all parties including shareholders and staff. effective leadership stems from sound corporate governance practiced by competent and highly experienced officials and directors at the various levels, setting a comprehensive strategy and elaborate business plans with appropriate mechanisms of responsibility, transparency and accountability in the financial institution. in this regard, the board of directors plays a prominent role in overseeing the development of a comprehensive strategy of the financial institution and in monitoring the decisions made by senior management for achieving these objectives. this requires having necessary skills and competencies for realizing the objectives set by the board. in addition, the board should establish clear guidelines regarding the independence of all departments and businesses in the organization and should ensure their compliance with established policies and approved procedures. therefore, special committees of the board such as the audit, compliance, compensation and other special committees, can play extremely important
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deposit insurance was virtually nonexistent, so that the failure of a bank might cause depositors to lose all or most of their savings. thus, depositors who feared that a bank might fail rushed to withdraw their funds. banking panics, if severe enough, could become self - confirming prophecies. during the 1930s, thousands of u. s. banks experienced runs by depositors and subsequently failed. long - established central banking practice required that the fed respond both to the speculative attack on the dollar and to the domestic banking panics. however, the fed decided to ignore the plight of the banking system and to focus only on stopping the loss of gold reserves to protect the dollar. to stabilize the dollar, the fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them. the fed's strategy worked, in that the attack on the dollar subsided and the u. s. commitment to the gold standard was successfully defended, at least for the moment. however, once again the fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions - including an accelerating decline in output, prices, and the money supply - seemed to demand policy ease. the third policy action highlighted by friedman and schwartz occurred in 1932. by the spring of that year, the depression was well advanced, and congress began to place considerable pressure on the federal reserve to ease monetary policy. the board was quite reluctant to comply, but in response to the ongoing pressure the board conducted open - market operations between april and june of 1932 designed to increase the national money supply and thus ease policy. these policy actions reduced interest rates on government bonds and corporate debt and appeared to arrest the decline in prices and economic activity. however, fed officials remained ambivalent about their policy of monetary expansion. some viewed the depression as the necessary purging of financial excesses built up during the 1920s ; in this view, slowing the economic collapse by easing monetary policy only delayed the inevitable adjustment. other officials, noting among other indicators the very low level of nominal interest rates, concluded that monetary policy was in fact already quite easy and that no more should be done. these policymakers did not appear to appreciate that, even though nominal interest rates were very low, the ongoing deflation meant that the real cost of borrowing was very high because any loans would have to be repaid in dollars of much greater value (
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of each currency's value in terms of gold defines a system of fixed exchange rates, in which the relative value of ( say ) the u. s. dollar and the british pound are fixed at a rate determined by the relative gold content of each currency. to maintain the gold standard, central banks had to promise to exchange actual gold for their paper currencies at the legal rate. the gold standard appeared to be highly successful from about 1870 to the beginning of world war i in 1914. during the so - called β classical β gold standard period, international trade and capital flows expanded markedly, and central banks experienced relatively few problems ensuring that their currencies retained their legal value. the gold standard was suspended during world war i, however, because of disruptions to trade and international capital flows and because countries needed more financial flexibility to finance their war efforts. ( the united states remained technically on the gold standard throughout the war, but with many restrictions. ) after 1918, when the war ended, nations around the world made extensive efforts to reconstitute the gold standard, believing that it would be a key element in the return to normal functioning of the international economic system. great britain was among the first of the major countries to return to the gold standard, in 1925, and by 1929 the great majority of the world's nations had done so. unlike the gold standard before world war i, however, the gold standard as reconstituted in the 1920s proved to be both unstable and destabilizing. economic historians have identified a number of reasons why the reconstituted gold standard was so much less successful than its prewar counterpart. first, the war had left behind enormous economic destruction and dislocation. major financial problems also remained, including both large government debts from the war and banking systems whose solvency had been deeply compromised by the war and by the periods of hyperinflation that followed in a number of countries. these underlying problems created stresses for the gold standard that had not existed to the same degree before the war. second, the new system lacked effective international leadership. during the classical period, the bank of england, in operation since 1694, provided sophisticated management of the international system, with the cooperation of other major central banks. this leadership helped the system adjust to imbalances and strains ; for example, a consortium of central banks might lend gold to one of their number that was experiencing a shortage of reserves. after the war, with great britain economically and financially
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going forward, the global economy is expected to continue growing at a moderate pace. in the world economic outlook ( weo ) released by the international monetary fund ( imf ), growth projections have continued to be revised upward, and both advanced and emerging economies are expected to maintain their firm growth through next year. at international conferences i have recently attended, a frequently used phrase has been " synchronous growth " of the global economy. at those conferences, participants from various economies all looked brighter than they used to, which has given me the strong impression that the global economy has entered a new stage. ii. economic developments in japan : long - lasting recovery next, i will touch upon developments in japan's economy. the economy has improved steadily this year, backed in part by the developments in the global economy that i just outlined. real gdp for the july - september quarter registered relatively high growth of 2. 5 percent on an annualized basis, representing positive growth for the seventh consecutive quarter since the january - march quarter of 2016. in detail, japan's exports have been on an increasing trend, mainly led by it - related goods exports to asia. domestic demand has also increased. specifically, business fixed investment has continued on an increasing trend with corporate profits improving. private consumption has been increasing moderately, albeit with fluctuations, against the background of steady improvement in the employment and income situation. public investment also has remained at a relatively high level due in part to the implementation of the government's stimulus measures formulated in fiscal 2016. as these developments show, japan's economy is currently expanding moderately in a well - balanced manner, supported by multiple factors - - namely, external demand, domestic private demand, and domestic public demand. another salient feature of japan's recent economy is that the benefits of the economic expansion have been spreading to a wide range of economic entities. according to the bank's tankan ( short - term economic survey of enterprises in japan ), the diffusion indexes ( dis ) for business conditions have continued to be positive, not only for large enterprises and manufacturers but also for small enterprises and nonmanufacturers ( chart 2 ). also, by region, the dis have improved significantly for all regions. the current economic recovery is also characterized by its long duration. the duration of the current recovery phase, which started in december 2012, likely reached 60 consecutive months in november 2017 ( chart 3 ). this exceeds the 57 months of the izan
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s. economic activity therefore still looks unlikely to accelerate and remains vulnerable to downside risks. i personally have remained cautious about the outlook for the u. s. economy throughout. however, forecasts by private - sector economists have fluctuated greatly since the beginning of 2010. 8 the divergent views regarding the outlook have probably been caused by differing opinions regarding the time it will take to resolve the balance - sheet problems. a risk common to many advanced economies is the sharp growth in public debt. when the market β s confidence in fiscal sustainability declines, economic activity is negatively affected due to the adverse feedback loop between financial and economic activity. in some peripheral european countries, such a negative feedback loop has already materialized, creating persistent tensions in financial markets. however, this has not spread to other regions so far thanks to the establishment and expansion of support mechanisms to maintain stability in the region such as the european financial stability facility. the political unrest in north africa and the middle east is believed to have been triggered by rising food prices, which meant that a growing part of the population was thrown into poverty. at the meeting of the group of twenty ( g - 20 ) finance ministers and central bank governors held in february 2011, it was agreed to create a new study group charged with examining the impact of rising global commodity prices on global economic and financial conditions and reporting back to the g - 20. forecasts for u. s. economic growth for both 2010 and 2011 by private - sector economists as of the beginning of 2010 averaged between 3. 0 and 3. 5 percent. in the summer of 2010, the forecasts were revised downward to levels well below 3. 0 percent, and were then revised upward again toward the end of 2010. these fluctuations in the forecasts caused swings in the sentiment of households, firms, and financial markets, and led to increased volatility in economic activity. bis central bankers β speeches iii. growth potential of the japanese economy so far, i have talked about the outlook for the japanese economy from a cyclical perspective. i would now like to discuss it from a longer - term perspective. since 1990, following the bursting of the bubble economy, japan β s average annual growth has hovered at a low level of around 1 β 2 percent. the sustained economic expansion from fiscal 2002 to 2007 was in reality supported by a global financial bubble. with the benefit of hindsight, i am afraid i have to say that it is clear the self - sustaining growth mechanism during that period was not sufficiently
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that transact with several of the facilities. specifically, the new york fed is seeking to establish roles for non - primary dealer counterparties to serve as commercial paper dealers, eligible sellers, and agents for the commercial paper funding facility ( cpff ), the secondary market corporate credit facility ( smccf ), and the term asset - backed securities loan facility ( talf ), respectively. these three facilities currently rely exclusively on the new york fed's primary dealers, but the scale and scope of their activities make them well suited for an expanded counterparty base, particularly as we try to reach broader segments of the economy. this initiative represents a major step forward in our efforts to engage with small - tomidsize broker - dealers, including minority -, women -, and veteran - owned business enterprises ( mw vbes ), as well as smaller businesses and investors that transact with these broker - dealers. indeed, we have explicitly encouraged mw vbes to apply, and i'm pleased to share that just yesterday we announced the addition of seven new broker - dealers for the smccf and two cpff dealers, including several mwvbes. we have planned an open and rolling application process for these roles and intend to name additional counterparties in the weeks ahead. complementing this effort, the new york fed also announced a parallel process last week whereby firms may also apply to become agency cmbs dealers to support the desk's purchases of agency cmbs. in closing, let me finish where i started. in this time of pain and hardship, we have choices to make in how we respond, and the opportunity before us is to create generational opportunities for a broad and inclusive set of businesses to help advance an equitable recovery. i look forward to partnering with you on this work for years to come. 1 1 rajashri chakrabarti and william nober, β distribution of covid - 19 incidence by geography, race, and income, β federal reserve bank of new york liberty street economics, june 15, 2020. 2 2 rajashri chakrabarti, william nober, and maxim pinkovskiy, β are financially distressed areas more affected by covid - 19?, β federal reserve bank of new york liberty street economics, august 17, 2020. 3 3 daleep singh, β the fed β s emergency facilities : usage, impact, and early lessons, β remarks at hudson valley pattern for progress, july 8, 2020. 4 4 jerome
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payments are being made in a timely way. in addition, we have a new poll about credit and financing for small businesses, the latter are an important source of new jobs. the survey asks firms about credit applications and reasons for not seeking credit. almost 900 regional businesses responded to our may 2011 poll, of which nearly 15 percent were from the upstate region. the next poll will be in january. if you, as part of a small business, would like to participate in our january poll, please pass your card to my colleagues in the audience. next month, we will host a workshop for the new york city metro area β s small businesses β to provide information about how they can participate in the global economy and expand their companies by exporting their products and services. the export - import bank, the small business administration and the u. s. department of commerce will be on hand. they will tell participants how to tap demand in the global marketplace and what government programs are available to enhance credit, reduce payment risk and increase lines of working capital. we are also facilitating a β speed mentoring β forum in which small businesses will receive feedback on their business plans and advice about applying for financing from a range of finance professionals. in 2012, we β re planning similar events in the capital region. we hope to partner with many of you to support the small business sector. as you know, even states as wealthy as new york have large pockets of poverty. so, we target some key initiatives specifically to low - and moderate - income groups. we have worked hard to help neighborhoods that face high foreclosure rates. for the past three years we have provided housing advocates, including the empire justice center, with the latest information on mortgage conditions, via roundtables, presentations and newsletters. to share what we learn about our diverse district, we have a rich website. i invite you to visit newyorkfed. org to explore our highly localized maps and information on small business, credit and housing conditions and even the latest job openings at the new york fed. finally, and crucially, in the aftermath of the financial crisis, we are working with our colleagues in washington, d. c., and at other agencies to help put the nation β s financial system on a firmer footing. yet, much remains to be done and we are determined to keep at it. i recognize fully that there can be no return to pre - crisis business as usual β whether on the part of the financial sector
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low - yield environment therefore played a key role in the accumulation of fragilities that led to the crisis. its core macroeconomic precondition was a global glut in net savings as well as liquidity, coupled with a lack of safe financial assets at global level. the savings and liquidity glut was largely the outcome of policies that reinforced or insufficiently countered the effects of savings - investments and current account configurations. part of the responsibility for the creation of global imbalances lay with those countries that underestimated the risks of high consumer indebtedness and large current account deficits. however, export - led growth strategies pursued by several systemically important emerging market economies, including china, also contributed substantially to the build - up of fragilities at global level. these strategies, intentionally or not, led to persistent interventions in the foreign exchange market on a unilateral basis and the accumulation of large external reserves reinvested in the borrowing countries. in the short term, the strategies generated growth in these economies ; however they had several negative effects, both at domestic and at global level. domestically, they led to forms of financial underdevelopment that had negative consequences on capital allocation and income distribution. at global level, exportled growth strategies made it easy for the us to incur large and increasing current account deficits and to delay the necessary adjustments. they also gave rise to an accumulation of dollar - denominated assets which could not be reinvested in emerging market economies due to their financial underdevelopment in the form of a shortage of safe financial assets. moreover, the build - up of these assets resulted in a de facto taxation of consumption and a subsidy for inefficient investment, which in turn prevented an efficient inter - temporal smoothing of consumption and a rebalancing of growth towards domestic demand. all of these factors contributed to the compression of yields across the maturity spectrum. according to the average estimates of a pool of studies, central bank purchases of us treasuries alone lowered us long - term interest rates by around 70 basis points, with some studies estimating an impact of up to 200 basis points. weak surveillance mechanisms surveillance mechanisms with β put your house in order β at their heart proved to be weak in the run - up to the crisis. the imf recognised that a surveillance framework centred around β put your house in order β was insufficient to meet the demands of the world economy in 2007, when it updated
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yen projection bis central bankers β speeches ( chart 9 ) balance sheet projections tril. yen end - 2012 end - 2013 end - 2014 ( actual ) ( projected ) ( projected ) monetary base jgbs cp 2. 1 2. 2 2. 2 corporate bonds 2. 9 3. 2 3. 2 exchange - traded funds ( etfs ) 1. 5 2. 5 3. 5 japan real investment ( j - reits ) estate trusts 0. 11 0. 14 0. 17 loan program support 3. 3 banknotes current deposits breakdown of the bank's balance sheet total assets others ) total liabilities ( including and assets ( including others ) net bis central bankers β speeches ( chart10 ) transmission channels quantitative easing : expansion in the monetary base qualitative easing : expansion in jgbs and risk assets increase in jgb purchases and their maturity extension purchases of etfs and j - reits channel downward pressure on the entire yield curve channel lowering risk premia of asset prices channel portfolio adjustments by banks and investors channel inflation expectations improvement of financial conditions οΌ borrowing costs, bank credit, stock prices, etc. οΌ increase in expenditure ( consumption, fixed investment, exports ) improvement of the output gap decrease in real interest rates increase in inflation expectations increase in the cpi bis central bankers β speeches
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for these company buffers, their creation is directly connected with wage restraint during economic booms. the creation of buffers is just as important for the public sector as for the corporate sector, particularly in the central government. it is necessary to generate budget surpluses during economic booms, in order to have room for manoeuvre in bad times and to endure deficits in times of recession within the framework of the stability and growth pact, and its 3 per cent of gdp limit. responsibility for curbing the booms and softening the recessions will shift in the emu world to a much greater extent than before to fiscal policy. here political decision - making will face strong pressures and challenges, both in finland and in many other countries. on the whole, it is good to keep in mind that a monetary union country with good central government finances will certainly have far more room for independent economic policy manoeuvring than will a non - monetary union country with a large central government deficit and debt. [UNK]
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authorities, but the ssm regulation assigns some macroprudential tasks also to the ecb. in particular, the ecb may decide on stricter measures than national authorities, using the counter - cyclical buffer or other macro - prudential tools provided for by the eu legislation. bis central bankers β speeches as a conclusion, i would like to end my presentation on a positive note, based on the fresh news we have heard from the ecofin meeting held the day before yesterday. discussions about the single resolution mechanism seem to be progressing, and we can expect some good results from brussels next week. bis central bankers β speeches
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these assumptions regarding potential growth were very optimistic and that actual growth has been much lower. the 3 % - limit is therefore relatively generous. iii the ecofin council β s decision on 25 november 2003 not to act further on the basis of european commission recommendations regarding france and germany subjected the stability and growth pact to a crisis and an acid test. prior to the decision, some said that if the procedure was not pursued properly in accordance with article 104 ( 8 ) and ( 9 ) of the treaty, the pact was effectively β dead β. the press was rife with black humour - β obituaries β of the pact were published. i do not share this view. a look at everyday life shows us that violating a rule or norm does not automatically invalidate or β kill β it. however, we must do all that we can to implement the pact, to reactivate it and thus to restore the weakened public confidence in the β maastricht rules β. the evident confusion and obvious differences of opinions about the fundamental questions regarding the workings of the stability pact as defined by the treaty and the council regulations are cause for concern. does the council of finance ministers have leeway for continuing the procedure if it materially shares the commission β s view that a member state has not sufficiently complied with its obligations? can the council adopt a new recommendation ( article 104 ( 7 ) ) even if a member state did not sufficiently comply with earlier recommendations, causing and the commission therefor has submitted another proposal ( cf article 104 ( 13 ) )? finally, does the official declaration of the heads of state or government made in amsterdam in july 1997, according to which the council of finance ministers β is invited always to impose sanctions if a participating member state fails to take the necessary steps to bring the excessive deficit situation to an end as recommended by the council β, have only political significance, or does this not also imply that they have committed themselves to comply with the terms of the stability and growth pact? article 31 ( 3 ) of the vienna convention on the law of treaties expressly recognises the possibility of such β subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions β. it has therefore become such a fundamental question of credibility that the commission, in its role as the β guardian of the eu treaties β, filed an objection to the ecofin council β s decision of 25 november with the european court of justice. it is also necessary to avoid β contagion of other
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, 57, 251 2, 70, 426 59, 374 3, 54, 532 2003 β 04 7, 52, 627 2, 97, 903 81, 120 3, 17, 308 2006 β 07 7, 28, 878 3, 81, 449 1, 37, 284 3, 83, 439 2007 β 08 7, 15, 408 4, 00, 611 1, 58, 823 4, 47, 920 2008 β 09 7, 31, 524 4, 72, 493 1, 76, 339 4, 83, 501 2009 β 10 7, 39, 646 5, 55, 874 1, 82, 520 5, 16, 491 2010 β 11 7, 57, 535 7, 15, 914 2, 18, 679 5, 63, 154 the above table suggests that public sector banks are no longer the major employment provider in the financial market and also that their per employee expenses have gone above that of private sector banks. the staff strength of public sector banks have gone down between 1998 β 99 and 2010 β 11 but that of private sector banks have gone up significantly. the per employee expenses of public sector banks have gone above that of private sector banks and today, is more than 150 % higher than that of private sector banks. this is bis central bankers β speeches despite the fact that pension expenses of psu banks are not fully reflected in their staff expenses. one thing is, thus, loud and clear β the competitive advantage in terms of staff costs that we always thought the public sector banks had is no longer there. the absence of the cost advantage coupled with the problem of lower productivity underscore the critical need for urgent hr transformation in public sector banks. hence, time has come for us to pay attention to this critical aspect on which our ability to compete finally hinges on. we can no longer postpone this issue. conclusion the public sector banking system in india is standing at an important cross road. there are critical choices to be made and initiatives to be taken. the time is ripe for leaving the old baggage and taking bold measures. these measures would determine the future path of public sector banks and whether they would continue to retain their position of preeminence in the banking space or would they yield to the pressure from their peers in the private sector. considering the importance that banks have in the nation building process, the choices made now could have a bearing on the economic future of
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should have electronic trading. all business is settles, whether this is done through a traditional market - maker system or by electronic trading. those buying fixed income instruments want to be sure of receiving what they have bought an those selling want to receive the money they have been promised, regardless of the trading form. on the other hand, it is clear that it would be desirable to take the opportunity to design a new system that would provide a good means of handling settlements. this is particularly important as the increased volumes hoped for, which are the whole point of the new system, will create increased risks in terms of settlement. today settlement on the fixed income market is done by means of net settlement in vpc. this works well in many ways and the routines are perceived as manageable by the market players, as far as i understand it. however, the system is nevertheless obsolete and involves risks. if one of the parties involved failed to meet its payments during the daily settlement, for instance, if one party was forced to make a suspension of payments or simply lacked sufficient liquidity, the situation could become troublesome. the existing routines can be called into question. one can imagine situations where settlement is not achieved, which could have consequences for the liquidity of the banking system. from the point of view of financial stability, this is an unsatisfactory situation. the requirement normally made of a settlement system is that settlement can be achieved even if the largest party should fail. this requirement is not met in sweden and the security in the swedish payment system would not be regarded as satisfactory in an international evaluation. vpc's owners, i. e. the banks, undertook to remedy this problem when they purchased vpc from the government. that was in spring 1999, and as far as i know nothing has yet been done. common to all methods, unfortunately, is that they cost a lot of money to implement and this money has to come from the market players in some way. however, it should be in the interests of the market players that something is done. in the long run, it is unlikely that the banks'international counterparties will accept that settlement in sweden is done through systems that are inferior to those in the rest of europe, and with questionable security. it is reasonable that we should live up to the international standards now being established. it would be a defeat for the market if the government had to enforce solutions in this field through legislation. starting point for a renaissance these brief comments show that
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kristina persson : monetary policy and the labour market speech by ms kristina persson, deputy governor of the sveriges riksbank, at lo region's annual general meeting, lo vastmanland, vasteras, 12 may 2006. the diagrams to the speech can be found on the website of the sveriges riksbank. * * * thank you for the invitation to participate in this lo region's annual general meeting! my speech will concern developments in the labour market and the significance of monetary policy for unemployment and employment. introduction there is a common fallacy that there is a tradeoff between inflation and unemployment ; that one can buy slightly lower unemployment at the cost of a higher inflation rate. i would argue instead that it is quite the reverse : stable prices provide a good foundation for the economy. low inflation reduces uncertainty for consumers and firms ; it becomes easier to predict the outcome of a decision to buy or sell and to compare different prices. economic agreements can be signed for longer periods, which reduce uncertainty. when people make better - informed decisions, the economy is more efficient. the task that the riksdag ( the swedish parliament ) and the government have given to the riksbank is to maintain price stability. the riksbank has then defined this statutory target as an inflation rate of 2 per cent ( measured as cpi inflation ) and with a margin of 1 percentage points. this means that the focus is on inflation when the executive board of the riksbank makes its monetary policy decision. however, this does not prevent giving consideration to the real economy β growth and employment β when this can be done without jeopardising the inflation target. this is also clearly stated in the preparatory work on the sveriges riksbank act. the riksbank uses the repo rate β the rate at which the banks can borrow or deposit funds in the riksbank - as its monetary policy instrument. when interest rates are low, demand is usually high households save less and companies invest more - which leads to a gradual increase in prices. the reverse applies when interest rates are high. however, the interest rate should not be higher than it needs to be to guarantee that the riksbank β s inflation target can be met. with hindsight, we can note that inflation was below target in 2004 - 2005 and that the interest rate was therefore too high. the main explanation for this is that productivity growth was higher than expected and international price developments were weaker. competition
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jerome h powell : semiannual monetary policy report to the congress testimony by mr jerome h powell, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 16 june 2020. * * * chairman crapo, ranking member brown, and other members of the committee, thank you for the opportunity to present the federal reserve β s semiannual monetary policy report. our country continues to face a difficult and challenging time, as the pandemic is causing tremendous hardship here in the united states and around the world. the coronavirus outbreak is, first and foremost, a public health crisis. the most important response has come from our health - care workers. on behalf of the federal reserve, i want to express our sincere gratitude to these dedicated individuals who put themselves at risk, day after day, in service to others and to our nation. current economic situation and outlook beginning in mid - march, economic activity fell at an unprecedented speed in response to the outbreak of the virus and the measures taken to control its spread. even after the unexpectedly positive may employment report, nearly 20 million jobs have been lost on net since february, and the reported unemployment rate has risen about 10 percentage points, to 13. 3 percent. the decline in real gross domestic product ( gdp ) this quarter is likely to be the most severe on record. the burden of the downturn has not fallen equally on all americans. instead, those least able to withstand the downturn have been affected most. as discussed in the june monetary policy report, low - income households have experienced, by far, the sharpest drop in employment, while job losses of african americans, hispanics, and women have been greater than that of other groups. if not contained and reversed, the downturn could further widen gaps in economic well - being that the long expansion had made some progress in closing. recently, some indicators have pointed to a stabilization, and in some areas a modest rebound, in economic activity. with an easing of restrictions on mobility and commerce and the extension of federal loans and grants, some businesses are opening up, while stimulus checks and unemployment benefits are supporting household incomes and spending. as a result, employment moved higher in may. that said, the levels of output and employment remain far below their pre - pandemic levels, and significant uncertainty remains about the timing and strength of the recovery. much of that economic uncertainty comes from uncertainty about the path
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basis, names and details of participants in each such facility ; amounts borrowed and interest rate charged ; and overall costs, revenues, and fees for each facility. we embrace our responsibility to the american people to be as transparent as possible, and we appreciate that the need for transparency is heightened when we are called upon to use our emergency powers. we recognize that our actions are only part of a broader public - sector response. congress β s passage of the cares act was critical in enabling the federal reserve and the treasury department to establish many of the lending programs. the cares act and other legislation provide direct help to people, businesses, and communities. this direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long - lasting damage to our economy. i want to end by acknowledging the tragic events that have again put a spotlight on the pain of racial injustice in this country. the federal reserve serves the entire nation. we operate in, and are part of, many of the communities across the country where americans are grappling with and expressing themselves on issues of racial equality. i speak for my colleagues throughout the federal reserve system when i say, there is no place at the federal reserve for racism and there should be no place for it in our society. everyone deserves the opportunity to participate fully in our society and in our economy. we understand that the work of the federal reserve touches communities, families, and businesses across the country. everything we do is in service to our public mission. we are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. thank you. i am happy to take your questions. 3 / 3 bis central bankers'speeches
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in the u. s. dollar is apparently easing concerns over the future prospects of exports and production. in addition, a sense of relief is apparently growing in the markets because the shanghai g - 20 has alleviated concerns that the kind of abrupt change in the exchange rate system that was made in the summer of 2015 may occur again. still, as the problem of excess production capacity in the manufacturing sector lurks in the background, the low growth in fixed asset investment and inventory adjustments are expected to continue for a while. as for prices, the disinflationary trend is likely to continue for a while, as the supply - demand conditions remain easy, mainly with respect to goods. as for overseas economies, as i have explained until now, the slowdown in emerging economies, including china, and commodity - exporting economies is coming to a halt. however, as the recovery of the u. s. economy, which is the driving force, lacks strong momentum, the world economy is expected to remain in a state of slight deceleration for the time being. while the negative spiral of the strong dollar - - and the strong chinese yuan - - and the weak crude oil prices is in a lull in the global financial markets, market liquidity has apparently been reduced due to various financial regulations. in addition, the influence of algorithmic trading and high - frequency trading ( hft ) is apparently growing, so the possibility cannot be ruled out that the markets will become unstable again because of the effects of the u. s. economic developments and ensuing monetary policy conduct. therefore, i continue to pay attention to the possibility that these factors will affect such aspects as market confidence. b. japan β s economy japan β s economy grew by 1. 7 percent in the january - march quarter this year on an annualized quarter - on - quarter basis, after posting negative growth of 1. 1 percent in the octoberdecember quarter last year ; however, if the leap - year factor is excluded, the latest growth was close to zero. recently, private consumption has continued to be lackluster after weatherrelated factors that affected consumption in the winter have dissipated. in addition, production activity, which has recently been more or less flat or weaker due to the effects of the slowdown in emerging economies, including china, and commodity - exporting economies and of an accident at a steel plant, is showing some weakness, mainly in the transportation equipment sector, whose supply chains have been disrupted by the
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bank of japan presents its quarterly economic outlook for summer 1997 bank of japan, quarterly bulletin, august 1997 ( advance summary ). 1. japan β s economy continues on a moderate recovery trend. production and income are showing underlying firmness despite the continued reaction to the temporary surge in demand ahead of the consumption tax hike. among final demand items, public - sector investment has been on a decreasing trend, and housing investment has been somewhat lackluster, particularly as a result of the reaction to the rise in demand ahead of the consumption tax hike. on the other hand, net exports have recently increased significantly and business fixed investment has been rising steadily. despite the continued decline in demand which followed the rise ahead of the consumption tax hike, particularly in consumer durables, the recovery trend in personal consumption does not seem to have been hindered. in these circumstances, industrial production has been firm and the growth in employees β income has been rising steadily, albeit moderately. price indices were pushed up in april 1997 by the consumption tax hike, but excluding this factor, prices have been stable. both quarter - to - quarter and year - to - year changes in domestic wholesale prices ( adjusted for seasonal electricity rates ) have been near zero, and the year - to - year declines in corporate service prices have narrowed. the year - to - year rises in consumer prices ( nationwide, excluding perishables ) are widening somewhat, albeit by a small margin. changes in commercial land prices have varied by type, and residential land prices have virtually stopped declining. 2. in the financial markets, the overnight call rate ( uncollateralized ) stayed slightly below the official discount rate of 0. 5 per cent. the long - term government bond yield rebounded to near 2. 7 per cent in late may, as market uncertainties about the economic outlook and the japanese financial system gradually subsided after the second half of april. however, it declined to around 2. 2 - 2. 3 per cent. stock prices rose to Β₯20, 000 - 21, 000 in may and june 1997, and have recently been fluctuating without showing clear direction. in the foreign exchange market, the yen reached Β₯127 to the u. s. dollar in early may, but later appreciated and has recently moved at around Β₯113 - 116 to the u. s. dollar. with respect to the fund - raising activities by firms, growth in bank lending continues to be lackluster but fund - raising through the capital market has
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easily will deliver higher profitability, which in turn is expected to bring about further wage increases. price stability and financial system stability next, i will present my view regarding the future conduct of monetary policy. the bank has been pursuing powerful monetary easing for more than eight and a half years since the introduction of qqe in 2013. nonetheless, partly due to the impact of covid - 19, it is unavoidable that this monetary easing will be prolonged further. to achieve the price stability target of 2 percent, the bank is expected - - even after covid - 19 subsides - - to persistently continue with further effective and sustainable monetary easing, which reflects the findings of the assessment in march 2021. for monetary easing measures to have a sustained impact, maintaining the stability of the financial system is indispensable. in this regard, japan's financial system has been maintaining stability on the whole, while covid - 19 continues to have a significant impact on economic and financial activity at home and abroad. nevertheless, it is necessary to continue to pay attention to the possibility that credit costs will increase due to a delay in economic recovery at home and abroad. also, downward pressure on financial institutions'core profitability is likely to persist as a trend even after covid - 19 subsides, reflecting the prolonged low interest rate environment and structural factors such as the decrease in loan demand due to, for example, the declining population. in this situation, attention should continue to be paid to the risk of a gradual pullback in financial intermediation and to the possibility that the vulnerability of the financial system will increase, mainly as a result of financial institutions'search for yield behavior. in march 2021, the bank analyzed and assessed the impact of its monetary easing on economic activity and prices, as well as on the functioning of financial intermediation and market functioning. based on the findings, it took policy actions to conduct further effective and sustainable monetary easing. it will continue to deliberate on whether there is room for more improvement in its conduct of monetary policy by carefully weighing the positive effects and side effects of monetary easing, taking account of developments in economic activity and prices as well as financial conditions at the time. in doing so, my view is that the bank should pay due attention to the fact that side effects of monetary easing will accumulate over time. the bank will continue to conduct monetary policy in an appropriate manner so as to fulfill the two missions of achieving price stability and ensuring the stability of
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increasingly severe. according to survey results, banks are applying tighter terms and conditions not only on mortgage loans but also on real estate loans for business properties and on corporate and consumer loans. recently released labor market statistics indicate that the pace of increase in employment has decelerated and the unemployment rate has risen. in this situation, however, private consumption and business fixed investment are so far continuing their moderate upward trend, although the pace of increase is decelerating. it seems likely that the u. s. economy will register relatively low growth rates in the short run but will gradually return to a path with growth rates close to the potential rate as the housing market correction progresses. however, the risk should be borne in mind that depending on future developments in the housing market correction and in global financial markets, private consumption and business fixed investment may fall below expectations through negative wealth effects, credit tightening, and deterioration in business and consumer sentiment, thereby leading to further deceleration in u. s. economic growth. the european economy continues to expand, with business fixed investment and private consumption maintaining their upward trend. however, the possible adverse effects on financial conditions of global financial market disruptions may pose a downside risk. meanwhile, emerging economies and oil producing countries have been expanding robustly and are playing a more significant role as pillars of world economic growth. thus, it seems reasonable to expect that thanks to the widening base of growth the world economy will continue to expand robustly. however, downside risks to this outlook are growing, reflecting intensified adjustment in the u. s. economy and in global financial markets. at the same time, attention should also be paid to the risk of inflation. in the united states, inflationary pressures are remaining, reflecting continued high levels of resource utilization, namely in labor and production capacity. in china, the economy continues to expand strongly, and there are signs of overheating, especially in fixed investment, despite various measures taken by the authorities to cool down the economy. the strong growth of the global economy and other factors, such as geopolitical risks and the speculative inflow of funds to commodity markets, are causing international commodity prices to remain elevated, as evidenced by the fact that crude oil prices temporarily rose above 100 dollars per barrel at the beginning of the year. thus, countries around the world face difficult monetary policy challenges in the presence of both downside risks to the economic outlook and upside risks to inflation. iii. developments in global financial markets global financial markets remain unstable,
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amongst the state governments in may 2006. as on june 30, 2007, eight state governments had set up the grf, of which three had put in place the revised scheme. ways and means advances, and cash management the reserve bank of india ( rbi ) has been extending ways and means advances ( wma ) to state governments since 1937 with the objective of covering temporary mismatches in the cash flows of their receipts and payments. the wma scheme has been periodically revised, right since the early 1950s, in the light of the perceived requirements of the state governments, keeping in view the evolving fiscal, financial and institutional developments as well as the objectives of monetary and fiscal management. state - wise limits in respect of normal and special wma are determined based on certain parameters and have been revised, periodically, over the years. an overdraft ( od ) occurs whenever these limits are exceeded. maximum time - period ( days ) and / or financial limits up to which the state governments can remain in overdraft have been specified ; these limits have also been revised periodically. payments on behalf of the state governments are suspended in case the od limits are breached. till the late 1990s, the normal and special wma limits of state governments were fixed in terms of specified multiples of their minimum balances kept with the rbi. both the minimum balances and the β multiples β to obtain the normal wma limits, were revised upwards a number of times ( though not necessarily at the same time ) over the years. there have been strong demands from several states, from time to time, for upward revision of the wma limits. rbi had taken the view that wma is meant for meeting the temporary mismatches in the cash flows and hence, any upward revision in the wma limits to meet structural deficits of the states is inappropriate. the matter remained a contentious issue for some time. the initiation of the conference of state finance secretaries in 1997 induced a transformation in the approach to formulating changes in the wma scheme. distinct from the past, advisory committees were periodically constituted by the reserve bank to review the prevailing wma arrangements and recommend changes, as considered appropriate, in the light of the evolving circumstances. the involvement of experts from outside the reserve bank in such advisory committees helped to strengthen and broad - base the modalities for effecting appropriate changes in the wma scheme. in fact, three advisory committees, that have been constituted so far, have been chaired by experts
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reserve bank β s standpoint, initiatives relating to credit culture, financial literacy, financial inclusion and priority sector lending would continue to remain high on the policy agenda. concluding remarks rbi has considerable professional skills and the states recognise and value them better when we are willing to consider state - specific orientation to our broader analysis. the rbi, like most of the central banks, commands considerable credibility and good public image and as a public institution is considered relatively apolitical in viewing the vertical relations between the centre and the states and horizontal ones amongst the states. the bi - annual conference of the state finance secretaries sponsored by the rbi has proved to be an excellent forum for wide - ranging discussions. the technical committees or groups that are formed, have membership entirely from the states, though centre may occasionally be associated, but rbi provides secretarial and technical support. the centre and each state concerned decides the appropriate course of actions. the fact that some of the states have adopted a few but not all the recommendations of the committees and groups, demonstrates the shift away from the perceived centralisation of the past towards a participative process. i am happy to submit that all the states, though with varying degrees of enthusiasm, fully endorse the immense contribution of the process of partnering between rbi and the states in the cause of better financial sector and fiscal empowerment in the states. let me conclude with profuse thanks to the madras school of economics for provoking me to think aloud on this subject and share the thoughts with wider audience. the school came into existence in 1995, but very soon, it could obtain β a β grade from the national assessment & accreditation council. the ministry of environment and forests has also designated the school as a centre of excellence in environmental economics. i have no doubt that the school would emerge to be an internationally recognised centre of excellence in economic studies attracting the best of students and teachers from different parts of the country as well as other countries. on our part, we in the rbi are in close touch with the school with a view to obtaining their expertise in the process of monetary policy formulation. thank you.
