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gent sejko : monetary policy of the countries of the region between us federal reserves and european central bank speech by mr gent sejko, governor of the bank of albania, at the becici summit of the countries of the region on " regional financial stability in a new global environment ", becici, montenegro, 16 june 2017. * * * dear mr. chairman, dear colleagues, i would like to start by thanking the organizers for this invitation. as usual, i find it highly useful to share, among colleagues, opinions on common challenges. the title of the panel suggests our monetary policy stances are somehow shaped by the ecb and the fed monetary policy paths. though far from being the full picture, this is true, at some extent. the monetary policies of both these central banks are highly relevant to us. they affect external conditions and they could dictate the directions, the speed and the price of financial flows. furthermore, for countries with a dollarized or euroized financial system, they might also affect domestic credit, financial conditions, balance sheets, as well as exchange rates. so, this brings us to the following questions. where does our monetary policy sit at the current situation? what challenges do we face? and, how do we respond to the shifting of these external monetary policies? i am quite confident these issues will be broadly covered during this event. now let me make a few remarks, regarding the monetary policy of the bank of albania vis - a - vis that of the ecb or the fed. the boa has pursued an expansionary monetary policy, which has been both supported and facilitated by the monetary policy stance of the ecb. during the past four years, the bank of albania has been engaged in an extensive course of monetary accommodation. in the presence of weak cyclical developments and low inflationary pressures, we have decreased our policy rate to a historical minimum of 1. 25 %. furthermore : we have increased our liquidity injections in the banking system ; we have adopted negative rates for required reserves in euro, in line with the policy of negative deposit interest rates in the euro area ; we have been engaged in a clear and transparent forward guidance, announcing our preference for accommodative policy in line with our inflation target ; however, unlike the fed and the ecb, and similarly to other central banks in the region, we have not activated unconventional monetary policy tools. this is because the monetary policy accommodation pursued by the
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is, the positive effects of transparency may not be fully benefited if this information is not interpreted fairly by economic agents. this is particularly necessary for countries of a short history of market economy, where the degree of public involvement in the country β s economic life is still low. therefore, the bank of albania has been very aggressive in terms of designing and developing various programs for public education. numerous meetings with market participants, with financial and banking community, with the business, with the academy, with the media and beyond, with the public, have been regularly carried out and i assure you that they will continue with the same intensity even in the future. i would like to emphasise that the argument of transparency enhancement remains equally valuable also for the rest of financial system. transparency, without becoming an end in itself, and without damaging the achievement of final objectives of the business is a necessary market element for building confidence and expanding business relations, in products and volume, maintaining the financial system equilibrium and stability. in this framework, transparency should become a global concept of the financial market for products, services and actions taken by it. to this end, i would request from the banking system to further enhance its transparency with the public, particularly in terms of explaining simply and sincerely the products it provides, the commissions it applies, without leaving behind the publication in due time and quality of financial results, pursuant to legal obligations. in this context, i would like to let you know that the bank of albania will be rigorous in meeting all the obligations arising from the observance of laws and regulatory basis. as my friend eijffinger states : β transparency seems to mean different things to different people β, it is understandable that the debate remains open to both, academic and practical plane. new elements, quantitative indicators, empirical models are constantly added to it. the material to be presented today, adds a new value in this regard, with practical importance for central banks. i am confident that today we will have the opportunity and pleasure to expand our knowledge and consolidate our confidence in transparency effectiveness. i invite you to be full of attention for the presentation. honourable professor eijffinger, i thank you for accepting my invitation to present your research in tirana, and i wish you have a pleasant experience during your stay in albania.
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2 / 2 bis central bankers'speeches
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per callesen : the role of financing and regulation amid broader policies to mitigate climate change speech by mr per callesen, governor of the national bank of denmark, at the green climate fund's 2019 private investment for climate conference, seoul, 8 october 2019. * * * thank you for the invitation. it is good to be back at the gcf. 2011 β 2014, i served as a member of the transitional committee and the board. today, i will focus on the role of financing and regulators in the context of broader policies to mitigate and adapt to man - made climate change. this past year has seen stronger engagement in climate issues around the world. this is most welcome. there has been better engagement by the financial industry. central bankers and financial regulators are now involved in addressing climate - related financial risks. the climate challenge is so large that all players in our economies, all areas of policy, and all countries in the world will have to deliver and push in the same direction. we need to be aware of the context. others are better placed to consider developments in emissions and the setting of targets for future reductions. my perspective is the policies needed to meet objectives. i remember the early 1990s, almost thirty years ago. we understood the climate impact of co2 emissions, and we began assessing how economic scenarios affected emissions. the policy implication was pretty clear : announce a credible path of gradually increasing carbon pricing to set expectations right without affecting already undertaken investments by firms and households too much. that has not happened. an appropriate pricing of fossil fuels, in line with the true costs of co2 emissions, would still be the most efficient driver of the needed climate - friendly innovation, investment and behavioural change of billions of people and hundreds of millions of firms. that behavioural change is needed to incentivise the rolling out of existing and upcoming technologies. we need more information on policies setting emissions, country by country. but we know that the current average direct global price of carbon is 2 usd per ton, approximately zero. only about 20 per cent of global greenhouse gas emissions are covered by a carbon price. only a fraction hereof is priced at levels consistent with the paris agreement. the price of most co2 - intensive products, such as oil, gas and electricity, etc., is in some cases raised by close proxies of direct carbon pricing, such as fuel taxes. in other cases, the price of such products is reduced by fossil fuel subsidies.
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ronald waas : β implementation of use of bi - rtgs system in money settlements for transactions in the capital market β speech by mr ronald waas, deputy governor of bank indonesia, at an event entitled β dissemination of mandatory use of rupiah within the republic of indonesia β, bank indonesia, jakarta, 15 june 2015. * * * distinguished : β’ heads of banks in indonesia ; β’ chairs or representatives of banking associations or organizations in indonesia ; β’ heads of departments of bank indonesia ; β’ ladies and gentlemen. good morning and may god bless us all 1. to begin our event this morning, i would like to invite all of us to praise god the almighty for giving us the opportunity to meet in this favorable occasion titled β dissemination of mandatory use of rupiah within the republic of indonesia β. 2. today, we invite you to have a discussion to establish the same perception and improve our understanding on banking, as well as disseminate and educate on the implementation of mandatory use of rupiah within the republic of indonesia. we are aware that the enforcement of the regulation on mandatory use of rupiah within the republic of indonesia ( bi regulation no. 17 / 3 / pbi / 2015 dated 31 march 2015 and bi circular no. 17 / 11 / dksp / 2015 dated 1 june 2015 ) is of significant importance for today β s attendees and the community. the reason is the use of rupiah closely relates to economic activities in general, primarily payment transactions in indonesia. ladies and gentlemen, 3. i consider the awareness of mandatory use of rupiah within the republic of indonesia is based on three significant main dimensions and determines our identity as a nation. 4. first, legal dimension. this is not a new regulation enforced by bank indonesia. since 2011, we already have a currency law, regulating rupiah as one of the symbols of state sovereignty which must be respected and honored by all indonesian people. the establishment of bank indonesia regulation related thereon is expected to promote strengthening and purifying payment transactions within the republic of indonesia by the use of rupiah. 5. various other regulations have been established, such as law on the flow of foreign exchange, law on special economic zones, presidential regulation on the blueprint of national logistics system development, regulation of minister of trade on inclusion of prices and tariffs of goods and services, and many other relevant regulations on rupiah, all of which provide a very strong foundation for the use of rupiah
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##h as a lawful means of payment in any payment transactions is a very fundamental element and serves as a pillar of successful and robust national economy. in the long run, the mandatory use of rupiah may also prevent the increasingly spreading dollarization in our economy, which in turn will support a more sound economic structure. ladies and gentlemen, 16. bank indonesia realizes that enforcement of mandatory use of rupiah will not be easy. therefore, bank indonesia and the government will cooperate with the law enforcement and state institutions and also collaborate with the private sector. 17. in this regard, we have also cooperated and agreed with the indonesian airline ticketing association ( astindo ) and the indonesian hotel and restaurant association ( phri ) to uphold the mandatory use of rupiah within the republic of indonesia in any transactions related to the business fields of the two associations. 18. we also consider that law enforcement efforts must be balanced with an intense dissemination and education to the community. such community awareness is the first line of defence we must consistently embed to the whole community. only in that way will rupiah become β host β in its own country. bis central bankers β speeches ladies and gentlemen, 19. we expect that the series of dissemination on mandatory use of rupiah will strengthen our commitment to realize the sovereignty of rupiah within the republic of indonesia and support to achieve stability of rupiah exchange rate. 20. to conclude, may god will always accompany, guide, and facilitate our steps towards a better future. thank you. bis central bankers β speeches
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i mentioned earlier. but, crucially, it would be for the senior manager to satisfy the regulator on the question of reasonableness β thus the presumption is created until it is rebutted. the change that the government has announced to create β the duty of responsibility β will, if parliament approves it, replace the presumption with a statutory duty on senior managers to take reasonable steps to prevent breaches of regulatory requirements by their firms from occurring. thus it will be for the regulator to show that the senior manager did not take such steps as it was reasonable for a person in that position to take to prevent the breach of regulatory requirements. in my view this does not represent a watering down of the requirement. why? well the β duty of responsibility β creates a positive duty on senior managers to take reasonable steps to prevent regulatory breaches occurring. this will be on a statutory footing, which hardwires the concept in the very fabric of the regulatory regime, rightly reflecting the importance which society places on this issue. let me be very clear, substituting β duty β for β presumption β changes the mechanism of enforcement not the substance of the requirement on senior managers, and i would not support changing the latter. there has been a lot of noise around the new regime in recent months, and i have asked people involved whether their problem was with the β presumption β, or with the regime more broadly. the universal answer has been that the difficulty was with the β presumption β not the regime which appears to have broad support. so, if parliament is in agreement, and i do not presume to take that for granted, i expect that the new regime will be put into effect in the spirit with which it is intended, and that the focus bis central bankers β speeches will shift to that spirit and away from finding ways to circumvent the β presumption β. to be blunt, i hope that those within firms and their advisors will respect the will of parliament on this crucial point. the new regime matters hugely for getting the right incentives for people running firms. the important word is not β presumption β or β duty but rather β responsibility β, it β s about holding people more personally to account. if there are people who wish to argue that they should not take on the responsibilities of the job they do, then i believe they have no place in the industry, it β s that simple. we all want well - run firms
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qe as an economic policy tool - what does it do and how should we use it? speech given by dave ramsden, deputy governor for markets and banking peter sinclair town hall lecture, university of birmingham 17th february 2021 with thanks to tom smith, amy lee and jon bridges for their assistance in preparing these remarks, and to bank colleagues including andrew hauser, maggie illingworth, mike joyce, nick mclaren, rhys phillips, and beth blowers for their many helpful comments and suggestions. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice introduction it β s a pleasure to be speaking today at the university of birmingham, and an honour to be doing so at the third peter sinclair town hall lecture. my focus today is on quantitative easing β qe for short β and its use as an economic policy tool. the bank of england β s internal independent evaluation office ( ieo ) published its own evaluation of qe earlier this year, where it noted that β there remain open debates about how qe works in different states of the world, its broader interlinkages and its potential limitations β. 1 what i want to use my lecture for today is to set out my own views on qe as a policy tool, as well as contribute some thoughts to some of those debates. before i do that, though, i want to start with my own recollections of peter. tim harford began this lecture series last autumn by noting that he was an economist because of peter, as is true, i am sure, of many people joining us today. i can actually take it further. i was first enthused by economics by one of peter β s students, the late ken durham, like peter also a great teacher and educator, who taught me economics at school and encouraged me to apply to brasenose college. the only bit of the whole application process to brasenose which went well was my economics interview with peter, which i remember as much more of a friendly conversation than an interrogation. that set the tone and started an unbroken trend for every one of my interactions with peter over the next 37 years, whether in brasenose, or over one of his famed pastoral teas in the cafe in the oxford covered market, at one of the seminars he would invite me to give to his students at the bank β s ccbs while he was its director, through to more recently in the
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- the - technology - that - gst - will - bank - on - fromjuly / articleshow / 58907708. cms https : / / www. gst. gov. in / by design, invoicing data about their own business is made available to users of the gstn. continuing the theme from the pcr, we already know that trusted, verifiable data from any registry can significantly improve access to credit. similarly, we expect an explosion in the number of credit products specifically designed for business flow, such as invoice discounting based on gstn data. the interplay of pcr and gstn now, the pcr can aggregate the information of a borrower using the core credit information repository and information lying in a set of sub - systems spread across multiple agencies ( e. g. mca database, gstn etc., refer to chart 2 above ), to aggregate information of a borrower. together, these sub - systems create a universe of verifiable information and allow safe access to the data for all important stakeholders in the financial system. what is noteworthy about these institutions is that they are all digital - native. they have been designed as digital infrastructure, being able to support multiple use cases atop them, without being partial or overly prescriptive on any one use case. this is not happening in a vacuum. much of this would not be possible if the other roadblocks to going digital weren β t already solved. other public digital infrastructure such as ekyc for knowing your customer or unified payments interface ( upi ) for digital payments are nudging users towards creating larger data footprints, and helping them indirectly improve their creditworthiness. with this infrastructure in place, we expect the costs for on - boarding those users who are currently excluded by formal credit to nosedive. it will become feasible to serve a large number of customers, operating at a much lower average transaction size. just like in the fast - moving consumer goods ( fmcg ) sector, banking and access to credit too will be β sachetized β to make it more accessible and affordable for the masses. we want that even a small tea shop vendor should be able to take a 500 rupee loan at fair rates, say, for only a week, based on such data. it doesn β t stop there. these new institutions can also provide better tools to regulators and researchers to monitor the health of,
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sale, or more broadly the point of interaction ( poi ). for merchants, instant payments at the poi could be a cost - efficient alternative to cards. such solutions are currently emerging across europe. it is important to ensure that they have pan - european reach so that end users can make and receive payments without restriction across national borders. to this end, the erpb set up a working group to analyse in detail the barriers to pan - european reach and usability and ways to overcome them. many of the innovative payment solutions introduced over the past few years have been based on the use of card payment schemes. although payment cards are the most widely used payment instrument in europe, a true sepa for cards has not yet been achieved. for example, cardholders cannot use their national payment cards to make payments across europe unless they go through a global card payment scheme that can execute such intra - european payments. the industry sees the implementation of a european infrastructure for instant payments as an opportunity to instantly clear and settle card transactions, which would offer a possible way of supporting the interlinking and interoperability of national card schemes. efforts to ensure the interoperability of schemes should be strengthened and should aim to foster a european identity, for example by using a common european logo to show users that their cards can be used across the eu. let me now conclude. digitalisation has brought a great deal of change to the payments market, and there is more on its way. the gdpr and psd2 have been introduced to protect eu citizens and to support competition in payments. for its part, the eurosystem is helping to drive innovation and integration in retail payments, not least by providing instant settlement services through tips and setting up the erpb as a forum for high - level market agreements. the main areas for further development are standardised apis, instant payments at the point of sale, and the interoperability of national card schemes. i look forward to proactive cooperation with the payments industry in these areas, based on joint standardisation and harmonisation. thank you for your attention. 2 / 2 bis central bankers'speeches
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our economy, have important roles to play to prevent the blood from being infected as well as to ensure the well - functioning of our blood circulation for more productive, better immuned, and more inclusive economies in asia. thank you very much for your kind attention.
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##it vote and the u. s. presidential election. ladies and gentlemen, while all sectors of asian economies, including businesses, households, banks, financial institutions, as well as authorities, must transform themselves in order to thrive in the new world, i strongly urge that banks and financial institutions look beyond their conventional financial intermediary function, and get actively involved in addressing the key issues of the economy. after all, the financial system is the blood vessel of the economy. facing with these challenges, and aspiring to achieve a sustainable and prosperous asia for many more years to come, financial system must, at the very least, help with the three key words i mentioned earlier : 1 ) productivity, 2 ) immunity, and 3 ) inclusion. first, to enhance productivity, the trend in technology advancement together with research and development will be the key enablers to increase productivity in asia. the imf β s chief, madame christine lagarde, has recently warned that β another decade of weak productivity growth would seriously undermine the rise in global living standards β. in this regard, banks have to embrace and employ technologies not only to improve their organisation β s own competitiveness, but also to be able to provide more efficient and lowercost financial services to asian businesses and households. regulators also need to establish an ecosystem that encourages financial innovation, competition, and efficiency improvement. in my view, there are at least two areas that banks and financial institutions could help improve productivity. first, digitization will certainly enhance productivity in financial services. in thailand, electronic payment and digital banking are becoming increasingly widespread. under the national e - payment program, businesses, households, and the government will significantly benefit from the cost reduction of financial services both in terms of money and time saved. many initiatives under the national e - payment program, for instance, the new faster payment system or β promptpay β and electronic government payments will provide foundation for many new add - on applications that will improve productivity across different segments of the thai society. thai banks have definitely played significant roles in hatching out these initiatives, starting from ideas and all the way through to implementation. second, financial connectivity, particularly within our region, will also play a key role in enhancing productivity. regional cooperation amongst asian countries, not only in trade and investment, but also in finance has a potential to expand much further. i strongly believe that improved financial connectivity in asia will be mutually beneficial to all. there are already many ongoing initiatives, for instance, promoting the usage
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has improved to some extent, even if there is considerable uncertainty about how much. in conclusion, the swedish economy appears to have undergone only some of the structural changes that the american economy has implemented. it remains to be seen whether the β new economy β can have any further impact in sweden.
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of the economy. in the last few years, the growth of the american economy has surpassed most forecasts. not only has the rate of growth been high in historic terms during the present upswing - around 3. 5 % per year on average since the end of 1991 - it has besides been very stable and unusually long lasting. at the same time, unemployment has fallen to near 4 % ; levels this low have not been witnessed since the 1960s. however, in distinction to previous booms, there has been no increase in the rate of inflation and the underlying rate of inflation has been more than halved since 1991, from over 4 % to 2 %. public finances have improved considerably, from a deficit of 5 % of gnp in 1991 to an expected surplus of around 1 % this year. looking at productivity per hour worked in american business, which is perhaps the best measure of how good a country β s growth potential is in the longer term, this has risen sharply, by over 2. 5 % on average since 1997 ; this figure can be compared with an average growth of productivity of around 1. 5 % over the period 1974 - 96. a substantial part of the improved productivity of labour can be explained by very high investments - so - called β capital deepening β - not least in computer equipment. in spite of the fact that unemployment has continued to fall throughout the period, the growth of productivity has been impressively high. this is remarkable considering the fact that the new jobs have principally been created in the service sector, where productivity generally increases at a lesser rate than in manufacturing. three principal groups of reasons for the positive trend in america can be distinguished. one important reason behind the upswing appears to be good economic policies. since the beginning of the 1990s, fiscal policy has been directed towards achieving a balanced budget, and for a year or so now the budget has been balanced. in order to achieve this, taxes have been raised, expenditure diminished and budgetary procedures made more stringent. monetary policy has been directed towards keeping inflation low and stable and has succeeded in warding off both destabilising inflationary and deflationary pressures at an early stage. the policy mix of monetary and fiscal policy therefore appears to have been favourable. a number of structural factors seem to have been important. deregulations in many sectors and increased globalisation have intensified already tough competition and increased the pressure on the partners on the labour market, leading to greater flexibility in the labour market and enhancing
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so certainly the new part of this job is the inner machinery of the ecb. but the monetary policy decisions and the related decisions were part of my knowledge even before, because we shared decisions that were taken in the past. wsj : your first months saw a lot of activity. is there much more the ecb can do when it comes to financial stability and economic growth? has it done about as much as it can? draghi : what i am going to say doesn β t imply anything as far as future monetary policy decisions are concerned. within its primary mandate the ecb will do its utmost to ensure price stability in the medium term and within the remit of the treaty to foster financial stability. wsj : what β s the first statistic you look at in the morning? draghi : stock markets. wsj : do you look at the euro exchange rate? draghi : not in the early morning. bis central bankers β speeches
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financing. to this end, the cbk has adopted a risk - based supervisory framework for aml / cft. this framework complements the existing framework on prudential supervision and legal compliance with special attention directed to anti - money laundering and combating financing of terrorism. nevertheless, all agents have a responsibility in reducing aml / cft risks and building a robust framework for cross - border payments. third, financial sector regulators need to remain vigilant on potential risks, while safeguarding an effective processing of payments and ensuring that a consumerfocused environment is maintained. as a regulator, financial stability continues to be our primary objective, regardless of the transaction channels that are deployed. however, cyber security and data privacy continue to pose the greatest concerns in terms of the efficacy of regulatory protections, and further concerted work is called for. there is certainly a lot of room for peer learning. these are the issues that will likely come up in your discussions, and i hope a way forward will be found. i look forward to interesting and lively interactions, but more importantly, to learning from your diverse experiences in this area. once again, i am grateful for this opportunity to engage with you. thank you for your attention!
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sub prime crisis, these funds have injected significant amounts of long term funds to the large ailing institutions to resurrect them or to prevent them from continuing with poor financial health. in that sense, the sovereign funds have acted as an immensely useful stabilizing force during the financial crisis. however, the injection of such funds has been received with mixed feelings in the geo - political context. i would think the debate on this development is just beginning and it would be useful for all of us to carefully watch the movement of this issue in time to come. another important development in reserve management is the extensive use of external fund managers. external fund managers are being increasingly engaged by central banks, as many central banks are yet to acquire the technical skills and competencies required to manage the new asset classes that are developing in these dynamic market conditions. i would think this factor too, would be one that we would have to give a lot of attention in the future, and as to how we make use of such expertise without compromising central banks β core objectives, would be a challenge for all of us. 6. my dear friends, given the importance of reserve management, it is timely to organize a seminar on this subject. when reading through your program, i realized that the organizers and the resource persons have done remarkably well in selecting the topics to be covered. in my view, the topics and presentations are just the right blend that a reserve manager would wish to focus on, in this day and age. finally, let me take this opportunity to sincerely thank the resource persons who have accepted our invitation to share their knowledge and experiences on various subjects relating to reserve management, the central banks of our member countries for showing high interest in this program, our own cbs for organizing this event, and i wish that all of us could benefit significantly from the program. i wish this seminar all success.
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eli m remolona : emerging trends in central bank policies and operations speech by mr eli m remolona, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the 4th international research fair, manila, 30 july 2024. * * * introduction that was a very thought - provoking presentation, refet [ gurkaynak ]. refet is an old friend from the fed ( federal reserve ). but my role now is to welcome you all, to do a proper welcome for you all. so, professor refet gurkaynak, presenters, discussants, and participants - from both the philippines and abroad - and bsp ( bangko sentral ng pilipinas ) colleagues, including my colleagues in the monetary board, good afternoon and thank you for joining us over the next two days. this is the fourth annual bangko sentral ng pilipinas international research fair. the fair started in 2021 and it has become one of my favorite events. so, thank you former governor ben diokno, who gave the opening remarks today. thank you, former governor felipe medalla, and thank you to the bsp research academy ( brac ) for all that you have done to set up this fair and to sustain it. as we all know, central banking is a nerdy business. that means research is central to what we do. this reminds me of an episode in douglas adams'wonderful novel, a hitchhiker's guide to the galaxy. in the novel, a supercomputer called deep thought was asked the question, " what is the answer to life? " after extensive computation, deep thought replied that the answer to life is the number 42. when doubts were raised about the strange answer, deep thought replied, " that is definitely the answer. i think the problem is that you have never actually known what the right question is. " right questions indeed, research is largely about asking the right questions. often the answer to the right questions would need good data. about data, the mathematician and physicist henri poincare has said, " science is built up with facts, as a house is with stones ; but a collection of facts is no more a science than a heap of stones is a house. " as the world changes, our questions change, our data change, and our analyses change. when i look at the program for today and tomorrow,
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5 turning to london, the need to finance successive wars β the spanish war of succession, the austrian war of succession, and the seven years war β gave rise to a financial revolution in the eighteenth century. the establishment of the bank of england β although private at the time β enhanced the state β s opportunity to borrow, and led to the establishment of a genuine capital market which attracted savings, and where joint - stock companies and government securities were traded. london consolidated its position as a leading international financial centre in the nineteenth century following britain β s expansion as the dominant player in the world economy after the napoleonic wars. productivity gains from technological innovations ( such as mechanisation of textiles, use of coal in the metallurgical industry and use of steam ) during the industrial revolution further enhanced its position as an already great trading and colonial power. 6 1 / 4 bis central bankers'speeches brexit and global capital markets the city β s international pre - eminence developed over 250 years. agglomeration benefits in terms of labour and scale reinforced the city β s attractiveness. 7 the uk now receives the second largest fdi inflows in the world and the largest in the eu. over half of the stock of uk fdi is in financial services. most financial transactions in the eu β three quarters of the hedging activity, more than three quarters of the fx activity, half of the lending and half of the securities transactions β take place in the uk, irrespective of where the counterparties are based. 8 in this context, it is fair to say that both central banks and firms must grapple with sizeable and specific issues associated with brexit. broadly speaking, it is not unreasonable to assume that much of this fdi is predicated on uk access to the single market, and a portion will be diverted to other member states when britain leaves. however, estimating the impact of brexit on the geography of international financial centres is complex. in this regard, research undertaken by staff at the central bank of ireland shows location decisions of non - bank financial fdi are driven by the very same factors that are traditionally regarded as determinants of investment decisions in more traditional sectors of the economy. 9 specifically, the research finds that barriers between the home and host, market size, regulation and taxes, as well as other traditional gravity variables such as sharing a common border, currency, language and legal system have an impact on firms β location decision.
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to initiate a rapid sequence of policy rate hikes to above their estimated neutral levels. according to survey and market - based proxies, this would require bringing policy rates well into positive territory ( slide 8 ). however, these are not the conditions that we are facing today. rather, the economy is evolving in ways that suggest that, after a long period of very subdued price pressures, inflation is increasingly likely to stabilise in close proximity to our 2 % target over the medium term. the current inflation outlook therefore calls for a gradual normalisation of our policy stance, reflecting the significant progress made towards meeting our inflation target in the future. during such a process of gradual normalisation, the focus should be first on unwinding step - bystep the exceptional measures we took to fight low inflation, starting with net asset purchases. the degree to which policy will need to be adjusted over time depends on how the inflation outlook continues to evolve. the focus on ending net asset purchases first reflects, at least in part, the fact that their side effects tend to increase over time. 5 5 / 8 bis central bankers'speeches the experience of the past few years demonstrates, for example, that balance sheet policies have a significantly larger impact on house prices than changes in short - term policy rates, thereby contributing to the measurable rise in residential real estate prices ( slide 9 ). 6 similarly, years of balance sheet expansion have caused the bond free float in some economies to decline to very low levels ( slide 10, left - hand chart ). as such, an end to net asset purchases enhances the availability of safe assets that the market requires to function well ( slide 10, righthand chart ). 7 ending net asset purchases when inflation is robustly converging to our target also credibly underlines that our actions are solely guided by our mandate, refuting concerns about fiscal dominance. finally, in the current environment of large imported inflation, reversing the current exceptional measures has the potential to mitigate inflationary pressures even without the usual long lag in policy transmission. over the past years, these measures have contributed to large capital outflows from the euro area, thereby putting downward pressure on the euro exchange rate ( slide 11 ). the exit from these measures can thus support the currency and, for a net importer of energy, provide tangible and immediate support to euro area households and firms by improving the terms of trade. choice of policy instruments the second aspect relates to the
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β are engaged in a similar process. i can assure you that the federal reserve has not spared any effort in preparing its internal systems and the financial services and products we provide to financial institutions for the year 2000. we have completed y2k preparations for our services and products, and in june 1998 we opened a testing facility for our customers. to date, more than 9, 000 financial institutions have tested the services they use with the federal reserve. these represent all of our major customers in terms of transaction volume and dollar amount of the items processed through the federal reserve. we also have tested the automated payment services we provide to federal agencies such as the social security administration to ensure that banks can receive government payments and then post the deposits to their customers β accounts. the new york clearing house, in particular, and other private commercial entities that process wholesale and retail payments have followed testing programs similar to ours. no one can say with certainty that there won β t be any problems or disruptions during the century rollover. however, based upon the information i have shared with you, we expect that any disruptions or glitches in the united states that do occur will be minor and of limited duration. moreover, because there is an expectation that something somewhere will go wrong, the financial sector β from the regulators to the markets and payment systems to the smallest introducing broker or bank branch β is preparing contingency plans. i would also like to emphasize that a percentage of automated systems are down every day without causing serious disruptions to commercial transactions and markets. for example, 1 β 2 % of atm machines in the united states are down at any given moment β some simply because they are out of paper β yet consumers know to go down the block to another machine or into the bank branch or local supermarket to obtain the cash they need. even more serious disruptions periodically occur : the new york stock exchange and, only last month, the chicago board of trade computers have experienced glitches that caused their markets to close temporarily without causing serious disruption to the us financial markets. in all of these situations, americans react with typical aplomb : they prioritize and address the most serious safety and well - being issues first, and they usually are willing to tolerate some inconveniences and delays related to less - critical needs. increase in readiness information and readiness of other domestic sectors as i said earlier, my assessment of the financial services sector is based on publicly available facts and information. even as late as
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for release on delivery 1 : 15 p. m. edt october 19, 2021 welcoming remarks remarks by michelle w. bowman member board of governors of the federal reserve system at the women in banking symposium richmond, va ( via webcast ) october 19, 2021 good afternoon. it is a pleasure to be able to join you today for this conversation, and as a bank regulator and former banker, i am pleased that this conference is making the case for diversity in terms that everyone in business can understand. at any time, but especially now when attracting and keeping skilled and talented employees is so challenging, it only makes sense that you β ll get the best employees if both men and women see a business with diverse leadership, and the opportunity to advance. and when a large share of your customers are women, when understanding their perspective is so important to your business, having women in leadership positions will help you serve these customers better and make you a more profitable and successful enterprise. in the year and a half since the pandemic began, life has changed in many ways, deeply impacting how we work and how we spend our time and money. the effects of these changes on the economy have been significant. so today, i would like to focus my discussion on how all of this has affected women in the labor market. of course work has changed for nearly everyone in the labor force, but for women, the changes have arguably been greater during this time than any other since world war ii. back then, millions of women entered the workforce to step into roles historically reserved for men, and this time millions left the workforce to deal with school closures and other changes to home life caused by the pandemic. one question is how durable these changes may be. therefore, today, i will also consider how these shifts may affect women β s long - term financial prospects and will end with ideas about potential ways to make it easier for women to join or rejoin the workforce. effects of the pandemic on women β s employment when considering the level of employment, i tend to focus on both the unemployment rate and the labor force participation rate. let β s start with the unemployment rate. the economic and social distancing restrictions imposed at the onset of the pandemic resulted in enormous job losses, with the unemployment rate surging from 3. 5 percent in february, which was a 50 - year low, to 14. 8 percent in april 2020. women were affected more than men, which is a
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], and even the united states is beginning to page 3 of 10 suffer. faced with this situation, political leaders β and one of them in particular β have the most important role to play : it is up to them to restore the confidence they have undermined. monetary policies do their part by keeping interest rates low in the face of the slowdown, but they cannot tackle the underlying cause. for the euro area, these uncertainties are being compounded by a painful paradox : the causes of the slowdown are largely external, but the region is being acutely affected. this imbalance is attributable to the weight of germany, which is highly specialised in the manufacture of capital goods and β overexposed β to global trade. it nonetheless also illustrates the fact that europe needs to make greater use of the scope it has to respond : it has less public debt ( 81 % of gdp ) than the united states ( 106 % ) or the united kingdom ( 87 % ), but it makes less use of fiscal stimulus, especially in germany. in addition, the expansion of the euro β s international role would be a useful means of consolidating our economic sovereignty. the euro is 20 years old and it is our success : it ranks second in the international monetary system, but it still needs to increase its importance at the global level. the dollar remains a key pillar of america β s global power, and china is taking a greater interest in the internationalisation of the renminbi. the other major threat to europe β s sovereignty is technological. of the large digital corporations β the gafa and other bigtechs β whose power equals that of sovereign states, none is european. and europe is seriously lagging behind in investment : in 2015, the euro area β s stock of information and communication technology ( ict ) capital amounted to 7. 6 % of gdp compared with 10. 9 % in the united states. v yet europe has the advantage of having a single market : you can see what happens without it with brexit and the cost of a β no deal β for the british economy. but we need to be more bold. by taking full advantage of the size effect : there are still too many implicit borders and too much page 4 of 10 fragmentation. by using the power of standardisation, notably to direct innovation, as illustrated by the gdpr and data where europe is taking the lead. by daring to implement an industrial policy with public - private partnerships, as in
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firms belonging to different segments of the financial industry. this implies that the traditional approach of specialised agencies is no longer perceived as satisfactory. on the other hand, the problems related to the creation and effective management of a universal agency are very complex. indeed, co - ordination remains necessary, be it between specialised agencies or between the organisational units within a universal agency. a second issue involves the role played by central banks. there are three main arguments in favour and three main arguments against the unification of prudential supervision and central banking. the arguments in favour are the following. first, there is a potential for exploiting synergies between the supervisory function and the core tasks of a central bank. a thorough understanding of the proper functioning of payment systems and of other market infrastructures is essential for the smooth conduct of monetary policy. information collected for supervisory purposes may play a significant role in this. the second argument concerns the need to focus on systemic risk. central banks have a privileged position from which to assess the impact of macroeconomic shocks and the financial stability of groups of intermediaries. the third argument concerns the independence from political interference and the technical expertise of central banks. similarly, we can identify three arguments supporting the establishment of a supervisory agency outside the central bank. the first one concerns the alleged conflict of interest between monetary policy and prudential supervision. many authors have argued that the body in charge of monetary policy cannot be entrusted with supervision, because the monetary policy stance would be affected and it would pose a threat to price stability. a second argument is based on the observation that no clear distinction is made between the different financial products and intermediaries belonging to distinct financial sectors. i already discussed this argument earlier when i talked of the technological advances. the third and final argument concerns the need to avoid an excessive concentration of power in the central bank. while it may be a difficult and controversial exercise to weigh up the pros and cons of the two solutions at a general level, without making allowances for the specific environment, in the particular context of the eurosystem the balance of the arguments leans in favour of maintaining a strong role for national central banks in prudential supervision. the reasons for this are twofold. first, the conflict of interest regarding monetary policy and concentration of power is no longer relevant given the structure of the eurosystem, since the introduction of the euro has implied an institutional separation between the monetary jurisdiction β the euro area β and the supervisory jurisdiction β domestically chartered institutions
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amplify their concern and thus lead to uncontrollable turmoil. therefore, governments in the united states, europe, and other countries, in quick succession, announced that they would expand deposit insurance coverage substantially and guarantee financial institutions'debts. the third measure was to put in place a framework that used public funds to purchase impaired assets held by financial institutions and inject capital into financial institutions. given that the financial system problem is essentially a problem of a capital shortage, it is necessary to identify the amount of capital shortage and compensate for it. however, as japan's past experience suggests, it is extremely difficult to accurately gauge, on a real - time basis, the size of impaired assets and a capital shortage when a negative interaction is at work in the financial and economic systems. to ensure financial stability, someone must make a judgment on the capital shortage from a macroeconomic perspective, and that someone can only be the public authorities. the public authorities must decide on a substantial public funds injection if it is judged necessary after thoroughly factoring in future downside risks. while it appears that the condition of global financial markets has somewhat improved as a result of a series of measures being taken by the public authorities, strains in the financial markets are highly likely to continue for the time being. b. developments in overseas economies given the situation in global financial markets, economic activity in the united states has been sluggish with continued adjustments in the housing market. the losses incurred by financial institutions were at first mainly on securitized products related to the subprime mortgage problem, but recently losses on consumer and commercial real estate loans have been on the rise. despite the reduction of the federal reserve's target for the federal funds rate from 5. 25 percent to 1. 0 percent within the short period of a little over a year, the actual interest rates applied to funding by financial institutions, firms, and households are generally rising due to wider credit spreads. the tightening in financial conditions is exerting downward pressures on the economy, and this is leading in turn to deterioration in the asset quality of financial institutions. in other words, a negative interaction is operating between the financial system and economic activity, and the outcome of events is still not clear. in europe, financial institutions'lending attitudes have become tighter as in the united states. demand in the area is slowing due to the deterioration in the terms of trade reflecting the earlier increases in commodity and materials prices, and export conditions are worsening reflecting developments in the
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been assumed, but i believe that the momentum for price rises remains intact. i believe that there are the following risks to the outlook. risks to japan's economic activity are developments in overseas economies, such as the u. s. economic policies and geopolitical risks, firms'and households'medium - to long - term growth expectations, fiscal sustainability in the medium to long term, as well as the effects of the consumption tax hike scheduled to take place in october 2019. risks to prices, in addition to the risks that i just mentioned, are developments in firms'and households'medium - to long - term inflation expectations, the fact that there are items for which prices are not particularly responsive to the output gap, as well as developments in foreign exchange rates and international commodity prices going forward. in assessing the outlook for developments in economic activity and prices, i am paying particular attention to the effects of the scheduled consumption tax hike. on this point, the bank estimated in the april 2018 outlook report that the net burden on households around the time of the consumption tax hike was expected to be smaller than that of the two previous consumption tax hikes. in fiscal 1997, apart from the hike in the consumption tax rate by 2 percentage points to 5 percent, there were additional increases in the household burden in the form of a termination of income tax reductions and an increase in medical costs resulting from reforms of medical care insurance. together, these were estimated to have resulted in an increase of over 8 trillion yen in the net burden on households. in fiscal 2014, the tax rate was raised by 3 percentage points to 8 percent, and the increase in the net burden on households was estimated to have been about 8 trillion yen. although measures were taken to reduce the burden, such as increases in welfare benefits, the effects of such measures were lessened by an increase in pension - related burdens. on the other hand, in fiscal 2019, even though the consumption tax rate is scheduled to be raised by 2 percentage points to 10 percent, there are plans to implement a number of measures to mitigate the burden - - such as a reduced tax rate and an increase in welfare benefits for pensioners - along with the provision of free education. as a result, the net burden on households is estimated to be about 2 trillion yen. of course, these estimates merely indicate mechanical computations of the net burden on households, and there is inevitably considerable uncertainty as to the impact of the consumption tax hike mainly because the impact on the
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gathered here : 4. the first involves further bolstering financial inclusion in trinidad and tobago. our country became the 100th member of the international body, the alliance for financial inclusion ( afi ) in 2013. afi β s main role is to strengthen the ability of individuals across the globe β especially low income persons in remote page 2 of 5 areas β to safely and meaningfully participate in organized financial activities. in certain parts of africa, east asia and latin america many communities are effectively cut off from the banking world β most transactions are by barter, or cash, and few persons have or even know what a bank account is. trinidad and tobago is somewhat different β we do have a widespread banking presence due to the country β s income level, our relatively small size and our long history with banks. nonetheless, we still need to work more on encouraging, embracing and keeping the participation of several communities in the formal financial sector. in this regard, it is important for banks to pay particular attention to the specific needs of the young, the elderly and the differently abled among others as you roll out your array of services and outfit your facilities. we at the central bank are boosting our national financial literacy program in 2017 / 18 ; we are happy to partner with batt in common areas so that the man in the street has a better understanding of the importance and the options available for savings, investments, budgeting, retirement planning as well as the potential risks in the financial world. 5. a second issue relates to transparency and fairness in dealing with customers. as we develop as a society, financial transactions can tend to become more complex and opaque β sometimes you get the impression that you need to enlist a senior counsel to get you through the fine print of the contract for setting up the most basic savings account! it is therefore imperative that banks and other financial institutions commit to meaningfully simplifying their agreements and making every effort to ensure that their customers understand the terms and conditions. we at the central bank are encouraged by the relaunch of the banking code of practice a few days ago, but like mr. stoddard, the financial services ombudsman, we look forward to the principles of transparency and fairness being page 3 of 5 applied fully in practice. one specific example i would call to mind is the guideline on the mortgage market, jointly developed between the central bank and batt, to cover information disclosure and predictability in the adjustment of interest rates on loans on what for most
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jwala rambarran : consolidated supervision, risk - based supervision and market discipline opening remarks by mr jwala rambarran, governor of the central bank of trinidad and tobago, at the basel ii implementation workshop, organised by the caribbean regional technical assistance centre ( cartac ), port of spain, 17 β 20 september 2013. * * * good morning first, i wish to thank cartac for arranging this basel ii implementation workshop and for inviting me to give some brief opening remarks this morning. as we all know, safe and robust banks operating in a well regulated financial system play a key role in the economy and society. one of the main lessons of the recent global financial crisis is that banks must improve their ability to manage risk, so they do not inflict serious damage on the economy. this calls for a stronger risk management culture within banks. this calls for stronger regulation and supervision within central banks and other regulatory agencies. in today β s discourse, most commentators assume that β strengthening regulation β is simply a matter of implementing international standards, of which the most important is the basel capital accord, designed by the basel committee on banking supervision. other commentators, however, have examined alternative approaches to prudential regulation beyond standards. they argue that a strategy for prudential policy must address three main weaknesses : the impossibility of fine - tuning bank safety margins in the uncharted territory that is banking in the developing world ; the need to provide insulation against the large shocks to which these economies are prone ; and the lack of enforcement that results from the concentration of political power in many such countries. this year marks the 25th anniversary of the 1998 basel capital accord, which through its two incarnations has emerged as the international gold standard for banks [UNK] capital requirements. the first manifestation came in june 2004 when the basel committee wholly rewrote the original basel accord, which has a number of flaws. for instance, it is risk insensitive, it does not differentiate between credit risk and other risks a bank typically faces, and it can easily be circumvented by regulatory arbitrage. the new accord, generally known as basel 2, represented a fundamental change of approach to regulation. the revised framework is highly complex and makes its understanding and implementation a great challenge, not only to regulators but also to the regulated community. basel 2, for example, assumes that discipline by the markets and by supervisors is beneficial. yet, as we have seen particularly, over the last five years, both markets
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, by contrast, would have an advantage, not least because at1 coupons are tax - deductible in most member states. to sum up : banks would become less resilient and the playing field less even. but let me come back to basel. the reforms we agreed on in basel do make sense, and they strengthen the resilience of banks. a key feature of the reforms is their global nature. they are designed to ensure not only safer and sounder banks but also a level playing field. so if reforms are not implemented as agreed, the playing field will become uneven, opening the door to regulatory arbitrage. but regulation is not the only game in town, of course. supervision counts too. and although supervisors need rules to guide their work, they see that not everything can be or should be captured by rules. global reforms such as those devised in basel and their transposition into european law cannot be perfectly tailored to each and every business model that banks pursue. at best, rules can cover the average case. this is particularly true in a sector that is changing as quickly as banking. so it is up to the supervisor to adapt the capital requirements to a bank β s specific risk profile in order to cater for deviations from the average case. to this end, the rules should be principlebased and leave sufficient discretion to the supervisors. in the european context, this need is even greater, as nowadays, we often have to deal with 19 slightly different national rules applying to the same case. 2 / 3 bis central bankers'speeches common principle - based regulation, applied to all 19 countries, would allow supervisors to cater for bank - specific risks in their national environment, thus ensuring a level playing field. so, let me conclude. the overarching question is : have the reforms so far helped to make the banking sector a safer place? my answer is : yes they have, but they still need to be finalised. the key point is to implement the reforms, to turn them into actual law. so, we cannot stand still ; we have to move on. and under no circumstances should we move backwards. thank you for your attention. 3 / 3 bis central bankers'speeches
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few years. this progress has been achieved through the large - scale privatisation of state - owned banks and the extensive opening - up of the banking sector to foreign ownership. this process has contributed to greater financial integration with the eu and significant gains in terms of efficiency and stability. however, the level of financial intermediation remains relatively low and the provision of bank financing represents a much smaller share of gdp in the accession countries than in the euro area countries. furthermore, the financial sector of accession countries remains dominated by the banking industry, as capital markets are not yet fully developed. from an ecb perspective, further deepening of the accession countries'financial markets is needed to ensure the proper transmission of monetary policy impulses once they join the euro area, and it may also help these countries make full use of their growth potential. coping with any of the three challenges which i have just mentioned will have a significant impact on the design of monetary and exchange rate policies. taking into account the different starting points and progress made so far in addressing these challenges, accession countries may well pursue different approaches in the pre - accession phase. once in the eu, however, there is a clear path defined in the treaty that should be followed by all eu member states towards the adoption of the euro. first, immediately upon eu accession, the new member states have to treat their exchange rate policy as a matter of common interest. furthermore, in view of the final objective of adopting the euro, accession countries are expected to join erm ii at some point following accession to the eu. most accession countries have already expressed their intention to join the mechanism as soon as possible after their entry into the eu. however, it should be clear that erm ii membership does not need to happen immediately after eu accession in all cases, nor does erm ii membership need to be limited to only two years, which is the minimum for adoption of the euro. a longer membership of erm ii may, in some cases, be helpful since it would allow countries to retain the exchange rate as an instrumental policy variable during the catching - up process. participation in erm ii should thus be seen as a meaningful and flexible framework for increasing convergence with the euro area, and for tackling the challenges faced by accession countries on the road towards the adoption of the euro. finally, after having outlined the path along which the euro will go east, i would also like to say a few words about a path which i am confident will not be followed a
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the decision taken by the ecb for significant banks, allowed all supervised entities to operate temporarily below the level of the pillar 2 guidance, the capital conservation buffer and the lcr. the esrb has issued a recommendation that the relevant authorities request financial institutions under their supervisory remit to refrain from paying dividends, buying back shares and paying variable compensation until at least january 2021. there is a case, therefore, for building up safeguards against moral hazard and excessive build - up of risks in markets. we need to reflect, among other things, on a macroprudential framework for non - bank finance. while basel iii comprehensively redesigned the regulatory framework for banks, change has come more slowly to nonbank financial institutions ( nbfis ), especially asset managers, despite the increased size, concentration, interconnectedness and speed of action of the industry. the awareness is growing that nbfi risks involve externalities. with no β basel accord β for non - banks, there is enough regulatory variation across jurisdictions to allow for reflection on what worked best, or is likely to work best, in managing market stress and avoiding endogenous amplification of shocks. in the past few years, the first fsb and iosco recommendations on liquidity and leverage in asset management have opened the way ; work on this should continue. an aside on the gold holdings of central banks β answer to a question from the audience. there are historical reasons behind central banks β large holdings of gold β a relic, whether β barbarous β or otherwise, of the times when gold was the official basis for the international monetary order. there is also an aura of solidity around gold, an instinctive idea that it can be a safe haven in the event of extreme disruptions. there are, in fact, also eminently rational, tecnical reasons to keep gold as part of a central bank β s assets. portfolio diversification is essential for central banks β long - run financial soundness and thus, ultimately, for their independence. some diversification between β paper β assets ( if you will allow me this expression in a paperless world ) and a commodity, specifically one that people often turn to in troubled times, does make sense. according to the escb β s accounting rules, capital gains on gold reserves are not recorded in the profits and loss account, but they do show up in the overall capital position and, in this way, they contribute to the balance - sheet coverage of the bank
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strengthening institutions and developing a pluralistic and competitive local private sector will greatly contribute to mitigating instability and preparing countries to transition out of conflicts and fragility. ida should deploy its suite of analytical and financing tools for conflict prevention and remain engaged during conflicts. overall, we reaffirm the recommendations that we have laid down in the non - paper on fragility, conflict and violence in ida21, together with other donor countries and the africa, eca, mena and lac ( haiti ) borrowers'representatives. job creation and business development across ida countries is our north star in improving local opportunities, especially for the young. this should mitigate the drivers of forced migration, while continuing to improve regional infrastructures, food security, access to energy and health systems and pandemic preparedness. the international finance corporation ( ifc ), working together with ida, should allocate additional resources to better support local companies and business associations. the most recent caf measures for ida allowed us to smooth out the financial implications of earlier frontloading, while also strengthening capital for the next cycles. we look forward to future work to enhancing development impact and further optimizing ida's balance sheet. 2 / 3 bis - central bankers'speeches our constituency appreciates the central role of africa and the partnership built around ida. italy has embraced this same spirit with the mattei plan, a renewed approach to development cooperation that revolves around the gradual agreement of goals and targets co - designed with african countries. it will be rolled out in synergy with international partners, in the areas of education and training, agriculture, health, energy and water. to embark on a path of sustainable growth, the african continent should also play a stronger role in clean energy products'global supply chains. italy fully supports the " resilient and inclusive supply - chain enhancement " ( rise ) initiative, launched in october 2023, including with a financial contribution. italy will work closely with the world bank to ensure a swift implementation of rise during its g7 presidency. above all, a successful ida21 replenishment requires a collective effort from all β donors, borrowers and management. the italian g7 presidency is actively supporting and coordinating this effort. 3 / 3 bis - central bankers'speeches
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efforts have to be intensified to enhance business efficiency and innovation. in this regard, the islamic subsidiaries, with their increased autonomy in business operations, would be better positioned to determine their own business strategies and to realise the vast growth potential in the islamic financial industry. on this note, it is my pleasure to congratulate the affin group on the occasion of the official launch of affin islamic bank berhad. i wish affin islamic bank berhad every success in maximising the potential opportunities and contributing to achieving its objectives. akhir kata, dengan lafaz bismillahir rahmanir rahim, saya dengan sukacitanya merasmikan pelancaran affin islamic bank berhad. terima kasih.
