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statement by kuroda haruhiko, governor of the bank of japan, concerning the bank's semiannual report on currency and monetary control before the committee on financial affairs, house of councillors, on may 26, 2020 introduction the bank of japan submits to the diet its semiannual report on currency and monetary control every june and december. i am pleased to have this opportunity today to talk about recent economic and financial developments and present an overall review of the bank's conduct of monetary policy. i. economic and financial developments i will first explain recent economic and financial developments. the global economy has become depressed rapidly, reflecting the impact of the novel coronavirus ( covid - 19 ) pandemic. economic activity has been disrupted significantly worldwide as a result of preventive measures against the spread of covid - 19 taken by each country and region, such as restrictions on going outside and immigration / emigration. according to the latest world economic outlook released by the international monetary fund ( imf ), the global economy is projected to register large negative growth of minus 3. 0 percent for 2020, which is worse than at the time of the global financial crisis. japan's economy also has been in an increasingly severe situation due to the impact of the spread of covid - 19 at home and abroad, and for the time being, that is likely to remain the case. the year - on - year rate of change in the consumer price index ( cpi ) is expected to be somewhat weak for the time being, mainly affected by the spread of covid - 19 and the decline in crude oil prices. thereafter, as the impact of the spread wanes at home and abroad, japan's economy is likely to improve, supported by accommodative financial conditions and the government's economic measures, as well as through the expected materialization of pent - up demand and a projected recovery in production from the decline brought about by the spread of covid - 19. the year - on - year rate of change in the cpi also is expected to increase gradually. however, the outlook for economic activity and prices is extremely unclear, as it could change depending on the timing of the spread of covid - 19 subsiding and on the magnitude of the impact on domestic and overseas economies, and thus the bank considers that risks are skewed to the downside. meanwhile, global financial and capital markets have become unstable rapidly since late february with deterioration in investors'risk sentiment. | as a result of swift and aggressive responses taken by the government and central bank in each country and region, tension in financial markets has abated somewhat. however, the markets have remained nervous due to a decline in liquidity. in addition, although japan's financial system has maintained stability on the whole, financial conditions have become less accommodative in terms of corporate financing, as seen in deterioration in firms'financial positions. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. the bank considers that the important thing in terms of monetary policy under the recent economic and financial situation is to support financing mainly of firms and maintain stability in financial markets. with this in mind, in march and april, it enhanced monetary easing. moreover, at the unscheduled monetary policy meeting held on may 22, the bank decided to introduce a new fund - provisioning measure to further support financing mainly of small and medium - sized firms. the bank has introduced and enhanced the following three measures since march : purchases of cp and corporate bonds, ( 2 ) the special funds - supplying operations to facilitate financing in response to the novel coronavirus ( covid - 19 ), and ( 3 ) the new fund - provisioning measure. through these three measures, which are referred to as the special program to support financing in response to the novel coronavirus ( covid - 19 ) with the total size of about 75 trillion yen, it will actively support financing mainly of firms while cooperating with the government. in addition, with a view to maintaining stability in financial markets, the bank has been providing ample yen and foreign currency funds without setting upper limits mainly through purchases of japanese government bonds ( jgbs ) and the conduct of the u. s. dollar funds - supplying operations, and has been actively purchasing assets such as exchange - traded funds ( etfs ). by conducting these measures, it will continue to contribute to supporting financing mainly of firms and maintaining stability in financial markets. the bank recognizes that powerful monetary easing measures will contribute to supporting economic and financial activities, coupled with various measures by the japanese government as well as those by the government and central bank of each country in response to the spread of covid - 19. on this basis, the bank will closely monitor the impact of covid - 19 for the time being and will not hesitate to take additional easing measures if necessary. thank you. | 1 |
christian noyer : some thoughts on the financial crisis speech by mr christian noyer, governor of the bank of france, at paris - europlace, tokyo, 18 november 2008. * * * ladies and gentlemen, it is a great pleasure for me to be here and share some thoughts on the financial crisis. it is too early to draw all the lessons from recent events in financial markets. it is however vital to start reflecting on the experience of the last few months. even more in periods of tension than in normal times, action and reflection should reinforce one another. it is at the very moment of managing the current crisis that we lay the foundations for the future financial system. having said that, i propose to reflect with you on four topics : β’ the nature of the financial crisis β’ the policies implemented to address it β’ the macroeconomic outlook β’ the outlook for financial regulation the nature of the crisis the crisis first emerged as a liquidity crisis. the first symptoms appeared at the beginning of august 2007 when serious disruptions surfaced on the inter - bank market. more than a year later, tensions on money markets are still with us. recent weeks have witnessed abnormal levels of spreads, a shortening of maturities, and the contraction, or even closure, of some market segments. through spill - over, these tensions are also affecting non - financial corporations and, more broadly the financing of the economy. the crisis also emerged as a crisis of securitisation. securitisation is an old and successful technique used to refinance a range of loans. what was new about it is that it got used extensively in highly unstable financial structures, which were financing short - term assets that were illiquid, complex, and whose value proved to be uncertain and contingent upon models. the instability of such structures was largely masked. indeed, cheap money allowed easy refinancing of poor quality debt and of assets with uncertain value. also, favourable ratings and credit enhancements artificially boosted the quality of loans underlying structured products. the rise in defaults on such loans, first on subprime mortgages, triggered a chain of reactions whose consequences are still unfolding now. credit protections proved illusory. liquidity dried up much more quickly than it had appeared. rating agencies massively, suddenly and sharply downgraded products which until then were deemed of the highest quality. the demise of the β new β securitisation chain highlights two fundamental realities. the first one is that far | equity can have harmful effects. to meet the financial challenge, savings have a central role to play. i will focus on two avenues for steering them into productive investment. first, savings should be reoriented towards the long - term, more easily than towards direct risk - taking. french and, more generally, european savers are more risk - averse than american ones β and this is probably not going to change. the first savings motive in the euro area is indeed insurance against unexpected events ( mentioned by more than 50 % of households ). viii but at the same time, savers are more and more concerned by the increase in life expectancies and the need to prepare for retirement : old age provision ranks as the second most important savings motive ( nearly 40 % ). ix therefore it makes sense to offer savers new, complementary forms of savings products, that are less liquid during the first years, but that include some form of longterm capital guarantee. these new products would provide financial intermediaries β in particular life insurers β with liabilities long enough to take pooled risks β in the form of equity investments essentially β and savers with the higher returns offered by equity over the long run. to promote these new products, we also need, at the very least, to avoid any tax distortions that might penalise them more than liquid and risk - free investments. second, savings should better circulate across europe, to where investment needs are. a large part of the solution lies at the european level, with the building of what i call a β financing and investment union β ( fiu ), rather than just a β capital markets union β ( cmu ). this fiu would merge together the initiatives already in place β the cmu of course, but also the juncker plan and the banking union β in order to magnify their impact through synergies and more ambitious measures. let me mention two measures for tackling obstacles to cross - border investment. firstly, the fiu would encourage the development of a pan - european venture capital ecosystem. one of europe β s most obvious limitations is indeed the size of its funds compared with us ones : the size scale varies from at least 1 to 10 given the national borders and the domestic bias in europe. this unfortunately limits european funds β ability to take on big enough equity stakes, especially in β scale up β companies β successful start - ups at a later stage. the second example concerns the regulatory | 0.5 |
also promote further integration and alignment of the ccpt with the vbi financing and investment impact assessment framework ( or vbiaf ) sectoral guides5, with the third cohort of the guides to be issued by end of the year. recognising the need to bridge critical data gaps in climate and environmental risksrelated information, a major deliverable by jc3 was the publication of the climate data catalogue. since its issuance a year ago, the jc3 has further expanded the data catalogue which now includes close to 400 credible data sources. this enhanced data catalogue, alongside other tools and resources are now accessible on the new jc3 website being launched today. smes form another important component in the climate equation and are a key focus of jc3 agenda. it is encouraging that 60 percent of smes see that strengthening esg practices can increase business opportunities and create long - term value. however, only 28 percent of smes have adopted elements of esg practices in their business6. to support smes'transition, an sme focus group was recently formed under jc3 to bring together multiple initiatives focusing on smes to improve coordination and engagement with partners and industry bodies. the focus group will actively pursue measures to build technical capability, improve access to financing via mechanisms such as guarantees, and reduce the costs of transition in coordination with key stakeholders within the ecosystem. as part of efforts to scale up transition finance, the jc3 has rolled out the greening value chain or gvc pilot programme. the programme has effected change for more 2 / 5 bis - central bankers'speeches than eighty participating smes within the supply chain of four corporates. these smes have begun to measure their ghg and identify emission - intensive areas within their operations. several smes have also started to provide emission reports to their corporate customers. with a workable model developed through this pilot initiative, this is expected to pave the way for financial institutions to work with more corporates and their supply chains to accelerate transition. this afternoon, we will also hear more pilot projects to spur the adoption of sustainable and low carbon practices in the agriculture sector and industrial parks in malaysia. the jc3 also remains committed to enhancing the climate expertise of financial professionals. the jc3 has been working closely with training institutes to provide curated and specialised climate - related training for the industry. i am encouraged by the increasing focus and concrete climate actions taken by financial institutions. there are more'net zero'commitments, wider options for | policy measures during june to september 2013 june 5 : customs duty on gold imports was raised to 8 per cent from 6 per cent. june 12 : limit on foreign investment in government dated securities raised by us $ 5 billion to us $ 30 billion. july 8 : banks were prohibited from proprietary trading in the currency futures / exchange traded currency options markets. [ proprietary trading in etcd market was allowed within banks β net open position limit and any limit imposed by the exchanges on june 20, 2014. ] july 15 : upper bound of the policy rate corridor ( i. e., msf rate ) raised by 200 basis points. quantity of central bank liquidity available through the laf window restricted to 1. 0 per cent of net demand time liabilities ( ndtl ) of banks. [ the interest rate corridor was realigned to normal policy operations by end - october 2013. ] july 22 : gold importers were required to make available 20 per cent of their gold imports for exports. july 23 : liquidity adjustment facility ( laf ) by way of repos at each individual bank level was restricted to 0. 5 per cent of its own ndtl. maintenance of daily cash reserve ratio ( crr ) balance raised to 99 per cent of the requirement from 70 per cent earlier. [ daily crr requirement was reduced to 95 per cent w. e. f september 21, 2013. ] august 13 : customs duty on gold imports was further raised to 10 per cent. august 14 : limit on overseas direct investment under ( odi ) through automatic route reduced from 400 per cent to 100 per cent. limit on remittances by resident individuals under the liberalised remittance scheme ( lrs ) reduced from us $ 200, 000 to us $ 75, 000 per financial year. [ limit under lrs scheme was enhanced to us $ 125, 000 without end use restrictions except for prohibited transactions in june 2014 and odi limit was restored to 400 per cent in july 2014. ] august 22 : fdi limits / routes were relaxed for select sectors. august 28 : forex swap window with the reserve bank to meet the entire daily dollar requirements of three public sector oil marketing companies. [ since december 2013, oil companies have sourced their entire dollar demand from market. ] september 4 : ecb norms were liberalised making it available for general corporate purposes. september 6 : banks were offered a window to swap their fresh fcnr ( b ) dollar funds with the reserve bank. the overseas | 0 |
removing this cloud. over the previous few months, we at the central bank have been making a careful assessment of the likely bank loan - losses that are in prospect over the next few years. this is over and above the valuation work being carried out by nama, and which gives us a good fix on the likely recoverable value of the larger property loans. we have been working on the non - nama loans and figuring out their likely performance as they suffer from the impact of the overall economic downturn β part of it of course attributable to the global crisis, and not just to the bursting of our own bubble. this exercise involved working with the banks, but challenging their estimates of loan - loss based on our own more realistic β some may say pessimistic β credit analysis. ( i am over - simplifying the exercise, as it also looked at other elements of the profit and loss account over the coming years ). the conclusions of this exercise are worth emphasizing. to my relief, and slight surprise, it turns out that most of the banks started the boom with such a comfortable cushion of shareholders β funds that they would be able to repay their debts on the basis of their own resources. this includes the two big banks. it is because of this fact β that their shareholders β funds will remain positive through the cycle β that one of them, bank of ireland, has already been able to tap the private market for an additional equity injection. of course they do need additional capital to move forward, but, as has happened in the us and elsewhere, the government β s capital injections of last year into these two institutions looks like being well - remunerated. this takes account of the low prices being paid β much lower than originally envisaged β for the loans being transferred to nama. the nama purchases replace risky property - related loans with risk - free nama bonds and are part of the process of putting them on a solid foundation. by the way, knowledgeable experts on the property market assure me that, at the low prices they have paid, that organization now has a good chance of breaking even over the coming years, as indeed has been its stated intention all along. having calculated their likely future losses, we have now required the banks to rearrange their affairs to ensure that they have ample capital reserves to ride out this period of losses. they are responding with plans that raise additional capital reserves and reduce the scale of their less central activities | reluctant ( as indicated in my january 2011 speech ) to endorse further accumulation of indebtedness of the state in order to recapitalise the banks to insulate the financial system and the economy against tail risks. even if external insurance was not available, direct injection of the capital from external sources would have been a much better solution. however ( as has been seen again with the case of spain ) this was simply not on offer, limiting the possibility for decoupling the pressures of the banking system from those of the sovereign. global upward pressures have increased the amount of capital banks are expected to maintain as both market participants and regulators reassess the uncertainty and volatility surrounding bank asset valuations. and it β s not just a question of ratios : upgraded regulatory requirements will soon disallow some elements of what used to be counted as capital, placing further upward pressure. for ireland, the agreement with the troika requires irish guaranteed banks to hold sufficient capital not only to meet the crd ( international regulatory requirements ), but to have enough to absorb prospective losses over the period 2012 β 2014, based on the independent calculations of blackrock solutions, and the cost of selling - off non - core assets sufficient to bring the loan - to - deposit ratios of the banks back into a plausible range ( not more than 122Β½ % ), and to maintain the higher threshold of 10Β½ % capital ( even excluding elements of capital that are not regarded as β core tier 1 β ) in the base case scenario. this is what determined the additional capital requirements announced in march 2012. our assessment of the capital needs of the banks will evolve over the coming years. as i stressed here eighteen months ago, loan - loss projections following a big bust involve an irreducibly large element of uncertainty. at the central bank, we continue to research the determinants of loan losses. economic conditions ( including house prices ) facing the borrowing firms and households are not the only determinants. as we have been stressing in other fora, the effectiveness of the banks β engagement with their stressed borrowers, as well as the legislative and administrative framework for dealing with insolvency ( details of which are being announced by the government today ) are important factors. it should not be thought a paradox that a more engaged and holistic approach by banks, and a less rigid and costly insolvency framework can help reduce loan losses over time. meanwhile, given the final view of | 0.5 |
, the 1990s provided many illustrations of similar events. the discussion about financial cycles is far from new. one example is the major debate of the 1920s and 1930s between the austrians ( hayek, etc. ) on the one hand, and keynes on the other. keynes was focusing on the demand side and on how to get out of the bust, whereas hayek was focusing on the supply side and on how an economy got into the bust in the first place. while a great deal has been done to understand the reasons behind financial instability, many questions remain unsolved. so the discussion continues and when it comes to crises prevention, two conventional pieces of policy advice seem to emerge. the first line of defense is moral suasion. the central bank could warn market participants in various ways that they are becoming overly optimistic in their expectations about future cash flows, if we are talking for instance about stocks or real estate. the problem with moral suasion is that it is difficult to calm down a market that is rushing to new highs. talk rather than action is often not enough. still, if a bubble is starting to build up, it may be worth a try. this is one reason why several central banks have began to publish financial stability reports. in this way one can perhaps broaden the public discussion about what is happening. the second line of defense is prudential regulation. however, the way prudential regulation is done in practice raises two, interrelated problems. the first has to do with the fact that most financial crises stem not from individual banks getting into difficulties and affecting others by contagion. rather, in most cases, many institutions act more or less similarly, encouraged by overoptimistic expectations that macroeconomic conditions can be extrapolated uncritically into the future. the second problem with prudential regulation is that the tools are themselves often based on perceptions of risk which are not independent of the credit and asset price cycle itself. on the one hand, underlying actual risk builds up as expansion and leverage continue and the financial cycle proceeds on the other hand, apparent risk declines with the rise in collateral values. this causes difficulties for supervisors who tend to concentrate on individual institutions and treat risks as exogenous. this is not to deny that by improving prudential regulation, setting international standards ( for example basle ii ) etc, the risk of financial instability can be significantly reduced. supervisors are also recognizing the shortcomings i just mentioned and are | increasingly focusing on developments that generate systemic macroeconomic risks and on constructing built - in mechanisms to dampen the financial amplification of the business cycle. for example, supervisors are trying to encourage stress - testing by private sector risk managers to enable them to better see through asset market misalignments. another way is to make provisioning practices more forward - looking than at present and to adopt more conservative, less cyclically sensitive measures of value. the idea is to build capital cushions in good times that can be used in bad times. hence financial cycles could be milder. whether improved prudential regulations, supervisory practices and risk management techniques will suffice to avoid financial cycles in the future remains to be seen. our experience so far does, however, leave some doubts about this. this brings us to a possible third line of defense that could at least in principle be used to prevent large financial cycles. i am of course thinking about monetary policy the argument is that since we live in a fiat money system, there is no exogenous constraint on the supply of credit except through monetary authorities. if those reactions are geared exclusively to controlling inflation, then the monetary anchor may not counter a build - up of credit that does not immediately lead to inflation in the price of current output. hence, there is little to prevent the emergence of cycles in the prices of real and financial assets that are not included in the measure of inflation. in addition, experience has taught us that price stability is not, by itself, sufficient to ensure financial stability. so why don β t central banks simply change the way they conduct monetary policy and also try to prevent financial cycles? well, the conventional view is that they should not. there are some very powerful arguments against a central bank trying to respond to credit expansion and β misalignments β in asset prices that do not lead to inflation in goods and services. first, how do we know that a bubble is a bubble and not a reflection of fundamental values? second, even if the central bank does recognize the emerging bubble and wants to prevent it from building up, by the time it could form a judgement about this, it would be to late. third, if a central bank is fortunate with both the recognition and the timing, there is still a risk that it will cause an economic recession. to have any effect on excessive optimism about future returns on financial assets, the monetary response might have to be. nevertheless, the costs of financial cycles are sufficiently large to warrant | 1 |
balanced. but as we look further out to 2007 and beyond, we see increasing risks that the unwinding of global economic imbalances could involve a period of weak world economic growth. the bank will continue to assess the adjustments and underlying trends in the canadian economy, as well as the balance of risks, as it conducts monetary policy to keep inflation on target over the medium term. mr chairman, paul and i will now be happy to answer your questions. 1 / 1 | david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ontario, 26 october 2005. * * * good afternoon, mr chairman and members of the committee. we appreciate the opportunity to meet with this committee twice a year, following the release of our monetary policy reports. these meetings help us keep senators and all canadians informed about the bank's views on the economy, and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before this committee last april, we said that the economy appeared to be operating slightly below its production capacity, and that we expected it to move back to full capacity in the second half of 2006. in our october monetary policy report, which we published last thursday, we said that economic growth in the first half of the year was somewhat stronger than we had previously expected. indeed, the global and canadian economies have continued to grow at a solid pace, and our economy now appears to be operating at full production capacity. past and recent movements in energy prices and in the exchange rate for the canadian dollar, along with competitive pressures from china and other newly industrialized economies, are giving rise to significant ongoing adjustments in the canadian economy. given these adjustments and the slow growth of productivity in recent years, the bank has slightly reduced its estimate of potential output growth for 2005 and 2006. the bank projects that the economy will grow in line with production potential through 2007, with growth averaging 2. 8 per cent this year, 2. 9 per cent in 2006, and 3. 0 per cent in 2007. with the economy operating at capacity and with higher energy prices, pressures on consumer prices are somewhat stronger than they were at the time of the july monetary policy report update. assuming energy prices evolve in line with currently prevailing futures prices, cpi inflation is projected to average near 3 per cent through the middle of 2006, before returning to the 2 per cent target in the second half of next year. core inflation should remain below 2 per cent in coming months, returning to 2 per cent by mid - 2006. the bank raised its key policy interest rate to 3 per cent on 18 october. in line with our outlook, some further reduction of monetary stimulus will be required to maintain a balance between aggregate supply and demand over the next four to six quarters, and to keep inflation on target. short - term risks to this projection appear to be | 1 |
and monetary policies. such maintained consistency will grow trust in and credibility for the policies. second, amidst diverse and increasingly complex economic challenges as well as various vulnerabilities, including high current transaction deficit and inflation, a synergy of monetary and fiscal policies and structural reform are required to allow higher economic growth with maintained macro stability. third, timeliness is important in adopting policies. bank indonesia considers that policy mix should be implemented in a timely and measurable manner. ladies and gentlemen, 29. although external and internal challenges for the national economy ahead will become increasingly serious, it does not necessarily mean that the enthusiasm of our present economic achievement prospect will go dim. we think optimism over our economy ahead will remain high. 30. slide 19 : with such optimism, we estimate that indonesia β s economy will grow by 5. 4 % β 5. 8 % in 2015 and 5. 6 % β 6. 0 % in 2016, in a reduced deficit in the current transaction balance. with such prognosis, it is estimated that real exchange rate will relatively stable. to ensure that different structural reform programs supporting economic growth will be implemented, we are consistent in seeking to anchor inflation rate and its expectation on the medium term target at 4Β±1 %. 31. however, various positive prospects are not easily realized because there are some risks and challenges ahead. global economic condition ahead will remain full of uncertainty. divergent global monetary policies will make the world β s financial market vulnerable to shifting perception. global turbulence risks may spillover quickly to our economy through the financial market and trade. 32. meanwhile, we are still struggling with diverse structural rigidity and inefficiency, thereby making the supply side of our economy unresponsive. 33. considering the global and domestic economic constellations require consistent stability - oriented monetary policies and β firm β structural reform policies to increase the capacity and competitiveness on the supply side ; therefore, we expect our economy ahead will sustainably grow high from β non - artificial β forces. ladies and gentlemen, 34. i conclude my brief introduction. further description of the journey of indonesia β s economy in 2014 has been prepared in a 2014 indonesia economy report book ( lpi ), which you all will receive at the end of this event. 35. we invite all of you to thoroughly observe the contents of the book, which is the eminent regular publication of bank indonesia. as an illustration of the book cover, we have selected a figure of the β gradon boat | stabilize rupiah exchange rate, and ( iv ) strengthen macro - prudential policy. 13. slide 11 : bank indonesia β s policy to increase bi rate in november 2014 is an β ahead to curve β step to mitigate expected inflation increase risks and ensure inflation pressure post - increase in subsidized fuel price will be controlled and temporary and may immediately return to the targeted track. 14. we believe that with inflation and its expectation anchored to low rate, people β s real savings and purchase power will not be eroded ; therefore, it becomes the foundation for stronger economic growth and poverty alleviation in the future. 15. the monetary policies we have adopted are accompanied by the strengthening of inflation control coordination through the inflation control team ( tpi ) and regional inflation control team ( tpid ). 16. the tight bias policy we have adopted also aims to ensure that the deficit in the current transaction balance, which has been taking place for three years, will remain controlled at 2. 5 β 3 percent of gdp and will not increase. controlled deficit in the current transaction balance is very vital to ensure the national economy will grow strong and balanced and job creation will continue. bis central bankers β speeches ladies and gentlemen, 17. we also see that efforts to maintain macroeconomic stability must also be supported by the principle of prudence in the business world. we observe that such prudence is primarily required for businesses obtaining foreign loans. 18. slide 12 : in this relation, bank indonesia has obliged corporations to do hedging by applying the following rules : ( i ) minimum hedging ratio, ( ii ) maintenance of forex liquidity adequacy, and ( iii ) minimum credit rating. we will consistently monitor the private foreign loans and take advanced steps if necessary. 19. slide 13 : in the financial sector, we also see that structural challenges must also be tackled to deepen financial market. alternative financing sources in our economy still focuses on the banking sector and remains undiversified, while the roles of bond market have been insignificant. 20. slide 14 : efforts to deepen financial market by developing β hedging β market have become very urgent as well because we will face increasingly complex global challenges. therefore, bank indonesia in cooperation with the financial services authority ( ojk ) has established a foreign exchange market committee, issued market conduct, simplified and deregulated some provisions to facilitate hedging transactions on the forex market, encouraged interbank repurchase activities | 1 |