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measures that we took to maintain price stability in the euro area. 2 as you can see on my next slide, declining transaction volumes in eonia over the past three years coincide with the start of our large - scale asset purchases and the associated mounting excess liquidity in the system. 2 / 10 bis central bankers'speeches but part of the decline also reflects a stronger role of non - banks in managing liquidity. i will come back to this in a minute. these two factors together have lowered the ability of eonia to accurately reflect banks β borrowing costs. on my next slide you can see how exposed eonia has become to sudden fluctuations in this environment : in november last year we observed that, amid thin liquidity conditions, comparatively small changes in transaction amounts can cause pronounced volatility in the level of eonia. 3 / 10 bis central bankers'speeches the problems faced by benchmarks have resulted in a notable regulatory effort to establish improved benchmark rates. at a global level, this has resulted in the adoption in 2013 of iosco β s principles for financial benchmarks, which have been endorsed by the financial stability board ( fsb ). the fsb coordinates international work to review and reform benchmarks and has encouraged public authorities and the private sector to identify robust overnight risk - free rates. 3 in the eu, these efforts have resulted in the adoption of the eu benchmarks regulation, which lays down requirements to ensure accuracy and integrity. 4 the regulation requires benchmarks to be reliable and robust, and underpinned by observable transactions in an active market determined by competitive supply and demand forces. eonia and euribor in their current form do not comply with these requirements, and may therefore be prohibited for use, at least in new contracts, from january 2020, unless reformed in the case of euribor. it is also uncertain whether their use in legacy contracts will be permissible. the volume of such legacy contracts with maturities beyond 2019 is substantial. a quarter of outstanding interest rate derivatives using eonia and more than half using euribor have maturities in 2020 or later. 80 % of floating - rate debt securities using euribor β worth almost β¬1. 5 trillion β also extend beyond 2019. and as mentioned above, a substantial share of mortgages are referenced to euribor. inadequate preparation by the private sector could result in market dislocation once current benchmarks become obsolete. progress in creating a new euro area benchmark new benchmarks are
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with, in the end, virtually no costs for taxpayers when the restored banks were sold. after the financial crisis and the misbehaviour of several institutions, which by the way, is still being uncovered, the change of culture from easy public bailouts to a new culture of private bailing - in is justifiable and i support that trend. the burden of proof should be put on those who want to invoke exemptions to the new approach. however, for those of us able to understand the externalities to the whole economy and society that a financial crisis can generate, balanced and complex judgements have always to be applied. a distinction has to be made between how to deal with a few individual cases and the way to address the risks of generalised financial crises. the new european legislation contemplates the necessary exceptions that, as a last resort, foresee interventions that can safeguard financial stability in a member state or in the area as a whole. i trust that the new legislation will be applied by the competent authorities with rigour, wisdom and a sense of proportion in the aftermath of our comprehensive assessment. 2. banks β balance - sheet repair and the economic recovery i turn now to the implications of banking union for other economic aspects. some economists are of the view that negative developments in bank credit in the eurozone are predominantly due to credit supply restrictions linked with insufficient capital to absorb losses supposedly still unrecognised. 5 this view is not entirely correct. we have observed a marked acharya, v. and s. steffen, β falling short of expectation? stress - testing the european banking system β, ( 2014 ) ; kashyap, a. commentary on similarities between eu and japan ; kashyap, a. et al. β how does financial regulation change bank credit supply? β ( 2014 ). bis central bankers β speeches increase in banks β capital ratios since the beginning of 2009. since the onset of the global financial crisis, the top 20 european banks have increased capital in dollar amounts, net of share buy - backs, by much higher numbers than the corresponding top 20 american banks : usd 289 billion by eu banks against usd 179 billion by us banks. and according to the fdic, the leverage ratios of the biggest european banks, calculated according to the same accounting standards, are very close to their american peers. 6 since mid last year in particular, european banks have implemented write - offs and increased provisions and capital, partly
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looking carefully at the economic history, we see two sorts of changes. some legal and economic institutions change slowly enough to allow us to anticipate future outcomes fairly accurately. but from time to time, there are some very rapid or significant legal or institutional changes. such events usually emerge in the aftermath of a deep crisis. this seems to be the case these days. new legal provisions and new institutions are needed to build the banking union or the fiscal union. for more than two decades i have been one of those who promoted democracy and market economy in romania. therefore i have to believe that western civilization will continue to be democratic, applying the rule of law in market economies. with these institutions in place, we can look backwards to draw some lessons on the future of the banking sector. i will do this through the eyes of a central banker. a central banker is always interested in the way the banking system works. if the banking system moves away from being sound and shock - resilient, monetary policy becomes inefficient. when many changes are to be implemented, the risk of making mistakes cannot be ruled out. bis central bankers β speeches one way to look at the banking system is to see its history as a succession of financial crises. in a nutshell, from the great depression to this day, the banking system faced two major financial crises : the one in the ` 30s and the current one. in between, there were some more or less mild financial crises. from this perspective, as a central banker, i see two trends. first, some financial crises, whether major or not, have led to in - depth reassessments of the regulation paradigm over time. second, a cross - border approach to regulation policies has been developed gradually. however, it has recently accelerated as a prerequisite for the envisaged banking union. ii. 1. the experience until the β 60s one of the main conclusions reached in the aftermath of the great depression was that competition in the banking sector could jeopardise financial stability. by putting downward pressures on profit margins, competition stimulates banks to take on new risks, thus reducing capital buffers. consequently, for the following four decades, until the late β 60s, many measures were aimed at controlling competition. particularly, limits were imposed on lending and deposit rates, on loans to the private sector, on main monetary variables ( which are nowadays set by credit institutions ). likewise, worldwide restrictions were in place on cross - border
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failure of governments and regulators. in my view, free markets work properly given a set of good rules. it is natural for human beings to make free choices. it is the regulators ` duty to design rules that always preserve this freedom while preventing, for as long as possible, the accumulation of problems from asymmetric information, perverse incentive and conflict of interests. the two approaches of regulation β the one up to the ` 60s and the one before the outbreak of the current crisis β are a proper basis for understanding what good rules might mean. iii. the financial system in the aftermath of the crisis the financial industry is supposed to be the lubricant of the economic engine and ensure its smooth and efficient functioning. to grasp the sheer scale of its task, just imagine the billions of savers and investors whose interests have to be matched by the financial system, each of them having a particular behaviour, often driven by emotions. in doing so, financial institutions use specialized resources to assess and manage risks, including complicated mathematical models. just think of the many nobel prizes that were awarded for achievements in this field. the complexity of financial intermediation explains some of the seemingly peculiar features of the financial system as, for instance, the fact that the volume of transactions on the forex market is many times larger than what would be required by the actual exchange of merchandise. bis central bankers β speeches the major positive contribution of the financial system is its ability to deal with asymmetric information problems. adverse selection and moral hazard are issues emerging from asymmetric information. they are a cost to society, as they hamper lending. financial system expansion has been the natural solution of the society in order to overcome asymmetric information problems. financial institutions put their capital at risk and derive income from the spread between lending and deposit rates. in doing so, they use specialized resources to assess credit risk and discipline the borrower. the fact that it has failed, triggering heavy costs to the society, leads to deep public anger and resentment. β while anger and resentment may be useful spurs to action β β to quote andrew crockett ( 2011 ) yet again β β they are much less helpful in shaping a balanced response to the crisis that both safeguards society against financial fragility and preserves the contribution that the financial sector makes to high quality sustainable growth β. indeed, the crisis response so far has perhaps focused too much on preventing future financial crises and neglected the fact that robust economic growth is simply not possible without
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segments. we can achieve explosive growth if banks are able to customize and deliver cost effective products and services to this customer segment while simultaneously guiding and providing handholding support to these sectors. the fear of increase in npas cannot be a ground for depriving these sectors of timely and adequate credit. besides translating into increased business opportunities for banks, these sectors can significantly contribute to employment generation and growth in savings, and would support gdp growth. there is also a need to encourage incubation and development of new business ideas and providing funds to translate these into reality. facebook would not have been a reality if angel investors reid garrett hoffman and peter thiel had not funded mark zuckerberg. according to a bcg india study, india has 190, 000 millionaires but only about 500 angel investors. the hnis in india prefer to invest in real estate. while venture capital funds, to some extent, do provide funding to start ups, much more needs to be done to develop a viable ecosystem where new ideas with potential for employment and wealth generation can flourish. banks could consider providing funding to such innovations. attitudinal changes success demands change in the way banks do business, harness the power of innovation, recognize the huge potential at the bottom of the pyramid and reach out to them. banks need to go the extra mile in financial literacy by educating the customers and understanding the ecosystem in which small businesses and agricultural operations grow and thrive. they need to learn to work in a partnership to finance sustainable business. success is not about financing seemingly safe large corporates by following the herd in a β me too β manner. it is about changing mindsets, looking at untreaded paths, putting the customer above all and tapping the power of technology. this demands a committed workforce with the requisite technology, hr and risk management skills. it calls for re - skilling the existing workforce and hiring and retaining talent in the public sector, particularly, in view of the large scale retirements over the next few years. psbs would have to increasingly look at performance management, changing mindsets and empowering employees for fast and effective decision making. it requires a cultural revolution in the banking sector, particularly for public sector banks if they wish to retain the competitive advantage of size over the smaller but more nimble footed private sector / foreign banks. regulatory / supervisory environment one of the essential pre - requisites for attaining sustained growth is financial stability, which in turn requires a combination of strong regulation and supervision
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systemic risk frameworks, would have to be identification of where the risks lie. 36. let me conclude by underlining some of the broad issues that would need to be addressed in the indian context going forward : a. how to strengthen capital requirements for market risk when most banks are on standardised approach? the basel iii regulatory initiatives under market risk are largely focussed on the internal model based approach. banks in india are currently on the standardised approach and in any case, most of the banks would continue to remain under the standardised approach. there is, therefore, a need to address the upgradation of the standardised approaches also. we are considering calibrating the capital requirement under standardised approaches with the available data for market risk. b. how to strike a balance in regard to fee - based revenue streams of banks? while non - interest income does offer diversification benefits, it may not necessarily be less risky than conventional loans. apart from the financial risks, there are significant reputational risks, particularly when banks engage in distribution of third party products. there cannot be rule - based prescriptions in this regard. but it would be imperative for the bank boards to closely understand the underlying risks, assess whether returns are commensurate with the risks and monitor such businesses of banks. for the market discipline to work, increased, granular disclosures of fee based income may have to be looked into. c. how to address conflicts of interest in banks β lending relationships and capital market activities? can the chinese walls be really effective in ensuring real separation of these activities within a bank? this issue is also relevant in respect of banks β being allowed to trade on exchanges for clients. d. how to strengthen the rating regime? the rating requirements in india are essentially driven by regulatory policies applicable to exposures of the regulated entities to various asset classes. it would therefore be imperative that the rating methodology employed for such activities is looked into by the regulator concerned. bis central bankers β speeches the rating agencies are supposed to adopt a through the cycle approach while assigning ratings. the regulators will need to modulate the risk weights applicable to the external ratings dynamically as per their assessment of systemic risk. towards strengthening the framework for cras, the system needs to shift away from issue - rating to issuer rating β the rating assigned to a particular instrument cannot be taken as reflective of the credit risk of the issuing entity. e. how to address excessive collateralisation of balance sheets? in view of the
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basic entrepreneurial skills when they leave school. consumer protection we always refer to the customer / consumer as the king. if our customers are kings then we should look after and treat them as kings. therefore having simple and transparent consumer protection mechanisms in place is critical. for example, in the financial system, consumers need to be aware of the fees and charges they have to pay. what do they do and where do they go if they have complaints about financial services and products? to this end, the central bank will soon introduce a voluntary banking and financial institutions code for financial institutions in the country. i hope our banks and other financial institutions will sign up to this code because it is very important that our customers / consumers are protected and well informed. access to financial services to achieve this objective, there is increasing focus on the use of technology as a means of overcoming the physical barriers to extending financial services in rural areas. the use of the mobile phone as channel to extend coverage of financial services to a greater portion of our rural people is a good example. there is also special emphasis on ensuring greater access to financial services by our women. bis central bankers β speeches the three goals i have just highlighted form the key activities of the national financial inclusion taskforce ( nfit ) established early this year. and i am encouraged that anz and other banks in the country are proactive members on the taskforce. and on their own banks have also been very proactive in conducting financial inclusion activities for their clients and the wider public. i am confident that with on - going support from all stakeholders, solomon islands would successfully achieve the moneypacific goals ahead of the other countries in the region. official opening ladies and gentlemen, without taking anymore of your time, i would like to thank barry for inviting me to this important occasion. i wish barry and his team on - going success in their activities in solomon islands. with these few words, ladies and gentlemen, i now have the pleasure in declaring anz β s new honiara central branch here at the hyundai mall officially open. thank you very much. bis central bankers β speeches
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this additional facility to conduct their banking business. this branch certainly has a modern look and feel about it. i feel as if i am in an bis central bankers β speeches anz branch in sydney or brisbane. anz has certainly raised its standard in terms of its facilities. i know it is not cheap but this is what i mean when i say that solomon islands deserve the best or world class facilities and products and not the β fitim solomon β facilities or products. update on si economy let me provide a brief update on our recent economic performance. at the beginning of this year we projected the solomon islands economy to grow by around 6 percent, slightly lower than last year. based on available data for the last seven months, it appears that growth for 2011 would be the same or even higher than last year. economic performance in the first half of 2011 had been robust with key macroeconomic indicators showing positive outcomes. in the real sector the production of all commodities were strong in the first half of 2011 with copra doubling, palm oil up 14 %, cocoa up 26 %, fish up 17 % and logs up by 50 %. of great interest is log production, with total output up to july reaching 1, 143, 222 cubic meters. at this rate, total log production for 2011 would reach 1. 9 β 2. 0 million cubic meters. gold production has also come on stream and is contributing to the country β s exports and growth. in the external sector, strong commodity prices and production have led to : improvements in the trade account with the june quarter posting a trade surplus, the first since 2006. marked improvement in export receipts, lower import payments, donor and investment inflows contributed to the positive outcome in the external sector. as a result, foreign reserves rose by 24 % to sbd $ 2. 6 billion by last week, or equivalent to over 10 months of import cover. in the monetary sector, money supply ( m3 ) grew by a moderate 3. 0 % as opposed to 0. 8 % growth in the same period last year. at the same time credit growth has been subdued resulting in : a 22 % increase in liquidity since december 2010 despite the central bank absorbing more than $ 200 million of this liquidity from the banking system. in terms of government finances, the country β s fiscal position has improved markedly. with sound fiscal management, revenue collection has increased and expenditure contained within budget allocations. the government had been able to build up its cash reserves. on
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interest rates across key industrial countries in recent years supports this hypothesis. however, this co - movement in long - term interest rates might also be the outcome of global shocks which affect different countries in much the same way and, therefore, prompting similar national monetary policy responses. in this case, the co - movement in national longterm interest rates does not necessarily imply that central banks no longer exert an influence on their domestic long - term rates. 2. 3 credit channel the credit channel consists of several sub - channels with the bank lending channel and the balance sheet channel probably being the ones that have been most analyzed. whereas the bank lending channel concentrates on the supply of bank loans, the balance sheet channel looks at the effects of monetary policy on the overall supply of funds via borrowers β net worth. as concerns the bank lending channel, a number of studies document that financial innovation β such as securitisation or credit derivatives β have led to banks becoming more flexible in reacting to monetary policy. more specifically, they may have become able to better isolate their loan costumers from restrictive monetary policy impulses. 2 consequently, financial developments may have made the bank lending channel less important. however, to the extent that credit protection through credit derivatives is associated with an increase in bank credit supply the importance of the bank lending channel has not necessarily changed. for example, the possibility of transferring credit risk may not result in reducing risk from a see boivin, giannoni, mojon, β how has the euro changed the monetary transmission? β, nber working paper no w14190. see for example altunbas, gambacorta and marques - ibanez ( 2007 ), β securitisation and the bank lending channel β, ecb working paper no. 838. see for example hirtle ( 2007 ), β credit derivatives and bank credit supply β, federal reserve bank of new york staff report no 276. specific activity ( such as lending ) may increase that activity. in such a case, monetary policy would still operate through a bank lending channel as capital requirements would still be effective. according to the balance sheet channel, possible interest rate changes influence the creditworthiness of borrowers via the evaluation of their assets. creditworthiness, in turn, influences the premium that borrowers have to pay for external financing, and, thus, economic activity. while the analysis of the balance sheet channel was originally applied to non - financial institutions, the deep
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a major impediment to small business growth. another core task in growth - spurring labour market reform will be to bring down non - wage labour costs, which are a major barrier to employment growth. that is equivalent to further reforming the social security systems. we have already added a small but fully - funded pillar to our pay - as - you - go pension system. however, pension reform is still unfinished business. employees will need to resort to more private provisioning. in terms of growth orientation, europe has been a bit of a laggard, although we have sound economic fundamentals. the time for more structural adjustments has undoubtedly come. they should help to both exploit and raise the growth potential. in general, economic policymakers need to provide a viable framework for giving enterprises and house - holds certainty of planning. pro - growth policies are not restricted to domestic issues. a coherent approach to pro - growth policies must encompass liberal trade policy. lowering barriers to trade and granting market access must be part of any credible set of pro - growth policies. there are really few things economists are willing to agree on, but the benefits of free trade are among them. therefore, the doha round of international trade negotiations is another great opportunity for the world economy to foster growth. 2. 3 a sound financial system the third factor in policies for sustainable growth is a sound financial system. it is a necessary precondition for the exploitation of the growth potential. there can be no investment without financing, and there can be no proper financing without a sound financial sector. it is not a question of whether a financial system is a capital market system or relies more on banks for the allocation of funds. by tradition, continental europe tends to be more bank - centred than the english - speaking countries. this tradition is now under change. not even the setback for financial markets which followed the bursting of the millennium bubble brought this process to a halt. under the new single currency, capital markets in the euro area have begun to play a larger role in financing. financial integration is - aside from price stability - one of the hopes we had for the euro. it materialised quickly. more liquid and more thoroughly integrated euro - area capital markets are providing businesses with better and more diverse financing options. ever more companies are going straight to the market, implying a changing role for banks. the euro - area financial system is becoming more balanced. finance in europe - which has not been bad before the euro arrived! - achieved a
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these markets. to conclude, i would like to stress on the importance of allowing financial technologies into our financial markets and at the same time implementing proper regulatory regimes to ensure such technologies, market players and our economy is not abused for illicit purposes. blockchain technology, if properly used, can be applied in a large variety of sectors, including, trade, commerce, healthcare and governance. it could be used in pledging of collateral, registration of shares, bonds and other assets, and operation of land registers, and many more. i wish you all a successful conference. thank you. wassalam alaikum. 3 / 3 bis central bankers'speeches
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ahmed munawar : speech - 2024 annual meetings of the imf and the world bank group remarks by mr ahmed munawar, governor of the maldives monetary authority, at the 2024 plenary of the boards of governors of the international monetary fund and the world bank group, washington dc, 25 october 2024. * * * assalam alaikum and a very good morning it is a great honor to you to the 2024 plenary of the boards of governors of the international monetary fund and the world bank group. a warm welcome to the managing director of the imf kristalina georgieva and the president of the world bank group ajay banga. congratulations ms. georgieva, on commencing your second term as the md. this year is special. we are celebrating the 80th anniversary of the bretton woods institutions - a major milestone in the history of global economic governance. i would like to reflect on the words of the first annual meetings chair of the boards of governors, u. s. treasury secretary, john w. snyder : " in joining the fund and bank, our respective governments have not only invested large sums of money, but they have in a considerable measure staked their economic destinies on the success of these institutions. we must not fail our governments and, above all, the hopeful people we represent. " these words hold true today, as they did 80 years ago. for 80 years, the imf and world bank have remained beacons of hope, managing global crises from wars to pandemics. even in tough times, we find resilience. chairing the board of governors in this historic meeting by a small state like mine is a sign of the inclusivity of these institutions. despite tighter financial conditions and rising geopolitical tensions, the global economy is showing remarkable strength. a soft landing is within reach. inflation is moderating. yet, we cannot become complacent. uncertainty remains high. ongoing conflicts and upheavals in many parts of the world cast a shadow over our progress, and further escalations would have a much larger impact on vulnerable economies, including through higher commodity prices. it is true that significant challenges remain, and i would like to highlight three such challenges. firstly, climate change. small countries like the maldives, are on the front lines of climate change. the maldives aims to have 33 % of its electricity from renewable sources by 2028. this transition will build climate resili
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emmanuel tumusiime - mutebile : financial innovation and inclusion β challenges and implications for monetary policy and financial stability opening remarks by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the comesa ( common market for eastern and southern africa ) committee of central bank governors symposium on β financial innovation and inclusion β challenges and implications for monetary policy and financial stability β, kampala, 24 may 2013. * * * governors of comesa central banks secretary general of comesa resource persons senior central bank officials ladies and gentlemen, good morning everyone. i am delighted to welcome you to this comesa committee of central bank governors symposium on the theme, β financial innovation and inclusion : challenges and implications for monetary policy and financial stability β. during our 18th meeting held in kigali in december 2012, we recognised new challenges in the financial sector and decided to organise a symposium to share experiences and to explore ways of facilitating financial innovation and inclusion with due consideration of the page attendant effects on the efficacy of monetary policy and financial stability. today, we have a panel of experts who will enrich our understanding of the challenges posed by financial innovation and inclusion on monetary policy and financial stability. i am confident that the presentations and discussions during this symposium will fill any existing knowledge gaps on these issues. we will undoubtedly leave this forum with a strategic vision on the role that central banks should play in shepherding the development of financial innovation and inclusion. fellow governors, ladies and gentlemen, allow me to make a few remarks on this very important topic as a precursor. to date, our financial systems have experienced rapid financial innovation, driven mainly by advances in information and communication technology. both the banked and unbanked public can move money and effect payments much faster and with greater convenience. of all the innovations, mobile money growth has developed and proliferated across the region at such a remarkable pace that it should attract keener regulatory oversight. yet, regulation and supervision of innovations is often a double edged sword. on one hand, suboptimal regulation restrains the pace and extent of innovation. on the other hand, smart regulation provides a safe and secure environment. our discussions should shed light on the threshold beyond which the extent of new financial services makes them systemically important, and below which freedom unleashes creativity. moreover, because ict has delivered services to the unbanked who had no access to financial services before, it carries the hope of facilitating development. nonetheless, financial
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##es which can then be used as raw materials in agroprocessing industries ; ii ) to free up labour for employment in modern industries, and iii ) to create a rural market for the products of domestic industry. uganda formulated the plan for the modernisation of agriculture in the 1990s but this has not been implemented effectively with dire consequences for the performance of the agricultural sector. labour productivity in ugandan agriculture is among the lowest in the world. most of the smallholder food crop sector is characterized by subsistence farming, with no use of modern inputs. the strategic objective of agricultural policy should be to help uganda β s smallholders to adopt good agricultural practices, produce more output for the market and to start to use modern farm inputs. the first step towards agricultural modernization is an effective agricultural extension service which can reach the mass of smallholder farmers and encourage them, through technical advice and demonstrations, to adopt good agricultural practices. the returns to investing in modernizing smallholder agriculture are potentially huge. the combination of adopting good agricultural practices and low input technology could enable smallholders to double their yields, which would raise farm incomes and bis central bankers β speeches generate marketable surpluses. it is a mistake to believe that ugandan agriculture can be modernized by focusing on large scale commercial farms, rather than smallholders. given the structure of agriculture in uganda, which is dominated by smallholders, large scale farms are never likely to account for more than a small share of farm output. furthermore, yield per area of land in ugandan agriculture is inversely related to farm size ; hence replacing smallholder agriculture with large scale farms is likely to reduce total farm output. 3. accelerate the demographic transition the demographic transition plays a key role in economic development. no developing country has achieved middle income status and structural transformation of the economy without undergoing a demographic transition. a demographic transition entails a fall in the total fertility rate, which reduces the population growth rate and the pulls down the agedependency rate. uganda has only just begun its demographic transition. it has a total fertility rate of 6. 1 children per woman and so has one of the highest age - dependency rates in the world, at over 100 dependents per people of working age. many of the fast growing economies of developing asia have age - dependency rates of around 50, because they began their demographic transitions several decades ago. lower age - dependency rates are closely correlated with higher savings rates and greater real spending per person on human capital development, which is crucial for structural