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a financial environment that is transitioning towards greater deregulation and towards more market - based rules, it is important that the islamic financial institutions inculcate a high level of confidence among consumers not only on the shariah - compliance aspects of the islamic financial products offered, but also on their business operations. concerted efforts by the industry to develop standardized documentation and features of islamic financial contracts would enhance the level of public understanding of the different types and concepts of islamic financial products. islamic financial institutions also need to provide consumers with the information that accurately represents the unique features, risks and returns associated with the islamic products and services. enhanced financial literacy on islamic financial products will facilitate the process for consumers to make well - informed and effective decisions on their financial transactions, with a clear understanding and appreciation of the unique characteristics and features of islamic finance and its real economic value. indeed, the strengthening of the range of islamic products and services needs to be accompanied by an improved market understanding of the islamic financial products. this requires well trained staff who are equipped with the required skills and knowledge in islamic finance that are able to provide quality advice to the customers. correct terminologies need to be used with an ability to highlight the distinguishing features of the products and services. this is particularly important in a dual financial environment where both conventional and islamic financial system are operating in parallel. the regulatory framework governing market practices by the islamic financial institutions can also be strengthened further to ensure its continued soundness. this will involve the implementation of the prudential standards that have been issued by the islamic financial services board, the ifsb. greater transparency through the observance of minimum disclosure requirements needs to be adopted by the industry. good business practices need to be embedded in all aspects of islamic financial operations, not only as part of good governance and corporate social responsibility, but also as part of brand building. market efficiency in conducting islamic business activities can also be enhanced further to ensure its sustained competitiveness as an intermediation process. as we are advancing into the third phase of the financial sector master plan, where the environment will become increasingly more liberalised and dynamic, we now have to look beyond the 2010 strategies. a key feature of the new environment is increased competition. the benefit of this trend will be to the consumers and businesses in terms of better prices, better range of products and services that are of a higher quality. this in turn would contribute to the overall performance of the economy. to be at the leading edge of competition, continuous
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public comment on proposed principles providing a high - level framework for the safe and sound management of exposures to climate - related financial risks for large banking organizations, β press release, december 2, https : / / www. federalreserve. gov / newsevents / pressreleases / other20221202b. htm. crowe, christopher, and ellen e. meade ( 2008 ). β central bank independence and transparency : evolution and effectiveness, β european journal of political economy, vol. 24 ( december ), pp. 763 β 77. debelle, guy, and stanley fischer ( 1994 ). β how independent should a central bank be? β in goals, guidelines, and constraints facing monetary policymakers, proceedings of a conference held in north falmouth, massachusetts, in june 1994. boston : federal reserve bank of boston, pp. 195β221, www. bostonfed. org / economic / conf / conf38 / conf38f. pdf. rogoff, kenneth ( 1985 ). β the optimal degree of commitment to an intermediate monetary target, β quarterly journal of economics, vol. 100 ( november ), pp. 1169β89. tucker, paul ( 2018 ). unelected power : the quest for legitimacy in central banking and the regulatory state. princeton, n. j. : princeton university press.
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for release on delivery 8 : 45 a. m. edt june 17, 2022 welcoming remarks remarks by jerome h. powell chair board of governors of the federal reserve system at β international roles of the u. s. dollar, β a research conference sponsored by the federal reserve board washington, dc june 17, 2022 good morning, and welcome to the inaugural conference on the international roles of the u. s. dollar. thank you all for participating and for lending your expertise on this important topic. this conference marks the first use of our new martin conference center, which i hope you enjoy. the international financial and monetary system that emerged after world war ii has been defined by the centrality of the dollar. it is the world β s reserve currency and the most widely used for payments and investments. as outlined in recent work by board staff, this global preeminence has been supported by the depth and liquidity of u. s. financial markets, the size and strength of the u. s. economy, its stability and openness to trade and capital flows, and international trust in u. s. institutions and the rule of law. 1 professor barry eichengreen will expand on some of these themes later this morning. the dollar β s international role holds multiple benefits. for the united states, it lowers transaction fees and borrowing costs for u. s. households, businesses, and the government. its ubiquity helps contain uncertainty and, relatedly, the cost of hedging for domestic households and businesses. for foreign economies, the wide use of the dollar allows borrowers to have access to a broad pool of lenders and investors, which reduces their funding and transaction costs. the benefits of the dollar as the dominant reserve currency have generated an extensive academic literature. yesterday β s paper on the treasury market by alexandra tabova and frank warnock extends that work in meaningful ways. see carol bertaut, bastian von beschwitz, and stephanie curcuru ( 2021 ), β the international role of the u. s. dollar, β feds note ( washington : board of governors of the federal reserve system, october 6 ), https : / / doi. org / 10. 17016 / 2380 - 7172. 2998. - 2the federal reserve β s strong commitment to our price stability mandate contributes to the widespread confidence in the dollar as a store of value. to that end, my colleagues and i are acutely focused
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and other illegal activities, and some rather spectacular incidents of theft and fraud have occurred. and we have seen significant financial risk, given the volatility and illiquidity of the assets. authorities should work toward a coherent set of policies for crypto assets that is aligned internationally. this strategy will need to cover risks in both cash and derivatives products, as well as in the related ecosystem. the canadian securities administrators ( csa ) launched work on offerings of crypto assets last year, noting that β where appropriate β they are treating these as securities. 21 i just returned from the g20 meetings in buenos aires and am pleased that the g20 is increasing its focus in this area, given the global nature of these products. 22 18 see i. foucher and k. gray, β exchange - traded funds : evolution of benefits, vulnerabilities and risks, β bank of canada financial system review ( december 2014 ) : 37 β 46. 19 these etps formed part of a larger β short vol β trade, which before early february some estimates put as high as us $ 2 trillion, and which allowed retail investors to access complex and leveraged trading strategies that were typically done only by sophisticated investors. see box 3 in the bank of canada financial system review ( november 2017 ) : 14. 20 see box a in bank for international settlements, β international banking and financial market developments, β bis quarterly review ( march 2018 ). for more information, see csa staff notice 46 - 307 cryptocurrency offerings ( august 24, 2017 ). see also committee on payments and market infrastructures markets committee, β central bank digital currencies, β bank for international settlements ( march 2018 ). for more information, see the g20 β s march 20 communique. my bottom line here is that we need a sharpened focus on consumer and investor protection, and market integrity. these are foundational elements of a sound financial system because they support trust. plan for when things go wrong the last area i want to highlight is readiness : we need to be prepared for when things go wrong. it is impossible to be rid of all risks, and undesirable as well. a modern economy advances because people work hard and are willing to stick their necks out. that means that some risk will materialize. that said, the system should be able to withstand some failures without imposing huge costs on those who did not take the risk in the first place. we have made a lot of
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progress in a number of areas, but more needs to be done. for example, we identified the financial institutions and fmis that could have outsized impacts on the financial system if they failed, and we are subjecting them to more stringent regulation and supervision, including recovery and resolution planning. 23 central banks and international policy organizations have also worked to develop earlywarning indicators of risks to the global financial system. 24 while these are helpful as a starting point, we need to recognize their limitations, particularly if they rely on deviations from historical trends or threshold values. that is why it is important to push the analysis further to properly gauge the risk. stress tests are an excellent way to help us understand what could happen if financial institutions were subject to adverse events, such as a steep house price decline or a brexit vote. they also provide practical information about what might be needed to withstand and recover from these events. the bank of canada works with other organizations, such as osfi and the international monetary fund, to conduct regular stress - testing exercises of financial institutions and to improve our modelling techniques. 25 the unfinished business here is that models used for stress testing capture mainly firstround effects, with limited ability to identify spillovers that we know can end up being even more important. for example, while the bank β s current framework does capture second - round effects that could come from interbank exposures and asset fire sales, it could be improved. the bank, and others who conduct stress tests, could introduce the basel committee on banking supervision has developed quantitative metrics for identifying global systemically important banks ( g - sibs ) and a set of principles ( no quantitative metrics ) for assessing domestic systemically important banks ( d - sibs ) : β global systemically important banks : updated assessment methodology and the higher loss absorbency requirement β ( july 2013 ) and β a framework for dealing with domestic systemically important banks β ( october 2012 ). for example, see bank for international settlements, β early warning indicators of banking crises : expanding the family β ( march 2018 ) ; and t. duprey and t. roberts, β a barometer of canadian financial system vulnerabilities, β bank of canada staff analytical note no. 2017 - 24 ( december 2017 ). 25 k. anand, g. bedard - page and v. traclet, β stress testing the canadian banking system : a system - wide approach, β bank of canada financial system review (
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are confident that we have all the tools necessary to withdraw monetary stimulus in a timely and effective way. 6 indeed, our balance sheet is already beginning to adjust, because improving financial conditions are leading to substantially reduced use of our lending facilities. the balance sheet will also shrink over time as the mortgage - backed securities and other assets we hold mature or are prepaid. however, even if our balance sheet stays large for a while, we will be able to raise our target short - term interest rate β which is the rate at which banks lend to each other overnight β and thus tighten financial conditions appropriately. operationally, an important tool for adjusting the stance of monetary policy will be the authority, granted to us by the congress last year, to pay banks interest on balances they hold at the federal reserve. when the time comes to raise short - term interest rates and thereby tighten policy, we can do so by raising the rate that we offer banks on their balances with us. banks will be unwilling to make overnight loans to each other at a rate lower than the rate that they can earn risk - free from the fed, and so the interest rate we pay on banks β balances will tend to set a floor below our target overnight loan rate and other short - term interest rates. additional upward pressure on short - term interest rates can be achieved by measures to reduce the supply of funds that banks have available to lend to each other. we have a number of tools to accomplish this. for example, through the use of a short - term funding method known as reverse repurchase agreements, we can act directly to reduce the quantity of reserves held by the banking system. by paying a slightly higher rate of interest, we could induce banks to lock up their balances in longer - term accounts with us, making those balances unavailable for lending in the overnight market. and, if necessary, we always have the option of reducing the size of our balance sheet by selling some of our securities holdings on the open market. as always, the most difficult challenge for the federal open market committee will not be devising the technical means of unwinding monetary stimulus. rather, it will be the challenge that faces central banks in every economic recovery, which is correctly judging the best time to tighten policy. because monetary policy affects the economy with a lag, we will need to base our decision on our best forecast of how the economy will develop. as i said a few moments ago, we currently expect inflation to remain
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build a strong foundation with the introduction of the fednowsm service, a new instant payments infrastructure that is scheduled to go into production in two years. the fednow service will enable banks of every size and in every community across america to provide safe and efficient instant payment services around the clock, every day of the year. through the banks using the service, consumers and businesses will be able to send and receive payments conveniently, such as on a mobile device, and recipients will have full access to funds immediately. promote competition and diversity and lower transactions costs today, the costs of certain retail payments transactions are high and not always transparent to end users. 7 competition among a diversity of payment providers and payment marie - helene felt, fumiko hayashi, joanna stavins, and angelika welte, distributional effects of payment card pricing and merchant cost pass - through in the united states and canada, federal reserve bank of boston research department working papers no. 20 - 13 ( boston : frb boston, 2020 ), https : / / www. bostonfed. org / publications / research - department - working - paper / 2020 / distributional - effects - paymentcard - pricing - merchant - cost - pass - through - united - states - canada. aspx. - 6types has the potential to increase the choices available to businesses and consumers, reduce transactions costs, and foster innovation in end - user services, although it could also contribute to fragmentation of the current payments system. by providing access to a digital form of safe central bank money, a cbdc could provide an important foundation on which private - sector competition could flourish. reduce cross - border frictions cross - border payments, such as remittances, represent one of the most compelling use cases for digital currencies. the intermediation chains for cross - border payments are notoriously long, complex, costly, and opaque. digitalization, along with a reduction in the number of intermediaries, holds considerable promise to reduce the cost, opacity, and time required for cross - border payments. while the introduction of cbdcs may be part of the solution, international collaboration on standard setting and protections against illicit activity will be required in order to achieve material improvements in cost, timeliness, and transparency. 8 we are collaborating with international colleagues through the bank for international settlements, committee on payments and market infrastructures, and the g7 to ensure the u. s. stays abreast of
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joachim wuermeling : current challenges in europe β a central banker β s perspective speech by prof joachim wuermeling, member of the executive board of the deutsche bundesbank, at the money marketeers of new york university, new york city, 29 march 2018. * * * 1 introduction ladies and gentlemen thank you very much for inviting me to speak to you here on wall street β any self - respecting central banker would jump at the chance to greet an audience on the world β s most renowned street of money and finance at least once during their career! i was fascinated to learn that wall street got its name from a protective wall built back in the 17th century, and that the new york stock exchange was founded there in the late 18th century. it β s remarkable that a protective wall has come to be synonymous with an open global financial centre where people from all over the world meet and do business together. despite its name, wall street has never benefited from walls. quite the opposite, in fact : it has profited from tearing down walls, from eliminating tax barricades and trade barriers. there are three topics i would like to emphasise in my speech today that all have something to do with walls : first, i would like to offer an outlook on the current political situation in germany and europe. as you all know, germany benefited tremendously β almost 30 years ago now β from a certain wall being torn down, with the help of our european and american friends. second, i would like to touch upon monetary policy and economic developments in the euro area, and i am sure that the ecb β s decisions on monetary policy that might be in the pipeline will have an effect on wall street. third, i would like to share a few thoughts on free trade, and on the difficulties and risks posed by walls and barriers in our globalised economies. 2 current political situation in germany and europe looking at what the media say about europe these days, you might be forgiven for thinking that the β old continent β is hurtling towards chaos. a headline of the new york times springs to mind, which read : β chaos in catalonia β. the huffington post wrote about the β brexit chaos β. and the washington post fears that the eu might even cease to exist : β what the e. u. must confront if it wants to survive β. let me assure you : the future of europe is not really on the rocks, despite what these headlines might suggest. it is
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. if the microprocessor β s breakthrough in the early 1970s constitutes the starting point, then it will presumably be another couple of decades before any sizeable economic effects are discernible. counting instead from the invention of the computer in the mid 1940s, however, means that we could already be in the beginning of a phase of rising productivity and growth. nevertheless, i believe it is till early to be able to provide an unequivocal answer to this question. what is clear is that electronics and microprocessors have revolutionised telecommunications and household appliances such as tv sets, videos and music equipment. we give little thought to the fact that microchips are now to be found in the simplest kitchen appliances. they are a part of our daily round. bear in mind, moreover, that there are no doubt applications that have not yet been exploited with the more powerful and, above all, cheaper capacity of new computers. electronic techniques were used in the 1970s to produce electronic components and equipment. in the 1980s, computer hardware and programmes were developed, along with various services that made it possible to incorporate computers in many fields. the pressure for change has shifted to software and know - how. in the 1990s software became more standardised and attention focused on attempts to create new infrastructure, for instance by extending the internet. the new infrastructure has enabled globalisation to take a large step forward. a good example of a field where the new technology has been utilised for strong growth is the financial sector. no one now dwells on the fact that the financial sector largely stands or falls with the new technology ; it has become commonplace. tv satellites and the internet have paved the way for new and better means of communication. that in turn has provided a base for the growth of many new types of services. many people now use the internet for bank transactions. buying and selling goods on the internet is still fairly limited but is growing. today, most people in sweden have access to news and entertainment from all parts of the world. firms have had to adapt to new markets and new conditions for distribution. new enterprises and new rules follow in their wake. as the new technology becomes cheaper, it also becomes available for more and more applications. one example is biotechnology, where the conditions for research and product development have changed completely. new companies are now being established. swedish enterprises have quickly gained a leading position in the new fields. sweden can be said to act as something of a european centre for the new information
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zamani abdul ghani : building a progressive takaful sector in the overall islamic financial system keynote address by mr zamani abdul ghani, deputy governor of the central bank of malaysia, at the 2nd seminar on regulation of takaful, langkawi, 23 february 2006. * * * bismillahirrahmanirrahim. his excellency dr. bassel hindawi vice chairman, director general of the commission insurance commission of jordan mr. anwar khalifa ebrahim al - sadah deputy governor, bahrain monetary agency professor rifaat ahmed abdel karim secretary - general, islamic financial services board distinguished guests and participants, assalamualaikum warahmatullahi wabarakatuh and good morning. 2. it gives me great pleasure to be here this morning to welcome you to malaysia and to this beautiful island of langkawi. i am also pleased to be invited by the islamic financial services board ( ifsb ) to address this major event that brings together those among us who share deep interest in the development of global takaful and islamic finance. alhamdulillah, we have among us today distinguished market players, regulators, scholars, consultants as well as participants from almost twenty ( 20 ) countries around the world. i also wish to congratulate the ifsb for its efforts in organizing, for the second consecutive year, this international seminar focusing on the regulation of takaful. let me at the outset reiterate the importance of this seminar as a source of collaboration for ideas, sharing of knowledge and exchange of experiences for the continuous developments and improvements of the islamic finance industry. this event is especially important as it touches on new areas such as the regulation and supervision of the takaful industry as only minimum guidance is currently available. ladies and gentlemen, 3. before i continue with this keynote address, let us all take a moment to remember allahyarham dr. mohamed aboulkhair zaki badawi, a great thinker and collaborator for the cause of islam, and particularly in the area of islamic finance. he has devoted so much of his time and energy for the benefit of the ummah. we will always remember his numerous contributions to the development of islamic finance. we cherish his involvement, among others, in the introduction of shariah - compliant mortgage, the establishment of the shariah council to reconcile conflicts between islamic and conventional laws and the establishment of the first islamic financial institution licensed in the united
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banks. in the case of takaful operators, they would rely on the islamic banks, through bancatakaful arrangement, to have automatic access to the banks'wide customer base and to leverage on the banks'reputation and prominent position to effectively distribute takaful products. the islamic capital market will also depend on the takaful operators, and to some extent the islamic banks, to participate in subscribing to islamic financial instruments which fulfil the medium to long - term financing needs. in return, the adequate supply and availability of a wide range of financial instruments offered in the islamic capital market has facilitated takaful operator to effectively manage its asset portfolio to match the liability and risk profile of the takaful fund as well as enhances the ability of takaful operator to generate attractive investment return to stakeholders. 9. allow me now to take this opportunity to share with you malaysia's experience in the development of the islamic financial system that has earned malaysia, alhamdulillah, the recognition by the international financial community as a leading islamic financial hub. in developing the islamic financial system, malaysia has adopted a phased - in approach which can be divided into three different phases. the first phase of the development of islamic finance in malaysia began more than three decades ago with the establishment of an islamic savings institution known as the pilgrim fund board, or tabung haji. tabung haji is the first islamic financial institution in malaysia. this was followed by the establishment of the first full - fledged islamic bank in 1983 and the first takaful operator in 1984. the establishment of the first takaful operator in malaysia was inspired by the prevailing needs of the muslim public for a shariah - compliant alternative to conventional insurance, as well as to complement the operation of the islamic bank. insyaallah, by the end of this year we will have a complement of twelve ( 12 ) islamic banks and nine ( 9 ) takaful operators with equity participation by malaysians as well as renowned international market players. 10. in the second phase of the development of islamic finance, malaysia initiated the development of a private islamic financial securities market. the issuance of a broad range of islamic financial instruments contributed in creating a more conducive investment environment for investors who preferred shariah - compliant instruments. another significant development in the domestic islamic financial market was the issuance of ringgit - denominated islamic debt securities by two multilateral financial institutions, the international finance corporation
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barry whiteside : promoting financial inclusion in fiji opening remarks by mr barry whiteside, governor of the reserve bank of fiji, at the launch of the financial services demand - side survey report, suva, 17 september 2015. * * * salutations the australian high commissioner, ms margaret twomey the un resident representative, ms osnat lubrani the uncdf executive secretary, ms judith karl excellencies and members of the diplomatic corps distinguished guests our financial inclusion partners and stakeholders members of the media ladies and gentlemen welcome and introduction bula vinaka and a very good afternoon to you all. it is my great pleasure to welcome you to the official launch of the demand - side survey report on financial services in fiji. thank you for taking the time to share this milestone event in our financial inclusion journey. after months of collaboration between the reserve bank and our partners, the pacific financial inclusion programme, the alliance for financial inclusion, the fiji bureau of statistics and other key stakeholders, the final version of the report is now ready to be unveiled. many of you present here will know that our financial inclusion journey effectively started back in late 2009 and early 2010, with the setting up of our national financial inclusion taskforce following a gathering of interested stakeholders. these stakeholders agreed to commit to an end - goal of helping our people to improve their lives and those of their families by providing easier access to financial services along with the necessary knowledge and skills to best utilize them. at the time we made a joint commitment to reach 150, 000 unbanked or underserved fijians by the year 2014. this was a priority goal of our first medium term national financial inclusion strategy, which also included incorporating financial education into the fijian schools β curriculum. it was extremely pleasing to note that both these targets were achieved well before the end of 2014. collaboration and partnership with all stakeholders has clearly been the key to our success and this must be recognized. and as taskforce chairman i would like to say how grateful i am for the total support given to me and to the reserve bank by the financial institutions, government ministries, civil society and donor agencies β all our stakeholder partners. we share a common vision of making fiji a better place for all our people. but while there have been some key achievements in the past few years, we believe that much more remains to be done to promote and facilitate financial inclusion in fiji. we are now in the process of formulating our 2nd medium term financial inclusion strategy which will
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into the mainstream legal and regulatory landscape of the malaysian financial system. this would mean that they may no longer be placed under the development financial institutions act. this is a positive development as it reflects the maturity and success of the institution in delivering on its developmental mandates. in conclusion, the progress of the nation is a collective responsibility. all of us have our own part to play. our roles may be different but we share a common vision towards a shared, inclusive and sustainable prosperity for all. for all of us gathered here today, this outcome is crystallised in the vision for dfis to lift the growth and development of malaysia. for this to happen, dfis need to ensure that they are financially sustainable, possess the agility to support the existing and new economic drivers, and constantly measure their performance and contribution in an appropriate performance management framework. as dfis will continue to be at the forefront of efforts to meet the sdg goals, i hope that the next two days will sow the seeds for individual and collective actions that will both transform dfis and increase their development impact. with this, i wish all of you a productive forum. 5 / 5 bis central bankers'speeches
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manoeuvre so that they can equalise differences between different economies. the escb therefore does not pursue an exchange rate target. its monetary policy is oriented exclusively to the risks to internal price stability. the exchange rate does play a certain role, however, because key import goods - such as raw materials and energy - are invoiced in dollars. the decisive factor, however, is always the overall monetary policy setting. this is something which the governing council of the ecb will analyse thoroughly at its next meeting on thursday. iii mr yam, another factor which has doubtless contributed to your successful monetary policy track record is the proximity to the market of the hong kong monetary authority, which is also responsible for supervising the financial markets and the banking sector. monetary authorities must have their finger on the pulse of the financial markets. after all, monetary policy decisions have direct implications not only for the money market but also for the foreign exchange and capital markets - both nationally and globally. today, given interlinked markets and internationally active credit institutions, instability can spread more easily. this tendency is being reinforced by the fact that some credit institutions are acquiring new, truly global dimensions - as is illustrated by the announced merger of deutsche bank and dresdner bank here in germany. hence there is a much greater onus on central banks than in the past to take on responsibility for the financial stability of the financial markets, too. they have to focus their efforts in this context on crisis prevention. central banks need to monitor the markets constantly so that they can detect crisis signals at an early stage. for this they require prudential supervisory information on system - relevant individual institutions at first hand. this is why they also have an oversight function for the payment system, for that could pose substantial systemic risks to the banking sector if major market players were to experience disruptions in their payment operations. in germany it is the bundesbank which, by virtue of its involvement in banking supervision or as the government β s fiscal agent, is able to inject the necessary market competence and market proximity into the monetary policy decision - making process. in all the discussion about the tasks and future structure of the bundesbank, therefore, it must be assured that the german central bank remains anchored in the financial markets. the reform of the bundesbank must lead to more streamlined structures and to a strengthening of the bundesbank within the escb. germany, as one of the major industrial nations in the world and the
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andreas dombret : why focus on culture? statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the institute of law and finance conference β towards a new age of responsibility in banking and finance : getting the culture and the ethics right β, goetheuniversity, frankfurt am main, 23 november 2015. * * * ladies and gentlemen, it is a great pleasure for me to be here with you at the ilf conference to discuss responsibility in banking and finance with you. let β s start with a little thought experiment. if i were to ask you to take out a blank sheet of paper and to write down your company β s values and ethics, would you be able to do it? would it be easy or difficult? let me go a step further : if i were to ask some of your colleagues to do the same β without conferring with each other β would your sheets be similar or different? my bet is that they would be different, at least in some of the details. however, i am pretty sure that most of you here today have already given some thought to culture and ethics, both privately and professionally. furthermore, i reckon that a lot of your companies have already adopted a code of conduct, a code of ethics or the like. under these assumptions, why do you think i believe no two sheets would look exactly alike? there are two reasons. one is that how corporate values are ranked in terms of priority is, of course, informed by personal values and ethics. the other is that a corporate culture may well exist on paper β and only there. and this is exactly where the heart of the problem lies : creating a corporate culture and embodying this culture in one β s own behaviour and daily life are two altogether different things. banks support the functioning of the economic cycle by term transformation, lot size transformation and risk transformation, to name just a few ways. to do so, they have to act as agents for at least two parties : savers and investors. however, for the bank to be able to act as an agent, both parties have to trust the bank. trust β this is one of the most important factors in the banking sector. without it, banking as we know it would be difficult, if not impossible. sadly, the financial crisis and its aftermath demolished many people β s confidence and trust in the banking system. now it is up to us to regain this trust, re - establish
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position, and is ready to meet the new challenges. the path to the euro area has the potential to become a catalyst for consolidating the political and macroeconomic framework. this is a real opportunity that we should not miss. 5 / 5 bis - central bankers'speeches
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##b. the more specific reason is related to the particular features of bulgaria's system of fixed exchange rate of the bulgarian lev to the euro, and to the high level of synchronization of our business cycle with that of the euro area. while the monetary policy direction is quite clear, the fiscal policy outlook raises more questions. in the context of the euro area this is due to the absence of a fiscal union, the different fiscal positions of the individual countries, and the different, but on the whole high, levels of their debt burden. against this backdrop, bulgaria's fiscal position continues to be solid, with its second lowest debt - to - gdp ratio in the eu. however, the country's fiscal position faces some serious potential risks arising from the severely disrupted budgeting process over the last two years and the trend, emerging in this period, towards continued loosening of fiscal policy. the issue is not so much the high expenditures which were needed and largely unavoidable, especially during the covid - 19 crisis, but rather their quality. the higher expenditures in that period, which led to a higher deficit, were meant to be targeted and temporary, and this was the right approach. within the strongly fragmented budgeting process, however, these targeted and temporary expenditures mostly became allencompassing and continuous, and tended to increase further. in this case risks occur along two lines. on the one hand, the persistent and progressive loosening of fiscal policy could bring us back into the long - forgotten times of high deficits, growing debt, and liquidity difficulties of the budget. this would in turn adversely change the internal structure of budget expenditures, with increasing debt service expenditures, especially in the context of rising interest rates, at the expense of investment and social expenditures. the cure in such cases is to achieve primary surpluses in the future, and this can be done in two ways : cutting fixed expenditures or raising taxes. we know, even from our own experience in the 1990s, that this process is painful. on the other hand, there is real danger of conflict between the objectives and directions of the fiscal and monetary policies. tightened monetary conditions and loosened fiscal conditions have contrary macroeconomic effects, at least on demand. to this we could add the significantly delayed structural reforms which could have supported the resolution of supply - related problems, but have not yet been brought into the focus of the budgeting debate. the combination of these two factors would seriously hinder the endeavours
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mugur isrescu : 30 years of partnership between the world bank group and romania speech by mr mugur isrescu, governor of the national bank of romania, at the 30 years of partnership between the world bank group and romania event, bucharest, 7 november 2022. * * * vice president bjerde, directors vincelette, akhalkatsi and karadsheh, prime minister of romania, vice - chairman of the senate, vice - chairman of the chamber of deputies, presidential adviser, your excellencies, ladies and gentlemen, next month we will celebrate the 50th anniversary of the accession of romania to the world bank and the international monetary fund ( imf ) in 1972. romania was the first among the countries of the former communist bloc that joined the international financial institutions. unfortunately, during the 1980s the authorities in bucharest had weakened the relationship between romania and these two institutions, almost close to severing all ties. the normalization of the relationship, after the fall of the communist regime, led to a new beginning. the opening of the world bank's office in october 1991 β the moment we are celebrating today β signifies a milestone that marked the start of a new historical point of reference in romania's relations with the world bank and our transition towards a market economy. the 1990s were perhaps the most difficult ones. we had benefited from the direct support of the imf and the world bank. i recall that, shortly after my appointment as governor in september 1991, i received, from a world bank expert, the first report regarding the transition from a mono - banking system, common to a centrally planned economy, to the two - tiered banking system ( central banks β commercial banks ) we have in place today. truth be told, if i were to mention all the partners and friends from the world bank, with whom i have worked over the past 30 years, i would exceed my allotted time. the world bank provided support on multiple fronts. this has been highlighted by the previous speakers and i will not repeat what has already been said. however, there is something that i would like to emphasize. the transition from a centralized economy to a market economy entailed not only loans and financing, but also new laws, building new institutions and good practices. access to the world bank knowledge and expertise helped romania to implement the reforms that followed. 1 / 2 bis - central bankers'speeches in this context, i would mention two of the world bank's programs,
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will reduce inequality, but what i would like to emphasize is that in low income and developing countries in general, the most important factor in reducing inequalities stays within the national authorities competencies. proper economic policies must be implemented in order to ensure inclusive economic growth, which generates the reduction of inequality. as it was very well underlined previously, households in romania borrow more than the inhabitants of peer countries. however, credit to low - income people does not come from banks, where they are not eligible. they resort to non - financial institutions instead, where looser credit standards come at the cost of higher interest rates. adequate economic policies will help increase the credit worthiness level of low - income citizens, which then can apply for sustainable loans. also, good economic policies means an increase in the quality and complexity of manufactured products within an inclusive economic growth. it means higher research and development expenditures that will determine an increase in the supply of medium and high tech goods. the global economy is still in a favorable position, albeit decelerating, while the uncertainty is rising. new opportunities, but also new risks and new challenges emerge, such as brexit, the trade and currency war, the cold war of technology, the debt crisis, money laundering, climate changes, higher inequality. all these aspects must be addressed as complementary to current policies. besides the discussions that took place here, related to the soundness of the financial sector and the need to have financial services widely accessible, i would like to underline two main points, in which i strongly believe. 2 / 4 the first one is that β there is no financial inclusion without social inclusion β as we look at the development indicators, we can notice, on the one hand, that significant quantitative progress have been achieved in reducing the worldwide poverty across countries. one the other hand, however, there are still important and rising differences related to the living standard, healthcare, education, sanitary conditions within the countries. inequality among the citizens affects their living standards, state of mind and the democracy itself. interest in social spending issues has risen globally over the last decade. the imf has voiced increased concerns about rising inequality, the need to support vulnerable groups, to address demographic, technological and climate developments. in their 2019 report, social spending is mentioned as a key policy in maintaining social and political stability. even companies seem to intend to change their strategy. after being accused of an obsession with short - term earnings while neglecting investment, depressing wages and
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only to expand its branch network to five this year but also bring to the financial sector some exciting and innovative products. an example of this is the visa debit - card which was launched today. it is the bank of zambia β s expectation that these efforts, accompanied by prudence in risk management, will contribute to the further deepening of our financial markets. however, i must mention here that, most banks in zambia have concentrated their branches expansion programmes in the already banked districts of our country. we still have a number of districts with a lot of economic potential but without financial service providers. this entails that civil servants and other citizens in formal employment have to travel long distances and in some instances for a number of days before they can access their salaries. furthermore, income earning citizens in the informal sector like fishermen and farmers cannot deposit their earnings in a safe savings account due to the absence of bank branches. most of our people cannot borrow loans to further create wealth by growing their projects. a number of them end up losing their hard earned income in fires, theft and other calamities. it is also very common for hard working women to lose their little incomes to their beer drinking husbands who know where their wives keep their little savings. i therefore, wish to challenge access bank through the group deputy managing director as well as the managing director of access bank in zambia to consider opening branches in areas like chavuma, chiengi, gwembe, chilubi, lufwanyama, mufumbwe and several others to tap into the vast potential these places possess. this will not only improve financial inclusion but will also provide you with new customers and thus a higher deposit base. i am certain that over time these places will be your most profitable centers as places like lusaka will only yield narrow margins due to stiff competition. chairperson, zambia β s economy has shown some resilience in the midst of the global economic crisis. as you are aware, the economy has posted some marked improvements in macroeconomic indicators in 2009 with gdp growth estimated at 6. 3 %. both inflation and the yield rates on government securities have edged downwards while the exchange rate of the kwacha against major international currencies has also shown some stability in the recent months. it is for this reason that i reiterate my appeal to all financial service providers including access bank zambia limited, to make some meaningful efforts in addressing the high cost of banking services in the country. it is also my expectation
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caleb m fundanga : enhancing access to finance in zambia opening remarks by dr caleb m fundanga, governor of the bank of zambia, at the official launch of the access bank zambia limited acacia and longacres branches and the visa debit card, lusaka, 16 february 2010. * * * your excellency the high commissioner of the republic of nigeria in zambia, ms marcus folake bello ; the chairman of the board access bank zambia ltd, mr caleb mulenga ; the group deputy managing director, access bank plc, mr herbert wigwe ; the managing director, access bank zambia ltd, mrs mukwandi chibesakunda ; members of the board of directors for access bank zambia ltd, present ; management and staff of access bank zambia ltd ; colleagues from bank of zambia ; distinguished invited guests ; members of the press ; ladies and gentlemen. it is my privilege and honour to officiate at this important launch of the longacres and acacia branches of access bank zambia limited. as the central bank and regulator of the banking sector, we are always pleased to be associated with the achievements of the institutions that we regulate, particularly where these developments lead to increased access to banking services as well as convenience for the zambian public. ladies and gentlemen, it is a well known fact that bank branch expansion programmes play an important role in increasing access to the banking services. it is also true that such developments will not only bring banking services closer to those who need them, but also improve competition among banks in zambia while creating jobs for our people. however, there is need to complement physical branch expansion with product innovation programmes that will capture a lot more people in the remote areas of our country. in addition, the crucial role that banks play in financial intermediation cannot be overemphasised. the real challenge is for all financial sector players to play their honest part in enhancing savings mobilization and to effectively channel the public β s savings to support financing of economic activities in all parts of the country. chairperson, it is pleasing to note that despite the recent challenges facing the global economies, access bank zambia limited remains committed to growth through its efforts to expand its branch network and through product innovation. although the bank has been in existence for just under two years, it now has three branches which is a very welcome development. i am certain that this development will go a long way in enhancing access to finance. furthermore, i am reliably informed that the bank is earmarked not
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the introduction of this product here in fiji. we totally support any initiative or pilot project in microinsurance, and hope that insurance companies do take the initiative to explore the potential of this market. i β ll now invite mike mccaffrey, the technical specialist for pfip to introduce the topic for the evening, microinsurance.