bank of italy β s supervisory action and the banking union thanks in part to the action of the bank of italy and in spite of the sharp deterioration in loan quality, between september 2012 and september 2013 the non - performing loan coverage ratio rose from 38. 3 to 39. 9 per cent on average for italian banking groups. the ratio of core bis central bankers β speeches tier 1 capital to risk - weighted assets rose from 10. 0 to 10. 6 per cent. coverage and capital ratios must continue to increase ; this preserves investors β confidence in the banks and lowers the cost of funding, thus helping to ensure an adequate flow of credit to economic activity. during the crisis, lending has been more buoyant at the better - capitalized banks. the bank of italy is scrutinizing the weaknesses in the structure and working of banks β boards of directors ; the aim is to remove factors that can hinder banks β capital strengthening and to foster better business management. the proposals put forward in last december β s public consultation document are designed to improve banks β governance by limiting the number of directors and increasing the possibility for shareholders to make their views known. the bank will take account of the comments that emerged during the public consultation when it issues the final provisions. correct organizational arrangements are essential for efficiency and stability. the growth in the number of banks in difficulty was mainly due to the recession, but weak governance systems also played a role, as did episodes of outright malfeasance. during the crisis the vicious spiral between the state of the banks and that of their respective sovereign issuers had a perverse effect on intermediaries β creditworthiness and their ability to raise funds in the market. banking union can make a decisive contribution to breaking this link. the first step is the launch of the single supervisory mechanism. the comprehensive assessment of the leading euro - area banks β balance sheets to be carried out by the ecb and the national authorities will contribute to the single supervisory mechanism β s launch, at the end of this year, on a solid and credible basis. this will make clear and comparable information available on the state of european banks β health. the exercise will be carried out transparently and rigorously, with uncertainty about the way it is performed reduced to the minimum. the assessment will cover all the asset items and the related risk profiles. in examining the quality of exposures, uniform criteria will be used, in line with italian practices, which are acknowledged to be among the most scrupulous | . the first phase of the examination of the quality of banks β assets, devoted to the selection of riskier portfolios, is drawing to a close. in the second phase, which will get under way in the coming weeks, a large number of credit files will be analyzed and the adequacy of the value adjustments in banks β accounts will be assessed. in the last few days the european banking authority and the ecb have announced the main features of the stress test. the exercise will refer to the three years 2014 β 16. the threshold value of the capital ratio that banks must comply with at the end of the period is 8 per cent in the baseline scenario and 5. 5 per cent in the adverse one. the definition of capital, which will take due account of the choices made by national authorities, in line with the provisions of the transitional regime, will be that in force at the end of 2016. the corrective measures that intermediaries will be asked to take will be related to the nature of the capital weaknesses revealed by the stress test. if they emerge in the baseline scenario, banks will be asked to implement the necessary measures rapidly ; if, instead, they only appear in the adverse scenario, the time frame will be determined appropriately as part of a recapitalization plan agreed with the supervisory authorities. in recent months i have already drawn attention to the need for a rapid definition of public backstop mechanisms, capable of reassuring the markets about the authorities β determination to tackle and overcome any weaknesses that should emerge from the assessment exercise. the design of the banking union must be completed with the introduction of the single resolution mechanism for failed banks. the negotiations under way between the council, the commission and the european parliament on the agreement reached by the council at the end of last year must move forward and be concluded rapidly, so as to allow the responsibilities of supervision to be aligned with those of the management and resolution of crises as soon as possible. the decision - making process must be speeded up and made more effective. the long transitional period envisaged before the resolution bis central bankers β speeches fund becomes fully effective must be shortened, so as to make the overall mechanism entirely credible. in order to return to rapid, sustained economic growth it is not enough to eliminate the factors of risk that i have recalled β to counter excessive disinflation, ensure the credibility of fiscal consolidation and stimulate renewed lending. italy has still not risen properly to the challenges of technological innovation and the globalization of | 1 |
analytical underpinnings of the ecb β s strategy, which have granted a prominent role to the bank - based transmission mechanism in the context of our monetary pillar, are well - suited for this task. at the same time, many other factors, relating to legacy and structural problems, are holding down bank profitability. hence a durable improvement in the prospects of the euro area banking system requires further efforts outside the realm of monetary policy. these include, notably, the swift and thorough completion of banking union. additional adjustment in the banking sector towards greater cost efficiency and business models that remain viable in the new regulatory and macroeconomic environment is also needed. for some parts of the banking system, these adjustment needs have arisen because of regulation discouraging unsustainable pre - crisis business models that were highly reliant on aggressive leverage and maturity transformation, regulatory arbitrage ( in particular via offbalance sheet activities ), and a lack of transparency and due diligence in the origination of financial products. in others, the adjustment needs reflect structural challenges and overcapacity. in both cases revenue sources will have to be augmented by more sustainable 7 / 8 bis central bankers'speeches business models that are consistent with the new policy environment. beyond the banking sector, policy needs to pave the way for a more dynamic recovery and β even more importantly β a more favourable end - point of that recovery. for the crisis has not just led to an underutilisation of economic capacity, but has also reduced the pace at which economic capacity itself expands β its potential growth. pre - crisis, the potential growth rate in the euro area, on average, amounted to almost 2 % per annum ; after the crisis, this growth rate roughly halved. the implications for economic prosperity are striking : an economy growing at 2 % more than doubles over a 40 - year period ; an economy growing at 1 % expands by less than half over the same horizon. meanwhile a strong economic basis is essential to cope with other challenges facing the euro area over the longer - term. these include the burden of high legacy debt, large implicit liabilities related to unfunded pension claims, and intensifying distributional concerns in the context of a widening income gap. we are therefore facing a mixed outlook. the cyclical recovery is proceeding at a moderate pace and, despite continued downside risks, has proven resilient to a range of adverse external shocks. the ecb β s accommoda | the underperformance of bank equities may actually be testament to such concerns. of course, weak bank equity markets are not, in the first instance, a public policy concern. but they may become such concern if they persist and morph into a systemic phenomenon. the reason is that the newfound financial resilience of the euro area banking system can only be sustained if it is accompanied by improved financial performance in the future. otherwise, banks will struggle to generate capital organically or raise equity in capital markets, which is the cushion that allows banks to weather adverse shocks, retain or even increase their exposure to the real economy, respond to potential regulatory changes, and attract future investors. and, besides the dampening effects on their own financial resilience, this scenario would put a dent into the contribution that banks can make to the economic recovery : deteriorating earnings prospects weigh on bank equities, which in turn increases the cost banks face when raising equity in the market. while this increase in the cost of equity may initially be compensated by the substitution of equity with debt funding, the scope for such substitution is limited by regulatory requirements and banks β own motives to establish adequate capital buffers. hence, a persistent decline in equity valuations will ultimately render credit more costly and less profitable for banks which, in response, may curtail lending to the real economy. this adverse link from low interest rates to weak bank profitability to lower loan supply is particularly problematic in view of evidence suggesting that the low interest rate environment is likely to persist for an extended period of time. according to this evidence, declining potential growth together with a relative scarcity of safe assets to absorb global savings have led to a declining natural interest rate β that is : the rate consistent with full resource utilisation and steady inflation rates around the central bank objective over a longer - term perspective. in the context of such decline of the natural rate and the continued cyclical weakness, the necessary degree of monetary policy accommodation implies a constellation of very low interest rates for an extended period of time. therefore, the ecb will preserve its accommodative stance until inflation returns to our aim, which will remove some of the cyclical drivers of weak profitability linked to disappointing nominal growth. it will be crucial to continue monitoring the implications of our monetary policy measures on the position and prospects of the banking system and approach any future re - calibration of our monetary policy toolkit, should this be necessary at all, in a way | 1 |
employment, lower unemployment and lower wage shares than earlier. but we are uncertain how long this period will last. even if we use different models and anecdotal information, we cannot escape the need for a healthy portion of qualified judgement when making forecasts and setting the interest rate. my experience from as far back as the 1970s is that in the event of major disturbances and structural changes in the economy, one essentially has to rely on general insights about the functioning of the economy. models that rely heavily on regressions easily break down. as mervyn king, the governor of the bank of england, stated explicitly to the point2 : β.. that β s what we have to do with every variable that we look at, work out why it β s growing faster or slower than it was before and not to use some rather mindless regression. β¦ the secret of good policy is to try and think trough what are the economics of the shocks hitting the economy at present. that in a nutshell is my philosophy of how you should do policy. don β t rely on regressions from the past. β having discussed the role of monetary policy and rather complex economic models, i will move on to the final theme which may seem more prosaic, notably measuring current inflation. in general, the production level of economic statistics is probably very high in norway, as shown in international comparisons by the imf among others. it would also seem that it is very cost - effective. improvements are frequently made to the methodology and the compilation of cpi statistics. in august this year, the indices for electricity, books and air travel were revised. last year, statistics norway changed the method for the treatment of rents in the housing market, and the previous year the food index was revised. a general view is that changes in statistics production should be well documented and should place particular emphasis on identifying the effects such changes might have on measured inflation. furthermore, the statistics should be comparable, but not necessarily see mervyn king, governor, bank of england on the occasion of the tenth anniversary of the central bank's independence : ( see financial times, thursday, 3 may ). identical, across countries. it is positive that others are interested in and debate statistics production. 3 with an inflation target for monetary policy, measuring inflation is of particular importance. cpi inflation is used as a reference in the wage negotiations each spring. many financial contracts are linked to cpi inflation. a number of international studies have concluded that there are considerable | national budget for 1997, the ministry considered this matter and set the allocation to equities at 40 per cent 7. in the correspondence between norges bank and the ministry, there is also support for the fiscal rule β s assumption of a real return of 4 per cent with an equity allocation of 40 per cent. in 1998, the fund started investing in listed equity in 21 countries, all of them featuring a fairly well developed financial market. other countries were later incorporated into the benchmark portfolio. in 2007, small companies were included in the benchmark portfolio. today, the fund has equity holdings in 8, 000 companies in almost 50 different countries. the bond portfolio was expanded from 10 to 18 countries in 1998. since 2002, the fund has gradually moved into the corporate bond market and mortgage - backed securities. chart : fund returns in 1998, analyses indicated that returns would be higher than achieved to date. it should be noted that the fund is nevertheless considerably larger than expected 10 β 12 years ago. high oil and gas prices have resulted in substantial transfers to the fund. sizeable returns on oil in the ground have more than offset low returns on securities. since equity investment started in 1998, the annual average real return on the fund has been a good 3 per cent after expenses 8. this figure is partly a reflection of the financial crisis. the fund β s short history includes a lost decade in the stock market, with two periods of sharp decline. during financial crises of the type we have recently experienced, the government as investor has no place to hide. even though it is less visible, the return on government real investments in norway is also lower during economic downturns. the estimated size of norway β s offshore oil wealth naturally varies widely with oil and gas prices and frequent changes in petroleum reserve estimates. the ministry of finance now assesses the value of the government β s share of the remaining petroleum wealth at nok 3. 6 trillion, which is about nok 550 billion lower than the ministry β s estimate one year earlier. chart : ownership interests in summer 2007, the ministry of finance decided to increase the allocation to equity from 40 per cent to 60 per cent and reduce the allocation to bonds correspondingly. surging oil and gas prices, high oil production and favourable economic conditions for the norwegian economy led to high transfers to the fund in the course of 2007 and 2008. equity prices fell sharply through 2008. it was against this background that the fund purchased equities for more than nok | 0.5 |
opening remarks by mar guΓ°mundsson, governor of the central bank of iceland, at a conference organised by the bank and the reinventing bretton woods committee on the uncertain future of global economic integration, harpa concert hall and conference centre, reykjavik, 14 - 15 september 2017. i welcome all of you to this conference and the foreign participants to iceland. the conference is organised by the central bank of iceland and the reinventing bretton woods committee. the heading is broad and probably reflects in part the worries that some of us might currently have about the future of global economic integration. the topic encompasses both real economic integration β that is, trade in goods and services and the flow of labour and equipment across borders β and financial integration β that is, cross - border capital flows and stocks and associated activities of banks and other entities. the financial integration part will probably dominate the proceedings, not least because most of the speakers are current or former central bankers. i do not see that as a problem, as in my mind more work remains to be done in assessing the costs and benefits of global financial integration than regarding real side economic integration. after all, the post - war global economic order was initially based on the principles of free trade in goods, current account convertibility, and monetary stability through fixed but adjustable exchange rates vis - a - vis the us dollar. open capital accounts were the exception, however. real side economic integration was seen to be more important for economic progress than financial integration. it worked well for a long while, and some call the period from 1950 to 1970 the golden years. yet there were inherent flaws in this set - up that contributed to its demise in the early 1970s, not least the well - known triffin dilemma regarding the conflict between the domestic economic objectives of the country providing the main reserve currency and the required international supply of that currency. then capital accounts were opened up, with strong momentum in the 1980s and early 1990s. capital controls were increasingly undermined by technology and financial innovation, and strong arguments were being made to the effect that open capital accounts would bring significant benefits. after all, ongoing real economic integration at a global level demanded at least some degree of global financial integration. as the bis reminded us in its latest annual report β and jaime caruana might touch on in his keynote speech later in this session β trade and finance tend to go together. freer capital movements in turn undermined pegged exchange rates and thus contributed to the spread of flexible exchange rate regimes and | - time restrictions that would impede or distort the operation of financial markets. this is good, and it should allay the fears of a return to the past. however there is a strong commitment β to ensure that all financial markets, products and participants are regulated or subject to oversight as appropriate to their circumstances β. the g20 further outlined the need to strengthen transparency and accountability, to promote integrity in financial markets and to reinforce international cooperation in the regulatory field, broadly endorsing the program and the division of labour agreed upon in this field by the managing director of the imf and the chairman of the fsf. the fsf, in the words of chairman draghi, is working in particular to ensure that financial systems would have more capital, less leverage and would be subject to more effective regulation. this would imply, inter alia, reducing the procyclicality of the regulatory framework and its reliance on β selfregulation β by market participants, which paves the way to β regulatory capture β. this is a welcome change from the attitude that allowed in the past a growing proportion of markets, products and participants to go unregulated on the grounds that β they have no systemic impact β. this is the attitude that brought to us the β shadow banking system β made up of unregulated sivs and conduits, distributing opaque structured products containing subprimes and other risky assets with the active marketing of unregulated rating agencies. obviously, the systemic impact of these g20 commitments will depend on the actual outcome of the negotiations underway in the relevant trade and regulatory bodies. turning, finally, to the anchor question i must say at the outset that this is the area where little progress has been made so far in official fora. the g20 declaration mentions the need to reform international financial institutions, but mostly to reflect more adequately β changing economic weights in the world economy in order to increase their legitimacy and effectiveness β. how can we be sure that these steps will ensure that a global crisis such as the present one will not happen again? pro - cyclicality is an inherent feature of all financial systems and it is likely that a mere rebalancing of power would not achieve significant results in the absence of effective supra - national mechanisms to promote stability - oriented macroeconomic policies at the national level, especially by systemically important countries. unfortunately, the g20 declaration has placed insufficient emphasis on measures against the perpetuation of | 0 |
tonight i β ll focus on one of the most important : monetary policy. eight times per year, the federal open market committee β the fomc β meets to set the path of interest rates over the next six to seven weeks. all 12 presidents of the various regional federal reserve banks β including me β and the governors of the federal reserve board participate in these meetings. how does its regional structure help the federal reserve system make better monetary policy? the answer lies in the nature of the regional bank presidents β contributions during fomc meetings. during the course of the meetings, the presidents typically comment on the behavior of their district economies β in my case, the economies of the six states that make up the ninth district. this region - specific information helps to provide a granular, more forward - looking foundation for the making of national monetary policy. bis central bankers β speeches where do the presidents get this region - specific information? there are many answers to this question. but we are especially indebted to the members of our boards of directors and advisory councils, who use their extensive contacts in the local community to provide us with valuable economic intelligence. the reserve banks know that our district economies are all complex systems, and so we need β intel β from a wide range of perspectives. accordingly, the reserve banks work hard to ensure that the members of our boards and advisory councils come from many walks of life β farming, banking, fortune 500 companies, nonprofits, labor unions and start - ups to name but a few β and many parts of our districts. so, the 12 presidents contribute to monetary policy deliberations by providing local economic intelligence about their districts. but the presidents also often make comments about economic research being done within their banks that helps shed light on national economic conditions. hence, the geographic diversity within the system is important for another reason : it generates valuable intellectual diversity across the system. for example, back in the 1970s, the minneapolis fed research department played a key role in fostering the β rational expectations revolution β that has helped transform the making of monetary policy around the world. i β d love to take a few hours to explain this important development in policymaking β but it β s a friday night. the relevant point is this : would these economists have played this same role had they been working in washington, or anywhere else in the system, for that matter? i believe that the answer to this question is no. the ideas in the research department were generated by synergistic | participating countries, and ( ii ) there is still uncertainty regarding the role of these countries within the single supervisory institution. bis central bankers β speeches the question arises whether the decision to entrust the ecb with a banking supervision mandate was the appropriate choice. in my opinion, it seems that is the case, although a number of opinions highlighting potential problems should not be ignored. in favour of the ecb are its strong expertise in the financial sector, as well as the synergy that exists between banking supervision, on the one hand, and the lender - of - last - resort function and payment system oversight, on the other hand. as the third pillar of the banking union, the single bank resolution mechanism is deemed to ensure a centralised management of banking crises that provides options for dealing with bank failures in an orderly way, with minimal disruptions to the economy. the principles of the resolution should be set out in a single rulebook and they should address the issues of the cost of bank recovery, the fiscal backstop, and the moral hazard problem that may occur. the cost of banks β recovery or resolution should be borne by shareholders and creditors. nevertheless, in the case of systemic crises, an explicit fiscal backstop may be required, on the design of which a political consensus will be difficult to achieve. another challenge to establishing this mechanism relates to the heterogeneous resolution framework at the national level, which calls for significant changes in national insolvency, labour and tax laws. additionally, if the european stability mechanism were enabled to recapitalise banks directly, negative consequences could occur in terms of moral hazard within the single market, as well as unfair competition between participating and non - participating banks in the banking union. however, one should not overlook the fact that the single bank resolution mechanism has the advantage of increasing the speed and credibility in addressing banking crises ( especially cross - border failures ). as regards the single deposit guarantee scheme, the underlying idea is that a larger pool of resources reinforces confidence in the banking system. a caveat is worth mentioning, however : in times of extreme financial stress, the size of potential liabilities may undermine the credibility of the mechanism. even if this pillar is less urgent than the others, steps in this direction have already been taken. specifically, the coverage of the national deposit guarantee schemes has been harmonised at the level of eur 100, 000 / depositor / institution and measures to simplify protected deposit repayments have been adopted in terms | 0 |
to achieve several goals. first, re - establishing the political contacts on the subject at the highest level, as we must not forget that in the end it is a political process and a political decision. unfortunately, in recent years the contacts on this topic have been protocol rather than substantive. second, returning to the path of fiscal consolidation, which is important not only for the accession process, but is also the basis of our most important comparative advantages in economic and financial terms. such a development is also of great importance for the bnb, due to the need to harmonise the monetary and fiscal conditions in our country. third, adopting as quickly as possible the law on the introduction of the euro, which will give clear indications, but also legal guarantees for businesses and households, as to what lies ahead. 4 / 5 bis - central bankers'speeches fourth, accelerating the work on the remaining conditions and technical preparation. here i mean above all the issues of the government's competence, since, as i indicated, the bnb and the banking sector are working according to plan and will be fully ready before the end of this year. if this scenario materialises as soon as possible after the upcoming elections, the chances of joining the eurozone in 2025 remain strong and entirely realistic. in conclusion, let me sum up what i said. as a result of the political crisis of recent years, we have lost both the initiative and the leadership in the process of joining the eurozone. nevertheless, our readiness in terms of accession conditions, legislative and technical framework remains high. to successfully finalise the process in 2025, we also need a sustainable, pro - european political structure. 5 / 5 bis - central bankers'speeches | dimitar radev : spillovers from the ecb β s monetary policy decisions are fast and strong statement by mr dimitar radev, governor of the bulgarian national bank, for the iflr yearbook : global banking & financial policy review 2019 / 2020, published on 24 september 2019. * * * there is much discussion these days about the course of monetary policy in the euro area. what global headlines rarely catch, however, is how such policy affects the european economies outside the euro area. bulgaria is an example where, due to the high openness of our economy and the strong financial links with the euro area, spillovers from the ecb β s monetary policy decisions are fast and strong. around 50 % of bulgaria β s exports go to the euro area. investors from the euro area account for 67 % of our fdi stock. our banking system is dominated by the presence of euro area owned banks, which hold around 55 % of the sector β s assets. the monetary policy regime in bulgaria ( a currency board with the national currency fixed to the euro ) is another factor enhancing the direct transmission of ecb β s monetary policy. therefore, even though bulgaria is not a member of the euro area yet, it is important to consider how our economy is affected by the ecb β s continued accommodative stance. financial stability and its implications are issues to be potentially concerned about. the ecb β s monetary policy in recent years has succeeded in sustaining the economic recovery in the eu following the great financial crisis. in the eu countries that are not using the euro, the effects from monetary conditions in the euro area led to improving macroeconomic environment, loosening financing conditions, and high bank liquidity. that stimulated lending and, in turn, the increase in residential property prices. however, these developments also increased cyclical risks. the bulgarian national bank conducted research into bulgaria β s financial cycle. our findings showed that we are currently in an upward phase of cyclical risk accumulation. hence, we activated and then raised the rate of the countercyclical capital buffer. we have so far taken two decisions. in 2018, we set the countercyclical capital buffer rate applicable to credit risk exposures in bulgaria at 0. 5 %, with effect from october 1 2019. in early 2019 we raised the rate to 1. 0 %, with effect from april 1 2020. the rate is applied to the overall credit stock of banks and not to the volume of newly issued | 0.5 |
##sing macroprudential policies to be put in place to prevent expansion of banks β balance sheets beyond a certain scale, putting the onus on authorities to determine what is the optimal size and structure of the country β s financial sector β not an enviable task. if large banking systems with access to foreign finance become involved in providing credit to the local economy they have the capacity to rapidly destabilise it. furthermore, it will be difficult or impossible for the national fiscal authorities to deal with the failure of such a bank, if it is providing systemically important payment or transactions balance services to the domestic economy. of course, these considerations are directed to the situation of a small country with a large banking system. more generally, the interpenetration of banking systems has been seen as an important contributor to limiting uncompetitive practices in terms of price and improving provision of services. the degree of segmentation of international finance along national borders that has been seen in the course of this crisis is surely an over - reaction which should, and will in time, be reversed. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | lockdowns, many of us worked from home. central banks, including my own, mostly followed this trend. i must say that i was genuinely surprised, first, by the way we were able to engineer an almost instantaneous, seamless transition to remote working arrangements ; and second, by the fact that many tasks could in fact be performed remotely in such an efficient way. while there are pros and cons to remote working, and some degree of physical interaction is likely always to remain valuable for most tasks, the β new normal β will surely see a different mix of home and office hours with respect to the old. β’ this was one clear instance where investment in digital technologies had not yet released all its potential. i should add in passing that certain society - level efficiency gains ( e. g. fewer hours wasted in commuting, less traffic congestion, less pollution ) may never show in productivity statistics at the firm level. β’ swift technological progress can have disruptive effects on market dynamics. new leaders emerge and incumbent firms are often displaced in a relentless process of creative destruction. β’ market leaders pave the way for progress by pushing the frontier. there are two ways for society as a whole to reap the full productivity benefits of innovation : diffusion from pioneers to followers, and resource reallocation from laggards to front - runners. both are likely to be necessary. regulation and public policies can make a lot of difference on both counts. i shall touch very briefly on some potentially policy - relevant issues, among the many for which today β s discussion will certainly provide valuable and thought - provoking material. β’ rapid innovation usually requires a certain amount of resource reallocation to deploy its potential. physical and financial capital, entrepreneurship and labour should therefore find ways to move across firms and industries without unjustified friction. rules and institutions are extremely important in this respect. β’ let me make first one comment on the capital market. given the vital role of business birth and growth for employment creation and innovation, institutions are needed that can efficiently channel resources towards promising, high - potential firms. as growthoriented finance requires specialised skills and contracts, the activity of dedicated financial intermediaries is important. it needs strengthening, especially in europe, where, despite some significant growth in the last decade, the presence of such intermediaries is still too thin. venture capital and private equity can sustain business dynamism by selecting valuable projects, financially supporting entrepreneurial activities and helping start - ups to | 0 |