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the evidence of psychology suggests that the β system β and β situation β are far more likely to predict actual ethical behaviour compared to personal convictions. this is somewhat comforting, because it means that a huge part of the ethical challenge can be addressed without the need to reform people from within. the problem of β bad apples β, it seems, can be largely solved by focusing on cleaning up the β bad barrels β. however, the element of β people β remains relevant in determining behavioural outcomes β even if to a lesser extent. again, this is a very wide and complex subject, but i wish to briefly mention two key points. first β we must remember that the financial sector, like human society, is made up of moral creatures. we cannot live, much less flourish, unless we recognise this and begin to employ the language of ethics in business. the language of business must align with what most people feel about how to live well : be honest ; give trust ; create lasting values ; be reliable ; and take pride in your work. the evidence reveals that employees are much more productive, and feel more fulfilled, when they believe that they share the same values as the organisation they work for. my point is simple β we must not shy away from the language of morality and objectivity in finance. yes, there are many ambiguous areas. but some things are right, and some things are wrong ; and as moral creatures, we should engage on these terms, even in business. morality does not 4 / 5 bis central bankers'speeches cease to exist when we go to work. if dishonesty is unacceptable, then it is unacceptable regardless of whether we are dealing with a neighbour or with a counterparty. the global financial crisis has been a sobering reminder of why we must not divorce ethics from finance. second β we must all face up to the difficult but necessary decisions of keeping out bad apples from the financial industry. recruitment and promotion plays a key role here. organisations should pay careful attention to the individuals they hire and promote. recruitment assessments should be done with utmost vigilance, and financial firms must be more candid in dealing with cases of misconduct. complaints and suspicions should be investigated properly, with an opportunity for the individual in question to make representations. if their name is cleared, then this should be recorded, to protect them against unfounded accusations in the future. if they are found to be in the wrong, then proportionate disciplinary action should be taken and recorded. often, bad apples
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, it is not only in the epc β s own interests that it stays at the centre of european retail payments integration and innovation ; it is also in the interests of the market. it is clear that the epc should continue contributing to sepa council work, as a representative of the european banking sector for retail payments. the involvement would be at the strategic level and often also at the requirements level. in addition, as scheme owner of sct and sdd, the epc has a continued responsibility for maintenance and improvements. it should do that in a transparent way, as is being done with the customer stakeholder forum, the clearing & settlement forum, and with the consultations on new releases. perhaps the epc should review its involvement in cards, where it is not a scheme owner. the sepa cards framework and its subsequent q & as have not proved to be very effective in developing a european card payments market. the work of the cards stakeholders group on the standardisation of functional requirements and the standardisation of the security requirements for cards and terminals should become the leading workstream. the epc β s role would then be to channel the positions of the european banking sector at the strategic level of the sepa council, as well as to provide technical expertise in the discussions of the cards stakeholders group. it is a good example of how social dialogue and multistakeholder involvement can work. for innovative payments, such as internet and m - payments, the epc has a legitimate role to enable the use of the epc β s own schemes. it could do so by developing implementation guidelines for sct and sdd for use in such payments. it is important that this is done in a way that involves other stakeholders, also those outside the traditional banking sector. conclusions let me conclude. the work on payment systems and on sepa in particular remains a crucial part of european integration in the area of financial services. sepa is delivering value to all european citizens. for banks, before and during the financial crisis, the provision of retail payments is one of their few stable business lines and an area on which many banks are focusing. the internet, in an embryonic form, started 43 years ago today. young people today are unaware how our economy, our society and the world functioned before the internet, and especially before the world wide web. how do you think they perceive the fact that the institutions to which they entrust most of their money and on which they rely to make most of
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haircuts on lending against those securities increased ( chart 5 ). both the risk - averse moneyseeking investors and the leveraged risk - seeking investors on either side of the dealers β balance sheets questioned the liquidity and solvency of many of those dealers. maturities shortened dramatically until most transactions were at overnight maturities, rolling daily ( gorton et al, 2014 ). some dealers experienced β runs β. financing terms for leveraged investors tightened sharply, causing some to fire sale assets and adding to market instability. in the us, the market infrastructure was flawed, with the daily unwind of tri - party repo transactions relying on massive intra - day financing from private sector clearing banks. 8. 5 % is the sum of the 6 % minimum tier 1 to risk - weighted assets ratio plus the 2. 5 % capital conservation buffer under basel iii. bis central bankers β speeches since the crisis, regulators have addressed many of the underlying problems of excessive leverage and maturity transformation : a. securities financing transactions are included in the internationally - agreed leverage exposure measure adopted by the basel committee 4. leverage ratio requirements will put prudent limits on the size of dealers β matched books. b. they are also included in the basel committee β s measures to address liquidity risks. the recently - announced net stable funding ratio 5 will require short - term secured loans to financial and non - financial borrowers to be backed by at least 10 % stable funding. and supervisors can use the liquidity coverage ratio 6, as we have been doing for some time in the uk, to require dealers to hold liquid assets against prime brokerage risks such as withdrawal of cash margin by hedge fund clients. c. the financial stability board has agreed minimum haircuts 7 in order to limit the leverage that non - banks can obtain through borrowing cash against private sector securities. these haircut floors have deliberately been set at β backstop β levels designed to prevent excess in times of market exuberance while allowing room for prudent firms to do their own risk management. d. the us authorities have taken steps to strengthen the tri - party infrastructure. the reforms are not yet complete. one important missing ingredient is data collection to monitor market trends more closely. for example, the authorities need to understand the composition of the collateral being used across key financial markets in order to identify concentrations. the financial crisis showed the risks associated with a market - wide margin call when widely - used collateral is subject to an unexpected common price shock
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. data is also needed to track the terms of transactions, including maturity and haircuts. one interesting idea is for regulators to run exercises in which they ask prime brokers to calculate portfolio haircuts against archetypal leveraged portfolios. the aims would be both to track any loosening in market - wide standards over time and to spot outlier dealers that require lower haircuts than their competitors. these significant regulatory reforms will have consequences for the behaviour of dealers and investors in securities financing markets. some market participants may seek ways around the new regulations : for example, there has been talking about dealers β renting β balance sheet from other market participants or establishing off - balance sheet financing vehicles. the flipsides of more resilient dealers and markets in periods of stress may well be less leverage, less maturity transformation and lower dealer inventories in more normal periods. the balance is not easy to strike ; we may need to readjust our approach as we learn. but the goal of these reforms is clear : to make securities financing markets resilient. robust securities financing markets should help to stabilise rather than destabilise the financial system in the face of shocks. the reduction in dealer inventories has attracted a lot of comment, with questions about whether they will be willing and able to provide liquidity as market makers in falling markets on the same scale as in the past. but the role of dealers in providing stable financing to leveraged investors may be equally important. those investors may be the most likely to see a market crash as a buying opportunity β but only if they are not over - leveraged and have access to borrowing from financially - sound dealers. put another http : / / www. bis. org / publ / bcbs270. pdf. http : / / www. bis. org / bcbs / publ / d295. pdf. http : / / www. bis. org / publ / bcbs238. pdf. in october 2014, the fsb published strengthening oversight and regulation of shadow banking : regulatory framework for haircuts on non - centrally cleared securities financing transactions ( http : / / www. financialstability board. org / publications / r _ 141013a. pdf ). bis central bankers β speeches way, we want dealers and leveraged investors to be providers not demanders of liquidity in a crisis. references gorton, g b, metrick, a, & xie,
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). this shortening occurred even though the ecb β s assessment of prices and economic activity and its monetary policy inclination remained constant. the earlier - than - projected hike in the interest rate implies a faster - than - projected monetary tightening, which may undermine the economic recovery process. in this sense, the ecb β s action can be interpreted as a provision of monetary accommodation, because it helped lengthen the expected duration of the current interest rate policy by financial markets in line with the ecb β s view. c. forward guidance in the united kingdom in the united kingdom, the monetary policy committee ( mpc ) of the boe made a new move in july 2013, although it was not forward guidance describing the future monetary policy stance. after expressing concerns about the significant upward movement in market interest rates, the statement it issued indicated that in the committee β s view, the implied rise in the expected future path of bank rate [ the policy interest rate ] was not warranted by the recent developments in the domestic economy. because the statement helped to lower the market interest rates, the effects were similar to those of the ecb. following a new remit letter from george osborne, the chancellor of the exchequer, in march 2013, the mpc released a comprehensive set of forward guidance over the future conduct of monetary policy in august 2013. the statement indicated that the mpc intends not to raise bank rate from its current level of 0. 5 percent at least until... the unemployment rate has fallen to a threshold of 7 percent, subject to the conditions below. the mpc stands ready to undertake further asset purchases while the unemployment rate remains above 7 percent, if it judges that additional monetary stimulus is warranted. it was also stated that the stock of asset purchases would be maintained until the 7 percent threshold is reached and subject to conditions. the conditions are then defined in the form of the following three β knockouts β : ( 1 ) the cpi inflation 18 and 24 months ahead will be above 2. 5 percent ; ( 2 ) medium - term inflation expectations do not remain well anchored ; and ( 3 ) the financial policy committee ( fpc ) judges that the stance of monetary policy poses a significant threat to financial stability that cannot be contained by the substantial range of mitigating policy actions available to the fpc. if any of these knockouts are breached, the mpc will cease the above - mentioned guidance. it is state - contingent guidance, linking to the policy interest rate, asset
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supporting annual m3 growth. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) was β 3. 1 % in march, unchanged from february. weak loan dynamics for nonfinancial corporations continue to reflect their lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) stood at 0. 4 % in march 2014, broadly unchanged since the beginning of 2013. the april 2014 bank lending survey confirmed the stabilisation of credit conditions for loans to enterprises and households. credit standards over the previous three months remained broadly unchanged for loans to enterprises but were eased in net terms for households. broadly in line with these results, in the survey on the access to finance of small and medium - sized enterprises ( smes ) for the period october 2013 - march 2014, smes reported that bank loan availability had become less negative and had actually improved in some euro area countries. according to both surveys, the general economic outlook contributed less negatively or even positively to these developments. at the same time, banks still reported tight levels of credit standards when seen in a historical perspective. since the summer of 2012, substantial progress has been made in improving the funding situation of banks. in order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed. in this context, the ongoing comprehensive assessment of banks β balance sheets is of key importance. banks should take full advantage of this exercise to improve their capital and solvency position, thereby contributing to overcome any existing credit supply restriction that could hamper the recovery. to sum up, the economic analysis confirms our expectation of a prolonged period of low inflation followed by only a gradual upward movement in hicp inflation rates towards levels closer to 2 %. a cross - check with the signals from the monetary analysis confirms the picture of subdued underlying price pressures in the euro area over the medium term. regarding fiscal policies, according to the european commission β s spring forecast, the general government deficit in the euro area is expected to decline further, from 3. 0 % of gdp in 2013 to 2. 5 % this year and to 2. 3 % in 2015. the government debt - to - gdp ratio is expected to stabilise
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alan greenspan : cyclicality and banking regulation remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the conference on bank structure and competition, federal reserve bank of chicago, chicago, illinois, 10 may 2002. * * * my congratulations to mike moskow and his colleagues for once again designing and implementing an excellent and topical program, with some very interesting papers. the theme of the conference - financial market behavior and appropriate regulation over the business cycle - - could not be more relevant for a group of central and commercial bankers, not to mention our academic friends. to be sure, there are those that believe that a regulation should be considered totally independently of either current business conditions or the regulation's implications for financial markets. this position is predicated on the view that the reason for the regulation - - in the case of financial markets, usually prudential behavior, consumer protection, or community reinvestment - - is an end in itself and should require that macro policymakers adjust to the regulation. indeed, some of what we do is that. but our emphasis today is the need to be sensitive to the market and cyclical implications of the regulations we adopt. the conference theme does not imply cyclical effects or market responses should dominate the decision about applying a rule that may be needed for other purposes. rather, our assignment at this conference is to consider, as part of the policymaking and evaluation process, the joint implications of our regulatory - - and, i should add, our supervisory - - policies both for their intended purposes and for financial markets and cyclical stability. cyclicality in financial markets and intermediation financial markets and intermediaries are part of the macroeconomic cyclical process, and thus new rules involving these markets and institutions need to be evaluated in that context. this is an important reason, in my judgment, why central banks in general, and the federal reserve in particular, should remain in the bank regulatory business. it is evident that regulatory rules can add to ongoing macroeconomic and asset - quality cyclicality. rules are constraints or limits that require responses as those limits are approached. sometimes those limits - - say capital constraints - - may induce tighter lending standards or shrinking balance sheets for a number of institutions at the same time, engendering significant real business - cycle effects. we must, therefore, be aware of the implications beyond the original intent of a rule and consider its associated tradeoffs. government programs, too, often
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which is, as quite important, recognised and by the ecb, in order to reduce risks of sudden stops. more than half of investments in serbia are channelled to tradable sectors, with one third of the total going to the manufacturing industry through many small projects to export - oriented sectors. being so, the fdis were one of important drivers of the two - digit export growth rates of our manufacturing industry during the last four years. plus, we also have constant growth in geographical diversification of fdis, also recognised as important. fdi structure by sector fdi inflow ( net basis ) and coverage of current account ( in eur bn ) net fdi, % of gdp 4. 0 177 % fdi / cad coverage other finance transportation mining construction and real estate trade manufacturing 3. 5 143 % 146 % share in gdp : 3. 0 2. 5 118 % 9. 4 102 % 2. 0 91 % 7. 5 7. 0 6. 4 56 % 35 % 5. 1 1. 5 1. 0 5. 2 0. 5 3. 6 21 % 3. 6 3. 5 0. 0 - 0. 5 2. 2 2008 2009 * nbs projection 6. 2 62 % 62 % 2018 * source : nbs. * preliminary data high and diversified fdi inflows have been quite supportive for our growth fundamentals. one reflection of their benefits is a rise in production and employment, and improvement of the structure of our economy. we expect that fdi will be one of the push up factors for our economy to growth at rates of at least 4 % in the medium term. another benefit is that they are facilitating the access to global value chains. let me give an example. additional benefit of fdis, as recognised and said already, is export diversification. according to the imf β s export diversification index, serbia ranks 12th out of 186 countries, and this is quite good result. with this i would like to end this part regarding the level, structure and importance of fdis. fdi inflow to automobile industry and automobile industry exports ( in eur mn ) exports, production and employment in manufacturing ( 2012 = 100 ) 1, 800 1, 600 1, 400 1, 000 production ( lhs ) productivity ( lhs ) employment ( lhs ) exports ( rhs ) 1, 200 car exports ( lhs ) exports of other companies ( lhs ) cumulative fdi inflow in automotive
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year, the nbs created a stable economic environment and successfully slashed inflation, forcing the government and policy makers to face the reality. and the reality is unyielding : inflation does not create jobs, it does not push gdp up, and, perhaps most importantly, inflation has not created welfare anywhere in the world! is it then possible that, even after the devastating consequences of the 1992 - 1993 hyperinflation on the country β s economy, serbia has still not grasped how damaging the effects of inflation can be?
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mario draghi : imfc statement statement by mr mario draghi, president of the european central bank, at the thirty - ninth meeting of the international monetary and financial committee, washington dc, 12 april 2019. * * * the euro area economy expanded at a slower pace in 2018, following robust growth in the previous year. the economy grew by 1. 9 % in year - on - year terms, marking a sizeable moderation in the pace of economic expansion. while there are signs that some of the idiosyncratic domestic factors dampening growth are fading, global headwinds continue to weigh on euro area growth developments. the persistence of uncertainties, related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets, is leaving marks on economic sentiment. at the same time, the economy continues to exhibit a high level of capacity utilisation, and the unemployment rate in the euro area has continued its downward trend, falling to its lowest level since october 2008. the number of people in employment has increased by more than ten million since mid - 2013. nevertheless, since the annual meetings in october 2018, incoming data have been weak, in particular in the manufacturing and tradable goods sectors, reflecting a slowdown in external demand. this was compounded by some country and sectorspecific factors that are turning out to have somewhat longer - lasting effects than previously expected. our monetary policy measures continue to support domestic demand, which remains the backbone of the euro area β s economic growth. private consumption is driven by employment gains and rising wages. although business investment has lost some momentum, economic fundamentals remain supportive ; high levels of capacity utilisation, together with favourable financing conditions and robust demand, are expected to continue to further support investment. in addition, the expansion in global activity is expected to continue, although at a slower pace. since the annual meetings, short - term economic projections have been revised downwards. the latest ecb staff projections put annual real gdp growth at 1. 1 % in 2019, 1. 6 % in 2020 and 1. 5 % in 2021. at the same time, the persistence of uncertainties related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets poses downside risks to the euro area growth outlook. headline inflation in the euro area has lately been hovering around 1. 5 %, somewhat lower than in the summer of last year, when it was around 2. 0 %
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) for all items excluding fresh food rose to 2. 4 percent last summer due mainly to the rise in crude oil prices, but declined thereafter to around 0 percent reflecting the decline in prices of petroleum products and the stabilization of food prices. looking ahead, the year - on - year rate of decline in the cpi ( excluding fresh food ) will likely accelerate through the middle of this fiscal year reflecting the deterioration in demand conditions in addition to the fact that the level of cpi at this time last year was elevated due mainly to the rise in prices of petroleum products and food. thereafter, however, assuming that medium - to long - term inflation expectations remain stable, the rate of decline in the cpi ( excluding fresh food ) is likely to moderate as the effects of the changes in the prices of petroleum products abate. the above projections regarding future economic activity and prices continue to be attended by considerable uncertainties. those that demand attention are the downside risks. the bank will continue to carefully monitor developments in economic activity and prices bearing in mind these downside risks. iii. financial conditions developments in the world economy and in global financial markets are the major downside risks to japan's economy, but i have already elaborated on them and i will now turn to japan's financial conditions. from last autumn, the effects of the financial crises in the united states and europe spread to financial markets in japan. in the money market, tensions increased as can be observed in wider spreads between interbank funding rates and short - term government security rates. the issuing conditions for cp and corporate bonds sharply deteriorated. the initial cause of the recent tightening in financial conditions was the global credit contraction. therefore, the recent changes in financial conditions are characterized by the sharper deterioration in financial positions of large firms than in those of small firms. the heightened pressures in the global financial and capital markets directly affected the financial positions of large firms through increased difficulty in raising funds from foreign banks and from the domestic cp and corporate bond markets. large firms increased the volume of borrowing from banks and tried to hold ample liquidity at hand due to increased concerns over future financial conditions. the deterioration in financial positions of large firms negatively influenced the financial positions of small firms through various channels. in view of these assessments, the bank took aggressive policy actions in order to provide abundant liquidity in the money market and to facilitate corporate financing. these actions include the outright purchases of cp and corporate bonds. although cp and corporate bonds are fund - raising tools used mainly by large firms
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their assets to be in government securities only. managing public perception 31. another challenge is to build trust in the minds of depositors and public in general. considering that in india we have been only licensing universal banks which engage in all types of financial activities, it may be a challenge to manage the public perception and provide enough confidence to the public to enable them to place deposits in differentiated banks. there will be a need for creation of awareness through proper communication strategy and depositor education. we are conscious of this need. legal provisions for licensing of differentiated banks 32. section 22 of the banking regulation act, 1949 provides that a company intending to carry on banking business must obtain a licence from rbi except such of the banks ( public sector banks and rrbs ), which are established under specific enactments. every bank in india, i. e., domestic and foreign, apart from banking business, can carry out all the activities permitted under section 6 of the banking regulation act. however, the act also provides for reserve bank specifying the terms and conditions and other requirements, along with the licences. we have to employ these provisions for licensing of differentiated banks. viability of the models 33. concentration risk : the differentiated banks will be fraught with concentration risk and a downturn in a particular sector or region can jeopardize the operations of a bank. bis central bankers β speeches 34. asset liability mismatches : sector - specific banks run the risk of asset - liability mismatches. asset liability mismatches will be posing a challenge to liquidity management by differentiated banks. it is therefore, imperative to have specific asset - liability management ( alm ) tools for such banks. 35. absence of cross subsidization : universal banks function by engaging in crosssubsidizing loss making business in one segment with earnings from another which will not be possible for specialized banks thereby, impacting their revenues. the localized operations or restriction on the banks to engage in a particular activity could lead to non - availability of cross - subsidization impacting the viability of such models. 36. avenues for income generation : providing avenues for income generation for the differentiated banks is a challenge. to begin with, other fee - based business like distribution of insurance and mutual fund products, credit card business, remittances, payment and settlement business, etc. could be permitted to augment the revenue streams. 37. these model related issues we have addressed through prescribing single
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s estimate of potential output of between 2, 0 and 2, 5 per cent. the weak outcome last year was partly due to the impact of protracted strikes in the mining and manufacturing sectors during the year. the bank estimates the negative impact of these strikes to be in the order of around 1, 2 percentage points of gdp. hopefully, prolonged work stoppages will not be a regular feature each year. the question we need to ask ourselves is why the growth prognosis is so weak. some of it has to do with the global economy, as i outlined earlier. secondly, there are binding constraints coming from the electricity supply uncertainties. our estimate of growth tries to incorporate some element of the impact of load shedding on output. there are two elements here : one is the impact of longer term constraints which hamper new investment, and which is reflected in the overall lower potential output ; the other is the impact of load - shedding on existing capacity and therefore on current output. we estimate this latter factor to be in the order of magnitude of around 0, 5 percentage points of gdp. load - shedding appears to have contributed to a general low level of business confidence, as evident in the various confidence indices, but also evident in the very low growth in private sector gross fixed capital formation. in 2014, gross fixed capital formation contracted by 0, 4 per cent, driven mainly by the 3, 4 per cent contraction in investment by the private sector, which accounts for just under two thirds of capital formation. on a more positive note, in the second half of the year growth was positive, a reversal of the strongly negative trends observed in the first half of the year. however, supply side constraints and low confidence are likely to constrain stronger growth. it is worth noting that the more favourable fixed investment outcomes observed in 2013 were mainly related to renewable energy projects. the main driver of growth in recent years has been the consumption expenditure by households. however, the contribution to growth in 2014 declined by one percentage point to 0, 8 percentage points. while we would prefer to have investment - driven growth, even consumption has been relatively subdued for some time, declining to 1, 4 per cent in 2014 compared with 2, 9 per cent in 2013. a further concern has been the recent sharp drop in consumer confidence, which, according to the fnb / ber survey reached a level of β 4 in the first quarter of the year, compared to an average of + 5. factors
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fixed - interest - rate assumption to an unconditional forecast that includes a reaction function of the central bank. the initially established quarterly projection model was a small - scale model belonging to the second generation of such models. it was thus relatively simple and arguably missed many important links in the economy. nevertheless, it was already quite close to the state - of - theart among the inflation - targeting central banks around the world, and intense work has been in progress to build a higher - generation model. as a result from july 2008 the cnb β s forecast is based on latest generation general equilibrium model, which is fully based on micro specifications. of course, expert judgment and short - term analyses still play an important supplementary role in the design of the final forecast. it is worth mentioning that the development of our forecasting system has been part of the wider evolutionary process that the czech inflation targeting regime has gone through. the first years of the new regime were not easy, and included frequent numerical target misses. nevertheless, the czech republic enjoys low inflation, and inflation expectations seem to be firmly anchored at low levels at present. monetary policy decision - making is rule - based and transparent, thereby enhancing the credibility of the cnb. let me conclude with the statement that a β forecast based β monetary policy framework seems to fully allow an independent central bank to commit credibly to its long - term goal of price stability and this certainly means a lot.