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sada reddy : information exchange on microinsurance in fiji speech by mr sada reddy, governor of the reserve bank of fiji, at the β information exchange on microinsurance β in fiji, suva, 15 july 2010. * * * it is a pleasure for me to address the opening of this β information exchange on microinsurance. β first, let me extend a warm welcome to you all. tonight we have gathered leaders from the private and public sectors together in order to discuss an important topic in financial inclusion β microinsurance. from the ceo β s of insurance companies, to rural cooperatives of farmers, everyone here has a part to play in the development of this field, which will help create a more stable and secure fiji. as you all know the reserve bank of fiji continues to partner with key stakeholders of financial inclusion like the pacific financial inclusion programme ( pfip ), to extend financial services and financial literacy to rural and low income people around fiji. this event is another example of this strong partnership and represents some of the wonderful progress we have made together over the last year. the national financial inclusion taskforce turns five months old in three days, and has already been displaying some impressive results. exactly one month ago, nfit brought vijay mahajan, founder of basix bank and chair of the cgap executive committee to provide insight on the status of financial inclusion in fiji. further at the end of last month the asian development bank presented a comprehensive report it completed on the same topic to nfit. the report made obvious some areas in which we need to make reforms, and also offered some clear guidance on paths we can take moving forward. one issue the report exposed was that we currently have no standardized reporting format for microfinance, which means financial transparency is very low. in order to increase the transparency of microfinance institutions, and facilitate better performance monitoring standards, rbf and pfip collaborated to provide financial reporting training to 35 people here in fiji at the beginning of this month. this is an important step to building the local capacity here now, to ensure that microfinance initiatives in the future are both stable and sustainable. further, the nfit working group on financial literacy has designed a strategy and is busy implementing financial literacy into the national curriculum here in fiji, so all our children will have the basic understanding of money management they will need to succeed. scoping is also being done by pfip to conduct a national baseline
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. this has led us to adapt our communication, which is based on the intention to keep rates low for a prolonged period. given the low level of inflation, investors are anticipating a qe package between now and the end of the year. are they mistaken? our new long - term liquidity lending ( tltro ) programme, which will be launched in september, will in particular enable banks to address their major bond refinancing needs. as a result, the banks will not only be encouraged to lend more and at more favourable conditions, but they will raise less funding on the markets. this liquidity will be returned to investors, which they can use to buy other assets. so we shouldn β t be expecting a genuine qe package? last month we launched a package of measures that will be activated in september and december before being renewed on a quarterly basis. barring any new circumstances, we need to take time to measure the effects. when you talk about large - scale asset purchases, which assets do you mean, exactly? to be really effective, bearing in mind the limited size of the private capital market in europe, this type of programme is likely to include mainly government bonds. bis central bankers β speeches the new longer - term loans to banks are conditional on them granting credit. don β t you think they will use them to purchase sovereign bonds as in the past? they could do it to invest their liquidity on a temporary basis before finding a permanent home for it. the banks are aware that it is not wise to be over - exposed to sovereign debt. the link between banks and governments, which is what prompted the sovereign debt crisis, is now monitored very closely. the euro has not really fallen despite the fall in the key interest rates. is this a concern for you? we have noticed that following the new measures, a persistent rising trend has been halted. we are confident that when the new measures are implemented, they will underpin an accommodative monetary policy. the euro area needs such a policy β unlike other major currency areas, which are at a completely different phase of the economic cycle. and this rebalancing is likely to be reflected, over time, in the external value of the euro. a portuguese bank has triggered turmoil on the european markets. are the euro area and its banks still a cause for concern despite all the firewalls that have been put in place? the banking union that the european central bank is actively preparing for will
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of the emu in 1999 the euro area has witnessed an increase of more than 12 million in the number of people employed. the rise in the overall employment rate in the euro area over the last ten years has been mainly due to an increase in the female and older workers employment rates, partly driven by the progress made by structural reforms in some european countries. this improvement in the employment situation is also reflected in the contribution of workers to economic growth. the degree of labour utilisation reflects the extent to which the labour force in an economy actually contributes to the production process and therefore has a direct influence on output growth. for the euro area, labour utilisation grew on annual average by 0. 4 % [ percentage changes ] between 1996 and 2006 6 [ compared with 0. 1 % in the us ] when defined as the total annual hours worked divided by the total population. 7 although this is a very encouraging fact, which shows that the positive employment effect we witnessed over the last ten years has significantly helped us to counteract the growth differential to the us, one has to remain aware of the inferior starting position of euro area countries. these improvements did not cancel out structural weaknesses of labour markets. first of all, despite the important progress recorded, the overall employment rate in the euro area remains low by international standards [ 64. 5 % in the euro area compared with 72 % in the us in 2006 ] and the unemployment rate is still clearly too high [ 7. 9 % compared with 4. 6 % in the us on annual average in 2006 and 7. 1 % to be compared to 4. 5 % in april this year ]. also to be noted in 2006, the number of annual hours worked in the euro area was 1604 compared to 1804 8 in the us. this clearly suggests that there is still considerable room for improvement as regards increasing the level of labour resource utilisation in europe. second, while the prime - age male employment rate in the euro area is comparable to that observed in the united states, when we look at the youth, female and older worker employment rates, the disparities remain important. in 2006 the female employment rate was 56. 5 % in the euro area and 66 % in the us, the older workers employment rate was 41. 7 % in the euro area and 61. 8 % in the us, the youth employment rate was 37. 1 % in the euro area and 54. 2 % in the us. these figures appear to be consistent with an
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accessing capital markets. if anything, net bond issuance by australian banks has been strong over recent months, and to the extent that banks are able to take advantage of this availability to extend the term of their wholesale liabilities, that will further improve their resilience to any funding disturbances that may eventuate. wholesale funding is a little more expensive than it was, though marginal funding costs are still no higher than the average cost of the funding being replaced. on the topic of loan quality, the strengthening of lending standards for housing that has resulted from the actions of both apra and asic was timely. so often over the years, tighter standards tended to come too late and reinforced a downturn after it had begun. these measures have occurred ahead, so far as one can tell, of the point in the cycle when measures of asset quality start to deteriorate. some moderation in house prices in some of the locations where they had been rising most rapidly, while not the direct objective of the supervisory measures, is also, in my judgement, helpful. in the business space, the banking system has fairly modest direct exposure to the falls in oil and other commodity prices, with lending to businesses involved in mining and energy accounting for only around 2 per cent of banks'total lending. more generally, competition to lend to business has increased over the past couple of years and business credit growth has picked up appreciably. overall, this is to be expected and is a welcome development at a time when a missing element of the economic growth story is capital spending outside the mining sector, which appears to remain very weak. one notable trend is the aggressive expansion of some of the foreign banks active in the australian market. here there is a note of caution. if these are taking opportunities left on the table where local players ( or earlier foreign players ) were simply too conservative, all well and good. but one is duty - bound to observe that there is a history of foreign players expanding aggressively in the upswing only to have to retreat quickly when more difficult times come. it is worth remembering that cycle. conclusion it seems to be part of the economic zeitgeist that people are continually looking for the β downside β risks. it hasn't always been so - i recall lengthy periods when the mindset was always to see inflation pressures around every corner. that people seem to find it easier to bis central bankers β speeches imagine the downside today is a mark of the length of the shadow
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are very well aware that price pressures are likely to remain subdued for a prolonged period of time but we expect inflation rates to converge again towards 2 per cent as the cyclical upswing of the economy takes hold. we are at the same time very conscious that, if some of the downside risks do materialise, then β because price pressures are already weak today β we would act decisively again. this view is very strongly shared by the governing council members. what are the scenarios that could lead you to act? there are a number of downside risks that we have identified. they relate to the state of the economy and downside risks to growth, a tightening of global financial conditions with undue spill - overs to the euro area, energy prices, and β last but not least β a fatigue in structural reforms in europe. this would mean that investments do not pick up and that business confidence doesn β t improve further. for me that β s the most bis central bankers β speeches important aspect of all β that structural reforms are being implemented so as to improve growth potential, employment opportunities and overall confidence. however, for this last downside risk, monetary policy has clearly its limits in what it can do. another risk would be that, as a result of the comprehensive assessment, there could be some dampening effect in the short term. that risk is still fairly limited and temporary β and should be compensated for by the expansionary effects over the medium term, which will positively affect confidence in the nearer term. we will be monitoring this risk from a monetary perspective. however, this potential procyclical effect of an aqr should not lead to softening the rules of the aqr. the instruments you use to handle each scenario may depend of the nature of the shock. each instrument has a different impact and any of the measures taken would depend on our analysis of the monetary and economic developments. could you just say a little bit more about the possible impact of the aqr? a strong comprehensive assessment makes central bank action more effective. monetary policy does not work as well if banks β capital basis is thin and insufficient to support lending. in the us, you can intervene directly in the markets to transmit monetary policy stimulus, because the markets play a bigger role in financing the economy. here, the pass - through of your monetary policy is primarily via the banks and it takes time. the comprehensive assessment should shorten the time it takes for monetary policy to impact the real economy. indeed
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commercial banks in a healthy situation was absolutely indispensable in the experience of japan at the beginning of the millennium. in the absence of such action, there is a risk that fiscal stimulus packages will simply trickle away, leaving us burdened with the full load of outsized fiscal liabilities and with no prospect of a sustained economic recovery. how far has europe advanced on these issues? with regard to financial supervision and regulation, the european union is currently preparing important decisions along the lines recommended by the de larosiere report. among other things, this report proposes a new system for macro - prudential supervision in which the general council of the ecb would play an important role. there was certainly no lack of warnings β from many quarters β before the crisis. but no mechanism or institution existed to ensure that admonitions were followed by decisive and swift action. the new european system would assign the task of pre - emptive analysis and grant the necessary authority to put risk mitigation measures into practice. with regard to the appropriate balance between near - term stimulus and medium - term stability, the euro area clearly benefits from its medium - term stability - oriented framework. it is an invaluable anchor for private sector expectations, regarding both fiscal sustainability and price stability. having proved its value in times of crisis, this framework has emerged even stronger than before. with regard to the overall support to the financial sector, i have been deeply impressed by the action plan drawn up by euro area governments and the european commission within a short period of time. this action plan and its swift implementation has confounded the sceptics who had questioned the ability of euro area governments to act in a timely fashion in the event of a major economic crisis. nevertheless, more action is urgently needed to entirely resolve the toxic asset problem. the ecb β s response to the financial crisis let me now turn in more detail to the ecb β s management of the financial crisis. when the first signs of liquidity hoarding by banks appeared in august 2007, the ecb took several measures to protect against a disorderly correction in credit. banks were not only concerned about the volume of liquidity that they could secure at present, but also about the horizon at which liquidity was expected to remain available to them. so the first thing we did was to provide banks with an insurance against future liquidity shortfalls. we lengthened the liquidity horizon for banks by expanding the share of refinancing that was
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be still broadly balanced, with upside risks in the near term mainly stemming from higher than expected oil prices and indirect tax increases. however, downside risks continue to exist owing to weaker than expected developments in economic activity. the monetary analysis indicates that the underlying pace of monetary expansion remains subdued. the annual growth rate of m3 was 2. 5 % in january 2012, up from 1. 5 % in december 2011. loan growth to the private sector also remains subdued. however, its annual rate ( adjusted for loan sales and securitisation ) picked up slightly in january to 1. 5 % year on year from 1. 2 % in december. the annual growth rates of loans to non - financial corporations and loans to households ( adjusted for loan sales and securitisation ) stood at 0. 8 % and 2. 1 % respectively in january. the volume of mfi loans to non - financial corporations declined only slightly in january, following the pronounced decline in december. by contrast, the flow of loans to households in january was positive. following the signs of improvement in the financial environment, it is essential for banks to strengthen their resilience further, including by retaining earnings. the soundness of banks β balance sheets will be a key factor in facilitating an appropriate provision of credit to the economy. to sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. a cross - check with the signals from the monetary analysis confirms this picture. looking ahead, in order to deliver a favourable environment for sustainable growth and to support confidence and competitiveness, the governing council stresses the urgent need for governments to make further progress towards restoring sound fiscal positions and implementing the structural reform agenda. regarding fiscal consolidation, many governments in the euro area are making progress. continuing with comprehensive fiscal consolidation and complying with all commitments remains essential. in this respect, the 2012 european semester should be used to enforce rigorously the reinforced fiscal surveillance mechanism. equally important are structural reforms to increase the adjustment capacity and competitiveness of euro area countries and to strengthen growth prospects and job creation. in this area, more progress is desirable. the governing council strongly welcomes the european commission β s alert mechanism report on macroeconomic imbalances and expects the proposed in - depth country reviews to actively support the reform processes under way in euro area countries. we are now at your disposal for questions. bis central bankers β speeches
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of cabbages. but, when an economy is hit by inflation, all the prices would rise simultaneously, so both carrots and cabbages seem to be equally profitable. this would confuse the producers who would now be unable to make any choice between the two products. hence, the much desired relative price change does not occur, when an economy has been hit by inflation. instead, the absolute prices start to change and such changes do not provide the price signals for allocating resources. fifth, continued inflation distorts the balance sheets of companies, especially the balance sheets of financial institutions. companies may record profits in nominal terms, but a large part of such profits are eroded in real terms by inflation. when profits are adjusted for inflation, companies would find that their performance has not been so spectacular as has been depicted by the amount of rupees they have earned. in fact, their real position has pushed them backward to a lower level. sixth, inflation very forcefully hits the vulnerable groups with a weaker bargaining power. such categories include housewives, students, pensioners and workers whose salaries are not linked to inflation. it would lead to continuous agitation by these groups creating social and political dissension. the country, instead of using its resources for investing in long term growth generating projects, would have to spend its energy and resources for solving such social issues. thus, inflation is the unrivalled public enemy number one. who should take the blame for inflation? it is ironical that practically everyone in the society should take blame for a continuously high inflation in an economy. this is because everyone, even in a very little measure, would have contributed to facilitate inflation to raise its ugly head. it happens when people of a country believe that they can have a higher standard of living without working harder or producing more. inflation in the long run is directly related to the amount of money which people would have for buying goods and services. when that quantity of money is in far excess of the quantity of goods and services, the general price level has to move up in order to facilitate the required volume of transactions. hence, the magic solution for keeping inflation in check has been the production of money exactly in line with the production of goods and services in the economy. any violation of this golden rule, for whatever the justifiable reason, would pave the way for the long run inflation to peep into the system. in this context, the central bank has an inalienable responsibility to take all the
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back towards 2 % and ensure the firm underpinning of inflation expectations. the monetary policy response so how have we responded? our response has certainly been unconventional, in the sense that our measures are unprecedented β but it is far from unorthodox. we have responded in a way that any central bank with a strict price stability objective would do. it has essentially involved three overlapping steps. the first step, as i said, was to lower overnight interest rates all the way to their effective lower bound β including below zero for the deposit facility. but once we reach this point, and if inflation is still too low and more monetary stimulus needed, the central bank has to adopt new instruments to fulfil its mandate. the next logical step to ease monetary conditions is to influence more directly the term structure of interest rates, which we did by introducing forward guidance in july of last year. we have recently re - affirmed our forward guidance that key policy rates will stay low for an extended period of time in line with the subdued outlook for inflation. and in the targeted long - term refinancing operations ( tltro ) programme we have backed this up, by providing term funding over up to four years at a very low fixed rate. as a result, the level of the forward interest rate curve in the euro area is currently uniformly lower than it has ever been β and also lower for instance than at any point in the us since the start of the financial crisis. both these steps have in common that they operate through steering current and forward money market rates. however, once the margin for manoeuvre here becomes exhausted β that is, overnight and near - term money market rates are both at the lower bound β a third step becomes necessary. if further monetary stimulus is needed, central banks need to by - pass the money market and intervene directly in other asset markets to affect, through prices and quantities, the various transmission channels of monetary policy. speaking in amsterdam earlier this year, i clarified the circumstances under which the ecb would need to resort to asset purchases to increase meaningfully the degree of monetary accommodation. in what i called the β third contingency β, i referred to a broad - based weakening of aggregate demand that would threaten our baseline scenario of recovery and / or a loosening in the anchoring of medium - term inflation expectations. and this is the point the ecb has reached with the governing council β s decision to initiate purchases of asset - backed securities ( abs ) and
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shaktikanta das : india β s relations with the international monetary fund remarks by mr shaktikanta das, governor of the reserve bank of india, at the release of shri v. srinivas β s book on " india β s relations with the international monetary fund : 25 years in perspective 1991 - 2016 ", new delhi, 26 july 2019. * * * i am delighted to be part of this event for the launch of shri v. srinivas β s book on β india β s relations with the international monetary fund β. a respected civil servant of the 1989 batch, he has drawn extensively on his hands - on stint as advisor to the executive director for india at the imf during 2003 β 06, combining it with his scholarship and experience in policy making. the book and the function today will promote readership on an important subject and spur more thoughts and analysis. as you are aware, rbi as an institution is closely involved with the functioning of the imf both to project our macro economic interests as well as from the angle of governance of the imf. 2. against the backdrop of previous fund programs with india in 1966 and 1981, the book trains its focus on perhaps the most eventful period of india β s engagement with the fund, beginning with the balance of payments crisis of 1991 and covering the period up to 2016 that brings to the fore the dramatic transition in india β s status with the imf from a debtor to a creditor. in the same period, the indian economy also witnessed a transformation from an inward - looking economy driven by import substitution to an increasingly open and emerging global power in a dynamic world order. this period also witnessed the transformation of the fund from a stigmatised lender of last resort focused exclusively on exchange rate surveillance towards a more central role in the international monetary system after the global financial crisis. over this period, the fund has not only focussed on macroeconomic policies but embraced a wider gamut of issues that covered women β s empowerment, poverty alleviation, sustainable development, fintech and climate change. as dr y. v. reddy has stated in his foreword to the book : β the book fills a serious gap in the existing literature on the subject β¦. β. i congratulate srinivas for his scholarly contribution in writing this book. 3. i thought i would take this opportunity to share some of my own thoughts on the fund and its role in the international monetary system, drawing on my experiences
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more, broader, market participants means a wider range of potential employment opportunities for those keen to join the market. workforce diversity differs across sectors ( figure 4 ) and across firms within sectors. but it also means that service providers need to get better at relationship management, investing more in understanding increasingly diverse customer needs. it is striking, for example, that portfolio managers in asia are twice as likely to be female ( figure 5 ) ; and the gender mix of retail fx trading in europe β a rapidly growing market segment β is approaching 50 / 50 ( figure 6 ). it would be too simplistic to say that service providers need to be as diverse as their customer base. 14 but recruiting from a broader diversity pool and hiring people with different life experiences helps firms understand the mindset of their clients better, improving customer engagement and ultimately increasing returns. https : / / newfinancial. org / wp - content / uploads / 2016 / 06 / women _ in _ uk _ finserv _ 2016 _ final. pdf see for instance, p. 11 of the 2016 cfa report on gender diversity in investment management at : https : / / www. cfainstitute. org / en / research / survey - reports / gender - diversity - report all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx figure 5 : female representation in portfolio management by region15 figure 6 : gender breakdown of retail fx traders16 my final point is on culture. public authorities and firms right across the financial spectrum have put an enormous amount of effort into culture change in recent years. painful fines and enforcement actions have led to intense scrutiny of internal conduct. over 330 firms have signed the uk women in finance charter, committing themselves to supporting the progression of women into senior roles, setting and publishing progress against gender diversity targets, linking senior executive pay to those targets, and appointing a named senior executive to be accountable for gender diversity. 17 and the fx global code that i mentioned earlier has introduced clearly defined standards demonstrating which behaviours are no longer acceptable, rebuilding trust in the market and removing obstacles to open, non - biased recruitment. these higher ethical standards will make the sector more accessible and inclusive, improving the number of opportunities, but also strengthening the appeal of working in the fx market. https : / / www. oliverwyman. com / our - expertise / insights / 2016 / jun / women - in - financial - services
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is highly transparent for the market, e. g. regarding in - house procedures, which is hardly feasible. allow me to briefly outline the german prudential approach : β’ banking supervision is guided by the principle that a bank's management is responsible for its business decisions. therefore, banking supervision in germany does not actively intervene in banking activities, i. e. by making specific recommendations. β’ from the central bank's perspective, i would like to stress that it cannot be the task of a central bank to bail out insolvent credit institutions. the ministry of finance would be responsible for that, if tax revenue were required for assistance measures. but even cases such as financially sound institutions merely having liquidity problems should, if possible, be resolved with the help of private or semi - private lenders before reaching the gates of the central bank. the liquidity consortium bank in germany is such a β lender of penultimate resort β. in addition to the three categories of credit institutions, the bundesbank also has a stake in this consortium bank, and it provides refinancing against collateral. apart from that, the bundesbank has not committed itself in a binding manner to take action in the event of a crisis. it would also be β 2 β desirable if a liquidity consortium bank or comparable institutions were established in other european countries. β’ if it were not possible for the creditworthiness of an institution to be restored either by other institutions or with the help of the deposit guarantee scheme, having that institution exit the market would, in general, be a feasible consequence. however, if such a step posed a serious threat to the stability of the banking system, i. e. if the institution in question were β too big to fail β, a joint solution would have to be found by all the private market players and public bodies concerned. already the number of institutions we must consider to be β too big to fail β has risen in the recent past, and further mergers will cause this number to keep rising. mergers of global players do not only raise new questions in banking supervision. they also pose the risk that size leads to moral hazard effects. for precisely this reason, each crisis must be assessed individually. the key principle is that the government's response must not be predictable and that private market players should be involved in potential rescue operations to the greatest possible extent. β’ the recent financial crises have been increasingly drawing attention to international crisis management. in my opinion, the aforementioned principles should
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be applied in this context, too : there should be no explicit or implicit government guarantees regarding the solvency of the respective banking system ; temporary liquidity crises should be resolved, wherever possible, before government intervention becomes necessary ; the private sector should be comprehensively involved both in crisis management and in loss - sharing. β’ international support measures must always remain an exception and never become the rule. under no circumstances should private investors be able to rely on public bodies to assume their losses in the end. instead, i believe it would be desirable to create an international liquidity safeguarding fund made up of the major global players, which would also have the most to gain from a largely deregulated and sound financial system. this will not be an easy undertaking, since there seem to be few incentives for a bank to assume other institutions'risks. nevertheless this road should be taken in order to strengthen market discipline. i believe that membership in a club comprising the major global players would be a special quality which could actually become attractive for those institutions. besides, it seems quite conceivable that banking supervision might be willing to grant those institutions more selfregulatory powers. the case of the hedge funds ltcm proves that the private sector can find solutions without having recourse to public funds. at that time, the federal reserve bank of new york was only acting as an intermediary to bring national and international financial institutions together, which then provided the necessary funds. the same principle applies both nationally and internationally : moral hazard problems can only be prevented by emphasising and requiring that responsibility be taken by financial market participants, and by limiting the intervention of public bodies. avoiding moral hazard will also increase the stability of the system and improve crisis management. * * *
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delisle worrell : economic and financial services developments in barbados welcome remarks by dr delisle worrell, governor of the central bank of barbados, at the domestic financial institutions conference 2015, bridgetown, 8 september 2015. * * * welcome everyone to the annual one day conference on banking and other financial services for barbadians and residents, organised by the financial services commission and the central bank, in association with the bankers β association and our other partners in the private sector. as you know the fsc and cbb host two of these conferences every year, the other one with a focus on our international financial services. ( the 2015 international financial services conference took place on april 10 ). today β s conference comes at a time when the economy has overcome the foreign exchange challenge of 2013 by the decisive budgetary adjustment taken in that year. the adjustment policy is a textbook example of how economies like ours should respond to foreign exchange market pressure. the keys to success are early detection of the problem and swift implementation of tax increases and public expenditure cuts, sufficient to reduce the demand for imports. with that episode behind us, the focus returns to measures to grow the economy. tourism is our main source of foreign exchange and we have had an encouraging revival in numbers and spending this year. new investment is underway or in prospect in hotels, tourism related services, public utilities and infrastructure. both in tourism and in international business and financial services, government and private interests are taking initiatives to enhance the quality and range of our offerings, to explore new markets and to build the barbados brand as the basis for our competitiveness. quality, branding and smart marketing are also the key elements of the strategy for exports of food, beverages and manufactured goods. we have begun to recognise that power generation through alternative energy has the power to transform our economy. now that we have made a start with photovoltaics, incentives for investment in green energy must be made effective, so that investment accelerates significantly. the economic benefits of expansion of the foreign exchange sectors are spread through the society largely via small and medium enterprises. these enterprises will be the main source of job creation in the near term. smes are also the wellsprings of innovation and of the development of cultural and ict services barbados aims to sell to an international market. government plays a vital role in supporting these growth promoting activities with incentives, and technical, financial and other support. in addition, government has the responsibility to secure fair access to international markets for barbados β
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end with a panel on electronic commerce in which we will discuss the availability of electronic payments facilities and what measures would be most useful in promoting e - commerce. bis central bankers β speeches
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##ilience of non - bank financial institutions and market - based finance. where macroprudential tools are not available, authorities may need to make use of their supervisory powers to mitigate the consequences of the materialisation of financial stability risks and ensure that markets do not become impaired. relevant authorities should also continue to monitor risks closely and enhance supervisory dialogue with supervised non - bank financial institutions where needed. [ - ] by ensuring that their risk management practices adequately reflect the deterioration in the risk environment and by heeding supervisors'guidance and expectations, non - bank financial institutions themselves can further strengthen their resilience and help prevent tail risk scenarios from materialising. for insurers, this means paying close attention to market and liquidity risks, which could materialise in a scenario of increased market volatility and high uncertainty. " ivass is carefully monitoring the heightened risks faced by the market as a whole as well as those borne by individual insurers. enhanced dialogue with supervised undertakings is in place, in line with both our long - standing supervisory approach and the above - mentioned esrb warning. as highlighted in my concluding statement to the 2021 ivass annual report, by ensuring that their risk management practices adequately reflect the risks they face, and by carefully heeding supervisors'guidance and expectations, insurers can further strengthen their resilience to exogenous shocks. they can thus help households and firms to absorb the impact of the current market turmoil and the italian economy at large to get back on track of long term, sustainable growth. 1 ignazio visco, considerazioni finali. 2 ibid. 4 / 4 bis - central bankers'speeches
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of the monetary policy stance. the ongoing deterioration in the global risk appetite as of august led to an excessive depreciation in the turkish lira posing risks on the inflation outlook. in addition, sizeable price adjustments in administered products in october led the short - term inflation to increase above forecasts. in order to not to allow inflation expectations to deteriorate, the cbrt delivered an important tightening in monetary policy since october. accordingly, the interest rate corridor was widened upwards and the amount of the turkish lira funding through one - week repo auctions was adjusted and the average funding cost was raised significantly ( chart 5 ). chart 5. cbrt policies cbrt policy rates and overnight repo rates source : cbrt. cbrt funding and average interest rate source : cbrt. the monetary policy committee believes that the tight monetary policy stance should be maintained for a while to ensure that the inflation outlook is consistent with the medium term targets. moreover, due to the ongoing uncertainties regarding the global economy, we are of the opinion that maintaining a flexible monetary policy will be appropriate. the downward slope of the current yield curve signifies a tight monetary policy stance ( chart 6 ). additionally, loan interest rates have recorded a notable increase since october ( chart 7 ). as a consequence, loan growth rate declined to more reasonable levels towards the yearend ( chart 3 ). bis central bankers β speeches chart 6. chart 7. yield curve * consumer and tl business loan rates * ( percent ) calculated by the return on bonds quoted on the ise * flow data. * * 4 - week moving average. bonds and bills market using the extended nelson - siegel ( ens ) method. source : cbrt. source : ise, cbrt. overall, the last quarter of 2011 was marked by ongoing tightening in monetary and financial conditions and a pronounced deceleration in loans. 2. macroeconomic developments and main assumptions having climbed to 10. 45 percent at end - 2011, inflation was significantly above the target. as you all know, the article 42 of the central bank law stipulates that in the case of a significant breach of the inflation target, we are required to report to the government and announce to the public the reasons behind the breach of the target and the necessary measures to be taken. i would like to announce that we will publish the open letter that will be sent to the government today on our web - site at 12 a. m. now, i will touch upon
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caleb m fundanga : overview of zambia β s banking sector remarks by dr caleb m fundanga, governor of the bank of zambia, on the occasion of the 10th anniversary of bank of china ( zambia ) limited, lusaka, 13 april 2007. * * * β’ his excellency β the chinese ambassador to zambia ; β’ vice - president of the bank of china β head office ; β’ chairman of the board of the bank of china ( zambia ) limited ; β’ managing director of the bank of china ( zambia ) limited ; β’ distinguished invited guests ; and β’ ladies and gentlemen let me first express my sincere gratitude for having been invited to speak on the occasion of the 10th anniversary of the bank of china ( zambia ) limited. ladies and gentlemen, during the last ten years, the performance of bank of china has been satisfactory with total assets steadily increasing to k391. 4 billion in december 2006from k6. 4 billion in december 1997 and total deposits increasing to k294. 2 billion in december 2006 from k2 billion in december 1997. on this basis, bank of china had grown to become the eighth largest bank in zambia albeit operating with only one branch. bank of china ( zambia ) is a 100 % subsidiary of bank of china which went through a successful initial public offer ( ipo ) and has resulted in bank of china being a top tier globally listed bank. over the same period in zambia, the overall financial performance and condition of the banking sector has been satisfactory. the banking sector has maintained adequate capitalization and all the banks met the minimum capital requirements of 5 % for primary capital and 10 % for total regulatory capital. however, in january 2007, the bank of zambia revised the minimum required capital to start a bank from k2 billion to k12 billion. the bank of zambia anticipates increased economic and investment activity in zambia in the coming years and so banks operating in zambia need to stand ready to safely provide the required level of financing. it is therefore the expectation of the bank of zambia that all banks will comply with this requirement by june 2008. ladies and gentlemen, since our two countries, zambia and china, established diplomatic ties 43 years ago, the relationship has been both cordial and beneficial as seen by the growth in chinese investment into zambia in mining, textile, construction, banking, and agriculture. currently, china is zambia's third largest investor, after south africa and the united kingdom. the expected creation of the us $ 800 million special economic zone
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in the emergence of peer - to - peer lenders and technology firms offering banking services. there is also increasing competition in banking services more generally, as firms like paypal become well - established in markets like retail payments that were previously the preserve of high street banks. on top of this, the trend towards more capital market - based financing in europe β supported by the new initiative on capital markets union β will inevitably weaken banks β market power, especially for firms that can easily substitute bank and market finance. and though still relatively small in quantitative terms, we are also seeing a greater role of β shadow banks β in direct lending β asset managers, pension funds, private debt funds β that heralds a shift towards a less bank - dominated financing mix. taken together, this represents a uniquely challenging environment for european banks, and this is visible in their generally weak financial performance : price - to - book ratios are low and profitability is meagre. many banks have a cost of equity exceeding their return on equity. bis central bankers β speeches moreover, there is little chance of the economy coming to the rescue or of interest rates rising any time soon. banks will have to return to profitability in the context of a slow recovery with depressed net interest margins. so, should we be concerned about how banks will fare in this difficult climate? as i already intimated, in my view we need to take a nuanced stance here that balances principle and practice. in principle, the developments in the banking sector should be largely positive for society at large. many banks grew too quickly before the crisis and developed unsustainable business models, so a period of consolidation is both desirable and inevitable. the aim of the regulatory agenda, which is to make banks more resilient and reduce the burden of bank failure on society, is also fully justified. and the ongoing structural changes are welcome. if we believe in the benefits of creative destruction for normal firms, then we must also believe in it for financial firms. innovation that raises competition in retail lending, and leads to better and cheaper services for customers, is a net gain for the economy. so, a priori, i do not see any role for regulators in protecting banks from new operators β on the contrary, innovation should be nurtured and encouraged. equally, the objective of a capital markets union is clearly in the public interest. it would benefit, in various ways, financial stability, access to finance and entrepreneurship. in particular for equity risk capital
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of the indian banks to the synthetic and complex structured products. the adverse effects on the economy were mainly due to sudden reversal of capital flows, tightening of credit availability from the overseas and domestic markets impacting respectively the domestic forex market and liquidity conditions. this resulted in increased pressure on banks to provide credit at a time when their financial resources were already quite strained pursuant to the rapid credit expansion in the previous three years. in the circumstances, the thrust of the various policy initiatives by the reserve bank has been on providing ample rupee liquidity, ensuring comfortable dollar liquidity and maintaining a market environment conducive for the continued flow of credit to productive sectors. 7. what saved the day for the indian financial system was our policy approach of gradual and calibrated integration of the domestic financial system with overseas markets, especially the debt markets β through capital controls β as also well - modulated regulatory policies to contain bank exposure to sensitive sectors, which are more prone to asset bubbles, such as real estate and capital markets. further, ensuring that banks maintained adequate capital and liquidity while containing undue volatility in the forex and debt markets helped in preserving financial stability, while promoting growth. in understanding the indian perspective on banking regulation, it would be useful to look at the regulatory framework prior to the crisis and the measures initiated to strengthen it in the wake of the crisis. regulatory framework β prior to the crisis 8. in devising the regulatory framework for banks, rbi has always kept in focus the financial stability objective. a number of counter - cyclical regulatory measures that are now attracting attention world - wide, were already in place in india even before the onset of the crisis capital requirements 9. the minimum capital adequacy ratio ( crar ) for banks in india at nine per cent is higher than the basel norm of eight per cent. banks are also required to ensure minimum tier i capital ratio of six per cent from april 1, 2010. the current average crar for the scheduled commercial banks is over 13 per cent while tier i ratio is about nine per cent. importantly, tier i capital does not include items such as intangible assets and deferred tax assets that are now sought to be deducted internationally. liquidity buffers 10. indian banks have a significant holding of liquid assets as they are required to maintain cash reserve ratio β crr, currently 5. 75 per cent β and statutory liquidity ratio β slr, currently 25 per cent β both,
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carlos da silva costa : addressing npls at a european level leaving the crossroads address by mr carlos da silva costa, governor of the bank of portugal, in the magazine of the eurofi conference in malta, 5 - 7 april 2017. * * * addressing the high level of npls was one of the ssm β s supervisory priorities for 2016. it remains one of the major supervisory challenges in 2017. indeed, the overall stock of npls in the euro area is relatively high compared with other geographies, albeit with significant heterogeneity. some member states experienced a rapid surge in the npl ratio subsequent to a burst of a real estate bubble. in other member states, the increase occurred later and was widespread across sectors. this is the case of portugal, for instance, where npls grew essentially in the context of the 2011 β 13 recession and are a manifestation of the ongoing economic adjustment process, characterized by a reallocation of resources towards the tradable sector and away from the construction and real estate sectors. the current setting mirrors these differences in pace and drivers, as well as the specificities of national economies : some jurisdictions report double - digit npl ratios, while others report much lower levels. in an integrated market, however, different ratios do not β cannot β mean different degrees of concern. repercussions of high npl levels cross borders : through banks β balances sheet cross - exposures, through economic spillovers in the face of subdued credit supply and hindered monetary policy transmission and inevitably through market perception. the systemic nature of such risks is heightened by widespread low bank profitability, increasing capital requirements and a still incipient npl secondary market. npls are, indisputably, a european problem. and a european problem calls for a european approach. but to what extent? a european approach resides first and foremost on concerted action from all member states. enhanced efforts at national level, especially in what regards bank supervision and marked improvements in the legal / judicial / tax framework β notably to reduce the significant bid / ask spread in npls secondary market β are a necessary condition to address the high npl stock and to build the foundations for a better management of flows. but they are certainly not sufficient. the abovementioned risks of contagion also require targeted and potent initiatives to reduce the npl stock β and this is where a unified european strategy could prove more valuable. a european problem calls for a european approach. but to
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two systemically important banks were resolved and the resulting institution was recapitalised. domestic and external payment restrictions were imposed. and the government has started implementing a sizeable fiscal adjustment, and is carrying out some important structural reforms aimed at improving the functioning of the economy in a durable way. those measures were painful and they have imposed a large short - term cost on the economy and cypriot society. but they have started to pay off. the restructuring and recapitalisation of the banking sector have led to a significant improvement in the health of the financial system. payment flows have normalised, while the domestic payment restrictions have been gradually lifted. the current account deficit of the balance of payments has almost been eliminated, from a peak of 15. 6 % of gdp in 2008. the general government deficit has fallen by around half from a peak of close to 6 % of gdp in 2012, consistently over - performing the fiscal targets in the programme. those achievements are impressive and command respect from the rest of europe. they have helped cyprus to regain access to international capital markets earlier in 2014. looking forward, the successful completion of the comprehensive assessment should not be seen as the end of the efforts to put the banking sector in the best position to serve the cypriot economy. overcoming the legacy of the crisis requires further crucial steps. the quality of bank assets continues to be a cause for concern. at more than half of the total loan portfolio, non - performing loans ( npls ) are the highest in the euro area, and among the highest following any recent banking crisis. addressing the high level of npls is critical. npls are a major hurdle to the provision of credit to the economy, as the attention of banks is diverted to the work - out of legacy problems instead of looking forward to profitable business opportunities. exposure to the fragile property market remains in banks β balance sheets. the new foreclosure framework is necessary for the resolution of the high levels of npls. taking into account last week β s decision of the supreme court, it is now time to make a major push in this regard. fundamental drivers do not fully explain the npl levels observed in cyprus. under the legislation prevailing before the recent reform, there were insufficient incentives for borrowers and lenders to find solutions to restructure debt. the foreclosure process in cyprus could take 10 to 15 years, much longer than in most other countries. in the absence of a credible perspective of the collateral being seized, borrowers β
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christian noyer : the end of the financial dictatorship? introduction by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, to session 5 β the end of the financial dictatorship? β, aix - en - provence economic forum, aix - en - provence, 6 july 2013. * 1. * * firstly, is finance really a dictatorship? this question isn β t new : already petronius, in roman times, at the start of our modern era, asked : β what use are laws when money is king? β the question seems rhetorical, and you can sense in its resignation that the latin writer ( who, incidentally, was born in the nearby city of marseille ) was already worried about the difficulties of establishing the primacy of politics over finance. i ) it is true that the world of finance does have considerable powers : β’ the power to create and support economic development. in its most traditional forms, this is finance β s most crucial role β and power : it is an essential cog in the wheel of economic activity, allocating capital, supplying credit and enabling the management of risk. more than just β the sinews of war β, it can be seen as the lifeblood flowing through our veins. β’ but also a highly destructive power : it was the unchecked sophistication of finance and the excesses this caused that lay behind the 2007 - 2008 financial crisis, a crisis that subsequently transformed into an economic, social and political crisis. limited losses on subprime loans ultimately led to the destruction of millions of jobs throughout the world, and the links between finance and the real economy were cruelly laid bare. ii ) but finance can certainly not be considered β all powerful β : in my opinion, the world of finance only has the political power that state governments choose to give it. β’ granted, the difficulties some countries were facing, notably in the euro area, were exacerbated by financial market pressures β think back to the attacks on italian debt in the summer of 2011. but if the markets were able to exert this pressure, it was because those countries had, in a sense, put themselves at their mercy by demanding that they finance their ever - expanding public deficits, even during periods of growth. β’ in nearly all the crises faced by the euro area since 2009, it is true that market reactions were often brutal and even extreme. but these reactions were frequently