friends and family. if you are fortunate enough to find a job that is a good match for your skills and ambition, you still have to ask yourself : will housing be affordable? will the commute be a nightmare? will my partner be able to find meaningful employment too? i β ll bet a few people in this room have had prize candidates slip away once they realized that they could not afford greater toronto area housing prices, or were not keen to spend hours commuting to work every day if they lived further out. as the expansion continues, history tells us that job churn will pick up as employment continues to grow. this should lead to more employers finding it necessary, and worth their while, to offer higher wages. job churn is technically the sum of all workers who change jobs from an existing job, enter the workforce by obtaining a job, leave their job ( voluntarily or not ) or quit the labour force altogether ( e. g., through retirement or becoming a discouraged worker ). aside from the lingering effects of the oil price shock, the aging workforce may also be contributing to slow job churn. older workers tend to value stability more than younger workers do. see o. kostyshyna and c. luu, β the state of labour market churn in canada, β bank of canada staff analytical note no. 2019 - 4 ( january 2019 ). interestingly, labour mobility has increased significantly in the last 20 years. bank staff have found that the mean absolute difference in employment rates between provinces has converged to be the same as the difference between us states. see d. amirault and n. rai, β canadian labour market dispersion : mind the ( shrinking ) gap, β bank of canada staff analytical note no. 2016 - 3 ( march 2016 ). what structural factors could weigh on wage growth going forward? all that said, some forces that have been weighing on wage growth are structural, and therefore are likely to persist. in fact, these forces are not unique to canada ; they are being felt in many advanced economies. 13 how innovation is playing out in the global economy is at the centre. technological advances have lowered demand for many types of routine jobs, both cognitive and manual, in all advanced economies, including canada. these losses have been more than offset by jobs in other sectors that are experiencing stronger employment and wage growth. high - tech workers are the most obvious example. at the same time, more and more workers have to compete for | of our 6 september interest rate announcement, the risks around the basecase projection are judged to be a little greater than at the time of the july update. the main upside risk relates to the momentum in household spending and housing prices, while the main downside risk is that the u. s. economy could slow more sharply than expected, leading to lower canadian exports. the bank judges that the risks to its inflation projection are roughly balanced. on 17 october, we left our key policy rate unchanged at 4. 25 per cent. the current level is judged, at this time, to be consistent with achieving the inflation target over the medium term. we at the bank will continue to pay close attention to the evolution of risks, as well as to economic and financial developments in the canadian and global economies. | 0.5 |
mitigate the domestic and external effects of financial crisis, particularly in large economies like china and india. fourthly, the impact of instability in times of crisis appears largely to be borne by the home or domestic public sector rather than the global private sector. avoiding crisis is ultimately a national responsibility. in such a milieu, the policy makers are often confronted with competing positions and need to make choices in the face of daunting dilemmas. concluding remarks in a recent survey of the world economy, the economist ( september 16, 2006 ) predicted that the emerging economies are set to give the world economy its biggest boost since the industrial revolution. a greater integration into the global system of production and trade, supported by buoyant capital flows, is driving a widening wedge between the emerging and the developed countries in terms of growth rates. already accounting for more than half of the world gdp, in purchasing power parity terms, they will raise their share to two - thirds of the global output in 20 years'time. it took 50 years for britain and america to double real income in the 19th century when they were industrialising ; china is achieving the same feat in nine years! over the next decade, almost a billion new consumers will enter the global marketplace, providing an enduring stimulus to economic activity across the world. in all humility, it needs to be recognised that despite soaring economic growth, real per capita incomes and therefore, standards of living in the developing countries remain well below those in the developed countries. as the bric report of goldman and sachs ( 2003 ) had thoughtfully projected, the average per capita income in america would still be three or four times higher than in china even in 2040. the imf has estimated that if india's relative per capita income rises by under 2 per cent, it will take more than a 100 years to close half the distance from the developed countries'per capita income levels. if india's per capita income grows by three per cent in real terms, it will still take 69 years to close half the gap. more important, faster growth alone will not automatically eradicate poverty ; it depends on how inclusive that growth is and how the benefits of globalisation are shared. the future will, in all likelihood, call for some radical thinking, perhaps new vistas of development in operational and institutional frameworks of monetary policy. so far, it is claimed, the emerging economies have made the work of monetary authorities a lot easier than before by subduing inflation both | , pds should reduce and in fact consider eliminating their access to the call money market. there is an opinion that such restrictions of access to call money in indian conditions would add to stability in financial markets and help develop term money market. a final decision would no doubt be taken after discussions in technical advisory committee on financial markets of rbi, and further consultations with market participants. liquidity adjustment facility rbi influences liquidity on a day - to - day basis through laf and is using this facility as an effective flexible instrument for smoothening interest rates. the operations of non - bank participants including fis, mutual funds and insurance companies that were participating in the call / notice money market are in the process of being gradually reduced according to pre - set norms. such an ultimate goal of making a pure inter - bank call money market is linked to the operationalisation of ccil and attracting nonbanks also into an active repo market. the effectiveness of laf thus will be strengthened with a pure inter - bank call / notice money market in place coupled with growth of repo market for non - bank participants. the laf operations combined with judicious use of omos are expected to evolve into a principal operating procedure of monetary policy of rbi. to this end, rbi may have to reduce substantially the liquidity through refinance to banks and pds. for example, if rbi intends to tighten the money market conditions through laf, the automatic access of refinance facility from the rbi to banks and pds may reduce the effectiveness of such an action and thereby cause transmission losses of monetary policy. it may be appropriate to note that in most of the developed financial markets, the standing facilities operate at the margin. at present rbi provides standing facilities comprising the support available to banks under collateralized lending facility ( clf ) and export credit facility to banks, and liquidity support to pds. one way of reducing the standing facility will be to eliminate clf from the standing facilities and reducing the present ratio of normal and back - stop facilities. the existing methodology of calculating eligible export credit refinance continues till march 2002 and rbi has expressed its intention of moving away from sector specific refinance. as crr gets lowered and repo market develops, the refinance facilities should also be lowered giving more effectiveness to the conduct of monetary policy. towards international standards as part of the ongoing process of reforms, it is necessary to improve our standards, codes and practices in matters relating to financial system | 0.5 |
rachel lomax : why monetary stability matters to merseyside speech by ms rachel lomax, deputy governor of the bank of england, at the launch of the merseyside economic review 2005, the mersey partnership, liverpool, 24 february 2005. * * * it is a great pleasure to be back in merseyside, as the guest of the mersey partnership. it β s always inspiring to be in a city that has a great future as well as a glorious past β and i β m not referring to will alsop β s supercity of the north. when i was last in liverpool everyone was on tenterhooks waiting to hear the outcome of the european capital of culture. congratulations on a spectacular result. by all accounts you β re set to be european capital of shopping too when the new grosvenor development opens in the paradise area of the city. this is my first visit as a member of the bank of england β s monetary policy committee ( mpc ). of course, the bank and liverpool go back a very long way. liverpool was a village when the bank was founded. by the time we opened our first branches around the country, that village had grown into a major port, the gateway to the workshop of the world. so it was natural that the branch the bank built in castle street in around 1850 was one of its grandest, the work of charles cockerell. we still have agents in the city β neil ashbridge and john young. and only three years ago the bank β s court held its annual out - of - london meeting in liverpool β s imposing town hall. i am particularly pleased to launch this, the third edition of the merseyside economic review. the partnership had its origins in a daily post campaign over a decade ago ( β who speaks for merseyside? β ). it broke new ground then and it has been breaking new ground ever since. the economic review was the first of its kind for any uk city region. and the partnership β s report on β the gender agenda : women in the merseyside economy β is another first. the value of the partnership β s approach is clear. economic regeneration is a highly complex long term business which has to bring together many different bodies and initiatives β at local, regional, national, european and even international levels. it β s only too easy to lose sight of the big picture. but successful partnership rests on shared goals and clear expectations. this review charts the way | that the firm is taking the matter seriously ; proportionate consequences for the individual, including some form of disciplinary warning and possibly some impact on remuneration ; and a wider review of lessons learned if there was any evidence that there was a systemic problem. see page 16, financial reporting council ( frc ), β corporate culture and the role of boards : report of observations β, july 2016. see footnote 7 for details. with appropriate modifications to reflect the fact that it has a very different range of functions to a commercial bank and is accountable to a different range of stakeholders, including parliament. for further details see : www. bankofengland. co. uk / about / documents / smr. pdf all speeches are available online at www. bankofengland. co. uk / speeches now consider the bank β s response to charlotte hogg β s case : she was formally warned in the strongest β and most public β of terms. there were consequences for her compensation. while she couldn β t forfeit a bonus as bank of england governors cannot receive one, she waived her salary increase this year. court reassigned her coo responsibilities. court reconfigured reporting lines and internal structures in order to improve governance, compliance and disciplinary processes, including reassigning the smr responsibility for implementing our code. and, on the basis of this one incident, the independent directors of court have initiated a widespread review that will draw on the expertise of the independent evaluation office, internal audit and the national audit office. its results will be made public. in other words, consistent with our higher standards, the bank planned a tougher response than we would expect in the private sector, but one that, in our judgement, was still proportionate to an honest mistake that was freely and transparently admitted. the treasury select committee ( tsc ) reached its own judgement, which in turn triggered charlotte hogg β s decision to resign. i fully respect both the tsc β s judgement and her decision. i wanted to speak to this, not to continue the debate about the rights and wrongs of this case, but instead to highlight some of the lessons that the bank and industry might draw from it. in particular, i want to dispel the urban myth that has developed around these events. while the prudential regulation authority ( pra ) can impose financial penalties and suspension under the smr, we do not run for our regulated entities a disproportionate | 0.5 |
are that euro area growth will atrophy rather than accelerate. research also suggests that providing a central bank backstop for government finances can have detrimental effects on capital allocation by the financial sector. a recent study by viral acharya8 and others looks at the real effects of the announcement of the omt programme and finds that while it stabilised the banking system, it also increased zombie lending by banks to unproductive firms. creditworthy firms in industries with a prevalence of zombie firms suffered significantly from credit misallocation, which slowed down the economic recovery. who, then, should take on the hot potato of policy intervention to avoid the pitfalls of last resort lending when a country runs into financing troubles? it might help to look at what can be done to mitigate the ill - effects of central bank lending to banks. the answer here is an effective bank recovery and resolution regime. if banks turn out to be not temporarily illiquid but truly insolvent, they will need to be restructured or resolved. as the late allan meltzer once quipped : " capitalism without failure is like religion without sin. it doesn't work. " this holds for banks and for companies in general. in the euro area, progress has been made in terms of requiring banks to hold higher capital buffers as well as establishing the single resolution mechanism. but similar progress is lacking when it comes to the possibility of restructuring sovereign debt. the esm could function as a vehicle for such a regime. but crucial elements are still missing. one such element is changing the contractual terms of government bonds in the euro area by 4 / 7 bis central bankers'speeches introducing an automatic maturity extension for all bonds, which would be activated the moment a government applies for an esm programme. ongoing deficits would therefore be financed, but original creditors would not be paid off for maturing bonds. not only would this continue to provide incentives for private creditors to lend cautiously, it would also significantly reduce the need for financial aid under an esm programme. furthermore, it would vastly broaden the scope of the rescue mechanism. had it been possible to automatically extend the maturity of bonds back in 2011, portugal would only have needed around β¬43 billion to cover its entire budget deficit until 2014, rather than the β¬76 billion in total that it received in assistance loans. this solution would allow the esm to work as a restructuring regime. automatic maturity extension buys time to figure out whether a country is merely facing a liquid | burkhard balz : bolstering confidence, high - quality financial development promoting a chinese path to modernization keynote speech by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the tsinghua pbcsf global finance forum " bolstering confidence, high - quality financial development promoting a chinese path to modernization ", beijing, 20 may 2023. * * * 1 introduction ladies and gentlemen, i am delighted to be able to speak to you today here at the tsinghua pbcsf global finance forum in beijing. as a central banker, i can certainly relate to the conference title, " bolstering confidence ". you see, confidence is a central bank's most valuable asset when it comes to fulfilling its tasks to the best of its abilities. none more so than in times of turbulence, when trust and confidence provide an essential basis. and we are living through turbulent times, there is no doubt about that. rarely has the immediate future been as incalculable und unpredictable as it was over the past three years. following on from the coronavirus pandemic, russia's war of aggression against ukraine has sparked deep uncertainty and sent anxiety levels soaring around the globe. the war poses potentially a threat to the tried - and - tested system of international cooperation and is placing a strain on the global economy. but surely everyone must grasp that the major global challenges we face in our time β first and foremost, climate change β can only be overcome if we pull together. and there are other developments as well which are putting many countries to a stiff test β the digital transformation is just one topic i could mention here. but true to the upbeat conference title of bolstering confidence, let me begin with some comparatively cheery news from germany. 2 economic activity and inflation germany's economy has weathered the fallout from the pandemic and the war better than had been feared for a time. true, the braking effect of higher energy prices in particular made itself felt for a while, and german economic output contracted by 0. 5 % in the fourth quarter of last year. but the current quarter is now expected to see a moderate rise ; real gdp is likely to increase somewhat on average in 2023. the german economy has proven itself to be more resilient and more adaptable than it is often believed to be. but what's far too high right now is inflation. measured in terms of the hicp, consumer | 0.5 |
turns out that, in contrast to the government bond yield spreads, agency yield spreads remained remarkably stable. this suggests that there were no significant changes in the perceived relative credit see j. ejsing and w. lemke ( 2009 ), β the janus - headed salvation : sovereign and bank credit risk premia during 2008 β 00 β, ecb working paper no 1127. quality of the sovereign issuers, but market liquidity factors influenced favourably the german government bond yields. iii. 3 the role of individual sovereign issuers β credit risk let me turn to the third factor that has shaped developments in the euro area government bond markets, namely country - specific sovereign credit risk. after reaching new peaks at the beginning of 2009, sovereign bond yield spreads have followed a downward trend, but with a few exceptions. ( slide 5 ) for some euro area member states, notably greece, they have widened again since mid - november 2009. the large and persistent increase in the spreads in the case of greece has been driven by concerns regarding its long - term fiscal sustainability as well as worries about the country β s ability to refinance its maturing government debt this year. following the announcement of additional fiscal consolidation measures by the greek authorities in march and the statement by the heads of state and government of the euro area later in that month, greek bond spreads narrowed somewhat. but re - ignited market concerns on the macroeconomic outlook and the government β s refinancing requirements drove spreads substantially higher over the past few days. contagion effects to other countries via the government bond markets have been limited so far. the statement on the support to greece by euro area member states issued yesterday had a significant favourable impact on the greek sovereign spreads today. overall, government bond yield spreads in some countries remain at relatively elevated levels compared to their pre - crisis levels. iii. 4 the relation between corporate and sovereign credit risk premia before concluding, i want to briefly focus on the relationship between sovereign and corporate credit risk premia. should we expect adverse spill - overs from developments in sovereign credit spreads to the relative costs of corporate financing across euro area countries? in particular, in the european monetary union is it still the case that sovereign credit risk premia provide a lower bound for credit risk premia of corporations residing in the respective country? as there are no intra - euro area exchange rate risks and the cross - country money market volatility is very small, these sources of cross - country differentials in | so as to reap the benefits of integration and development for efficiency and growth, while safeguarding financial stability, by addressing potential systemic risks that might stem from these processes. the recent experience, the ongoing policy debate and economic research converge on the need for greater transparency, reduced financial product complexity, improved corporate governance and more effective risk management. moreover, the crisis revealed the need for a strengthened regulatory framework, enhanced macroprudential oversight, intensified micro - prudential supervision and better cross - border crisis management and resolution regimes. the list is long, but it is vital that progress continues to be made on all relevant fronts. a lot has been achieved so far, but much more remains to be done. in particular, the global regulatory reform underway and the new eu supervisory framework will greatly contribute to both financial stability and increased financial integration. the european system of financial supervisors will support financial integration by promoting a single set of micro - prudential rules and the equal treatment of market participants. in parallel, the european systemic risk board will foster financial integration by safeguarding financial stability that allows market participants to better exploit cross - border opportunities. iii. the impact of the crisis on the sovereign bond markets in the euro area let me now turn to the second issue, namely the impact of the crisis on the sovereign bond markets in the euro area. this has been significant but heterogeneous, as demonstrated by diverging yield spreads. moreover, it has varied over time reflecting the effects of different factors. the major phases in the movements in intra - euro area government bond yield differentials since the outbreak of the crisis are broadly familiar. ( slide 1 ) therefore, i will abstain from a chronological description of developments and will focus on three key factors that shaped euro area sovereign bond spreads at different stages : first, the risk transfer from the financial system to the government sector ; second, the importance of market liquidity premia ; and third, the emergence of more country - specific sovereign credit risks. iii. 1 risk transfer from the financial system to the government sector in march 2008, euro area government bond spreads showed the first discernible increases since the beginning of the crisis in summer 2007. thereafter, spreads abated somewhat but did not return to pre - crisis levels. intra - euro area sovereign bond spreads picked up appreciably after the bankruptcy of lehman, reflecting β flight to quality β, but they widened substantially in october 2008, when eu governments announced large fiscal stimulus packages and comprehensive measures to support | 1 |
. diversification and innovation of financial structures. this would involve either applying innovative islamic products on a stand alone basis or applying a combination of islamic instruments to suit project finance needs. in attempting the latter, it needs to be ensured that vanilla islamic products such as murabaha, ijara and diminishing musharaka etc. are implemented with their necessary preconditions, consistent with shariah principles, to promote modes that can be used to finance commercial and project finance activity. this would require greater reliance on equity based financing, given that it is akin to participation and risk sharing consistent with infrastructure financing requirements and islamic principles. at the same time, it requires financial engineering, flexibility in the evolving sahriah system and alliance both among domestic and with the bigger global players ( such as standard chartered, hsbc, ubs, citibank etc. ) to diversify islamic financial structured products to support project finance in addition to associated real estate, shipping, trade, and aircraft financing. islamic financing products / structures are now quite common in middle east and saudi arabia and have gained ground in non - muslim countries too. in most cases it has to be recognized that islamic financing is incorporated within a multi - sourced project financing offering, along side the conventional project financing structures backed with or without supportive credit enhancement or export credit agencies financing. the islamic financing element of the project is provided pari passu with the other senior debt. istisna β s and variant structure of ijara are frequent products used. if required, there should be standard legal structure for establishing and operating with ease islamic spv as the financing vehicle. islamic finance tranches are known to offer additional benefit of competitive pricing and tenor. there should be harmonization of these alternate and multi - financing legal and regulatory structures and appreciation that conventional project financing documentation could be acceptable to different shariah boards / committees. pakistan has been exposed to these structures, given its earlier experience with the hub river project, which in early 1990s incorporated islamic tranche of istisna, and more of such recent deals. in designing such structures there has to be more tolerance among participants to : β’ integrate islamic and conventional funds to allow co - financed projects with different players ; β’ accept ownership risks ( since in all islamic transactions, lender is at some stage the owner of financed goods ) but with comfort of clarity of legal issues surrounding ownership ; β’ ensure proper tax treatment of the proposed islamic financing structures, avoiding adverse treatment relative to | to business and economic cycles and their behavior. the basic criticism on basel ii from all quarters is related to pro - cyclicality. the new accord makes the business cycle in an economy much more pronounced. it can create problems for policy - makers and also for economic stability. the arguments suggest that in times of recession as the borrower β s credit risk increases, as measured by either of the approaches, the banks will curtail lending, while in a booming economy they will expand lending. the proponents of basel ii, however, have argued that under the new accord the deterioration of a portfolio should begin to be reflected in a bank β s capital adequacy itself at a much earlier stage and no further deterioration should ideally occur in the capital adequacy ratio when it is recognized as an accounting loss. several options have been proposed for this purpose. for example, discretionary powers granted to supervisors under pillar ii, such as the ability to demand a buffer of additional capital during a business cycle expansion, is one way of addressing pro - cyclicality. another is to adjust the value of the probability of default in the internal ratings approach or advance approaches which draw on the historical trend analysis of the business cycle. whatever we do, we have to somehow come to grips with this phenomenon. the sixth point is how does basel ii introduce complications for access to finance. this is an area where we have to be careful because there is a lot of scope to enhance funding to the desired sectors and to specific groups of individuals which are currently under - served. first of all it has to be recognized that the banks do have to enhance business and coverage in these vulnerable sectors and vulnerable segments of population. so will this mean that they would require higher capital allocation for assuming what has got to be a higher credit risk? yes, of course, but this will clearly and hopefully not be a deterrent in encouraging credit flows to the small businesses and poor segments of the society, because we have to somehow accommodate this through better credit appraisal and credit vigilance rather than by adding excessive capital. one aspect which has been clearly underdeveloped in this architecture is how should the credit scoring mechanism be adopted for the small companies? some advancement has been made in this area in latin america, and sbp will have to actually look at this area quite closely. i am not advocating a fundamental deviation from basel ii, but rather proposing to find a robust and a workable solution to what i believe is a daunt | 0.5 |
hedge their currency and other risks on their new offshore investments. this growing demand can be expected to support the development of foreign exchange markets in china. the ability to hedge foreign exchange risk is β alongside the ability to denominate foreign liabilities in local currency β an important ingredient in helping ensure that the benefits associated with a more open capital account and flexible exchange rate are not outweighed by potential financial ( in ) stability costs. indeed, the development of deep and liquid hedging markets is one of the reasons why australia β s experience with capital account liberalisation and exchange rate flexibility has worked out well. when we first moved from a fixed, to a managed, to a floating exchange rate regime in the 1970s and 1980s, these markets were not particularly well developed, but they have since matured significantly. in large part, this occurred organically in response to the increase in demand for hedging products that arose once the exchange rate became more variable. this may well be the case for china too. this positive feedback loop between liberalisation and market development is also an important lesson from our own experience : if liberalisation does not occur it is hard for markets to develop, and if markets are not developed it is hard to liberalise. but a gradual process of liberalisation can promote market development and stability which makes it easier to liberalise further. one element of this positive feedback loop is that greater use of rmb for trade invoicing by chinese firms can allow these firms to reduce currency mismatches on their balance sheets and thus alleviate potential vulnerabilities that could otherwise arise from a more flexible exchange rate regime. another is that, as capital account liberalisation proceeds, the entry of non - residents to china β s domestic financial markets will increase the depth of these markets. and as non - residents become more willing to take on rmb exposures, the pool of potential counterparties for chinese entities seeking to hedge their foreign currency liabilities will also increase. centre for international finance and regulation ( 2014 ), β internationalisation of the renminbi : pathways, implications and opportunities β, research report, march. available at < http : / / www. cifr. edu. au / site / research / targeted _ research _ rmb _ internationalisation. aspx >. bis central bankers β speeches nobody knows precisely how this whole process of rmb internalisation will play out. this is partly because there is no historical precedent for an economy of china β s | hope. right now the big forces include : β’ for australia, the closing chapters of a very large and long - running terms of trade event, with all that means in terms of economic adjustment. this coincides with a household sector no longer being in a position to play a major role in leading growth by significantly increasing its leverage, because it had already done that in the past ; β’ a global economy growing but only moderately, affected by considerable structural change and facing legacy effects of debt, arising from a previous period of overconfidence and under - appreciation of risk ; β’ a disinflationary or deflationary environment for the production of goods and commodities, and even some services, accompanied by unusually low rates of wages growth ; β’ extremely low returns on safe financial assets, as central bank actions have removed a significant proportion of these assets from the market, and have encouraged investors to accept interest rate risk on the remainder by providing β guidance β, leading to : β’ high and rising valuations on existing fixed assets, including dwellings, around the world, but not so much, thus far, in the way of new capital formation by most existing businesses in the β real β economy. to this list of β conventional β forces we might add : β’ the β disruption β of the increasing application of digital technology, which may mean, among other things, that growth in sales, capital formation and returns to capital are happening in entities and activities we don't measure very well β or at all. many of these sorts of forces are low - frequency in their nature. most of the ups and downs in the time series from month to month, or even year to year, on which we all expend so much energy are just temporary fluctuations around these longer - run trends. if numerical forecasts can't be very dependable, are we β the economics community β much good at predicting these long - run forces? if we look back a decade, to the sorts of things that occupied much attention, the evidence is mixed. by the middle of last decade, we had certainly noticed the change in household borrowing and spending behaviour, understood that it was important and wondered how long it could continue, and what might cause it to alter course again. in that respect, we were at least looking in one of the right places. people had also sensed that the emergence of china was starting to have important implications for australia and the global economy. that said, the strength and duration of the bis central bankers | 0.5 |