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david dodge : monetary policy report speech by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 20 october 2005. * * * this morning, we released our october monetary policy report. in the report, we said that the global and canadian economies have continued to grow at a solid pace, and our economy now appears to be operating at full production capacity. past and recent movements in energy prices and in the exchange rate for the canadian dollar, along with competitive pressures from china and other newly industrialized economies, are giving rise to significant ongoing adjustments in the canadian economy. given these adjustments and the slow growth of productivity in recent years, the bank has slightly reduced its estimate of potential output growth for 2005 and 2006. the bank projects that the economy will grow in line with production potential through 2007, with growth averaging 2. 8 per cent this year, 2. 9 per cent in 2006, and 3. 0 per cent in 2007. with the economy operating at capacity and with higher energy prices, pressures on consumer prices are somewhat stronger than they were at the time of the july monetary policy report update. assuming energy prices evolve in line with currently prevailing futures prices, cpi inflation is projected to average near 3 per cent through the middle of 2006, before returning to the 2 per cent target in the second half of next year. core inflation should remain below 2 per cent in coming months, returning to 2 per cent by mid - 2006. the bank raised its key policy interest rate to 3 per cent on 18 october. in line with our outlook, some further reduction of monetary stimulus will be required to maintain a balance between aggregate supply and demand over the next four to six quarters, and to keep inflation on target. short - term risks to this projection appear to be balanced. but as we look further out to 2007 and beyond, we see increasing risks that the unwinding of global economic imbalances could involve a period of weak world economic growth. the bank will continue to assess the adjustments and underlying trends in the canadian economy, as well as the balance of risks, as it conducts monetary policy to keep inflation on target over the medium term. 1 / 1
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the short - term securities market is the least integrated segment of the money market. the european commercial paper and certificates of deposit markets are segmented in several market places. but i expect that the market - led short - term european paper initiative, the step initiative, will advance integration. this initiative aims at the convergence of standards and practices through market participants β compliance with the step market convention. in the coming days, euribor aci and euribor fbe will formally adopt the step market convention. issuers will then be able to apply for the step label. the eurosystem has supported this private - sector initiative since its inception by acting as a catalyst. it provides technical support for the labelling process for the first two years, and the ecb produces statistics on yields and volumes for this market. let me now turn to the euro government bond market, which is another market that has achieved a very high degree of integration, as revealed by the ecb β s published indicators. in the run - up to monetary union, euro area government bond yield spreads converged, and since then, government bond yields in different euro area countries have been driven mainly by euro area - wide factors and news. but let me take the opportunity here to explain the relationship between financial integration and market discipline, given that this has at times given rise to misunderstandings. it is sometimes argued that the convergence in euro area government bond spreads which was seen in the run - up to monetary union is evidence that the process of financial integration may be detrimental to the functioning of market discipline, the latter being the influence exerted by markets on governments by pricing different risks of default. this reasoning, however, neglects the fact that the observed convergence in government bond yield spreads mainly reflected the closer coordination of monetary policies across euro area countries β an overall compression of risk premia also observable in other markets and outside the euro area β and the ensuing convergence of inflation expectations across countries, as well as the progressive elimination of uncertainty regarding exchange rate movements and, finally, the disappearance of intraeuro area exchange rate risk by the time the euro was introduced. since 1999, government bond yield spreads have mainly reflected differences in liquidity and in perceived credit risks, which in turn reflect the sustainability of the countries β fiscal positions. i will highlight two implications. first, such β local factors β continue to have an impact on bond yields in various euro area countries. yest, pricing differences related to credit risk perceptions do not signal
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transact at the quoted price have been identified, brokers reveal their names so that they can determine if each other β s credit quality is acceptable and if the exposure can be accommodated within credit limits. as you see, automation of trading is limited in the otc derivatives market. trading systems for foreign exchange. among financial products, foreign exchange probably has recorded the most dramatic shifts in trading mechanisms in the last few years. the volume of foreign exchange traded through electronic brokering systems has grown rapidly and now accounts for some three - quarters of the trading in major markets. besides these systems in the interdealer market, foreign exchange dealers also have developed electronic trading facilities for customers. most bank dealers in foreign exchange have websites that allow their customers to trade electronically. electronic trading between customers does not seem to be happening, although systems reportedly are under development. despite the enthusiasm with which electronic enhancements to trading have been embraced in the spot foreign exchange market, vendors have not successfully extended their services to derivative products involving foreign exchange. a service for the trading of forward foreign exchange has attracted meager volumes, as has a service for the trading of forward rate agreements. the latter service has been hampered by its inability to offer its products in the united states. if the recommendations of the president β s working group were enacted, this trading system would be excluded from the commodity exchange act ( cea ), and the legal status of products offered through the service would be clear, likely enhancing its attractiveness. trading systems for swaps. development of electronic trading systems for swaps also is likely being hampered by the potential application of the cea. the cftc has raised questions about the applicability of the cea to a system that electronically matches swap trades between dealers. this system automates the functions that voice brokers currently provide in the interdealer market. participants in the system electronically indicate their desire to enter into specific transactions. other dealers can accept a transaction, or they can send an electronic message suggesting possible changes in terms. participants can execute trades only with other dealers for whom they have acceptable credit limits. the credit limits of all dealers vis - a - vis each other are loaded into the system before trading. the managers of this system believe that regulatory uncertainty about the application of the cea has slowed the growth of their business, too. potential risk - management benefits. what are the implications of these developments ( or potential developments ) for risk management? the most immediately apparent benefits spring from the changes
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##litation. to increase the profitability of our foreign exchange earning sectors we must improve the productivity of labour and the efficiency of capital, make our products and services superior in every market category, enrich our products ( sports, heritage and cultural tourism, for example ), do targeted marketing and develop new markets. it is critical that we improve service quality and set our standards at the very highest level. there are many success stories in each of these areas and we should always keep them in mind. we should celebrate these achievements, and use them as inspiration for what still needs to be done. bis central bankers β speeches the fiscal adjustment : the fiscal adjustment is designed to stabilize the economy by matching foreign exchange outflows to inflows, and to slow and eventually eliminate the drain on foreign exchange over the next several months. reserves are held for the purpose of financing imports in the interim, while the measures take effect. we expect reserves to fall during that period, but we expect that once inflows and outflows are brought into balance, our foreign exchange reserves will return to levels that have been sustained since 2008. barbados has no problem in servicing government debt. service costs on the external debt are less than 10 % for the foreseeable future, and the net public sector ratio to gdp is a moderate 62 %. barbadians have every reason to be confident of our future : barbadians have bested the caribbean through strength of character, sound decisionmaking, and investing in ourselves. the quality of our lives reflects our achievement. we have beaten the odds before, and we can do it again ; experience has taught us that it is not as difficult as it seems, once you buckle down to the task. patience, persistence, determination and commitment to excellence will win the day. there is something that each and every barbadian can contribute to growth : for entrepreneurs it is the development and promotion of projects to prospective foreign investment partners ; for government it is the upgrade of business facilitation ; and for workers, the improvement of productivity and the development of the barbadian reputation for excellence. finally, the narrative matters. we must together build our self - confidence, by celebrating our successes, to give us energy for tackling the challenges ahead. bis central bankers β speeches
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delisle worrell : barbadians have every reason to be confident of our economic future op - ed article by dr delisle worrell, governor of the central bank of barbados, 31 october 2013. * * * barbados is well placed to address the challenging circumstances our economy faces. we have achieved a very high standard of living, the highest among independent caribbean countries in the human development index, and on par with industrial countries. we rank a respectable 47th of 147 countries in the world competitiveness index, and are first among caribbean countries in the index. barbados β economic policy making arrangements are superior and our institutions are world class. barbados β social and political stability are highly regarded internationally, and the country has good physical infrastructure. how we make policy : the stability of our dollar is foremost in the minds of all barbadians, and the value of the currency is protected by the adequacy of the central bank foreign exchange reserves. every day the minister of finance and top policy makers of the central bank and ministries of finance and economic affairs receive a chart of the foreign exchange reserves, and each month this economic team meets to monitor and discuss the latest developments in the economy and to make adjustments as necessary. the team produces an annual forecast which informs fiscal policy : the budget is designed to match foreign exchange outflows to expected inflows, with a mid - year budget correction, if necessary. the recent budget was a world - class effort, which few democracies have emulated : a steep decline in our reserves became evident only in may this year and by the first week of june cabinet had agreed on the magnitude of the adjustment that would be necessary. a national economic consultation on june 24 secured buy - in from the social partners. this was followed by discussions with all stakeholders and the passage of the august 15 budget, by all accounts fit for purpose, of the right magnitude and with appropriate incentives. for a democratic process, this was a remarkably swift reaction. the growth strategy : the barbados economy is fuelled by foreign exchange. we do four things at internationally competitive prices ( tourism, international business, rum and green energy ) and the foreign exchange we earn and save from these is used to fuel the imports we need for production and consumption. to grow the economy sustainably, we have to grow the foreign exchange earning sectors. fiscal stimulus is not sustainable, because government doesn β t earn foreign exchange. growth is led by the private sector, while government provides incentives and faci
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would have you believe, there is some price worth paying to reduce such tail risks in the future. this past weekend β s historic basel iii agreement strikes exactly the right balance. in my remarks today, i will focus on the costs and benefits of financial sector reform. i will argue that the economic case is compelling and the basic stakes enormous. financial crises are normally followed by financial repression ; economic downturns, by increased protectionism. without credible, coordinated financial reforms, we risk losing the open trading and financial system that has underpinned the economic miracle of recent times. j. dimon, chairman and ceo, jp morgan chase & company, in testimony to the u. s. financial crisis inquiry commission, 13 january 2010. the role of the financial sector before analysing the impact of the reforms, allow me to discuss briefly the role of the financial sector and how it failed during the crisis. by translating savings into productive investment, finance is central to economic growth. it has three core functions. first, through the payments system, it facilitates decentralized exchange, which is fundamental to the functioning of a market economy. second, finance transforms the maturities of assets and liabilities, taking short - term liabilities, such as deposits, and transforming them into long - term assets, such as mortgages or corporate loans. households and businesses can therefore do the reverse, holding shortterm assets and longer - term liabilities. this helps them to plan for the future and to manage risks arising from uncertainties over their cash flows. the social value of maturity transformation is unquestioned, but its performance creates fundamental risks, which requires public intervention. 2 third, the financial system intermediates credit, channelling funds from savers to investors. this allows savers to diversify their risk and everyone to smooth consumption over time and across states of the world. young families can borrow to buy a house ; students can pay for university. people can invest for their retirements and businesses can finance working capital and investment. however, if risk is persistently mispriced, these savings and investments will be misallocated and economic welfare reduced. the crisis financial services are supplied by a combination of banks and markets. in recent years, markets grew to the point that they became important alternatives to banks for corporate and household finance. more and more of the traditional functions of banks β including maturity transformation and credit intermediation β were conducted through a broader range of intermediaries and investment
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. in the 10 years following a financial crisis, the median output growth rate decreases by 1 per cent, and the unemployment rate increases by 5 percentage points. 9 experience suggests that costs build well into the future. in studies released last month, the basel committee found that the median cumulative loss of past financial crises was 63 per cent of national gdp. given the scale of potential losses, there are clearly large benefits to reducing the frequency of crises ( chart 2 ). the extensive analysis of the basel committee suggests that higher capital and liquidity standards would do just that. in particular, the combination of strengthened liquidity standards and a 2 - percentage - point increase in bank capital ratios would raise the annual expected level of gdp by 1. 8 per cent relative to trend. see c. reinhart and v. reinhart, β after the fall β, forthcoming in macroeconomic policy : post - crisis and risks ahead, federal reserve bank of kansas city economic policy symposium, jackson hole, wyoming, 26 β 28 august 2010. because this improved performance accrues over time, it is a gift that keeps on giving. using a conservative real discount rate of 5 per cent, the cumulative present value of this better performance is equivalent to more than 35 per cent of gdp, or β¬0. 9 trillion for germany. 10 some in canada argue that our sound financial system implies that the potential gains are small for our country and the g - 20 reforms are, therefore, unimportant. this is misguided. in open economies such as ours and germany β s, reducing the incidence of foreign crises is even more important than domestic benefits. today β s reality is one of deep interconnectedness, where financial problems in other regions spill rapidly into our own. in an increasingly multipolar economy, we simply cannot afford to lurch from crisis to crisis every five years. to reduce this frequency, we need a strong, universally applied framework. the basel iii rules, combined with the fsb and imf β s review processes, have the potential to be just that. costs of reform despite the clear benefits, stronger prudential standards also impose costs. banks can follow several strategies to meet regulatory demands for higher capital requirements. most obviously, they could raise additional capital in public markets. if given sufficient time, they could generate capital internally through retained earnings. in addition, they could pass on some of the costs of the higher standards to their customers through higher interest spreads or increased fee income. finally,
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. as reported in the official statistics, the uk terms of trade have not deteriorated that much over the past year, although the trade statistics ( both for prices and volumes ) have been affected by methodological changes ( and the underlying challenges posed by covid and brexit for data collection ). nonetheless, higher international energy prices weigh on domestic demand through their implications for household real income and the real profits of non - energy companies. 11. see β wages and inflation β in the bank of england monetary policy report, february 2022. 12. see pill ( 2021 ). 13. see broadbent ( 2022 ) for a discussion of the issues surrounding central bank forward guidance in a uk context. 14. see filardo ( 2014 ), rudebusch and williams ( 2008 ). 15. or ( as in the mpc β s may 2022 monetary policy summary ) entertain dissenting views not just on votes on bank rate but also on the communication reflected in the summary. 16. for a discussion of these risks and their potential consequences in a previous interest rate cycle, see pill ( 2019 ). 17. see bank rate increased to 1. 25 %, bank of england, 16 june 2022. 18. the views expressed in this speech are not necessarily those of the bank of england or the monetary policy committee. i would particularly like to thank saba alam and nick bate for their help in preparing the speech. i have also received helpful comments from andrew bailey, tom belsham, ben broadbent, fabrizio cadamagnani, alan castle, andrew hauser, neil kisserli, catherine l mann, nick mclaren, dave ramsden, michael saunders, fergal shortall and silvana tenreyro, for which i am most grateful. the responsibility for all remaining errors is my own. returning inflation to target - slides
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mixed. [ 13 ] on occasion, it has started well. but β almost uniformly β it has eventually ended in confusion. at a time when policy rates were stuck at their absorbing effective lower bond, a case for forward guidance could be made on the grounds that it allowed for further monetary easing by flattening the forward rate curve when the conventional approach of lowering bank rate was no longer available. [ 14 ] but β at least for the present β that case no longer holds, now that rates have risen comfortably into positive territory. if some easing were required, bank rate could be raised more slowly than currently anticipated ( or even reduced if necessary ). forward guidance can also help contain interest rate volatility while policy is uncertain. as central banks make the difficult transition away from the very accommodative policy settings first established in the face of the global financial crisis and maintained, more or less, ever since, a case could be made that forward guidance ( capital f, capital g ) has helped to ease and support the shift. it is on that basis that i have β somewhat reluctantly β acquiesced in the β further tightening β forward guidance embodied in mpc statements through the turn of the year. but now asset purchases have ceased, bank rate has risen, the qe asset portfolio is shrinking, and gilt sales are under consideration. the transition from one phase of monetary policy to another is better established, and better understood. as a result, the case for maintaining forward guidance to smooth the transition is, at least in my view, much diminished. on this basis, the β further tightening β forward guidance that had been in place in mpc statements since november β despite its evolution over the intervening period β had come to outlive its usefulness. speaking from the collective perspective of the mpc, using forward guidance of that form requires near - unanimity across members of the committee if it is to be meaningful. but, as the patterns of individual votes on bank rate in recent months reveals, unanimity about the short - term interest rate outlook no longer exists. we should not be defensive about that. one of the strengths of the mpc set - up is individual accountability and the diversity of view that it encourages. at a time when inflation is elevated, monetary policy faces substantial challenges, and uncertainty is heightened by geopolitical and epidemiological concerns, it would be not only surprising but also worrying if all mpc members moved in lockstep
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euro area itself β something which is being felt, not least, by german exporters. for another, exports to the euro area are of relatively minor importance for most regions outside europe. last year, euro - area countries imported goods worth us $ 2, 340 from outside the euro area, which corresponds to just under one - fifth of the euro area β s gross domestic product ( gdp ). in the first half of 2012, imports from non - euro - area countries fell by 4 %. looking at the situation the other way round, exports to the euro area account for just 4 % of the rest of the world β s gdp. if the emerging and developing countries are combined into a single group, the figure is somewhat higher, at 5 %. over the past few years, exports of goods to the euro area have made a positive contribution to economic growth in the emerging and developing countries, but this stimulus is now absent. in nominal terms, the lack of this growth impulse explains only about a tenth of the current slowdown in growth in the emerging market economies and developing countries. for brazil, the euro area is of even less importance as a sales market. exports to the euro area account for no more than 2 % of gdp. with an export share of 10 % of gdp, brazil is, anyway, a rather closed economy. with regard to the currently quite marked slowdown in growth in brazil, other factors are therefore of greater relevance. this significant growth slowdown in the large emerging economies is due mainly to specific, home - grown factors. here in brazil, the deceleration was especially pronounced in industry. one major reason for the lull since 2010 is the loss of price competitiveness due to the appreciation of the brazilian real. another factor, admittedly, is that real earnings in the manufacturing sector have also gone up sharply over the past few years. you all know that brazil is not a low - wage country. as a result, domestic goods are increasingly being substituted by imports. the congested infrastructure ranks as a further structural obstacle to macroeconomic development. the fact that there are said to be roughly as many helicopter taxis in sao paulo as there are helicopters in all of germany is due, if nothing else, to your city having gained a reputation for being faced with frequent traffic jams. logistics experts say that deliveries of goods in brazil take twice as long over the same distance as in china. whether or not the announced government investment programme to modernise the road and rail networks
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financial and economic history. therefore, one might be tempted to classify 2012 as an β annus horribilis β. i wish to challenge this view. will 2012, with hindsight, possibly go down in history as an β annus mirabilis β? absurd, you may think. but on second thought this notion seems less absurd than it first appears. let us not forget that the famous poem of john dryden entitled β annus mirabilis β was inspired from major events in the year 1666. a very difficult year, to put it mildly, a year in which the great fire destroyed 80 % of the city of london. the fire spread so rapidly due to the city β s narrow streets and the β interconnectedness β of houses. the battle to stop the fire was considered to have been won by two factors : the strong east winds died down, and the tower of london garrison used gunpowder to create effective firebreaks to stop the fire from spreading further eastwards. dryden β s view was that god had performed miracles for england. the king promised to improve the streets. bis central bankers β speeches well, some may say, so it is in 2012. the fire in the financial markets was stopped by the ecb, by the two firewalls efsf and esm as well as by the governments announcing that they would improve the financial system. thus 2012 is an β annus mirabilis β. but as you know, miracles need to be acknowledged either by the pope or by the scientific community. so let us check whether a miracle was at work in 1666. and what i am going to say now about 1666 can be understood as a metaphorical warning about what could happen if we do not draw the right policy conclusion from the events of 2012. despite numerous radical proposals, london was rebuilt using essentially the same street plan which was in use before the fire. so the miracle is that nothing similar to the great fire has happened in the following years. the lesson of this story is quite clear. the financial system needs better rules than in the years preceding the crisis. we need a resilient financial system. we need a strong supervision. we need effective macroprudential instruments. we need to know how these instruments will work, which is a challenge for the scientific community as well as for macroprudential policy makers. otherwise, we would be putting our trust in a miracle. and we need to understand the complicated interactions between the financial and the real economy
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objectives. in this sketch of our history, i would also want to flag the following important achievements. 1. the conduct of monetary policy has been improved in line with global practices, developments in the financial sector, and the changing economic environment. the establishment of the monetary policy committee ( mpc ) in 2008 has enhanced the legitimacy and transparency of monetary policy decisions, as well as guiding expectations about the policy direction. 2. the prudential regulation and supervision of banks has been strengthened over the years. for instance, risk management guidelines were issued in 2005. in response to the need to strengthen the powers to resolve banks and thereby enhance the sector β s stability, the kenya deposit insurance act was enacted in 2012. consolidated supervision and regulation of banks with cross - border operations has also been enhanced. we are grateful to our development partners that have and are helping us in this area. 3. financial inclusion has increased substantially. access to formal financial services has increased from 26 percent in 2006 to over 75 percent currently. conversely, the proportion of the population that are financially excluded has been reduced by half since 2006. additionally, kenya β s ranking of access to credit by customers advanced 88 places to 28th among 189 countries in the world bank β s doing business survey 2016. bis central bankers β speeches 4. innovations in the payment systems and the integration of it systems have increased efficiency in the payments, clearing, and settlement systems. these innovations include : the real time gross settlements ( rtgs ) systems that allow settlements in real time ; full automation of the clearing house and other improvements β cheques that took 21 days to clear some 10 years ago can now be cleared in just two days. mobile payments have ballooned and account for over 80 percent of the number of payment transactions. the introduction of internet banking has enabled the central government, ministries and counties to reduce their paperwork and make payments in an efficient manner from far - flung locations. 5. the cbk continues to support the national treasury manage its accounts. in conjunction with the national treasury, the government bond programme has been revitalised and the debt portfolio skewed to the current ratio of 78 percent bonds and 22 percent bills. it is against the background of appreciation of these achievements that we started our journey in september 2015, toward our golden jubilee celebrations. the events over the last year have been anchored on the youth, in recognition of their key role in our nation β s growth and great expectations. subsequently, the cbk launched and supported initiatives targeted at em
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innovation, build strong banks and partnerships in the banking industry to ensure a stable financial sector in the country. strong banks can weather shocks more easily. strong banks will support economic growth. ladies and gentlemen, i wish to conclude by congratulating fina bank for opening the ngong road branch and to assure the board and management of fina bank of the central bank β s support in your growth initiatives and progression. with these few remarks ladies and gentlemen, it is now my honour and pleasure to declare fina bank β ngong road branch β officially open. thank you and god bless you all.
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agency problem that sits at the very heart of corporate governance. certain board members in the banking industry, rather than being guided by such principles that best serve the interests of their banks, often use their authority to advance their own agenda. this attitude is anathema to the principles of good governance. in the banking industry, integrity should be a palpable mark of distinction. by integrity i mean that board members do not make decisions just for a quick buck. it means board members are not solely transaction - driven ; they are in for the long - term benefits of their companies as well as of their clients. it also means that, if things do not go well, board members stand by their clients and if things do go well they do not take unfair advantage of it. while profit making remains the principal motive for any enterprise in a capitalist system, a usurious attitude in the banking business does quite often bring with it the seed of self - destruction. the good banker formulates an educated view before executing any decision in his professional life. i have been receiving many complaints from bank customers in the last five years. few of the complaints that i receive seem reasonable. most of the complaints, after investigations, are found to be unreasonable. it is a common feature that borrowers do not pay sufficient attention to the contents of contracts they sign before borrowing. often borrowers tend to swallow more than they can chew. it β s panic when the banker finally applies the sword. my appreciation of such a situation leads me believe that both bankers and borrowers share the blame. to borrowers i would like to say : refrain from borrowing sums of money that is beyond their repayment capacity. to bankers, i would like to reiterate that they should, right from the outset, ensure that borrowers do have the repayment capacity before disbursing funds to them. some banks do it ; some don β t. we are contemplating anti - collusive measures. lately, various interpretations have been given to the monetary policy stance of the bank of mauritius. five years ago, the bank of mauritius tightened its monetary policy stance with the rate of interest having gradually risen to high levels. the then prevailing conditions did warrant the tightening. it is commonplace that economies do undergo cyclical changes. the same set of policies that is appropriate for a particular phase of the economic cycle may not necessarily be appropriate for a different phase of the cycle if the objectives of the bank β s policies are to be achieved.
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that is why the bank of mauritius re - oriented its policy stance and brought about reductions in the rate of interest during the last two years. the successive reductions in the rate of interest helped alleviate the financial burden of enterprises in the export processing zone ( epz ). to what extent monetary policy can go on accommodating the interests of the various economic sectors without compromising the very mandate of the bank of mauritius is clear to the enlightened observers. there are limits to what monetary policy of the bank can deliver. the problems of the epz are mostly management and market - related. the emerging problem of our sugar industry is also market - related. the problems are definitively not rooted in the exchange rate of the rupee. it is inappropriate to speculate that a deliberate step to cause the rupee to depreciate is in the policy agenda of the bank of mauritius. this perception is incorrect. world price of oil has attained unprecedented levels. it will evidently impact on the domestic price level. a depreciation of the rupee, triggered by oral stimulus, would exacerbate inflationary pressures in the economy. ladies and gentlemen, having said that let me reiterate my support to the board of directors and the management of the ioib for the efforts they have been putting in so far to steer the bank out of troubles. i wish them the very best of success. thank you.
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level statistical information on firms has been collected since the early 1950s. back then, only a few aggregate statistics were available. we began by surveying the balance sheets of a small group of firms, an activity that was progressively expanded until it became what is now the survey on industrial and service firms. these days, we collect detailed data on about 5, 000 firms. at the beginning of the 1960s, the bank began surveying household finance. nowadays, this survey allows us to evaluate income and wealth distribution at the micro level in order to analyse individual preferences and the determinants of their economic decisions. in recent years, we have interviewed a sample of more than 8, 000 households in each survey ; about 50 per cent of them were part of a panel. in 2016, banca d β italia started its project on big data and machine learning applications. we wanted to fine - tune the accuracy of our economic analysis by combining all available skills ranging from economics to statistics, from computer science to engineering, and from mathematics to applied physics. this year we have stepped up our action by strengthening the team with new resources from universities and by widening our data collection from private companies. 1 3. the covid - 19 pandemic has radically transformed our lives in a number of different ways. direct personal contacts have been partly replaced by online events. most meetings around the world are now organized via multiple it applications. this has allowed many of us to keep working in safety. it has also reduced both travelling cost and carbon emissions. these changes have been made possible by the progress of it in many areas, from core technology advances β like further doublings of basic computer power every 18 months β to successful investment in complementary innovations, like cloud infrastructure. one of the most important developments is the wave of recent improvements in artificial intelligence, especially machine learning. such as, for example, immobiliare. it, mutuionline. it, twitter, indeed, dow jones, etc. machine learning represents a paradigm shift from the first wave of computerization. historically, most computer programs were created by accurately codifying human knowledge, mapping inputs to outputs as prescribed by the programmers. in contrast, machine - learning systems use categories of general algorithms ( e. g. neural networks, random forest and gradient boosting ) to figure out mappings and are typically driven by voluminous amounts of data. by employing huge data sets and big data processing resources, machines have made impressive progress. for instance, error rates
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us to act intelligently, as well as boldly and courageously if necessary. will the euro one day be as important a currency as the us dollar? that is not the aim ; the euro was not created for this purpose. my predecessor wim duisenberg and i have always said that the euro was not created to either compete with or replace another currency. we are not campaigning for the international use of the euro. the euro was created in order to achieve the single european market. if we can achieve this goal, we will provide an important basis for prosperity, stability and peace in europe.
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evident with the increasing application of derivatives to credit risk. the rapid globalisation of finance is well illustrated by the phenomenal growth in cross - border financial activity. an april 1995 survey by the bank for international settlements estimated that an average of us $ 1. 2 trillion flowed through the world β s foreign exchange markets each day, up 45 % on three years earlier. estimated turnover of over - the - counter derivatives on an average day was us $ 880 billion, 70 % of which involved transactions with counterparties in different countries. an article in institutional investor in august 1997 provides another illustration of the magnitude of cross - border finance - - β nearly us $ 150 billion of net new private capital poured into the main latin american and asian economies in 1996, almost double the 1995 level β. these numbers are enormous however you want to look at them. new sources of systemic risk the globalisation of finance, the liberalisation of financial markets and rapid technological change have opened up new opportunities in commerce for achieving economies of scale, and facilitating the international rationalisation of production and distribution. the resulting benefits include productivity growth and improving living standards. innovations like derivatives improve the efficiency of financial markets. new technology allows sophisticated management information and control systems, and the application of complex analytical models to help institutions manage risks more effectively. but while considerable benefits flow from such developments, they also inevitably bring with them new risks. one of the most important from a central banker β s perspective is the introduction of new sources of risk to the stability of the financial system : β’ liberalisation and globalisation bring competition, which squeezes out the rents created by previously protected markets. this produces efficiency gains but it also means that financial institutions in the new environment have less of a buffer of protected profits and are therefore more vulnerable to distress caused by either mismanagement or misfortune. β’ derivatives bring new risks in that they can expose financial institutions to greater leverage, thereby allowing for shocks to be amplified. in addition, they increase the linkages between national financial markets, which means that adverse events are quickly transmitted from one market to another. β’ furthermore, market participants can now react very rapidly to a problem in a particular country, or even a perceived problem. capital can move rapidly and in large volumes. again, a disturbance in one country can now flow rapidly to other countries with the result that other countries β financial systems, and the international financial system more generally, are arguably more exposed to disturbance than before globalisation. in the light of these increased
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are reviewing the scope for managing capital flows. capital controls may be appropriate in some circumstances, perhaps to mitigate problems arising from temporary surges in capital inflows in economies with weak financial sectors. for a debtor country like new zealand, an open capital account is essential. introducing capital controls, instead of making the necessary adjustments, would damage the credibility and bis central bankers β speeches stability of new zealand β s financial sector, and increase the real cost of capital for new zealand. reducing interest rates can at times reduce pressure on the exchange rate but analysis of past ocr cuts in new zealand shows on average minimal or no intra - day impact on the exchange rate, and even less impact on a weekly basis. analysis of β unexpected β ocr changes with trade weighted index changes following a rate decision still does not show a strong relationship to subsequent movements in the exchange rate. this reinforces the idea that the exchange rate primarily reflects returns in the broader economy rather than simply returns in the money market. we set the ocr such that the inflation outlook remains consistent with the pta and the financial markets understand this. if we reduced the ocr without sound reasons the exchange rate might drop initially but rise later when the inflationary implications of the rate cut became clear, especially if the belief was formed in the meantime that the central bank β s commitment to price stability was wavering. foreign currency intervention is unlikely to have a sustained impact on the new zealand dollar, but can have an impact in the short term if the reserve bank makes the right calls about the exchange rate departing from fundamentals. the reserve bank has four criteria to assess whether intervention should be undertaken. these are : whether the exchange rate is exceptional relative to history ; is the exchange rate justified ; would intervention be consistent with the pta ; and whether the market conditions exist to successfully shift the value of the currency. even if the first three criteria are satisfied at a point in time, it makes little sense to risk incurring losses to taxpayers by intervening when currency flows supporting the new zealand dollar are particularly strong. but we will remain vigilant on these criteria and will be prepared to intervene if all conditions are met. so there are clear limits to what monetary policy and exchange rate intervention can do to lower the new zealand dollar. in order to achieve a sustained reduction in the new zealand dollar it would be necessary to alter the overall level and pattern of saving and investment in the economy. in particular, it will be necessary to tackle our
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inflation rates are projected to remain elevated in 2006 and 2007, with risks to this outlook remaining clearly on the upside. given the ongoing marked dynamism of monetary growth in an environment of 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 to longer term. it is essential that inflation expectations remain firmly anchored at levels consistent with price stability. if our assumptions and baseline scenario continue to be confirmed, it will remain warranted to further withdraw monetary accommodation. indeed, acting in a firm and timely manner remains essential to ensuring price stability over the medium term. the governing council will therefore exercise strong vigilance. as regards fiscal policy, euro area countries have recently notified their deficit and debt figures for 2005 to the european commission, and most have reported on developments in 2006 and budget plans for 2007. while, on average, this information points to further, albeit slow improvements in budget balances, this should not give rise to complacency. it is important that commitments under the revised stability and growth pact are met in all euro area countries. it is essential that budgetary consolidation is strengthened in the current economic upswing and that pro - cyclical policies are avoided. this would boost confidence among market participants and the public. to that effect any revenue windfalls from faster than expected growth should be pre - committed and used in full to speed up deficit reduction or to increase surpluses in good times. the prospects for attaining sound budgetary positions improve when consolidation plans are based on credible commitments to reduce expenditure ratios and better expenditure control mechanisms. finally, let me reiterate previous calls for high quality statistical data and sound statistical reporting, which are key for the prevention and correction of budgetary imbalances. as regards structural reforms, the governing council stressed the importance of creating a fully operational single market and flexible product and labour markets in order to enhance the adjustment capacity of the euro area economy and its resilience to external shocks. liberalising product markets to allow more competition would raise incentives for firms to invest and innovate, thereby raising productivity growth. removing labour market rigidities and distortions in wage and price formation are key conditions for promoting more homogeneous cost and price competitiveness trends among euro area countries and for generating sustained output growth and job creation. in particular, wage increases should be guided, in general, by the trend in labour productivity growth, while taking full account of
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yves mersch : monetary policy and financial stability under one roof keynote speech by mr yves mersch, member of the executive board of the european central bank, at the 6th policy roundtable of the european central bank : β the future of global policy coordination β, frankfurt am main, 6 september 2013. * * * ladies and gentlemen, it is my pleasure to join you at the 6th policy roundtable of the ecb, which this year focuses on β the future of global policy coordination β. i will be speaking about the interaction of a particular set of policies, namely monetary, micro - prudential and macro - prudential policy. but rather than discussing the global dimension or replicating the discussion at jackson hole, i will restrict myself to the changes taking place under the roof of the ecb : the ecb taking over responsibility for elements of micro and macro - prudential supervision in the euro area. having the financial stability function under the roof of the central bank is of course nothing new. it is almost exactly hundred years since that the federal reserve act was signed into law. according to the regulation, federal reserve banks were created β to furnish an elastic currency, to afford means of rediscounting commercial paper β β and notably β β to establish a more effective supervision of banking β. this combining of monetary and supervisory functions reflects the fact that, for monetary policy authorities, financial stability is obviously key. a stable financial system with sound and solvent banks supports the smooth transmission of monetary policy and ultimately contributes to macroeconomic stability. this is particularly relevant for the euro area, where banks play and crucial role in providing financing to the real economy, most notably to smes. conversely, financial imbalances can be a genuine threat to price stability, in addition to being extremely costly from a macroeconomic perspective. but in my remarks today i would like to focus on a specific aspect of these interactions β that is, between monetary and macro - prudential policy. the key point i would like to make is that this interaction should be stronger than in the micro - prudential area, where the impending regulation imposes a separation between monetary policy and supervision. the reason for this is simple. while micro - prudential policy focuses on the stability of individual institutions, both monetary and macro - prudential policy take a more systemic perspective and aim ultimately at system - wide stability. let me explain the interaction between these two policies in more detail. in many ways β objectives
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who is able to make lethal passes to the strikers to score goals, and at the same time organise and support the defence to consolidate the victory for the team. 12. like the mid - fielder in the soccer team, the corporate treasury function needs to be strategically located to support the front line business team in spots where they can strike business deals and where defence can be efficiently organise to handle the risks that may be encountered by the team. in the context of asia, there is a compelling case for mncs to set up corporate treasury centres in a financial centre where they can easily capture the china opportunities and where the key treasury functions can be organised efficiently. 13. this can be better achieved by the formation of a regional ctc to centralise the management of treasury activities which is essential for advancing operational efficiency, risk management and cost reduction. the business case is obvious and compelling. regional cash pooling reduces idle cash and transaction costs by standardising payment systems and centralizing foreign exchange management. cost of capital can be reduced by optimising external and internal funding. it can also optimize the corporate tax structure and compliance with international regulatory requirements to support global business expansion. 14. hong kong is keen to be considered by mncs as a location for setting up ctcs as we see huge benefits in becoming a ctc hub in the region. the cash pooling function of ctcs will enlarge hong kong β s liquidity pool and strengthen hong kong β s role as an international financial centre as ctcs are major users of financial services, capital markets and professional services. it is our goal to capture in particular the high value - added segments of the ctc value chain, including cash and liquidity management, corporate finance activities and financial risk management. by attracting more ctcs and corporate activities here, we will not only bolster our financial sector but also advance the development of headquarters economy in hong kong. 15. so the interests of mncs and hong kong are very much aligned. that said, we are fully aware that the competition to become the asian ctc hub is very keen within the region. there is a need to understand our competitive position, amplify our strengths and double our efforts in areas that we need to catch up. 16. for this purpose, the financial secretary tasked the hkma in 2014, with the assistance of consultants, to conduct a reality check on hong kong β s competitiveness vis - avis our competitors and to devise a strategy to promote hong
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6. in parallel, riding on her rapid economic growth in the past decades, mainland china now has a growing cluster of home grown mncs in a wide range of sectors. chinese companies now account for 95 of the fortune 500 companies. these mncs are now flexing their muscles in the international arena, typically starting with trade and eventually venturing into mergers and acquisitions and global portfolio investment. we can safely assume that they will take even bolder steps with the supportive policies under the β one belt, one road β strategy, bringing new business and business partners for other global mncs. 7. these favourable macro trends are indeed good news to the corporate treasurers. yet, in shaping strategies to capture these opportunities, there is also a realization that the business environment has become significantly more challenging after the global financial crisis. 8. the quantitative easing by the g3 economies is causing wide swings in exchange rates, asset and commodity prices which have heightened the need for hedging and risk management. the ultra - low yields of their treasuries ( for example, yields of government bonds of germany and france of maturity less than 6 years and 4 years respectively are in the negative zone ) in turn has made cash management and portfolio investment difficult. the bis central bankers β speeches alternative of searching for yields in emerging markets has resulted in more risks to manage. the interbank market as a source of liquidity also can no longer be taken for granted. 9. compounding the challenge of treasury management is the regulatory landscape after the global financial crisis. the capability of banks in providing funding and making market for hedging tools has become more constraint due to deleveraging and implementation of the global regulatory reform, in particular the basle iii requirements on capital and liquidity. the increased market volatility has also made the raising of funds in the capital markets more challenging. 10. to stay ahead of the game, corporate treasurers need to ensure that the treasury function can be transformed to better support international growth in order to capture the immense opportunities in asia, and at the same time sharpen the management of capital, liquidity, funding and treasury related risks in order to navigate safely in the post crisis intricate market environment. 11. so, as the agenda of this summit suggests, corporate treasury management can no longer afford to remain in a passive maintenance mode, but need to adopt a proactive and strategic mode. to use a soccer analogy, an effective corporate treasurer needs to be like a good mid - fielder
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work only if the government respects the autonomy of the central bank, and the central bank itself stays within its mandate, delivers on that mandate and renders accountability for the outcomes of its policies and actions. 5. putting the three elements of today β s lecture context together β shri palkhivala β s exemplary commitment to preserve and promote values and institutions of democracy in india ; the reserve bank β s role in the democratic edifice of india ; and the completion of my term as the governor of the reserve bank β i determined that the best way i can pay tribute to shri palkhivala is to focus on a topic that threads together these three elements. that explains my topic for today : β five years of leading the reserve bank : looking ahead by looking back β. β may you live in interesting times? β 6. the chinese have an adage : β may you live in interesting times. β i can hardly complain on that count. i had come into the reserve bank five years ago as the β great bis central bankers β speeches recession β was setting in, and i am finishing now as the β great exit β is taking shape, with not a week of respite from the crisis over the five years. 7. from a central banking perspective, history will mark the last five years for two distinct developments. the first is the extraordinary show of policy force with which central banks responded to the global financial crisis. this has generated a vigorous debate on the short - term and long term implications of unconventional monetary policies as also on the responsibility of central banks for the cross border spillover impact of their policies. the second historical marker will be the manner in which, reflecting the lessons of the crisis, the mandate, autonomy and accountability of central banks are being redefined in several countries around the world. notwithstanding all the tensions and anxieties of policy management during an admittedly challenging period, i consider myself privileged to have led one of the finest central banks in the world during such an intellectually vigorous period. 8. against that context, i want to divide my lecture today on β five years of leading the reserve bank : looking ahead by looking back β into two segments. in the first segment, i want to look back over the last five years and give my assessment of the macroeconomic developments during this period and the reserve bank β s response. in the second segment, i will address the major challenges for the reserve bank on the way forward. i. macroeconomic developments over the last
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experience in india demonstrates that the pricing of the products and services β both on the liability as well as on the asset side are heavily weighed against the retail customers as a group. in fact, we have evidences of retail customers being paid different interest rates on their deposits for the same tenor within the same bank. similarly, i have seen one particular bank β s lending rate for automobile loan vary quite widely. i do not know why a standardized loan product like an automobile loan should be priced differently for different customers when it is a secured loan. banks should in such cases upfront decide on whether the customer can be given a loan or not and once the lending decision has been made i don β t see any reason for discrimination in the pricing of the loan. i do not understand why the banks should be looking to benefit from information arbitrage they hold rather than pricing their products transparently. in contrast to the situation in developed economies, such problems are more endemic in the developing world as here not only the level of financial education and literacy is low, but the financial consumer activism is also pretty much dismal. 16. insofar as the lending decisions in retail banking business goes, i believe the banks would need to start using scoring models for assessing the credit worthiness of borrowers to bring in greater transparency and efficiency. credit scoring model is a statistical technique that combines several financial characteristics to predict the behavior of new applicants based on the performance of previous applicants. at least among the indian banks, except for a couple of foreign banks and new generation private none of the other banks seem to employ them. in fact, in my interactions with the bankers i feel that there is lot of misgivings about the scoring models and generally people mistake it for rating model. my firm belief is that for bringing in uniformity, transparency and fairness in the retail lending process, the banks would need to start employing credit scoring. 17. as i briefly alluded to above, for the retail banking business to thrive in the developing markets, it is essential that an effective consumer protection environment is created quickly. as most of you are aware, across the globe, the regulators and supervisors are turning increasingly intolerant of unfair market practices adopted by the market bis central bankers β speeches participants. we have seen large amounts of penalties levied on banks by the regulators mainly for failing to protect consumers β interests and for unfair practices. in fact, there is a growing feeling that the banking regulators / supervisors have proved ineffective in checking
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capital requirements β including a floor for model - based rwa β and leverage ratio requirements should complement each other. risk - weighted requirements should guide economic decisions at the margin, while the leverage ratio should serve as a backstop. yet, until the measures to resolve the rwa problem take effect, it is prudent to give a greater weighting to the leverage ratio when assessing the big banks β resilience. indeed, analysts increasingly pay attention to the leverage ratio when assessing and comparing banks. domestically focused commercial banks increased mortgage exposure, capital situation stable i would now like to turn to the domestically focused commercial banks. in 2014, these banks further increased their exposure to the swiss mortgage and residential real estate markets. while the share of new loans with high loan - to - income ratios β a measure of affordability risk β remained persistently high, mortgage lending growth and the share of new mortgage loans with a high loan - to - value ratio decreased. hence, the increase in exposure was lower than in previous years. with respect to bank capitalisation, the situation remained largely unchanged in 2014. first, the domestically focused commercial banks β leverage ratios remained stable at high levels by historical standards. second, these banks β risk - weighted capital ratios increased slightly and are significantly above regulatory minimum requirements overall. furthermore, stress test results suggest that most domestically focused banks should be able to absorb estimated losses without seeing their capitalisation fall below the regulatory minimum. nevertheless, under the most relevant adverse scenarios for these banks, the losses would deplete a large proportion of their surplus capital. experience in switzerland in the 1990s, as in other countries, suggests that this would lead to a general weakening of the banking sector and significantly affect banks β ability to lend, with negative and lasting repercussions for the real economy. the stress test results highlight the importance of banks holding significant capital surpluses relative to the regulatory minimum requirements. the activation of the countercyclical capital buffer in 2013 and its increase in 2014 has made a significant contribution in this respect. bis central bankers β speeches risk of renewed increase in imbalances on mortgage and real estate markets overall, imbalances on the mortgage and residential real estate markets have remained broadly unchanged since the last financial stability report. from a financial stability perspective, this is a positive development. however, it is still too early to give the all - clear. on the one hand, imbalances remain at a high level and have not yet started to decline. on the
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the new european currency would destabilize the swiss franc. in the past, the swiss franc, along with the german mark, played the role of a safe haven currency whenever monetary crises occurred. with the disappearance of the german currency, the swiss franc would find itself first in line of fire in case of a dollar crisis, for example, or even worse, in case of doubts about the stability of the european currency. b ) second, we risked seeing the euro being increasingly used as a means of payment in switzerland. as the common currency was about to become the main unit of account for our exports, we feared that domestic firms might adopt the euro as well, so as to minimize exchange rate risks. some were even considering wages being paid in euro. if use of the franc were to be crowded out by the euro, the swiss national bank would have had little leverage left to influence monetary conditions in switzerland. it would become a sort of paper tiger! c ) third, even short of a full β euro - ization β of the swiss economy, we feared the loss of our monetary policy autonomy. given the importance of the common currency for the swiss economy, what else could the swiss national bank do other than follow the european central bank β s policy and de facto integrate the franc into the euro zone? a gradually shrinking interest - rate differential between euro and swiss franc investments as well as a loss in monetary autonomy would have resulted. how does our recent experience relate to these concerns? 3. our experience as an independent monetary entity a ) the euro / swiss franc relationship our fears of a euro destabilizing the swiss franc did not materialize. relative to the euro, and since its introduction, the franc has been fluctuating in a relatively narrow band of plus or minus 5 percent, about four times less than against the dollar during the same period. the swiss franc appears now to be less affected by exchange rate shocks and more shielded from speculative movements. in the past, the franc was overreacting to the dollar β s fluctuations, so that the pain of an appreciation of our currency relative to the greenback was exacerbated by a simultaneous appreciation of the swiss franc relative to the german mark. this double whammy effect, attributed to the narrowness of the swiss franc market, was highly penalizing for our export sector. since the introduction of the euro however, this pattern is no longer observed.