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perception is shared today by a significant number of fellow citizens. the ecb has ensured that the euro is a credible and stable store of value. why then do you think that one in two germans wants the deutsche mark back? once again : the euro has ensured stable prices. in the last 12 years the price level has been more stable in the federal republic than over the previous 50 years. the germans, too, are aware of how valuable it is. why are you in favour of an enhancement of the rescue umbrella? governments need an effective mechanism, which is supportive to ensure financial stability. bis central bankers β speeches germany is the biggest contributor to the rescue of the euro. are we europe β s paymaster? germany is a very important country in europe. the measures to combat the debt crisis are borne jointly by the member states. germany is an important anchor for europe, not only on account of its economic size, but also and above all owing to its own creditworthiness, its sound fiscal policy and its competitiveness. why does europe not just let default countries go bankrupt? first, i would say : debts should be repaid. it is the rule of law. now, the international monetary fund has been around for many years to help marshalling adjustments in countries with difficulties, in order for them to recover their creditworthiness and honour their commitments. europe is in line with this approach, for the sake of the financial stability of the euro area as a whole. many experts believe that greece β s bankruptcy is unavoidable. the greek government has taken measures within a strong programme negotiated with the european commission and the international monetary fund. we expect greece to implement these measures to the letter. compliance with the announced adjustment programme is checked every three months. after ireland, will other countries be taken under the eu rescue umbrella? we are asking all countries to bring their fiscal house in order. this is the best way for them to win back their creditworthiness. have the right lessons been learned from the financial crisis? we are on the road to far - reaching changes in the international financial system, and it is important that these changes are made. together with the international community we are working hard to ensure that banking rules are changed. much has already been done, but a great deal also remains to be done. will the euro still exist in 20 years β time? of course, there is no doubt about that. will more than the current 17 countries then have the currency? today
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jean - claude trichet : interview in bild interview with mr jean - claude trichet, president of the european central bank, in bild, germany, conducted by mr oliver santen and published on 15 january 2011. * * * mr trichet, in one word, how would you describe the state of the euro today? if you allow me two words : credible and stable. will the euro crisis get worse this year? let me be very clear : this is not a crisis of the euro. rather, what we have is a crisis related to the public finances of a number of euro area countries. all governments have to put their finances in order, and above all those governments and countries which have lived well beyond their means in the past. how are the euro area countries ever to reduce the debt, now totalling β¬7 trillion? this year, the budget deficit in the euro area will be half as high as that in the united states or japan. virtually all advanced economies face acute fiscal problems. this is something that is often forgotten. that being said, this is no time for any complacency. let me repeat : the ecb expects the governments in the euro area to make enormous efforts to bring down their debt. some countries have to get their debt under control again. can you understand that many germans are afraid of inflation? the germans are right to be fiercely against inflation. inflation hurts in particular the poorest. price stability is a precondition for growth. but the germans and the european citizens do not need to be afraid : we have delivered and we will deliver price stability. inflation in europe rose to 2. 2 % in december, the highest rate for two years. we are always concerned if inflation rises and are following developments very closely. but the figures for december can be accounted for, above all, by rising energy prices. let me say something about the longer - term figures. in the last 12 years the average rate of inflation in the euro area has been 1. 97 %, and in germany only 1. 5 %. those are better figures than at any time in the 50 years before the euro was introduced. in germany, inflation was 2. 2 % in the 1990s, 2. 8 % in the 1980s and even higher in the 1970s. these figures speak for themselves. but why does nearly everybody have the impression that the euro has made life more expensive? that may have been the case ten years ago. i do not believe that this
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the federal reserve system, august 15 ). publication is also forthcoming in the journal of money, credit and banking. this paper did not specifically address community bank lending, but the authors conducted subsequent analysis of community bank data using the methodology set forth in the paper. bis central bankers β speeches but just as important is what, unfortunately, is not yet getting as much attention in washington. what is not happening β what in fact may be difficult to achieve until this postcrisis work is near completion and the overarching goal of financial stability has been addressed β is a more proactive inquiry and articulation of a positive vision of what kind of financial system we want to foster or preserve. while we focus on the difficult task of implementing a wide range of rules, a number of questions about the industry remain, questions that we must shift our full focus to once the post - crisis work is near completion. for example, is diversity in both the size and type of financial institutions critical to the goals of stability and access to credit? should new technologies that permit mobile payments and mobile banking be fostered through federal policy? to what extent should we be concerned about cyber threats, and are there features of a financial system that can mitigate or thwart such threats? after a crisis caused in part by opaque financial engineering, how do we prevent such excesses without stifling innovation that might benefit customers and the public and foster economic growth? should financial inclusion and financial literacy be regulatory goals, as some have suggested, and what responsibility should banks bear in achieving such ends? what do we do to re - calibrate a multi - layered regulatory response that was partly dictated by the exigencies of a crisis rather than by calculated principles of best design? we have to address these and other questions if we hope to envision a post - crisis financial regulatory system that supports a strong, dynamic, and diverse financial system. this, to me, is the strongest motivation for moving ahead as expeditiously as possible on implementing statutory requirements and international agreements to raise capital standards so that we can begin lifting our vision beyond a crisis response. moreover, as we implement these requirements and agreements, one of the things that the agencies have been considering is how we can do so in a way that does not differentially harm those financial institutions whose actions were not, by and large, responsible for the need to develop a policy response to the crisis. timeliness let β s talk about the importance of timely implementation of
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sarah bloom raskin : let β s move forward β the case for timely implementation of revised capital rules speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the ohio bankers day, columbus, ohio, 6 june 2013. * * * the views in these remarks are my own and not necessarily those of my colleagues on the federal reserve board. good morning and thank you to the ohio department of commerce division of financial institutions ( dfi ) for the invitation to come to columbus to share some thoughts with you on ohio bankers day. in my remarks this morning, i want to describe some features of an appropriate regulatory capital framework for banks β focusing on community banks β and i β ll cut to the chase by setting out what i believe to be two imperatives in finalizing this framework. each of these imperatives has, at its core, the inherent goals of minimizing uncertainty and promoting safety and soundness. these imperatives are timeliness and simplicity. to explain why timeliness β by which i mean timely implementation of final capital rules in the united states β and simplicity are imperative, it helps to set the stage. and to do that, i have to go back in time. way back, in fact, to when i was a child growing up in a small town in illinois, just minutes away from the indiana border. there was no bank in our town, but there was one in the next town over, which was where my family and our neighbors would do their banking. the bank probably had no more than $ 30 million in assets. on saturday mornings, my mother ( who essentially was the cfo of the family financial unit ) would toss me in the back seat of the car and drive over to deposit my parents β paychecks, which, in those days before atms, meant visiting a teller. if there were no checks to deposit, saturday morning would be when my mother would go to withdraw cash for the week. β get in this line, β my mother would order. β we want shirley. β sometimes, we would end with a visit to the vault. to my seven - year - old self, going to the vault was deadly serious, a ritual that began by signing in with a stern - looking man who held the keys. it felt like entering a cave and looking at gold, although in retrospect i suspect my mother was only checking on insurance policies or her passbook savings. after the vault,
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swanson ( 2004 ) find that if analysts ignore risk premiums in federal funds and eurodollar futures, they will estimate longer - horizon policy expectations that β lag behind β actual market expectations, remaining too high when the fed is easing and too low when the fed is tightening. 15 fortunately, this research also shows how to correct the futures data to account for the time variation in risk premiums. once again, we see that some subtlety is required to extract the information available in asset prices. a great advantage of market - based measures of policy expectations, relative to periodic surveys that ask market participants about their expectations, is that market measures are available essentially continuously. 16 these measures thus lend themselves to β event studies β of two types, both of which are employed at the board of governors. the first type analyzes how various events, such as federal reserve statements ; the release of minutes, testimony, or speeches by members of the federal open market committee ( fomc ) ; and macroeconomic news affect market expectations of monetary policy. one simply compares the implied policy expectations before and after the event being studied. we have already considered an example, the effects of the most recent payroll report, in figure 3. analyses of this type provide insights for policymakers into the question of what economic factors the β market, β viewed collectively, is focusing on at a given time. the second type of event study uses market - based measures of policy expectations to analyze the effects of policy changes on the economy. in particular, when the fomc chooses to set the target for the federal funds rate at a value different from that expected by the market, asset prices tend to react strongly. for example, in a recent paper, kenneth kuttner and i ( 2004 ) studied the effects on stock prices of unanticipated changes in monetary policy, as measured by settings of the federal funds rate target that differ from those implied by federal funds futures market. we found that a surprise increase of 25 basis points in the funds rate target typically results in a decline in broad equity indexes of about 1 percent, whereas a change in the funds rate that is expected by the market has essentially no effect on stock prices. 17 our work is just one example of a number of event - study analyses that may well shed light on the effects of monetary policy and the channels of monetary policy transmission. policymakers are concerned not only about market expectations of output, inflation, interest rates, and other key variables, but
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reports suggest that well over half of these foreclosure starts could result in property sales. not want borrowers who have avoided problems through responsible financial management to feel that they are being unfairly penalized. let me turn now to some recent efforts to help distressed borrowers refinance. the fhasecure plan, which the federal housing administration ( fha ) announced late last summer, offers qualified borrowers who are delinquent because of an interest rate reset the opportunity to refinance into an fha - insured mortgage. recently, the congress and administration temporarily increased the maximum loan value eligible for fha insurance, which should allow more borrowers, particularly those in communities with higher - priced homes, to qualify for this program and to be eligible for refinancing into fha - insured loans more generally. these efforts represent a step in the right direction. not all borrowers are eligible for this program, of course ; in particular, some equity is needed to qualify. in addition, second - lien holders must settle or be willing to re - subordinate their claims for an fha loan, which has sometimes proved difficult to negotiate. separately, some states have created funds to offer refinancing options, but eligibility criteria tend to be tight and the take - up rates appear to be low thus far. in cases where refinancing is not possible, the next - best solution may often be some type of loss - mitigation arrangement between the lender and the distressed borrower. indeed, the federal reserve and other regulators have issued guidance urging lenders and servicers to pursue such arrangements as an alternative to foreclosure when feasible and prudent. 5 for the lender or servicer, working out a loan makes economic sense if the net present value ( npv ) of the payments under a loss - mitigation strategy exceeds the npv of payments that would be received in foreclosure. 6 loss mitigation is made more attractive by the fact that foreclosure costs are often substantial. historically, the foreclosure process has usually taken from a few months up to a year and a half, depending on state law and whether the borrower files for bankruptcy. the losses to the lender include the missed mortgage payments during that period, taxes, legal and administrative fees, real estate owned ( reo ) sales commissions, and maintenance expenses. additional losses arise from the reduction in value associated with rep
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senad softi : from crisis to recovery introductory statement by mr senad softi, governor of the central bank of bosnia and herzegovina, at the imf - world bank constituency meeting, sarajevo, 14 september 2022. * * * your excellences, ladies and gentlemen, dear fellow governors. it is my great pleasure to present my statement to the imf - wb constituency meeting. i am very proud that bosnia and herzegovina are a host of such high - level event. i think it is a perfect place for our meeting in this increasingly polarized and divided world. we share the same problems and the same destiny so cooperation, exchange of views and experience are more important than ever. as central bank governor, i will talk on three main topics : 1. central bank of bih and 25 years anniversary 2. our relations with the imf and the world bank 3. and how do we see the future? 1. central bank of bih achievements in its 25 years'history central bank of bosnia and herzegovina celebrate 25 years anniversary this year. we started our operations on august 11, 1997. during this time, under complex and challenging circumstances in europe, the world and in bosnia and herzegovina, the country's monetary stability was maintained as one of the key factors of the macroeconomic stability. we managed to keep our currency board working, serving our macroeconomic stability and society. and it proved to be successful and resilient during good times but also during crises such as financial crises in 2008, pandemic one in 2020, as well as the present one with war in ukraine. during crises time central bank of bosnia and herzegovina provided : enough cash in circulation for banks and citizens, maintained efficient payment system in the country with no delay, lead coordination and communication on the high level among other institutions in the country, and keep timely and transparent public communication. this is how we maintained stability and confidence in the domestic currency - the convertible mark, thereby contributing to overall financial stability of bosnia and herzegovina. all 25 years we have been working in the interest of the state, economy and citizens of bosnia and herzegovina. we have passed a dynamic path, from the establishment of the single currency of bosnia and herzegovina, through the reform of the payment systems and banking sector, to the numerous implemented projects with domestic and 1 / 3 bis - central bankers'speeches international financial institutions, which has established us as a strong, professional and responsible institution. the cbbh is also recognized by relevant domestic and international organizations
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senad softic : we will carefully monitor developments and possible changes media statement by mr senad softic, governor of the central bank of bosnia and herzegovina, on possible impacts of the euro introduction in croatia. statement issued on 7 august 2020. * * * the central bank of bh does not expect major challenges related to the introduction of the euro in croatia, said the governor of the central bank of bh he said that the foreign exchange risk in transactions with croatia will remain insignificant, as long as the currency board regime is in force in bh, or until bh introduces the euro. how much will the adoption of the euro in croatia, sooner or later, have an impact on bosnia and herzegovina, given the border connections and the turnover that still exists? we do not expect major challenges regarding the introduction of the euro in croatia. on the contrary. the exchange rate regime in force in croatia is a managed fluctuating exchange rate. the fact that croatia is in erm ii means, among other things, that the cnb has successfully maintained the exchange rate of the kuna against the euro in a certain narrow spread. therefore, fluctuations in the exchange rate of the kuna against the euro, and consequently against the km, were not strong. this means that foreign exchange risk in the financial system and the real sector, from this aspect, was not emphasized. with the introduction of the euro, foreign exchange risk in transactions with croatia will become negligible, as long as the currency board regime is in place in bh, or until bh introduces the euro. therefore, when croatia introduces the euro, the risks of doing business with croatia will be lower because the foreign exchange risk of changes in the value of the kuna against the euro will be eliminated. also, exchange operations ( currency exchange operations ) will be simpler because the same money will be used in 17 other countries. it is possible that in the medium term, the croatian economy will become more integrated and turn to countries that have the euro. but i repeat, there should be no major challenges. the cbbh will monitor the developments very carefully and take measures in time, if necessary. 1 / 1 bis central bankers'speeches
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michael gondwe : mobile payments and mobile banking in zambia opening address by dr michael gondwe, governor of the bank of zambia, at the 4th annual celpay mobile payments conference, lusaka, 12 september 2012. * * * β’ the chairman of the board of celpay zambia, dr. jacob mwanza β’ the chief executive of celpay international, mr. lazarus muchenje β’ senior government officials β’ representatives of embassies β’ chief executives officers of commercial banks and financial institutions β’ representatives of international business organisations β’ representatives of zambian business organisations β’ distinguished participants β’ members of the press β’ ladies and gentlemen it is an honour and privilege to officiate at the 4th mobile payments conference being hosted by celpay zambia limited under the theme β 1st decade mobile payments, 2nd decade universal mobile banking services β. the theme for this conference is appropriate and timely as it provides an opportunity for participants, and especially stakeholders, to not only reflect on what has been a decade of tremendous achievement and growth, where major changes have occurred in banking due to the introduction of mobile payments and mobile banking, but also an opportunity to gaze into the future and take a pioneering role in charting out how mobile payments can ultimately provide more banking services remotely, and away from traditional banking. it is now accepted that the advent of the internet coupled with the emergence of mobile phones have greatly enriched the banking experience whilst simultaneously serving as the core technologies assisting africans and most of the developed world to start accessing financial services. mr. chairman, i am extremely proud that this mobile banking and mobile payments revolution that has changed the face of banking forever was started right here in lusaka, zambia by celpay zambia, who on april 24, 2002 made the very first mobile payment and in doing so ignited a banking revolution that is bringing affordable, accessible payments and banking services to previously financially excluded societies and families. i would like to congratulate celpay on this momentous achievement and on their 10th anniversary. i trust that as you go through your deliberations over the next two days, this pioneering spirit will be enthused into your discussions and debates and you will chart the way forward for the next decade so that more banking services can be delivered through this innovative channel to even more people. ladies and gentlemen, i would like to take a moment to dwell on the global environment. since 2008 the world has gone through an unprecedented financial crisis, which led to the collapse of some major global financial institutions and
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of the financial sector. this has been demonstrated by the pensions and insurance authority, the insurers association of zambia as well as securities and exchange commission and the capital markets association of zambia who successfully launched the insurance week under the theme " insurance - solutions for a better tomorrow " and world investor week under the theme " learn more about investor resilience and sustainable finance " earlier this month. i am confident that the key messages disseminated during these events will contribute to raising the levels of financial literacy in the country. be assured that i am committed to supporting the implementation of the national strategy on financial education through such campaigns. ladies and gentlemen the world savings day celebrations would not be successful without recognising individual and organizational contributions towards improving financial literacy in zambia. in this regard, awards will be presented under nine categories namely : 1. exceptional individual contribution to financial education, 2. outstanding theme interpretation ; 3. exceptional leadership in financial literacy ; 4. champions award ; 5. most innovative financial education programme ; 6. outstanding financial literacy footprint ; 7. exceptional financial literacy media outreach ; 8. outstanding initiative by an educator ; and 9. best savings product of the year. i am delighted to grace this year's world savings day award presentation and wish the nominated participants all the best. in conclusion, i would like to thank the organisers and stakeholders under our partnership arrangement, in particular, the bankers association of zambia, securities and exchange commission, pensions and insurance authority, rural finance expansion programme and dsik for their continued support to the world savings day celebrations every year. thank you 3 / 4 bis - central bankers'speeches 4 / 4 bis - central bankers'speeches
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quality of regulation and lay the grounds for strengthening the financial sector. our foremost task, as we see it, is enhancing protection of rights of financial services consumers. i will be honest with you β at the nbu we truly hoped that ukraine would get a real protection system guaranteed by laws. but the parliament decided otherwise. however, this is not an excuse to abandon people with their problems with banks and nonbank financial institutions. today, i am very happy to inform you of the following : the nbu assumes responsibility for protection of rights of financial services consumers and establishes a special unit in charge of these issues. first of all, it will enable regulation of the information disclosure system that will deal with information on financial products and services. information transparency is at the core of trust in the financial services and safeguards higher prosperity of the public. we will continue our work on people β s complaints, but from now on it will be more systematic. the chain β complaint β response β changes in regulations β will become shorter and more efficient. this will help reduce the number of misunderstandings between financial institutions and their customers, improve their information awareness, and teach the financial market to address their customers β questions and comments. second. the nbu has assumed the leadership and developed a vision for the future strategy of financial literacy. why does the central bank need it, considering that we are not part of the education system? our goal is to prepare young people for life in the real world full of challenges and rapid changes. today, we encourage everybody present to join in common work based on our vision. i hope in a year we will be able to sum up our first results. ladies and gentlemen, i am confident that many of you have joined the forum with brilliant ideas of how to make financial services more accessible for ukrainians. so, let β s get to work! 2 / 2 bis central bankers'speeches
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nbu is pursuing the policy of steering inflation to a point target of 5 % within an extended policy horizon of up to three years. inflation targeting reduces uncertainty, while flexibility allows us to take current economic conditions into account β including structural shocks caused by the war. flexible inflation targeting has its own distinct features. 2 / 4 bis - central bankers'speeches first, we focus on long - term goals. even in crisis conditions, we adhere to inflation benchmarks, paving the way for a gradual return to full - fledged inflation targeting. second, our monetary policy reacts to the conditions of the day : we have a broader monetary policy horizon under the transitional regime, which allows us to quickly adapt and respond to new shocks, such as energy crises or supply chain disruptions. third, flexible inflation targeting involves the use of a combination of instruments. apart from interest rate policy, we maintain an active presence in the fx market and impose caps on capital movements. as favorable prerequisites emerge, however, we continue our movement towards more market - based mechanisms. we will give special attention today to this third feature, as the use of a combination of policy instruments is not unique to ukraine and is increasingly seen in other small open economies. in fact, the main task of this workshop is to find an effective balance between the instruments used β in particular those based on advanced macroeconomic analysis. the fourth important feature of a flexible monetary regime is a high level of interaction between the fiscal and monetary authorities. the nbu cooperates closely with the government in raising external financing and implementing reforms in ukraine. at the same time, this cooperation implies that authorities must respect each other's mandates. which brings us to the fifth feature : the nbu strives for transparent, active communications with every target audience. we freely explain our decisions to avoid misleading market participants, experts, government officials, investors, and the public. we do this to maintain their trust β the primary anchor for an effective policy. through this approach, ukraine has been able to retain macrofinancial stability while setting the stage for economic recovery, despite continuing to face massive challenges. in addition to internal transformation, an important component of resilience is close cooperation with international partners. for ukraine, cooperation is now an integral element of macrofinancial stability. and at this point i'd like to reiterate our gratitude to our partners for the expert, financial, military, and humanitarian assistance they have provided. today we are one thousand and fifteen
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and behaviours, interlinked with technological advancement ; and deepening european integration. 1 / 4 bis - central bankers'speeches for the bank, the last decade has been one of new policy development and implementation, of changes in our frameworks, of harnessing deeper and more diverse expertise, and of a growth in staff numbers. it has been a period of responding to change in the external environment, with an enduring commitment to our important public service mission. so the leadership challenge for my colleagues and i in the central bank is to act in a way that is balanced and proportionate, effective and fair and delivers the right outcomes. we operate in a market based economy and the central bank wants to see that the people of ireland, europe and the customers served around the world from ireland are served by a well - functioning system. so when the central bank's board, the central bank commission, of which i am a member, set out the central bank's strategy, it did so in a complex environment. we did this with a commitment to build on what has been achieved to strengthen the resilience of the financial system, enhance protections for consumers and investors, and support economic policy development. the decade ahead will see continued rapid change in economies and in the financial system, driven by technology, by changing demographics, the imperative of responding to the climate and biodiversity emergencies, and a more uncertain world. this requires us then to accelerate our own pace of change to deliver on our mandate and to meet the public's expectations of us. and it requires us to do so in a considered and deliberate way. our strategy then has four connected themes, safeguarding, future - focused, open & engaged, and transforming. they represent a renewal and repositioning to ensure that our direction and ambitions are responsive and forward looking. i'll reflect upon them briefly. firstly, safeguarding. the stability of the financial system and the effective regulation of financial services and markets, while ensuring that the best interests of consumers of financial services are protected, is at the core of our mandate and our work. this word, " safeguarding ", sums up the public's expectations of the bank and its staff and so it takes a central role in our strategic execution. secondly, future - focused. a rapidly changing world, economy and financial system requires a shift in our focus, our analysis and our frameworks. a forward looking approach will mean anticipating and responding proactively to changes in the economy and
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initiatives while the bsp has been trying to enhance banks β risk management practices, it is also simultaneously working on improving the risk - based capital adequacy framework as empowered under the gbl of 2000. we responded swiftly once the legal framework was put in place. in march 2001, the bsp adopted basel i - type framework through circular no. 280. this circular provided the guidelines for the computation of risk - based capital for credit risk. the bsp β s risk - based capital adequacy framework was further enhanced with the issuance of circular no. 360 in december 2002. circular no. 360 incorporated market risk into the framework. in 2005, the focus was on preparing the implementing regulations for the eventual implementation of basel ii in the philippines. at the time, preparatory works on basel ii implementation were already at an advanced stage globally. the discussions during international fora had already become complex and rather extended. for our part, the approach to implementation has been more calculated. certain elements of the basel ii approaches such as those pertaining to risk weights for corporates and npls, were gradually incorporated in existing regulations to pave the way for a smoother implementation of the whole new framework in 2007. meanwhile, in response to heightened appetite and growing exposure of banks to structured products and in preparation for the envisaged take - off of the domestic securitization market following the approval of the securitization act of 2004, the bsp pre - emptively issued in 2005 the risk - based capital treatment of banks β exposures to structured products and securitization structures. in support of major policy objectives of enhancing credit access and expediting the clean - up of bad assets from the system, the bsp likewise advanced lower credit risk weightings for high grade corporate debt exposures and micro and sme exposures, but also increased the risk weighting on non - performing loans. this year, the bsp has issued the much - awaited basel ii implementing guidelines for the philippines. the bsp β s task force on the implementation of basel ii has just concluded their series of briefings both within and outside of the bsp in preparation for the parallel run that will be conducted starting end this year until mid next year. unlike the existing bsp risk - based capital adequacy framework, the new basel ii - based framework does not only focus on the computation of the appropriate level of capital given a certain level of risk exposure, but it also highlights
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from qe. moreover, in february we did make an unexpected announcement of a change in the maturity structure of our purchases. this was intended to prevent the bank β s holdings becoming unduly concentrated in any particular segment of the market and had the for a summary of the evidence, including references to related studies, see michael joyce, matthew tong and robert woods ( 2011 ), β the united kingdom β s quantitative easing policy : design, operation and impact β bank of england quarterly bulletin, 51 ( 3 ), 200 β 212. specifically, investment - grade yields fell by around 70 basis points, while sub - investment grade yields fell by around 150 basis points. bis central bankers β speeches consequence of shifting them more towards shorter durations. the subsequent response of yields at different maturities was broadly in line with what would have been expected on the basis of our first round of purchases ( see chart 3 ). the approach is also less suited to analysing the impact on the prices of assets which are less immediate substitutes, such as equities. these are likely to take longer to adjust, as it probably takes a while for portfolio managers to decide how they want to rebalance their portfolios. but, as chart 2 shows, equity prices rose substantially once qe was actually under way β by around 50 % during qe1 and around 10 % during qe2. in both cases, the switch from decline to growth coincides with the commencement of asset purchases. it seems unlikely that all of the recovery in equity prices during these periods was down to our qe. during both phases of the programme, the us federal reserve undertook similar policies, and in recent months the ecb has injected large amounts of liquidity through its two longer - term refinancing operations. equity prices rose in those jurisdictions too. many of the companies in the equity price indices are international in focus and will be as exposed to developments abroad as in their home market. moreover, there will have been other factors affecting equity prices, though during the second programme those other factors β slowing growth and the worsening euro - area situation β seem more likely to have depressed equity prices, rather than boosted them. given that qe is supposed to operate by driving asset prices up, however, it would seem peculiar not to ascribe some part of the rise to our actions. econometric studies4 carried out at the bank imply that equity prices probably rose by about 20 % as a result of the first phase
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, reflecting in part efforts to stimulate domestic demand, that has been offset by a widening in the surplus of the major oil producers as increased revenues resulting from high oil prices are largely saved rather than spent. while one might expect the chinese economy to continue to rebalance towards greater reliance on domestic demand and lower savings, that process is likely to take many years to play out, so an early reversal of that factor holding down yields seems unlikely. another possibility is a shortage of high - quality safe assets, 10 with countries like china accumulating reserves particularly in the form of us treasuries. that in turn will also have increased the demand for substitutes, including the government debt of other advanced economies. but recent events in the euro area have highlighted the fact that the debt of for instance, if an employer is putting aside an additional 15 % of the wage bill to cover accumulating pension liabilities and the price of buying a given stream of future income rises by 20 %, then he would now need to put aside an additional 3 % of the wage bill to meet those obligations. see ben bernanke ( 2005 ), β the global saving glut and the us current account deficit β, sandridge lecture, virginia association of economics, richmond, virginia, 10 march. see ricardo caballero, emmanuel farhi and pierre - olivier gourinchas ( 2008 ), β an equilibrium model of global imbalances and low interest rates β, american economic review, pp. 358 β 393. bis central bankers β speeches some sovereigns is not as safe as market participants thought. that has led to increased demand for the debt of those sovereigns that are still regarded as safe, including that of the united kingdom. how long such a β safe - haven discount β persists depends not only on what happens in this country but also what happens abroad : the demand for one country β s bonds as a safe haven depends in part on how risky those of other countries are thought to be. since the financial crisis and subsequent recession, another factor likely to have contributed to depressing yields is the sharp decline in investment, prompted by the deterioration in the outlook and heightened uncertainty. to date the recovery has been painfully slow, with negligible growth in the united kingdom over the past year and a half. and though there is some variation in the pace of recovery across countries, in general growth has been weaker than after a normal cyclical downturn. in part that reflects the fact
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zeti akhtar aziz : raising the bar for the next phase of growth and development β sustaining transformative momentum welcoming address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 10th ifsb ( islamic financial services board ) summit 2013 β the future of the islamic financial services industry β resilience, stability and inclusive growth β, sasana kijang, kuala lumpur, 16 may 2013. * * * it is a great pleasure to welcome you to this 10th ifsb summit, on the β the future of the islamic financial services industry : resilience, stability and inclusive growth β. bank negara malaysia is most honored to host this year β s summit, which is held in conjunction with the 10th anniversary of the islamic financial services board ( ifsb ). it was here in kuala lumpur 10 years ago that we witnessed the momentous occasion of the ifsb inauguration, that was the culmination of international collaboration among the founding member countries with the support of several key international and multilateral institutions. its landmark establishment in 2002 as the international prudential standard setting body for the islamic finance marked a major milestone in the effort to strengthen the international infrastructure for the islamic financial system, steering the path for its successful integration as a viable component of the global financial system. a decade on, the work of the ifsb in ensuring a cohesive cross - border regulatory framework and the international best practices that are attuned to the intrinsic characteristics and peculiarities of islamic financial intermediation, have served to underpin the development of a sound and stable islamic financial system, ushering in a phase of rapid growth and greater internationalization of the industry. indeed, 10 years since the founding of the ifsb have been a period of significance, during which the islamic financial services industry has grown impressively with its landscape dramatically evolved. this growth acceleration has been accompanied by the widening of its geographical reach transcending its traditional borders in muslim majority countries to the more established financial centres. in addition, islamic finance has evolved as a comprehensive system of intermediation servicing all segments of society, including governments, businesses and households regardless of scale of businesses and income levels. in this decade, islamic finance has also evolved from being domestic - centric to become increasingly internationalized, intermediating funds across borders and becoming a new vehicle that bridges economies and fostering closer financial linkages, particularly among emerging and developing markets. as a form of financial intermediation that
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let me quickly reflect on the state of play of these long - term determinants of growth. concerning labor, the region has been facing constant shrinking of working - age population - 0. 5 % on average, per year in the last nine years, mostly due to unfavorable demographics and emigration. if we take into account estimates that 1 / 3 of the emigration is high - skilled labor, then obviously, this is not only an issue of quantity, but quality as well. in this context, global competitiveness report points to a large human capital gap of the region with an index rank of 62. 2, compared to 16. 7 for eu15. the health crisis emphasized even more the long - standing and burning issues that need to be tackled such as increasing participation rates ( that currently hover around 54 % ), rising life expectancy, skill mismatches, and in particular digital skills and " jobs skills of tomorrow ", although given the structural nature of the problem it will continue to weigh on the medium - term growth dynamics. concerning capital stock, data reveals that the capital stock in the region constitutes only one third ( 35 % ) of the capital stock in the countries of the european union. this calls for raising investment ratio and closing investment gaps. these gaps are particularly wide in infrastructure, looking at the average rank of 70. 5 for the region compared to 16. 7 for eu152. however, there is also a great scope for improvements in ict infrastructure, as a cornerstone of the new economy, in order to accelerate digital transformation of the economies. as for productivity, it remains low, about 1 / 3 of the eu average. in the last five years before pandemics, the average gdp growth of the region was 3 %, with tfp 2 / 3 bis - central bankers'speeches contribution of merely 0. 3 p. p. to increase productivity, the region must tackle structural and institutional obstacles that inhibit efficient allocation of resources. the evidence suggests that institutional reforms in emerging economies are associated with about 1 p. p. a year higher total factor productivity growth compared to " normal " years3. so far, fdis in the tradable sectors are one of the traditional venues that increase productivity that implies not only tapping additional external sources for growth financing, amidst low domestic savings, but also transfer of know - how and technologies. however, pandemics led to significant deceleration of fdis and trade flows, flagging up many vuln
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kristina persson : monetary policy and competition speech by ms kristina persson, deputy governor of sveriges riksbank, at roslagens sparbank β s annual general meeting, norrtalge, 17 april 2002. * * * thank you for the invitation to come here to roslagen sparbank β s annual general meeting. today, i do not intend to discuss current monetary policy, but rather to concentrate on an area that is of great significance for inflation and monetary policy, namely the competitive conditions in the swedish economy. the objectives for monetary policy are clearly stated in the sveriges riksbank act β to maintain price stability and to promote a safe and efficient payment system. the riksbank has further defined the first of these objectives in an inflation target, i. e. that the annual rate of change in consumer prices shall be 2 per cent, with a tolerated deviation interval of Β± 1 percentage point. interest rate decisions influence price trends partly via the effects on resource utilisation, which means that the impact of the decisions has a certain time lag. it is partly for this reason that monetary policy is based on the total assessment of how the rate of price increase will develop one to two years ahead. there are a number of factors in the economy that affect inflation, but over which the riksbank has no control. these include the exchange rate, fiscal policy, international economic developments, potential growth, the functioning of the labour market and competition conditions on the product markets. today i intend to primarily focus on the relationship between monetary policy and competitiveness. let me first of all state that the riksbank has no responsibility for competition issues β our responsibility is monetary policy β and our most important instrument, the repo rate, does not affect competitive conditions on the different markets. however, changes in competitive conditions can have significance for price trends on certain sub - markets. from textbook to reality if there were perfect competition and total information, conditions that only prevail in university textbooks, market prices would be determined by companies β marginal costs. as there is competition between a large number of producers on every market, no company has any power over pricing and all consumers meet the same prices. on a market characterised by perfect competition, more companies would establish themselves as long as the prices exceeded the marginal costs and they could make a profit. as there would be no entry barriers in this simplified, but pedagogical textbook world, and no lack of skilled
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in markets exposed to competition. a number of different markets have been opened up to competition over the past ten years and sweden is in many aspects a model for other countries to follow. examples of markets that have been exposed to competition are the electricity market, post and telecommunications, the capital and foreign exchange market and a large part of the transport sector. the main areas where competitive pressure in sweden is tangibly lower than in the eu and prices are higher are the food and housing sectors ( and the construction sector ). swedish food prices are just over 20 per cent higher than in the rest of the eu, while housing is around 35 per cent more expensive. these areas of expenditure together comprise more than ΒΌ of the cpi basket and are also responsible for a large part of low income earners'total expenditure. the absence of competition in the greater part of the public sector, which constitutes approximately 30 per cent of the swedish economy, entails both a risk of lower efficiency and that a significant part of the economy is not offered alternatives in the form of new business ventures with the growth and th flexibility that small companies can offer. during the 20 century there was a development towards a greater element of competition and use of alternative operating forms within the public services sector. in the central government sector, state - owned monopolies such as the post office, the telecommunications administration and the state - owned energy company have been opened up to competition. examples of remaining state - owned monopolies are apoteksbolaget, systembolaget, swedish railways, svensk bilprovning, svenska spel and statens pensionsverk. the county council / local authority sector has now chosen to expose to competition many of the businesses it runs. this includes waste transport, property maintenance, local bus routes, care of the elderly, cleaning, sns economic council ( 2002 ), unlimited competition, sns - forlag. exposure to competition is here defined on the basis of concentration and other barriers to competition such as companies'actions, regulations limiting competition, entry and exit barriers. price comparisons for housing are difficult. differences in quality and structure between the swedish and european housing markets makes accurate price comparisons difficult. for instance, there is a large supply of rental apartments in sweden, while in other countries there are few of these and they are often greatly subsidised. statistics sweden estimates that the relative price for housing in sweden is probably rather exaggerated. primary healthcare and dental treatment. studies by the swedish association of local
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are still somewhat below our 2 percent objective. but, even here, i think there has been progress. despite the strengthening of the dollar and the decline in energy prices, core pce inflation has been quite stable over the past year β currently running at around 1. 6 percent. that is not a tremendous difference from our 2 percent objective. so why has the united states done a bit better compared to europe and japan in terms of achieving our monetary policy objectives. i think there are a number of contributing factors. first, u. s. household balance sheet repair occurred relatively quickly. this is in part because the housing foreclosure process wiped out many mortgage debts. part was accomplished by a long period of very slow household debt growth. and part was accomplished by the sharp fall in interest rates that helped cut debt servicing costs. second, in the u. s., the banking system was recapitalized and deleveraging occurred quite quickly following the financial crisis. capital from the troubled asset relief program, or tarp, was put into the large banks and soon many of them replaced this tarp capital by raising new equity. the scap stress test in 2009, and the annual ccar stress tests that followed, worked to constrain the rate of bank capital distributions and, thereby, helped to build up bank capital ratios. and, u. s. banks worked hard to clean up their balance sheets. poor assets were managed down or run off, and underwriting standards were tightened. third, the federal reserve was particularly aggressive early on in its pursuit of monetary policy accommodation in order to keep inflation expectations well - anchored. this is a necessary condition, in my view, to maintain the efficacy of monetary policy. if inflation expectations were to get unmoored to the downside, then it becomes more difficult to pursue a stimulative monetary policy. could things have been done differently in the u. s. in such a way that would have led to better outcomes? absolutely. with the benefit of hindsight, we could have and should have been even more aggressive on the monetary policy side. while we made progress with some of the innovations on monetary policy that we eventually introduced β such as the openended purchase of $ 85 billion of treasury and mbs securities per month β it would have been better if we had done this sooner. there is a lot as well that is outside the fed β s purview that could have been done to make the u. s.
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has been much weaker. the need for further efforts in this direction is fully recognised by many institutions, including the ecb, and is at the heart of the european union's initiative to create a truly integrated market for financial services. the vicepresident will address this issue tomorrow in his summing - up. the second ecb central banking conference is structured very much like the first one. today and tomorrow, there will be three sessions covering a number of issues related to the general theme of this conference, and based on research papers and contributions from discussants. a policy panel will follow these sessions. the first session will deal with developments in european banking. the paper by jean dermine takes a look at how the european banking system has changed since the treaty of rome in 1957. it then asks a provocative question : how " real " is the single banking licence? the second session, tomorrow morning, will address the changing character of european finance, and in particular consider to what extent europe is shifting from bank financing to market financing. in their paper, luigi zingales and raghu rajan will assess recent developments in this respect, and impediments to a further shift to a more market - based financial system. our speaker in the third session, jean - pierre danthine, will illustrate the benefits from the discipline that economic theory can impose on our thinking when analysing european equity market integration. he will also present a generalised approach to estimating the importance of country and sector effects in portfolio allocations. one of his discussants, bruce carnegie - brown, will draw on his experience as a market expert to interpret for us recent developments in bond markets. finally, as already mentioned, the policy panel, which will be the final session of the conference, will discuss the role of central banks in the maintenance of financial stability against the background of the transformation of the european financial system. i am particularly pleased to see that we have been able to bring together such highly esteemed policy - makers and academics for this purpose. ladies and gentlemen, i should like to finish at this point and hand over to our first speaker. i sincerely thank you again for coming here today. i wish you a very interesting and stimulating discussion, and i look forward to hearing about the results of the second ecb central banking conference.