peter pang : managing capital flows β the search for a framework welcoming address by mr peter pang, deputy chief executive of the hong kong monetary authority, at the asian development bank institute and bank for international settlements joint seminar for the book launch on β managing capital flows : the search for a framework β, hong kong, 21 april 2011. * * * good morning, ladies and gentlemen. 1. let me thank mr kawai for inviting me to this event. it β s my honour to welcome you to this joint seminar by the asian development bank institute ( adbi ) and the bank for international settlements ( bis ) to mark the launch of the new book, β managing capital flows : the search for a framework β. this is a topical issue right at the centre of attention of policymakers in this region. and as the title suggests, it is also a subject that we are still in search for an answer. 2. there is an old chinese proverb saying that β water can keep a boat afloat but it can also capsize the vessel β. this suitably characterises the nature of international capital flows β it brings both benefits and risks to the development process in asia. capital inflows have been playing a key role in the economic development of the region β funding investments and bringing along technology and skill transfers. these were conducive to the emergence of the β four asian tigers β in the 1980s, and the rapid modernisation process of china, india and other asian economies. on the other hand, the pro - cyclicality and highly volatile nature of capital flows poses significant macroeconomic management challenges to policymakers. if not properly managed, the build - up of excesses amid strong capital inflows and the subsequent bursting of the bubbles could be detrimental to financial stability, wreaking havoc on economic growth. 3. managing capital flows has been a dynamic learning process for policymakers in developing economies. prior to the asian financial crisis, asian economies embraced capital flows with little wariness of the downside risks. the dominant flow pattern at that time was for asian governments to invest their savings in high - grade government papers of the advanced economies. the funds were then recycled back to asia in the form of highly volatile shortterm capital flows. these resulted in serious imbalances in the balance of payments accounts, and mismatches in currency and maturity in the balance sheets of banks. the subsequent shifts in market sentiment and expectations led to abrupt reversals of capital flows out of asia | management. while conventional macroeconomic policies are useful in containing overheating in the overall economy, their deployment is often constrained by their broad - brush nature and the concern about attracting even more speculative inflows. therefore, many developing economies have also adopted other prudential and capital account measures to manage capital inflows and to contain the buildup of excesses in specific sectors of the economy and the banking system. for example, some regional economies have recently tightened the mortgage underwriting standards of their banks, and limited banks β foreign currency borrowing and derivatives positions. 12. to effectively manage capital flows, policymakers would need to improvise with the apparatuses in their policy toolkit and apply a policy mix tailored to their domestic circumstances. it is like the use of β chinese herbal medicine β β we feel the pulse, carefully calibrate a combination of remedial herbs ( i. e. policies ), and follow through with continuous fine - tuning in the light of market reactions. the process is pragmatic and, to a large extent, interactive. 13. given the need for customised solution at the national level, the sharing of experience is therefore very important. we welcome the timely publication of this book, which provides a good basis for studying the different approaches to managing capital inflows by different economies. individual countries β experiences would, collectively, help shed light on the formulation of an effective policy framework. 14. ladies and gentlemen, let me end my remarks by quoting a line from the book : β risk of crisis as financial integration increases will never disappear, and countries must pursue protection from risks of volatility and sudden stops β 2. we should always be vigilant, even in peace time. to mr kawai and other authors, congratulations yet again on the launch of this new and important book. 15. thank you. chapter 4 : β managing large capital inflows : taking stock of international experiences β ( by susan schadler ). bis central bankers β speeches | 1 |
we will be watching closely to see how the economy responds to higher interest rates. we β re not on autopilot. we will be looking for signs that the economy is returning to balance. just as canadians trusted us to respond with strength and conviction when the economy needed support at the onset of the pandemic, they are counting on us now to lower inflation. we take that trust seriously. we have the tools, we have the track record, and we are committed to getting inflation back to target. let me stop here. you β ve been an attentive audience, but an important part of being transparent and accountable is listening, and taking questions. so that β s what i β d like to do now. thank you. 6 / 7 bis central bankers'speeches 1 1. t. gravelle, β market stress relief : the role of the bank of canada β s balance sheet β ( speech delivered virtually to cfa society toronto, toronto, ontario, march 23, 2021 ). 2 2. t. macklem, β the imperative for public engagement β ( speech delivered virtually to the federal reserve bank of kansas city jackson hole symposium, jackson hole, wyoming, august 27, 2020 ). 7 / 7 bis central bankers'speeches | of that mean for inflation? we've come a long way from the 8. 1 % inflation we saw last summer. as i mentioned, annual cpi inflation was down to 4. 3 % in march, 1 / 2 bis - central bankers'speeches led by falling goods price inflation, and we see further declines ahead. that's good news. but many canadians are still struggling to manage the rising cost of living, and prices of many things that people need to buy are still rising too quickly. food price inflation is just under 10 %. we expect food price inflation to come down in the months ahead, but services price inflation will take longer. continued strong demand and the tight labour market are putting upward pressure on many services prices, and those are expected to decline only gradually. we expect it will take until the end of 2024 to get inflation all the way back to the 2 % target. when we met last week, the bank's governing council discussed whether we've raised rates enough, and we considered the likelihood that the policy rate may need to remain restrictive for longer to return inflation to the 2 % target. governing council also discussed the risks around our projection. the biggest upside risk is one i just mentioned - that services price inflation could be stickier than projected. the key downside risk is a global recession. if global banking stress re - emerges, we could be facing a more severe global slowdown and much lower commodity prices. overall, we view the risks around our inflation forecast to be roughly balanced, but with inflation still well above our target, we continue to be more concerned about the upside risks. let me conclude. our job at the bank of canada is to get inflation all the way back to the 2 % target. we are encouraged with the progress so far. and seeing inflation get down to 3 % this summer will be welcome relief for canadians. but let me assure canadians that we know our job is not done until we restore price stability. price stability is important because it restores the competitive forces in the economy and allows canadians to plan and invest with the confidence that their money will hold its value. that's the destination - we are on our way and we will stay the course. with that summary, the senior deputy governor and i would be pleased to take your questions. 2 / 2 bis - central bankers'speeches | 0.5 |
supply chains. for example, see pulakos, elaine, and robert b. ( rob ) kaiser, " to build an agile team, commit to organizational stability, " harvard business review, april 7, 2020, https : / / hbr. org / 2020 / 04 / to - buildan - agile - team - commit - to - organizational - stability ; " joint media statement of the 8th eas economic ministers'meeting, " august 28, 2020, https : / / asean. org / storage / 2020 / 08 / jms - of - the - 8th - easemm. pdf ; asean + 3 macroeconomic research office ( amro ) ; and " now what? post - pandemic policy considerations, " amro policy perspectives, pp / 20 - 01, july 2020, https : / / www. amroasia. org / wp - content / uploads / 2020 / 08 / 20200720 _ amro - policy _ perspectives _ post - pandemic - policy _ final. pdf. consumer asia covid - 19 has also brought significant changes to various aspects of our daily lives. this has led to changes in demand for goods and services. to exploit this new demand, many firms, including in asia, have begun to shift and strengthen their business focus accordingly, even as they continue their fight against covid - 19. more than ever, companies must be agile in order to adapt to the changing environment and capture new demand arising from the expansion of digital networks, online healthcare and education services, as well as the growth of e - commerce. in the longer term, these business reforms are expected to boost productivity. asia's services sector has long been noted for its low productivity. 2 however, the landscape has been changing dramatically in recent years, as illustrated by the especially strong growth of ecommerce in asia. 3 this is expected to improve the resilience of consumer asia by generating new consumption and investment, as well as increasing wages. c. sustainable economic growth from a longer - term perspective, asia must address its challenges in order to achieve sustainable economic growth. the key to achieving this goal is to work toward realizing an inclusive, green, and digital economy. while this will involve a great deal of time and effort, the rewards are expected to outweigh the costs. there is no trade - off involved between moving toward an inclusive, green, and digital economy and achieving economic growth over the longer - term ; rather | asia, " august 2020, https : / / www. mckinsey. com / ~ / media / mckinsey / featured % 20insights / asia % 20pacific / climate % 20ri sk % 20and % 20response % 20in % 20asia % 20research % 20preview / climate - risk - and - response - inasia - future - of - asia - research - preview - v3. pdf. facilitates financial inclusion but also stimulates economic activity by increasing investment and creating demand in relevant sectors. asia accounts for more than 60 percent of all fintech - related patents filed in the 20 years to 2018, 5 and offers huge potential in the fintech sector. the recent pandemic has accelerated the move toward digitalization. it has become increasingly important that governments and the private sector collaborate to further pursue initiatives to facilitate digitalization, focusing both on developing physical infrastructures and on legal and regulatory frameworks. iii. regional and international cooperation lastly, i would like to talk about regional cooperation in asia. regional cooperation in asia is conducted through various platforms including asean and asean + 3. there are also frameworks such as apec that extend to areas outside asia. in the financial context, the chiang mai initiative multilateralisation ( cmim ), a regional financing arrangement involving japan, china, south korea, and the 10 asean member countries, has made steady progress in enhancing its effectiveness, thereby contributing to financial stability within the region. central bank fora, including emeap and seacen, have also been effective. the covid - 19 pandemic has highlighted the importance of regional as well as international cooperation in implementing appropriate measures in response to economic shocks. external shocks with far - reaching effects, such as climate change, also require coordinated action. going forward, regional and international cooperation will become even more essential. conclusion today, i have discussed the impact and the challenges posed by covid - 19 on the global economy, with a focus on asian economies. many of the challenges asian economies now face are common to the global economy. the issues are wide - ranging and not easy to tackle. asian development bank, " harnessing technology for more inclusive and sustainable finance in asia and the pacific, " 2018, https : / / www. adb. org / sites / default / files / publication / 456936 / technologyfinance - asia - pacific. pdf. however, by overcoming and learning from these challenges | 1 |
zealand sweden peru chile south africa hong kong norway uk uk israel india eurozone brazil peru sweden czech rep. mexico norway australia south korea israel malaysia iceland new zealand south korea australia eurozone poland hong kong colombia indonesia philippines canada mexico poland india switzerland china czech rep. indonesia china turkey philippines south africa usa hungary hungary brazil malaysia argentina russia russia japan iceland argentina - 1, 000 ( percentage ) - 800 - 600 - 400 - 200 at 19 oct. 2009 between 4 sep. 2008 and 19 oct. 2009 source : bloomberg. figure 6 interest rates in pesos and dollars in the local market ( percentage ) jan. 08 apr. 08 jul. 08 oct. 08 stock exchange - 90 days jan. 09 apr. 09 jul. 09 oct. 09 libor + 90 - day on - shore spread sources : bloomberg and central bank of chile. table 1 monetary policy rate and expectations according to ees ( percentage ) actual level expected for expected 2 same month months ahead expected for dec. 09 oct. 2008 8. 25 8. 50 8. 50 7. 00 dec. 2008 8. 25 8. 25 7. 75 6. 25 feb. 2009 4. 75 6. 25 5. 00 4. 00 nov. 2008 8. 25 jan. 2009 8. 25 7. 25 mar. 2009 8. 25 7. 50 2. 25 6. 75 3. 13 2. 50 6. 63 5. 50 2. 00 source : economic expectations survey ( ees ), central bank of chile. figure 7 foreign credit flows to residents ( billions of dollars ) 3. 0 3. 0 2. 5 2. 5 2. 0 2. 0 1. 5 1. 5 1. 0 1. 0 0. 5 0. 5 0. 0 0. 0 - 0. 5 - 0. 5 - 1. 0 - 1. 0 - 1. 5 - 1. 5 - 2. 0 jan. 07 jul. 07 jan. 08 new credits to banks jul. 08 jan. 09 - 2. 0 jul. 09 new credits to non - banks net flow ( * ) ( * ) discounting bank and non - bank amortizations from total new credits. source : central bank of chile. figure 8 world growth ( annual change, percentage ) - 3 - 6 - 9 - 12 world at market exchange rate - 3 - 6 - 9 - 12 chile ( 1 ) gray area shows projections as from 2009. ( 2 ) figures for growth in 2009 and 2010 stand for | birgir isleifur gunnarsson : monetary issues in the european union and iceland speech by mr birgir isleifur gunnarsson, chairman of the board of governors of the central bank of iceland, at a seminar organised by the iceland trade council, euro info office in iceland and the eu commission on the theme : does the euro affect iceland?, reykjavik, 31 october 2001. * * * ladies and gentlemen : the evolution of european integration during the second half of the last century is remarkable in many ways. this process began soon after the end of world war ii and represented an effort to forge stronger bonds between european nations and thereby, among other things, reduce the likelihood of further conflict on the continent. although i shall not go into its history here, many notable milestones can be cited along the course that has been taken. one of the most notable was the formal establishment of the economic and monetary union in the beginning of 1999. now the abolition of the individual member nations β separate currencies is in sight. as of next year they will be replaced by euro notes and coin. not only will prices of goods and services be calculated and stated in a single currency in the twelve emu countries, but the same notes and coin will be used for business in them all. one consequence of pricing in a single currency in all member countries will be to facilitate buyers of goods and services greatly in making price comparisons, and competition within the eu will certainly become more active than it has been until now. economic and monetary union the emu has a population of more than 300 million and accounts for 16 % of global gdp. by way of comparison, the usa has a population of 280 million and accounts for 22 % of global gdp. exports of goods and services are equivalent to 19 % of emu gdp, while the corresponding figure for the usa is under 11 %. some 19 % of total world merchandise exports come from the emu, and 15 % from the usa. twelve of the fifteen eu nations belong to the emu. the uk, denmark and sweden remain outside it, but their positions differ somewhat. denmark and the uk have stated reservations about membership, on which they have reached agreement with other eu states. sweden, on the other hand, has opted to remain outside the emu, although no special reservations have been agreed upon for them. denmark is involved in currency cooperation with the emu, one aspect of which is that the exchange rate of the danish krone may not devi | 0 |
rates, involving a gradual and orderly appreciation of their currencies vis - avis the major convertible currencies, is also in the interests of the emerging economies concerned and in the interests of the international community. isn β t there a risk that the fiscal consolidation in the majority of european countries will slow down the economic recovery? no, i don β t think so. a consolidation of the recovery and a return to sustainable growth crucially depend on confidence : the confidence of households, the confidence of firms and the confidence of savers. the pursuit of credible and reassuring fiscal adjustment measures will contribute to the consolidation of the recovery because such measures inspire confidence in all those on whom economic prosperity depends. but has sufficient account been taken of the social risks involved? the main problem consists of the level of unemployment. as i said, a return to confidence, in particular fiscal confidence, is essential for the consolidation of the recovery and thus for the creation of lasting employment. the confidence to which you refer is measured in particular by the credit rating agencies. isn β t it necessary to reassess their role? why can β t the eu have its own credit rating agency? this is one of the major areas that is being looked into at the global level. past events have shown how risky it could be to rely blindly on the analyses of the credit rating agencies. financial institutions and investors must assume overall responsibility for the decisions that they take. how can monetary policy and eu economic policy be better coordinated? we have a monetary federation, which has provided monetary stability on a continental scale for 330 million citizens. necessarily, this must be accompanied by very close monitoring of fiscal policies and strict compliance by fiscal policies with the reference framework that we set ourselves. on behalf of the governing council, i have always asked for strict compliance with the stability and growth pact and the introduction of closer monitoring of developments in competitiveness within the euro area. today, we ask the european commission and president van rompuy, who have been charged with this task, to put forward proposals that go as far as possible in this regard : we need to significantly enhance fiscal and economic governance in the euro area. does global governance simply mean the convergence or merging of the approaches followed by the main international bodies? a lot of changes are happening in this regard : the imf is in the process of reforming its internal governance, with emerging countries being granted more seats. the european countries have agreed to reduce their representation. with regard to the informal governance of the | work, wages and monetary policy speech given by andrew g haldane chief economist, bank of england national science and media museum, bradford 20 june 2017 the views expressed here are not necessarily those of the bank of england or the monetary policy committee. i would like to thank will abel, shiv chowla, brad speigner and arthur turrell for their help in preparing this text. i would like to thank alina barnett, nick bate, tom belsham, stuart berry, melissa davey, kristin forbes, rich harrison, will holman, david latto, clare macallan, gareth ramsay and michael saunders for comments. all speeches are available online at www. bankofengland. co. uk / speeches it is wonderful to be here in bradford, just a few miles away from where i grew up. the city has of course a rich commercial history dating from the industrial revolution. back then, it was a thriving hub for textiles and other manufacturing industries. the city β s architecture bears witness to the rich civic investment that took place around this time, with the public and private sector often working in partnership. the decline of the uk textiles industry from the mid - 20th century was mirrored in bradford β s own fortunes. like many industrial cities, bradford went through a wrenching transition and still bears some of the scars. but that retreating tide now seems, decisively, to have turned. i am delighted to see civic and commercial investment beginning to return to bradford over the past few years. those scars are starting to heal. of course, there is plenty still left to do with parts of the city still among the poorest in the uk. but compared with when i last visited a few years ago, there is now a real sense of opportunity and optimism in bradford, lifting the spirits of the businesses operating here and the people living here. regional visits such as these are the most useful and most interesting part of my job. over the course of two days, i will speak and listen to over two dozen businesses of all shapes, sizes and sectors. i will speak and listen to a number of charities, not - for - profit enterprises and schools. i will do a walkabout in sunbridge wells, an underground parade for retail and leisure and a great example of that civic investment and entrepreneurial spirit operating once again in the city. and i will have with me a film crew, distilling some of the key bits of my visit to a wider audience across the | 0 |
set trade policy. but we need to understand shifts in global trade because they affect lives and livelihoods, and they drive costs and inflation. conclusion so let me conclude with the implications for monetary policy. the rapid globalization through the 1990s to around the global financial crisis significantly reduced the prices for many globally traded goods. this contributed to a lower cost of living for many households. going forward, with globalization slowing, the - 13 cost of global goods may not decline to the same degree. all things equal, this could put more upward pressure on inflation. trade disruptions may also increase the variability of inflation. the pandemic taught us a lot about supply shocks and how they can affect the volatility of prices. supply chains are complicated, and shocks affect inputs and outputs in different ways. and while supply shocks are historically transitory, they can persist β and accumulate. we also learned that when the economy is already overheated, disruptions to supply can have an outsized effect on inflation. so what is the bank of canada doing to ensure we β re prepared for the supply shocks that come with trade disruptions? we β re investing in data and analysis to better understand supply chains, especially at the global level. we β re updating our models to use scenarios when periods of uncertainty make central forecasts less reliable. and we β re using more microdata to track and understand the consequences of trade and industrial policy. but even with a better understanding and better information, trade disruptions may mean larger deviations of inflation from the 2 % target. supply shocks present central banks with a difficult trade - off β monetary policy can β t stabilize growth and inflation at the same time. that means we have to focus on risk management, balancing the upside risks to inflation with the downside risks to economic growth. most importantly, we must avoid adding uncertainty to an already uncertain environment. that means ensuring inflation is low, stable and predictable even as global trade is being rewired, recast and redirected. thank you. | need to be addressed, but it is important they not become a pretext for inefficient protectionism. trade is also being rerouted as businesses try to diversify supply chains and find friendlier partnerships. 4 but the combination of more trade restrictions and shifting trade routes means supply chains have actually gotten longer β with products detouring through other countries such as vietnam instead of going directly from china to the united states. 5 fragmentation has economic costs. businesses have to focus on national security and geopolitical uncertainties, not just efficiencies and productive partnerships. the imf estimates that costs of trade fragmentation could range from 0. 2 % to 7 % of global gdp. 6 but costs go beyond trade β and the losses are unlikely to be distributed evenly. the loss of knowledge spillovers, high - tech partnerships, critical imports and capital flows affect low - income economies in particular. the potential for trade and innovation to continue to lower global poverty will decline. 7 trends in canada β s trade so those are the global trends. in many ways, canada is a microcosm of these global shifts. our overall trade growth has slowed in recent years. our export growth has been coming increasingly from services. and global fragmentation is presenting new challenges and opportunities. slowing trade growth canada is a very open economy. over the last decade, trade as a share of gdp has been about two - thirds β the second highest in the g7 and the fourth highest in the g20. we rely on exports for roughly one - third of our income. imported components feed our industry, and imported final goods and services improve the lives of canadians. the united states is, by far, canada β s biggest trading partner β accounting for roughly 75 % of canada β s exports. thanks in part to the canada - us free trade agreement in 1989, and updates in the years following, canada and the united states benefit from the largest bilateral trade relationship in the world ( chart 5 ). our biggest exports to the united states are oil and gas, and motor vehicles and parts. 4 see l. alfaro and d. chor, β global supply chains : the looming β great reallocation β, β paper prepared for the jackson hole economic policy symposium : structural shifts in the global economy, august 24 β 26, 2023. jackson hole, wyoming : federal reserve bank of kansas city. 5 h. qiu, h. s. shin and l. s. y. zhang, β mapping | 1 |
generating inflation expectations. the need for a reversal of expectations through a change in policy regime is likewise inherent in the thinking behind the bank β s quantitative and qualitative monetary easing of today. indeed, macroeconomic policies initiated by takahashi have many similarities with the economic policies under prime minister shinzo abe ; namely, the first and second β arrows β of β abenomics. β it is for this reason that the takahashi economic policy is viewed as playing a pioneering role in abenomics. the basic thinking behind the takahashi economic policy was to manage aggregate demand through both fiscal and monetary policies, and this coincided with keynesian principles. what is noteworthy about takahashi β s policy package is that it was put in place before keynesian economics became established. for instance, in the united states it was only from 1933 that president franklin d. roosevelt called for an exit from the gold standard, adopted a monetary easing policy, and introduced the new deal, which was considered to embody the essence of keynesian theory. by 1935, takahashi judged that japan β s economy had returned to a stable course. while tightening fiscal expenditure, he tried to stop the bank from underwriting government securities ; otherwise, this would lead to hyperinflation. his actions were opposed by the military, which sought a further expansion in military spending. he was eventually assassinated by young military officers on february 26, 1936. after his death, the bank β s underwriting of government securities was mismanaged, which led to hyperinflation after world war ii. the important point to remember is that it was not the takahashi economic policy itself but the mismanagement of the bank β s underwriting of government securities after takahashi β s death that led to hyperinflation. based on the lessons learned from history, subsequently the public finance act prohibited the bank from extending credit to the government by underwriting government securities. moreover, under quantitative and qualitative monetary easing, the bank has set its price stability target at 2 percent, based on the recognition that neither deflation nor hyperinflation is desirable. to conclude, the takahashi economic policy was consistent with economic theory and takahashi implemented his policy package expeditiously. it was indeed a successful macroeconomic policy of which japan should be proud, and his great achievement still stands as exceptional when compared with the contemporary episode of deflation that lasted for nearly 15 years. bis central bankers β speeches concluding remarks at today β s symposium, i understand that there will be a series | policy β which were put in place to respond to the showa depression of 1930 β 31. looking back at economic developments around that time, the 1920s were a period of persistent depression following the economic boom during world war i, the great kanto earthquake of 1923, and the showa financial crisis of 1927. then, in 1930, junnosuke inoue β finance minister under prime minister osachi hamaguchi β returned japan to the gold standard, lifting the gold embargo that had been in place since world war i. japan β s return to the gold standard meant a shift to a deflationary regime, with current deficits and price declines as a result of tight fiscal and monetary policies. in addition, in returning to the gold standard inoue set the exchange rate between gold and the yen at its former level, which was equivalent to excessive appreciation of the yen. all of this served to produce a deflationary recession in japan. in addition to these developments, the spillover of the great depression in 1929 into the domestic economy was regarded as the central cause of the showa depression. bis central bankers β speeches against this background, in 1931 takahashi assumed the post of finance minister for the fifth time in his career. under prime minister tsuyoshi inukai, he implemented a package of accommodative macroeconomic policies combining fiscal and monetary policies. this became known as the takahashi economic policy. on the first day of his return to office, he took the dramatic step of ordering an exit from the gold standard and a restoration of the gold embargo. as a result, foreign exchange rates became able to move in tandem with actual developments in the economy. in terms of fiscal policy, he increased fiscal expenditures, supporting the economy from the demand side. on the monetary policy front, the bank pursued accommodative measures by cutting its official discount rate and underwriting japanese government securities directly from the government. the takahashi economic policy β combining fiscal, monetary, and exchange policies effectively β led to the adjustment of the yen β s excessive appreciation and counteracted declining price levels. as a result, among the major world powers, japan became the first to succeed in achieving an economic recovery and escape from deflation during that period. the key to the takahashi economic policy β s success was a shift in economic policymaking from the deflationary regime of inoue to the reflationary one of takahashi. this overcame the public β s deflationary expectations, | 1 |