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of another financial crisis. matters are likely to become worse if additional credit availability enables enterprises to postpone balance sheet adjustment. so, the focus should be on the proper allocation of credit instead of its aggregate amount. it is important that good borrowers rather than the bad ones are the main beneficiaries of credit growth. i am not downplaying the importance of credit in fostering economic activity. far from it. bank credit and other debt instruments are crucial to all economies, but balancing the risk and opportunities is always a challenge, a challenge that we must never forget. the crisis has demonstrated very clearly the importance of limiting the reliance on debt - financing and having adequate safeguards in place to prevent credit bubbles. a shift toward more equity financing is urgently necessary, for which, an appropriate environment has to be in place for attracting new non - debt capital flows. * * * so, what should be the way ahead? putting the economy back on track requires a coherent, integrated national policy strategy to restore the health of the financial sector, restructure the corporate sector, and reinforce the sustainability of the public finances. the economic recovery must be based on equityfinanced investment and not on debt - financed investment. given the need to ensure fiscal sustainability, recourse to more state funding for restructuring the economy and increasing investment is not a feasible option. some of the required policy measures, notably in the financial sector, have been and are being implemented. without a determined follow through with supporting measures on other fronts, the fragile economic recovery will stall and problems will intensify. * * * priority has been given to repairing the balance sheet of banks. based on the findings of a comprehensive asset quality review and stress tests in late 2013, balance sheets of four banks have been repaired through recapitalization and transferring non - performing loans to bis central bankers β speeches the bank asset management company. the findings of the recently concluded comprehensive assessment indicate that, notwithstanding these efforts, the health of the banking sector remains fragile. this is not surprising. the banking system is the nerve center of the entire economy. nonperforming loans remain high even after the transfers to the bank asset management company and their volume has increased in the course of 2014. this is a result of the still weak economic growth, slow deleveraging in the corporate sector and too slow enterprise restructuring. the rehabilitation strategy also involves bank resolution through liquidation, consolidation and privatization. two small domestic banks are currently in the process of being
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benoit cΕure : the implications of bail - in rules for bank activity and stability opening speech by mr benoit cΕure, member of the executive board of the european central bank, at the conference on β financing the recovery after the crisis β the roles of bank profitability, stability and regulation β, bocconi university, milan, 30 september 2013. * * * i wish to thank paolo emilio mistrulli for his contributions to these remarks. i remain solely responsible for the opinions contained herein. ladies and gentlemen, i would like to thank carefin and the department of finance at universita bocconi for inviting me to speak today in milan. i would like to use this opportunity to focus on what is in my view a crucial aspect of bank stability, namely, the existence of effective resolution mechanisms. excessive risk - taking by banks is at the origin of the financial crisis. one of the many factors contributing to their risk - taking behaviour was the distorted incentive structure resulting from the lack of an effective resolution mechanism. establishing a strong approach to bank resolution is an essential component of properly realigning incentives towards risk. why is this the case? as you know, bank resolutions are often costly, complex and timeconsuming, in particular for large institutions. without alternative ways to restore their viability, governments have too often found themselves compelled to bail - out entities using taxpayer money. this government support may be successful in avoiding financial contagion within closely interconnected banking system. but the expectation of assistance via publicly funded bailouts amplifies moral hazard, leading to excessive risk - taking. moreover, in the euro area it has nurtured what became the nexus of the crisis, the fatal feedback loop between bank and sovereign creditworthiness. so these are already two reasons to rethink the allocation of losses in bank resolution. the former is general and the latter is specific to the fragmented structure of the euro area. a third reason, which i will not discuss here, relates to the political economy of bank resolution. even if it were efficient for financial stability reasons to let taxpayers bear the burden of losses in resolution, it would be unpalatable to them, and it would be unfair unless they can exert effective control on the risk - taking behaviour of banks β which has not been the case so far. existing bank resolution mechanisms are being overhauled in many countries following the adoption in 2011 of the financial stability board ( fsb ) β s key attributes for
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instrument in this regard. thank you for your attention! 5 / 5 bis central bankers'speeches
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gent sejko : the importance of media in analysing albania β s monetary policy address by mr gent sejko, governor of the bank of albania, at the end - of - year meeting with the media, tirana, 20 december 2018. * * * dear ladies and gentlemen, welcome to our end - of - year meeting with the media. i would like to thank you for your readiness, objectivity, and seriousness in covering the activities of the bank of albania and informing the public about them, throughout 2018. thanks to you, our analyses and decision - making have been communicated in a thorough manner, mindfully tailored and styled in accordance with the age and profession of the targeted audience. i must note that, in addition to broad geographic coverage, your comments and analyses on the economic and financial developments in albania have been very professional. at the bank of albania, my colleagues and i maintain that the current media reality is an important part of our activity. our decision - making could not be considered complete without your contribution. communication is a vital and delicate process for a central bank. i must emphasize that, without your help and objectivity, realisation of bank of albania β s decision - making regarding monetary policy and financial stability would have been an impossible mission. figuratively, i would point out that you are the ones that enable the translation of our analyses and conclusions into an adequate and easy - to - understand message for the general public. you have informed the public on our actions and interventions related to monetary policy, as well as on our decisions related to financial stability, market efficiency, banking regulations and other more specific aspects. this leads us to the conclusion that the level of reporting has improved significantly, which, in turn, urges us to be more demanding of ourselves in all the arguments and analyses underpinning our decision - making. i would like to thank you for your constructive role in reporting news items related to developments in the economy, finances, money, the banking system, inflation, financial stability, as well as to the risks towards which our economy is exposed. i would also like to assure you that the bank of albania will continue to be an open and very loyal institution vis - a - vis the media. the bank of albania will be continuously open to communication with regard to the entire spectrum of economic, financial, contemporary, professional and unbiased news. dear ladies and gentlemen, it has become a tradition now for us to organise, during the end - of
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as the share of household wealth managed by professional asset managers increases, raises the need for good governance, more financial education, and transparency. there is a crucial need for adequate information to households. recent developments in financial markets support the view that households may not be a position to make informed choices owing to a lack of financial sophistication. they do not fully grasp the risks inherent to their investment decisions, even more so, if these investments have medium to long - term horizon. most households today simply do not have the time, skill or the access to the relevant information in order to manage themselves their long - term savings. they depend on professional asset management for these purposes. however, the interaction between sophisticated asset managers and financially unsophisticated households has its own risks ( for both sides ) β requiring supervision and consumer protection in order to avert contagion and reputation effects. the role of private pension funds in financial markets let me now turn to the role of pension funds in the financial system and their interactions with and implications for monetary policy : from a monetary policy viewpoint, given the interactions between financial market developments and monetary policy decision - making it is important to monitor and understand the factors driving the structures of the financial system. furthermore, a well - functioning, liquid and deep financial market is essential for central banks as it better ensures that high quality information about economic fundamentals can be extracted from financial market prices. owing to the fact that pension funds are stable long - term investors with sophisticated investment strategies implies that they potentially play an important role in the shaping of the financial market. hence, the growing importance of pension funds, as illustrated in the strong growth of pension fund assets, is therefore likely to enhance the efficiency, depth and liquidity of the financial markets. this may contribute to improving the functioning of the financial system and, in turn, may foster a smoother transmission of monetary policy. in this light, it may be useful to briefly dwell on the recent trends in terms of pension fund investment structures measured by the allocation of financial assets. chart ii thus illustrates that bills and bonds issued by the public and private sectors is the predominant asset class constituting around 39 % of total pension fund assets in 2006. however, the importance of bonds as an investment class has been waning somewhat in recent years reflecting a reallocation of pension fund assets towards allocations in shares and investment funds. especially, pension funds β investment in mutual funds increased markedly over the past years : from 8 % of total
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##sidencies. the italian presidency has also promoted the development of a global baseline for disclosing and reporting sustainability information ; it has focused on metrics for classifying and verifying sustainable investment ; and it has called on international financial institutions to align their operations with the aims of the paris agreement. other initiatives to further promote sustainability include : the request to the imf and the international organisations of the interagency group on economic and financial statistics to consider climate - related data needs in preparing a new data gap initiative ; the work carried out by the financial stability board to both address data gaps on climate - related financial risks and enhance disclosures ; the proposal to examine how to scale - up digital finance to promote sustainable growth ; and the analytical review of specific solutions to achieve climate neutrality, including carbon pricing. digitalisation also received ample consideration in our agenda. in july the g20 menu of policy options on digital transformation and productivity recovery was endorsed. it provides an overview of measures to revive productivity growth, with a particular focus on digital platforms, digital skills and intangible assets. this menu will contribute to future discussions within the g20 and will eventually serve as a guide for effective policies and regulations, to ensure that the benefits of digitalisation and innovation are fully exploited and evenly shared. as part of our drive to foster the development of new technologies, in may the bank of italy and the bank for international settlements ( bis ) innovation hub, through its singapore centre, launched a new g20 techsprint, following an analogous initiative last year by the saudi arabian presidency. our international hackathon received about 250 draft proposals and 99 full applications from 25 countries ; 21 teams advanced to the final stage and the 3 most promising solutions for the proposed challenges, which concerned green and sustainable finance, won the competition. these 3 teams are now competing in the global fintech hackcelerator organised by the monetary authority of singapore at this festival. i am recording this message before the announcement of the winners, so i wish them all the best of luck. our attention to the opportunities offered by digitalisation has gone hand in hand with a focus on the challenges that it poses to financial inclusion. the digitalisation of payments and financial services has accelerated sharply during the pandemic. in lower income countries, many citizens can access basic financial services only through online providers. without comprehensive financial awareness and better consumer protection, consumers, not only in less developed countries, may find themselves exposed to risks due to digitalisation. the
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luis de guindos : the euro area economy and our monetary policy stance remarks by mr luis de guindos, vice - president of the european central bank, at asociacion para el progreso de la direccion ( apd ), madrid, 18 march 2019. * * * recent economic developments in recent months, incoming euro area data have continued to be weak and the economy has grown below expectations. that is, euro area real gdp increased by 0. 2 % quarter - on - quarter in the fourth quarter of 2018 ( according to preliminary estimates ), which was slightly up from 0. 1 % in the quarter before, but well below the 0. 4 % growth observed in the first half of 2018. the continued weakness, particularly in the manufacturing sector, reflects the slowdown in external demand, compounded by some country and sector - specific factors. the global economy is expanding at a more modest pace. according to imf estimates, global growth has moderated to 3. 7 % in 2018 ( from 3. 8 % in the previous year ), and is expected to slow to 3. 5 % in 2019. important euro area trading partners, such as china, show signs of a maturing economic cycle, and this has affected euro area exports. net exports recovered in the fourth quarter of 2018 ( according to preliminary estimates ), but weaker exports were the main factor behind the steep growth slowdown observed in the third quarter. in the euro area, the slowdown in growth has been particularly visible in the manufacturing sector. euro area industrial production, excluding construction, declined by 1. 4 % quarter - onquarter in the fourth quarter of 2018, with the slowdown being widespread across sectors and most major economies. purchasing managers β survey data on manufacturing production also moved into contractionary territory last month. growth in services, in contrast, proved to be more resilient. country and sector - specific factors have been playing a role as well. temporary issues in the automotive sector due to new regulation, for example, caused industrial production to fall particularly strongly in some euro area countries. these idiosyncratic factors are only fading slowly, and have been weighing on growth for longer than anticipated. meanwhile, persistent uncertainties have left their mark on business and consumer confidence. these uncertainties relate to geopolitical factors, such as the state of play of the brexit negotiations, the continued threat of trade protectionism and vulnerabilities in emerging markets.
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banks this would be one of the more benign outcomes. and it seems to be happening right now. scenario two : fintechs might break up the value chain of banking. banks would end up losing revenue, market share and direct contact with clients. the result might be a more fragmented market where some players operate outside the scope of regulation and supervision. scenario three : banks might still end up being crowded out. at the same time, however, the fintechs could be swallowed up by big tech companies, such as google, amazon and facebook. the market would become more concentrated, less competitive and less diversified. whichever direction we are headed, there is one thing we supervisors worry about : increasing or unidentified risk. and there are indeed some risks that have become more apparent now that fintechs have entered the scene. a basic truth is that new players make the market more competitive. and that could squeeze profits and force banks to cut costs in areas such as risk management. this is a general concern we have. at the same time, bank funding might become less stable. new products, tools and services 1 / 3 bis central bankers'speeches enable depositors to easily and quickly switch banks ; they can select a better offer in a heartbeat. for banks, deposits might become a less reliable and more costly source of funding. with regard to lending, we are also seeing new trends such as peer - to - peer lending and crowdfunding. here, savers and borrowers interact directly β banks no longer serve as middlemen. as these new businesses grow, risks associated with traditional banking might emerge β just think of the risks from maturity and liquidity transformation. some peer - to - peer lenders are already securitising the loans they originate from their platforms. regulators will need to deal with the resulting vulnerabilities. the work on shadow banking done by the financial stability board and the basel committee on banking supervision might serve as a basis. some fintechs also apply new models for scoring the quality of loans. these models are based on vast amounts of data and are supposed to be more precise than traditional approaches. but they have hardly ever been tested in a severe recession or a crisis. so we don β t know how well they would work in such situations. in respect of asset management, new products such as robo - advice are now appearing. these are computer programmes that advise customers on how to invest their money. depending on their design, they might lead many investors to
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be shared. conversely, in the euro area, around 70 % of the financing received by households and firms is mediated by the banking sector, while only the remaining 30 % is obtained on capital markets. this is practically the opposite of the united states, and reveals how the financing of the economy depends on the banking sector in europe. as a result, capital markets in the euro area absorb 10 % of shocks, and the credit channel around 34 %. 3 / 9 yet irrespective of the different composition of the risk - diversification channels, what needs highlighting is that in the euro area the combined power of all the private risk - sharing channels is much more limited than in more stable monetary unions. given that the role of the public sector is also virtually non - existent in europe β s case, the outcome is that more than 56 % of the effect of shocks β as opposed to 28 % in the united states β is not shared. moreover, it is important to note that during the most acute phase of the last financial crisis, the main risk - sharing channel in the euro area β the credit channel β virtually disappeared, owing to the process of renationalisation of bank loans. this was due to the climate of mistrust about banks β financial health, and to the existence of negative feedback loops between public finances and banking solvency. to sum up, in the euro area our risk - sharing channels are weaker and, what is more, they tend to contract precisely when they are most needed. the limited strength of private risk - sharing channels in the euro area reflects both the underdevelopment of capital markets and a highly segmented banking system at the national level. there are practically no banks with a pan - european strategy, and there is little progress in cross - border lending, especially in the retail markets, or in other words, in lending to households and firms. today, the euro area β s banks continue to grant more than 90 % of credit to firms resident in the same country, with only 5 % going to firms in other euro area countries. in the case of loans to households, the bias is even greater. expanding this foreign activity is essential for the sound working of the euro area. in this respect, there is still a long way to go before we achieve a pan - european banking system and a more complete banking union. the need to complete banking union since banking union was launched in 2012, substantial institutional progress has been made towards the creation of a new
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bargaining system does not take into account the large differences in individual firms β specific situations, so it is not the most suitable one to prevent the bout of weak demand from generating a sharp fall in employment. further, the predominance of indexation clauses in collective labour agreements is a problem that becomes particularly harmful when, as in the current circumstances, inflation has risen due to an external shock, like oil prices, at a time of cyclical weakness. it is naive to believe that automatic wage adjustment to reflect past consumer price increases provides any protection to household disposable income. on the contrary, these clauses ( which have now been done away with in most european countries ) lessen the ability of firms to compete and keep creating jobs, generate inflation ( which affects those not protected by similar provisions ) and, in short, hinder adaptation to the external shock. in general, these characteristics of the spanish labour market have meant that employment has so far been the economy β s main adjustment variable in periods of crisis, since it is the quantities ( i. e. the number of workers ) that change given the impossibility of adjusting prices, i. e. wages. thus it is not surprising that in the past year the unemployment rate in spain has risen by 2. 4 percentage points to 10. 4 % in 2008 q2, while in the same period the euro area unemployment rate has remained relatively steady at a little above 7 %. the fact that spain has the highest unemployment rate of the oecd countries should lead us to reform our labour market institutions and improve this lamentable ranking. many of my talks in recent months have referred to the activity of spanish financial institutions. these played an essential role in the fourteen years of expansion and, thanks to their capable management, were in a sound position at the beginning of the international financial crisis. but it cannot be denied that spanish institutions face difficult challenges : first, as noted above, although they were not agents of the crisis, they are being affected by the standstill on the international financial markets ; second, balance - sheet building by firms and households, which i mentioned earlier, will lead to a substantial moderation of borrowing by these sectors and hence to a reduction in the business of credit institutions ; finally, the phase of real - estate adjustment and, in general, of economic slowdown, is already being reflected in increased doubtful assets, although this was to be expected and is still far from reaching alarming levels. for all these
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also emerging as a material source of financial risk. our supervisory expectations explicitly apply to the management of both climate - related and environmental risks, both of which are a material source of financial risk. however, many banks have so far come up with only a high - level description of the general impact on vulnerable sectors, like agriculture, mining and manufacturing, and have yet to perform adequate materiality assessments. as the two supervisory exercises demonstrated, for the glass to become full β that is complying with our supervisory expectations β banks must considerably increase the pace of progress. and i will now outline how this can be done. the way ahead for banks and supervisors in line with the guiding principle that no material risk should remain unaddressed, we expect all banks under our supervision to be fully aligned with our expectations by the end of 2024 at the latest. this clear implementation deadline also ensures a level playing field for all banks in the banking union. in other words, after 2024, a limbo of identifying a risk as material but not adequately addressing it will no longer be tolerated. however, we are mindful of the challenges banks may face in aligning with our supervisory expectations. to smooth the transition further, we have also set some intermediate deadlines for banks to reach specific milestones. for example, by the end of march 2023 we expect all banks to have a sound and comprehensive materiality assessment and business environment scan in place. this means that banks must make an explicit judgement on the impact of c & e risks through various transmission channels in the short, medium and long term across their portfolios. insufficiently documenting the non - materiality of certain portfolios will no longer be acceptable. let me insist that by now all key ingredients to make c & e risks an integral part of banks β strategy and risk management are well known. but you β the banks β are in the lead when it comes to translating ambitions into practice by designing and implementing tools to adequately manage these risks. one of the silver linings of our supervisory exercises last year is that we have published the good practices observed in both the climate stress test [ 7 ] and the thematic review [ 8 ]. to give a telling example, in the area of governance some front runners have already integrated c & e risks into the work of the management body. for example, in one bank the management body approves the environmental strategy and risk management framework and oversees their implementation in day - to - day processes. it is supported in this work
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therefore need to make existing methodologies more stable and, where possible, simpler. ecb banking supervision is currently working on a revised methodology for setting pillar 2 capital requirements, which will be published by the end of 2024 and fully applied in the 2026 srep cycle. making existing methodologies simpler and more stable also enables supervisors to focus methodological work on novel risks. 6. making better use of it systems and analytics : reliable it systems and good data analytics are crucial if banks are to serve their clients well. they are equally important for supervisors. evolving supervision thus requires continued investment in it systems, not least to reap efficiency gains from the use of artificial intelligence. we have therefore prioritised our digital agenda. our it strategy for the years 2024 - 28 foresees continued investment to improve efficiency, access to data, risk analysis and collaboration. for instance, fit and proper assessments account for almost half of supervisory decisions. they are used to assess whether members of a supervised bank's management body are suitable for their roles. the heimdall tool supports experts in processing the vast amounts of information they receive when carrying out these assessments. this helps improve the quality of assessments, as the manual workload is reduced and supervisors can focus on more complex cases. another example is athena, a web - based platform helping supervisors find, extract and compare information from a corpus of millions of articles, supervisory assessments and bank documents. supervision will not become " light touch " these changes will improve european banking supervision. they will make supervisory processes more targeted, efficient, predictable and transparent. the srep will become shorter. from 2026 onwards, srep decisions will be sent to most banks by the end of september, rather than december as is currently the case. this will reduce the time lag between the identification of deficiencies and the remedial action that banks are expected to take. supervision will become more intrusive by using the full range of supervisory tools and moving up the escalation ladder more swiftly when findings are not remediated. the reformed srep will not mean less supervision or a " light touch " approach. the key purpose of supervision β to ensure that banks remain safe and sound β will not change. but supervision will become more effective. this is more relevant than ever in the fast - evolving environment that we live in. as the risk environment evolves, supervision is evolving, too. all of this will, ultimately, benefit growth and financial stability in europe
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come to their platforms, institutions must reach out to customers in cyberspace. the technologies are there, such as open apis. but as i mentioned before, the technology has to be a means to an end that the consumer finds useful. and of course it must be secure and stable. 37. the second trend is that financial services will become increasingly real - time. gone are the days when we were able to handle everything with batch mode operations. customers are already expecting real - time execution in payment services, remittances, investment advice, and insurance applications β and this list will grow. this will require not only faster data connections or more computing power, but a whole range of new processes for assessment, risk controls and regulatory compliance. as banks upgrade their analytics and procedures to provide speedier customer services, regulators like the hkma will need to 4 / 5 bis central bankers'speeches work with them to adopt new suptech and regtech solutions to better meet these new challenges. 38. the third trend is the rising importance of cross - border applications of fintech solutions. technology offers ways to overcome some of the long - standing inefficiencies in financial services, like cross - border payments or trade finance. the use of blockchain technologies comes to mind. we have conducted pilot schemes with our peers in the region to try out blockchain solutions. for example, we have started a joint research project with the bank of thailand on implementing central bank digital currency in cross - border payments. we have also completed a proof - of - concept test with the we. trade platform to connect the digital trade finance platforms of hong kong and europe. so far, it looks quite promising, and we have engaged mainland china and singapore on similar connections. 39. a lot of future fintech development will involve cross - border collaboration. in recognition of this, the bank for international settlements ( bis ) decided to establish an innovation hub to explore macro issues that cut across jurisdictions. and i am delighted to say that the first innovation hub centre of the bis has recently commenced its operation here in hong kong, and we look forward to close collaboration with the hub. concluding remarks 40. fintech in hong kong has come a long way since we first held this event in 2016. many of you here have contributed to this progress. we now all look forward to building on our experience with exciting new initiatives and trends. the government, the financial regulators and the industry bodies all recognise that we need a
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banking services. this is likely to force existing banks to consider how to further upgrade their services, and better make use of technology in their offerings. the result, i hope, will be a more innovative and globally competitive banking sector in hong kong, offering customers more diversified and efficient services. technology use is a means to an end 20. last but not least, we should bear in mind that the use of technology is a means to an 2 / 5 bis central bankers'speeches end, and not an end by itself. most people appreciate new technology for what it can do to improve their lives. they don β t really care whether the algorithms or the chips are amazingly innovative. to achieve wide adoption, any innovation has to offer users a β unique value proposition β. in plain language, the consumer wants to know β what can it do for me? β 21. take mobile payment as an example. this has rapidly taken off for retail payment in mainland china and some other places. in hong kong and other markets, people already use credit cards and e - payment systems like octopus, so mobile payments will grow more slowly. the point is that mobile payment technology is only the means to an end. the hong kong consumer will ask : β what can it do for me? β. mobile payment operators will need to give them an answer to that question β in addition to what current payment means like octopus can do, are they adding further value through new services like cross - border remittances or enhancing customer value through loyalty programmes. looking ahead 22. i hope you can see that we have moved ahead since three years ago, when some of you were telling us that the hkma was a big hindrance to fintech development. i am happy to say that the hkma is widely recognised locally and internationally for our proactive stance in fintech adoption. more importantly, hong kong is recognised for its much more mature fintech ecosystem, thanks to the adoption of technologies by banks, asset managers, insurers and other financial institutions here. so, what β s next? 23. to the general public, fintech has already brought significant changes to payments, banking and financial management. these new products and services will continue to improve and evolve. at the same time, technology adoption by financial institutions and regulators is likely going to bring another wave of changes. at first, this will probably be about efficiency gains in their internal operations. but in the long - run it may lead to profound changes in the
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ben broadbent : the economics of deflation speech by mr ben broadbent, deputy governor for monetary policy of the bank of england, at imperial college business school, london, 27 march 2015. * * * the cpi in february this year was no higher than in february 2014. this is the first time the uk has failed to record positive annual inflation for over 50 years. inflation was briefly negative in late 1959 and early 1960. before then, you have to go back to the early 1930s, and the agonies of the great depression, to find a period when uk consumer prices fell over a sustained period ( chart 1 plots three - year rolling averages of inflation ). because of the depth of the economic downturn at that time, and the more recent stagnation of japan, the weakness of price inflation today has raised fears in some quarters about the risks of sustained deflation in this country. the mpc β s objective is not simply to prevent prices from falling : it is to ensure they rise at the target rate of 2 % a year. because of the attention it β s been getting, however, i β m going to focus today on negative inflation specifically. i β ll divide the substance of my remarks in two. one part will discuss the basic economics β how and why it matters if prices decline over a protracted period β the other, the frequency and implications of deflation in the historical data. chart 1 deflation last seen in 1930s source : ons and hills, thomas, dimsdale ( 2010 ). within that first section there are two points i β ll try and get across. one is the distinction between the price of what we buy ( consumer prices ) and the price of what we sell ( mainly wages ). for the moment it β s the first that β s fallen not the second : the drop in inflation has been driven largely by something that has significantly boosted real incomes ( the sharp decline in commodity prices ). it is what some have termed β good β deflation and, while it is unlikely to go on for that long, it is positive, not negative, for demand and output. there is a risk that the fall in prices becomes more generalised and more sustained. if so β and this is the second point about the economics β what matters is not deflation per se but the capacity of monetary policy to respond to it. there are circumstances, in particular when the appropriate or β neutral β real interest rate is clearly positive, and when
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is likely to rise quite steeply in early 2016. i β m also struck by the rarity of persistent deflation in the past 15, particularly amongst countries with an independent monetary policy. as we β ve seen, long periods of falling prices were perfectly common during the gold standard. that β s inevitable under a commodity peg if, over any period of time, the commodity itself is in fixed supply. the same was true in other countries at the time and, infamously, during the great depression. it was only when britain came off gold, in 1931, that its nominal income started to accelerate 16. and since the second world war, and the abandonment of commodity standards, positive inflation has been the norm β so much so, in fact, that the commonly cited example of the japanese deflation is almost unique. chart 12a deflation episodes are rare chart 12b even rarer in countries with floating exchange rates source : bordo and eichengreen, imf and oecd source : bordo and eichengreen, imf and oecd note : sample 1960 - 2010 ; 3300 observations note : sample 1960 - 2010 ; 3300 observations. a very recent paper by claudio borio and co - authors at the bis makes the same point ( borio et al. ( 2015 ) ) ; see also broadbent et al ( 2010 ). for more on the contractionary effect of the gold standard during the great depression, see eichengreen ( 1996 ). bis central bankers β speeches the international data on consumer prices are relatively rich : we have annual numbers for over 70 countries, most of them back to 1960 17. in all, across countries and years, there are 3, 300 separate post - war observations. in only 70 of these β barely 2 % of the sample β has inflation actually been negative ( chart 12a ) ; the majority of these β deflations β ( 46 out of 70 ) have lasted no more than a year, many of these shorter episodes coinciding with falls in oil prices ; of the 24 deflations lasting two or more years, 20 have been in economies with fixed exchange rates, most of those emerging economies ; among countries with freely floating exchange rates, only bahrain and β somewhat more famously β japan have experienced protracted deflations, both of them twice ( chart 12b ). this is not a common occurrence. a credible monetary policy reduces the persistence of movements in inflation why might deflation
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literacy. in this regard, we will continue to work on legislation that are important to the bangko sentral β including amendments to our charter and the credit information system act. for the third pillar, we will continue to ensure that our philpass remains a safe, sound, reliable, and efficient payments system. we have also set strategic objectives to address bsp β s operational efficiency and maintain the public β s trust and confidence. we are of course aware of the challenges facing us on our way to achieving our objectives. for instance, inflation risks remain, in part due to relatively high liquidity growth, as remittances remain strong and growing confidence in the economy brings with it a steady inflow of foreign investments. this is the same β problem of plenty β that faces other countries in asia. to address this, we need to be creative and use non - traditional instruments. last may, for instance, we adopted preemptive measures to absorb liquidity. while it is too early to assess the effect of these measures, initial results are encouraging, and the inflation outlook remains benign even as the economy continues to power ahead. there is also no let - up in our campaign to encourage banks to strengthen their balance sheets through asset cleanup, capital buildup, and consolidation. this month, in parallel with other countries, the bangko sentral starts implementing basel ii, which requires that regulatory capital reflect the risks the banks are exposed to. we will also continue to innovate and adapt to the changing environment. for instance, electronic rediscounting has reduced processing time for credit applications of banks, including fund releases, from 3 to 5 days to just 5 minutes. we will also continue to implement our economic and financial literacy program to educate and empower more filipinos to benefit from the opportunities economic development brings. our program aims to cover millions of our entrepreneurial poor through our microfinance advocacy ; millions of students through the integration of saving and money management in our elementary curriculum in cooperation with the department of education ; millions of ofws and their families on growing their money through investments or entrepreneurship ; and the general public through a network of economic and financial literacy centers that the bangko sentral shall set up. later today, we will have the symbolic launch of our first economic and financial center at the lobby of our five - storey building. indeed, we at the bangko sentral ng pilipinas have a long list of things we need to do in the service of our
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england independent in 1997. but by monetary policy frameworks, i mean the broader set of rules and procedures for taking decisions about interest rates. prior to 1992, such frameworks often took the form of a commitment to maintain a fixed exchange rate, most recently as a member of the erm. but these proved hard to sustain β sterling was repeatedly devalued, at great political cost to the government of the day. perhaps the most controversial frameworks took the form of commitments to meet targets for the growth in the money supply. these were meant to act as rules, which would tie the hands of politicians, but they proved ineffective, not least because the underlying economic relationships broke down. there were also periods β notably the 1970s β when there was no discernible monetary policy framework at all ; when monetary policy was in eclipse and governments relied on incomes polices to control inflation. these, too, were a dismal failure. inflation has averaged 2. 5 % since 1997, with a standard deviation of 0. 8 %. in the two decades to 1992, it averaged 9. 6 %, with a standard deviation of some 5. 6 %. over the past decade, output has grown steadily, averaging 2. 8 %, with a standard deviation of 0. 7 %, compared with an average of 2 % and a standard deviation of 2. 5 % over the seventies and eighties. all these frameworks suffered from one of two basic problems. they either lacked credibility, or they lacked sufficient flexibility for policy - makers to respond intelligently to events. so it is little surprise that they were associated with two decades of poor macroeconomic performance. sterling β s exit from erm in the autumn of 1992 led to an overhaul in the way monetary policy was conducted, with the adoption of an explicit target for inflation, and a number of moves to make the process of policy - making more transparent through the publication of minutes of what was popularly known as the ken and eddie show, and a new inflation report, produced by the bank. what was special about the 1997 arrangements? in the event, 1992 marked a break with the past. but while the policy innovations of the 1993 - 97 years were showing promise, the framework remained relatively informal. and decisions about interest rates stayed in the hands of the chancellor. the change in government in 1997 led to a far - reaching effort to institutionalise and depoliticise monetary policy arrangements. a new bank of england act stipulated that the objective of monetary
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to the port authority. the air space is now free and anybody planning to erect a high - rise building in the formerly restricted four degrees sight band should have no problem to obtain permit from the port authority. wind tunnel tests were carried out in france to test the building against wind forces with a speed of 275 km / hr. this required that the stone cladding and the curtain wall with glass, aluminium members and fixings thereto constructed in stainless brackets resist pressure and suction forces in the order of 2 / 3 of ton per square metre. this means moving weight of 8 average bodied persons standing on an area of 1m x 1m. total cost of the building, inclusive of fit outs and furniture, is expected to reach rs1, 890, 700, 000 of which rs234 million went to the exchequer in the form of vat. at constant 1980 prices, the year when one of the first high rise buildings appeared in the port louis skyline, the cost of this building excluding vat works out to rs395 million. at constant 1994 prices, the year when yet another high rise building appeared in the port louis skyline, the cost of this building excluding vat works out to just over rs1, 010 million. this building, taking into consideration that it is an intelligent building, is indeed the least expensive high rise building in port louis. before concluding, let me, on behalf of the board of directors of the bank of mauritius and on my own behalf, thank the mauritius commercial bank ltd. for having allowed us to use the mcb building for the installation of the sector navigational lights. thank you.