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william c dudley : the evolving structure of the us treasury market remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the evolving structure of the u. s. treasury market : third annual conference, federal reserve bank of new york, new york city, 28 november 2017. * * * vic chakrian, ellen correia golay, frank keane, matthew milroy, marcus petersen, liza reiderman, william riordan, and nathaniel wuerffel assisted in the preparation of these remarks. on behalf of the federal reserve bank of new york and our co - sponsors β the u. s. department of the treasury, the board of governors of the federal reserve system, the u. s. securities and exchange commission, and the u. s. commodity futures trading commission β i would like to welcome you to this year β s conference on the structure of the u. s. treasury market. as always, what i have to say today reflects my own views and not necessarily those of the federal open market committee or the federal reserve system. this is the third year the new york fed has co - hosted the treasury market structure conference, which provides an opportunity to deepen our understanding of the changing landscape of the treasury market. many of you remember the market volatility of october 15, 2014, that precipitated the need for additional engagement between the private and public sectors about treasury market structure. the joint staff report on the treasury flash event, the treasury department β s subsequent request for information, and the work that has followed identified a number of changes that have reshaped the treasury market over the last decade. these include the increased electronification of trading, the changing nature of intermediation and liquidity, and the entry of new market participants. in light of these changes, the joint staff report highlighted four important priority areas for additional work. in taking these efforts forward, we have benefited from ongoing engagement with market participants and other members of the public. the first priority is gatherings like this one, where both private and official sector participants come together to study and share views on what the market β s evolution means for its structure and liquidity. understanding how the treasury market is evolving can enable us to be good stewards of its trajectory. a second priority is improving the availability of data on activities in the cash market. after the historic volatility that occurred on october 15, 2014, the official sector had limited
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access to transaction data. this resulted in a months - long lag in the process to gather and analyze data from the event. the introduction this year of transaction data reporting by broker - dealers to the official sector is thus a critical step forward. while closing this data gap for the official sector is an important milestone, work remains to ensure that the scope of collection is sufficiently complete and dynamic to maintain coverage of relevant firms, as intermediaries and liquidity providers evolve. one initiative in this direction is the board of governors β plan to collect transaction data from depository institutions. looking ahead, i expect that a continuing priority will be increasing data transparency to all market participants and to the public in a manner that supports β and does not harm β market liquidity and integrity. part of the successful evolution of the modern treasury market will be adapting to the data needs of its participants. i believe transaction data reporting to the public based on careful study will ensure that the treasury market does not fall behind other markets, will promote a robust and level playing field, and will help safeguard the liquidity characteristics that make the treasury market the benchmark for risk - free trading around the world. the rise of electronic trading, another market feature highlighted in the joint staff report, helped 1 / 3 bis central bankers'speeches to identify a third priority area : the market practices and risks associated with the treasury market. market infrastructure β including the financing of treasury transactions, as well as the clearing and settlement of those transactions β seldom merits investor attention until an element that is vital to smooth functioning of the market goes awry. the history of financial markets is filled with examples β some recent β in which confidence in trading collapsed after market participants no longer knew or could assess the underlying risk of market engagement, leading them to disengage. while such disengagement may be rational from the perspective of an individual participant, it is destructive to the collective market function. a major infrastructure issue for the treasury market has been the clearing and settlement practices of the cash market. this can be opaque, with a majority of trades cleared away from central counterparties ( ccps ). while central clearing is more uniformly used in other segments of the treasury market β such as futures β many market participants elect to clear and settle cash treasury transactions in a bilateral fashion. this process includes many market participants : trading venues, clearing agents, and clearing banks. no single participant has a view of the entire clearing and settlement system. the treasury market practices group (
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crisis of 2008. then too, we faced similar extreme siege conditions of the global financial system, and the challenge of responding immediately and decisively to the crisis within the boundaries of democratic processes. we managed that challenge. the g - 20 β s leadership and the all - out efforts mounted by the imf and other multilateral institutions to do what it takes to pull back the global economy from the brink of collapse and set it on a path of recovery were applauded across the world. 9. there are important differences between the 2008 crisis and today β s situation. i. in 2008, when the world got into a crisis, there was a lot of policy force. in the years before the crisis, the world enjoyed the so called β great moderation β with steady growth in advanced economies and accelerated growth in the emerging economies, and low inflation all around. so we could attack the crisis with the full fire power of monetary and fiscal stimulus. sadly, the policy space for stimulus is much less today. ii. in 2008, the world responded to the crisis in coordination. sure there were differences, but these differences were resolved, and governments and central banks acted firmly, decisively and where required creatively. a similar perception of coordination is lacking today. iii. in 2008, both advanced economies and emdcs were at the same phase of the business cycle. today, they are at different phases of the business cycle. iv. in 2008, the crisis originated in the financial sector and transmitted to the real sector, but the rescue was by the public sector. in 2011, it is the other way round. the crisis is originating in the public sector and hitting the financial sector, and undermining the confidence of the private sector. 10. let me now conclude. there is a great deal of anxiety around the world about the outcome of this weekend β s fund - bank annual meetings and the g - 20 meetings. there are strong expectations that we will converge on a plan of action that will reverse the crisis of confidence. we once again have to show the resolve that we did in 2008 to meet those expectations. bis central bankers β speeches
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subir gokarn : perspectives on financial sector strategy keynote address by dr subir gokarn, deputy governor of the reserve bank of india, at the high level panel on opportunities and challenges for financial services in india and europe, new delhi, 20 september 2010. * * * the inputs of b. m. misra, pallavi chavan and rakhe p. b. in preparation of this address are gratefully acknowledged. i welcome this initiative by the asia - europe business forum to organize a discussion on opportunities and challenges for financial services in our respective regions. virtually all significant debate that is taking place today on financial sector regulation and development, whether in advanced or emerging economies, is placed in the context of the crisis and the role that the financial sector played in it. however, there is a significant asymmetry in that debate, as is evidenced, for example, in the discussions on post - crisis financial regulatory strategies in the g20 process. it is by now fairly clear that significant differences in regulatory frameworks across countries contributed to very different outcomes in terms of both the role of national financial sectors in the crisis and, in turn, the impact of the crisis on the financial sectors themselves. within the g20 process, this has resulted in concerns about a β one - sizefits - all β regulatory response to the crisis. however, on a more constructive note, it has also contributed to the emergence of a collective view on balancing the role of the financial sector in the development process with the need for global co - ordination on regulation in the face of increasing global integration of both financial systems and economies as a whole. this β emerging market perspective β was the subject of a seminar organized in seoul as a prelude to the recent g20 finance deputies meeting in gwangju, korea, earlier this month. i believe that this perspective provides an important foundation for sustaining a meaningful dialogue between advanced and emerging economies, of which this forum is an example. in this brief keynote address, i would like to put forward some thoughts on the broad principles that guide our thinking on financial sector development and which have shaped our contributions to the β emerging market perspective β that i referred to earlier. on previous occasions, i have articulated four basic principles : efficiency, stability, transparency and inclusion. an effective strategy would need to balance the objectives implicit in the four principles by, first, exploiting the complementarities between them and second, recognizing the tradeoffs and, wherever they arise, prioriti
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lower bound in a monetary union like the euro area. at this point, is moving from interest rates to asset purchases as the main instrument of monetary policy simply a linear progression? or does the specific institutional makeup of the euro area mean that there are non - linearities when the lower bound is reached, which in turn make large scale asset purchases of private and sovereign paper an exceptional tool? my own view is that when the central bank is in danger of missing its mandate, and it has a tool at its disposal that is both legal and effective, it has to use it. indeed, the governing council is unanimous that the asset purchase programme is a monetary policy tool in a legal sense. yet at the same time, it is clear that the design of an asset purchase programme including sovereign bonds has to reflect the specificities of the euro area institutional framework with a single monetary policy and many fiscal authorities. and the governing council decision reflects these considerations. we have taken a significant monetary policy step, showing that we have the capacity and determination to deliver our price stability mandate, and that we act in full independence. but we have also acknowledged, through the loss sharing arrangement, the reality that the euro area is not a fiscal union and it is for politicians, not central bankers, to decide if and when it will become one. importantly, the expanded asset purchase programme was also in line with the communication on our reaction function that we introduced last year to help observers understand our strategy in an environment of heightened uncertainty. in a speech in april 2014 president draghi laid out three contingencies that would warrant further policy action by the ecb. and as each of those contingencies materialised, we responded as we indicated we would. in particular, we communicated explicitly that should we enter our β third contingency β β a worsening of the medium - term outlook for inflation and / or a loosening in the anchoring of inflation expectations β we would deploy a broad - based asset purchase programme. it is bis central bankers β speeches therefore no surprise that market participants, seeing much the same economic and financial data as we do, have largely anticipated this move. it is important to keep this in mind as it helps clarify some misconceptions about what drives the governing council β s decisions. long - term nominal interest rates have declined by around 100 bps since the middle of last year precisely because we specified our reaction function and markets understood it. therefore, the argument that asset purchases are unnecessary because market interest
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, her majesty β s government is extending the senior managers regime to all firms in ficc markets and putting them on a common basis with banks and insurers. being a senior manager in finance now brings the responsibility and accountability that befits what the best in the industry have long recognised : finance is a true profession. the bank of england β s role in markets has been comprehensively overhauled. we β re replacing constructive ambiguity with open for business when we provide liquidity to markets. we β re working with others as one bank to develop markets that support financial stability and the real economy. we β ve revamped our governance and we β re holding ourselves to the highest standards of accountability, including the senior managers regime on top of parliamentary and public scrutiny. so a huge amount has already been completed to make markets fairer, more resilient, accountable and effective. these reforms are essential for the uk to remain the leading international financial centre. bis central bankers β speeches they are essential not least because the size of the uk - based market - based financial system could increase from six to nearly 15 times uk gdp by 2050. but the journey isn β t finished. today is a chance to take stock and reflect : not just on our achievements but on what we might have missed, overdone, or simply got wrong. given the complexity and scale of financial reform, it would be remarkable if every measure were perfectly constructed. or if they all fit seamlessly into a totally coherent, self - reinforcing whole. authorities must have the courage to listen, the honesty to admit our mistakes and the confidence to set them right. because we β re determined not to repeat the cycles of the past when bursts of post - crisis reforms would eventually drift into complacency and cohabitation. when the caravan moved on, markets were left unattended to slip slowly into excess and ethical drift. today we want not only to profile progress made, but also to spur a continual process of review and reform. this isn β t just about fixing the fault lines that caused the last crisis, but also about seizing new opportunities from fintech and market - based finance. it's about building truly global markets, in the uk and elsewhere, and the cross - border governance and cooperation they need to function well. it is precisely because we don β t know all the answers that we β re setting questions before us today : - what more needs to be done? are there gaps that
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amando m tetangco, jr : the philippine economy β building resilience in a time of uncertainty speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the economic forum β philippine economic outlook β prospects and challenges β, hosted by security bank, manila, 11 february 2009. * * * distinguished officers and staff of security bank led by its chairman mr. frederick y. dy, president and ceo mr. alberto s. villarosa, other distinguished speakers, guests, ladies and gentlemen : good afternoon! it is my pleasure to join you for today β s economic briefing. i laud the efforts of security bank for making this gathering possible. i welcome opportunities such as this to help shed light on our current economic and financial environment, from the vantage point of the central bank, which i hope is not far removed from how it is in the β real β world. much has already been said and written about the current environment we are in β it has been described as being β a tsunami of historic proportions β to being the β the worst crisis since the 1930s β. every writer or speaker seems to want to paint a picture direr than the one before. today, i don β t want to be included in that list β rather, i hope i can more candidly share with you a balanced ( realistic ) view. let β s begin with what we now know against what is still uncertain. three things stand out. first, we have clearly seen that, on the one hand, the crisis has moved from its epicenter β the us and europe β and has begun to manifest itself in emerging markets, including our part of the world. on the other hand, however, we don β t know how much further or deeper the crisis β reach and breadth would be once the dust, as they say, finally settles. second, so far the policy prescriptions from the major economies have been β unconventional β β untested ( so to speak ) in these unchartered territories we now trek. unfortunately, the very nature of these prescriptions requires patience not only from those in the major economies but also from those at the periphery such as the philippines. the policy prescriptions clearly need time to filter to the markets and achieve the necessary effects. question is, how much patience and tolerance do the markets have? other questions that are perhaps racing in stakeholders β minds are :
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strong economic growth and low inflation. the integration of the financial markets the integration of the european financial markets was one of the advantages expected from the introduction of the single currency. what can be said today? as far as money markets are concerned, a very strong convergence of short - term interest rates could be observed by the end of 1998. after the introduction of the euro, the implementation of the operational framework for the single monetary policy and the new target system have accelerated the creation of a liquid and integrated money market for the whole of the euro area. the speed at which the eleven national money markets have integrated into one single large market is remarkable. the target system has allowed for a swift and efficient transfer of funds within the monetary union, thus reducing interest rate differentials between countries. the elimination of short - term interest rate differences was in turn necessary to enable the eurosystem to conduct its monetary policy in an efficient manner in the entire euro area. the success of target cannot be denied, not only from a technical point of view, but also from a commercial one as it has for the moment captured about 70 % of the total volume of large value cross - border payments in the euro area. although it started earlier, the process of integrating bond markets will take longer. the impact of the single monetary policy is indeed slighter on these markets and national characteristics - in particular different tax regimes - still remain important. however, the disappearance of the exchange risk, the harmonisation of market practices, the redenomination of government debt into euro at the beginning of the third stage of emu and important issues of government bonds in euro have contributed greatly to accelerate the process. yet this has not led to the disappearance of interest rate spreads between countries. the european bond market is, as you know, largely dominated by the national treasury departments which still place the major part of their issues on their domestic markets. while one has witnessed a decreasing spread between interest rates as a result both of the commitments made within the stability and growth pact and of the disappearance of the exchange risk, differences due to the size, liquidity and to the specific risk of each sovereign issue, however, still remain. though the european market of government bonds still suffers from a certain segmentation, the corporate bond market has already at present exceeded all expectations. during the first six months of this year, european companies are said to have issued more than double the amount registered in 1998. moreover, the average size of these issues has increased considerably. this
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reason that wolfgang schauble, germany β s finance minister, also recently reiterated just how important it is for the european commission to β strike the right balance between its political function and its role as guardian of the treaties ". realigning action and liability is not an end in itself. it is about creating the right incentives to encourage member states to do all they can to bring about sustainable growth and employment. ultimately, this also strengthens identification with the european project, as the german council of economic experts recently pointed out. 7 / 8 bis central bankers'speeches 4. conclusion ladies and gentlemen, it is important to β focus all efforts on preventing inflation, β as ludwig erhard wrote in his book β wohlstand fur alle β in 1957. it is in line with this principle that the bundesbank has done its utmost to ensure price stability over the last 60 years. if necessary, it is not afraid to ruffle a few feathers if it sees risks to stability. this has not damaged our reputation among the general public, as proven not only by surveys, but also by the widespread support for us on occasions such as our recent open day in frankfurt, for example. on our anniversary, federal president frank - walter steinmeier, too, attested to the public β s deep - seated confidence in the bundesbank β and not just in the area of monetary policy, but in our other key tasks as well. we will continue working to justify this confidence. of that you can be sure. 8 / 8 bis central bankers'speeches
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the first is our assessment of the inflation outlook in light of the incoming economic and financial data. this assessment will be informed primarily by our staff macroeconomic projections, on which all data are incorporated in a coherent manner. in this regard, the staff march forecast pointed to a weakening of activity in 2023, with real euro area gdp expected to grow by 1 % in 2023 ( compared with 3. 6 % in 2022 ). this scenario is somewhat more optimistic than that of the previous projections ( published in december ), reflecting better than expected recent economic data and the fall in the cost of energy, so that real income losses are lower. growth is expected to pick up, to 1. 6 %, see β an overview of the ecb β s monetary policy strategy β. in both 2024 and 2025, based on a robust labour market, improving confidence and the recovery of purchasing power. however, these growth rates are lower than projected in december owing to a stronger tightening of financial conditions, including a larger appreciation of the euro exchange rate. and, in any case, the accumulated growth path expected now for 2022 - 2024 is significantly lower β around 2. 5 % lower β than that projected in december 2021, before the war in ukraine, reflecting the material deterioration of euro area terms of trade. on inflation, the baseline scenario is one of gradual convergence of inflation to our 2 % target. after peaking at 10. 6 % in october last year, hicp declined to 6. 9 % in march this year, according to the flash estimate, on the back of lower energy prices and base effects. by contrast, food price inflation and underlying inflation ( excluding energy and food ) have continued to rise, surprising on the upside and posting high rates in march ( of 15. 4 % and 5. 7 %, respectively ). headline inflation is expected to remain high for the rest of 2023, albeit on a downward path that will take it to 2. 8 % in the last quarter of the year. this drop in inflation is mainly explained by the energy component, while underlying inflation is expected to remain elevated. specifically, the ecb projections point to inflation averaging 5. 3 % in 2023, before decreasing to 2. 9 % in 2024 and to 2. 1 % in 2025. this downward trend would be underpinned by the gradual disappearance of upward pressures from the reopening of the economy, previous supply - side shocks ( supply bottlenecks and
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bank of japan β s may report of recent economic and financial developments1 bank of japan, communication, 20 may 1999. the bank β s view2 japan β s economy, at present, has stopped deteriorating, but clear signs of recovery have not been observed yet. with regard to final demand, business fixed investment has been on a downward trend, and recovery in private consumption continues to be weak on the whole. net exports ( exports minus imports ) are leveling off. meanwhile, housing investment has been recovering. public works seem to be increasing rapidly against the background of the large increase in orders in early spring. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production has stopped decreasing. the deterioration in corporate and consumer sentiment seems to have ceased due to this economic situation as well as the improvements in the financial environment, including the subsidence of the public β s anxiety about the stability of japan β s financial system and the recovery in stock prices. however, corporate profits remain weak, and employment and household income conditions are deteriorating as the unemployment rate has been marking a historical high. conditions in corporate finance continue to improve, but firms β concern about the availability of funds in the future has not completely disappeared yet. as for the outlook, with the progress in inventory adjustment gradually paving the way for a recovery in production, the government β s economic measures and the monetary easing by the bank will continue to underpin the economy. improvements in the financial environment are also expected to exert positive effects on the economy gradually. with respect to corporate activities, however, firms have started taking steps toward full - scale restructuring, facing the continued decline in profits. although such corporate restructuring is expected to improve productivity, it may, in the short run, reduce fixed investment and discourage household expenditure through the resulting deterioration in employment and income conditions. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand. overall economic developments require careful monitoring in consideration of the above points. it is also important to promote structural reform, while preparing an environment that facilitates such reform, in order to assure the economy β s sustained growth in the medium term. with regard to prices, reflecting the large output gap, domestic wholesale prices are on a downtrend, and corporate service prices are weakening. import prices are rising due to the bottoming out of international commodity prices such as crude oil prices. consumer prices remain weak. in relation to price developments in the future, distinct narrowing in the output
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gap is still unlikely for the time being even though the economy has stopped deteriorating. this report was written based on data and information available when the bank of japan monetary policy meeting was held on may 18, 1999. the bank β s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on may 18 as the basis of monetary policy decisions. furthermore, the decline in wages is likely to continue exerting downward pressure on prices. under such circumstances, prices are expected to remain weak. in the financial markets, the overnight call rate has stayed at nearly zero, and confidence about the availability of liquidity is growing among many financial institutions. interest rates on term instruments are declining further, reflecting the market β s view that monetary easing will continue for some time. moreover, the japan premium has almost disappeared. long - term interest rates, on the whole, have declined against the background of no clear signs of economic recovery and the decline in term interest rates. stock prices have been firm reacting to the further rise in u. s. stock prices since march. the amount outstanding of funds in the call money market has been gradually decreasing. to date, this has not led to any difficulty in funds settlement, but close attention should be paid to future market developments. with regard to corporate finance, credit demand for economic activities such as fixed investment remains weak. firms β moves to increase their on - hand liquidity in the face of difficult fund - raising conditions are settling down. as a result, credit demand in the private sector has weakened further. private banks have basically retained their cautious lending attitude. however, they are no longer constrained by severe fund - raising conditions and insufficient capital base. under these circumstances, major banks have started to extend loans more actively than before, especially for projects involving relatively small credit risks, and their lending stance is gradually becoming positive. as a result of these developments, credit conditions, which tightened previously, have eased somewhat. the situation continues to warrant careful monitoring on the extent to which private banks will ease their lending stance, and how this change will affect firms β propensity to invest.
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recession of the last 18 months has been the deepest since records began in 1961. real gdp fell by 5. 1 % in 1998 after rising by about the same percentage in the previous year. unemployment has risen to 6. 2 %, a level unprecedented for hong kong. this was accompanied by plummeting asset prices that at their lowest had fallen by 50 % in the case of residential properties and 60 % in the case of the hang seng index. in an economy as used to prolonged economic growth and full employment as hong kong and so heavily dependent on asset values, it is not surprising that this translated into a sharp rise in bad debts for the banks. the bad debt charge for our locally incorporated banks in respect of their hong kong business more than tripled in 1998, albeit from a low base. non - performing loans ( measured by those that have been classified as substandard, doubtful and loss ) rose from around 2 % at end - 1997 to 7. 3 % at the end of last year. this is a sharp increase but it is important to put it into regional perspective. the equivalent figure for non - performing loans in thailand at present is around 46 %. the picture in indonesia is even worse. hong kong has therefore fared better in respect of credit risk than its neighbours. it has no doubt been helped in this by the solid regulatory framework in hong kong and the infrastructure of business laws that makes it relatively easy to take and realize collateral and to put defaulting borrowers into liquidation. banks are also free to carry on their business without political interference. i believe that hong kong has also benefited from its openness as a financial centre, though this can also have its drawbacks. major international banks are allowed to play a full role in our banking system, including in many cases participating as full retail banks. this has allowed cross - fertilization of talent, systems and products between the local and foreign banks. finally, another point in hong kong β s favour is that it had already gone through a banking crisis in the early 1980s, in which abuses such as connected lending had played a part. this provided a stimulus to major reform of the banking law and to improvement of supervisory standards, a process that has continued to this day. we should not however allow the relatively better credit performance of hong kong during the crisis to lull us into a sense of complacency. much of the blame for the rise in bad debts in hong kong can indeed be laid at the door
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still not much new lending going on - in hong kong domestic lending has fallen for ten months in a row. the main priority for many banks is therefore to limit the damage from loans already on the balance sheet. to be successful in this objective requires a number of factors to be in place at both the individual bank and sector levels. in individual banks, there must be an effective system of credit monitoring and loan classification to detect problem loans at an early stage and to enable corrective action to be taken as soon as possible. as i have already indicated, the shift from relationship banking and the unwillingness of borrowers to supply sufficient information have been hindering factors in hong kong in enabling banks to pick up early warning signals. once problems have been detected, it may be sufficient in the early stages to leave the handling of these with the account officers. but when the problems are too deeprooted, there will usually be advantage in transferring problem loans to a dedicated loan recovery unit where specialist expertise attention can be devoted either to restructure the loans or to take recovery action and liquidate any collateral. this is the theory, but it is easier said that done to find loan recovery specialists when many bankers in the region have not experienced a prolonged period of economic decline. outside experts, for example from the accounting firms, can help to fill some of the gap. but it is also essential that the banks build up their own resources and provide more training to their own staff on how to deal with problem loans. at the sector level, it is necessary to have an effective insolvency regime to ensure that nonviable companies can be wound up in an equitable manner before they have the chance to build up even further losses. however, liquidation should generally be a last resort and there should be an alternative to insolvency that allows distressed, but commercially viable, companies to survive as going concerns, thus preserving employment and productive capacity. this requires a framework that encourages negotiation and compromise between distressed borrowers and their creditors. the objective should be to agree a standstill on debt payments and a moratorium on legal proceedings to provide a breathing space during which negotiations on a debt restructuring can take place. in hong kong, the association of banks has issued non - statutory guidelines for the conduct of debt workouts. these are based on the so - called london approach to workouts that was developed by the bank of england. other countries in the region have also used this as a model for dealing with corporate restructuring
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the penalty that may be imposed for reserve deficiencies was relaxed and subjected to a reduced maximum limit until 31 march 2021. also, the notification requirements related to changes in banking days and hours and temporary closure of bank units and supervised financial institutions offices / service units and submission of documentary requirements for type c licenses were further relaxed. moving forward, we reaffirm our continued partnership with ctb in the pursuit of remaining financial sector reforms. 1 / 3 bis central bankers'speeches our β test and learn β approach or regulatory sandbox remains useful in dealing with increasing digital financial innovations in the market. one of the significant outcome of our β test and learn β approach that has graduated to full implementation involved a pioneering rural bank that engaged a cloud service provider for its core banking system. indeed, one critical transformation already taking place in the banking industry is the move towards going β cloud - based β as more than 20 financial institutions have transitioned towards hosting their core banking solutions in the cloud. however, there has been an uneven take up of cloud banking among the industry as rural banks represent a disproportionately larger share of cloud adopters. this is something that we hope to understand more through discussions with the industry. for thrift banks, this should mean two things. first, shifting to the cloud must be seen as an opportunity, as even rural banks have maximized the benefits of scalability of financial services, from mobile and electronic banking to near field communication ( nfc ) payments. second, thrift banks must embrace the change of mindset from a β brick and mortar β thinking to embracing the promise of digital transformation in providing crucial banking services to its clients. moreover, smaller thrift banks can take advantage of these available digital technology to lower operational costs. the opportunities are limitless, but risks, business synergies and contribution to growth have to be carefully considered. the covid - 19 pandemic has also accelerated the digitalization of financial services to support resilience. innovative solutions could support the reopening of the economy while minimizing resurgence of the virus. widely reliable and affordable access to internet will be critical to ensure business continuity under the new normal. the shift to e - commerce, digital financial services, digital public service and social protection delivery which started during the lockdown will likely to continue even after the relaxation of lockdowns. under its digital payments transformation roadmap, the bsp aims to shift at least 50 percent of retail payment transactions to digital, and
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it was because of this that led the bsp and the monetary board here to the new clark city. it is worth noting that the bsp follows a very rigorous set of criteria in selecting sites for its facilities. these standards β which include everything from lot configuration, site conditions, to infrastructural support β are intended to ensure that the bsp β s operations are suitably located. after an exhaustive canvass of sites north and south of metro manila, it is crystal clear that the new clark city is the only one that met the requirements of the bsp β with flying colors, might i add. in my previous stint as budget secretary, i was fortunate to have a hand in crafting and implementing the β build, build, build β program of the government, which is aimed to usher in a β golden age of infrastructure β in the philippines. one of the key elements of that program is the establishment of a new government center on this very location. under the leadership of bcda president and ceo vince dizon, the new clark city is rapidly transforming itself to a resilient metropolis that will drive growth momentum in β paspas capas β 1, tarlac, as well as in other nearby provinces in central and northern luzon. 1 / 2 bis central bankers'speeches with the national government administrative center situated just around the corner, as well as the continuing influx of government institutions setting up shop within the complex, the new clark city is also clearly geared towards responsive governance and public service. today, as governor of the bangko sentral, i β m gretly honored to lay the groundwork for bringing one of the country β s most trusted government institutions to this most vibrant growth corridor. in the memorandum of understanding which we are signing today, the bsp and bcda agree to work hand - in - hand to facilitate the relocation of the bsp security plant to the new clark city, on the plot of land just outside of this tent. once the details of relocation are threshed out, bsp and bcda will formalize its respective commitments under a new memorandum of agreement, which will serve as the implementing document for this purpose. from there, we will work unceasingly to complete the development within the shortest timeframe possible, at the highest level of quality and workmanship. we will explore the various modes of procurement available in order to leverage local and international expertise in the design and construction of the new spc. speaking
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cited are the growth rate of gross national product, the unemployment rate and the rate of inflation ( for which there exist several different measures ). all of these statistics have been coming up roses for some time β simultaneously. the gdp ( in real terms, after inflation ) has been growing continuously for eight years and this long expansion, instead of petering out, has accelerated in the last couple of years. real gdp grew about 4. 5 percent in the first quarter of this year and has grown about 4 percent a year for the last two years, despite the negative impact of the world financial crisis that began in asia in early 1997. millions of new jobs have been created in the last few years ; and unemployment, now at 4. 3 percent, has been at or below 5 percent for over two years. not long ago, most economists thought growth this rapid and unemployment this low would inevitably produce inflation. however, inflation has remained remarkably subdued, and, indeed has continued to decline over the last several years. all of this means rising standards of living and greater economic security for most americans. moreover, the strength of the economy has been spread broadly across all regions of the country. a few areas with deep - seated economic problems, such as northern minnesota, still lag, and parts of agriculture are suffering severely from the downward pressure of weak world demand on commodity prices, but growth in other sectors has taken up much of the slack. low inflation has reduced expectations of inflation, lowered long - term interest rates, encouraged investment and housing and made planning ahead easier for everyone. moreover, in the last couple of years, one of the discouraging aspects of this long expansion finally seems to be reversing. through 1996, the benefits of rising prosperity were flowing to those with skill and education, people already doing relatively well. those at the low end of the skill and income ladder were falling further behind. recently, however, very tight labor markets have meant that even unskilled and less educated workers have enjoyed higher real earnings, poverty rates have begun to decline, and even the bottom 20 percent of households have had a significant increase in their standard of living for a change. the high performance of the economy does not just mean more material possessions for most people, although it certainly does mean that. it also means more enjoyment of and support for the creative side of life β art, music, theatre, dance β and more public resources for improving streets, parks and schools, cleaning up pollution and preserving natural beauty
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the same time, the u. s. dollar has been strong, especially in relation to currencies of emerging market countries. in part, the strength of the dollar reflects the fact that our economy has been performing so well and has offered international investors profitable opportunities along with a safe haven from political and financial turmoil. the strong dollar has made imports cheap and has helped keep inflation low - to the benefit of u. s. consumers and the distress of some u. s. producers. we can β t count on low world commodity prices or a strong dollar continuing far into the future, and both have their downsides for us and for others. some features of the global economy, however, seem likely to endure. the events of the last two years come on top of a huge expansion of global trade, competition and productive capacity β all of which have given american businesses less control over prices in the face of rising costs and benefited american consumers through low prices. moreover, although we often think of β global competition β as being associated with internationally traded goods, many of the same forces that have made the global marketplace increasingly competitive β especially faster, cheaper transportation and the revolutionary changes in communications and information management β also operate to make domestic markets broader and more competitive. as buying, selling, and comparing prices at a distance has become easier, producers of all kinds of goods and services have found themselves in a more competitive environment with less independent pricing power than they used to have. the increasing competitiveness of the u. s. economy β and that of the rest of the world β seems likely to continue to reduce inflationary tendencies in the future. further deregulation would foster this competitiveness, as would further lowering of trade barriers. conversely, reregulation or a relapse into protectionism would tend to negate the procompetitive and antiinflationary trend. fierce national and international competition has its cost in uncertainty, disruption of lives and settled patterns. it demands flexibility and adaptability of businesses, workers and communities. it requires a willingness of workers to learn new skills, to take chances, to move to new jobs and new places. it requires nimbleness, flexibility and risk taking on the part of business. it requires communities to be adaptable, to make efforts ( not all of which will be successful ) to diversify their economic bases and to attract new jobs and residents when existing ones move on. it requires government to be imaginative and creative ( words we don β t
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place? is the swiss banking system more resilient to crises today? please allow me to give you our take on this. i will first look at those banks with a domestic focus before moving on to the big banks. switzerland β s domestically focused banks were not at the centre of the financial crisis, and all in all the new regulations are also likely to have little effect on them ; their liquidity and capital buffers are mostly well above the regulatory minimum requirements. the stress tests that the snb regularly conducts to assess risks also show that the banking system is largely well capitalised. notwithstanding this, the risk appetite of domestically focused banks has increased again in recent years, not least due to the low interest rate environment. there are also imbalances on page 6 / 8 the mortgage and real estate markets. it is therefore important that the domestically focused banks are aware of the risks they have assumed and ensure that they remain well capitalised in the future. and what about the two big banks? both have clearly strengthened their resilience in recent years, and are on track to meet the required standards within the stipulated time frame. they have continually improved their capitalisation with respect to maintaining operations as a going concern and ensuring their loss - absorbing capacity in the event of a restructuring or orderly wind - down. 11 they have also put in place key organisational measures to increase their resolvability. for example, both have set up swiss subsidiaries that would continue their systemically important functions in switzerland in the event of a crisis. the big banks have therefore already made substantial efforts on this front. what still remains to be done? first, the process of building up capital to absorb losses in a resolution scenario must be completed, and this will be achieved in the near future. second, by the end of 2019 the two big banks have to demonstrate that in the event of a crisis, they would still be able to maintain the functions that are systemically important for switzerland. in other words, the swiss entities that cover the systemically important functions must be sufficiently independent of the remainder of the bank, both operationally and financially. in addition, plans for a restructuring or wind - down of the entire bank ( at the global level ) have still to be finalised. looking at the domestically focused banks and the big banks together, we can say that the resilience of our banking system as a whole has increased significantly. we are convinced that our banks are better able to withstand a crisis today than
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between 1. 5 % and 2 %. this is lower than the growth rate we have observed since 2006. measuring the output gap is tricky, however, because certain favourable factors, such as the influx of skilled labour, the deregulation of certain domestic markets and increased global competition might have pushed up potential gdp growth. having said this, however, we should not overlook those factors which have the opposite effect. for instance, equipment investment has receded, which has a dampening effect on potential growth. moreover, even if capacity utilisation as a whole is not excessive, bottlenecks might occur in certain sectors of the economy. and, above all, experience has shown that the output gap is often underestimated during phases of growth. consequently, the risk of underestimating the output gap may now be greater than that of overestimating it. the third risk is associated with the future development of the swiss franc. as its exchange rate is determined by the market, it is subject to fluctuations. movements in the export - weighted swiss franc index alter the degree of restrictiveness of our monetary policy. normally, during periods of rising interest rates, this index tends to increase, thereby amplifying the effects of monetary policy by mitigating price increases in imported products and slowing the expansion in economic activity. this reaction pattern was not observed during the past two years, which could put pressure on interest rates. monetary policy decision before commenting our decision today, i would like to point out the changes that are shaping our current environment. in december 2005, when the present cycle of interest rate hikes began, we were concerned with the normalisation of the interest rate level β at the time the libor was at 0. 75 % β while allowing the economy to reduce its level of unused resources. our concern now is to ensure that monetary conditions are such that the healthy state of the economy does not jeopardise price stability in the medium term. we are still observing that the competitive pressure in the market is high, the labour market very flexible and that movement in the monetary aggregates is moderate. however, my analysis of the current situation has demonstrated that the inflation outlook has deteriorated in different respects since our last assessment : higher oil prices will have an impact on the consumer price index ; economic performance, which is better than expected, will result in an improved utilisation rate and increase pressure on prices and, finally, a renewed weakening of the swiss franc has neutralised the
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ratio of per capita bank deposits to income from 15. 8 per cent to 71. 2 per cent and the ratio of per capita credit to income from 12. 2 per cent to 51. 3 per cent over the period from 1972 to 2022. branches across rural, semi urban and urban areas have contributed to this mammoth financial intermediation. 11. patterns of financial intermediation are also shifting. industry has been a major recipient of bank credit but its share in total credit has come down from 60 per cent to 27 per cent during 1972 - 2022, broadly equal to that of services and personal loans. in the personal loans segment, borrowings by individuals now account for over 40 per cent as compared with less than 10 per cent share in 2000. this has ushered in to a unique phenomenon - the share of smaller loans β of up to rs. 10 crore β in total loans has increased to 60 per cent in 2022 from 45 per cent in 2014. this transformation has brought in its trail of associated changes in assessment, risk management and pricing of loans. on the lending side, a feature that has impacted the banking system is the reduced role of term lending institutions and emergence of corporate treasuries with new avenues for short - term financing. this has resulted in ( a ) increased reliance on banks for long - term funds ; and ( b ) gradual reduction in the share of working capital in total loans. banks'asset portfolios have become elongated, with term loans accounting for 65 per cent of total loans. 12. in conclusion, i would say that the impetus for transformation has come calling as india β already the fifth largest economy of the world β prepares to be among the fastest growing economies and an engine of global growth ( 2nd largest contribution to global growth in 2022 ). by 2025 - 26, india will match germany and become the fourth largest economy of the world. by 2027, it will surpass japan and emerge as the third largest economy of the world. india's population will become the largest in the world next year and it's youngest. it will demand the world's best financial intermediation services. banks will have a critical role in this transformation. information will be the plumbing in this evolving architecture. as we consolidate the gains of the past and move ahead to address new challenges, it is going to be up to us β all stake holders β to keep the bsr system robust, timely, comprehensive and open to change. today '
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s conference provides us an opportunity to prepare for this untravelled road that lies ahead. thank you. speech delivered by michael debabrata patra, deputy governor, reserve bank of india in the conference on'bsr @ 50'organised by the bank on october 28, 2022 at mumbai. prescient comments from om prakash mall, valuable inputs received from rajendra raghumanda and dibyendu bhaumik and editorial help from vineet kumar srivastava are gratefully acknowledged. 3 / 4 bis - central bankers'speeches 2 for example, while the'uniform balance book ( ubb ) introduced in each bank office required monthly reporting of account - wise information in regard to credit limits sanctioned and advances outstanding according to the type of account, type of borrower, occupation, purpose, security, and rate of interest charged, it had to be supplemented by ( i ) annual survey on purpose - wise distribution of bank advances ; ( ii ) half - yearly survey of interest rates on deposits and advances ; and ( iii ) mid - monthly survey on security - wise classification of bank advances. 3 the banking companies ( acquisition and transfer of undertakings ) act, 1970. 4 report of the committee on banking statistics ( chairman : a. raman ), rbi, august 1972. the bsr system replaced the ubb system and other regular and ad hoc reportings by banks to the rbi. 4 / 4 bis - central bankers'speeches
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will apply, as the uk will be a third country. with regard to banking, the relevant eu regulations and directives will necessitate a licence from an eu supervisor. therefore, banks are well able to prepare for this scenario and so make the worst case manageable. the necessary preparations certainly mean costs and a heavy administrative burden for banks, and they are complex and time - consuming. yet, despite these costs, it would be irresponsible to speculate on one particular outcome of the talks β such as a possible transition period β and adopt a wait - and - see strategy based on that educated guess. 3 / 4 bis central bankers'speeches let me be crystal - clear. preparations should already be well underway ; if not, they must start now! banks must establish at least basic entities in the eu β and, vice versa, in the uk β before it β s too late. in many cases, that means applying for new licences and a great deal of paperwork. while i am concerned about the state of preparations at some banks, i am at least as worried about the current position at other firms. for them, the pressure to prepare for the worst β and to do so now β may be even greater. as i said, the β no - deal β scenario represents an event with clear terms β with no hidden surprises β but, of course, there will be no surprises only if a company thinks this scenario through and asks itself : how would it affect us, our customer relations, our product offerings, our supply chains, and in terms of regulatory approval, and so on? think of it as a brexit stress test. if β and only if β you prepare meticulously, you won β t be caught out by the β no deal β scenario. so, the motto must be : hope for the best, but prepare for the worst. the potential repercussions of inaction are huge. firms have to act now! 5 friends after the break - up? terms of future cooperation supervisors are playing their part to support preparations. we are taking a strict, yet at the same time pragmatic approach. what do i mean by that? our aim is to make the transition as smooth as possible. we are providing a clear point of contact for banks, explaining our supervisory approach and offering guidance with the licensing. here is one example : when eu supervisors examine a bank β s internal model used to calculate regulatory capital requirements, they could proceed β
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. in addition, rating agencies have issued warnings, with germany no longer being left out. the timing of some of these announcements is certainly debatable β and, in my opinion, bis central bankers β speeches often questionable. however, this should not divert our attention from the responsibilities of fiscal policymakers. introducing, through regulatory measures, special rules for developing sovereign bond ratings does not seem a particularly appropriate solution, at any rate. instead, we should reduce references to ratings in regulations wherever possible. i should also mention that significant progress has already been made in the area of financial market regulation, too. given the fact that regulatory flaws were among the main causes of the financial crisis, this was, in my opinion, of paramount importance. the reform of the capital framework, which will improve the quantity and quality of banks β capital and thus their capacity to absorb losses, is certainly a particularly welcome development. increasing the amount of losses the banks β investors are able, and required, to bear, reduces the danger of taxpayers once again having to foot the bill. the phenomenon of systemically important banks, meanwhile, shows that basel iii is by no means the end of the road. the internationally agreed rules for dealing with the β too - big - to - fail β issue now have to be rapidly implemented at national level in an internationally consistent manner. the complex oversight and, if necessary, regulatory treatment of the shadow banking system remain atop the reform agenda. although the current zero weighting of government bonds likewise sets the wrong incentives, it should only be adjusted going forward, predicated on precise studies. looking at the financial markets and their regulation, however, i would like to mention one more thing. the sovereign debt crisis is shining a new light on a commonly held assumption, namely, that crises are caused by unfettered markets and can be avoided only by giving the state more space. however, the sovereign debt crisis has shown quite clearly that even states are fallible. of course, the crisis has opened our eyes to the blind faith in the market that has sometimes prevailed ; however, statism and dirigisme are by no means the right path to take. instead, we should return to a founding tenet of the social market economy : individual responsibility. those who take risks must also face the consequences. reviving attaching more importance to this principle this would represent major progress β including with respect to the sovereign debt crisis. conclusion ladies and gentlemen, i have touched upon various aspects which i think
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gent sejko : monetary policy of the countries of the region between us federal reserves and european central bank speech by mr gent sejko, governor of the bank of albania, at the becici summit of the countries of the region on " regional financial stability in a new global environment ", becici, montenegro, 16 june 2017. * * * dear mr. chairman, dear colleagues, i would like to start by thanking the organizers for this invitation. as usual, i find it highly useful to share, among colleagues, opinions on common challenges. the title of the panel suggests our monetary policy stances are somehow shaped by the ecb and the fed monetary policy paths. though far from being the full picture, this is true, at some extent. the monetary policies of both these central banks are highly relevant to us. they affect external conditions and they could dictate the directions, the speed and the price of financial flows. furthermore, for countries with a dollarized or euroized financial system, they might also affect domestic credit, financial conditions, balance sheets, as well as exchange rates. so, this brings us to the following questions. where does our monetary policy sit at the current situation? what challenges do we face? and, how do we respond to the shifting of these external monetary policies? i am quite confident these issues will be broadly covered during this event. now let me make a few remarks, regarding the monetary policy of the bank of albania vis - a - vis that of the ecb or the fed. the boa has pursued an expansionary monetary policy, which has been both supported and facilitated by the monetary policy stance of the ecb. during the past four years, the bank of albania has been engaged in an extensive course of monetary accommodation. in the presence of weak cyclical developments and low inflationary pressures, we have decreased our policy rate to a historical minimum of 1. 25 %. furthermore : we have increased our liquidity injections in the banking system ; we have adopted negative rates for required reserves in euro, in line with the policy of negative deposit interest rates in the euro area ; we have been engaged in a clear and transparent forward guidance, announcing our preference for accommodative policy in line with our inflation target ; however, unlike the fed and the ecb, and similarly to other central banks in the region, we have not activated unconventional monetary policy tools. this is because the monetary policy accommodation pursued by the