john c williams : no man is an island remarks by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the 2019 asia economic policy conference, federal reserve bank of san francisco, san francisco, california, 14 november 2019. * * * as prepared for delivery β no man is an island entire of itself, β wrote the poet john donne in 1624. almost four centuries later, his words still ring true. and they are particularly salient when it comes to the financial fortunes of the global economy. today i β m going to explore the commonalities and interconnectedness of the global economy, and what that means for the outlook in the united states. but before i delve into these ideas, i want to say what a pleasure it is to be back at the san francisco fed, among so many friendly faces. the asia economic policy conference is always a fascinating day, and i β d like to thank mary daly for the invitation to speak, and zheng liu and mark spiegel for putting together an outstanding program. i knew i was back in san francisco when this morning i spent 20 minutes in line, waiting to spend five dollars on a cup of coffee. this is one thing for which inflation appears to be alive and well. before i explore issues like inflation in any greater depth, i should give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee or others in the federal reserve system. the u. s. economy if monetary policy represents a set of scales, on one side we have a strong u. s. economy with unemployment near a 50 - year low, and on the other, a more challenging and uncertain landscape. gdp looks to grow around 2 percent this year, and unemployment has stayed at or near historically low levels, boosted by solid job growth. at the same time, the federal open market committee ( fomc ) has moved to cut rates three times. what β s going on? there are three trends i β ll explore today, which all demonstrate the commonalities and the interconnectedness of the global economy. the first is the low neutral rate of interest, or r - star, the second is slowing global growth, and the third is rising geopolitical tensions. all are critically important to the long - term prospects of the u. s. economy, and each tells an important story about the conditions we β | re experiencing today. low r - star those of you who know me won β t be surprised that i β m starting with low r - star! the neutral rate of interest β the rate that prevails when monetary policy is neither restrictive nor accommodative β has been an area of study, and a personal passion, for the past two decades. i could talk about r - star at great length, but you may be relieved to hear that for the purpose of this speech, there β s just one point i want to make : r - star has fallen, not only in the u. s., but around the world. 1 / 4 bis central bankers'speeches fundamental shifts have been occurring in the two main drivers of r - star over the past two decades : demographics and productivity growth. lower fertility rates and aging populations, as well as slower productivity growth, have pushed down r - star by as much as two percentage points in a number of developed nations. these structural shifts are having fundamental effects on real interest rates, growth, and inflation. a number of advanced economies have inflation below desired levels and longer - term interest rates that are well below where they were a decade ago. there are, of course, a few outliers, but the commonalities between the world β s developed economies are becoming more and more apparent. there β s no doubt that the u. s. is experiencing first - hand the effects of the structural shifts in demographics and productivity growth. but the fact that these changes are a common experience for so many developed economies creates challenges to our economic prospects at home. slowing global growth which brings me to the second trend i highlighted : slowing global growth. this story β of low interest rates, low inflation, and slow growth β is showing up in the data. the latest numbers from the international monetary fund ( imf ) follow the recent trend of steady downward revisions of growth estimates. their forecast for global growth for 2019 is now 3 percent, which is the lowest since 2008 β 09, and it β s not hard to think of scenarios in which growth slows even further. 1 in the old days, central bankers used to worry about inflationary pressures being too great. old habits die hard, and i β m always on the lookout for signs that inflation is rising too fast. but in the current climate it β s inflation that β s too low that β s of greater concern. you see, my five - dollar cup of coffee masks an | 1 |
significant participation in financial conglomerates, and the fiscal contingency embedded in life annuities and disability and survival insurance contracts. despite the progress made by the cmf, and the evolution of the industry in terms of risk management and corporate governance enhancements, moving towards a robust legal framework of risk based supervision in the insurance industry is essential for the preservation of financial stability. let me conclude. a deep capital market remains critical to economic development and to ease macroeconomic adjustment in the face of global shocks. the shallowing of our domestic capital market over the past few years has deteriorated the access of firms and households to long term finance. this puts into focus the need to reestablish long term savings as well as ease the functioning of our markets. the recent proposed legal changes included in the resilience bill, as well as the broad support that the proposed pension reform should promote long term savings are welcomed, and should support financial stability. thank you. 3 / 3 bis - central bankers'speeches | . perhaps the most interesting application of a liability - side focus on capital regulation is the case of insurance companies. given the ongoing discussions of capital standards in the international association of insurance supervisors, the issue is also a timely one. several relevant points can be derived from attention to the liability side of insurance company balance sheets. first, as shown in my earlier example of how liability structure affects capital needs, the largest segment of a traditional insurance company β s liabilities is composed of contingent claims based on the occurrence of specified events, such as the death of an insured person or destruction of insured property. these claims cannot be accelerated at the discretion of the holders of the contracts so, unlike deposits in a bank, these liabilities cannot run in any meaningful sense. unless customers decide to sever their relationship with the company, in which case the contingent liability will be reduced or eliminated, they will continue to provide funding to the firm. life insurance, in particular, has an unusually predictable liability pattern, well - refined by actuaries over the years. thus there is a relative absence of liquidity risk as compared with other kinds of intermediaries. property and casualty insurance is somewhat more volatile but that volatility is not correlated with the broader economy. so, while higher capital levels may be needed for microprudential purposes, the traditional property - casualty insurance model does not appear to raise significant funding, fire sale, or other macroprudential concerns. these traditional insurance liabilities argue for lower capital requirements than might be required for a hypothetical bank holding a similar portfolio of assets. and, as noted earlier, in some respects they also argue for a gone - concern approach to capital regulation. however, a second observation is that the liability side of the balance sheets of many large insurance companies look quite different from this traditional picture. many life insurers, for example, now offer wealth and retirement products with account values that can be withdrawn at the discretion of the policyholder, sometimes with little or no surrender penalty. although these products are generally considered medium to long - term liabilities, the option to surrender or withdraw funds creates the potential for increased claims that could strain the liquidity of the firm. recent history suggests that the surrender rates of fixed annuities are directly related to the path of interest rate rises. in the middle part of the last decade, as interest rates rose in the united states, the surrender rate for these products increased by about 75 percent in just a few years, before | 0 |
william c dudley : opening remarks at the economic press briefing on the survey of consumer expectations opening remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the economic press briefing on the survey of consumer expectations, federal reserve bank of new york, new york city, 18 november 2016. * * * good morning, and welcome to the new york fed β s economic press briefing. i am pleased to have the opportunity to speak with you today about our survey of consumer expectations. this is an important source of information that we use in our analysis of current and future economic conditions to help inform our monetary policy decisions. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee or the federal reserve system. 1 in pursuing its monetary policy objectives, the federal reserve relies on a large number of data sources that provide information about recent developments and the current state of the economy. most of these data sources are backward looking. that is, they provide data about past decisions and outcomes. in contrast, we know relatively little about the forward - looking subjective expectations and intentions of economic agents, which are a key determinant of current and future outcomes. this information, though, is essential for formulating policy and evaluating its effectiveness. the macroeconomic outcomes we observe reflect preferences and constraints, as well as beliefs of individual consumers and firms. therefore, a fuller understanding of such outcomes requires reliable data on the beliefs and intentions held by economic agents and how they evolve over time. in particular, consumer expectations influence a variety of considerations, including spending and saving behavior, wage dynamics, job search, housing demand and the demand for credit. given their importance in determining u. s. economic activity, consumer expectations are of particular value in assessing the economic outlook and the related risks. over the last decade, we have devoted significant resources to improving the measurement of the economic expectations of households. this work culminated in the creation of the survey of consumer expectations, or sce, in 2013. the expectations data collected in our survey give us direct insight into households β decision - making and consumers β financial and economic outlooks. while we monitor expectations on a number of topics, of particular importance are households β medium - term inflation expectations. having reliable measures of inflation expectations is crucial to assess the effectiveness of monetary policy and central bank communications. such an assessment focuses on analyzing the extent to which longer - run inflation expectations remain well - anchored, and on | evolution of asset prices and the economy from 1970 to 2003 for three of these economies, the united states, the united kingdom, and japan. 9 for each country, the top panel of the figure shows the evolution of an aggregate inflation - adjusted index of asset prices - which consists of an average of stock prices and residential and commercial real estate prices. the shaded areas cover recession periods, as determined by the business cycle dating committee of the national bureau of economic research in the united states, and a comparable see, for example, lubos pastor and pietro veronesi ( 2004 ), β was there a nasdaq bubble in the late 1990s? β nber working paper series 10581 ( cambridge, mass. : national bureau of economic research, june ). they argue that the high level of uncertainty about the future growth rate of dividends of tech firms helps explain these firms β stock prices without resorting to a bubble. the difficulty of satisfactorily β detecting β bubbles is well known in the economics literature. for a recent survey see refet gurkaynak ( 2005 ), β econometric tests of asset price bubbles : taking stock, β finance and economics discussion series 2005 - 4 ( washington : board of governors of the federal reserve system, january ). for uniformity across countries, all data shown in this figure, and data discussed later on, including those for the united states, are drawn from international institutions. the asset - price data have been kindly provided by the bank for international settlements ( bis ). for detailed explanations of these data see c. e. v. borio, n. kennedy, and s. d. prowse ( 1994 ), β exploring aggregate asset price fluctuations across countries : measurement, determinants, and monetary policy implications, β bis economic papers 40 ( basel : bank for international settlements ). methodology for the other countries. 10 the bottom panels show the evolution of gross domestic product in these economies together with a historical estimate of the economy β s potential. 11 to be sure, business cycle chronologies may differ somewhat depending on the underlying methodology. the dates of peaks and troughs in economic activity for the analysis that follows are from the economic cycle research institute. for the united states, these match the dates determined by the national bureau of economic research ( nber ). for other nations, the institute β s methodology yields dates that are comparable to the nber dates for the united states, which facilitates comparisons across countries | 0 |
out by 2007, there is a view that this volatility is a manifestation of structural weakness in the front line regulator i. e. the stock exchange, overleveraging of the market, and margin calls which triggered heavy selling, uneasiness with delays in the settlement of the continuous funding system ( cfs ) which is expected to be modified and eventually be replaced by margin financing to do away fully with badla β a form of short selling β tightening of some regulations, introduction of universal identification number for brokers etc. secp has launched a probe of short and blank selling and has proposed measures to boost investor confidence by tightening the risk management practices at the stock exchanges, addressing issues of netting of open market positions across three markets, mark to market profit / loss, etc. barring these aberrations, the stock market has been exceptionally buoyant benefiting from the ( i ) increased investor confidence in economic policies and high corporate profitability, ( ii ) increased supply of scrips augmented by privatization of large government owned companies such as the recent additions to the market of issues of the pakistan telecommunication corporation ( ptc ), muslim commercial bank ( mcb ), and the large issue of a power project, namely the hub power company ( hubco ), which has been actively traded ( iii ) renewed interest of a large number of buyers of shares, ( iv ) bright prospect of reaping dividends and capital gains, ( v ) foreign portfolio investments and ( vi ) continuous efforts to strengthen the legal and regulatory framework of the, securities markets. the events in equity markets not only provide an opportunity for self correction of overvaluation but also will help strengthen the governance of the exchanges. the stock market is expected to further receive a boost from the continued implementation of the privatization program, issuance of gdrs by ogdc β a large utility company β and as the banking sector offloads more of their shareholding to markets, and companies initiate ipos to meet their financing requirements. to restore investor confidence, the regulator is encouraging systematically the strengthening of the governance of exchanges by restructuring of boards and appointment of independent management, encouraging the demutualization of exchanges, while strengthening risk management systems that have involved the introduction of t + 3 settlement and circuit breaker limits, proper capital adequacy for brokers etc. investor confidence will be further enhanced as the code of corporate governance has been incorporated into the listing regulations of stock exchanges, there is enhanced vigil | governor title date event venue : mr. tariq bajwa : remarks by the governor, state bank of pakistan : april 19, 2019 : 23rd zahid husain memorial lecture : sbp head office karachi remarks by the governor, state bank of pakistan 23rd zahid husain memorial lecture 19th april 2019 honorable chief guest justice ( r ) nasir aslam zahid, learned speaker dr. zhou xiaochuan, distinguished guests, ladies and gentlemen! 1. i feel honored to welcome you all to the 23rd zahid husain memorial lecture today, on β lessons from the role of people β s bank of china in china β s economic rise β by dr. zhou xiaochuan, former governor of the peoples bank of china. 2. the zahid hussain memorial lecture series is one of the most prestigious events organized by the state bank of pakistan every year, and serves a dual purpose : it symbolizes our humble effort to acknowledge the services page 1 of 7 rendered to the nation by mr. zahid husain β the first governor of the state bank. and second, the lectures offer an opportunity for intellectuals, academics and policymakers to come together and engage in healthy and constructive debates on contemporary economic issues and challenges. while we may be in variance with some of the viewpoints expressed by our eminent speakers, we nonetheless wholeheartedly welcome the opportunity to learn from their understanding and interpretation of complex economic interactions, and their efforts to deal with the identified issues. ladies and gentlemen! 3. but before i introduce our eminent speaker, please allow me to briefly recognize the services rendered to our country by mr. zahid husain. as we are all aware, this country faced incredible challenges immediately after independence. in the words of quaid - i - azam muhammad ali jinnah, we got a β mutilated, truncated and moth - eaten β country. 1 pakistan β s chances of survival did not appear encouraging during those earlier years. it was during these testing times that mr. zahid husain stood out amongst the dedicated lieutenants of our founding father. 4. mr. zahid husain was among the principal architects of pakistan β s financial and planning system. his commitment to public service and nation - building, and his resolve and ability to overcome multiple, significant challenges faced by the new - born country, set him apart from β truncated state, divided nation β ( ch. 2, p. 40 β 60 ) from β the struggle | 0.5 |
innovation fosters faster dissemination of information and its more rapid incorporation into financial market prices. this is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy via the interest rate channel. second, financial innovation contributes to an increased holding of financial assets by lowering transaction costs and facilitating arbitrage, hedging, funding and investment strategies. third, financial innovation often relies on greater leverage, increasing the effect of interest rate moves by the central bank. however, in times of combination of financial stress and adverse supply shocks, such as we are now facing, the risk of destabilising highly - leveraged financial institutions of potential systemic importance could complicate the task of the monetary policymaker wishing to raise the policy rate in a timely manner so as to prevent inflationary risks from materialising. besides, when conditions are less benign than usual, the transmission process along the interest rate curve may become non - linear : a striking feature of this summer β s events was the surge in short - term money market spreads in the euro area as well as in the united states and the united kingdom. wider and variable spreads between term funding rates, of which many bank loans are priced off, and policy rates are worrying in as much as they may reduce the efficiency of interest rate moves when needed. that said, as this situation stems from a sharp reduction in term liquidity due to a general fear of withdrawal among providers of liquidity, e. g. money market funds, its unwinding requires an appropriate provision of central bank liquidity to the short - term interbank markets but not necessarily a change in the policy stance. in contrast to the enhancement of the interest rate channel, at least in normal times, financial innovation is traditionally expected to have weakened significantly the so - called bank lending channel. financial innovation gives firms broader access to securities markets and, as such, makes them less dependent on bank funding. similarly, banks may be more able to issue debt securities and less dependent on the constraint of funding themselves with secured deposits. moreover, securitisation by banks was expected to alleviate their liquidity constraints and thus to further weaken the credit channel. indeed, previous research has generally found that banks have used credit market innovations such as loan sales and securitisation to diversify credit risk exposures and increase lending. however, recent research has highlighted the potential for bank capital regulation and market discipline to shape a bank capital channel of monetary transmission. viewed as an extension of the | , because in normal times regular flows of macroeconomic statistics more or less suffice to form a correct assessment of the outlook. special communication efforts are also required. one big challenge for communication in times of stress is to make the public understand that short - term liquidity management can be completely separate from the definition of the monetary policy stance with a medium - term perspective. as i have already pointed out 1, a standard result in economic theory ( william poole β s paper from 1970 ) states that, when demand for central bank money is uncertain, then it is optimal to stabilise the short - term interest rate, letting money supply adjust endogenously. that is precisely what has happened in the euro area over the last half year. indeed, the bulk of liquidity injections since last august was merely an attempt to align the cf. c. noyer, β no moral hazard : the banks are doing their job β, financial times, 18 september 2007. timing and maturity of the liquidity supply with a changing demand within the reserve maintenance periods, in order to stabilize the very short - term interest rate on the interbank market. of course, this is always a difficult task, since the increase in the precautionary demand for liquidity altered the behaviour of banks and rendered less efficient, at least temporarily, the forecasting models we use to calculate the benchmark need for liquidity. however, since the eurosystem acted as a price taker during these liquidity injections, it is obvious that the interest rates at which these fine - tuning and longer - term operations were settled had no information content for the monetary policy stance. in a period of increasing inflationary risks stemming notably from excess demand for commodities and energy worldwide, it is crucial that our liquidity management is not misinterpreted and does not contribute to a deterioration of inflation expectations. conclusion to conclude briefly, i shall invite you not to expect too much of monetary policy. not only, to quote the economist 2, are we, central bankers, β only human β, but also, to put in more classical words, monetary policy alone cannot do everything with one single tool, the policy rate. a lesson that the subprime crisis has taught us is that a lot has still to be done in order to improve the regulatory framework in which the financial innovation process takes place. i have no time to develop this further, but i am confident that in particular the implementation of basel ii will bring significant | 1 |
##b is transparency, already mentioned as one of the keys to greater credibility. transparency means openness about the ecb β s objectives, its policy implementation, its monetary policy deliberations and the forward - looking orientation of its policies. the ecb has explained, clearly and explicitly, that its main goal is maintaining price stability and described the strategies by which it is seeking to achieve it. i have already pointed out the additional issues of growth and unemployment. there is still discussion, but there is consensus concerning the primary objective. discussion of these topics will continue in publications, announcements, speeches by ecb authorities and discussions. this kind of transparency is an important characteristic of the ecb. the ecb will be accountable for its policy changes and for its announced policy intentions. this will contribute to transparency in its daily operations. in addition, for the sake of transparency the minutes of ecb executive committee meetings should be made public. on this issue, the ecb has one concern. if a member of the committee approves a decision that is not advantageous for his own country, it may cause some problems. indeed, the publication of the minutes of meetings years later could create some risks. at this stage, i find this a reasonable objection. maybe in time this problem can be solved. the fourth important characteristic of the ecb is that to reduce uncertainty, policymaking and economic indicators are treated on a forward - looking basis. the bank β s fundamental strategy is to calm down expectations for the future, since uncertainty is the most important ingredient of instability. the main sources of the ecb β s monetary policy, which is based on these principles, are thus determined. these are monetary aggregates, inflation targets and other intermediate objectives such as selected monetary indicators, and finally the conduct of monetary policy in the light of all these elements. the ecb has indicated that even if it has an inflation target, it will not announce it. these monetary policy conditions absolutely guarantee that there will be some uncertainties and questions, and the first question will be whether it will be possible to lower the inflation rate below 2 % when the intermediate targets are indicators calculated using the monetary aggregates of member countries. other questions follow. will the mechanisms of monetary policy transmission still work efficiently? can monetary policy moves made as they are in germany today, using monetary aggregates as intermediate targets, succeed in the euro area as well? which monetary aggregates will be used? what of the money demand function? will there be a | employment and sustainable growth in the medium and long term, there is no conflict between the growth and price stability objectives. i believe that the ecb β s present policies, based on all these discussions, aim at price stability as its primary task, with sustainable growth and low unemployment as major objectives. i also believe that the question of the general nature of the ecb β s monetary and exchange rate policies in pursuit of price stability, sustainable growth and low unemployment is of concern not just for those 11 countries. since the ecb β s policies will have global effects, they are of global concern. as you all know, the general outlines of the monetary policies to be pursued by the 11 countries whose currencies are tied to the euro have already been determined. this has also created some new problems. but before discussing them, i would like to point out the four main characteristics of the ecb. first, it is independent. this independence means that it can decide on what monetary policy strategies to follow and what monetary instruments, especially short - term interest rates, to use in pursuit of its primary objective of maintaining price stability. β 2 β the ecb β s governing council, consisting of the governors of the national central banks of the euro area and the ecb β s executive board, will determine the basic outlines of the ecb β s monetary policy. the chosen strategy will be carried out by the ecb β s executive board, consisting of a governor, vice governor and four members appointed by the president or prime minister of countries in the european monetary system. from the independence of the central bank governors on the governing council, one can infer a high degree of independence for the system. as i mentioned before, the ecb β s independence in implementing monetary policy towards the price stability objective can be ensured in this way. the second important characteristic of the ecb is its credibility. high credibility will increase the confidence of the public in the ecb β s policies and objectives, which in turn will help it achieve its primary objective. the most important ingredients of credibility are transparency and success in attaining its monetary policy objectives. for years now the central banks of germany, france and the uk have been earning credibility, and the confidence of firms, institutions and individuals in these banks has increased considerably. the ecb, established in an environment of confidence provided by the credibility of national central banks, believes its growing credibility will translate into confidence in its conduct of monetary policy. the third important characteristic of the ec | 1 |
jens thomsen : brief overview of the danish economy statement by mr jens thomsen, member of the board of governors of the national bank of denmark, at the meeting of the danish economic council, copenhagen, 30 november 2004. * * * the cyclical analysis of the chairmanship of the danish economic council is in line with other analyses : the danish economy is in an upswing, driven by strong growth in domestic demand. this contributes to bringing down unemployment and raising labour force participation. the latest national accounts figures indicate that growth is slowing down, but these figures are often revised significantly and thus uncertain. it goes without saying that it is prerequisite to danish economic development that the international cyclical scenario does not weaken markedly. danmarks nationalbank agrees with the chairmanship that fiscal relaxation is not required. fiscal policy must be formulated for the medium term, based on the 2010 plan. short - term fiscal adjustments tend to have unwanted effects. obviously, structural measures must be taken to keep the surplus on public finances at 1Β½ - 2Β½ per cent of gdp. here, the report points out that the lack of new employment - policy initiatives gives cause for concern. chapter 1. 4 β s discussion of wage competitiveness scarcely touches on the issue of productivity development. how can it be that danish wages have been rising faster than those of our competitors for a number of years and the effective krone rate has risen, while the employment level has been high, and has recently begun to rise again, and we have enjoyed a sound ( and rising ) surplus on the current account? this combination is worthy of a few comments, including the issue of productivity growth, even if it is not obvious what is cause and what is effect. as far as excise duties are concerned, it should be emphasised that some of these are highly sensitive to cross - border trading. therefore, changes in relative prices may have great consequences. the same applies to duties on pesticides. a ban on pesticides would be most effective if accompanied by a similar ban in our neighbouring countries. the proposal to introduce a tax allowance for maintenance and repair of one β s own home seems to conflict with the efforts to expand the tax base and reduce tax rates. the views advanced on the stability and growth pact are pertinent. clearly, the task is to increase the incentive to consolidate in the good times in order to avoid easing fiscal policy as seen in germany and france in 2001 and 2002. introduction of exceptions for certain expenses, such | with and evidence suggests that those with higher wealth have a higher propensity to save increases in income ( this idea goes back to kalecki ( 1954 ) and marx before him ). increases in job polarisation and skills premia, which also shift income towards the top of the distribution, are likely to add to this effect. globally, inequality could also increase as a result of the fourth industrial revolution, which would further lower the equilibrium rate in open economies like the uk and ireland. summers ( 2016 ) has argued that rising market concentration may also have been an important cause for the fall in the equilibrium interest rate over recent decades. see http : / / larrysummers. com / 2016 / 03 / 30 / corporate - profits - are - near - record - highs - heres - why - thats - aproblem /. measured as the proportion of people working part - time would who prefer a full - time job. all speeches are available online at www. bankofengland. co. uk / speeches this excess supply of labour available to work on non - automated tasks represents a shift along the phillips curve, imparting modest disinflationary pressures. for the uk, each additional percentage point of labour market slack is estimated to reduce annual wage growth by one third of a percentage point. however, mismatches between the skills of the current workforce and those required by the new technologies or other substantial frictions to workers changing role could cause the equilibrium unemployment rate to rise alongside any increase in unemployment β particularly if the speed of adoption of new technologies is faster than in the past. that would shift the phillips curve up, reducing the disinflationary effects of automation. at present, there is little evidence to go on to judge the likely size and persistence of any increasing in structural unemployment. monetary policy makers will need to remain alert to this possibility, updating their assessment as the transition occurs. the experience of the 1970s shows that mistakenly ascribing a structural pickup in unemployment to cyclical factors can lead to the wrong macroeconomic policy setting, with long - lasting adverse effects. a more automated world could also affect inflationary pressures through flattening the phillips curve. the threat of robot substitutes could weaken workers β bargaining power. and advances in artificial intelligence and similar technologies could increase companies β ability to learn about their competitors β marginal costs and leading to greater synchronisation of price changes across companies. already, there is evidence that online retailers adjust prices | 0 |