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. but let me emphasise that the governing council takes note of the assessment of ministers that the preventive arm of the pact and the governance structure of the pact could be strengthened. the implementation of changes in the preventive arm, however, needs to remain clear and transparent so as to preserve fiscal discipline and equal treatment across countries. the governing council is concerned about the changes to the corrective arm. by allowing a more lenient implementation of the excessive deficit procedure, there is a risk that the 3 % nominal deficit limit will be diluted. this could undermine confidence in sound public finance in the euro area member states. the credibility of the excessive deficit procedure needs to be fully preserved. it is essential that member states pursue fiscal policies that ensure the sustainability of public finances. the fiscal framework enshrined in the treaty and the stability and growth pact is a cornerstone of economic and monetary union and thus key for anchoring expectations of fiscal discipline. it must be maintained. the public can be assured that the governing council remains staunchly committed to maintaining price stability. general challenges ahead i hope that the new member states will not be perturbed by this. they must not weaken in their convergence efforts. as positive as the impact of the β convergence dividend β is ( reinforced by the convergence expectations ), it should be absolutely clear to new member states that a divergence penalty reflecting divergence expectations and the fear of fiscal laxity would have an equally negative and devastating impact on economic performance. there are considerable challenges facing the new member states in the non - fiscal sector, too. inflation rates will probably be put under upward pressure by the balassa - samuelson effect owing to the process of catching - up with the other member states and by further convergence of administered prices to market levels. macroeconomic instabilities may also result from the high level of unemployment, which is largely structural, as well as high and rising unit labour costs. these factors deserve attention since the sustainability of the process of convergence hinges on a sound starting position and the policies pursued thereafter, which both influences the sustainability assessment of current policies. in this context, let me briefly mention exchange rate policies. erm ii lends credibility to new member countries owing to the implied protection of the eurosystem. however, vulnerabilities for the new member states remain. these stem mainly from rapid credit growth, the large debt denominated in foreign currencies, the current account deficits and the rapid worsening of their international
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payment on ibrc β s promissory notes. as you will recall, an interim solution was applied to that instalment, which was effectively settled with a long - term government bond rather than cash. while this was not altogether an ideal solution from anyone β s point of view, seeking a non - cash solution for that instalment was a sound tactic for the government, embarking as it was on the larger question of rearranging the duration and terms of the overall central bank indebtedness arising out of the failure of anglo irish bank and inbs and the payment of their creditors. since then, there has been a very intensive process of discussion and negotiation on this matter, which is one of the two main thrusts of the government β s policy to have a euro area review of the indebtedness arising out of the banking crisis. there is considerable goodwill from all interlocutors in this process. nevertheless, it has not been easy to find a generally acceptable solution. taking into account both the statutory position and wider policy stance of the ecb, an initiative of this type will be novel and as such challenging. using our knowledge of central banking law and practice, we have been working carefully to build understanding and confidence around a set of proposed transactions designed to deliver for ireland, while not taking other decision makers too far out of their comfort zone. the ecb is an organisation that seeks to proceed as far as possible by consensus, and it is not surprising that this work has been taking quite a while. in fact, what we have designed is, i believe, largely in the interests of the eurosystem as a whole. i have nothing to add today to what has already been said by the minister for finance about the prospects and timing of the conclusion to these discussions. i am happy to take any questions you might have. bis central bankers β speeches
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patrick honohan : central bank of ireland β s strategic plan β re - engineering how we do business opening statement by mr patrick honohan, governor of the central bank of ireland, to the oireachtas ( national parliament ) joint committee on finance, public expenditure and reform, dublin, 16 january 2013. * * * thank you for inviting me to appear before the committee today. your letter of invitation proposed a wide range for our discussion today, and i will not attempt to be comprehensive in my brief opening statement. perhaps the best way of ordering my introductory comments is by reference to the central bank β s three year strategic plan which we published in november. consistent with our governing legislation, the central bank commission has set as the key elements : β’ restore financial stability and support economic recovery in ireland through the successful exit from the eu - imf programme of financial support and restoring a fully functioning banking system ; β’ reform the regulatory and supervisory framework to ensure risks to stability and consumer protection are identified and effectively mitigated ; β’ protect consumers by challenging firms, improving firms β compliance and promoting a better culture to help consumers have more confidence in financial services ; and β’ influence international policy making in monetary policy, financial stability and regulatory standard setting. underpinning these activities will be a focus on improved efficiencies and cost effectiveness, alongside the continuing development of our staff. delivering on this extensive mandate has, to say the least, been quite a challenge over the past few years involving a lot of judgment calls, a huge increase in the volume of activity and employment in the central bank and a re - engineering of how we do business. while the condition of the economy and the banking system still leaves much to be desired, i believe that things are moving in the right direction. as far as the economy overall is concerned it is fair to say that, since the level of economic activity collapsed in 2008 β 9, the elevated level of personal savings, the need to repair the public finances and for balance sheet repair more generally has meant that domestic demand has continued to shrink year - on - year. overall employment and incomes would have fallen even further were it not for the offsetting performance of exporting firms despite the much weaker international environment even than was expected two years ago. a reversal of some of the loss of competitiveness that was incurred in earlier years has contributed here, though more is needed if the return to growth in private sector employment is to be accelerated to the point where overall employment is growing
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the regulatory reforms that have already been broadly agreed, but being wary of adding further reforms to the work program. absent some major new development, which brings to light some major reform need not hitherto visible, to task the regulatory community and the financial industry with further wholesale changes from here would risk overload. lest this be considered too weak a position, let us remember how much is being attempted. and since we are already seeing the need to β tweak β some earlier agreed proposals, it is surely clear that the details of implementation should increasingly be our focus over the next few years. the g20 will need to remain open to the possibility β the likelihood even β that as experience is gained with implementation and we grapple with the inevitable difficulties, and as we learn more about how the financial the relevant standards are the fsb β s key attributes of effective resolution regimes for financial institutions. work is also underway by cpss - iosco to establish how best to apply the key attributes to financial market infrastructures. bis central bankers β speeches system is likely to operate in a new world, we will want to make occasional adjustments to the rules. none of that ought to be seen as a retreat from the high level objectives that have guided efforts to date : the desire for a more stable, more resilient and simpler financial system, that is better able and more inclined to play its β handmaiden of industry β role and better able to withstand failures of individual institutions. but in pursuing these goals, it is important that we : β’ strike the right balance between more regulation and more effective enforcement of existing regulation. inadequate enforcement and supervision was as big a problem as deficient rules β’ recognise the cross - border aspects of the financial system, with the associated need for cooperation and, yes, compromise. recognition of the legitimate interests of smaller markets is clearly of importance to australia but many other jurisdictions as well. this often coincides with the role of pushing for a principles - based approach instead of a one - size - fits - all heavy - handed, rules - based approach. it may also involve working to develop a β regional voice β on some issues β’ consider the combination of reforms in their entirety, and keep a lookout for unintended consequences. given the breadth and speed at which reforms have been introduced in recent years, careful analysis of how the various initiatives will interact is becoming more important. keeping the regulatory structure fit for purpose across a broad range of jurisdictions around the world is in fact a
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##s food, energy and fuel. sources : abs ; rba ; refinitiv ; u. s. federal reserve. conclusion the cash - flow channel is the obvious way in which monetary policy is transmitted to aggregate demand and inflation in australia. compared with earlier episodes of rising interest rates, this channel has been operating with a slight delay given the high initial share of fixed - rate loans. but around half of all loans that were fixed at a low rate have now rolled off, and most of the rest will do so over the next 12 months. required mortgage payments are at a record share of household disposable income and will rise further as more fixed - rate loans expire. the cash - flow channel is felt acutely by those with variable - rate debt. but there are other important channels of monetary policy. in particular, the rise in interest rates has increased incentives to save. this is true even for households that had built up a lot of extra savings during the pandemic. households with debt also have an incentive to save more ; some may be able to pay down their debts ahead of schedule or at least run down their savings buffers more slowly than otherwise. these and the other channels of monetary policy are slowing the growth of demand and contributing to a decline in inflation. the lags of transmission mean that some further effects of rate increases to date are still to be felt through the economy, which will provide further impetus to lower inflation in the period ahead. meanwhile, the board is paying close attention to economic developments here and overseas, and some further tightening of monetary policy may be required to ensure that inflation, which is still too high, returns to target in a reasonable timeframe. endnotes [ * ] i would like to thank richard finlay, jonathan hambur, jeremy lawson and jack mulqueeney, as well as a number of staff from domestic markets, economic analysis, economic research, financial stability and international departments for help with this speech. see la cava g, h hughson and g kaplan ( 2016 ), β the household cash flow channel of monetary policy β, rba research discussion paper no 2016 - 12 ; floden m, m kilstrom, j sigurdsson and r vestman ( 2021 ), β household debt and monetary policy : revealing the cash - flow channel β, the economic journal, 131 ( 636 ), pp 1742 β 1771. unlike the cash - flow channel, the intertemporal
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has been agreed upon. first, banks whose failure would pose a risk to the global financial system will face a capital surcharge. this framework has also been extended to domestic banks. here in canada, our six largest banks have been designated as domestic systemically important banks by the office of the superintendent of financial institutions. and in quebec, the autorite des marches financiers has designated desjardins as a domestic systemically important financial institution. all seven are required to hold 1 per cent more capital. second, standards, known as the β key attributes, β have been established for the effective resolution of financial institutions. under the key attributes, bondholders, shareholders and management β rather than taxpayers β will have to bear the brunt of losses. third, systemically important institutions are facing more intense and more effective supervisory oversight. this includes recovery and resolution plans, a cross - border cooperation agreement between relevant authorities, and a resolvability assessment. work is also well advanced to extend this framework to other systemic financial firms, including global insurance companies, non - banks and core financial market infrastructure. on shadow banking, the goal is to transform it from a source of vulnerability to a source of market - based finance that adds competition, diversity and resilience to the financial system. here, too, we have made good progress. at the most recent g - 20 summit in st. petersburg this past september, the leaders endorsed a set of recommendations to increase transparency, reduce moral hazard, and limit maturity and liquidity transformation. finally, on strengthening the resilience of core financial markets, more than half of the fsb β s member jurisdictions now have legislative frameworks in place to ensure that derivatives bis central bankers β speeches transactions are reported to trade repositories ; that standardized over - the - counter ( otc ) derivatives are cleared through central counterparties ; and that non - centrally - cleared derivatives have higher capital and margin requirements. there is more, but i want to turn to the four issues that deserve particular attention. leverage limits in an ideal world, regulators would accurately measure the riskiness of bank assets when setting capital requirements. but risks, of course, are not known with certainty nor can they be measured with precision. as a complement to the risk - based capital framework, a simple, but effective, leverage ratio was therefore imported from canada into the global standard. this leverage ratio sets a cap on the value of the assets a bank can hold for each dollar
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* * projected range from the bank of canada β s april 2020 monetary policy report statistics canada and bank of canada projections gdp last data plotted : 2022q4 these possible outcomes reflected two distinct dynamics. some economic activity and employment would return to normal levels as soon as the pandemic subsided and lockdowns were lifted β similar to what often happens following a natural disaster. other economic activity would take longer to come back. indeed, in the spring of 2020 economists around the world debated about whether the recovery would be v - shaped or l - shaped. the bank β s view was that each of these dynamics would likely play out in turn, resulting in a two - phased recovery : first reopening and then recuperation. why did we expect full recuperation to take longer? it was partly because of our experience with the global financial crisis of 2008 β 09. the long, drawn - out recovery that followed that crisis reflected a large and prolonged rise in unemployment and massive damage to balance sheets. as a result, the global economy took 10 years to recover to its pre - crisis trend. labour markets can be damaged by lengthy recessions. unemployment can have persistent effects on people β s skills and their ability to re - enter the workforce. because the pandemic began with such a huge increase in unemployment and so much uncertainty around how long the pandemic would last, this concern was front of mind. the unevenness of job losses caused by the pandemic also suggested that inequality could widen, which itself has negative economic consequences. in all, we saw powerful downdrafts on the economy in those early months β reflected in our expectation that it would take until 2023 for slack to be absorbed. the same view was evident in our projection for inflation at the time. we can see in chart 5 that our earlier projection showed inflation creeping up to our 2 % target over three years. chart 5 : consumer price index inflation, projected versus actual year - over - year percentage change, quarterly data, not seasonally adjusted % - 1 projected cpi inflation * actual cpi inflation * projected cpi inflation from the bank of canada β s july 2020 monetary policy report sources : statistics canada and bank of canada projections last data plotted : 2022q4 needless to say, this is not exactly how things turned out. the economy β s path of recovery has followed the upper edge of the range we had contemplated. employment recovered more quickly than expected. and inflation persistently ran much higher than
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- standard monetary policy instruments, such as the purchase of government bonds, is well known. however, the world keeps on turning and the debate moves on. the situation seems to be improving in the euro area. consumer confidence in december was at its highest for 18 months. unemployment is at a seven - year low. a broad - based recovery is under way β across countries and sectors. at the same time, inflation in the euro area rose significantly β from 0. 6 % in november to 1. 1 % in december. in germany inflation even stood at 1. 7 % in december. and unsurprisingly, some are calling for the ecb to put a quick end to its loose monetary policy. in terms of the desired level of inflation, it β s been a long, cold winter. we are now seeing the first ray of sunshine β that β s good. is this ray already having a warming effect and does it herald the spring? is inflation really back? perhaps one or two more rays of sunshine are needed ; they β ll bring a bit more warmth. higher inflation is currently being driven mainly by energy prices and they could well have only a temporary effect. what β s more important here is underlying inflation, from which the very volatile energy and food prices are excluded. and underlying inflation in december was just 0. 9 %, after 0. 8 % in november. this rise was largely due to the fact that package holidays became more expensive in germany. however, this does not tell us much as the prices of package holidays are always fluctuating. does this mean we still have to wait a long time before exiting accommodative monetary policy? 2 / 5 bis central bankers'speeches in my view it doesn β t mean waiting until the last doubt about the return of inflation has been dispelled. it is rather a matter of not risking a reaction to a temporary inflation spike β which then might lead to longer, exceptional monetary policy measures. all preconditions for a stable rise in inflation exist. i am thus optimistic that we can soon turn to the question of an exit. that β s why we need to be ready to act when the time comes. for loose monetary policy is like a strong medicine for someone who β s very sick. it works, no doubt, but it also has side effects β and some of the unconventional measures have stronger side effects than others. and while the intended benefits of these measures wear off over time, the side
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were made to align the english version to the german version. 5 / 5 bis central bankers'speeches
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, notwithstanding the severity and multiplicity of the adverse shocks, india's financial markets have shown admirable resilience. this is in large part because india's banking system remains sound, healthy, well capitalized and prudently regulated. second, our comfortable reserve position provides confidence to overseas investors. third, since a large majority of indians do not participate in equity and asset markets, the negative impact of the wealth loss effect that is plaguing the advanced economies should be quite muted. consequently, consumption demand should hold up well. fourth, because of india's mandated priority sector lending, institutional credit for agriculture has remained unaffected. the farm loan waiver package implemented by the government should further insulate the agriculture sector from the crisis. finally, over the years, india has built an extensive network of social safety - net programmes, including the flagship rural employment guarantee programme. these uniquely indian versions of automatic stabilizers should protect the poor from the extreme impact of the global crisis. rbi's policy stance going forward, the reserve bank's policy stance will continue to be to maintain comfortable rupee and forex liquidity positions. there are indications that pressures on mutual funds have eased and that nbfcs too are making the necessary adjustments to balance their assets and liabilities. despite the contraction in export demand, we will be able to manage our balance of payments. it is the reserve bank's expectation that commercial banks will take the signal from the policy rates reduction to adjust their deposit and lending rates in order to keep credit flowing to productive sectors. in particular, the special refinance windows opened by the reserve bank for the msme ( micro, small and medium enterprises ) sector, housing sector and export sector should see credit flowing to these sectors. also the spv set up for extending assistance to nbfcs should ease the financing constraints of nbfcs. the government's fiscal stimulus should be able to supplement these efforts from both supply and demand sides. when the turn around comes over the last five years, india clocked an unprecedented nine per cent growth, driven largely by domestic consumption and investment even as the share of net exports has been rising. this was no accident or happenstance. true, the benign global environment, easy liquidity and low interest rates helped, but at the heart of india's growth were a growing entrepreneurial spirit, rise in productivity and increasing savings. these fundamental strengths continue to be in place. nevertheless, the global crisis will dent
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prepared by the banks themselves, using the socalled bottom - up approach and applying the methodology of the european banking authority. the test was subject to strict quality assurance by the ecb and the national supervisory authorities. the exercise assesses the foreseeable position of banks in two scenarios : one, a baseline or more likely scenario ( a macroeconomic scenario approved by the european commission ) ; the second, an adverse β and severe but not impossible β bis central bankers β speeches scenario ( set by the european systemic risk board ), in the period 2014 β 2016. the consolidated balance sheets at year - end 2013 were taken as the starting point for the exercise. 3. scope of the exercise the comprehensive assessment examined 130 banks from 19 countries. the main data from the exercise as follows : β the assets reviewed account for 81. 6 % of the total assets of banks supervised by the single supervisory mechanism. the remaining assets, somewhat more than 18. 4 %, are assets of banks supervised indirectly by the single supervisory mechanism. β 15 spanish banks were examined, accounting for 90 % of the assets of spanish deposit - taking institutions. β along with teams from all the supervisory authorities, including naturally the banco de espana, consultancies, appraisers, audit firms and, evidently, the banks themselves under examination all participated. β more than 6, 000 experts, 600 of whom in spain, were involved at the european level. β for spain, the cost of the exercise was β¬32 million in total, of which β¬11 million correspond to the consultancy, oliver wyman, and β¬21 million to the audit firms and consultancies. under the terms envisaged in the current law on the management, supervision and solvency of credit institutions, this cost will be borne by the banks, in accordance with the legally established keys and procedures. as to the total cost of the exercise for the ecb and the supervisory authorities as a whole, i am not yet in a position to provide it. but the cost is high. 4. assessment of the exercise from an overall standpoint first, i do believe that having conducted such an exercise in such a short period of time is an achievement in itself. never to date has a stress test and an asset quality review been combined at the european level. it is a challenge of the first order, since banks from 19 countries with different supervisory models and different regulatory frameworks were involved. however, thanks to a sound methodology and with rigorous quality assurance processes
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juyeol lee : 71st anniversary of the bank of korea speech by mr juyeol lee, governor of the bank of korea, at the commemorating ceremony of the bank of korea's 71st anniversary, seoul, 11 june 2021. * * * dear fellow members of the bank of korea family! today marks the 71st anniversary of the bank of korea β s establishment. i wish to express my sincere gratitude to our predecessors who devoted themselves to the development of the bank of korea and our economy, and to the many people who have supported and encouraged the bank. i would like to say in addition how much i appreciate the efforts of all members of our staff, who are faithfully fulfilling the duties entrusted to them in their positions despite these difficult conditions caused by the prolonged covid - 19 pandemic. our economy has recently been showing a faster - than - expected recovery from the slump caused by the covid - 19 shock. recovery in face - to - face service industries is still slow and employment conditions for vulnerable groups are still difficult. however, exports are growing strongly and facilities investment is exhibiting a trend of robust recovery. consumption is also gradually emerging from its slump. the financial and foreign exchange markets have remained stable since the latter half of last year, after showing drastic volatility at the early phase of the covid - 19 outbreak. there are latent uncertainties associated with the pandemic, but our economy is forecast to show a more clearly marked recovery in the second half of this year. against a backdrop of stronger growth in major economies, our exports and investment are expected to remain robust and consumption to improve further. the rapid recoveries at home and abroad are greatly attributable to the active policy responses of governments and central banks around the world, and recently have been helped by the easing of restrictions on economic activity with expanding vaccinations. dear fellow members of the bank of korea! the unprecedentedly bold economic stimulus measures by the policy authorities of major economies including korea were a great help in overcoming a sudden crisis that hit without warning. they contributed significantly to mitigating instability in employment and income by preventing severe economic contraction. however, it is also true that, in this process, imbalances between sectors and groups have exacerbated. as economic agents display greater appetite for risk, asset prices have risen more rapidly relative to the real economy. as a result, asset inequality has widened, and private debt has increased greatly. recently, there
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has also been growing concern over global inflation. therefore, going forward we should carefully conduct policy to sustain the trends of recovery in the economy and employment, while making efforts to prevent the build - up of these imbalances. while encouraging capital concentrated in asset markets to flow into more productive sectors, we should manage the leverage of economic agents at a stable level. moreover, the expansionary measures taken so far in response to the crisis must be appropriately adjusted in conjunction with improvements in financial and economic conditions. this is essential for the stable and sustainable growth of our economy. continuous policy efforts are also needed to prepare for the post - pandemic era. in line with the currents of the times of the global economy, such as the shift to an eco - friendly economy and the fourth industrial revolution, many countries are racing to take up dominant positions in relevant industries. in the near future, the great divide will appear between countries and industries that apprehend this changing tide as an opportunity to create new growth engines and take a new 1 / 3 bis central bankers'speeches leap forward, and those that do not. in order for our companies and furthermore, our economy to secure competitive advantages, reforms of the industrial structure and regulatory framework must be accelerated. most of all, we need to strive to create an environment where innovation capacity in the private sector can lead to enhanced productivity and employment opportunities. dear fellow members of the bank of korea! i would like to talk now about the some of the things that our bank has to focus on carrying out from the second half of this year. if our economy is expected to sustain a trend of robust recovery, we will need to, at the proper time, begin to normalize the current accommodative monetary policy in an orderly manner. the timing and speed of adjusting the degree of monetary accommodation must be determined while closely examining the developments of the pandemic, the solidity and sustainability of the economic recovery, and the risk of build - up of financial imbalances. in this process, we should of course fully communicate with economic agents in advance so that they can prepare for policy normalization without being heavily impacted. we should promote stability in the financial and fx markets. going forward, domestic and overseas financial markets could show higher volatility due to global inflation and changing expectations about the monetary policy of major economies. we should closely monitor factors causing market unrest and take timely measures to stabilize the markets if needed. the buildup of household debt has become
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for release on delivery 1 : 00 p. m. edt ( 10 : 00 a. m. pdt ) october 20, 2021 how long is too long? how high is too high? : managing recent inflation developments within the fomc β s monetary policy framework remarks by randal k. quarles member board of governors of the federal reserve system at β charting a new course β 2021 milken institute global conference beverly hills, california october 20, 2021 thank you to the milken institute for the opportunity to join you today. this morning i β d like to outline my view of current economic conditions and the economic outlook and then turn to the implications for monetary policy. in particular, with employment still well below its february 2020 peak, i will focus on how the escalation in inflation this year is testing the monetary policy framework adopted by the federal open market committee ( fomc ) in august 2020. 1 outlook for economic growth recent data suggest that growth in the third quarter is likely to be lower than we had expected, but the foundations remain in place for strong economic growth over the remainder of this year and next. employment is growing, financial conditions are accommodative, businesses are investing, and households, in the aggregate, have a large stock of savings to draw on for future spending. weaker growth in payrolls in august and september, along with uneven consumer spending in july and august, appear to reflect ongoing concerns in some parts of the country about the spread of covid - 19, especially in high - contact service industries. supply bottlenecks and labor shortages that have been more widespread and persistent than many expected are camouflaging continued strong underlying demand for goods, services, and workers. supply constraints are particularly evident in interest - sensitive parts of the economy, such as residential investment and vehicle sales, limiting the scope for additional monetary accommodation to stimulate activity in those sectors. i expect that these developments, however, have for the most part simply postponed activity temporarily and that robust growth will return in the coming months. all of my remarks today represent my own views and not necessarily those of my colleagues on the federal open market committee. - 2there is evidence in recent weeks that we seem to be moving into a new phase of the economy. nominal retail sales rose seven - tenths of 1 percent in september on the heels of a nine - tenths increase in august, an indication that consumers kept up their pace of spending. robust business investment in equipment and
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. finally, the anpr also indicates that the agencies are considering modifying the risk weights on other retail and commercial exposures based on credit scores or some other factors. bankers - - particularly at small - to - medium - sized institutions - - have expressed concerns about our work on regulatory capital rules because of the potential competitive implications of implementing basel ii rules. in drafting the anpr, the agencies have tried to take those concerns into account. at the federal reserve, we are particularly interested in effects that basel ii could have on banking markets. in that vein, we have published several white papers analyzing the potential impact on specific aspects of banking, such as small - business lending, mortgage lending, and mergers and acquisitions ; a paper on credit cards should be available before the end of the year. while the conclusions of the papers published so far do not point to broad disruptions in existing banking markets as a result of basel ii, we do acknowledge that certain participants could be affected, especially in commercial and residential credit markets. as we move forward with revisions to our basel i - based rules, we continue to be quite interested in the comments of bankers and others about the potential implications of these proposals. your input is vital to making the final product the right one. as supervisors, our focus will continue to be on ensuring that risk - management processes are appropriate for operations of each institution and that those risk systems operate effectively. thus, we expect that non - basel ii banks can continue to have camels 1 and 2 ratings as long as they operate in a safe and sound manner. the anpr represents our attempt to reduce some of the differences between basel i and basel ii, while acknowledging that simpler rules are still appropriate for nearly all members of the banking industry. to be quite clear, from the federal reserve's perspective, institutions should not be looked upon as having deficient risk - management systems simply because they choose to stay under the basel i capital framework. in considering changes to basel i, a challenge we face is how to make the capital requirements more risk sensitive and responsive to potential competitive concerns, while not adding unnecessary regulatory burden. to make capital more risk sensitive requires regulators and bankers to employ clearer measures of risk taking. if these measures are used by bankers in their internal credit - decision process and are readily available for reporting purposes, then the regulatory burden will be smaller. however, some of the proposed amendments may require significant changes to internal information systems. we hope that bankers and others will give us specific comments on
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loans must be classified not only according to their past due status, as it was previously done, but also based on the creditworthiness of borrower and on the nature of the transaction. banks, according to resolution 2. 804 must follow specific liquidity management policies, such as : sound liquidity practices, the use of alternative scenarios and the application of stress tests ( reviewed by supervisors ). returning to the implementation of basle ii, supervision in brazil is as yet undecided with respect to the date of implementation or the timetable to be followed, as this will depend very much on the intentions and readiness of the banks and on the existence of robust and consistent databases and models. the intention is to achieve implementation as closely as possible to the g10 schedule. examples of tricky issues to be considered with care are : how to ( or whether to ) apply operational risk requirements for smaller institutions ; how to carry out the validation of internal models for both market risk ( we still do not allow banks to use them for capital purposes ) and irb ; how to encourage more complex banks to adopt irb. there are, however, more pressing priorities for brazilian supervision at present, such as the improvement of recently implemented processes of risk focused supervision, the consolidation of the new credit information system, the studies underway for the introduction of a supervisory rating system geared towards the determination of the adequate frequency and intensity of supervision for each particular financial institution / conglomerate and the definition of strategies for consolidated supervision and international co - operation. the new accord will be most likely implemented in brazil in a gradual manner, the new rules co - existing for a while with the old ones. this will be the case, for example, of the smaller banks, to which will be applied either the simplified standardised approach, which does not depend on external credit assessment institutions, or the current approach. one possibility is the application of the current approach with slight modifications, such as a review of the present weights and the incorporation of some innovations from the standardised approach. for these less complex institutions, the capital requirement for operational risk might not be explicit, but only covered under pillar ii. at best, some small banks might be required to allocate capital for operational risk through the basic indicator approach. in the case of larger institutions, they will be allowed, at first, to implement only the foundation irb approach. for the advanced irb approach more time will be necessary for the banks to improve database quality and for supervisors to improve their
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which is why adequate training to carry out the validation of models and capital adequacy assessments will be of fundamental significance. supervisors still have a lot of work to be done in order to implement basel ii. we understand that it is important to disclose, as soon as possible, an overview of our implementation plans to the industry while we internally make all the studies necessary to support the numerous decisions to be made. the next steps include, for example, the evaluation of simpler alternatives for smaller institutions ( non - bank and small banking institutions, the definition and disclosure of aspects of national discretion, the definition of eligibility criteria for irb, and, finally, the release of an β advanced regulation notice β - open to public / industry comments, and a country quantitative impact study considering revised aspects of national discretion.