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assets1 accounted for 88 % of the total assets held by households below the 20th percentile of the distribution ( with their principal residence accounting for 66 % of the total ). however, for households in the 90th income percentile, real assets represented 73 % of all assets and the principal residence just 34 %. similarly, a very small percentage of low - income households have listed shares or investment funds in their portfolios ( less than 3 %, compared with 33 % and 22 %, respectively, of households in the top decile of the distribution ). one factor that influences households β investment decisions is familiarity with financial products. indeed, as the bestinver - iese / cif observatory has shown, even in a study targeted at people more likely to be acquainted with financial investments, familiarity with savings vehicles and financial decisions vary across income, age and gender groups. these findings are consistent with those of the banco de espana β s latest survey of financial competences. this survey, based on a representative sample of the spanish population aged between 18 and 79, shows broad differences in the level of familiarity with the most common financial products. for example, according to the survey results, fixed - term deposits are the most common financial product among households ( 26 % ), and yet they are also one of the least known ( just 73 % have heard of them ). the population segment least aware of this basic investment product is that with the lowest educational attainment and the lowest income ( around 60 % have heard of them ). 2 real assets include principal residence, other real estate property ( homes, building plots, rural property, garages, industrial premises, shops, commercial premises, offices and hotels ) and the value of businesses related to selfemployment, jewellery, artworks and antiques. bover, o., l. hospido and e. villanueva ( 2018 ) β survey of financial competences 2016 : main results β. the public β s lack of basic financial literacy is also evident in their unfamiliarity with the concept of risk diversification. specifically, the survey of financial competences gauges whether respondents understand that, generally speaking, a broad portfolio of equities will offer less volatile returns than a single share. according to the survey, only half of the population understands this concept. for some years the banco de espana has been implementing its financial education plan, an initiative designed to help the public better manage their personal and household finances, and to foster what we
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s. dollar financial market enabled major japanese banks to adjust the liability side of their balance sheets and focus on increasing client - related deposits. see ichiue, h., t. kimura, t. nakamura, and h. hasebe, " the supply and demand of safe assets and the scarcity premium for government bonds, " bank of japan review, 12 - j - 1, january 2012 ( in japanese only ). see bertaut, c., a. tabova, and v. wong, " the replacement of safe assets : evidence from the u. s. bond portfolio, " board of governors of the federal reserve system, international finance discussion papers, no. 1123, october 2014. the following paper reviews the shift of funds from prime mmfs to government mmfs from the perspective of the supply and demand for safe assets : u. s. securities and exchange commission, " demand and supply of safe assets in the economy, " memo, march 2014. safe assets and financial vulnerability at this point, you might wonder why i am deploying as arcane a concept as safe assets in order to explain the changes in the debt composition of japanese banks. i have done so because the supply and demand of safe assets is an important reference point for monitoring and assessing the stability and potential vulnerabilities of the financial system. let us look back at the mid - 2000s. at that time, as the yield spread suggests, the demand - supply balance of u. s. dollar safe assets tightened. in response, u. s. and european investors searching for yields bought large amounts of highly rated asset - backed securities issued by private financial intermediaries with the perception that these financial instruments were safe but gave yields that were only a little better than u. s. treasuries. in turn, the issue of asset - backed securities, in particular mortgage - backed securities, rose to meet increased demand from investors. we know that not everybody lived happily thereafter : when problems surfaced in the u. s. subprime mortgage sector followed by the global financial crisis, the asset - backed securities lost their status as safe assets. 9 furthermore, the increasingly noticeable outflow of wholesale deposits from european banks, which aggressively invested in securitized instruments, could be explained at least in part by doubts over the appropriateness of regarding certain bank deposits as safe assets. the same mechanism seems to have been at work when u. s. mmfs reduced their exposure to
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innovation ( innovation no sahou, 2007, available only in japanese ), argue that manufacturing today should not be a mere monozukuri that can be measured in terms of quantity, but kotozukuri, or event making, that is, the creation of products that tell a certain story with which purchasers can identify and in which they find value. bis central bankers β speeches foundations. for example, because japan β s domestic market is relatively large, firms have been able to make some profit, even if their business focuses only on the domestic market. with regard to the fiscal problem, long - term interest rates have not been rising, the yen has not depreciated, and there has been no capital flight. in fact, even though the recession following the failure of lehman brothers was more severe in japan than in the united states and europe, in the foreign exchange markets, demand for the yen has actually increased, as it is viewed as a safe - haven currency. this is attributable to the fact that japan has been running a large current account surplus and is the biggest creditor nation in the world, so that japan is perceived as among the most robust countries in the world in terms of foreign currency funding. be that as it may, given that the decline in the growth rate is a problem that has plagued japan for a long period, a tremendous amount of human energy is needed to reverse this trend. what concerns me in this regard is that japanese society is losing a healthy sense of optimism. just as excessive optimism can generate an asset bubble, excessive pessimism can depress the economy. what is necessary is a strong will for reform and overcoming excessive pessimism. we should keep in mind that japan β s economy and society still have many strengths. the first strength is that japan is in asia, which is the very center of global growth. for example, looking at trade developments with china, which is now japan β s largest trading partner, japan β s exports to china have grown 4. 7 - fold since 2000, while imports from china have grown 2. 7 - fold. moreover, japan β s direct investment position in china has expanded by a factor of more than 5 ( chart 14 ). meanwhile, the number of visitors to japan from asian countries has doubled in the past 10 years, to about 7 million, accounting for nearly 80 percent of all visitors. in the future, visitors from asia are likely to increase further as their living standards
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budget plans of the government. in the short term, some additional fiscal spending might be possible. however, with respect to macroeconomic stabilisation, any further stimulus appears unnecessary, unless a perceptible deterioration in the economic outlook becomes apparent. germany β s output gap is about to close and forecasts don β t foresee a marked deterioration. it would be important to use the leeway wisely in order to promote sustainable growth in the long run and not just cause a flash in the pan. targeted investments in infrastructure, expenditure on research and education, and promoting incentives to work and invest by reducing taxation are keywords in that context. climate change is another important challenge, for which the german government has just proposed a package of measures. the current account surplus is already in the process of shrinking, and a loosening of fiscal policies may contribute to that. but we shouldn β t expect miracles. according to our calculations β and even in a more optimistic scenario β fiscal policy measures of a realistic size would reduce only a smaller part of germany β s current account surplus. they would raise imports only to some extent. and the impact on the current account deficit to gdp ratio in the us would be even far smaller. [ 8 ] one intuitive reason is the difference in sheer economic size : the us economy is roughly five times as large as the german economy. 3 trade tensions when considering options beyond fiscal policy, import tariffs in particular seem to be back in fashion. proponents believe that higher tariffs can solve several problems at once : they claim that raising tariffs can reduce current account deficits, protect jobs, and even make people better off. this belief is mistaken. indeed, even the impact of new tariffs on the current account balance is ambiguous. [ 9 ] intuitively, imports will be reduced. but exports are likely to fall at the same time, due to weaker foreign demand and an appreciation of the domestic currency. more importantly, by introducing new tariffs, a country runs the risk of damaging its own economy. tariffs increase the prices of imported goods, and this weakens the purchasing power of consumers. indeed, american researchers have found that the us tariffs introduced last year were almost completely passed through into us domestic prices. [ 10 ] retaliatory tariffs adopted by other countries will probably do even further damage. as roberto azevedo, director general of the world trade organization warned : β an eye for an eye will leave us all blind. β the trade conflict between the united states and china
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the imf and the oecd make their assessments of euro area economic policies available to the public. in the context of surveillance, the international community is also developing common understandings on a number of β rules of the game β to be implemented in each individual country on a voluntary basis. an example is given by the imf code of good practices on transparency in monetary and financial policies. the selection of best practices and rules enhances competition and transparency among policymakers, thus making the idea of good public governance a central component of international cooperation. third, consultation and surveillance are the forms of international cooperation which are relevant to the ecb in the area of macroeconomic policies. any form of ex ante international coordination of monetary policy with other macroeconomic policies could easily be incompatible with the eurosystem β s mandate and independence. attempts to coordinate ex ante would not only blur the specific responsibilities of individual policymakers, but also reduce their accountability. in determining its monetary policy stance, the ecb should and does take into account all relevant information. it cannot let its policy be determined solely by the current and future course of other policies. this could easily compromise the maintenance of price stability. the inappropriateness of ex ante policy coordination also applies to the more specific option of exchange rate coordination between large economic areas, for instance by setting ranges for the fluctuation of the major currencies. in this regard, i should like to take the opportunity to reaffirm that the ecb does not pursue any exchange rate target. our objective is to maintain stable prices in the euro area and not a specific level of the euro β s exchange rate. last but not least, the eurosystem takes part in the process of international cooperation not only in its role as a β primary player β - ie when euro area monetary and exchange rate policies are involved - but also in its roles as advisor to other euro area authorities on international issues and β catalyst for cooperation β. in this case, international cooperation is mainly designed to ensure global financial stability and enhance the architecture of the international monetary system. the economic rationale for this kind of cooperation can be summarised as follows. first, financial instability can materialise even with sound macroeconomic policies, as a result of factors such as inadequate supervision in emerging market economies and so - called β contagion β, ie the international transmission of instability. second, a world divided into sovereign states has inevitably moved more rapidly towards full capital mobility than towards common rules
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i know that you all will be keen to debate issues of emerging new banking structure with its building blocks in the form of new bank licenses, more liberal entry of foreign banks, mergers and acquisitions, required capital infusion to meet basel iii requirements, etc. yes, these are important issues. but i intend to start my keynote address on the theme of β new landscape for indian banking β with a little broader sweep. there is a need to bring about significant changes in the banking processes in this country so that the banks of today can remain relevant in the days ahead. in my talk today, i intend to focus on the key challenges in the business environment facing the indian banking industry and five important process changes that would be needed to meet these impending challenges. 3. first, with bringing down of the barriers to entry in the banking industry, are we geared for a more competitive banking industry that is likely to emerge? second, a paradigm shift is taking place in global banking activity and its regulation with greater emphasis on managing financial risks. are we adapting to it in right measure, without getting carried away by being overzealous in copying the regulatory changes, importing them in a ckd form or are we going to the other extreme of being obstinate and refusing to accept global norms and standards? a corollary to this is the penchant for financial innovations and financial engineering. are we captive to it or are we using this for the benefit of the real sector that produces goods and services, consumes them, saves some and invests the surplus. third, fear is the worst substitute for courage, though some dose of it may be necessary to stimulate defences. a question i would like to ask is, in view of the current asset quality concerns, are we making efforts to improve our credit appraisal systems? an important bis central bankers β speeches consideration in this regard would be to appreciate the need for sustainable development and hence, incorporating assessment of impact that the projects financed by the banks may have on the environment and the society. fourth, technological change is affecting banks as well as other industries. in fact, technology has entered all facets of our lives. it can pose threat as well as throws opportunities for banks. the key point is whether we doing enough to leverage technology to our advantage. fifth, with increasing competitiveness and information, the customer is becoming more demanding than before. so how are banks gearing up to improve customer service, commoditize products amidst more diversified
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steps to make monetary policy more accommodative? first, because the trend of inflation changed. it is not clear to us at this point if it is noise in the data β loud noise, to be sure, but noise β or a fundamental decline in inflation. however, it is clear to us that we have to continue to strive and raise the inflation rate toward the midpoint of the target range. second, the risks have intensified. should the risks be realized, we will want to act in a timely manner, in order to prevent to the extent possible a slowdown in economic activity. how will we do that? we have a range of tools, and they are all on the table. there are the standard tools, and we are refreshing the toolbox regarding tools that have not been tried here, or have not been used for a very long time. and one more comment on monetary tools β in recent weeks the issue of the foreign exchange market has been in the headlines. therefore, maybe this is the time to clarify β i did declare that in principle i would prefer that the exchange rate would be set by market equilibrium, and that was the also the bank β s approach before i took office. practically, there is a window of exchange rates that we view as consistent with price stability and economic activity, when we take into account all the factors and variables in the economy. the window is dynamic, and depends on parameters that change all the time, which naturally should not be disclosed. from this perspective, the bank of israel policy on this issue could be called β constructive ambiguity ", which is the appropriate policy for a small economy such as israel ; and therefore, if and when the bank of israel will assess that the exchange rate has materially deviated from the window that we defined, we may very well intervene in the market β and no one will receive a warning letter from us beforehand. thank you! 4 / 4 bis central bankers'speeches
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the next few months, taking account among other things of macroeconomic developments and their feedback impact on the public accounts. the estimated revenue effects of the measures to curb tax evasion are subject to uncertainty, both upside and downside. curbing expenditure growth will necessitate a sharp change of course with respect to the tendencies of the past decade. the limits on the resources at the disposal of central and local government will require, if service cuts are to be avoided, a serious overhaul of organization and territorial coverage. trade payables of government bodies and their public service firms must not be allowed to serve as an instrument for circumventing budget constraints. public financial adjustment and economic growth, together, are essential conditions for financial stability, which is in turn the pilaster of sustained growth. the indispensable modification of the overall composition of the public budget must be directed to stimulating growth. the reforms under way in the public administration and those that will raise the retirement age move in this direction. the curtailment of tax evasion can be a major factor for growth if it corresponds to the lowering of the rates levied on honest taxpayers. with the economic upswing, global payments disequilibria will tend to widen once more, heightening the connected risks to the sustainable growth of the world economy. the international monetary fund is fully committed to ensuring macroeconomic stability, but these imbalances, in being for more than a decade now, will persist for an extended period, and they will have to be funded. this is a titanic enterprise in both size and duration, and one that will only be feasible β without growth - threatening tempests β with capital markets that are far more robust, more transparent and better regulated than in the past. reform of the rules of finance the recent g20 summit in toronto observed that the agenda of essential regulatory reforms is proceeding on schedule. some aspects of the summit β s final declaration deserve special emphasis. first, the importance attached to the reform of basel 2 in order to increase the solidity of the system, including ambitious requirements on banks β capital levels and the definitions of capital. second, the affirmation of the need for further intensification of supervision, the extension of regulation to the shadow banking system, and the reinforcement of the derivatives market infrastructure. third, the resolution to reach an agreement at the time of the next summit in november. the new prudential rules will significantly increase banks β capital and improve its quality, limit
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and its impact on the euro area economy at its last monetary policy meeting on 10 april, the ecb governing council confirmed that an ample degree of monetary accommodation remains necessary to safeguard favourable financing conditions and support the economic expansion. this will ensure that inflation remains on a sustained path towards levels that are consistent with our inflation aim β a rate of inflation which is below, but close to, 2 % over the medium term. we continue to expect the key ecb interest rates to remain at their present levels at least 1 / 4 bis central bankers'speeches through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation consistent with our inflation aim. the governing council also confirmed its intention to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme. this will continue for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. to preserve favourable bank lending conditions and the smooth transmission of monetary policy, and to support access to financing, in particular for small and medium - sized enterprises, the governing council decided in march to launch a new series of quarterly targeted longer - term refinancing operations ( tltro - iii ). they will start in september 2019 and end in march 2021. significant monetary policy stimulus is thus being provided by our forward guidance on the key ecb interest rates, reinforced by the reinvestments of the sizeable stock of acquired assets and the new series of tltros. the governing council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards our inflation aim in a sustained manner. the benefits of our monetary policy measures have been sizeable and tangible. lending rates for euro area firms and households have declined to historic lows and converged across the region, and growth in bank lending volumes has significantly recovered since the beginning of 2014, thereby supporting investment and job creation. according to today β s preliminary flash data release provided by eurostat, there are now 9. 2 million more people in employment in the euro area than there were at the end of 2014, just before the ecb announced its expanded asset purchase programme, and 10. 8 million more than in the second quarter of 2013, when the number of people in work fell to its lowest point during the crisis. completing
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##marks used in the eu. in switzerland, too, a need for regulatory action is likely to emerge in this area. at the national level, the snb and finma are talking to financial market participants about ensuring a more robust construction of the interest rate benchmarks which are fixed in switzerland. the aim is to widen the data pool and improve the calculation methods, and the focus is on reference interest rates for very short - term swiss franc transactions, specifically one - day terms. these transactions form the basis for the swiss franc yield curve. the two benchmarks involved are, first, the tois fixing, which is used for interest rate derivatives in the swiss franc money market, and second, saron, which serves as the basis for the yield curve on the swiss franc repo market. progress has already been achieved on both interest rate benchmarks. although the level of activity on the money market remains persistently low, they continue to be available to the market as a basis for interest rate transactions in swiss francs. however, the libor retains its position as the most important interest rate benchmark in the money and capital markets. bis central bankers β speeches
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the president's working group on financial markets, 1999, page 17. let us again have a look at the ltcm case in order to assess the disruptive capacity of hlis through this second transmission channel. the president's working group on financial markets concluded, Β« nor were ltcm's exchange positions of such magnitude that a default by it would have caused significant disruptions of the u. s. exchange - traded futures market. Β» 8 for over - the - counter ( otc ) traded products there are no reliable numbers. it is, however, known that the majority of otc contracts were collateralised. 9 an upper bound for the non - collateralised positions is the abovementioned loss of usd 5 billion, which is presumably too small a number to create a severe crisis in other otc segments. moreover, we should not forget that hundreds of hedge funds are liquidated every year without any negative impact. also, the collapse of a large hedge fund, amaranth, in autumn 2006 had only a small impact on the financial markets. to summarise, hlis themselves cannot be seen as direct risk to financial stability, at least not at their present stage of development. however, there are two potential transmission channels through which shocks on hlis could spread to large international banks. if these shocks are large and banks are not robust enough, then the stability of the financial system could be at risk. however, available data and experience with failures of larger hlis in the past suggest that the disruptive capacity of hlis is rather limited. 4. should hlis be regulated? as we discussed earlier, the hli industry itself does not appear to be a threat to financial stability. however, the failure of one or more large hlis could β primarily via credit exposures β weaken a systemically important bank which, in turn, could weaken the financial system. this potential chain reaction, however, does not in itself prove the need for regulation. this challenge can be met by other initiatives. first of all, there is market discipline. market discipline can compensate for a lack of regulation. i assume market discipline to be more effective in the case of hlis than in the case of banks for three reasons : ( a ) investors in hlis are generally well informed and relatively β sophisticated β, ( b ) the number of investors is small and ( c ) hlis do not constitute an industry regarded as worth being rescued in terms of the public interest. however,
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one of the world β s largest economies, and hong kong, one the world β s freest and most open economies, stand to reap immense benefits from it. thank you.
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, the pboc is accountable to the state council and the branches of the pboc are accountable to the headquarters. as mentioned earlier, although hong kong has been subject to a severe ordeal during the financial turmoil, the pboc and other mainland government departments have not interfered in hong kong β s monetary affairs. furthermore, our autonomy in the management of hong kong β s foreign reserves is an important element in the mutual independence between the two monetary authorities. 13. while maintaining a mutually independent relationship, the two monetary authorities will continue to maintain and strengthen further the existing sound co - operation between the two places. both parties have held several regular and ad hoc discussions about monetary management, crossborder supervision of financial institutions and linkages between payment and settlement systems, and the achievements in these fields have been many. the mutual trust between the hkma and the pboc has contributed to exchanges and co - operation between the two places in relation to monetary affairs. ( c ) financial business between the mainland and hong kong are treated as international financial affairs and are conducted in accordance with the rules and practices of international financial activities. 14. all financial transactions between the two places after the handover have been conducted according to the rules and practices of international financial activities. claims and liabilities between banks and companies from the mainland and those in hong kong are regarded as external claims and liabilities. investment by hong kong companies in the mainland is regarded as foreign investment. when raising funds in hong kong, mainland entities are treated as other international and local market participants. mainland companies listed in hong kong are required to abide by security laws of hong kong and are regulated by the relevant regulatory authorities in hong kong. disputes relating to financial transactions are handled in accordance with international practice. where china β s arbitration law and other relevant laws and regulations are applicable according to the terms of a contract, the provisions relating to arbitration involving foreign parties are applied. ( d ) the hksar maintains its existing system of currency issuance and management. the hong kong dollar and the renminbi continue to circulate as legal tender in hong kong and the mainland respectively. the hong kong dollar is treated as a foreign currency in the mainland. likewise, the renminbi is treated as a foreign currency in hong kong. 15. the basic law has provided for the legal status of the hong kong dollar. the renminbi is still not yet freely convertible. however, even if it becomes freely convertible, it will only be one of
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funding in place, the prudent thing for banks β collectively β to do is lend. failure to help the corporate sector finance its cash - flow deficit will result business failures and unemployment that create greater losses for banks on their existing loans. those losses could far outweigh the small gains they might enjoy from protecting their balance sheets in the short run. 8 so lend they have. businesses have now raised β net of repayments β more than Β£50bn from banks since february. more than Β£30bn of new lending has occurred through the 100 % government guaranteed bounce back loan scheme. these 1 million loans are vital for many of the smallest businesses to bridge the disruption. but they do not help to finance the cash - flow deficit of medium and large sized companies that i described earlier. banks have lent Β£25bn has been lent to these companies, net of repayments. within that, there has been Β£12bn of lending approved through 55, 000 loans under the cbils scheme ; a further Β£2. 9bn through 428 loans under the clbils scheme. add to that at least Β£7bn of new bond issuance and Β£19bn lent through the ccff and these companies have raised at least Β£50bn of new debt. see may 2020 interim financial stability report on 11 march, the fpc reduced the uk countercyclical capital buffer rate to 0 % with immediate effect, and set out its expectation that it would maintain this rate for at least 12 months. further to this, in the q & a on the use of liquidity and capital buffers, the pra set out its general expectation that any required rebuild of capital buffers would be gradual, and that banks would not be expected to restore their capital buffers in full until a significant time after the end of the current stress. see may 2020 interim financial stability report all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice the financial system is well on the way to filing the financing needs of businesses. [ see slide 4 of accompanying deck ] by no means all the additional finance to preserve productive capacity has yet been delivered, particularly given the limited appetite many businesses may have to run down their cash buffers in the face of uncertainty. fuel must continue to be injected. and the fuel may need something extra to be added. that additive is equity. the case for equity there are at least three reasons for adding more
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between a strain in our economic muscle that recovers quickly and a muscle tear that holds back economic performance for some time to come. thank you. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice
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probably imagine how ancient retailers were quite happy with this invention. yet, without an assigned and trusted issuer, they still required the coins to have intrinsic value, i. e., to be made of precious metals. there were other problems with coins. firstly, they were often debased by mixing the gold or silver with less valuable metals. also β clipping β, that is, shaving off part of the material, was fairly widespread. this led to a phenomenon that many years later became known as gresham β s law. it says that in commerce β bad coins β drive out β good coins β as the latter are kept for saving purposes. mistrust in the coin system, or even its entire breakdown, was often the unhappy consequence. another issue was the plethora of mints that continued to grow in number as technology spread. fast forward, and at the mid - medieval period it had become fashionable for every european kingdom and principality to issue its own coins. with production costs lower than the coins β value, this was a useful source of income to finance the frequent wars at the time. but with multiple coins drifting around and uncertainty about their true value, it was essentially a mess. however, where there is chaos innovative minds see opportunities. during the 12th century, in the northern part of italy, a new type of institution emerged. these specialised in exchanging foreign coins for local ones, not unlike present day foreign exchange dealers. this reduced the problem with the many coins causing much confusion. even more advanced, some of the new institutions started to swap coins for bills of exchange that could be used in local trade. 3 the medieval coin - exchange providers brought banking to europe, it is often said. initially, they only handled deposits, as charging interest was viewed as usury by the powerful church. however, with italy the epicentre of european trade, you could still run a proper business facilitating transactions only. later, the house of medici and its peers took banking as well as bookkeeping to the next level. around the same time, the famous knights templar were also chipping in with innovations in payments and banking. they provided services for long - distance payments, one of them a system akin to international cheques. europeans involved in the crusades were faced with a long and dangerous journey to the holy land, where carrying valuables was risky. instead, the knight templars offered their clients to deposit their belongings at home against a letter. this - the
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from time to time, this has even led to new types of financial business that we recognise today. lately, a trend has been the emergence of new suppliers of payment services outside of the bank domain, in europe facilitated by legislation. their heterogeneity is large, but so is the potential of some of them. private and public sector do what they do best my third takeaway regards the role of the private and public sectors. while their roles may have changed over time, they have invariably explored their comparative advantages. throughout history, the private sector has showcased that it is an 8 excellent innovator and understands consumer needs. where there is a problem, it often provides a solution. the primary role of the public sector revolves around trust, universal services to all citizens, and security. one fundamental role of central banks today is to facilitate payments between banks. while the predecessor to our current clearing and settlement system may have started life in a london tavern, it later moved into the central banks. the main reason for this is to help banks settle payments using accounts at the central bank, i. e. in central bank money, thus abolishing the credit risks that could arise if they instead used commercial bank money. central bank money is generally regarded as the safest settlement asset that could be used. while the private sector innovates, the public sector needs to be ready to β step in β and correct market failure, provide coordination, guidance, and exercise its comparative advantages from time to time. in my historical walkthrough, i gave you some cases of this : the foundation of the riksbank on the ruins of stockholms banco ; postgirot, a rare example of the private sector failing to accommodate consumer needs ; and amsterdamsche wisselbank was an example of the government trying to solve the problem of not having uniformity of money. network and scale effects as important as ever my fourth and final lesson relates to network and scale effects, and the barriers to entry they pose. providers of new payments solutions need to invest money for development, setting up the infrastructure and marketing. hence, there is a high fixed cost associated with market entry. furthermore, to have a successful payments method, you need to have both payers and payees on board, and you need to reach a critical mass to cover your costs. we say that payments are a scale business. however, reaching a critical mass can be difficult since the value of the payment method is determined by the number
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##bly pegged and publish its available reserves on a regular basis. the simplicity of the goal facilitates communication and provides a single focus for policy. however, in a regime with multiple objectives, central bank officials must try to be transparent with respect to more than one objective. in short, as others have noted, more - complicated mandates require more - intricate communication. in that case, clearly summarizing a balancing of the goals would be more difficult in a short announcement, requiring as well other vehicles for describing the basis for policy moves, such as the fomc minutes and the semi - annual report on monetary policy. recent specific suggestions about central bank transparency i would now like to turn to some recent specific recommendations for improved transparency, in some cases with respect to the federal reserve system. these include the quantification of the central bank β s objectives, the publication of forecasts, and the earlier release of minutes. first, a central bank, the argument goes, should adopt and explicitly reveal numerical goals for its objectives in order to facilitate holding the monetary authority accountable, to reduce uncertainty, and to anchor private expectations about such things as inflation trends and monetary policy decisions. for example, many countries in recent years have set a single quantitative inflation goal. but, in my view, this approach has potential drawbacks. as i have noted on previous occasions, even in the case of a single inflation goal, the selection of a particular price index to guide policy is difficult, and the appropriate index and inflation value might change over time as the structure of the economy evolves and the pace and nature of technological advances vary. inflation targets also present problems in the presence of supply shocks, such as large increases in oil prices, that may simultaneously increase the price level and decrease aggregate output. most inflation - targeting central banks attempt to gain flexibility in such cases by focusing on core inflation, by having relatively wide target ranges, by stipulating β escape clauses β that allow inflation to diverge from the target for a while, or by aiming at inflation well in the future or at an average rate over the business cycle and thus allowing enough time for the effect of such shocks to have died down. despite such elements of flexibility, an inflation - targeting regime may still not typically attend sufficiently to output variation or financial stability. furthermore, these elements of flexibility may not foster the credibility of the central bank any better than a system of multiple objectives. the longer the policy timeframe and the wider the band for an inflation - targeting regime
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, it has become increasingly obvious over the years that a central bank needs a substantial insulation from political pressures to execute policy appropriately. such an independent central bank is less likely to succumb to the short - run temptation to boost output or to finance national budgets at the expense of long - run objectives such as price stability. in part, this follows because independent central bankers can have a more - distant horizon than other policymakers, which is desirable given the lagged effects of monetary policy on output and prices. to be sure, the establishment of the goals of monetary policy should take place within the democratic process, but experience teaches us that outcomes are better when the central bank has discretion to achieve those ends. thus, the elected representatives of the public should determine the goals of monetary policy, while a central bank should be granted independence to set its instruments. central bank openness allows the public and its elected representatives to make informed judgments and constructive criticisms about policies made by its central bank and to assess economic outcomes relative to specified long - run objectives. in general, to hold policymakers accountable, the electorate needs to know what they have done and the reasoning behind their key decisions. such democratic accountability is even more important for central bankers, because the voting populace does not directly elect them. in short, transparency is a quid pro quo for independence. clarity about policy decisions also can enhance monetary policy β s economic effectiveness. like other central banks, the federal reserve controls only a very short - term interest rate on borrowing reserve funds between depositories, the overnight federal funds rate. however, theory and empirical evidence indicate that longer - term interest rates and conditions in other financial markets matter most for the transmission of monetary policy to the economy. those longer - term rates and other financial asset prices, in turn, reflect expectations of future short - term rates as well as premiums for uncertainty. if the monetary authority can be more open about what it is doing and why and about how it perceives the economic outlook, then market participants can improve their expectations of future short rates, bringing the interest rates and financial prices that matter most for the economy closer into alignment with the intentions of central bankers. of course, those intentions are subject to uncertainty and to the constant flow of new information. but explaining decisions more fully allows market participants to better anticipate policy responses when unexpected developments take place. by accurately assessing the possible extent of policy reactions even before they occur, financial markets can speed needed economic adjustments. in sum, greater transparency allows
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. 54 per cent of nominal gdp. a recent survey by ifc and mckinsey ( 2010 ) suggests that 80 per cent of these msmes are excluded from the financial markets. the state of msmes in the country underscores the importance of this conference. suffice it to say that between 2003 and 2012, commercial bank loans to small scale enterprises dropped at an exponential rate. analysis of the annual trend in the share of commercial bank credit to small - scale industries indicates a decline from about 7. 5 per cent in 2003 to less than 1 % in 2006 and a further decline in 2012 to 0. 14 per cent. 5. a number of reasons have been proffered for this financing gap. the banks readily attribute their risk aversion stance for not lending to msmes to demand - side constraints, which include the lack of managerial capacity, inadequate collateral, and poor record keeping, amongst others. however, there also exist supply - side issues such as high transaction costs and lack of understanding by the banks of the nature and operations of msmes other constraints plaguing the msme sub - sector in nigeria include infrastructure deficit ( especially, power and transport ), bis central bankers β speeches policy inconsistencies, bureaucracy, multiple taxation and levies, weak intellectual property protection and contract enforcement, and insecurity. 6. your excellencies, distinguished ladies and gentlemen, we must therefore commit ourselves to the formulation and implementation of policies to strengthen the msme sub - sector. the cbn on its own part has been working assiduously towards developing a robust regulatory and supervisory framework and initiatives for improved access to finance for the sub - sector. some of these are the revised microfinance policy, regulatory and supervisory framework ; certification programme for mfbs ; designated non - financial businesses and professionals ( dnfbp ) ; competency framework ; payment system transformation ; development of a moveable collateral registry ; and the financial ombudsman bill currently before the national assembly. to further de - risk and encourage lending to the msme sub - sector, the cbn has also intervened with a number of initiatives such as the power and airlines intervention fund ( paif ) to help address the constraints of electricity ; small and medium enterprises credit guarantee scheme ( smecgs ) ; sme refinancing and restructuring facility ( rrf ) ; youth empowerment programme ( entrepreneurship development centres ( edcs ) and nysc venture prize competition ), financial inclusion strategy and tier
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and railway dividends β, 3 editions, sherwood, gilbert, and piper. stout, l ( 2012 ), β the shareholder value myth : how putting shareholders first harms investors, corporations, and the public β, berrett - koehler. the company law review steering group ( 1999 ), modern company law for a competitive economy : the strategic framework. the company law review steering group ( 2000 ), modern company law for a competitive economy : completing the structure. the company law review steering group ( 2001 ), modern company law for a competitive economy : final report. turner, j d ( 2009 ), β the last acre and sixpence : views on bank liability regimes in nineteenth - century britain β, financial history review vol. 16 ( 2 ). turner, j d ( 2014 ), β banking in crisis β the rise and fall of british banking stability, 1800 to the present β, cambridge university press. wolf, m ( 2014 ), β astrazeneca is more than investors β call β, financial times, available at : http : / / www. ft. com / cms / s / 0 / 6fe31054 - d691 β 11e3 - b251 β 00144feabdc0. html # axzz3gpwz57k7. bis central bankers β speeches
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in the overall degree of free trade even without a concerted shift in national policies. thus, it is crucial to maintain public pressure for free trade. first, it is important to continue to educate the public and create a political environment supportive of free trade. in this respect, targeted criticisms of protectionist actions may be more effective than general paeans to free trade. in a recent speech, my colleague, william poole, urged journalists describing trade restrictions to ask who gains, who loses, and what is the net gain or loss for the economy as a whole? 28 i very much support that sentiment. second, it is crucial to implement policies that foster stability and economic growth. reducing unemployment and diminishing economic insecurity will likely be more effective against protectionism than a thousand speeches like this one. toward that end, the federal reserve will do its part by working to promote stable financial conditions and sustainable, noninflationary growth. as of march 2004. u. s. customs and border protection ( 2004 ), continued dumping and subsidy offset act fy 2003 annual report ( washington : cbp ). gary clyde hufbauer and kimberly ann elliot ( 1994 ), measuring the costs of protection in the united states ( washington : institute for international economics ). william poole ( 2004 ), free trade : why are economists and noneconomists so far apart? speech prepared for the trade, globalization, and outsourcing conference, reuters america, inc., new york, june 15.
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. the different ways in which we experience artworks would appear to be a rich seam of inspiration, particularly given our respective banks β collections. β art in the workplace β does, after all, offer a very special situation in which to encounter creativity. day - to - day working life tends to revolve around performing a clear set of tasks and the routines they entail. there β s no denying that artworks in the workplace can sometimes also be a disruptive element, or quite literally β get in the way β whenever technical equipment or the like is being installed. and yet time and again, there are moments in which a work of art does indeed catch our eye, thereby creating another setting in which the topic β art & viewer β comes to the fore. the thematic group entitled β back to figuration β brings together works whose very format alone makes them stand out. for the most part, these are paintings dating back to the 1980s β a time in which a group of artists deployed gestural brushstrokes and applied layer upon layer of paint in revisiting figurative art. representational though these works may be, there is more to them than just a depiction of reality. these brief remarks are all i would like to say about the exhibition. no doubt you will make many more discoveries this evening β particularly in the way the exhibits contrast with one another β and be inspired to β build dialogues β of your own. and you wouldn β t be alone β on our first tour of the exhibition, pierre wunsch and i both found that this setting made artworks we knew from offices and conference rooms appear in a whole new light. before i conclude, let me just say how grateful i am to everyone who made the exhibition project such a success. i owe particular gratitude to yves randaxhe and anne bambynek, the curators of the belgian art collection. together with their counterparts from frankfurt, iris cramer and anja hagebarth, they have devised the exhibition in an ongoing dialogue, and the end result is most impressive. this art exhibition is uncharted territory for us, too. we β re delighted to have this forum to present our collections beyond the confines of our respective central banks. let β s hope that our invitation to β build a dialogue β with artworks which are otherwise reserved for our colleagues, guests and visitors will meet with the interest of the general public. thank you for your attention. 2 / 2 bis central bankers'speeches
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a comprehensive description of the new tender procedure will be issued during the course of next week. turning to today β s other meeting, the general council considered public finance developments in the eu. the general council also carried out its first annual review of the functioning of the erm ii, in accordance with article 16 of the erm ii agreement. finally, let me draw your attention to the calendar for meetings of the governing council and general council in 2001. a separate press release listing the dates as well as the related dates for the press conferences will be made available to you this afternoon. in this context, i should also like to point out that the press conference previously announced for 3 august 2000 has been cancelled.
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the first few days of june, also reflecting expectations that robust economic growth will continue in the euro area. notwithstanding the recent appreciation of the euro, the extent and duration of its previous depreciation will still exert upward pressure on consumer prices. against this background, the outlook for consumer price developments had become less favourable prior to today β s meeting. in april 2000 inflation - as measured by the harmonised index of consumer prices ( hicp ) - was 1. 9 %, following 2. 1 % in march. in the immediate future, the strong rise in oil prices in may 2000 is pointing to renewed short - term upward pressures. looking further ahead, all available forecasts for consumer price inflation for this year and next are now higher than they were at the end of 1999. current projections of a rate of inflation of around 2 % in 2000 and 2001 are clear warning signals. in conclusion, with today β s decisions the governing council has acted in a forward - looking manner in order to contribute to the maintenance of favourable conditions for a lasting, non - inflationary economic expansion. this should help other economic actors to rely firmly on the maintenance of price stability in the medium term. they are also called upon to contribute to price stability and growth by means of appropriate wage settlements compatible with employment growth, structural reform and fiscal consolidation. at the current juncture, they are especially encouraged to press ahead with structural reform, and governments are particularly urged to avoid a pro - cyclical loosening of fiscal policies. this is particularly important in those countries where there is a risk of overheating. let me now give the floor to the vice - president to say a few words about the decision to implement a variable rate tender procedure as from the main refinancing operation to be settled on 28 june 2000. the switch to variable rate tenders in the main refinancing operations is not intended as a further change in the monetary policy stance of the eurosystem. the new tender mechanism is a response to the severe overbidding which has developed in the context of the current fixed rate tender procedure. for the purpose of signalling the monetary policy stance, the minimum bid rate is designed to play the role performed, until now, by the rate in fixed rate tenders. this change does not in any way rule out the option that, in the future, the main refinancing operations of the eurosystem may be conducted in principle as fixed rate tenders. a press release setting out
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policies continued to underpin the economy since the 1990s. in the meantime, while the need for drastic structural reform was pointed out many times, in reality the reform did not progress except for deregulation in some areas. it could be one reason for the downtrend in japan β s economic growth rate since the 1990s that structural reform, which was essentially necessary in strengthening growth potential, did not progress smoothly. low growth and deflation such downtrend in growth potential is also one reason for japan β s long - standing problem of deflation. if the downtrend in the economic growth rate becomes protracted, people will become unable to have confidence in or expectations for future growth. as i mentioned earlier, concern over future growth shrinks people β s current spending. if that results in a decline in the actual growth rate, it forms a vicious cycle of once again lowering people β s future growth expectations. such structural vicious cycle will induce a chronic demand shortage. when there is a lack of demand compared with the supply of goods and services, normally, prices will fall. since the second half of the 1990s, japan β s economy experienced a downturn three times triggered by the financial system crisis, the bursting of the it bubble, and the lehman shock. whenever japan was faced with a substantial decline in the economy, the aforementioned vicious cycle was strongly recognized, and, even in the ensuing economic recovery phase japan repeatedly encountered the situation in which growth expectations did not sufficiently rise and it could not escape from a demand shortage. the result was a protracted deflationary trend. output gap and a mismatch between demand and supply according to an estimate by the cabinet office, the current annualized output gap is about 15 trillion yen. as it was estimated to be about 40 trillion yen immediately after the lehman shock, the gap has narrowed considerably but has remained substantial. in that regard, some point out that if economic activity is stimulated by fiscal or monetary policy to create a demand of 15 trillion yen, the output gap will be filled and japan β s economy can immediately overcome deflation. it is not that simple. the output gap in numerical terms is the difference between the size of demand for the existing goods and services and the existing production capacity to supply those goods and services. however, in reality, people β s demand itself has been changing due to structural changes in society, including aging. if the supply side has not been able to sufficiently meet such new demand, then it might not merely be
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a need for a financial diplomacy strategy, and ( 5 ) it should take due account of international political and security issues. these principles, notably the second principle, seem to be different from the exchange rate targeting proposal. prof. mccallum regards the separation by government of exchange rate policy and monetary policy as an anachronism, because of the linkage of exchange rate and interest rates within the general equilibrium framework. 17. second, we should put emphasis on the need to deal with the euphoria brought about by higher expected growth and the sharp drop in " finance premium " during the bubble period. the increasing collateral value compressed the finance premium for real estate and corporate borrowing. the aggressive risk - taking was facilitated by financial deregulation and the higher expected growth rate under price stability, in part due to mistaken perceptions of future technological progress ( figure 7 ). 18. today, we see a similar problem with low term - and risk premia, which constitute one of the causes of the " conundrum of global low long - term interest rates ". we observe that the real long - term interest rate among major advanced economies has tended recently to converge at around 2 % ( figure 8 ). given the low term - and risk premia across various financial markets, the low real long - term rate implies that any country which has higher expected growth rate, significantly above 2 %, is liable to register the acceleration of asset prices. 9 19. third, it may be useful to extract a signal or guide to future price developments from asset price changes by examining the factors and the sources of asset bubbles, to the extent that there exist various distortions and imperfections in financial markets. although it may be desirable to have an intertemporal cost of living index, this might not help us in the near future. it is possible instead to show the likely consequence of deviation of asset price from the historical trend or the simulated fundamental price based on models. it is interesting to note that the oecd ( 2005, 2006 ) identified the deviation of the actual rent - to - price ratio from the fundamental ratio based on the long - term historical average ratio, employing the inverse of user cost as a proxy to the price - to - rent ratio, as the user cost equates the expected cost of owning a house with the cost of renting. further, the oecd estimated the nearing of a peak to real house prices, if interest rates were to rise further. 20. fourth
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changes have been smaller. and with last wednesday's move, the mpr remains in the corridor. it should be noted that, the real monetary policy rate is around 4. 5 pp above neutral, if we consider its current level minus expected one - year inflation according to market expectations. this is one of the most contractionary rates in the region 1. 1 this calculation and reference are only intended to make a comparison with other economies and do not imply an evaluation of the contractivity of the monetary policy or the neutral interest rate. at this time we are working in the process of reestimating the neutral interest rate, those results will be published in the december monetary policy report. bilateral meetings foreign exchange intervention as announced, the foreign exchange intervention program ended on september 30. it helped the foreign exchange market to function properly, facilitating the adjustment of the economy and the financial markets to external and domestic conditions. in total, we sold us $ 6. 05 billion in the spot market and placed us $ 9. 11 billion in forwards. the stock of the latter will continue to be renewed, at market conditions, until january 13, 2023. the central bank does not pursue a specific level for the exchange rate. interventions are not related to this parameter, but rather to the evaluation of whether the exchange market is presenting problems in its functioning that may affect other markets. the conditions in which the market operates today are very different from those of midjuly. in general, the currency has followed the behavior of other parities. in any case, as always, we remain committed to the floating exchange rate regime, reserving the option to intervene in the exchange market in exceptional circumstances. it cannot be ruled out that the volatility of the foreign exchange market will remain at higher levels than usual in previous years, although certainly below the peaks reached during this year's most stressful moments. per se, this does not imply a malfunctioning of the market, and is mainly due to international factors over which chile has no influence. to the extent that some central banks that have been lagging behind in the fight against inflation accelerate their rate adjustment, volatility in financial markets will remain high.