β s fiji operations from that impressive global record, let me say something about their fiji operations. it started in 1956 with the newly formed statutory corporation taking over new india β s life insurance portfolio. so they have been in fiji for over 50 years. i congratulate them on this milestone. statistics show that lici fiji : β’ services about 50, 000 policies ; β’ has total premium income of f $ 21. 85 million in 2005 ; β’ settled claims totaling f $ 15. 8 million in 2005 ; β’ distributed f $ 5. 8 million as bonuses to policy holders in 2005 ; and β’ has a total asset of f $ 164. 75 million as at 31 december 2005. as you can see, lici has contributed significantly to the growth of the insurance industry in fiji and to the development of the country. insurance as you know is an important aspect of personal and corporate life. i am glad to say that lici is at the forefront of the industry and i hope will continue to play this lead role in the future. insurance industry in fiji as the regulator of the insurance industry in fiji, the reserve bank is satisfied with the overall performance of the industry. insurance companies are well capitalised and adequately meet their solvency requirements. as you would expect of the long term nature of business, the bulk of their assets is invested in government securities and term deposits with commercial banks. but the insurance industry faces several challenges. the first is the impact of the economic climate that the country is currently facing. as the economic decline reduces real incomes, policyholders may default on premiums and even surrender their policies. this comes at a time when the risks to businesses may be growing. i am informed that insurance companies including lici have introduced measures to address this challenge. i wish them well in this regard. the second challenge comes from abroad in the form of natural and man made disasters. the world insurance market is still reeling from the impact of the devastation of nine eleven, the hurricane in new orleans and tsunami in asia. in addition, the increase in terrorism activities poses a huge challenge for the insurance industry. the recent bombings in london and scotland are a worry. as a result, the hardening of world premiums is bound to affect the domestic insurance markets. the third challenge is the introduction of new international financial reporting standards. as a result of these new standards, we have seen a fall in asset values of insurance companies, which has reduced their solvency surplus in 2006. those affected by this development | total economic program. this holistic approach is extremely critical to ensure that all policies are pulling in the same consistent direction all the time. it will also bring transparency, certainty and predictability to economic policies. β’ secondly, we have to adopt a medium term view rather than a short term one. we all know that economic statistics come at a lag and they do fluctuate from month to month. in my view, we will secure more dividends if we develop a medium term policy approach. β’ thirdly, we need to protect our financial stability at all times. and we have done that in terms of domestic and external. government budget is stable and foreign reserves are holding. sustainability is the key. we should resist the temptation to go for short - term gains, which may create more serious problems for us in the future. building a good economic platform takes time. but it will help us in the long term. β’ finally, let us take action where we are clear of what we should do. often, we know what we need to do. even overseas analysts tell us what we already know. but unfortunately, we take our time getting those things done. i believe that we are now in a situation that we must act. we need to do all we can to build confidence, remove barriers to investment, raise exports, execute reforms, resolve the land tenure issue and so forth. we are currently projecting an economic turn around in 2008. we should be able to achieve this. moreover, we should aim to exceed the 2 percent growth estimated for 2008 and we can easily do what we need to do now. on monetary policy, as i said, foreign reserves have stabilized. this implies that our policies are working to slow down consumption. but it can also be the result of the economic downturn and the delay in major investment projects which have sizeable import contents. exports are still not performing. so we are still concerned about the medium term. in such a time like this we have to be pragmatic about what we can do. our credit ceiling will be in place for some time. we have allowed liquidity to rise which has led to commercial banks reducing their lending rates. and we have announced that only applications for advance payments for imports more than f $ 15, 000 will require bank approval. the bank believes that this policy measure will facilitate trade payments and assist importers meet their overseas commitments. let me add here that the bank is not considering any devaluation of the currency | 1 |
maintaining a capacity to trace and remedy faults. the ultimate purpose of the riksbank β s role as overseer of financial stability is to prevent both conventional and financial crises in the financial system. in concrete terms, the work entails following developments in the financial sector in the short term, primarily in the major banks, and working with structural changes, crisis management and regulation. an important part of the riksbank β s work in this field concerns cooperation with other authorities and companies in the financial sector. the importance of cooperation between authorities and private agents there is considerable common interest in creating resilience in the financial sector, which is based on the agents β dependence on one another. the entire system is dependent on the general public having confidence in the payment system as a whole. cooperation between the agents in the financial markets is necessary to find joint solutions and to be able to benefit from economies of scale. moreover, it is important to ensure joint basic conditions, such as access to electricity, telecommunications, fuel and water. the riksbank has actively conducted discussions in various contexts for some years now to disseminate information on how the payment system functions and how individual agents β attitudes to business continuity and crisis recovery planning affect the system as a whole. these discussions have mainly been conducted in three contexts. one of them is the cooperation for economic security ( soes ), which is called together by the swedish emergency management agency and where the participants include the riksbank, finansinspektionen ( the swedish financial supervisory authority ), the swedish social insurance administration and the national labour market board. another is the financial sector β s private - public sector cooperation body ( fspos ) that is called together by finansinspektionen and consists of representatives of the riksbank, finansinspektionen, the swedish bankers β association, independent savings banks, securities companies and insurance companies. the third discussion forum i would like to mention is the reference group for the payment system called together by the riksbank and consisting of representatives from vpc ab, bankgirocentralen, stockholm stock exchange, the major banks and the swedish bankers β association. part of the work in these working groups has entailed charting the flows and the infrastructure of the payment system. the charting process began as an internal project at the riksbank, with a general review of the payment system β s basic conditions, agents and services. this has since functioned as a basis | the normative effect of the first agreements remains uncertain. among other circumstances, it will depend on the level of coordination of negotiations between employers and employees. another problem was that teknikforetagen, an employers β organisation in the engineering industry, revoked the industrial agreement last year. the industrial agreement is an important reason that wage formation has worked so well since the mid - 1990s. the revocation of this agreement by one of the signatories meant that the future of the agreement became uncertain. this has been sorted out now, with a new proposed industrial agreement having been accepted by all parties except the swedish paper workers β union. i view the new industrial agreement as a success. it cements the principle that the parts of the business sector that are exposed to international competition should play a normative role in wage bargaining and gives the impartial chairmen a stronger role in the coordination within the manufacturing sector. it is thus positive that there is a new industrial agreement. but there is reason to remind ourselves of our experiences from the wage bargaining rounds in 1995. the coordination of the demands from the swedish trade union confederation failed in these wage bargaining rounds. the swedish paper workers β union and the employers β federation of swedish forest industries were first out then, and concluded a relatively high agreement that set the level for a large part of the labour market. the result of this was wage increases of over 5 per cent in the years 1996 and 1997, levels which were altogether too high in relation to the inflation target and the weak employment situation. the economic conditions for wage formation in the years ahead i will now briefly present the riksbank β s assessment of economic development in recent years. i will refer to the most recently published forecast from april. of course, quite a lot has happened since then, but, at the same time, two months later you don β t normally know a great deal more about developments two to three years ahead. in any event, we will be publishing an updated assessment in the monetary policy report in july. the international recovery is proceeding at a good rate for the world as a whole, we expect to see a gdp growth of over 4 per cent per year for the next three years. this is a high growth rate from an historical perspective ( see figure 4 ). but bis central bankers β speeches developments across the world are divided, with weaker growth taking place in the developed economies and stronger growth in emerging economies. the recovery of the united states and europe is continuing at a fairly | 0.5 |
where they have not experienced the same rapid decline in the use of cash. while the value of outstanding cash as a percentage of gdp is just over 1 per cent in sweden, it is 10 per cent in the eurozone and a good 20 per cent in japan. our nordic neighbours are also conducting similar analyses because of a decline in the use of cash. norway and denmark, for instance, have produced reports and analyses on digital central bank money. the bank of england and the bank of canada have published research articles in this field that analyse, for instance, possible motives for central bank digital currencies and their consequences for monetary policy and financial stability. 6 central banks in some emerging market economies have also shown an interest in central bank digital currencies. these countries β motives for being interested in central bank digital currency differ somewhat from our own. one motive is that they see the opportunity to broaden access to fundamental financial services to all parts of the population, that is to say, financial inclusion. other arguments concern reducing the use of cash, which may be regarded as costly and risky. they also point to the negative environmental aspects of cash and to the fact that it enables money laundering and makes it easier for the black economy. 7 the work that is done is not solely theoretical. uruguay, for instance, has already carried 5 as the payment market is a natural monopoly with network externalities, it has a strong tendency towards con - centration. for a more detailed description, see ingves ( 2018 ). 6 see, for instance, engert and fung ( 2017 ), davoodalhosseini ( 2018 ), kumhof and noone ( 2018 ) and meaning et. al. ( 2018 ). 7 see, for instance, rogoff ( 2016 ) for a more detailed discussion on problems associated with cash usage. 3 out a successful pilot project with a digital peso. in canada, singapore and the eurozone, prototypes have been produced and tested in limited environments to learn more. 8 the pilot version of the e - krona will be simple, but we are still some time away from a possible launch now that i have explained why we think it is worth analysing an e - krona, i would like to move on to talk a little more about what form it might take. if we construct an e - krona, there are in principle two models we could base it on. in one of them, the e - krona | stefan ingves : introduction on monetary policy speech by mr stefan ingves, governor of the sveriges riksbank, to the riksdag commitee on finance, stockholm, 15 november 2007. * * * what is the objective of the riksbank β s monetary policy? to maintain price stability β an inflation rate around two per cent a year? yes, this is of course correct. but behind this wording there lies a deeper meaning β the actual core of the task delegated by the riksdag ( the swedish parliament ) and ultimately the swedish people to the riksbank. because what it is essentially all about is to create the best possible conditions for good and sustainable economic development. and monetary policy contributes to this by keeping inflation low and stable. the inflation target is not merely a target, but also a means. the fact that i as governor of the riksbank have the opportunity to discuss monetary policy with you who represent the riksdag is also important for the prospects of reaching this goal in the best possible way. the riksbank must have support and legitimacy from the people to be able to succeed in its policy. it must therefore be easy to examine how monetary policy is conducted and how well we live up to our principles. the fact that the riksbank governor regularly takes part in these hearings is an important part of this process. our task also means that we must constantly strive to become better at what we do and develop our working methods. we must adapt to new demands from outside and implement changes where we or others find scope for improvement. evaluation and constructive debate contribute to making us better at what we do. my introduction on monetary policy here today will in a way deal with evaluation and development. i shall talk about the contents of our monetary policy report β our view of inflation prospects, the decision at the end of october to raise the repo rate by 0. 25 percentage points and what interest rate policy we believe will be required over the coming years. the report is one of the best tools for examining how well we do our job. but i will also talk about some changes we have made to better meet the requirements made of us, not least in our role as independent authority. because if i summarise what has happened in monetary policy since i was here in february, it is not merely a question of the forecasts and interest rate decisions we have published. we have also made changes in the way we communicate, to become | 0.5 |
real economy. pandemic, the reserve bank activated the asset price channel through large - scale purchases of government paper through open market operations ( omos ) and the secondary market government securities acquisition programme ( g - sap ) 20. large purchases of government paper softened g - sec yields which, in turn, facilitated the lowering of yields, i. e., interest rates, on all instruments priced off the yield curve. 14. the pandemic - induced liquidity measures were unique in several ways : ( i ) liquidity was provided only through the reserve bank β s counterparties for on - lending to stressed entities / sectors ; in that sense, most of it was targeted and not open ended ; ( ii ) asset purchase programme ( g - sap ) was for a limited period of six months and much smaller in size than advanced economies, and was confined to government securities in the secondary market ; ( iii ) collateral standards were not diluted in lending facilities ; 21 ( iv ) loan resolution frameworks for covid - 19 related stressed assets of banks and nbfcs were not open ended but subject to achievement of certain financial and operational parameters ; and ( v ) most of the liquidity injection measures had pre - announced sunset clauses, which helped in an orderly unwinding of liquidity on their respective terminal dates without deanchoring market expectations. 20 with a view to improving monetary policy transmission and enabling a stable and orderly evolution of the yield curve, the reserve bank implemented a secondary market g - sec acquisition programme ( g - sap ) in april - september 2021 to anchor yield expectations in the context of the large borrowing programme of the government. the reserve bank purchased g - secs amounting to βΉ1. 2 lakh crore under g - sap 1. 0 and βΉ1. 0 lakh crore under g - sap 2. 0. 21 unlike in many advanced economies, the collateral standards on the liquidity facilities of the rbi were not diluted but was confined to central and state government securities only. global upsurge in inflation and monetary tightening cycle 15. in early 2022, inflation in india was expected to moderate significantly with a projected average rate of 4. 5 per cent for 2022 - 23. this was premised upon an anticipated normalisation of supply chains, the gradual ebbing of covid - 19 infections and a normal monsoon. such expectations were, however, belied by the outbreak of hostilities in ukraine in february 2022. initially, the shocks came from | have already pointed out earlier this week. in particular, common equity instruments are first in line to absorb any losses that occur. only after they have been fully used up would additional tier 1 ( at1 ) instruments be required to be written down. this approach has been consistently applied in past cases and will continue to guide the actions of the srb and ecb banking supervision in crisis interventions. 1 additional tier 1 β a market worth roughly eur 250bn β is an important component of the capital structure of european banks. lastly, on the market environment, recall what the ecb governing council emphasised one week ago. the eurosystem's toolkit is fully equipped to provide liquidity support, if needed, and to preserve the smooth transmission of monetary policy. in this context, you will have seen that the eurosystem has increased the frequency of providing 7 - day usd funding from weekly to daily as of this week. this facility, which is backstop - priced, is designed to enhance the provision of liquidity via the standing us dollar swap line arrangements between six major central banks. the take - up so far has been very limited, which is, of course, good news as banks can readily meet usd funding needs in the market. 3. inflation and implications for monetary policy 3. 1 inflation remains much too high now, let me turn to the actual topic of my speech : inflation. at almost 9 %, germany's headline inflation rate [ hicp ] last year was one of the highest since the foundation of the federal republic. february's rate of 9. 3 % β while lower than in the months before β is still far too high. in particular, the recent increase in core inflation - β that excludes volatile energy and food prices β is a concern. importantly, both headline inflation and core inflation in germany will probably remain above the 2 % - mark next year and possibly in 2025, too. the same holds true for the euro area, where ecb staff projections see core inflation rates averaging 2. 5 % and 2. 2 % in 2024 and 2025, respectively [ after 4. 6 % in 2023 ]. 3. 2 interest rates are the primary tool in our toolkit against the backdrop of high inflation, the ecb's governing council has pursued the fastest rate hiking cycle in the euro area's history. in less than a year, it has raised interest rates by a staggering 350 basis points. this underscores | 0 |
of minimum balances has supported financial reach. banks have taken their services to the customers due to increasing competition and improvements in the delivery channels. banks are opening and re - opening branches in areas with none or few branches. efficiency is achieved when there are strong institutions with requisite capacity to satisfy market needs while complying with statutory and prudential requirements. ladies and gentlemen : one of the main challenges of monetary policy has been the presence of currency outside banks. in march 2008, it was ksh. 9 billion above the central bank target. however, in march 2010 it was ksh. 4. 9 billion below cbk target as a result of banks increased coverage of rural and low income areas. ladies and gentlemen ; financial sector reforms are far from being accomplished. given the changing dynamics of the economy and its growing complexities, the financial industry has to remain responsive and supportive of the broader economic ambitions and agenda. all the major players and stakeholders in the banking system will have to strive for continuity, broadening and deepening of reforms ; build and sustain the already implemented reforms and fill the remaining gaps. the growing competition along with increasingly diversified services both across the regions and sectors, as well as improved access to customer - base on the back of progressive reliance on technology, are the harbingers of the changing and efficient intermediation role of banks in the days ahead. the central bank is committed to reforms in the banking industry towards enhanced competitiveness. in line with this, the central bank has earmarked amendments to the banking act and microfinance act going forward. the amendments to the banking act and microfinance act are expected to further enhance efficiency and competitiveness of our financial sector. cbk in collaboration with the government and the market players will enhance its efforts in addressing other structural rigidities that contribute to market inefficiencies to take stock of developments as well as other emerging constraints. before i conclude, ladies and gentlemen, let me once again take this opportunity to reiterate the critical role of the financial sector in africa β s economic development. this potential can only be realized when african policymakers implement reforms to remove binding constraints in the sector. i am sure that in this gathering we have the capacity to identify those constraints to unleash africa β s potential. finally, i do hope that you will find time in your busy schedules to enjoy our world renown beaches. i wish you fruitful deliberations. thank you! | us here in kenya, we remain committed to fostering a stable market - based financial system as mandated by law. an efficient financial system collects and collates deposits from micro - savers and channels them to investors. this is the intermediation process. this process allows economic agents to evaluate the risks and prices in the market and align their investment portfolio and investment gestation. the kenyan case is both interesting as well as a policy strategy. it reflects a case of segmented markets. but the cost of credit and interest rates spread remains high. the spread is a major challenge in the banking sector because it acts as an impediment to expansion of credit and development of financial intermediation and signals inefficiency in the sector. the challenge for a policymaker is to develop a financial sector that answers to the challenges of the economy. in order to address market inefficiencies, the central bank and other stakeholders have undertaken significant reforms for the banking sector. these reforms include the operationalisation of the credit reference bureaus, payment systems improvements, opening of new currency centres, automation of trading system for treasury bonds, and the activation of horizontal repos. i will spend the next few minutes to highlight these initiatives. operationalisation of credit referencing mechanism : the banking ( credit reference bureau ) regulations were operationalised on 2nd february 2009. this will facilitate the sharing of credit information by institutions licensed under the banking act. this link will allow the industry to build information capital that is critical in the credit market. it will also enhance access to credit by smes and individuals that have been constrained by lack of physical collateral. further, the banking sector will be able to address the problem of non - performing loans at the origination point as credit history of applicants will be taken into account during the credit appraisal process. licensing of deposit taking microfinance institutions : the microfinance act was operationalised effective may 2008. currently, one institution has been licensed and eight applications for license are being processed. with the unique business models of microfinance institutions mainly targeted at the lower end of the market, bringing them under the purview of the central bank will not only give them a legal basis in dealing with depositors but will also boost access to formal financial services by the populace. deposit taking microfinance institutions are free to be community - based or nationwide. the national payments system sits at the centre of the financial system. it is imperative that payments systems are secure and efficient. | 1 |
directors and senior executives of banks. in giving consent, we recognised that, under certain circumstances, all our large banks being australian - owned could increase our system β s exposure to stress emanating from the australian economy and financial system. we will be considering this further and have let it be known that we will take further measures to manage this risk if necessary. as noted before, the conditions imposed on the anz β s acquisition are a specific application of our current policy thinking around governance and crisis management, coloured by the additional considerations introduced by the rbnz amendment act. this thinking is still developing, and relevant to all systemically important banks. generic policies regarding these matters will be fleshed out as part of our broader financial stability work programme, and we will be consulting with banks on those generic policies in due course. | national bank chief executive β s employment contract be between that person and the board of the national bank, and that any amendments to the national bank β s constitution have our consent. the intent of these measures is to ensure that there is coherence in the national bank β s local accountability arrangements and that the local board remains in a strong position to exercise independent and meaningful governance of the management of the national bank, in the best interests of the national bank, in good times and in bad. this requirement should be seen as a means of reinforcing our emphasis on the role of directors in overseeing a bank β s operations, and our ability to manage a crisis involving the failure of any large bank in new zealand. third, we require all prospective appointments of directors or senior executives to the anz or the national bank to be advised to us and the appointments made only if we have no objection. this measure ensures that the appointment process is in line with our new obligation introduced by the rbnz amendment act to have regard to the suitability for their positions of directors and senior managers of registered banks. generally speaking we would be unlikely to object to an appointment unless there were strong reasons to believe the individual would be unsuitable for a position of responsibility over a registered bank. finally, we require that each registered bank in the anz group maintain a level of capital in line with our current policy on capital adequacy for consolidated banking groups. this tightens up the capital adequacy rules a little in this case, to account for the fact that the anz group now contains two systemically important registered banks. we regard it as important that each of these banks maintain adequate capital on a solo basis. we took these steps in pursuit of our statutory obligations to promote the maintenance of a sound and efficient financial system in new zealand, and to avoid significant damage to the financial system that could result from the failure of a registered bank. we don β t think the conditions will make a great difference to the current day - to - day running of the national bank β s operations under normal circumstances. however, we do see them as important in bolstering our ability to deal with a crisis situation involving the bank or the anz group. we sought to impose the conditions in a manner consistent with our general approach to banking regulation, which is not to get into the business of managing banks, but to put the onus for effective bank management on the shoulders of those bestplaced to carry that task - the | 1 |
withdrawal through domestic banks. bank indonesia is also reviewing some regulations to enrich forex market instruments in order to revitalize hedging transactions. to curb regional inflation, we will optimize the functions of bank indonesia regional offices ( kbi ) as facilitator and catalyst for the acceleration of development in the region, particularly in eastern indonesia where growth is still having immense disparity. kbi will be encouraged to carry out its functions effectively by strengthening coordination and cooperation as well as synergizing with local government. in the future, task force for regional inflation control team ( tpid ) should be sustained by strategic consumer goods information systems primarily encompassing information on national production and stock. to achieve this target, strong commitment and support from a wide variety of parties, including from relevant ministries such as ministry of agriculture, ministry of commerce, as well as local government is significantly needed. distinguished guests, ladies and gentlemen, on the banking sector front, policy will be directed to maintain a proper balance between improving competitiveness and strengthening banks β resilience, as well as encouraging banks β intermediation function including broadening access to low cost banking services for the rural community. in order to improve banks β competitiveness, kebijakan suku bunga dasar kredit ( sbdk ) will be carried on to ensure a well - functioning market mechanism so as policy targets could be achieved. from banking supervision perspective, we will continue to enhance enforcement of policy by requiring banks to include an appropriate level of targets on efficiency improvement and credit rates lowering in their business plan. bank indonesia is also looking into the practice of interest rate setting for third party above the level set by the indonesia deposit insurance, as well as limiting the conduct of prize or gift offering to banks β customers. policy to strengthen banks β resilience will be conducted through improving banks β capital structure. it is hoped that such policy can reinforce bank in anticipating potential risk specifically amidst global economic uncertainty. i see that policies on consumer protection and governance also need special attention. following several act of banking frauds during the course of 2011, policy in these two aspects needs to be reviewed. for that reason, in 2012 we will continue to refine several aspects related to customers and potential customers protection. bis central bankers β speeches furthermore, to improve banks β governance, several regulations on financial report transparency would be reviewed particularly in relation to published financial report and regulation pertaining to appointment of public accountant by banks. we also will examine | their primary function, namely to collect funds from their owners and distribute it to borrowers. to be more precise, the main function of banks is to facilitate and finance activities associated with the supply of goods and services to the people ; more specifically β real β activities. therefore, financing activities through sharia banking are closely linked to real sector development. moreover, speculation and gambling, the main culprits behind the on - going crisis, are not tolerated. thus, by design, the islamic financial system can instill greater stability in an economy. and, if implemented correctly, the islamic financial system can provide an optimal risk management system. sharia financial system performance ladies and gentlemen, the potential role of sharia financial institutions in the economy has been discussed on numerous occasions. according to the banker magazine in 2007, sharia - compliant assets worldwide have grown by almost 30 % per annum in recent years. such growth outstrips most other business segments in financial services. in 2008, sharia financial assets worldwide reached $ 643 billion and are expected to exceed $ 1 trillion by 2010. in fact, there are currently more than 400 financial institutions offering sharia compliant products globally, including sukuk, which has created significant demand in the market over the last five years. countries like united arab emirates, saudi arabia and malaysia are competing to become centers of islamic finance. in such a competitive environment, indonesia also has a great opportunity to advance itself as the center of islamic finance. as the most populace muslim country on the planet, with a population of more than 237 million, indonesia is undoubtedly a promising market. since the establishment of its first islamic bank in 1992, the sharia industry in indonesia has exhibited relatively robust growth. sharia banking is in its infancy since the establishment of the first islamic bank in 1992, however, has demonstrated strong and steady growth. business volume has grown expansively, exceeding the growth rate of the banking industry as a whole. currently in indonesia there are three full islamic banks ( fibs ), 19 islamic banking units at conventional banks ( ibus ), and 92 islamic rural banks. as a whole, the industry is supported by 531 islamic bank offices currently operating throughout indonesia ( 288 fibs, 121 ibus and 92 rural banks ). the sharia banking industry has amassed total assets amounting to rp50 trillion ( usd 4. 2 billion ), or 2. 1 % of all bank assets in indonesia. this share has increased steadily from previous years : | 0.5 |