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exposed to the risk of persistent deterioration in labor incomes. more businesses see themselves as being exposed to the risk of a radical and persistent downshift in the demand for their products. these workers and businesses have an incentive to accumulate more safe assets as a way to self - insure against this enhanced macroeconomic risk. the federal fiscal situation is the third key source of elevated uncertainty. the federal government faces a long - run disconnect between its overt commitments and the baseline path of federal tax collections. this disconnect can only be resolved by raising taxes and / or cutting the long - run arc of spending. of course, this tension between revenues and expenditures predated the 2007 downturn. however, it is at least arguable that the fiscal debates of the past few years have made more americans aware of the uncertainties associated with resolving this long - run disconnect. and these uncertainties affect the demand for safe assets. the possibility of higher future taxes on corporate profits gives businesses an incentive to demand safe short - term financial assets as opposed to engaging in long - term investments. the prospect of reductions in medicare, medicaid or social security gives some households an incentive to demand more safe assets as a way of replacing those lost potential benefits. i β ve argued that, due in part to tighter credit access and higher uncertainty, the demand for safe financial assets has risen since 2007. at the same time, the global supply of assets perceived as safe has also fallen. americans β and many others around the world β thought in 2007 that it was highly unlikely that american residential land, and assets backed by land, could ever fall in value by 30 percent. not anymore. similarly, investors around the world viewed all forms of european sovereign debt as a safe investment. not anymore. thus, the fomc is confronted with a greater demand for safe assets and tighter supply of safe assets than in 2007. these changes in asset markets mean that, at any given level of real interest rates, households and businesses spend less. their decline in spending pushes down on both prices and employment. as a result, the fomc has to lower the real interest rate to achieve its objectives. 2 i often hear that the fomc has created a low interest rate environment that is harmful for savers and others. in my view, like savers, the fomc is being forced to make unusual decisions by an unusual economic environment that is not of its own making. the fom
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by saying that the federal reserve views inflation as being β mandate - consistent β if it is running at β 2 percent or a bit under β. congress has also mandated that the fomc set monetary policy so as to promote maximum employment. an important and ongoing communications challenge for the fomc is that it is much harder to quantify the maximum employment mandate than the price stability mandate. changes in minimum wage policy, demography, taxes and regulations, technological productivity, job market efficiency, unemployment insurance benefits, entrepreneurial credit access and social norms all influence what we might consider β maximum employment β. trying to offset these changes in the economy with monetary policy can lead to a dangerous drift in inflationary expectations and ultimately in inflation itself. looking back over the past four years : actions the national bureau of economic research β s business cycle dating committee serves as the official arbiter of precisely when recessions begin and end in the united states. 1 the committee has determined that what is commonly referred to as the great recession began in december 2007 and ended in june 2009. during that time period, real gross domestic product ( that is, gdp adjusted for inflation ) fell by 5 percent and unemployment nearly doubled. the federal reserve responded to the great recession and the associated financial crisis in a number of ways that fall roughly into two classes. first, the fed engaged in a vast amount of lending to firms believed to be in sound condition. it lent through conventional vehicles like the discount window and currency swaps with foreign central banks. but it also lent through relatively unconventional vehicles like the term asset - backed securities loan facility. 2 second, the fed lowered the real interest rate facing borrowers and lenders. here, i should clarify some terminology. by the term β real interest rate β, i β m referring to the interest rate received by lenders net of inflation. thus, if the interest rate on the loan is 5 percent per year and lenders expect inflation to be around 2 percent, the real interest rate see national bureau of economic research β s business cycle dating committee. see willardson ( 2008 ) and willardson and pederson ( 2010 ). bis central bankers β speeches is roughly 3 percent. economists generally think that it β s the real interest rate that matters for economic decision - making. i β ll first discuss the fed β s lending responses and then talk about the interest rate cuts. lending to understand the fed β s lending response to the events of 2007 β 09, we need to step
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market functioning and regulation and believing that the market and the right are dynamic, the bank of albania has supplied the banking market and the banking right with a new instrument β the repurchase agreement. by means of the law on repurchase agreement and the master contract, the bank of albania has initiated a process which needs to be further developed by the specialists of the area. personally and institutionally, we are expecting these efforts to be concluded with the execution of the first transactions of this kind. it is for this purpose that i invite all the participants in this workshop, which for the first time has brought together judges, prosecutors and lawyers from the banking market, to be active and complement one another. with the conviction that our initiative will be followed by other similar activities in the future, i wish you good proceedings. thank you for your attention.
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specialised in one or some lending activities ( financial leasing, credits, micro credit, factoring, etc. ). 3. savings and loan associations - ( 16 ) which collect deposits from their members and supply credits only to the members of the association. 1 / 6 bis - central bankers'speeches these financial entities ( banks and non - banks ) have continuously supported the economy of albania and households through lending activity. currently, the entire granted credit portfolio is assessed at all 805 billion. lending is the main activity carried out by non - bank financial institutions. the latter through this activity help a specific category of consumers and small enterprises, who do not manage to access the banking system. currently, 26 non - bank financial institutions operate in albania carrying out the lending activity, though they account for only 6 % of the system's credit portfolio, totalling all 53. 6 billion. the practice of selling and purchasing non - performing loans appeared in the albanian financial market, after the global financial crisis of 2008 - 2010. in this period, some of credits granted by banks over the years were not repaid by citizens. in 2015, these credits exceeded 25 % of total credits, directly affecting the soundness and safety of banks and turning into a serious threat to citizens'savings. the ability of banking sector to support the economy with new credits reduces significantly due to the overloading of balance sheets with non - performing loans. against this backdrop, the albanian government and the bank of albania adopted " the national plan on the reduction of non - performing loans " in september 2015. among other things, the plan charged the bank of albania with the task of regulating and licensing entities engaged in the purchase of non - performing loans. this practice, recognized internationally, is strongly recommended by the experts of the imf and the world bank. in that period, some financial institutions, in addition to lending for which they were licensed by the bank of albania, had also purchased non - performing loan portfolios from banks. this activity is based on the provisions laid down in the civil code on the transfer of credit ( articles 499 β 507 and 705, respectively ). pursuant to the amendments taking place in march 2016, credit purchase is considered a form of lending. through licensing, credit purchase and sale, based on the aforementioned articles of the civil code, is regulated and controlled by the bank of albania, being a subject to all supervisory obligations, including : reporting to the credit registry, providing periodic reports, risk management through
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liquidity, and the quality of loans continues to deteriorate because of the adverse feedback loop between the financial system and the real economy. a β mirage β phenomenon is taking place in that, despite public capital injection, concern over additional losses on the assets mounts over time and such concern in turn will heighten concern for a capital shortage of financial institutions. under those circumstances, it is of vital importance to remove uncertainty. there are two options to remove uncertainty stemming from financial institutions β nonperforming assets ; the government purchases those assets or provides a loss guarantee to those assets. nevertheless, even in both cases, uncertainty might not be removed for the assets not covered by the purchases or the guarantees, and investors thus would continue to ask the institutions for high risk premiums. consequently, the institutions might not be able to fully restore confidence in the market. in addition, there are also other difficulties ; how to set the selling price of the nonperforming assets in the case of asset purchase scheme and how to set the fee in the case of guarantee scheme. what japan faced in the past and what the u. s. is facing now is arguably those difficulties. however, even with such difficulties, it is an indispensable process to promptly identify the amount of losses and to carry out recapitalization to secure financial system stability, if necessary. it should be noted that new issues have emerged in the global financial system as public capital injection prevails. one of them is a gap between the level of capital recorded on the balance sheet and market participants β perception of franchise value of financial institutions. the level of capital presumably should reflect market expectations about earning growth potential of a firm. on one hand, recapitalization by the government serves as a buffer for future losses, in the same way with privately raised capital. on the other hand, it comes from different incentives from private capital, in which investors shoulder the risk with an expectation to recoup their investments by the future growth of the firm. in addition, if people increasingly tend to judge the soundness of a financial institution simply by looking at the level of capital on the balance sheet β in other words, looking at the capacity to absorb future losses rather than the earning growth potential β, a financial institution could face a paradoxical situation. a financial institution which does not accept public capital because of its financial soundness might suffer a competitive disadvantage against another institution which accepts public capital, because the sound institution has a lower capital
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to undertake a range of projects, in response to the surge in energy and materials prices and growing interest in environmental issues. these include the reduction in use of structural steel and facilitation of the reuse of scrap, the use of alternative energy, and the introduction of energy - saving equipment. in these areas, large firms in particular have been increasing capital spending to improve efficiency. with regard to development of new products, automakers, for example, have been working to develop energy - saving products such as hybrid cars and electric cars, and sales of hybrid cars are growing steadily. some electric manufacturers are increasing production of products related to alternative energy, such as solar batteries. v. the outlook for japan's economy and the conduct of monetary policy in view of the issues i have discussed, i would now like to talk about the outlook for japan's economy and the bank's conduct of monetary policy. the bank's main scenario is that growth will likely remain sluggish for the time being against the backdrop of high energy and materials prices and weaker growth in exports due to a slowdown in overseas economies. the sluggishness in japan's economy has arisen against the background of the broad adjustments in the world economy that i mentioned earlier. in this situation, the point that should be examined is whether or not japan's economy will experience a deep adjustment phase. i believe that the possibility of this occurring is small. let me explain the thinking behind this projection. first, as a result of firms'restructuring efforts, which continued in the 1990s up until recently, the " three excesses " β namely, in production capacity, employment, and debt β have been eliminated, and japan's economy has become more resilient to shocks that weaken economic growth. second, losses incurred by japanese financial institutions due to the subprime mortgage problem are limited compared to those of u. s. and european financial institutions and japanese financial markets continue to be stable, which suggests that the functioning of the financial system remains intact. and third, japan's financial conditions have been accommodative. although it is a cause for concern that financing conditions of firms in construction and real estate industries and small firms in general are becoming increasingly severe, financial conditions taken as a whole have been accommodative. the short - term real interest rate calculated by subtracting the cpi inflation rate from the call rate has been negative, as the policy interest rate β the un
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peter praet : the target2 - securities framework agreement address by mr peter praet, member of the executive board of the european central bank, at the event marking the first signatures to the t2s framework agreement, frankfurt am main, 8 may 2012. * * * ladies and gentlemen, it is no exaggeration to say that today is a historic date for the t2s project. it marks the end of more than two years of negotiations on the t2s framework agreement, one of the most critical legal documents underlying the whole project. the president reminded us in his address of how important it is to cooperate if we want to achieve our single market objectives. t2s is a clear example of the very good cooperation amongst stakeholders in the post - trade industry : as of today, the spirit of the project will move on from negotiation to cooperation. we shall work together with the csds to implement t2s β for the benefit of the european financial markets. i would now like to congratulate the csds that signed the framework agreement today. they have demonstrated their willingness to adapt to change. they will play a central role until t2s goes live by preparing and conducting the testing of the system, and they will help us to ensure that the operations of t2s run smoothly from the beginning. this is especially true for those csds that will transfer their operations to t2s as part of the first migration waves. it is in acknowledgement of this contribution that those csds will be entitled to financial incentives reserved for the early joiners. i am delighted to welcome them to t2s. the csds that signed the framework agreement today represent about two - thirds of the total settlement volume in the euro area. in addition, several other csds are expected to join over the next few weeks, once their feasibility assessments are complete. in total, we expect to reach more than 90 % β possibly 100 % β of the euro settlement volume by june 2012. t2s is a truly european project, which is capable of generating great economies of scale and of bringing benefits to its users and to europe as a whole. it is a network business : the larger the volumes settled in t2s, the more benefits for all of its participants, in terms of cost reduction and collateral savings. a large participation in t2s will also result in a wide harmonisation of practices and procedures across europe β harmonisation, which will, in turn, bring
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significant efficiency gains for t2s participants. the close involvement of csds has been a crucial factor throughout the project so far, and it will become even more crucial from now on. i wish to join the president in congratulating those who have been involved in the project β s governance. t2s is an entirely new concept. it is unique and nothing comparable has ever been done before. from the inception to the go β live, it will have required the engagement and collaboration of numerous different stakeholders, from the industry, from central banks and from other public authorities. effective cooperation is key to the success of t2s. decisions need to take into account several different points of view, while ensuring that the final outcome meets the objectives set in pursuit of deeper market integration in europe. this complexity is the reason why we had to develop a specific governance structure to manage the project. let me dedicate a few words to the governance bodies that have made the t2s framework agreement a reality : the t2s programme board and the csd contact group. the t2s programme board has run the daily management of the project up to now, regularly reporting to the governing council of the ecb. i would like to thank the members of the t2s programme board for their dedication and commitment over the past three years. they bis central bankers β speeches have coordinated effectively the several work streams constituting the project and fulfilled the mandate they were given by the governing council. they have made an enormous contribution to making the project a success. my gratitude also goes to the members of the csd contact group, the main forum for the framework agreement negotiations, which has played an instrumental role in ensuring that a mutually satisfactory agreement could be reached. following the signatures of the t2s framework agreement in june, the role of these two governance bodies will be assumed by their successor bodies : the t2s board and the csd steering group. in this new phase of cooperation, the t2s board will concentrate on the implementation and testing of the t2s platform, and then on the csd migration to the new settlement environment. the csd steering group will articulate and coordinate the views of the participating csds within the t2s governance. a major change to the current setting is that the chair of the csd steering group will be a csd representative. together, the two groups will cooperate to make sure that t2s delivers on its promises. i trust they will continue
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is something that we must learn about by seeing how the job market is operating. that is very different from the longer - run level of inflation, which central banks are presumed able to determine over time. at our conference in chicago, we also asked the panelists about our communications with the public, and the responses were humbling. the federal reserve communicates with the public about monetary policy through a variety of channels. at each of our policy - setting meetings, the fomc issues a statement, and chair jerome powell holds a press conference. three weeks after the meeting, the minutes of the meeting are published. twice a year, the federal reserve submits a monetary policy report to the congress. we heard in chicago that most members of the public care a lot about the job market and the cost of credit, but they are not aware of our communications about monetary policy. 8 of course, the media plays an important role in communicating our monetary policy actions and how they affect the economy. and the congress, which plays an important role in overseeing the fed, is a key audience as well. nonetheless, considering how we can provide greater visibility to the public about what we do will be one of the issues we will be considering as our policy review continues. listening now, how does today β s event fit into all of this? since i arrived at the fed, i have derived tremendous benefit from visiting communities all over the country to hear from them how they are experiencing the economy. today president mester and i want to hear from you. how is your community experiencing today β s economy? is everyone who wants a job able to get one? can they get the necessary training? are businesses finding it relatively easy to hire the workers they need? how does price inflation and wage growth affect you? what about the availability and cost of credit β whether to start or expand a small business, buy a car to get to work, or invest in owning a home or getting a degree? and are there ways we can better communicate with you? i look forward to hearing your views on these and other questions. 1 i am grateful to john roberts of the federal reserve board for his assistance in preparing this text. these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. 2 see richard h. clarida ( 2019 ), β the federal reserve β s review of its monetary policy strategy, tools, and communication practices, β speech delivered at
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for profit, such as the trading account for banks. and we support enhanced disclosures of fair value - based information. however, we believe that the accounting industry should be very careful before moving toward a comprehensive fair value approach, where all assets and liabilities are recorded on the balance sheet at fair value and changes in fair value are recorded in earnings, whether or not realized. in today's world, with the myriad of complex financial instruments that exist and are constantly being created, developing verifiable and auditable fair value estimates is a major concern. the lack of observable market prices, differences in modeling assumptions, expectations of future events and market conditions, as well as customer behavior make the task of assigning appropriate valuations very difficult. and because fair value models are forward looking, the auditor has an additional challenge of determining the line between normal variability in expectations that surrounds any forecast and earnings manipulation. to its credit, the financial accounting standards board ( fasb ) has recently issued an exposure draft on fair value measurement. the proposal was developed to provide a framework for fair value measurement objectives, and it is just the initial phase of a long - term fair value project. the initial phase is generally intended to apply to financial and nonfinancial assets and liabilities that are currently subject to fair value measurement and disclosure. it is not intended to expand the use of fair value measurements in financial statements at the present time. in our view, the proposal is a good first step in enhancing fair value measurement guidance, but we believe additional guidance is warranted. reliability issues should be addressed more comprehensively in the proposal. most important, the fasb should develop further guidance and conduct further research and testing to enhance the reliability of fair value measurements before the use of fair value is significantly expanded in the primary financial statements. furthermore, we believe that the fasb should work with other organizations including the public company accounting oversight board ( pcaob ), american institute of certified public accountants ( aicpa ), and accounting firms to enable the development of robust guidance that ensures fair value estimates can be verified and audited. transparent disclosure these concerns, among others, also raise the importance of disclosures in the financial statements that assist readers in understanding how the financial statements reflect the business strategy, risk management, and operating effectiveness of the enterprise. as organizations have grown in size and scope, innovative financing techniques have made it more difficult for outside investors to understand a particular firm's risk profile and the performance
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prasarn trairatvorakul : global risks and the outlook for thailand address by dr prasarn trairatvorakul, governor of the bank of thailand, at the fitch ratings 100th anniversary conference, bangkok, 27 september 2013. * * * distinguished speakers and panelists, ladies and gentlemen, i would like to thank fitch ratings ( thailand ) for inviting me to give an opening address at this year β s annual conference. much has changed both at home and abroad since i gave an opening address at this event two years ago. in retrospect, however, it is interesting to look back over the past two years and notice how most global risks we talked about β for instance, fiscal drag and political gridlock in the u. s., sovereign debt crisis in the eurozone, among others β are still with us today. most of the risks have reduced in terms of magnitude and urgency, but they certainly have not disappeared. in fact, each of them took turn to appear in the media spotlight and became an object of market β s obsession. victor hugo once said, β no army can withstand the strength of an idea whose time has come. β and that sounds fitting for today β s financial market, where obsession with one idea could have a far - reaching implication for so many countries, at once, in an invasive way that is hard to shield against. a. the state of indecisiveness that we live in it has been almost six years since the beginning of the global financial crisis. but despite the extraordinary policies in major economies, despite reassuring words of global authorities, despite considerable reform efforts, the healthy state of full recovery seems to be constantly pushed away from us. at this point in time, the world is still struggling in what i would like to describe as the state of β indecisiveness β. first is the indecisiveness that we have about growth prospects. mixed signals and counteracting forces abound, and it has become less obvious how global economic forces will - equilibrate. the talk of the two - speed or three - speed world, which was heard frequently earlier this year, proves to be an oversimplication of a much more complicated reality. among advanced economies, the u. s. and japan seem to have gathered some tangible traction as of late. but one should be reminded that the impact of sequestration in the u. s. is still yet to be felt fully. and
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strong growth last year. more specifically, the boost from the first - car scheme dissipated sooner than expected. household debt, which has risen fast and is now in the ballpark of 80 percent of gdp, starts to weigh on durable and semi - durable purchases visibly. and businesses also seem to postpone investment awaiting better economic conditions at home and abroad. in light of these factors, the bank of thailand projected gdp growth to be around 4 percent this year, a downward revision from a more bullish view we had earlier. but i would like to note that this is still a reasonable growth amid weak external environments, coupled with the fact that consumption has become somewhat overstimulated already. looking ahead, fundamentals of the economy remain sound overall. monetary and fiscal conditions will continue to be supportive. and despite some delay, contribution from exports is also bound to improve as the global economy gains a firmer footing. some concerns that i have about the outlook, however, are the possibility of continued sluggishness in private demand, and the possibility that supply - side constraints β both in the labor market and the production sector β could hold back the future potential of investment and exports. through this turbulent time, the bank of thailand has been steering its monetary and financial policies with prudence. the flexible inflation - targeting framework succeeds in anchoring inflation expectation, thus fostering continued growth and stability. the managedfloat regime accommodates baht movements that are in alignment with fundamentals, with policy instruments ready to curb excessive speculation and overshooting if needed. the strong international reserves position, at the same time, helps cushion against sharp flow reversals. efforts have also been expended on financial liberalization and regulatory reforms under the financial sector master plan. and for the banking sector, banks β capital bases have been strengthened well above international standard, while granting new subsidiary licenses for foreign banks will ensure that the future banking system stays competitive and vibrant. c. lifting barriers to sustainable growth distinguished audience, sound macroeconomic and financial practices have been instrumental in safeguarding economic stability and helping the country weather through numerous shocks that have come its way. sufficient policy spaces in monetary and fiscal policies provided buffers amid intense headwinds and supports in the times of need β notably in the aftermath of the global financial crisis and the flood devastation in late 2011. but now that the height of the global crisis is behind us, and the need for short - term macroeconomic management less pressing, a serious attention should also be
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tides, cities and countries as international financial centers rise and fall. for the most part, this rise and fall seems to reflect dynamic criteria such as transportation infrastructure, political stability and regulatory patterns. 1 since the 1970s, the competition amongst international financial centers has of course become genuinely global with diverse places such as luxembourg, singapore, hong kong, dubai and, most recently, shanghai joining the race. switzerland has good reasons to be confident about its ability to defend its status. most importantly, it sets out from a position of strength. particularly in the area of wealth management which comprises over half of the total added value of the banks, switzerland is clearly one of the world β s leading provider of services. the value of total assets managed in customer accounts in domestic banks as of the end of the year 2003 amounts to chf 3 β 300 billion, of which nearly 60 % is held by foreigners. according to various estimates, this corresponds to approximately one third of the world β s total private wealth managed abroad. much has been said and written about the various strengths of the swiss financial center which account for the dominant global position in wealth management. political, economic and monetary stability, know - how, traditional high quality of services provided, guaranteed protection of privacy and strict conditions ensuring the prevention of abuse are all key ingredients to switzerland β s past and future success. in the current global market place, some of these strengths represent structural competitive advantages. the swiss authorities and the swiss financial sector representatives rightly charles p kindleberger ( 1974 ) : β the formation of financial centers : a study in comparative economic history β, princeton studies in international finance, no 36, princeton : princeton university, november. make great efforts to defend these structural competitive advantages as much as other sovereign countries defend theirs. nonetheless, in a fierce global competitive environment, defense is a necessary but not a sufficient condition for sustained success. the offensive component of a comprehensive swiss strategy must be an unequivocal commitment from politicians, regulators and financial sector representatives to competition and free markets. such a commitment will foster innovation which will ensure the long - term viability of switzerland as a leading global financial center. a commitment to competition includes a firm commitment to an effective regulatory system based on transparency, proportionality, predictability and an uncompromising fight against abuse. such a regulatory framework does not stand in opposition to a commitment to free markets. to the contrary, it strengthens free markets by upholding the integrity of markets. regulatory authorities must not loose sight
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of the primary aim of regulation : to uphold the integrity of markets and not to impede the functioning of markets. let me conclude my brief formal comments with a specific example of how innovation in the face of global competitive pressures can foster the viability of the swiss financial center. in recent years, hedge funds have become an important segment of the global asset management industry. recent figures indicate that total assets invested in hedge funds are approaching the usd 1 β 000 billion mark. in comparison, the total size of the open - end mutual funds industry in the united states is usd 7 β 500 billion. according to industry figures, the annual growth rate of the hedge fund industry appears to have accelerated to a level in excess of 15 % in recent years. these figures suggest that investors increasingly look for largely unconstrained investment activities with a focus on absolute return. in addition, there has been an important shift from the traditional high net worth clients investing in individual hedge funds to funds being invested in hedge funds via diversified pools and formal fund of funds structures. these pooled assets, coupled with liberalizing regulatory developments have opened up hedge funds to a more diverse universe of investors, including a wide range of institutional and retail investors. currently, the total size of funds invested in hedge funds via pooled structures is estimated to be approximately usd 300 billion or nearly a third of the underlying hedge fund industry. remarkably, annual growth rate estimates of the pooled funds suggest that their expansion has proceeded at a more rapid pace than the underlying hedge fund industry. this implies that a significant portion of new assets flowing into hedge funds does so via collective asset management pools. in a competitive environment, the swiss financial sector has succeeded in leveraging its position as one of the world β s leading asset manager to secure an dominant position amongst collective asset management pool operators in the hedge fund industry. though many of the early formal funds of funds were registered under luxembourg, cayman island or bermuda law, swiss financial firms today manage a significant part of the world β s alternative asset management pools. with the growing importance of this industry in recent years, swiss regulators are easing regulatory restrictions to facilitate not only investment control of these asset pools by swiss financial institutions but also the legal registrations of formal fund of funds vehicles under swiss law. moreover, swiss financial firms have become leaders in financial engineering to structure underlying hedge fund asset pools according to differing client demands. the example of managed asset pools in the hedge fund industry illustrates that swiss financial firms are competitive and capable to respond
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stability and the efficiency of the financial system. it will enhance legal certainty, particularly with regard to the application of the regulatory framework to innovative proposals. meanwhile, the regulatory sandbox will enable the bank of greece to deepen its knowledge of financial innovation and, where appropriate, fine - tune its regulatory and supervisory approach accordingly. this major project would not have been feasible without funding from the european union, support from the european commission and the ebrd, as well as the technical support received from ernst & young. we owe you a big β thank you β for supporting our vision, and it was a great pleasure to have you with us today. again, i wish to thank the bank of greece staff for their hard work in achieving today β s milestone and for the support that they will continue to provide now that the regulatory sandbox has become operational. the bank of greece closely monitors developments in the area of innovation in europe and the rest of the world, and will continue to do so in future. the regulatory sandbox was set up drawing on the operational features of similar schemes in other countries, including lithuania, whose central bank we had the privilege of hosting on today β s panel. at the same time, the bank of greece is actively involved in european initiatives monitoring advances in financial innovation and reviewing relevant regulatory and supervisory developments. however, the work of the bank of greece in the area of innovation does not end here. as pointed out earlier, in the initial phase the regulatory sandbox will be intended for use only by authorised firms and for services authorised by the bank of greece. further down the road, our goal is to expand the scope of the regulatory sandbox to enable non - authorised financial firms to test their innovative solutions. a future version of the regulatory sandbox could be expanded to institutions established in another eu member state and operating branches in greece, in cooperation with the supervisory authority of the home member state. furthermore, the current version of the regulatory sandbox relies on customised guidance and active dialogue as its primary tools. a future version of the regulatory sandbox could also benefit from other, more drastic tools, for instance the lifting of particular requirements, where permitted by law, or the granting of an authorisation under restrictions. in conclusion, as of today, the bank of greece will be accepting applications from fintech firms for participation in the regulatory sandbox. we look forward to receiving the innovative ideas to be tested under our close guidance and support before they are put on the market. once
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2. the greek economy on a growth track the greek economy is currently on a growth track. this was made possible thanks to the completion of the second review and its positive effect mainly on confidence and liquidity. the fact that the economy β s growth dynamics has gained traction is primarily reflected in the positive path of gdp as well as in the improvement of short - term indicators : real gdp grew y - o - y by 0. 4 % in the first quarter and by 0. 8 % in the second quarter of 2017. overall, in the first half of 2017 real gdp increased by 0. 6 %, year - on - year. real gdp growth in the second quarter was mainly driven by an increase of 9. 5 % y - o - y in exports of goods and services, as well as by a rise in public ( 3. 3 % ) and private consumption ( 0. 7 % ), whereas gross fixed capital formation had a negative contribution, largely on account of delays in public investment programme disbursements. industrial production increased y - o - y by 1. 7 % in july 2017 for the tenth consecutive month. overall, between january and july 2017 industrial production increased by 5. 3 % relative to 1 / 6 bis central bankers'speeches the corresponding period of 2016. the volume of retail sales in the first half of 2017 rose by 2. 4 %, year - on - year. the positive momentum of the economy is also mirrored in the labour market, which has been showing signs of improvement since mid - 2014, on the back of structural reforms which allowed for a shift towards more flexible forms of employment. in more detail, employment rose y - o - y by 2. 4 % in the second quarter of the year, while the unemployment rate stood at 21. 2 % in june 2017, down from 23. 5 % one year earlier. the improved economic outlook and the completion of the second review contributed to a decline in greek government bond yields to their end - 2009 levels, thereby facilitating greece β s return to international markets on 25 july. at the same time, the yields of corporate bonds issued by the non - financial sector declined considerably as well. furthermore, fitch upgraded greece β s credit rating, citing sustained recovery and reduced political risk. other key developments that should be pointed out are : the successive reductions in the emergency liquidity assistance ( ela ) ceiling for greek banks, the increase in deposits, the attainment of the operational targets set so far for banks
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strong advocate for international cooperation on green finance. together with singapore and other countries, we have supported global climate governance, including through platforms such as the g20, the network of central banks and supervisors for greening the financial system ( ngfs ), and the international platform on sustainable finance ( ipsf ). first, we included green finance in the agenda of china β s g20 presidency in 2016, when the g20 green finance study group was set up and helped build consensus on green and sustainable finance. second, we jointly established the ngfs in december 2017, along with the bank of england, the bank of france, the monetary authority of singapore and other partners. 1 / 2 bis central bankers'speeches third, we jointly launched the ipsf work on common ground green taxonomy. in october 2019, the pboc joined the ipsf with the aim to mobilize private funds for environmentally sustainable investment, together with public institutions from the eu, singapore and other countries. china and the eu have recently set up the taxonomy working group under the ipsf. green finance has great potential as more countries commit to carbon neutrality. the pboc will focus on the following priorities to better support green recovery and green transition. first, we will further improve green finance standards to support the carbon neutrality objective. as we update our standards for green credit, green bonds and green funds, we will make sure projects supported by the green finance standards do not compromise our climate objectives while supporting environmental goals. second, we will consider the possibility of mandatory requirements for financial institutions to disclose environment related information. third, we will enhance capacity for analyzing and managing environment and climate risks. the pboc will strengthen study on the potential impact of environment and climate risks on financial stability. fourth, we will provide easier access for international investors to china β s green finance market. we will promote harmonization of green finance standards at home and abroad by updating domestic standards and strengthening international cooperation. in addition, the pboc will continue to harness fintech in promoting green finance. in our green finance pilot zones, we have made efforts to embed fintech in green finance. for example, in huzhou city, the local government established an integrated green finance service platform by using big data technology. it reduces the asymmetry on environment - and climate - related information, and bridges green projects and financial institutions. it also allows the pboc to monitor green loans provided by banks as well as other underlying data.