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in sub - prime mortgage delinquency rates, widespread uncertainty arose regarding the value of the abss because of lack of clear information on their content of sub - prime mortgage credits and the increase in payment delays. these abss are in the balance sheets of non - banking financial entities ( nbfes ) throughout the world, such as hedge funds agencies, or financial vehicles tied to banks, the latter particularly in europe. although the main global banks do not seem to be directly and significantly exposed to this component of mortgage loan risk in the us, they do have indirect exposures through credit lines or guarantees to nbfes and in europe they also have direct exposure to financial vehicles or conduits that they own. as these abss are illiquid, no direct information exists on their market value, which restricts the access to the market for nbfe trade securities that have β or are suspected to have β abss backed by sub - prime mortgage loans among their assets. this uncertainty has eroded insurance companies and pension funds β appetite for buying nbfes β trade securities, which has substantially raised costs and reduced access to financing, hindering the renewal of their liabilities. thus, the central point of this adjustment is located in the abs - backed trade securities β market and in nbfes that have β or are suspected to have β large investments in abss backed by sub - prime mortgages. in addition, in face of the difficulties to renewing their traditional funding sources and investors β redemption claims, occasionally these agencies or funds have been forced to make aggressive changes in their investing and financing strategies by selling off assets, using their commercial banking credit lines, raising capital contributions or resorting to sponsor banks β guarantees. in parallel, commercial banks have encountered difficulties in transferring to other investors the credit risk assumed when financing private equity funds engaged in leveraged corporate purchases. in sum, in this scenario of increased uncertainty regarding the value of some assets, demand for safer financial instruments has risen sharply, with increases in risk premiums and large downward corrections in the interest rates of government bonds ( figure 5 ). figure 5 : long - term interest rates ( percent ) source : bloomberg. the measures adopted in the past few days by central banks in industrial economies to pour liquidity into banking systems have been directed at both preventing financial swings to affect monetary policy conduction in the main economic zones and to facilities the operation of credit markets. rather than sustaining the valuations of asset prices, the main central
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fast pace. since december 31, 2002 till december 31, 2005, the balance sheet has recorded a growth of 64. 5 %, which in all respect is quite significant. deposits of the banking system registered unprecedented growth of 69 % since 2002. profits of the banking system scaled new heights. return on assets ( after tax ) increased to 1. 9 % in 2005 ( and further increased to 2. 1 % by sep 2006 ) from 0. 1 % in 2002. credit activities got a tremendous boost as banks responded zealously to meet the sharp rise in demand for credit. loan portfolio of the banking system got doubled in the last three years. unlike the past trends, the credit growth was fairly diversified. this led to substantial increase in the exposure of the banking system to new emerging sectors like consumer, agriculture and smes sectors. greater compliance with the corporate governance standards has helped keep npls to low levels and improve the management performance. as of december 2005, the key management performance indicators of the banking system confirm the impact of strengthened corporate governance and risk management practices within banks. for example : β’ intermediation cost has fallen to 2. 7 % as compared with 3. 4 % in 2000. β’ average earnings per share have increased to rs5. 7 from rs3. 2 in 2003. β’ deposits per employee rose to rs30. 2 million from rs14. 2 million in 2000. β’ assets per employee increased to rs39 million from rs19. 1 million in 2000. conclusion pakistan, like the rest of asia, is growing fast and the rise in per capita income, emergence of middle income group and relative wealth increases are together bringing with them new demands for retail banking industry. the transformation of pakistan β s banking sector, given the success in developing a stronger and robust system, offers some interesting perspectives and lessons for banking sector reform. the sector now faces interesting emerging challenges and risks that are not uncommon in financial systems in post reform period. going forward, pakistan β s financial sector strategy for next decade or so will aim at addressing the emerging challenges while laying the foundation for a deeper and efficient financial system which is competitive and financially inclusive. banks are now aggressive and recognize that having cleaned up their loan portfolios and balance sheets, they need to re - position themselves to take advantage of the boosting economy. over the next few years, commercial banks will have to focus on product innovations and diversifying their reach to infrastructure, housing, sme and microfinance industry while exploring and
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authorities have experience with dry - runs and tests. i hope all of you will feel inclined to share lessons learned in the discussions of today. fout! onbekende naam voor documenteigenschap. the european context the second angle i want to highlight is the european context. the introduction of european resolution legislation in the wake of the financial crisis offers strong benefits. but it certainly also presents challenges. for example, is our decision - making process effective enough? aren β t we too bureaucratic to act swiftly when needed? achieving common policy outcomes can be complex and time - consuming. this is understandable and perhaps inevitable, given the different views and interests of members states. but have we made enough progress to enhance resolvability since the crisis? i believe there are still some remaining issues that need further action. for example, further efforts are needed to ensure adequate levels and quality of banks β loss absorbing capacity as well as to operationalise the resolution tools. you may have different views on this and i β d love to hear them. it would give us valuable food for thought. a second major challenge we face, is that there are still gaps in the european resolution regime itself. for instance, the absence of a more harmonised insolvency regime at the european level may hinder an effective and consistent approach across member states. within the european union, placing for example a french bank into insolvency proceedings can still be completely different than in case of an estonian bank. the principles may be the same, but the recovery and timeframes can differ. we would like to see more consistency throughout the eu in this respect. that said, in my view the benefits of a single resolution framework greatly outweigh these challenges. we now have a single framework that applies to all banks in the european union. this really strengthens the level playing field. and on top of that, it can contribute to more effective cross - border solutions. clearly the solution of fortis back in 2008 serves as a bad example here, when the problems and crisis response were ringfenced across benelux borders. the new regime ensures that resolution tools can be applied to bank which is active in multiple countries. ultimately, we are convinced that risks to the financial sector can be mitigated more effectively as part of a joint european effort. challenges the third angle concerns the challenges facing dnb as resolution authority. here, i want to highlight two challenges that you may well recognize
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the greek pspp, the eurosystem could purchase approximately β¬3. 5 billion before running into the 33 % issuer limit. furthermore, some additional funding could also be raised if greek public sector non - financial institution bond issues were to be considered as eligible marketable debt instruments. some could argue that the above amount is a mere pittance compared with the total eurosystem β s purchased amount of β¬464 billion under the app programme, with greece β s participation being around β¬12 billion ( pspp = β¬9 billion, cbpp3 = β¬3 billion ). even in this respect, the signalling effect of greece β s inclusion in the app will be strong enough for ggb prices to recover accompanied by a significant fall in volatility, as the overall financial environment is normalised and greece ceases to be the outlier in the euro area. it is worth simply reminding the sharp fall in the government bond spreads of peripheral euro area countries ( italy, spain ) vis - a - vis the yields of core euro area country bonds, when the ecb announced the omt programme and their convergence after the omt final approval from the european court of justice. 3. last but not least, for a successful third and final mou, namely one that will stabilise expectations and facilitate a sooner - than - later return to international capital markets, there is something that was missing from the first two mous and hopefully will be achieved this time around. as you know, there is a cumulative loss of 25 % of greece β s gdp as a result of the consolidation programmes and internal devaluation during the last five years. capital formation has dropped by more than 60 % in the last 7 years : from β¬20 billion in net investment in 2008 to β 13 billion today ( 2008 : β¬53 billion gross investment, depreciation β¬33 billion. 2015 : β¬19 billion gross investment, depreciation β¬32 billion ). so very few would disagree that the country now needs an investment shock. the question of course is where such a shock might come from, given that an adjustment programme is in place. before going into more detail on this, let me say that there are technical ways to incorporate this investment dimension in an adjustment programme ( see my article in the wall street journal ( 2012 ), adding a new dimension to the two standard concepts of conditionality, namely fiscal and structural conditionality, that of investment conditionality ). i will indicatively give you one
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lending to the economy even if truly adverse scenarios materialise, as shown by the ecb β s vulnerability analysis published in july 2020. this shows that in the field of banking regulation, we did not waste the previous crisis and learnt our lessons well. my second point relates to regulatory response. the relief package that the ecb banking supervision announced in march was designed to ensure that banks can keep lending to the contracting economy. for instance, banks were allowed to temporarily operate below the level of capital defined by the bank - specific pillar 2 capital requirements, namely pillar ii guidance. 1 / 2 bis central bankers'speeches in lithuania, macroprudential policy was a key domain of the regulatory response package. prior to 2020, critics would say that our macroprudential set - up was perhaps too wide - ranging. but this crisis showed, i believe, that our policy stance was the right one. first, it helped prevent a deterioration in lending standards and a build - up of systemic risk in the run up to the covid - 19 shock. and second, when the time came, we implemented countercyclical policy decisions in line with the intended functioning of the framework. for instance, in mid - march, the bank of lithuania fully released the counter - cyclical capital buffer from 1 % to 0 %. overall, the relaxation of various requirements has increased the lending potential of banks in lithuania by β¬2 billion, or by a third, compared to 2019. of course, we are talking about potential here, not the real world. but the real - world data has been encouraging, at least in terms of lending to households, which has broadly returned to the pre - pandemic levels. going forward, policymakers should not β waste a good crisis β this time as well, and take a fresh look at the existing macroprudential framework. we could even consider novel ways of applying macroprudential tools β such as the application of borrower - based measures during the cycle, e. g. relaxing the loan - to - value or debt - service - to - income requirements in times of crisis. finally, i would like to make a point on the long - term issues of the european banking sector. the first issue here is inadequate bank profitability. in this regard, there is a need for consolidation via mergers and acquisitions to make the european banking sector leaner. completing the banking union by creating a european deposit insurance scheme ( edis ) would open doors for true
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corporations, the low level of interest rates has helped to improve their balance sheets after a period of excessive investment and borrowing. this restructuring, or repair of balance sheets, has been very important in the euro area. more recently, however, low interest rates have fuelled an increase in borrowing and a tendency of firms to borrow short term, rather than long term. but despite this development over the past year, the ratio of short - term to long - term obligations of euro area firms is not high. the flattening of the yield curve has exerted some pressure on bank profits. however, the profitability of euro area banks has evolved in a very satisfactory manner as a result of the positive influence of other factors, increased lending, especially mortgage lending, higher non - interest income and as a consequence of cost cutting and a reduction in the flow of provisions. low interest rates may encourage banks to increase their holdings of more risky assets and this could have implications if credit conditions change when interest rates increase. is that the same as saying that there are no risks to economic growth of rising interest rates? it is not the same thing, but under the present circumstances the consequences would be similar. with respect to the specific adjustment in the monetary policy stance of the ecb that took place earlier this month, i would not expect this to have a significant adverse effect, if any, on the ongoing economic recovery in the euro area. will the general global monetary policy tightening have an impact on euro area growth? in principle, a tightening of monetary policy β global and domestic - would be expected to contain aggregate demand growth. the extent, however, of this effect depends on the initial conditions and on the influence of a variety of other factors. in the us, despite the substantial increase in interest rates since the middle of 2004 which followed a fairly long period of low interest rates, economic growth has remained robust because of the cumulative impact of the previous monetary accommodation and of other factors that have at least partly counterbalanced the effects of higher interest rates. an important channel through which monetary policy influences the economy is through its effects on long - term interest rates. if long - term interest rates remain at a low level β as a result of favourable inflation expectations influenced by a credible monetary policy oriented towards price stability and as a consequence of the impact of other factors β then the effect on economic activity of a rise in short - term interest rates is going to be more muted. moreover, the expected strength of euro area economic growth in
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long - term debt sustainability in various parts of the world. these developments have further threatened financial stability as financial institutions hold a significant share of troubled countries β government bonds. here, the onus is clearly on governments to engage in the necessary fiscal corrections. however, this does not only mean exiting from the fiscal stimulus and support measures taken in response to the crisis. even with these measures reversed, fiscal policy still faces at least three important challenges. first, excluding crisis - related stimulus measures, most advanced economies are still left with historically high deficit - to - gdp ratios, which, in the context of today, are largely structural in nature. to put it another way, given the lower actual and potential post - crisis output and correspondingly lower post - crisis tax revenues, pre - crisis spending levels are no longer affordable. secondly, government debt - to - gdp ratios are now much higher than before the crisis, and the guarantees provided to the financial sector have added to the potential liabilities. thirdly, over the next two to three decades, governments face rising costs related to ageing populations. due to the combination of these factors, questions are β unsurprisingly β being asked about the ability of some governments to bring their public finances onto a sustainable path over the medium term. in this regard, let me point out that the state of public finances in the euro area differs significantly across countries. according to the imf the debt - to - gdp ratio ranges from 6 percent in estonia to 152 percent in greece in 2011, while the aggregate debt - to - gdp ratio for the euro area stands at 87 percent. but let me also emphasise that restoring sound public finances is not only a challenge for the euro area. as i mentioned before, government deficits and debt levels in many advanced economies outside the euro area have also risen to historically high levels, at least in a time of peace. for the largest industrialised countries such as the us, uk and japan, according to the imf the debt - to - gdp ratio in 2011 ranges from 83 percent in the uk, to 100 percent in the us and 229 percent in japan. the state of public finances clearly matters for central banks. at least from a theoretical point of view, one of the reasons is that monetary policy could in principle be used β or abused β to alleviate a government β s budgetary woes. the regime that has prevailed in advanced economies over the last three decades has been a regime of monetary dominance, under which
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a ten - day holding period and a 99 percent confidence interval, thereby creating potential arbitrage opportunities between the banking book and the trading book. the u. s. agencies issued their proposals to revise market risk capital requirements at the same time as the basel ii proposals, and we seek comment on the market risk proposals as well. notably, in the united states we would continue to have banks with significant trading book activity hold additional capital for the risks inherent in that line of business, whether they remain basel i banks or move to basel ii. given the international composition of this audience, i want to offer a few thoughts about the crossborder issues related to basel ii implementation. as you know, the u. s. agencies participate with other national supervisors in the accord implementation group and other groups to identify differences in implementation and discuss possible ways to harmonize rules and thereby reduce burden on crossborder banking organizations. we recognize that the adoption of differing approaches to basel ii by various countries may create challenges for banking organizations that operate in multiple jurisdictions, but it is good to remember that cross - border banking has always raised specific challenges that supervisors from various countries have worked hard to address. let me assure all bankers here that supervisors are aware that the process of adopting national versions of basel ii has heightened concerns about home - host issues. the federal reserve and other u. s. agencies have, for many years, worked with international counterparts to limit the difficulty and burden that have arisen as foreign banks have entered u. s. markets and as u. s. banks have established operations in other jurisdictions. we encourage bankers that have questions and concerns about home - host issues to promptly communicate with their regulators in all jurisdictions so that the issues can be addressed. enterprise compliance risk management and bsa / aml i would now like to turn to another area of the financial sector that regulators are focused on : compliance - risk management. this type of risk may result when an organization fails to comply with the laws, regulations, or standards or codes of conduct that are applicable to its business activities and functions. the federal reserve expects each banking organization to have a compliance infrastructure and culture in place across the entire institution that can identify and effectively control the compliance risks it faces. to create appropriate compliance - risk controls, organizations must first understand risks across the entire entity. managers should be expected to evaluate the risks and controls within their scope of authority at least annually. i also emphasize the need for the board of directors and senior management to
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they obtain from community banks. rather, small businesses are, on average, using more financial services and types of services than they have in the past, and are obtaining these services from a greater number and wider variety of financial institutions, often including community banks. 6 to remain successful, any business must adapt to a changing competitive environment. the adaptation of community banks over the past two decades is evidenced by the substantial changes in their balance sheets, on both the asset and liability sides. on the asset side, both the average ratio of total loans to total assets and the average share of lending comprised by commercial real estate loans have increased markedly. on the liability side, reliance on deposits of individuals, partnerships, and corporations has declined somewhat, and there has been a dramatic increase in the share of community banks that hold brokered deposits. in addition, community banks have become more reliant on non - interest sources of revenue. these changes in business strategy, which undoubtedly helped to maintain community bank profitability over much of the past two decades, may in the current financial environment exacerbate the risks faced by community banks. in this difficult operating environment, federal reserve examiners are encouraging community banks to focus on maintaining sound loan quality and strong credit administration practices. in addition, they are working with community banks to ensure that they maintain appropriate capital planning, credit administration, and liquidity management policies. for example, earlier this year, the federal reserve issued supervisory guidance ( sr letter 09 - 4 ) that reemphasized the importance of capital planning and prudent dividend policies for bank holding companies ( bhcs ) and their bank subsidiaries. this guidance β which was directed at all bhcs, both large and small β reminded them to ensure that they remain sources of strength to their bank subsidiaries and to curtail dividends when their financial condition is under stress. a key part of any effective capital planning process is an evaluation of the risk posed by concentrations in specific portfolios of loans or other assets, and of the buffers necessary to offset potential losses on these holdings. in late 2006, the banking agencies issued guidance addressing concentrations in commercial real estate lending. this guidance set forth supervisory expectations for the management of risks stemming from these and other concentrations, including consideration of the effects of stressed market conditions on a bank's assets and capital. in the time since this guidance was issued, examiners report that many community banks have conducted rigorous and effective stress tests. but examiners have also visited many
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andreas dombret : moving together β one year of european banking supervision speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the ese conference 2015 β financial supervision in europe β on the right track? β, prague, 2 october 2015. * 1. * * a courageous mission ladies and gentlemen ever since the idea of an integrated europe first arose, political convergence has been accompanied by scepticism and even by fears. how could nations and cultures with various languages, mentalities and histories develop a common understanding of government and administration? without a blueprint solution, europeans adopted a best - practice approach that is nicely captured by a quote from shakespeare : β wisely and slow. they stumble that run fast. β against this backdrop, the mission of a unified banking supervision network must have appeared almost illusionary. nevertheless, on 4 november 2014 it became a reality, and the ecb was designated as its leading authority, thereby becoming directly responsible for what turned out to be 85 % of banking balance sheets in the euro area. such a transition naturally involves acquiring skills and expertise : with that in mind, human resources equating to roughly 1, 100 full - time equivalents were newly appointed by the ecb. and it also meant developing administration systems and procedures from scratch. admittedly, europe has by now witnessed quite a few very influential developments on a european scale. but while the european union developed over decades and the euro was implemented as a common currency over a period of approximately ten years, the single supervisory mechanism, or ssm for short, became a fully fledged and operational organisation after around only two years of preparations. such a courageous mission could only be ratified under very specific circumstances. in fact, i believe that it was only realisable in the face of the financial and sovereign debt crises and the vulnerability of the common currency area that was revealed as a result. we experienced banks that were β too big to fail β and needed to be rescued. we also experienced banks that were caught in a vicious cycle together with their governments due to debt amalgamation. as a consequence, national supervisors were overburdened. good rules for the financial sector are not enough β they also need to be enforceable under bad circumstances. rules are worth little if you do not ensure that banks abide by them. therefore, one of the ssm β s primary goals was, and still is, to promote a trusted financial regime by protecting the common currency
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area from banks β exploitative potential. in addition, the ssm was designed to harmonise supervision, eliminate home biases, alleviate cross - border supervision and get an early and reliable overview of emerging risks β in short, to enhance the path towards a fully integrated financial sector in europe. the ssm was doomed to be successful because it had to be a key servant of financial stability as soon as it came into being. it also attracted attention because it had potential to serve as a compass for europe. moving together β is it working? after one year of the ssm, it is about time for a review. 2. components of the ssm β s success one year after its establishment, i can confirm that the launch of the ssm has been a success. but its success goes beyond a mere change of supervisory responsibilities. bis central bankers β speeches harmonisation and quality enhancement got underway beforehand with a comprehensive assessment that made sure that banks were well - capitalised from the outset. take a look at german banks β we witnessed recapitalisation even before the comprehensive assessment was carried out in 2014. in other countries, an overall β¬ 25 billion capital shortfall had to be straightened out as a result of the comprehensive assessment. corrections to banks β assets worth β¬ 48 billion and harmonisation of the definition of non - performing loans ( leading to corrections of β¬ 136 billion ) also made clear that the need for harmonisation was truly significant and that the new supervisory player was recognised as a serious authority from the beginning. putting such β hard facts β to one side, we are also seeing the benefits of the new regime in our daily business. there are 123 joint supervisory teams β or jsts for short β for those banks that are directly supervised by the ecb. bundesbank supervisors are participating in 22 jsts for german banks as well as in 12 host jsts for foreign banks. this multinational interaction noticeably helps preclude home bias. however, we cannot rule out the continued existence of some preconceptions because they may be unintentionally masked by habits and different attitudes towards supervision. but a cross - national dialogue is probably the most productive way to discover and discuss partial supervisory routines. furthermore, a level playing field and cross - border supervision are facilitated within the ssm area. of course, the european single rulebook and the european banking authority have their part to play in this development. but when it comes to the cross - border supervision of a banking group, institutional
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social market economy : continuing the success story with practical support and advice keynote speech marking the 70th anniversary of the german economic institute 27. 05. 2021 | virtual | jens weidmann de fr 1 introduction 2 guiding principles of the social market economy 3 how the social market economy has evolved over time 4 scientiο¬cally - based policy advice 5 relationship between market and government after the pandemic 6 conclusion 1 introduction mr kirchhoff, members of the presidium and of the management board of the german economic institute, ladies and gentlemen, it gives me great pleasure to be with you here today to deliver the keynote speech. first things ο¬rst : please accept my heartfelt congratulations on your institute β s 70th anniversary. the history of the german economic institute is closely intertwined with that of our country β s economic system. that β s why we need to turn the clock back a little further than 70 years to understand how the german economic institute we know today came into being. to the spring of 1948, in fact, when much of germany still lay in ruins, and many people didn β t ( tonne ) have enough to eat or a roof over their heads. rationing and price controls were in force, so people needed to present a ration coupon to buy groceries. and shops had nothing but empty shelves. only the black market was booming. around this time, the british and american occupation zones saw a new director of the economic council take [UNK]. journalists ο¬ocked to attend the newcomer β s inaugural press conference. one of them was marion graο¬n donhoff, a young economist who later became the editor - in - chief and co - publisher of the german weekly newspaper β die zeit β. horriο¬ed at what she heard there, she reported back to her colleagues, telling them that if germany wasn β t ( tonne ) already ruined in the ο¬rst place, this man with his crazy plan to do away with all the economic controls would certainly pull it off. heaven help us if he should ever become the economics minister, she added. the man who elicited such a dire warning from marion graο¬n donhoff turned out to be none other than the later economics minister ludwig erhard. in parallel to introducing the deutsche mark, he dared the unthinkable. turning a deaf ear to the warnings of his advisors and the allies β experts, he lifted restrictions and did away with many price controls and rationing rules
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is certainly adequate. nevertheless, when interest rates stay very low for a very long time, we may experience unwanted side - effects. one of these side - effects is the search for yield. investors may eventually increase the risk of their investments to make up for the shortfall in yields caused by low interest rates. and, indeed, it seems that investors already began their search for yield. in corporate debt markets, for instance, valuations are already somewhat stretched. and in the global lowinterest rate environment, ambitious valuations may well spread to other market segments. in this regard, the strong recovery in the property markets of some euro - area countries should set us thinking. take the german housing market, for example. between 2009 and 2012, prices in large cities rose by almost 25 %. and, in 2013, they increased by another 8. 9 %. calculations by the bundesbank already point to overvaluations in urban areas. nevertheless, when looking at the german market as a whole, the situation seems less dramatic. in 2013, prices rose by an average of 4. 5 % β a figure that does not give too much cause for concern. overall, prices in germany have not yet moved away from fundamentals. for me, warning bells would start ringing if there was a rapid increase in housing prices accompanied by a significant rise in lending. and even more warning bells would be ringing if this rise in credit was accompanied by deteriorating lending standards. having said that, i can assure you that at this point in time i am surrounded by silence. but it is not only bond markets and housing markets we have to look at. since we are at the nyse, let us take a look at stock markets. in 2013, there was only one way for most stock markets to go and that was up. the eurostoxx 50 increased by 18 %, the ftse 100 by 14 %, the dow jones by 28 %, and the nikkei skyrocketed by as much as 57 %. market volatility decreased, too. after years of risk aversion, sentiment switched to a β risk on β mode. did financial markets enter a new phase of β irrational exuberance β? such a verdict is certainly debatable. but financial markets are at least anticipating significant further improvements in economic fundamentals and prospects. and they are anticipating that governments around the world will continue to implement the necessary reforms. these expectations create vast scope for confidence shocks. this
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the rt hon sir edward george gbe : new economy - same old problems speech by the rt hon sir edward george gbe, governor of the bank of england, at the cbi national conference, held in birmingham, on 7 november 2000. * * * thank you, mr president. i β m honoured to have been invited back to address your annual conference. i remember very vividly my earlier visit to your conference in 1996. i remember reporting to you that the british economy was then into its fifth consecutive year - its nineteenth consecutive quarter - of relatively steady growth at an annual average rate of 2. 6 % ; that unemployment had fallen, pretty well month by month for most of that time, to below 7Β½ % ; and that inflation had averaged 2ΒΎ % over the previous four years - compared with over 10 % on average in the preceding two decades. the question then was could we keep up - or even improve upon - that performance. and my answer was a cautious yes - provided we met three conditions : a continuing firm grip on inflation ; continuing prudent and sustainable fiscal policy ; and continuing structural, supply - side flexibility. well, that cautious optimism was amply justified. today, we are well into our ninth consecutive year our thirty - third consecutive quarter of relatively steady growth ( despite having to absorb the global emerging markets financial shock of a couple of years ago ) at an annual average rate of 2. 8 % ; the number of people in employment has risen to an all - time high ; the rate of unemployment, on a claimant count basis, has fallen to 3. 6 %, which is the lowest rate for 25 years for the uk as a whole and the lowest rate for 20 years in every individual region of the uk ; and retail price inflation on the target rpix measure has now averaged 2. 7 % over the past eight years, and on the standardised hicp measure is currently the lowest rate in europe. and if you ask me today the same question - can we keep up that performance, my answer is still a cautious yes - on the same three conditions - low and stable inflation, fiscal prudence and supply - side flexibility. now i am very well aware that some of you - perhaps many of you - thinking of your own businesses may conclude that i β m living on a different planet. beneath the surface of these encouraging macroeconomic data, there is - and has been for some time a serious imbalance, with some parts of the economy
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doing very well ( including many of the services sectors and some manufacturing activity ) while other parts of the economy ( including much of agriculture, many manufacturing businesses and even other services sectors such as inward tourism ) face the toughest business conditions that many of them can remember. to take just manufacturing, total output has risen by only 2 % over the past two years, and it has actually fallen by 0. 9 % if you exclude the so - called β high tech β sectors ( ie computers, office and telecommunications equipment and electronic components ). total employment in manufacturing has fallen over that period by some 230, 000, of which 200, 000 were outside the β high tech β sectors. for what it β s worth there is a similar imbalance in the us, where total manufacturing has increased by 10Β½ % over the past two years, but by only about 1Β½ % similarly excluding the hi - tech sectors ; total employment in us manufacturing has fallen by some 435, 000, but by nearly 600, 000, outside the β high tech β sectors. there is no single explanation for these developments. they result partly from continuing and unavoidable long - term structural adjustment of capacity to market demand ; it results also partly from the effect of increasing global economic integration, inducing the relocation of manufacturing capacity in response to shifts in comparative productive advantage. but there is no doubt that some of these effects have been aggravated by exaggerated changes in foreign exchange rates - including the progressive weakening of the euro. that is a particular problem for the uk because of the relatively large proportion of our economy exposed to competition from the euro zone ( both in terms of our bilateral trade and competition in third countries ). even as a central banker i can understand why many euro - exposed businesses feel hard done by in present circumstances. and i can understand why they in particular might urge the monetary policy committee to signal that uk short - term interest rates have peaked. they make a seductive case. but in fact it β s not as straightforward as it sounds. if the intention is that by signalling that our interest rates have peaked we might weaken sterling against the euro, it is not at all obvious that it would in fact have that effect. today β s exchange markets between the major currencies are apparently being driven primarily by massive longer - term capital flows - direct and portfolio investments - which, for the time being, are overriding more conventional β fundamentals β. those longer - term capital flows in turn appear to be driven more by investors
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however cognisant of the current cost - push pressures and the potential of these to filter through to more generalised price pressures. these pressures will be closely monitored, and the mpc will take timeous action to ensure that second round effects do not take hold and that inflation pressures are kept in check. 6. conclusion to conclude, uncertainty in the global environment has not abated, as reflected by increased volatility in financial markets. while the global recovery has proceeded at a moderate pace, it remains unbalanced and uneven. to this end, the g20 is addressing issues of global imbalances and also reflecting on the future global monetary system. such developments will have an impact on south africa and policy developments going forward, as we are part of the global economy and one of the more liquid amongst emerging market financial markets. south africa β s growth outlook has improved, although it remains below pre - crisis levels and below that of other emerging and developing countries. inflation has recently trended higher, and while the bank β s forecast shows that cpi will breach the upper end of the target range, based on current information the mpc expects that this will be a temporary breach. however, developments will be closely monitored for any second round effects which could result in broader based price pressures. thank you. bis central bankers β speeches
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policy divergence with the united states β a tradeoff with which i am personally very familiar. spillovers from recent policy tightening monetary policy divergence remains a familiar theme today, but the focus has obviously shifted to the consequences of tighter u. s. monetary policy for the global economy. policy divergence is an ongoing concern given that most afes and many emes have continued to pursue highly accommodative monetary policies that remain appropriate in light of their weaker cyclical positions and subdued levels of underlying inflation. many observers point to the β taper tantrum β in 2013 as illustrating how monetary tightening by the federal reserve can potentially have strong contractionary effects on foreign financial conditions. subsequently, the expectation that a steadily improving u. s. labor market would call for tighter u. s. monetary policy β and hence imply greater monetary divergence with our trading partners β helped drive a sharp appreciation of the dollar between the middle of 2014 and the end of last year that was accompanied by capital outflows from many emes. against this backdrop and the concerns it raises, the reaction in financial markets to the fomc β s 1 / 3 bis central bankers'speeches decisions to increase the target range for the federal funds rate following its december 2016 and march 2017 meetings β by a cumulative total of 50 basis points β seems benign. the yields on risky foreign bonds, especially in emes, have continued to decline to below historical norms, and global stock prices have risen. the dollar has depreciated since mid - december, especially against emes, and the emes have experienced capital inflows. in my view, this favorable reaction partly reflects a view by market participants that the rate hikes are a signal of the fomc β s confidence in the underlying prospects for the u. s. economy that in turn has increased confidence in the global outlook : a strong u. s. economy is a major plus for the global economy. but the main reason for the positive market reaction is that foreign output expansions appear more entrenched, and downside risks to those economies noticeably smaller than in recent years. in europe, unemployment has fallen steadily ; inflation and inflation expectations are moving toward central bank targets ; and, while brexit entails many unknowns, so far it has not resulted in significant financial market disruptions. china β s economy also appears to be on a more solid footing, which has helped stabilize the renminbi as well as support growth in other em
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guy debelle : global influences on domestic monetary policy address by mr guy debelle, deputy governor of the reserve bank of australia, to the committee for economic development of australia ( ceda ) mid - year economic update, adelaide, 21 july 2017. * * * thanks to dan rees and rachael mccririck for their work on the neutral rate, which this draws directly on. there are a large number of factors that the reserve bank board takes into consideration in making its interest rate decision each month, both domestic and global. today i would like to talk about some of the global influences on domestic monetary policy. as you are well aware, the australian economy doesn β t operate in isolation from the rest of the world. this is also true when it comes to monetary policy. while the goals of monetary policy are very much domestic, in terms of inflation and employment, the influences on the achievement of these goals are both domestic and global. in talking about the global influences on the setting of monetary policy, i will make the probably obvious point that the policy rate here in australia is at a historic low, in no small part because policy rates elsewhere in the world are also around historic lows. why are global policy rates as low as they are? part of the explanation is that to meet their policy goals, central banks in other advanced economies have had expansionary policy settings since the start of the global financial crisis. moreover, in the largest advanced economies, policymakers have provided further monetary stimulus through large asset purchase programs, which have seen central bank balance sheets increase significantly. another part of the explanation is that the neutral level of the policy rate has declined in most countries, including here in australia. that is, the level of the policy rate where monetary policy is neither providing stimulus nor restraint is lower than it used to be. central banks have had to set their policy rates even lower than that already lower neutral policy rate to provide the appropriate stimulus to their economies. i will start by talking about four common global factors that have led to the expansionary monetary policy settings seen in most advanced economies for almost a decade. these four factors are present in australia to varying degrees. i will then discuss the neutral policy rate and its decline over the past decade. i will finish with some comments on the influence of global financial factors on domestic monetary policy considerations. four common global factors the first and most obvious factor influencing monetary policy settings globally is the financial crisis and its aftermath. the large and rapid decline in policy rate
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we must get closer to 2 / 11 bis central bankers'speeches the point where wage pressures materialise. wage growth in australia is subdued, as it is elsewhere. one noteworthy difference in australia is that labour productivity growth has generally been higher than it has been in other countries over recent years. as a result, there has been no growth in unit labour costs ( that is, wages adjusted for productivity ) in australia for five years, whereas in other countries, unit labour cost growth has been quite a bit higher. the fourth and last common factor is the sustained low inflation that has been evident globally for the past decade ( graph 2 ). this is a direct consequence of the three previous factors i have just talked about. in addition to those influences, there has been a continuation of the disinflationary pressure resulting from the integration of china into the global economy. there are signs that this latter force might be waning, with producer prices in china actually growing, following many years of continual, often quite substantial, declines. throughout the past decade, expectations about future inflation have remained broadly anchored, which, at times, has helped stave off a shift towards deflation, but currently may be dampening the prospects of a sustained pick - up in global inflation. 3 / 11 bis central bankers'speeches these four factors β the subdued global recovery, low investment, subdued wages growth despite low unemployment rates and low inflation β are the primary explanation for the very stimulatory policy settings in place globally ( graph 3 ). the fact that they are at such low levels has a material influence on why the policy interest rate in australia is also at a historically low level. 4 / 11 bis central bankers'speeches beyond these factors that i have just discussed, another significant factor contributing to the low level of policy rates globally is that the neutral policy rate in many countries has declined over the past decade. the neutral interest rate the neutral interest rate provides a benchmark for assessing the current stance of monetary policy. if the real policy rate β that is, the cash rate less inflation expectations β is below the neutral rate, then monetary policy is exerting an expansionary influence on the economy. if the real policy rate is above the neutral rate, then monetary policy is exerting a contractionary influence on the economy. the neutral rate is often associated with the turn of the 20th century swedish economist knut wicksell and was picked up by keynes. 4 the previous governor glenn stevens discussed the neutral rate
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trend. housing investment is likely to continue to trend moderately upward, supported by the improvement in household income and the view that interest rates will only rise from current levels, as land prices are starting to rise particularly in major metropolitan areas. increases in household spending will feed back to the corporate sector via increases in sales and profits, and thus, a virtuous circle between the household and corporate sectors is likely to keep operating. the second element is that there is likely to be a cyclical slowdown in the economic growth rate as the recovery has already lasted for over four years and is likely to mature. given the high level of corporate profits and the expansion in domestic and external demand, the momentum driving increases in business fixed investment is likely to be maintained. however, considering that there is a stable relationship in the long term between the capital stock and aggregate demand, the pace of increase in business fixed investment will probably slow eventually. business fixed investment has steadily increased for the third consecutive year since fiscal 2003, and this has resulted in high growth in the capital stock relative to the projected increase in aggregate demand. therefore, unless firms can make stronger forecasts for the economic growth rate and the rate of return on investment, it is becoming unlikely that they will keep up the current pace of increase in business fixed investment. in this situation, the growth rate of japan's economy is likely to slow toward the potential growth rate, which the bank estimates to be in the 1. 5 - 2 percent range. the forecast is around 2. 5 percent for fiscal 2006 and around 2 percent for fiscal 2007. the third element is that, as the economic recovery matures, a slowdown in the growth in productivity and upward pressure on wages are expected to exert upward pressure on prices. at an early stage of economic recovery, firms usually retain surplus labor and capacity and are therefore able to increase productivity by raising their rate of resource utilization. with the maturing of the economic recovery, however, firms have less scope to increase productivity in this way. as i have already explained, the output gap has closed, and as the economy is likely to continue expanding at a pace above its potential through fiscal 2007, the output gap is likely to become positive and then to widen moderately. moreover, in a situation of improving labor market conditions and with labor shortages being observed in a relatively wide range of industries, wages are likely to continue rising moderately. the rise in wages and the slowdown in the growth in productivity will together put upward pressure
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last disbursement of new loans is to take place. areas eligible for loans or investment range, for example, from environment and energy business, development of social infrastructure, medical and nursing care business, and regional revitalization business to business deployment in asian countries, and include efforts to support local industries. the measure is gradually producing positive effects as a catalyst β its intended purpose β since, although the maximum duration of loans provided under the measure is four years, more than 70 percent of actual individual loans or investments exceed this period. moreover, following the introduction of the measure, financial institutions have been establishing new dedicated funds and lending schemes, and some of them in certain cases have set a higher ceiling on the total amount of lending or investment than the 150 billion yen ceiling for the total amount of loans that they could obtain from the bank. bis central bankers β speeches iii. toward a sustainable growth path with price stability i will talk next about the structural problems facing the japanese economy. as i have explained, the economy has been showing signs of a moderate recovery but is still experiencing deflation because the growth momentum remains weak. the β lost decade β following the bursting of the bubble economy has unfortunately turned into β two lost decades. β it is necessary to consider what can be done to avoid a third lost decade. a. japan β s process of economic development let us look back on japan β s process of economic development in the past. right after the end of world war ii, japan looked to the affluent advanced economies of europe and the united states. at this point, japan enjoyed a latecomer advantage and, with hard work, was in a position to aim at catching up and even overtaking these economies relatively quickly. moreover, benefiting from a rise in the working - age population and the so - called population bonus β the increase in the share of the working - age population in the total population β it was easy to accelerate growth. furthermore, with industrialization having already gotten underway before the war, japan at the time was among the few countries that could produce high - quality manufactured goods at a low price and had few competitors in the international market. this favorable environment and japan β s economic model β based on detailed government industrial policy, strong support for firms from the main bank system, and strong employee loyalty based on the seniority system and lifetime employment β helped form a positive cycle facilitating a high rate of growth. as a result, in 1968, japan became the world β s second largest
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likely to become larger, more frequent and possibly more persistent amid rising political uncertainty, geoeconomic fragmentation, a possible tariff war and climate change. these driving factors reinforce each other and have non - linear effects on inflation and output. central bankers need to timely assess whether such supply - side price shocks are transitory or more permanent entailing a risk of de - anchoring inflation expectations. to this end, we need to collect more granular data and develop further our analytical tools to deepen our understanding of both the characteristics of the price shock and the complexities of the environment in which it occurs. the recent high - inflation episode is a good example. first, it has shown that commodities that are critical for production and more upstream along the supply chain are likely to create larger shifts in relative sectoral prices and spill over to core inflation. second, a combination of different types of supply and demand shocks amid structural transformations of the economies can blur the assessment of the impact of a commodity price shock on inflation and output, complicating monetary policy. one lesson from the recent experience of the post - pandemic surge of inflation is that existing models failed to predict it. central banks need to develop new tools which are able to identify the nature of the shock ( supply vs demand ) in real time and assess its implications for inflation. to this end, the bank of greece is developing forecasting models of inflation based on textual indicators of supply and demand disturbances in commodity markets from news articles of reuters and dow jones. 3 with the help of ai, these indicators can be updated on a daily basis and help predict inflation more accurately. preliminary findings of this research project, suggest that these indicators provide distinct information about future inflation movements relative to existing predictors, inflation expectations and survey forecasts. overall, they reduce out - of - sample inflation forecast errors by up to 30 percent. for energy - importing economies, like greece, the nature of energy price shocks, either supply - or demand - driven, is less relevant when assessing their overall economic impact. in particular, research shows that in european economies both types of global energy price shocks tend to influence wages similarly, with largely short - lived and transitory effects. 4 the most pivotal factors in driving inflation sharply upward during the recent inflation episode were the size and persistence of the energy price shock rather than its nature. the large and sustained shock necessitated a forceful monetary policy tightening cycle to curb inflation. domestic structural factors largely shape the transmission of commodity price changes to
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and increasingly outward - looking economy. as at the end of 2003, there were sixteen banks licensed to operate in or from malta. of these, eight were deposit money banks catering largely for the domestic market and licensed to transact in both the domestic and in foreign currencies. the other eight were international banks licensed to carry on banking business almost exclusively with non - residents and in foreign currency only. it should be noted that the distinction between domestic and international banks is administrative rather than legal, and is based simply on each institution β s choice as to whether or not to apply for a licence to operate domestically or to deal only with non - residents. otherwise all banking institutions are subject to the same regulatory and supervisory regime. with the coming into force of the single european passport for credit institutions, moreover, even this administrative distinction will become largely irrelevant. nevertheless, the international banks are without exception wholesale banks, while at least half of the domestic banks are retail banks, of which two have an extensive branch network. the impact of the international banks on employment and national income is still modest, although it is growing steadily. but they contribute substantially to the transfer of financial and technological know - how and to increased competition, as well as to the international integration of the maltese financial system. last year, for instance, one of these banks, which specialises in trade finance, acquired a controlling share in the london forfaiting company plc, and more recently concluded a deal for factoring in india. as for the domestic banking sector, which at the end of 2003 accounted for over 60 % of the lending portfolio and 80 % of the deposit liabilities of the entire banking system, this remains highly concentrated, reflecting the small size of the market and the history of the industry. in fact, until recently, the two largest banks accounted for over 90 % of the sector β s assets, though this share is now closer to 75 % as another two banks have since been licensed to operate domestically. today maltese banks are almost entirely in private hands, and at least five of the domestic banks, including one of the major ones, are foreign owned, while another, smaller bank is partly foreign owned. the government still retains a 25 % stake in bank of valletta, one of the two larger domestic banks, but it has stated its intention to divest itself of this holding and is currently looking for a strategic partner. as the economy developed and confidence in the banks increased, bank intermediation in malta, which was rather
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exchange controls to money supply management under floating exchange rates, the swiss national bank 1907 β 2007. bis central bankers β speeches further monetary policy expansion in the euro area ( from mid - 2014 ) now we come to the third phase, shaped by quantitative easing in the euro area. economic recovery in the euro area was slow, although the ecb β s promise in july 2012 to do everything necessary to preserve the euro greatly reduced market uncertainty. while the economy was tentatively getting back on its feet, inflation in the euro area dipped below 2 % at the end of 2013 and continued to fall from there. at the beginning of 2015, it slid into negative territory, giving rise to concerns about whether inflation expectations were well anchored ( cf. chart 13 ). in june 2014, the ecb lowered its main refinancing rate to 0. 15 % and its deposit rate to below zero. today, they are at 0. 05 % and β 0. 3 % respectively. in lowering the interest rate into negative territory, the ecb followed the example of danmarks nationalbank, which had already introduced negative deposit rates for banks in 2012. the primary goal of the ecb was, however, not the same as that of denmark ( which was to reduce capital inflows ) ; instead, it sought to increase inflation by stimulating lending. 6 from mid - 2014, the ecb sent ever clearer signals that it would be substantially easing its monetary policy. at the same time, there were increasing signs that the us federal reserve would be exiting its zero interest rate policy. against this backdrop, the euro began to depreciate considerably not only against the us dollar, but also against the pound sterling. between mid - 2014 and the beginning of 2015, the euro lost almost 15 % against the pound and more than 20 % against the us dollar ( cf. chart 14 ). a phase of general euro weakness set in. finally, on 22 january 2015, the ecb announced a quantitative easing programme going well beyond market expectations in terms of length, target volumes and the wide range of the securities eligible for purchase. the euro lost even more ground against the us dollar and the pound sterling. for its neighbours, the ecb β s monetary policy easing had both positive and negative effects. on the one hand, the measures promised to support economic recovery in the euro area, which, thanks to real economic linkages, would also benefit neighbouring states. on the other hand, as with the us dollar and the
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the riksbank also began its own quantitative easing programme and announced that it would intervene on the foreign exchange market if necessary. the czech national bank reacted with more foreign exchange market interventions, but decided not to implement negative interest. the table shows values for november 2014, since the snb β s announcement in december of a rate of β 0. 25 % on sight deposits with effect from january 2015 immediately impacted market interest rates. by january 2016, the situation had eased enough for danmarks nationalbank to raise the interest rate to β 0. 65 %. bis central bankers β speeches by discontinuing the minimum exchange rate, the snb regained some of its ability to conduct monetary policy. the new monetary policy stance is beginning to have an impact. since the minimum exchange rate was discontinued, there have been periods of great uncertainty on the financial markets in connection with greece, but also with china and other emerging economies. this would normally have caused the swiss franc to appreciate, whereas the franc has actually weakened slightly over the last 12 months. nonetheless, the swiss franc remains considerably overvalued against the euro in real terms. i draw the following conclusion for the third phase : unconventional monetary policy measures are now widespread in europe and have given central banks slightly more room for manoeuvre. the riksbank and the ecb are operating quantitative easing programmes. the central banks of the czech republic, denmark, sweden and switzerland are prepared to intervene in the foreign exchange market as necessary. and finally, danmarks nationalbank, the ecb, the riksbank and the snb have all introduced negative interest rates. 10 what kind of impact have negative rates had from a monetary policy perspective? as hoped, they have contributed to reducing upward pressure in the neighbouring countries of the euro area. however, corporate financing conditions have not significantly improved, unlike with a conventional reduction in interest rates, and mortgage rates have even risen in some cases. the cost / benefit ratio of unconventional monetary policy instruments must be continually reassessed. if an instrument is no longer having the desired effect after a change in prevailing conditions, monetary policy should be adjusted accordingly. in this regard, it is of central importance that not only the short - term costs and benefits are analysed, but also the long - term consequences. overall, those euro area neighbours with an independent monetary policy have thus far emerged from the crisis in reasonably good shape ( cf. chart 17 ). gdp in switzerland and sweden is currently
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ardian fullani : opening, extension and modernisation of the primary and secondary treasury bill market address by mr ardian fullani, governor of the bank of albania, at a meeting with the minister of finance and representatives of all banks in albania, tirana, 8 april 2005. * * * honored ladies and gentlemen! first of all i have the pleasure to thank you for your willingness in finding the time to take part in this work meeting. i would also thank your technical staff for the devotion shown in dealing with this issue, which constitutes one of our priorities at the bank of albania. at the bank of albania conference on β central banking in the time of integration β i launched, interalia, the idea of the need for qualitative developments in the banking and financial system and this as closely connected with the need for further increasing the intermediation role of this system in the economy. it is understandable that the implementation of this idea would simultaneously require the giving of more possibilities to the banking system, so that this system carries out its role better and more actively. the topic we are discussing today is in this line. i am strongly convinced that the treatment of this issue did not appear as something unexpected, but it is a logical result of the positive developments taking place so far and the banking system awareness to be more active in its role for raising public confidence in the system. in the line of this logic, the raising of confidence would bring about its positive effects even on increasing their banking activity, which will be in compliance with their objective to be in the market with as much dignity as possible. in this discussion i will not focus on the technical aspect of cause explanation and process implementation, which i consider as exhausted by discussions made between respective technical staff, but i will focus on what we intend to reach and on the shortest and safest way to complete this process successfully. also, i would like to clarify that the individuals will continue to participate in the primary market of securities and this market will continue to be organized by the bank of albania. what we intend to reach through this process is : 1. the realization of a smooth transition process, at the smallest cost possible, in terms of maintaining the participation of individuals in the primary market. 2. the reduction of the time which is needed for the realization of treasury bill primary market auction. 3. the increasing possibilities to apply into practice the principle β delivery versus payment β for operations that will be performed in the secondary and retail treasury bill market.