ardian fullani : overview of albania β s latest monetary and economic developments and outlook speech by mr ardian fullani, governor of the bank of albania, on the monetary policy decision of the bank of albania β s supervisory council, tirana, 30 may 2014. * * * today, on 30 may 2014, the supervisory council of the bank of albania reviewed and approved the monthly monetary policy report. after discussing the recent economic and monetary developments and their outlook, the supervisory council decided to lower the key interest rate by 0. 25 percentage point, to 2. 50 %. the key rate decrease aims at creating more favourable conditions for inflation to return to our target in the medium term. the decision reflects our assessment and projections for low inflationary pressures in the quarters ahead, in response to the weak aggregate demand and the downward trend of inflation in albania β s trading partners. this move contributes to boosting domestic consumption and investments, aiming at a fuller utilization of production capacities and a faster return of inflation to our target. ( let me now proceed with an overview of economic developments and key issues that were discussed at today β s meeting. ) * * * annual inflation rate was 1. 7 % in april, slightly down from the average rate recorded in the first quarter of 2014. in the last months, the dynamics of inflation have been largely determined by the performance of food prices. the added volatility of inflation for these items, over the past months was in response to structural changes in the domestic market and the downward trend of inflation in regional markets. prices of other items in the basket continued to give low contributions. in spite of the volatility, medium - term inflation trends remain clear. the overall economic and monetary environment is characterised by weak inflationary pressures, reflected, in turn, in low core inflation rates. the analysis of macroeconomic factors shows that aggregate demand remains weak, maintaining economic activity below its potential level. the unutilized productive capacity led to low increases in employment, wages and production costs. supply - side inflationary pressures remain weak, owing to the downward inflation in our trading partners, low primary commodity prices and stable exchange rate. inflation expectations remain subdued and close to bank of albania β s inflation target. regarding economic activity, recent data corroborate our earlier assessments for positive growth rates in the first months of the current year. aggregate demand increased due to the positive performance of domestic private demand, while the public sector β s contribution was negative. foreign demand continued to grow | reflected the decrease in credit to the private sector and the lower financing needs of the public sector. credit to the private sector shrank 2. 4 % in march. besides the weak demand from businesses and households, the sluggish performance of credit reflects the banks β conservative lending policies. this approach is reflected not only in the interest rates on loans, but also in other lending standards applied by the banking system. in this regard, the bank of albania deems that the banking system in albania has room for and should adopt a more appropriate behaviour towards crediting the albanian economy. the country β s economic and financial reality, on - going monetary policy easing and our liquidity - injection operations, as well as the adaptation of our regulations to the market situation provide the premises for faster crediting to the economy. consisting in financial institutions licenced to facilitate movement of funds in the economy, the banking system should be more active in crediting, as the steady growth of the economy is a prerequisite for the sustainable growth of the banking system itself. * * * the supervisory council concluded that the incoming available information does not alter our baseline projections on the country β s economic activity. the economy is expected to record a gradual growth in the quarters ahead, driven by foreign demand and domestic private demand. the output gap will remain negative during 2014, though the gap is expected to narrow. the price performance will continue to be contained and inflation is expected to gradually approach the target. recent information, however, reinforces our judgement for subdued inflationary pressures in the period ahead, keeping the balance of risks on the downside. at the end of the discussions, the supervisory council decided to lower the key interest rate by 0. 25 percentage points, to 2. 50 %. this further easing of monetary conditions is expected to facilitate a faster return of inflation to the 3 % target of the bank of albania. bis central bankers β speeches | 1 |
benoit cΕure : cyber resilience for pan - european financial market infrastructures introductory remarks by mr benoit cΕure, member of the executive board of the european central bank, at the high - level meeting on cyber resilience, frankfurt am main, 19 june 2017. * * * introduction it is a pleasure to welcome you here today to this strategic high - level meeting on cyber resilience for pan - european financial market infrastructures. the aim of bringing together high - level representatives from large european market infrastructures, critical service providers and public authorities is threefold : first we would like to gain a deeper understanding of the cyber threat landscape in europe. the european union agency for network and information security ( enisa ) will make a presentation on the cyber threat landscape and its relevance for the financial sector. second, we will share with you the eurosystem β s cyber strategy for financial market infrastructures and also explain ecb banking supervision β s approach to the issue of bank cyber resilience. third, we would like to hear your views on how we can all collaborate in a trusted environment to enhance the cyber resilience of financial market infrastructures. more specifically, we would like to assess with you how much interest there is in creating a highlevel cyber resilience forum for pan - european financial market infrastructures, critical service providers and competent authorities. before we start, let me briefly set the scene. the evolving cyber threat landscape in europe besides the undeniable advantages of information and communication technology, the increase in users and data on digital platforms, in cloud computing and across networks has also created greater opportunities for cybercrime. there are a variety of agents involved : criminals, hacktivists or nation states. they may have different motives : financial gain, espionage, disruption and destabilisation. but what they all have in common is that they are steadily increasing their level of sophistication and exploring ways of attacking. a sound operational risk management and it security framework are the first line of defence. but resilience to cyberattacks means more than that. unlike critical failures, the likelihood of cyberattacks cannot be mitigated. a paradigm shift is necessary. we have to accept that cyberattacks are inevitable and that attackers are persistent. consequently, we have to establish how β in case of persistent attacks β we prioritise our operations and resources, protect our key assets and restore functionalities. cyber resili | ##ence goes beyond technology, it also encompasses governance, company culture and business processes. given the extensive interlinkages and interdependencies in the financial system, it is obvious that 1 / 2 bis central bankers'speeches markets β overall cyber resilience depends not only on the resilience of each individual market actor but also on that of interconnected market infrastructures, participants and service providers. the eurosystem cyber strategy for financial market infrastructures following the increase in both the frequency and severity of cyberattacks over the last few years, legislators, regulators and standard setters have issued legislation and guidance on cyber security at national and international level and at cross - sectoral as well as sector - specific level. let me briefly mention three initiatives. first, in 2016, the ec adopted the directive on security of network and information systems ( the nis directive ). its aim is to bring the cybersecurity capabilities of operators of essential services to the same level of development in all the eu member states and to ensure an efficient exchange of information and good cooperation on the topic throughout the eu. second, at international level, the g7 countries have drawn up a set of fundamental elements of cybersecurity for the financial sector, as well as three further recommendations on the effectiveness of cybersecurity assessments, third - party risks, and coordination with other critical sectors. third, with a key focus on financial stability, the cpmi - iosco published a principles - based β guidance on cyber resilience for financial market infrastructures β in june 2016. supplementing the β principles for financial market infrastructures β, it provides additional detail related to the preparations and measures that financial market infrastructures should undertake to enhance their cyber resilience. in recognition of the escalating cyber threats, the legislative and regulatory guidance and the required paradigm shift, the eurosystem β s overseers have launched a strategy for cyber resilience in relation to financial market infrastructures. this strategy β which will be explained in more detail at agenda item 3 β is built on three pillars. the first pillar refers to the cyber resilience of individual financial market infrastructures. the second pillar refers to the resilience of the financial sector as a whole. the third pillar highlights the importance of establishing a forum which brings together market actors, competent authorities and the cybersecurity service providers. this brings me to the third and final objective of today β s meeting. creation of a | 1 |
year, having peaked at over 110 dollars just one year ago. against this backdrop, market participants have been increasingly concerned about investment and business implications. so what brought about heightened volatility in the global markets? i will attempt to answer by highlighting two key sources of volatility. in the aftermath of the global financial crisis, unconventional monetary policies β most notably successive rounds of quantitative easing β were implemented by major advanced economies. this abundant global liquidity contributed largely to strong asset price gains and higher risk appetites. as major central banks pursued their policy of flooding the market with liquidity, risks had been compressed, intentionally or otherwise. bis central bankers β speeches recently though, despite ample global liquidity, investors have grown worried about the diverging paths of monetary policy among major central banks. that is, the federal reserve or the fed is poised to begin its tightening phase while the european central bank, the bank of japan, and the people β s bank of china are likely to continue their ongoing monetary easing for a considerable period of time. the implications of diverging monetary policy stance for asset markets have weighed on the minds of investors around the world. as i shall elaborate, it is probably not the excess liquidity per se that generates turbulence and volatility, but prospects of the exit β or reversal β that does so. in the near future, global markets are bracing for the impacts from the fed β lift - off β, leading to growing nervousness in the markets. although the prospect of an interest rate increase by the fed has been widely anticipated ever since the taper tantrum in 2013, the uncertainty over its timing and possible impacts has in part contributed to episodes of market turbulence this year. after the eventual lift - off β whenever that may be β the markets will turn their attention to the pace of monetary tightening β or rate increases. the shift in market expectation over the pace will prompt volatility going forward. hopefully i have not spoilt your morning by delving too deeply into volatility. but, let me stress this, monetary policy divergence will continue to be an underlying source of volatility in the global and regional financial markets. however, issues in financial markets are, by no means, disconnected from the real economy. indeed, volatility arises from slow recovery, and timid growth outlook for the global economy, the so - called β new normal β. looking ahead, the global economy is expected to grow only at a subdued pace as some major advanced | rate. the thai banking system is also resilient, with a high level of capital buffer and stable loan growth, despite some deterioration in loan quality. banks have closely monitored their customers, and have maintained a high level of loan loss provision as a buffer for bad loans. they are also well capitalized, with the capital adequacy ratio at 17. 3 per cent and tier1 ratio at 14. 4 per cent, among the highest in asia. this suggests that our banking system has sufficient capital to shoulder unexpected loss, and accommodate credit expansion. in addition, their profitability will help enhance their capital base over time. last but not least, inflationary pressure is stable due to a substantial fall in oil price from last year. headline inflation, though currently in negative territory, is expected to gradually rise, and turn positive in 2016. deflationary risks remain contained as demand continues to expand, and prices of most non - energy items remain stable or trend upwards. such inflation trajectory is consistent with medium - term expectations of the public and the bank of thailand β s medium - term inflation target. overall, the economy and our financial system show a good sign of stability and resiliency. bis central bankers β speeches let me now turn to implications for the real economy and begin by giving you some positive news, that is, the economy is likely to register stronger growth momentum next year. tourism continues to show good prospects where the number of tourist arrivals is likely to exceed 30 million in 2016. fiscal stimulus will continue to be a key growth driver. public expenditure is expected to increase by more than 200 billion baht from this year, providing support to the economic recovery, especially the construction sector. in the private sector, there are signs of investment expansion in construction, telecommunications, and alternative energy, among others. although we may see export contraction in 2015, there are resilient spots in certain sectors. exports to clmv economies have experienced strong growth, and continue to show great potentials from which thailand could capitalize. in fact, the share of exports to clmv in our total exports is now on par with the share of our exports to the major trading partners such as the us, europe, and japan. thailand β s exports to the us are also poised to become firmer as the us economy continues to see improvement in its recovery. our exports of vehicle parts, electronic - appliance parts and electronics to the us have expanded in the past few months, and | 1 |
treaty, who have devised an institutional setting which is optimal for the maintenance of price stability and the achievement of high levels of economic growth and welfare in the euro area. i will come to that in a moment. the transition to stage three of emu in 1999 was a complete success from a technical point of view. a fully integrated euro area money market - an essential prerequisite for a monetary union - was reality from the very first day of the introduction of the euro. the overnight interest rate, a key indicator of the monetary policy stance, has been practically the same across the countries in the euro area since the start of stage three of emu in january 1999. this was certainly not obvious ex ante. it required a substantial amount of preparatory work, not only by the central banks in the euro area, but also by other economic agents, most notably the banking sector and the governments. the main yardstick for any evaluation of the success of the euro is, of course, the maintenance of price stability in the euro area. this is the ecb's primary objective under the treaty. the monetary policy strategy of the ecb was designed in such a way as to ensure the fulfilment of this objective. as a first element of the strategy, the governing council of the ecb defined price stability as " a year - onyear increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 % ". this definition serves to anchor inflation expectations and provides a framework against which the ecb can be held accountable. short - term fluctuations in the inflation rate are not under the control of the central banks. therefore, it was also announced that price stability is to be maintained over the medium term, imparting a medium - term orientation to the strategy as a whole. in order to attain the sodefined objective, the ecb is pursuing what is known as a two - pillar approach. the first pillar is a prominent role for money. the second is a broadly based assessment of the outlook for price developments and risks to price stability. giving money a prominent role in monetary policy analysis is something quite natural for a central bank geared towards price stability. inflation is ultimately a monetary phenomenon. the prominent role for money is signalled by the announcement of a reference value for the annual rate of growth of the broad monetary aggregate m3. in december 2000, the governing council of the ecb reconfirmed the reference value of 4 1 / 2 | the immediate future, there are still other challenges. for the ecb, maintaining price stability is a permanent challenge. building up a positive track record in this respect will be essential for its medium - term credibility. of course, other policy - makers also face a number of challenges. in particular, it was decided at the lisbon meeting of the european council that all possible actions should be taken in order to make the european economy the most advanced knowledge - based economy of the world by 2010. the ecb shares the view that this should be the most important ultimate objective of policy - makers in europe. enlarging europe's growth potential is the main yardstick for evaluating the pros and cons of different policies. at the same time, the ecb is convinced - and i think for very good reasons - that the best contribution that monetary policy can make to sustaining non - inflationary long - term growth is to maintain price stability in the euro area. europe's main problems are not of a cyclical nature ; its main problem is, in fact, the high level of structural unemployment. in the first two years of monetary union, the euro area countries have found themselves in the best economic situation they have had since at least a decade, with robust output and employment growth, low inflation and no major economic imbalances. what is needed now is the enhancement of the growth potential of the economy over the medium term. the main task remaining on the governments'agendas is therefore to promote the structural reforms that are essential to increase the flexibility and competitiveness of the european economies, and to make them more permeable to the introduction of new technologies and business practices. the area of labour markets is particularly important if the unemployment rate is to be lowered in a lasting manner. a well functioning labour market should always ensure that general wage increases are compatible with the objective of price stability ( what i would define as " macro " - efficiency ) and bring about flexibility and an optimal allocation of resources ( what i would label " micro " - efficiency ). i will concede that all these matters are not, strictly speaking, related to the euro ; they would, very plausibly, have been on the agenda of european governments anyway. the euro, however, makes them more compelling, forcing european governments to speak to one another even more frequently and together to find creative solutions as soon as possible. efforts to bring about further integration in the product and capital markets by harmonising regulation across europe are also | 1 |
##ediment is the lack of preparedness among new college entrants, with large numbers of those students needing remedial courses that earn no college credit. low readiness contributes to persistently low college completion rates, especially among lower - income, parttime, and nontraditional students. higher dropout rates, in turn, contribute to a substantial reduction in the net expected and realized returns from college attendance. the third major barrier to college attendance and completion is the rise in the cost of a college education. while a college education is generally a good investment, the cost of attending a fouryear college has risen considerably faster than wages over the last several decades. this means that college has become increasingly unaffordable β which can act as a drag on economic mobility and the growth of a college - educated workforce, and by extension, on productivity growth and living standards. as has been well documented by my new york fed colleagues, many young americans have adjusted to rising tuition and fees by taking on more debt. this trend highlights the importance of the federal student loan program, which has helped mitigate the impact of the shift in financing of 1 / 2 bis central bankers'speeches higher education from state and local funding to students and their families over the past few decades. however, the end result is that more students leave college with significantly higher amounts of debt. student loan debt has more than tripled over the past two decades and now totals over $ 1. 4 trillion. it is important to consider what these changes in financing higher education mean for economic mobility. first, new york fed researchers have documented that a large percentage of student borrowers β especially those who attend less selective colleges or drop out β have trouble staying current on their loans, and often become delinquent and default on their debt. we also know that these factors β slow repayment, delinquency, and default β are most prevalent among those from more modest family circumstances. in addition, there is evidence that student debt acts as a drag on homeownership. specifically, our research indicates that when college tuition rises in a state, it leads to higher levels of student debt and a lower homeownership rate. these factors matter for inequality and social mobility, because increasing home equity is the major form of wealth accumulation for the great majority of american families. thus, rising tuition and changes in the way that college is financed appear to have diminished the ability of higher education to lift people from poverty into the middle class. | ( at constant 2010 prices ) declined by β¬65. 1 billion in the period 2010 β 2016. in order to raise the net capital stock over the next decade to pre - crisis levels, gross fixed capital formation at constant prices needs to increase by about 10 % per year by 2029. excluding residential investment, gross fixed capital formation at constant prices needs to increase by about 5 % per year by 2029. without ignoring the effects of relatively low domestic demand, the higher cost of capital and funding constraints that hinder new investment, the business environment cannot be considered investment - friendly and discourages investment. this is due to the high tax rates, excessive red tape, the existence of barriers and obstacles that have proven to hamper investment, and delays in court proceedings and rulings. in this context, it should be noted that non - price competitiveness, so - called β structural competitiveness ", is not only low compared to the european partners, but has in fact fallen in recent years, according to the ease of doing business index of the world bank ( october 2018 ), the global competitiveness index of the world economic forum ( october 2018 ) and the global competitiveness ranking for 2019 of the imd world competitiveness center. 5. the prerequisites for sustainable growth to address the challenges facing the greek economy, speed up the recovery and strengthen investor confidence in greece β s long - term economic prospects, economic policy should focus on the following policy actions : 1st reducing the high stock of npls with the timely implementation of the systemic solution proposed by the bank of greece, as well as the solution proposed by the ministry of finance, which will supplement banks β own efforts. 2nd reducing the primary surplus target from 3. 5 % of gdp to 2. 2 % until 2022 as well as changing the fiscal policy mix, with an emphasis on lower tax rates and higher public investment, 4 / 11 bis central bankers'speeches so as to boost the growth impact of fiscal policy. with a public debt - to - gdp ratio of 180 %, higher growth ( or lower interest rates ) is 1. 8 times more effective in reducing the debt ratio than a higher primary surplus. 3rd broadening the scope for public - private cooperation, in line with best international practices, for example by strengthening public - private partnerships in investment, social security and healthcare. 4th improving the effectiveness of public administration and the efficiency of state - owned enterprises. 5th stepping up the pace of the privatisation programme and improving | 0 |
macroprudential tools contained in the ssm regulation are thus specific aspects of the financial stability mandate of the ecb, which is based on the specific authorisation in article 127 ( 6 ) of the tfeu. neither the ssm regulation in general, however, nor article 5 in particular confers a general competence on the ecb in the fields of financial stability and macroprudential policy. democracy, independence and financial stability when we interpret the competences of public institutions we are essentially discussing the limits of their powers. as with any discussion on public powers, the aspect of legitimacy also needs to be considered. in the field of financial stability and macroprudential policies, a multitude of institutions are involved, such as parliaments, eu political institutions, national governments, and expert bodies at both the european and the national level. some of these actors derive their legitimacy from their independent expertise, others from their democratic accountability. what role each of them should play in achieving financial stability is intimately connected with the source of their legitimacy. this brings me back to the first point of my speech : financial stability might be an objective less well suited to independent expertise - based bodies than a price stability objective. even though the treaty does not give a definition of price stability, it is an objective that is quantifiable. the ecb governing council aims to maintain inflation rates below, but close to, 2 % over the medium term. putting a figure on price stability makes monetary policy more transparent and provides a clear and measurable yardstick against which european citizens can hold the ecb accountable. for financial stability no such clear yardstick exists. without clear objectives, however, it is much more difficult to measure the performance of independent, expertise - based institutions and hold them to account. 21 beyond that, the pursuit of financial stability often involves choices with stronger distributional implications. this is an additional argument in favour of the ultimate responsibility remaining in the political sphere. financial stability is thus a policy area where expert bodies and politically accountable institutions are called on to cooperate, with no one having exclusive responsibility. in this field, expert bodies with strong guarantees of independence, such as the ecb, might be better suited to β contributing β in an advisory capacity 5 / 7 bis central bankers'speeches while the β ultimate responsibility β is rather borne by institutions embedded in political accountability arrangements at the national level. otherwise political pressures to adopt one or the other stance in questions of financial stability might also threaten central bank independence. | ' shield'( development of effective countermeasures ) is traditional in the security field, our ability to adequately secure ai systems will have a major influence on the ability of different actors to make extensive use of this technology. 2 / even though ai technologies are not yet fully mature, it seems to me that central banks and financial supervisors should embrace them without delay, for at least three reasons. 1 / 3 bis - central bankers'speeches first, to continue to carry out our missions effectively, by doing more and doing it better. ai can of course help us become more efficient, by increasing the level of automation. but we also want to offer new capabilities to agents. for example, our lucia tool, an ai - based system with the capacity to analyze large volumes of banking transactions, allows us to assess the performance and relevance of banks'aml / cft models during our on - site inspections second, to develop critical expertise in ai. using ai for our own purposes allows us to gradually acquire a good command of the technology, and is a very effective way of properly understanding its benefits and risks. the virtues of learning by doing explain why internal uses of ai are very complementary to the supervision of ai systems deployed by the financial sector. for example, very recently, the acpr, with the help of banque de france's innovation center, le lab, organized a " suptech tech sprint ", a hackathon intended to explore what generative ai can bring to the various supervisory functions. in three days, this event revealed the potential of large language models ( llm ) for supervision. finally, to drive the financial ecosystem, by sending a signal to the market that it too can β or must β take the plunge. for example, the cutting - edge work being carried out at the banque de france on post - quantum cryptography is raising awareness among private stakeholders about the need to address this threat. so, while it is clear to me that central banks and supervisors must seize the opportunities offered by ai, the question is : how do we do that? 3 / it seems to me that we must first lay down a fundamental principle of governance : ai must be at the service of humanity and society, and not the other way round. from this perspective, even if it does not solve all the problems, the ongoing adoption of the european ai act, the world's first binding text laying down the principles of " trustworthy ai ", is a welcome step | 0 |
banks would be allowed for reckoning for slr purpose, up to march 31, 2017. 12. at present, all dccbs, barring a few, are maintaining their slr assets in the form of time / fixed deposits with the respective state cooperative banks. therefore, dccbs lack experience and expertise in making investments in government securities. with a view to familiarizing dccbs with the basics of investment in government securities, viz. opening of sgl / csgl accounts, non - competitive bidding, selection of securities / intermediaries, price discovery, valuation, etc., it was decided to conduct orientation programmes at our regional offices for the benefit of all the dccbs. going forward, the knowledge gained from investment operations in government securities will help these banks set up a dynamic treasury department in each head office and facilitate effective funds management and asset - liability management and improve their profitability. i express my sincere thanks to nabard and idmd for coming forward to extend faculty support for conducting the orientation programmes. i hope this training would help the participants in understanding the basics of investment in government securities and carry out their investment operations with more confidence. my best wishes for the success of the training programme bis central bankers β speeches | banks from the fortnight beginning july 12, 2014. 10. rbi is now vested with powers to prescribe the form and manner of liquid assets to be maintained for slr purpose. the practice followed by the cooperative banks for maintenance of slr assets was reviewed and in the interest of banking policy and with a view to safeguarding the funds of the depositors, it was decided that the cooperative banks should maintain slr assets in government securities as is the case with commercial banks. accordingly, stcbs / dccbs were advised vide our circular of june 5, 2014 to shift their slr funds to government securities by march 31, 2015. salient features of the changes announced in our circular of june 5, 2014 are as follows : ( a ) crr for stcbs / dccbs increased from 3 % to 4 % of their total demand and time liabilities ; ( b ) slr brought down from 25 % to 22. 5 % of their total demand and time liabilities ; ( c ) crr / slr for stcbs / dccbs will move in tandem with those for commercial banks in future. ( d ) the manner of maintaining slr assets by stcbs / dccbs has been brought on par with commercial banks ; ( e ) stcbs / dccbs were given time till march 31, 2015 to start maintaining slr assets as per the revised procedure ; ( f ) stcbs / dccbs were be permitted to reckon their term deposits maintained with public sector banks and idbi bank ltd. as slr assets till march 31, 2015, in addition to the slr assets maintained as fixed / term deposits with the apex banks, in order to ensure smooth switch - over to the revised procedure. 11. as the revised instructions on slr will require expertise in treasury management, rbi decided to calibrate the process. accordingly, a road - map for phased implementation of the new dispensation has been provided vide our circular of july 21, 2014 advising the banks to meet investments in government securities as per the following timeline : bis central bankers β speeches investment in government securities as % of ndtl date by march 31, 2015 β 5 % by march 31, 2016 β 10 % by march 31, 2017 β 22. 5 % or the slr as may be prescribed by rbi on that date in the interim period, term deposits maintained by stcbs and dccbs with public sector | 1 |