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zhou xiaochuan : tenth anniversary of the china foreign exchange trade system speech by mr zhou xiaochuan, governor of the people β s bank of china, on the tenth anniversary of the china foreign exchange trade system ( cfets ) and the opening ceremony of the forum on china β s money market, shanghai, 16 april 2004. * * * distinguished delegates, ladies and gentlemen : good evening. i β m very delighted to be with you on the tenth anniversary of the cfets and the opening ceremony of the forum on china β s money market. ten years ago the china foreign exchange trade system ( cfets ) was set up in shanghai as part of the efforts to reform the rmb exchange rate system. starting from this, china began to construct a modern platform to offer trading, information and supervision services to the interbank market. based on this platform, a national unified rmb funding market was established in 1996, the interbank rmb bond market appeared in 1997, and a national unified rmb commercial paper market debuted in 2003. so far, by using electronic telecommunication technology, the cfets has basically formed a national unified trading platform and service system for the interbank rmb money market and fx market, serving all financial institutions in the country. all of these achievements have laid a solid foundation for safeguarding china β s financial security, increasing market supervision, improving the monetary policy transmission mechanism, and promoting market - based interest rate and exchange rate reform. the decade of accomplishments in the interbank market evolution is the result of reform and opening - up, as well as the devotion and participation of market participants. on this occasion, on behalf of the people β s bank of china, i would like to extend sincere thanks and profound solicitude to the staff of the cfets and all market participants. looking at development trends in the global fx market, we can see that we have enjoyed the latecomer advantage in terms of technology, but there is still a long way to go in market construction and development. the continuous deepening of china β s reform and opening - up requires further development of the financial market, and requires us to update the concept according to specific situations and encourage innovation with the future in mind. first, the transitional period for the banking industry after china β s entry into the wto ends in december of 2006. with the realization of national treatment for foreign institutions and the gradual deregulation on market accession, china β s financial industry will encounter increasing international competition
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similar to those we have so often witnessed in the last couple of decades. i have also discussed various aspects of fluctuations in asset prices. one encouraging conclusion that i think we can draw in this connection is that the present monetary policy framework in sweden, with built - in inflation targets, provides a reasonable basis for tackling any problems that may arise.
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, is that this favourable development not only reflects a cyclical economic recovery, but is largely attributable to β the new economy β. definitions of the β new economy β vary, but most people seem to mean that for various reasons the growth potential of today β s economy is higher than before. among the reasons given for this are increased globalisation and the development and dissemination of information technology. this is an interesting hypothesis, but it must be pointed out that it is difficult to prove whether, and, if so, how much growth potential has actually changed. this obviously restricts the room for manoeuvre in monetary policy to a certain extent. what we must do here is to strike a balance between not holding the economy back more than necessary while at the same time making sure that the credibility of our inflation target policy, which has taken so much effort to build up, is not lost. however, there is another aspect of the american debate that has received much less attention than the β new economy β, but that i think is at least as important, and that is the role that monetary policy is assumed to have played in the favourable developments of the last twenty years. there is much talk in the us about the β long boom β, i. e. the period lasting from the early - 1980s to the present, which has been characterised by a high rate of growth, with only one rather mild recession in 1990 - 91. household sectors β saving rate and debt ratio in usa - 2 source : ecowin there are various theories about the reasons for this positive trend. however, it is often assumed that the monetary policy pursued by the american central bank ( β the fed β ) has played a decisive part. the fed β s policy during the last twenty years differ from the policy in the preceding period in their more active and determined use of monetary policy to keep inflation low and stable. as a result, it has been possible to avoid both the overheating and the recessions that often occur when an overheated economy suddenly comes to a halt. in other words, the fed is credited with succeeding in making recessions fewer, smaller and shorter, mainly by ensuring that the economy does not become overheated. it is important to point out that the favourable trend in the us economy during the last twenty years is not, as you might gather from following the swedish debate, due to the american central bank β leaning back β and basically letting the economy β take care of itself β
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amnesty program is turning out to be one of the world β s most successful repatriation program. a total of nearly 90, 000 people have participated in the program. the declared assets have reached 1, 030 trillion rupiahs with 69 % from domestic assets, 25 % from foreign assets not repatriated, and 5 % from foreign assets that is repatriated. this have well succeeded earlier market expectation of 30 to 50 billion usd or equivalent to 390 to 650 trillion rupiahs ( if using exchange rates of 13, 000 rupiahs per usd ) in declared assets. most economist expect the amounts to be doubled by next march to about 2, 000 trillion rupiahs and create fiscal income ranging around 0. 3 to 0. 5 % of total gdp. 11. i am also delighted to share that based on the economist, asia business outlook survey 2016, indonesia is among the top three most attractive destination to invest in asia after india and china. also, according to japan bank for international corporation ( jbic ) survey, amongst the asean countries, indonesia is the most preferred place for business investment. this is in line with the world bank β s ease of doing business ( eodb ) 2016 survey, whereby indonesia is ranked at number 109, up by 11, for ease of doing business out of 189 surveyed countries. distinguished guests, ladies and gentlemen, 12. this pre annual investment forum is expected to provide our reserve management department with valuable insights on the global economic and market outlook of 2017. we hope this forum will provide us with a more comprehensive overview on the current and future investment challenges to better manage our reserves in future. 13. therefore, i have high expectations that this forum will bring - in new insights on how as an investor we can seize the opportunity for better page 4 of 5 pre annual investment 2017 returns amidst higher volatility, whilst maintaining the common central banks principles of safety, liquidity, and profitability. 14. before we start the discussion, please allow me to thank the committee for their hard work in preparing this event. also, i would like to thank all the speakers, respectable asset managers and my colleagues from bank indonesia for the willingness and enthusiasm to participate in this event. 15. with that final note, i hope this forum can continue to have a positive impact on our reserve management strategy, specifically in seizing a workable strategy that optimizes our investment goals, while minimizing our risk. may the almighty bless us and light
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pre annual investment 2017 pemerintah daerah opening remarks β global economic and market outlook 2017 β ( as prepared for pre annual investment forum 2017 ) 24 - 25 november 2016, surabaya, indonesia honorable, our esteemed guest speakers, o mr. richard kellly from td securities o mr. bilal hafeez and euben paracuelles from nomura o mr. jahangir aziz from jp morgan o mr. andre de silva from hsbc o mr. gundy cahyadi from dbs my fellow colleagues from bank indonesia, distinguished guests, ladies and gentlemen, good morning, 1. i would like to begin by thanking god the almighty, allah swt who has blessed us with the opportunity to meet here in the occasion of bank indonesia pre annual investment forum 2017. i would like to express my sincere appreciation towards our international guest speakers who have travelled a long way to attend this event. i also hope that you can take time to explore the beauty of east java as part of the magnificent indonesia. 2. the main agenda of this forum is to discuss about the β global economic and market outlook 2017 β. i believe now is a perfect time for such discussions to take place, in the face of heightened global uncertainty. on this note, i encourage all of us here today to actively page 1 of 5 pre annual investment 2017 participate in exchanging views and ideas so that we can have a spirited discussion filled with fruitful conclusions. distinguished guests, ladies and gentlemen, 3. as we all may know, the financial market in 2016, has been moderately challenging compared to 2015 and shall face more headwinds ahead. to this date, the global market has been filled with surprising β tail risk β events and outcomes. the two main unpredictable events that we can easily recall are brexit in last june and the elected us president, mr. donald trump in last november 8th. 4. aside from β tail - risk β events, the main challenge we face ahead is growth. the global economic outlook projection by imf has shown that global economic recovery remains sluggish as reflected by a more subdued outlook for advanced economies. this becomes more evident following the brexit and weaker - than - expected growth in the united states. 5. in october, imf downgraded the outlook for growth in advanced economies, down by 0. 2 percentage points in 2016 and unchanged in 2017. on the other hand, the outlook for emerging markets was raised by 0. 1
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peter praet : is secular stagnation the new economic reality? remarks by mr peter praet, member of the executive board of the european central bank, for the policy panel entitled " how to deal with potential secular stagnation? " at the secular stagnation and growth measurement conference, bank of france, paris, 16 january 2017. * * * the term β secular stagnation β was coined by alvin hansen before world war ii. 1 among the driving factors of the slowdown he predicted were limited population growth and lack of innovation. a decade or so later, we had the baby boom and one of the strongest economic expansion the world has ever experienced β in french, β les trente glorieuses β started. this experience should certainly invite all of us to be prudent with the concept of β secular stagnation β. let β s not forget that a similar panel ten years ago would have been discussing β the great moderation β. over the past 10 years, euro area growth has been particularly weak, with the level of gdp only having surpassed its pre - crisis peak level in the third quarter of 2015. short - term growth prospects were periodically revised downwards, and recent estimates of euro area potential growth are approximately 1 %, compared to 1. 5 % - 2 % in the pre - crisis period. these developments have raised the question of whether this low growth environment is in fact the new economic reality. central to this debate is whether the slow growth can be attributed to cyclical β and hence ultimately transitory β factors related to the financial crisis, longer - term structural factors, or a combination of both, whereby cyclical factors have over time turned into permanent factors, for example via hysteresis effects. longer - term structural factors have certainly been at play in the euro area. the decline in potential output growth pre - dates the financial crises, in fact going back to the mid - 1990s, and reflects a long - term slowdown in the growth of total factor productivity. this decline went largely unnoticed. to some extent this oversight can be explained by the fact that in the decade leading up to the crisis the overall macroeconomic environment had been stable. remember our debates during the great moderation and all the good reasons that were put forward to explain macroeconomic stability! today we can look back at this period and see the expectation gaps that we could not clearly identify in real - time. in various parts of the euro area, firms β
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even into negative territory. at face value, such estimates are consistent with the secular stagnation hypothesis. but as policymakers, can we really base our actions on such an intangible variable? my answer is no. this is why the ecb has always followed a comprehensive monetary policy strategy, based on two pillars, and has in practice always looked at a broad range of indicators to assess its monetary policy stance. second, policy instruments. proponents of the secular stagnation hypothesis typically argue that a low equilibrium real interest rate makes monetary policy ineffective, since interest rates cannot fall low enough to absorb the excess of saving over investment. and though several central banks have shown the zero lower bound is not, in fact, a constraint to the interest rate instrument, there is an effective lower bound on interest rates, which is probably not too far from zero. so does that mean central banks have reached the limit of their actions? again my answer is no. instead we have used non - standard measures to flatten the term structure of interest rates and lower financing costs in the economy directly. and the ongoing economic recovery is testament to their effectiveness. what this shows is that theoretical constraints can be lifted in practice, because the economy is much more complex than models can capture. third, the relationship of monetary policy with other policy areas. this is the thorniest issue. there is always a risk for a central bank of becoming the only game in town, even though large parts of the growth challenge are clearly beyond its remit. the drivers of long - term growth are innovation, technology diffusion, which is to say, productivity growth. to manage this risk, central banks should always staunchly stick to their mandate. this is the only way for them to do their part effectively while ensuring that the overall policy response remains comprehensive, consistent, well - sequenced and incentives - compatible. 1 this is the full text of remarks delivered in an abridged form in paris on 16 january 2017. 2 / 2 bis central bankers'speeches
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critical infrastructure such as transport and communication networks does not support the growth of economic activities in africa. the inadequate supply of electricity, for example, leads to increase in production costs thereby rendering products expensive. most of the existing legal infrastructure that is vital for the enforcement of competition laws, bankruptcy and other commercial laws are weak and inadequate. rule of law, property rights, among others must therefore be firmly rooted to provide the enabling legal environment for africa β s development. information / data constraints many development projects are poorly implemented due to lack of data, which often lead to insufficient knowledge on the magnitude developmental challenge. the poor data base is largely due to lack of adequate infrastructure and skills for data mapping and analysis. there is need to focus on addressing these challenges to aid effective policy formulation and implementation. bis central bankers β speeches access to credit entrepreneurs and investors are exposed to limited credit channels which constrains competitive business expansion and productivity growth. increases in foreign capital inflows and developmental aids have reversed following the global financial crisis. fdi inflows are relatively low making long - term investment difficult. there is need to re - engineer the credit market in africa so that the needs of entrepreneurs can be adequately met. climate change / natural disasters the impact of climate change and global warming that mostly emanates from the industrialized countries makes africa vulnerable to counter - productive forces. rising incidence of natural disasters including droughts, floods, tropical storms, soil erosion and landslides are major threats to human life and property imposing huge social and economic losses. the lack of capabilities to accurately predict, monitor and mitigate the above sources of environmental degradation has severely constrained development efforts in africa. trade retaliation africa β s attempt to protect infant industries may provoke retaliations from trading partners that could further shrink the market for africa β s exports. subsidies and fiscal incentives for domestic producers may induce tariff changes that could limit trade with other countries. trade retaliation is no doubt a major threat to the new development strategy for africa. violent conflicts the prevalence of conflicts and social instabilities are among the major problems turning african countries into fragile states. the continent has the high concentration of the world β s poorest people with little or no social safety nets. civil unrests, inter - religious and ethnic conflicts are prevalent in most of the countries. there are numerous cases of domestic and imported security problems as exemplified by the recent war in libya and the political crisis ; as well as the terrorist attacks across the continent. the inability to resolve conflicts erodes the
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likely challenges to the new paradigm in order for africa to succeed under the proposed new economic development paradigm, the continent must cultivate a sense of urgency in overcoming some of the likely challenges currently confronting it. these challenges include : corruption the high incidence of corruption constitutes a major challenge to the successful implementation of any new development strategies in africa. the effects of corruption are bis central bankers β speeches multi - dimensional. corruption promotes the diversion, depletion and misallocation of scarce resources, as well as increase in the costs of production of goods and services. it results in inefficient state ownership, excessive private accumulation and widening inequalities. the lack of transparency and accountability associated with corruption prevents public participation in the decision - making process thus, limiting positive developmental outcomes. the multiplicity of functions and the wanton duplication of agencies in some african countries equally promote wastages and inefficiencies in the management of resources. corruption also distorts fiscal discipline and impedes institution of good corporate governance practices. market access low level of inter - complementarity of african goods limits the ability of the continent to support a high level of intra - african trade. this results from the production of the same category of goods β primary goods, in addition to the fact that they service the same international market. there is a strong need therefore for diversification of the production base in africa. market access is also greatly reduced by the existence of sanitary phytosanitory measures conditions under the wto, which promotes conditions that african countries cannot meet. there is need for the revaluation of the international trade rules that have limited the bargaining power of the continent. due to the weaknesses of the domestic production base, african countries are unable to reciprocate the most favourable nation status in countries with which they sign bilateral trade agreements, and also fully participate in preferential trade agreements such as the african growth and opportunity act ( agoa ) and economic partnership agreement ( epa ). technological constraints the low technology base in africa is a major constraint to development. old technologies are often deployed with over - reliance on traditional methods of production which results in low productivity and competitiveness due to the lack of economies of scale. african countries have also been unable to develop cutting edge technologies owing to weak research and development. this results from poor funding of research institutes and science education. there is need therefore for better funding of research initiatives in order to stimulate technological advancements. structural / institutional constraints the lack of
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β, american economic review, papers and proceedings, 99 ( 2 ), pp. 600 β 605. assmann, christian, jens boysen - hogrefe and nils jannsen. ( 2009 ) β costs of housing crises : international evidence β, kiel working paper 1524, kiel, germany. bernanke, ben s. ( 2005 ) β the global saving glut and the u. s. current account deficit β, sandridge lecture, virginia association of economics, richmond virginia, march 10. bernanke, ben s. ( 2010 ) β monetary policy and the housing bubble β, presented at the annual meeting of the american economic association, atlanta, georgia. bleaney, michael and liliana castilleja - vargas ( 2009 ) β real exchange rates, valuation effects and growth in emerging markets β, open economies review, vol. 20, no. 5, pp. 631 β 643. bracke, thierry and michael fidora ( 2008 ) β global liquidity glut or global savings glut β, ecb working paper series, no. 911, frankfurt am main, germany. cihak, martin ( 2006 ) β central banks and financial stability : a survey of financial stability reports β, presented at the imf seminar on current developments in monetary and financial law, washington, d. c., october 23 β 27. demirguc - kunt, asli and enrica detragiache ( 2010 ) β basel core principles and bank risk : does compliance matter? β, imf working paper, no. 81, washington, d. c. eickmeier, sandra and boris hofmann ( 2010 ) β monetary policy, housing booms and financial ( im ) balances β, ecb central bank working paper series no. 1178, april. garber, peter m. ( 2001 ) famous first bubbles : fundamentals of early manias, cambridge, massachusetts : mit press. greenspan, alan ( 1999 ) β testimony before the committee on banking and financial services β, u. s. house of representatives, washington, d. c., july 22. kasriel paul l. ( 2004 ) β collateral damage from a u. s. housing bust β, positive economic commentary, the northern trust company, july 30. kindleberger, charles p. and robert aliber ( 2005 ) manias, panics and crashes : a history of financial crises, hobo
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buffers for bad times and contingent debt conversions into equity for tail risk situations are highly desirable. 6 as for liquidity, although extreme versions of null maturity mismatch between the assets and liabilities of banks have proven historically impractical, a more flexible and modern version of the debate has been led by taylor ( 2007 ) and bernanke ( 2010 ). adrian and shin ( 2009 ), eickmeier and hofmann ( 2010 ) and maddaloni and peydro ( 2010 ) provide empirical evidence of the effect of lax monetary policy on the crisis. obstfeld and rogoff ( 2009 ) consider that the possible existence of a β savings glut β was partly the result of the u. s. monetary policy stance, and bracke and fidora ( 2008 ) confirm empirically that the β savings glut β was probably a less important driver of the economic imbalances than a β liquidity glut β. on the contingent debt conversion proposal see squam lake working group on financial regulation ( 2009 ). simons β ( 1948 ) full - reserve banking for retail deposits supporting the payment system should not be excluded a priori. 7 the agreement reached by the basel committee in september 2010, known as basel iii, that established higher capital standards including two new capital buffers ( β conservation β and β countercyclical β ) to be introduced gradually, and a tier 1 leverage ratio to be analyzed further, is a step in the right direction. nevertheless, the new requirements may still prove insufficient to prevent crises, given their relatively low target values, and the inclusion of components of lesser quality than common equity in tier 1 capital. overcoming these limitations is of the utmost importance considering the poor record of the basel core principles for banking supervision in preventing financial problems in the past. 8 however, the regulatory weakness that more likely led to excessive risk taking in this crisis was the ambiguous government safety net held out to investors and institutions. this included the explicit limited guarantees on deposits but most importantly, the realized assumption that, when problems arise, the government can extend this protection to other investments and rescue financially significant institutions. in particular, the β too big to fail β policy is a well - known source of moral hazard that leads to the unpleasant outcome of promoting risk taking with private rewards and socially shared costs. the only solution to dealing with this problem is to abolish the policy. this would imply forgoing the bailout capacity of the
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employment - led economicgrowth can be achieved. as recently emphasized by the imf, however, a success of this policy requires that structural reforms in various areas such as the labor market, industry and finance should be implemented in harmony. i look forward to a variety of insightful ideas being proposed here today and tomorrow, through enthusiastic discussions and constructive sharing of opinions among conference participants. i hope that the ideas proposed here will lead to tangible outcomes. thank you. bis central bankers β speeches
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juyeol lee : employment and growth : roles of macroeconomic policy and structural reform opening address by mr juyeol lee, governor of the bank of korea, at the 2016 bank of korea international conference, β employment and growth : roles of macroeconomic policy and structural reform β, seoul, 30 may 2016. * * * good morning, ladies and gentlemen! i am delighted to welcome you all to the 2016 bank of korea international conference. let me begin by expressing special thanks to our keynote speakers, st. louis federal reserve bank president james bullard, and imf deputy managing director min zhu, and to all of our session speakers, moderators, discussants, and panelists. i would also like to express sincere appreciation to professors thomas j. sargent and barry eichengreen, for their contributions in preparing this conference. without their devotion and support, the bank of korea international conference could not have received the significant recognition that it now enjoys. almost eight years have passed already since the global financial crisis. but global economic growth, which we had expected to gradually approach its pre - crisis trend level, has recently shown signs of deceleration. employment conditions are also not clearly improving. insome countries, including korea, employment is increasing quantitatively, but in qualitative terms employment conditions are not improving. considering this, i believe that our discussion of β employment and growth β at this year β s conference is very meaningful and timely. despite active policy efforts by individual countries, to enhance their economic dynamism through various unconventional measures, economic recoveries are being delayed. and this suggests the possibility of structural changes in the global economy since the crisis. from the aggregate demand perspective, the structural change is associated mainly with population aging, growing debt and worsening income imbalances, which result in a decline in consumption and investment. from the aggregate supply perspective, meanwhile, a prominent cause is our inability to improve productivity in a timely manner due to a shortage of investment. we need to pay close attention to concerns about the so - called β secular stagnation β of the global economy, recognizing that such structural changes in the economic environment could make our current trend of low growth become chronic. if this low growth is attributable in large part to structural changes in the economy, then i think we need to shift our policy response paradigm to address it. specifically, rather than working to enhance short - term growth, a more effective strategy will be seeking sustainable and balanced growth over
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kristina persson : monetary policy in a low - inflation economy speech by ms kristina persson, deputy governor of sveriges riksbank, at the stockholm strand rotary club, stockholm, 18 february 2005. the references for the speech can be found on the sveriges riksbank β s website. * * * introduction thank you for the invitation to take part in this morning seminar. i intend to begin by giving my views on the current prospects for the economy and inflation, including the risks associated with, among other things, the unwinding of the present global imbalances. i will do so against the background of the minutes from this year β s first monetary policy meeting, which were published last week and which gave an account of the executive board β s discussion on 27 january. then i will discuss the riksbank β s remit, different ways to conduct monetary policy and the possible implications of the low inflation rate for future monetary policy. the current monetary policy situation since christmas the news flow has been dominated by the huge tidal wave disaster that hit the countries in the indian ocean. despite the scale and extent of the disaster the consequences for the world economy will probably be very small. that at least has been the conclusion from the different international meetings that have taken place after christmas. international economic activity is thus expected to continue to strengthen and resource utilisation in the world economy to become increasingly higher in the coming years. inflation has risen slightly in most countries, owing mainly to the increasing oil price. but excluding oil, inflation has not risen at the same rate. there are plenty of spare resources in several of the biggest economies, and in recent years competition has toughened in many industries. as a result, international inflation is forecast on the whole to be relatively moderate in the coming years. the economic situation in the us and the euro area in the us the economic situation is continuing to improve. in the fourth quarter last year gdp in the us rose by 0. 8 per cent compared with the previous quarter, partly due to a sharp increase in investment. this reflects a benign investment climate in the us with historically high profits and optimism among firms. indicators of growth prospects for the fourth quarter provide a positive picture of the activity level in the us economy. as resource utilisation has picked up the federal reserve has raised its key policy rate from 1 per cent to 2. 5 per cent. many factors suggest that we can expect the tightening to continue in the spring. inflation is estimated
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would greatly improve the image of the region in front of the international community and it would make our final aspiration for eu membership easier to achieve. on the other hand, i think that we should benefit from the work in group for yet another reason. regardless of the different levels of the countries β developments and despite many other geopolitical factors, i hold the opinion that in the fields of economy, the banking sector, structural reforms, finance and markets, we show the same symptoms and to a certain degree, priorities converge. this is why i think that foreign assistance will be more effective. this is why i think that the several projects that may be prepared by the foreign donors would be more effective. i think that the region will show more or less the same progress without creating wide contrasts which β according to a long - term perspective β could emerge as serious problems. i hope that the agreement we signed today will only be the first step in the long road towards the comprehensive cooperation between our two institutions. personally, i consider the fields of payments, research, human resources and statistics as other areas of reciprocal interest. cooperation should be concrete and should serve to the adoption of better standards, as well as to the exchange of opinions with regard to various matters related to the regulatory framework. as regards the agreement of understanding in the field of banking supervision, i would like to emphasize the fact that a standard model which is in compliance with the european directives and the basel committee has been adopted. this is a concrete and appropriate common commitment with regard to cooperation in the field of supervision. it is worth mentioning that both parties, among other things, will extend their cooperation in the field of organizing common events as well as various training programmes of common interest. 1 / 2 personally, i think that the bank of albania has already developed its supervisory and analyzing capabilities to a satisfactory level, and as a consequence, i think that our assistance in this field will be useful. at the same time, i think that in the banking and payments authority of kosova, as a more recent institution, these capabilities are being developed at a satisfactory pace and i believe that its staff holds many practices and findings that they could offer to their colleagues at the bank of albania. at the conclusion of this short speech please let me express once more the great pleasure that this visit gives to me. i avail myself of this opportunity to assure my kosovar friends that they will always find in me and in the bank of albania an open window not
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