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emmanuel tumusiime - mutebile : bank of uganda β s position on the exchange rate statement by prof emmanuel tumusiime - mutebile, governor of the bank of uganda, kampala, 19 january 2011. * * * i think that it is now necessary to state clearly bank of uganda β s position on the exchange rate. we believe that the current level of the uganda shilling / dollar exchange rate is undervalued. moreover, further depreciation will be counterproductive for macroeconomic management, especially because of the impact this will have on the prices of imported goods and hence on consumer price inflation. consequently, the bank of uganda intends to adopt a more aggressive stance to support the exchange rate. we sold dollars yesterday to the interbank market. we are prepared to intervene again if necessary. we are complementing this by raising interest rates in the interbank market and on repo instruments. of course open market exchange rates are difficult to control and no central bank can guarantee to move the exchange rate in the direction it wants. however, i want to stress that we are not indifferent to further exchange rate depreciation and that for the immediate future, curbing such depreciation will be a priority of the bank of uganda β s macroeconomic management. bis central bankers β speeches
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to develop these models to better incorporate financial factors. neither can it be required that the models capture serious financial crises. this would probably require the development of special analytical tools and models. the role of monetary policy must be developed and clarified. even if improved supervision and regulation enable us to reduce the risk of serious financial imbalances accumulating, monetary policy will still face difficult dilemmas. the financial markets have a remarkable capacity to develop continually and to find ways past regulation. consequently, we cannot rely on supervision and regulation always succeeding in preventing financial imbalances from arising. in the future, we will certainly continue to see various forms of bubbles, in which asset prices increase in a manner that is not sustainable over the long term, together with a rapid growth in credit. in such cases, the central banks must take a position regarding whether and to which extent monetary policy should consider this phenomenon. the debate regarding the extent to which monetary policy should attempt to counteract the unsustainable development of credit growth and asset prices β a policy often called β leaning against the wind β β has been spurred by the current crisis. those who have doubts about such a policy maintain that it may entail an unnecessarily tight monetary policy, with costs in the form of a low utilisation of resources and low inflation, at the same time as monetary policy is deemed to be a blunt instrument to use against financial imbalances. according to this assessment, it would require excessively large and costly interest rate increases to prevent these imbalances from arising. such imbalances, of course, frequently build up in lars e. o. svensson discusses this in more depth in his speech β flexible inflation targeting : lessons from the financial crisis β, held on 21 september 2009 at de nederlansche bank, amsterdam. times of great optimism and excessive future confidence, and, in such a situation, increased interest rates may have a limited effect on lending and asset prices. it is entirely possible β and, in my opinion, perhaps even likely β that this assessment is correct, but i would like to emphasise that there exists a significant degree of uncertainty at this point in time. so far, research has not had much to say about the ability of monetary policy to counteract financial imbalances. naturally, this observation also implies an argument against any policy that strongly advocates a monetary policy actively aimed at preventing financial imbalances. however, my view is that, in certain situations,
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in order to stimulate the growth needed to help sweden out of the crisis. at present, it is not the time to counteract imbalances by leaning against the wind. however, should this development become cause for concern, there are other means for making mortgages more expensive for households and thus reducing demand for housing and subduing price development. one such method would be to require greater mortgage repayments. this would increase households β monthly expenses directly and would thus be an effective means of subduing demand. another method would be to lower the loan - to - value ratio of each property. both of these possibilities will be open to the banks themselves when they consider that there exists due cause. but they are also measures that finansinspektionen can prescribe if it is deemed that developments are beginning to be cause for concern. in its recently - published risk report, finansinspektionen discussed these possibilities. we at the riksbank will make an announcement when we feel that a serious imbalance risks accumulating. as regards the housing market, i do not believe that the greatest risk is a matter of either monetary policy or financial stability. the greatest risk is that more and more households forget that interest rates will be back at normal levels quite soon, which will entail mortgage interest expenditure of possibly three to four times current levels for those with variable interest rates. and most households in sweden have variable interest rates. we occasionally hear from analysts or the press that the riksbank is not making it sufficiently clear that interest rates will eventually rise. so let me repeat this once again in clear language, just to be on the safe side. when the economic upswing gathers speed β and the recovery has already started β interest rates and, accordingly, households β loan costs will rise very rapidly. this should be considered very carefully by those borrowing, just as it should be considered very carefully by bank staff handling lending to households.
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risks. however, the crisis also exposed the weaknesses in central bank liquidity management and the need for more flexible frameworks. 6. insulating south africa given this background, what is it then that south africa can do to insulate itself against these global risks? well - coordinated and sound policies are required going forward. south africa β s macroeconomic policies have served us well and the need for fiscal consolidation, whilst important to ensure continued fiscal sustainability, is less pressing if one compares the country to other developed markets. it has already been noted that while countercyclical policy did prevent a more severe recession, our public debt ratio remains comparatively low while there is a clear medium - term plan to reduce the budget deficit. policymakers need to monitor at all times global economic and financial sector developments, understand linkages between global and domestic developments, and ensure that policies and regulations are calibrated to allow appropriate responses in a flexible and quick manner. one of the reasons for south african banks coming out of this crisis in good shape is due to the prudent regulatory and supervisory framework. the g - 20, of which south africa is a member, continues to do much work on financial regulation, through the financial stability board ( fsb ) and the basel committee on banking supervision ( bcbs ). south africa is represented on both the bcbs and the fsb as well as various working groups. consequently, the developments and discussions in international fora are closely monitored to ensure the ongoing alignment of the south african framework with international developments where applicable and appropriate. south africa is also an active participant in the mutual assessment process ( map ), a working group formed by the g - 20 as part of its work to deal with the impact of the financial bank of england, 2009, the role of macro - prudential policy. crisis. the map working group was formed to provide the g - 20 with a framework for strong, sustainable and balanced growth. global co - ordination and global responses are required given the nature of the challenges we are facing, but that does not necessarily always imply uniform measures and synchronised timing. country - specific circumstances must continue to be taken into account. 7. conclusion although the worst of the sub - prime crisis is behind us, it has left behind a legacy of indebted nations, which will complicate the future conduct of both fiscal and monetary policy. these challenges, unless adequately addressed, could derail the nascent global economic recovery. the continued recovery
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executive management department an address by lesetja kganyago, governor of the south african reserve bank, at the launch of the mpc schools challenge, pretoria 21 july 2017 good morning ladies and gentlemen decisions whether to cut, increase, or keep interest rates unchanged are of enormous importance to the economy general, and they affect most people, either directly or indirectly. this often raises the question : how do central banks make these decisions, and specifically, what factors do they take into account in making these decisions. one of the channels that many central banks use to explain how they make these decisions and what factors they take into account is to run a competition for high school learners. typically, these competitions involve a group of learners forming themselves into a monetary policy committee and making a case either to cut, increase, or keep interest rates unchanged. the south african reserve bank began a pilot in 2012 in partnership with the gauteng department of education to : offer learners the opportunity to enhance their understanding of monetary policy and how it relates to the economy as a whole ; help learners understand better how the economy works ; assist learners to better understand how the sarb β s monetary policy committee makes decisions ; improve broad economic literacy in the country ; create an opportunity for learners to put the classroom economic theory into practice and thereby enhancing their understanding of economics ; stimulate interest among learners in a career as an economist ; and raise awareness and understanding of the role and responsibilities of the sarb. the mpc schools challenge has since been expanded to cover 7 provinces. we have also since partnered with the department of basic education and the provincial departments. we have had 450 schools participate in the challenge since 2012, involving 1 340 learners. by participation we mean schools whose team submitted an essay. a requirement of the programme is that participants take a combination of economics and mathematics subjects, excluding maths literacy. certain schools therefore do not qualify as they do not provide this learning combination. next year, the challenge will become national with the addition of kwazulu - natal and the western cape provinces. hence, today β s launch of the mpc schools challenge. the way the competition works is that each school must constitute a team of four learners who model themselves on the monetary policy committee ( mpc ). the team presents its case to a panel of sa reserve bank economists. representatives of the department of basic education moderate the outcome. to ensure that all entrants have access to the same basic data, the sarb provides learners with relevant economic data
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related to energy prices : core inflation was 1 % in the same month. oil prices seem to have bottomed out and this should help inflation return to positive territory over the course of 2016, thereby lowering real interest rates and making monetary policy more effective. [ slide 4 ] the new comprehensive package of measures adopted on 10 march 2016 made euro area monetary policy more accommodative. one of its distinctive features is that it targets the financing of the real economy. the new series of targeted refinancing operations ( dubbed β tltro 2 β ) should improve medium - term funding conditions for banks and foster bank lending to companies and households. insee : indicateur de climat des affaires et de retournement conjoncturel. bis central bankers β speeches 3 / structural policies moreover, monetary policy is not the only game in town. it is supported by structural reforms that increase potential growth, particularly in countries with a high unemployment rate. history has shown that ambitious reforms can contribute durably to growth. sweden in the 1990s and germany a decade later have demonstrated that structural reforms enhance employment rates, potential growth and resilience. they also reduce labour market duality, and provide more opportunities to new entrants in the labour market, particularly young people. in the wake of a severe crisis, sweden and germany rebuilt their economic models and, as a result, have been better able to weather the latest downturn. indeed, a number of european countries are conducting major reforms to bring high and sustainable growth back. those reforms are particularly challenging when it comes to the labour market, but they are needed. we need to improve labour flexibility and reduce the duality in the labour market between permanent and temporary contracts, which generates both high structural unemployment and inequality. the most emblematic example is spanish reforms. their results are impressive, especially when we consider the very difficult economic situation in the country during their implementation. since the beginning of 2013, spain has experienced a decrease in its unemployment rate of some 6 percentage points and spanish growth is nowadays one of the main drivers of the european recovery. contrary to preconceptions, france has also demonstrated in the past its capacity to meet the challenge of economic and social reform. in the 1990s, to prepare for the introduction of the euro, france pursued a competitive disinflation policy that proved highly effective. remember that in the late 1990s, france experienced the highest gdp growth and the weakest inflation rate among european countries, along
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with a significant fall in its unemployment rate. today, french reforms are heading in the right direction, [ slide 5 ] in particular the tax credit for competitiveness and investment ( cice ) and the responsibility and solidarity pact ( rsp ) that enhance the competitive strength of the french economy. a policy of administrative simplification, the so - called β simplification shock β, and a new law to sustain economic growth and entrepreneurship ( β loi macron β ), are also being conducted in order to rebuild business confidence. however, we are not there yet and a number of reforms need to be complemented. in particular, in the labour market : hopefully renewed progress will be made with the draft law under discussion in parliament. finally, in the euro area, fiscal policy is now more balanced since significant adjustment has already been achieved. structural efforts and a growth recovery have led to a reduction in deficits and to a stabilisation in the ratio of debt to gdp. this more balanced policy mix is an opportunity to engage in new ways of thinking and to strengthen the recovery via stronger economic coordination in europe. the room for manoeuvre in economic policy is highly heterogeneous across european countries, and each country should use its capacity to improve the overall situation [ slide 6 ]. european countries have done quite a lot on their own, but now we can and must do more to coordinate demandside policies and structural reforms at the european level. to do so, i would like to make two proposals. 4 / strengthen investment first, we need to improve investment financing [ slide 7 ]. our efforts should be put towards financing growth and innovation and towards finding the right mix between debt and equity financing solutions, while still preserving financial stability and consumer protection. in the eu, the european commission has launched several initiatives to serve these objectives, particularly the investment plan and the capital markets union. bis central bankers β speeches second, we need to focus on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. the european fund for strategic investments ( efsi ) drives the investment plan for europe. it supports strategic investments in key areas such as infrastructure, education, research, innovation, as well as risk finance for small businesses. through the use of limited public guarantees, it aims to foster private investments totalling eur 315 billion in three years. for the first year, the plan managed to trigger around eur 76 billion of
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association ( uba ) had a general meeting today and agreed to re - elect most if not all their current executives. i am pleased to announce that mr. samwiri njuki, md orient bank has been re - elected as chairman uba and mr. nick mbuvi, md barclays has been re - elected vice chairman of uba. congratulations. let me conclude by once again thanking you for being here this evening. may god bless you all.
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because managing risk is essential for a rational allocation of capital among competing investment projects, which is essential for economic growth. although the strategic objectives of management in the public sector are often different from those in the private sector, effective risk management is essential in both sectors. the timing of the workshop is especially opportune, coming in the wake of the most severe global financial crisis in more than 50 years. the global financial crisis has provided salutary lessons for risk managers in financial institutions all over the world. risk managers have begun to understand that financial risk is a much more complex phenomenon than had hitherto been realized, prior to the crisis, not least because risk can be generated endogenously within the financial system, rather than being simply the consequence of exogenous shocks to the financial system. the global financial crisis has demonstrated that even those assets and financial institutions regarded as relatively risk free β investment grade securities for example β can suffer substantial losses. we now know that tail risks, the low probability risk of very large losses β sometimes referred to as β black swans β β occur much more often than is predicted by many statistical models. risk managers have also learned that the liquidity of financial assets and institutions is much more fragile than they had previously thought, especially in transactions based financial systems, and that a drying up of liquidity can generate large losses in asset values. the value of rating agencies and the ratings that they provide have also become the subject of critical review as a result of their performance in the run up to the global financial crisis. reputable rating agencies issued panglossian ratings for securities, such as collaterised debt obligations, the risks of which they did not properly understand. investors who purchased these securities in the belief that they carried negligible risk suffered serious losses. looking ahead, it is difficult to be sanguine about the prospects for stability in global financial markets. the large structural imbalances which characterize the global economy will eventually have to be rectified ; a process which could generate further volatility in asset prices, such as the exchange rates of the major international currencies. the global economic crisis itself has severely damaged public finances in many of the industrialized economies and this is bound to have consequences for the price of government debt and possibly also exchange rates in the medium to long term. as a result, the type of assets which traditionally comprise the bulk of central bank foreign exchange reserves may become much more volatile in the future. in such circumstances
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policy response as much as possible to the primary mandates of the respective authorities. our primary mandate is inflation targeting and it will remain so. as you know, mexico wasn β t hit by a financial crisis in 2008 but nevertheless we felt the need to be prepared. by having a much stronger preventive attitude, we want to stop the events that really could compromise our inflation targeting objective. if we were to have a financial crisis, then the central bank might be forced to guide monetary policy by other considerations rather than inflation per se. we want to avoid that distraction by making sure the financial system remains strong. we see it as a serious attempt to fully gear monetary policy actions to inflation considerations. it β s difficult to say that you can avoid crises, but there is less chance if the authorities are making a coordinated attempt to stop them. as much as we can we want to keep the price stability and financial stability mandates distinct. that might not always happen but you have to at least try. what we want to avoid is a full - blown financial crisis because then you might not have the option to use monetary policy solely for controlling inflation. we have seen this at other central banks, which have used monetary instruments for financial sector issues. perhaps not in mexico, but elsewhere a lot of criticism has been directed at inflation targeting and central banks β focus on cpi inflation. is this criticism at all justified? right now i would say that we have to learn the lessons of recent episodes. at least from my first stock - taking of the issue, the conclusion that i β ve come to is that we, as central banks, have to pay close attention to what β s happening in financial markets. and, as much as there is compatibility between inflation fighting and maintaining a sound financial system, a central bank should act on it. when you were talking about data gathering before, what sources of data were neglected pre - crisis perhaps not just in mexico but elsewhere as well? in mexico we already have a pretty good system. we learnt our lesson in 1995 with the tequila crisis. right now mexico β s at the forefront of data gathering. we β ve taken care of the granularity of information. we have pretty much transaction - by - transaction information. however, we need to hold more information on transactions between mexican companies and their foreign counterparties. during 2008, the most severe glitch that we had β i mean it wasn β t systemic at all β was some exotic derivatives that the big mexican corporations contracted with
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##ing with regulation. also, we need to ensure we have sufficient information to judge whether there are systemic vulnerabilities in the mexican financial system. it is a field that β s not very developed in central banking though many central banks are taking similar steps. you must have all the evidence at hand to do the analysis for macro and micro issues. you also need to have coordination between the authorities. in addition to information gathering, we β ll have more resources devoted to analysis and also have the ability to make policy recommendations. when you say policy recommendations do you mean just in terms of regulation or also in the context of monetary policy? the idea is to see the whole map and even to make policy recommendations in areas that might not be in the direct control of the central bank. it is not only the central bank that β s focusing on financial stability. it is also the finance ministry and the financial regulatory agencies. through a presidential decree a financial stability board has been created, on which there are representatives from the central bank, the ministry, the deposit insurance institute and the regulators. the secretariat is housed within the central bank and a lot of the work in the financial stability department will feed into the financial stability board. the idea of the department is therefore not only to deal with areas in the domain of the central bank, but also to contribute to the discussion that will occur at the level of the financial stability board, the council for stability of the financial system. what powers will that financial stability board have? more than anything, the motivation for setting it up was to have a structure through which you could have formal coordination of policy between the financial authorities. the policies that will be agreed at that level will be implemented through the authorities represented on the board. the idea is to evaluate the system as a whole and then to quell any vulnerabilities as they emerge. there are some grey areas among the authorities, but the idea behind this is that you β re more likely to have a coordinated, timely response rather than overreacting. does the fact that the financial stability board could in theory call for a rate hike to tackle financial imbalances not conflict with your inflation targeting framework? not really. the idea is to respect as much as possible the mandates of each authority. if there is, say, asset - price inflation and there is a threat to financial stability, then it might be possible to address the issue through regulatory aspects rather than interest rate hikes. the idea is to align the
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joseph yam : one country, two financial systems speech by mr joseph yam, chief executive of the hong kong monetary authority, at the luncheon of the british chamber of commerce, hong kong, 20 october 2006. * * * ladies and gentlemen, thank you for inviting me to speak to you today on the subject of " one country, two financial systems ". the continuing strong british presence in hong kong since 1997 - in all areas of business and society β has been one of the many positive features of the " one country, two systems " policy : it is also a measure of the success of this policy. the british chamber of commerce in hong kong has played a leading role not only in representing the interests of british companies in hong kong, but also in promoting hong kong to the world. the british commercial presence in hong kong is a rich and diverse one, covering a vast range of economic activities. these include, of course, the everexpanding financial services sector, which benefits both from hong kong β s dense economic connections with the mainland of china, as well as from the " one country, two systems " policy. it is this subject that i now wish to explore with you. i believe it was deng xiaoping who first coined the phrase " one country, two systems ". a study of his speeches suggested that the concept germinated at the beginning of the eighties, before margaret thatcher paid him a visit in 1982 at the great hall of the people and raised with him the question of the political future of hong kong. the phrase was then used, for the first time in public, by deng xiaoping when he received industry and business leaders from hong kong in june 1984 1. since that occasion, it has become by far the most common formula for summarising the governance arrangements for hong kong after the resumption of the exercise of sovereignty. it has, indeed, turned out to be a most effective political expression, capturing succinctly china β s policy towards hong kong, emphasising that hong kong is to be ruled by hong kong people ( [UNK] δΊΊ ζ²» [UNK] ) and that there is to be a high degree of autonomy in the governance of hong kong ( ι« [UNK] [UNK] ζ²» ). the policy has also been most successfully implemented, contributing further to the credibility of the formula and the unique political concept that it encapsulates. indeed, whenever one hears the phrase " one country, two systems ", the immediate context will almost invariably be the political
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reserve requirements, banks in hong kong do not need to maintain large balances in their clearing accounts held with the hkma. this means that the crucial part of the monetary base, in the form of the aggregate balance in the clearing accounts that all the licensed banks maintain with the hong kong monetary authority, is very small. this in turn makes interbank interest rates in hong kong very sensitive to capital flows into and out of the currency board. the sale of a small amount of hong kong dollars by a bank to the hkma, which has to take it and provide us dollars at the fixed exchange rate in accordance with the discipline of currency board arrangements, could send interbank interest rates sharply higher. fact number two : the hedge funds had been borrowing and sitting on large amounts of hong kong dollars. from the beginning of this year to the middle of august, over hk $ 30 billion of one and two - year money were raised through the issue of debt paper in hong kong. the issuers were the multilateral institutions such as the world bank, the asian development bank, the nordic investment bank, the european investment bank, the european bank for reconstruction and development, the council of europe, etc. we welcomed these multilateral issuers making use of, and therefore helping to develop, the debt market in hong kong. but the real borrowers behind these hong kong dollar debt issues were predominantly the hedge funds, providing, through swaps arranged by intermediaries, attractive us dollar funding at below libor to the multilateral institutions. to use less jargon, as i said the hedge funds have been borrowing and sitting on large amounts of hong kong dollars. they of course do so for a purpose. but since i am talking about facts i do not wish to venture a guess here. all i would like to point out is that the cost of running a hk $ 30 billion position, with an interest rate premium over the us dollar that had been driven up to about 5 percentage points, is over hk $ 4 million a day. and i would only add that the hedge funds are not exactly in the habit of throwing money away for nothing and that they do not seem to have been using the money to buy up hong kong stocks. fact number three : on the securities side, the potential for serious market dislocation had been building up. while the turnover in our stock market fell quite substantially as financial turmoil in the region intensified, activity in our stock index futures market grew sharply and disproport
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policy has an impact right across the real economy. this brings me back to my initial hypothesis β namely that monetary policy in the euro area may work better if other policy areas play their part. because the dynamics of the abs market are significantly influenced by the regulatory framework. and there is still work to be done here. let me say quite clearly : no one wants to have the complex, opaque products of the precrisis years. also, repackagings of the umpteenth tranche of a financial derivative should be things of the past. no one wants to promote a certain class of product just for its own sake. and securitised sub - prime mortgages in the united states certainly made an inglorious contribution to the emergence of the financial crisis. but the regulatory framework should be appropriate for the actual risk. and in this respect there are significant differences between current and previous securitisations and between the experiences in the us and those in europe. bis central bankers β speeches since the start of the 2007 β 08 financial crisis, the default rates of european abs were on average between 0. 6 % and 1. 5 %. in the us over the same period, they were on average 9. 3 % to 18. 4 %. european sme abs are even further below these default rates, at about 0. 1 %. the current rules lump all abs together and are much too conservative. they effectively question their existence. under the current regulatory conditions simple, transparent abs built on real assets face almost as many problems as much more complex financial products. the ecb has therefore, in cooperation with the bank of england, made a number of proposals for a better functioning securitisation market in the european union. that this approach has been welcomed in principle by the governments of the member states is shown by the joint working paper of the finance ministries in berlin and paris. the proposals are derived in part from the quality and transparency demands that the central banks place on abs, which can be deposited as collateral in monetary policy operations. and because we, as a central bank, have to protect our balance sheet, these demands have always been very high. the abs market is therefore a good example of how financial market policy can benefit our monetary policy and can also contribute to the recovery in the euro area. thus, two goals of good financial market policy in the european context can be named : it should be growth - friendly and it should support a successful implementation of monetary policy
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yves mersch : for a european capital markets union β securing stability, overcoming fragmentation closing keynote speech by mr yves mersch, member of the executive board of the european central bank, at the zeit konferenz β banken & wirtschaft β, chamber of commerce and industry, frankfurt am main, 10 september 2014. * * * dr esser ( managing director, zeit verlagsgruppe ), dr raettig ( vice - president, chamber of commerce and industry, frankfurt am main ), ladies and gentlemen, i would first like to thank you for inviting me to deliver the closing speech of this high - calibre conference. i would do an injustice to the participants in the previous two panel discussions if i attempted to sum up the day β s deliberations. instead, i β d like to conclude by linking together financial market policy, which has already been discussed at length today, our monetary policy and the overall functioning of europe β s economic and monetary union. a common currency in a union of states such as the european union can only work in the long term if financial market policy, economic policy and fiscal policy interact at european level and in the member states within the framework of common rules. in this way, the independent central bank is given the opportunity to fulfil its monetary policy mandate. unfortunately we are quite some distance from this ideal condition. the crisis has shown us just how much the various policies affect each other. it has shown how easily bad budgetary management, excesses in the financial markets and a steady loss of competitiveness can reinforce each other. i am convinced that europe has understood this. but i β m not sure if it is ready to draw all necessary conclusions. without doubt, some changes for the better have taken place since the beginning of the crisis : most of the member states and in particular the programme countries have made significant efforts to put their budgets in order and improve their competitiveness. with the banking union we are now taking a decisive step at european level. it will increase the stability of the banking system in the euro area and protect taxpayers in the future more effectively against expensive bank bailouts by linking risk and liability more closely. however, the economic recovery is still some way off : in the last quarter, the economy stagnated in the euro area. unemployment is still at 11. 5 %. prices in august rose by only 0. 3 %, but inflation expectations are anchored. all in all, these figures
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if they get very large and pose macroprudential concerns, then we may consider regulation. likewise, a payment service through the internet will not automatically attract regulation β these are typically small payments, often in connection with e - commerce. β only larger, more significant players that cross the materiality and other thresholds are regulated. β even then, we do not regulate them as banks and throw at them the whole kitchen sink of capital and liquidity requirements under the banking act. β we regulate them under the payment systems oversight act or the remittance agents act β modular regulation customised to address the specific risks or concerns they pose. β but i must acknowledge we do not have ready - made regulations for all new technology solutions ; often we must improvise the use of existing legislation, even as we draw up new ones. third β actively promote the fintech ecosystem and seek to harness its potential for good. while regulation must not front - run innovation, regulators must run alongside innovation β’ we must know what β s going on and be ready : either to promote or to restrain. there are three ways in which mas does this. one, we actively engage fintech firms to better understand emerging innovations and help them design their solutions for financial services. take for example cloud computing. β’ β’ our traditional approach was to deal only with regulated fis, not their service providers β but with cloud solutions proliferating, we changed tack β many of these solutions offered strong efficiencies and cost savings but not all models met our regulatory requirements for data integrity and protection. so we engaged in dialogue directly with cloud service providers to explain our concerns and at the same time understand the technology β the service providers then came up with solutions that met our concerns β and we modified our requirements to take account of new business models and technological capabilities. two, we allow our fis to experiment with new technologies in a safe environment. fis do not have to seek mas β permission to try new things. β’ responsibility lies with boards and management to assess the risks and put in place adequate safeguards β’ but with many innovations, it is not always possible to anticipate every vulnerability or whether there is a risk of breaching regulation. β’ sometimes, as nike puts it, you have to β just do it β. bis central bankers β speeches mas will therefore introduce a β regulatory sandbox β approach that aims to give fis more confidence to experiment and launch their innovative products or services within controlled boundaries. β’ the idea is not
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the same entity, who is accountable to the customer? as the number of 3rd - party intermediaries involved in a financial service grows, there might also be increased operational risks. we will need to adapt our regulatory approaches. pay greater attention to market conduct, consumer protection, and technology risks. regulatory frameworks will need to become more modular and agile. entity - based regulation remains relevant for the provision of key services such as deposit - taking, insurance, and the offer of securities. but for the growing number of players who offer niche financial services, we need to rely increasingly on activity - based regulation. this is all still fairly familiar ground, as the fundamental structure of financial services remains largely intact. intermediaries continue to be at the centre, even as distribution becomes more decentralised with diverse players and new ways of connecting with customers. stepping a layer down, let us now examine the underlying infrastructure of financial services. technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralised systems of today. take for example, open crypto networks based on self - executing smart contracts and noncustodial financial services, where users maintain control over their assets at all times. by replacing intermediaries and central parties, these networks aim to reduce both the cost and risk of finance. by decentralising key aspects of financial infrastructure, such as access, data, and code, open crypto networks can also potentially enhance inclusion and innovation. when firms of all sizes, and even individuals, can directly access financial infrastructure, it could mean more competition and inclusion. when transaction data is available to all participants, and not confined within the intermediary responsible for the transaction as is the case today, it could mean more contestability and transparency. w hen code can run directly and publicly on these networks, unlike proprietary code that runs on private servers, it could mean more interoperability and innovation. we are certainly not at the point where these self - governing networks can meet the high standards of governance, security, resilience that we demand of critical infrastructure. even so, central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure. these ideas could be particularly relevant to the development of cbdcs. finally, we turn to the layer at the base of the system β the instruments, or forms of money that should confer the properties of a public good. 2 / 4 bis central bankers'speeches the decentralisation of instruments is most clearly
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efforts through expanded access to financial institutions ( financial inclusion ) and bpd regional championship program are continuously carried out. 71. an improved resilience of banking industry policy seeks to sustain the banking industry growth, to strengthen competitiveness and to mitigate the crisis surprises. to achieve these goals, banking industries are required to strengthen their qualitative and quantitative improvement aspects, which is attained through the existing sets of rules in fit and proper test, increased compliance of commercial banks, risk based balance asset ( atmr ) and associated effective risk management in business cooperation bancassurance. 72. policies related to institutional empowerment, competitiveness and the resilience of rural banks and islamic banks are aimed to create an equal playing field with conventional banks. these efforts will be endorsed by sets of rules and regulations in earning assets quality rating, bank financing and sharia unit restructuring, the maximum limit of funds for rural banks ( rb ) sharia financing, and changes in licensing change from conventional banks into islamic banks. 73. through this policy package, bank indonesia attempted to strengthen the effectiveness of banking supervision, particularly through the creation and implementation of early warning system and macro prudential supervision. these efforts will be in line with the refinement of rules and regulation in risk - based banking supervision, improvement in bank entry and exit policies, and adoption of risk - based supervision and consolidated supervision. distinguished guests, ladies and gentlemen, 74. let me also seize this opportunity to propose my ideas on indonesia β s policies and guidelines for desirable future to cope with economic turbulence ahead. these are generally basics but in my humble opinion these issues are critically important as steps to be taken in order to transform the post - economic conditions of economic and banking crisis today, towards sustainable economic growth. 75. first, i recognize that the sustainable supply of indonesian foreign exchange is crucial to sustain macroeconomic stability, particularly in maintaining exchange rate stability. we need to think thoroughly how the foreign exchange, particularly from export, can comprehensively cover import and financing needs, in addition to its contribution to financial deepening. 76. second, i believe the strengthening of banking supervision system and the deepening of the banking industry through consolidation remains vital to determine the success for overcoming a crisis amid the global competition. banking capital might be sufficient to boost up the national economy pillars progressively ; however i develop a feeling this is not sufficient to face the incoming potential crisis. lessons bis central bankers β speeches learned from the crises in 1997 / 1998 and 2007 / 2008 have
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measures taken include among others imposing a level of interest rate in combination with macroprudential measure to manage excess liquidity. this is done through increasing minimum reserve requirement. the scope, sequencing and timing of the policy mix took into consideration inflation and macroeconomic projections, the current excess liquidity ( including the impact of foreign exchange intervention and fiscal expansion ), and the cost of monetary operation. 32. we continue to calibrate the mix of policy measures taken to strike an optimal trade off between various macroeconomic targets. bank indonesia also maintains on going coordination with the government especially to minimize the impact of volatile foods and administered prices inflation on the economy. distinguished guests, ladies, and gentlemen, 33. in the short run, i believe the opportunity for higher economic growth is still very much wide open. bank indonesia projects economic growth in 2011 to reach the range of 6. 0 % β 6. 5 %, and increasing to 6, 1 % β 6, 6 % in 2012. investment which bis central bankers β speeches began to improve since 2010 is expected to continue its growth hence creating a more balanced economic growth structure. 34. higher growth in 2011 is also supported by solid performance of the external sector. exports is expected to be more diversified and grow stronger while the fast growing imports is in line with robust investment and consumption. 35. the portion of foreign direct investment as a composition of capital inflows is estimated to expand. overall, the 2011 balance of payment is projected to reach a surplus of usd16. 4 billion, and the foreign reserves to reach usd112. 6 billion by the end of the year. this is equivalent to 7. 5 months of imports and short - term government debt repayment. the sizable foreign reserves will strengthen sustainability of the indonesian economy in mitigating various external shocks ( a self insurance mechanism ). distinguished guests, ladies, and gentlemen, 36. we observe stronger economic growth in 2011 is expected to be accompanied with rising inflationary pressure. we are well aware of the number of sources of inflationary pressure, especially those coming from increase food prices as well as possible adjustment of administered prices. the rise in inflation expectation due to the impact of food price increase on the perception and dynamics of the domestic financial market recently, is also a special concern to us. 37. in this context, bank indonesia together with the government will continuously coordinate to fine tune various programs to increase supply and improve distribution of staple goods. bank indonesia has high hopes and is certain that the
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offer additional stimulus. liquid financial markets are not the cure to the crisis, but they remain a necessary precondition to any solution. unconventional instruments are fast becoming a natural part of the policy toolkit of major central banks. central banks across emerging markets β including albania β are also exploring the possibility of employing unconventional instruments. however, it is not without risks and it might not be easily implemented in emerging economies. in particular, we believe emerging markets β central banks should avoid raising the risk profile of their balance sheets and should strive to preserve the credibility of their policy frameworks and independence. the second set of challenges is to acknowledge the long - term impact of the pandemic on our economies and societies, and to account for them in our policy frameworks. the spectrum of potential implications is wide but i will try to concentrate my remarks on a few items : the pandemic may drive a greater gap in terms of inequality, both among the advanced and developing economies as well as within an economy. an economic consequence of this pandemic is that it may slow down the catch - up process of developing economies relative to advanced ones. an additional one may be inequality within an economy, given that unemployment hits more the young population and those less educated. how these divergences may shape the future of social and economic policies aiming at addressing these divergences, this remains to be seen. the enforced limited social interaction due to the risk from coronavirus has accelerated the shift towards digital business and digital finance. while financial technology ( or fintech ) has been on the rise prior to this pandemic, the lockdown and limited social interaction has promoted further growth of this sector which may change the landscape of financial industry in the future. the pandemic may well trigger permanent shifts to the work - life balance. remote working can become a permanent option in the future as some global companies may have already predicted. a final issue, is how the pandemic may affect the current climate crisis in the long run. besides the short - term impact of the lockdown on the climate issue, an optimistic view holds that the lockdown may trigger e new momentum towards a cleaner economy. * * * honorable participants, i am looking forward to an open discussion and your fruitful feedback on these issues. 3 / 4 bis central bankers'speeches i am confident a frank exchange of ideas will enrich our joint understanding on the nature of challenges we are facing as well as on the best policies and instruments we should
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gent sejko : albania β s economy and its interaction with monetary and fiscal policies statement by mr gent sejko, governor of the bank of albania, to the hearing session of the parliamentary committee on economy and finance, about the draft - budget 2017, tirana, 22 november 2016. * * * honourable chairman, honourable members of the committee, the steady and long - term development of albania has been and is a constant priority of bank of albania β s work. therefore, accomplishing this objective requires not only applying prudent monetary and fiscal policies, but also their constant and efficient coordination. the approval of the budget and the accompanying fiscal package is decisive for the country β s economic development. the budget and the relevant fiscal package outline the short and medium - term priorities for public finance, contribute to the long - term profile of growth and development by supporting with funds the structural reforms, and orientate the private sector development by determining the incentives on consumption and investments. therefore, the bank of albania appreciates the opportunity to be able to present to this hearing session our opinion on the draft - budget 2017. in compliance with our legal mandate and the scope of our expertise, the opinion of the bank of albania on the draft - budget 2017 will focus on the following : albania β s development perspectives, intertwined with the monetary and fiscal policies ; fiscal projections and public finance stability ; and, effects of projected public borrowing on the domestic financial markets. at the end, there are some suggestions on possible measures to boost the effectiveness and stability of public finances. 1. the expected performance of the economy and its interaction with the monetary and fiscal policies the albanian economy has shown signs of recovery over the past two years. this performance reflects the recovery of private consumption and investments, whereas the external environment has been and remains unfavourable. the expansion of the private sector activity was supported by our accommodative monetary policy and was favoured by the consolidating fiscal policy implemented during this period. this policy mix has brought financing costs down for the private sector and has improved the liquidity situation in the economy. the 2017 budget takes into account forecasts for the real economic growth at 3. 8 % and an increase in the nominal value of the gross domestic product to 6. 3 %. as detailed in the draftbudget and in the accompanying explanatory notes, such economic growth will be supported by the continuation of the combination of the monetary stimulus with the fiscal consolidation policy. however
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