short - term foreign currency debt of the central government, and on levels of international reserves, including financial derivative positions. for transparency standards to be most effective, they require as broad a participation by authorities as possible. further, they must balance the need for comprehensive and timely disclosure with the need for accurate data. improvements in financial data from the private sector, which i have discussed, are crucial, but public sector disclosure must not await improvements in private sector disclosure. the imf can contribute to public sector transparency with respect to critical economic variables through implementation of the special data dissemination standards, or sdds. voluntary compliance with sdds by all countries will provide some assurance that economic transactions are not being based on misleading or incomplete information. the need for capital mobility a third lesson suggested by the historical analysis is that the ability to attract foreign exchange is a critical element of a stable global financial system. in the modern context, i believe that this finding has two corollaries. first, we must avoid blocking capital flows, particularly of long - term funds. there have been policymakers who have advocated capital controls. i do not need to give a group of business economists a lesson in basic economics, but there are those outside of this room who need to be reminded of the benefits of free capital flows. even though current international financial troubles indicate that there are risks from the free flow of capital, the benefits are substantial and contribute importantly to rising standards of living. as you know, an individual country β s pool of savings does not always equal its pool of investment opportunities. if borders were closed to the flow of capital, interest rates would adjust to equilibrate domestic saving and investment, but some investment opportunities, which might be attractive by international standards, might go unfunded while less attractive domestic opportunities would be funded. with the free flow of capital, countries that have a greater pool of highly productive investment opportunities will benefit from the inflow of capital and those that export capital can put their savings to better, more rewarding use. this presumes the institutional underpinnings outlined above. protectionist impulses for measures that impede the flow of goods, services and managerial knowhow must also be avoided. while participation in such free exchange across borders creates industries and individuals that are made better off and some that do not fare so well, we know that, on balance, all societies are better off from allowing the free flows of international competition. given the fact that there are scarce resources globally, it is | prices for pce rose more than expected in september and october and so did " core " pce inflation, which excludes more volatile food and energy prices and is a better guide to future inflation. three - month annualized core pce inflation has risen over the past two months, while six - month annualized inflation has made only a small improvement. these rates now stand at 2. 8 percent and 2. 3 percent, respectively. these recent readings have contributed to 12 - month core pce inflation of 2. 8 percent in october. if we compare components of core inflation this october with last october, we see 12month housing services inflation has softened and goods inflation has moved to slight deflation, but there has been an increase in nonmarket core services excluding housing. overall, i feel like an mma fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute. but let me assure you that submission is inevitable - inflation isn't getting out of the octagon. while the recent increase and the level of inflation raise concerns that it may be getting stuck above the fomc's 2 percent goal, let me emphasize that this is a risk but not a certainty. i take the recent inflation data seriously, but we saw a similar uptick in inflation a year ago that was followed by a continued decline, so i also don't want to overreact. and i expect housing services inflation to continue to moderate and i do not take much signal from the elevated inflation for other non - market services. now let me turn to the implications for monetary policy based on my assessment of the underlying economic outlook. while some near - term aspects of the outlook may be a little unclear, something that is clear is the direction for monetary policy and our policy rate over the medium term, which is down. this downward trajectory reflects the fact that the level of aggregate demand in the economy, relative to supply, has moderated significantly over the past year - it is plainly visible in the data on spending and the labor market. inflation over that time is also significantly lower, so it makes sense to be moving policy rates toward a more neutral setting. and there is a ways to go. in september, the median of the projections of fomc participants was that the federal funds rate would be 3. 4 percent at the end of next year, which is about 100 basis points lower than it is today. | 0.5 |
restrictions on cross - state bank branching and ownership, which points in the same direction. these two aspects β monetary policy transmission and promoting citizen welfare - explain the efforts that central banks have made to contribute to the integration process, although the leading roles and initiatives rightly correspond to the european commission and to market forces. maybe the most telling example of the central bank contribution is the establishment of target, promoted by the eurosystem and introduced at the beginning of stage three with the aim of integrating the system of large value payments across the euro area. it is widely recognised that its success has played a crucial role in the integration of interbank markets in europe. however, the mandates of most central banks, including indeed both the eurosystem and the banco de espana, also cover other objectives. there is, in particular, an area which deserves special attention in this context. i am referring, of course, to the function of promoting financial stability. it is precisely in this area where the impact of financial integration is less clear. does financial integration promote financial stability? or does financial integration put financial stability in danger? as a matter of fact, while the effects of higher integration on per - capita income and on the efficiency of monetary policy transmission have received a lot of attention by researchers, the impact of financial integration on financial stability is under - researched. that is why we are holding this conference. despite the lack of research, it seems clear that there are some areas where financial integration favours financial stability. firstly, a more integrated financial system enlarges the opportunities available to investors, lenders and borrowers to diversify the different risks associated with their financial decisions. through such diversification, they should become less exposed to idiosyncratic shocks, asset prices and financial flows should behave in a smoother way and as a result, the risk of financial distress should be reduced. secondly, in a more integrated system, financial intermediaries would find it easier to grow and at the same time would find the incentive to do so in the enlargement of their potential markets. larger institutions would therefore be in a better position to reap the benefits of greater economies of scale, and would also increase their financial muscle to withstand potential shocks. unfortunately, however, there are no free lunches in the economy and it seems that financial integration can also have negative effects on financial stability. therefore, fully integrated financial markets pave the way for shocks to propagate more quickly among market participants, thereby affecting a | of the ratio, has continued posting negative rates of change. hence, the comparatively larger fall in npl in 2014 has been the main determinant of this reduction. in the first half of this year, the spanish banking industry posted somewhat lower consolidated profits than in the first half of 2013, although they were far removed from the heavy losses of 2012. in a setting still marked by low volumes of activity, low interest rates and a still - high level of non - earning assets, banks β ability to generate interest income remains subject to downside pressure. these factors were offset by the decline in operating expenses and by lower losses attributable to asset impairment. as to the industry β s solvency, spanish banks as a whole had a cet1 ratio as at june 2014 that comfortably exceeded the required minimum. the firming and intensification of these trends will largely depend on developments in the spanish economy and on recovery taking root. the outlook for the economy remains favourable ; so far, it has proven resilient to an external environment in which growth forecasts for the global economy have been revised downwards, and in which the recovery in european countries β those most important for our economy β has lost momentum. thus, on the domestic front at least, it would be necessary to embed the reforms under way, thereby enhancing our capacity for recovery. bis central bankers β speeches the start - up of the single supervisory mechanism among the challenges posed by the ssm is that of attaining quality bank supervision, applying strengthened and uniform standards and making the most use possible of the acquired knowledge of the various national authorities, while setting in place a common supervisory culture. in light of the work undertaken to date and the intense collaboration between the ecb and the national authorities, these goals are realistic. the banco de espana is striving to ensure this is a successful process, cooperating with the ecb and the other ssm participants. we have adapted our organisational arrangements and working methods to smooth interaction with the ssm and the ecb. a further key challenge will be to maintain a level playing field in the member countries, applying uniform supervisory principles. that is a major challenge, given that in europe there is a wide diversity of banking models and legal systems. further, while the heterogeneity of regulatory frameworks has recently been lessened following the entry into force of the capital requirements directive and regulation ( crd iv and crr ), differences persist and must be discussed. such | 0.5 |
ore each day ; now it is over a million tonnes a day. coal shipments have been running at a rate of around 300 million tonnes a year, at least until the recent floods. australian capacity to export lng is now around 20 million tonnes a year, up from around half that in 2004. this looks like it will increase to over 50 million tonnes within five years. the rise in demand has been driven in large part by the rapid growth of key emerging market economies such as china and india. over the past decade : the average annual growth of gdp per capita has been around 5Β½ per cent in india and almost 10 per cent in china ; the number of people living in cities in those two countries, especially china, has risen by over 250 million, which implies having to expand or create cities ( with the attendant buildings and infrastructure ) to house the entire population of australia more than 10 times over or, alternatively, to house the populations of france, germany and japan combined ; and steel production has doubled in india and it has more than quintupled in china. thus far, the demand for resources has stretched the global capacity of suppliers. prices of key raw materials have consequently been driven upwards. as a result australia β s terms of trade have risen sharply, to be about 65 per cent above the 20th century average level, and about 85 per cent above the level that would be expected had the downward trend observed over the 20th century continued. even assuming the terms of trade soon peak and decline somewhat, they are nonetheless, over a five - year period, at their highest since at least federation β by a good margin. with the terms of trade at their current level, australia β s nominal gdp is about 13 per cent higher, all other things equal, than it would have been had the terms of trade been at their 100 - year average level. of course australia has substantial foreign ownership in the resources sector so a good proportion of this income accrues to foreign investors. nonetheless, probably about half of that additional 13 per cent of gdp accrues to australians one way or another. we also know that a large expansion in the resource sector β s capacity to supply commodities is being planned. already, mining sector capital investment has risen from an average of around 2 per cent of gdp over the past 25 years to about 4 per cent, which exceeds the peak reached in the booms of the late 1960s and early 1980s. given the scale of possible additional investment projects that have been mooted | ##hwerdt and j. turunen ( 2005 ) : β growth in euro area labour quality β, ecb working paper series, no 575, january 2006. oecd ( 2005 ) β education at a glance β. oecd ( 2005 ) β education at a glance β. the state of structural reforms if euro area countries now summon up their strength and ambitiously push forward with structural reform, this will support and broaden the improvement in economic activity in the euro area. this is why the ecb has always encouraged the implementation of structural reform within the so - called lisbon strategy, which was set in place by a meeting of the european council of heads of state and government, in lisbon in may 2000. five years later, progress has been made in some areas - as also indicated by an increase in the euro area employment rate. still, all in all the reforms have not been far - reaching enough. against this background, the mid - term review of the lisbon strategy in 2005 led to a re - launch of the process by shifting the strategy β s focus more strongly on growth and employment. as an outcome of this process, all eu countries have prepared so - called national reform programmes that outline structural reform steps for the years 2005 - 2008. these efforts are welcomed by the ecb. the potential gains to be reaped are substantial. a recent study published by the netherlands bureau for economic policy analysis finds that if europe would reach the objectives set in the lisbon strategy ( for example, full implementation of the internal market for services, a reduction of administrative burdens, improvements in human capital as well as r & d and employment targets ), eu gdp could be higher than otherwise by 12 to 23 % and employment by about 11 % by 2025. 23 other important findings relate to investment in the knowledge - based economy. analyses made by the european commission 24 show that if the effects of the increased knowledge investment foreseen within the lisbon strategy were added in, the increase in annual eu potential output growth could reach up to three quarters of a percentage point. over a ten year period, this would imply an increase in the gdp level of up to 7 or 8 %. of course, these are just crude calculations, which, however, give a notion of how large the welfare - enhancing potential of implementing structural reforms is. also the ecb β s monetary policy has a role to play in supporting the implementation of structural reforms. a credible monetary policy aimed at maintaining price | 0 |
to the micro, small and medium enterprise sector. but we also recognize that investors and consumers are exposed to greater risk of financial abuse. we, therefore, stand ready to take regulatory action if warranted to uphold fair and healthy competition. the bsp likewise collaborates with both local and foreign counterpart regulators to ensure consistency in the priorities, prevent regulatory arbitrage, and to promote optimization of digital innovations. along with digital transformation is our increased efforts towards the deepening of financial consumer protection and education. i believe that we can truly reach financial inclusiveness if filipinos will become more aware of the varied financial products and services that are available in the system to meet their different needs. in particular, the bsp conducts financial education expos and issues financial advisories towards this end. in 2018, we shifted our approach to financial education β from on the ground delivery of learning sessions to forging strategic partnerships. the bsp has ongoing partnerships with the department of education, overseas workers welfare administration, the philippine army, and soon with the armed forces of the philippines and the civil service commission. learning tools were developed, taking into consideration the profile and learning needs of audiences, as well as institutional set - ups / training delivery mechanisms of our partners. a measurement framework is also being developed to monitor programmatic key performance indicators and measure the impact of initiatives under each partnership. ladies and gentlemen, let me leave you with some key takeaways. first, sound and resilient philippine banking system supports domestic economic expansion. second, digitalization and financial technology are re - shaping the future landscape of the philippine banking system. third, the bsp stands ready to provide an enabling regulatory environment to keep pace with the evolving developments in the financial system. fourth, leveraging on the implementation of new laws, the bsp is now in a stronger position to pursue its mandates and advocacy towards broad - based and inclusive growth. 4 / 5 bis central bankers'speeches lastly, attainment of sustained and inclusive growth of the economy as well as the banking sector is a shared responsibility among various shareholders. it is through our harmonized efforts and partnership that we can accomplish any challenging task and be able to sustain our growth momentum. as our staunch partner, we are always grateful to finex for your invaluable support in equipping banking and finance professionals with the necessary skills and knowledge to cope with the demands and challenges of today β s ever changing financial landscape. again, thank you for your continued support to the bs | policy of central banks. principle 4 : stable money requires monetary policy this leads us directly to the fourth principle : stable money requires monetary policy. the advent of bitcoin rekindled a debate about automatic monetary policy. some people believed that a stable money supply would guarantee stability. the supposed limit of 21 million bitcoins was seen by some as a key to stability. the facts are different. and the reason is simple. the price of money depends on supply and demand. a fixed supply or a fixed algorithmic increase of supply is by no means a guarantee for stability. the economy develops, fluctuates and β hopefully β grows. payment patterns change. the velocity of money changes. all of these factors will result in price volatility if the money supply does not react accordingly. therefore, stable money requires monetary policy. principle 5 : monetary policy requires the independence of a responsible institution, i. e. ( that is ) a central bank and who should be responsible for that monetary policy? i believe in principle 5 : monetary policy requires the independence of a responsible institution, i. e. ( that is ) a central bank. we should strive to make an institution responsible for monetary policy. that means supplying money and setting an interest rate so that price stability is maintained. moreover, safe and [UNK] payment systems should be promoted so that currency can flow easily and safely. trust in money must be accompanied by stable and [UNK] payment and settlement systems. these do not necessarily have to be operated by the central bank. however, the central bank should at least be responsible for distributing central bank money. this central bank should, of course, be accountable to the general public and should act as transparently as possible. however, its independence must be guaranteed. history is full of examples in which unsound public policy has wrongly harnessed the central bank to support and even finance the government. this has led, in all cases, to a lack of focus on stability and has eroded trust in the central bank and trust in the currency. we should not make the same mistakes as in the past. because money will only work if the authority remains responsible. if a central bank does not fulfil its task, it will lose trust, legitimacy and, in the end, its money. a clear focus on stability, central bank independence, and a prohibition government financing via central banks are key pillars of a successful monetary policy. looking ahead having laid out these principles, it is clear that, notwithstanding any | 0 |
output gap and the design of monetary policy, " journal of economics and business, vol. 52 ( january - april ), pp. 117 - 41. a discussion of risk management by central bankers is in alan greenspan ( 2004 ), " risk and uncertainty in monetary policy, " speech given at the meetings of the american economic association, january 3. individuals. 10 in any event, i know that the heterogeneous viewpoints expressed by my fellow committee members are intellectually stimulating and that they spur me to improve my own thinking about the economy and about the best course for monetary policy. thus policymakers and the public at large live in an uncertain world. for example, most of you are probably wondering when this speech will end. i thought about gradually drawing to a close at, say, a measured pace, but my risk - management instincts tell me just to stop. thank you. alan s. blinder and john morgan ( 2005 ), " are two heads better than one? monetary policy by committee, " journal of money, credit, and banking, vol. 37 ( october ), pp. 789 - 811. | of the spectrum are policymakers who suspect that most firms and households form their expectations using something closer to simple rules of thumb based on recent history. under this alternative worldview, a string of adverse supply shocks is dangerous because it has the potential to cause rising inflation to become embedded in expectations. should this shift in expectations occur, the joshua gallin ( 2004 ), " the long - run relationship between house price and rents, " finance and economics discussion series 2004 - 50 ( washington : board of governors of the federal reserve system, september ). jonathan mccarthy and richard peach ( 2004 ), " are home prices the next β bubble β? " federal reserve bank of new york, economic policy review, vol. 10 ( december ), pp. 1 - 17. donald l. kohn ( 2006 ), " monetary policy and asset prices, " speech given at the european central bank colloquium held in honor of otmar issing, march 16. central bank would face a persistent inflation problem, one whose correction would likely require a prolonged period of tight monetary policy. in this less comfortable world, restoring price stability can involve a painful process of slow growth and elevated unemployment. of course, these considerations are more than a theoretical curiosity and help to explain the intense focus of central banks on inflation expectations. the marked rise in energy prices over the past few years led until recently to a rate of overall consumer price inflation notably above core inflation. however, the available measures of expectations - whether from surveys or financial markets - have shown longer - term expectations increasing very little, if at all, throughout this period, providing some assurance about the inflation outlook. however, this is an ex post assessment. as a policymaker, i would have been more confident in my ex ante judgment about the risk of expectations moving higher if we had had a better understanding of the determinants of expectations regarding prices and of the links between these expectations and the subsequent performance of inflation. more generally, the uncertainty we face about the process of expectations formation makes interpretation of the underlying correlations in the data challenging. this is no surprise : the rational expectations revolution begun by robert lucas more than thirty years ago started from the premise that it is impossible to move from reduced - form evidence to the underlying economic structure without understanding the evolution of expectations. much of the macroeconomic literature over the past few years has focused on how alternative assumptions about expectations may explain the patterns of correlations in aggregate data. however, the empirical weaknesses of the | 1 |
mr. tietmeyer considers the challenge of the euro for europe special address by the president of the deutsche bundesbank, prof. hans tietmeyer, at the conference on β the challenge of the euro for emerging markets β, convened jointly by the national bank of poland and the european economics and financial centre in warsaw on 12 / 2 / 98. europe is facing major challenges. not only will it have to take important decisions affecting the course of future integration. above all, europe must also stand up to the test of global competition while preserving its basic values of freedom and solidarity. the immediate task facing the countries of central and eastern europe is economic transformation - making their economies internationally competitive and open on a sustainable basis. jumping into the β deep water β of international competition with privatised enterprises and banks has set off radical reforms having far - reaching implications. one of the great thinkers of the enlightenment, immanuel kant, said that the true philosophers are those who carry conviction through their teachings and by setting an example. poland may be said to be one of the most successful countries in transition so far. for years now, it has been achieving notable rates of growth. the central bank is doing a good job under its president. it is universally recognised that the rate of inflation has been brought down sharply and that this has been a crucial factor underpinning the restructuring of the economy. furthermore, important steps have now been taken towards autonomy for the polish central bank ; they are reflected in the central bank act which recently came into force. germany congratulates poland on the progress that has been achieved. and we are pleased that many different contacts exist at all levels - including, of course, the field of central banking. i should also like to mention the notable scale of direct investment in poland by german enterprises. it is gratifying to see that particularly small and medium - sized enterprises are involved in that area. but, where there are many points of light, some things inevitably cast a shadow. according to the oecd, one of the major risks is that the expansion of the current account deficit cannot be sustained at a manageable level. furthermore, the oecd experts are calling for the acceleration of restructuring, especially in the areas of privatisation and pension reform. i am certain that the responsible decision - makers in poland are taking that advice seriously. ii the eu countries are also facing a problem of transformation. increasingly fierce worldwide competition is setting great challenges for most of the eu | . 2 / 3 bis - central bankers'speeches we are making online and printed versions of the abridged historical booklet available to the general public, in german and in english. after that, the full academic volume and the monographs will be published. based on the publications, we will set up further projects to disseminate the study findings. before i give the floor to you, professor brechtken and professor ritschl, may i express β on behalf of everyone involved in this project β our appreciation and gratitude for all your work. 3 / 3 bis - central bankers'speeches | 0.5 |
martin redrado : the central bank of argentina passed the test article by mr martin redrado, governor of the central bank of argentina, published in clarin newspaper on 5 august 2007. * * * this time, the epicenter was not latin america, southeast asia or southern africa. the financial turbulence of the past few days comes from the developed world β more specifically, the united states. real estate prices, which have been falling for more than twelve months now, have begun to affect the quality of the assets in the mortgage market. in particular, banks and mutual funds trading mortgages in the subprime market have passed on increased risk to the system. this has led to a massive sale off in most of the higher - yield asset classes, including emerging market securities, to cover losses in the markets of origin. against this turbulent backdrop, which leads to a new risk assessment and tighter credit, argentina has shown that it has the necessary exchange rate and monetary tools to provide its population with a horizon of solvency and predictability. in this context, the central bank of argentina is like a chess player playing simultaneous games, since monetary policy cannot have an erratic or spasmodic behavior. instead, each β move β must be in line with the global strategy applied in multiple chessboards, that is, preserving the value of currency, the stability and depth of the financial system, and the equilibrium in the monetary market. from this perspective, special attention should be given to the downstream effect of each β move, β since often, β sacrificing a pawn β may seem costly in the short - term, but healthy and consistent with the main goals of the framework in place from a strategic point of view. action taken β encompassing a set of financial and banking regulations and direct intervention in the monetary, foreign exchange and financial asset markets β should not be interpreted in isolation. instead, it responds to a preventive and consistent strategy developed in the past few years to ensure the necessary β artillery β to prevent frights in times of international financial turbulence. prudential foreign reserve accumulation is an example that speaks for itself. as with every insurance policy, it represents an β abstract β benefit while it is not used, but a β concrete β one in financial stress situations : the $ 44 billion in the central bank β s coffers were enough to discourage speculation that might have increased uncertainty. if this is coupled with the positive inflow of dollars coming from the external surplus, the potential | some parts of the euro area do not appear to be in line with the need to encourage higher employment. the eurosystem β s monetary policy strategy with regard to the eurosystem β s monetary policy strategy, i should like to emphasise that the euro area monetary policy is a single one and therefore indivisible β by definition. monetary policy decisions must be based on area - wide rather than national considerations and hence on area - wide indicators. monetary policy has to be transparent so as to stabilise public expectations of future price developments. in order to clarify how we interpret the mandate conferred on the ecb by the treaty, the governing council has announced a quantitative definition of its primary objective. price stability has been defined as a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 %. this has to be maintained over the medium term. as the wording β increase β makes clear, deflation β that is, a persistent fall in the price level β would not be consistent with price stability. it would not be possible for us to announce where exactly we would draw the dividing line between price stability and deflation. this is partly for reasons that have been described as the measurement bias in consumer price indices. for the united states it was estimated that measured consumer prices tend to slightly overestimate actual inflation. a bias may also exist for the euro area hicp, although its exact magnitude is as yet unknown and needs to be explored further. to maintain price stability, the governing council has chosen a stability - oriented monetary policy strategy. the chosen strategy is forward - looking in nature and also ensures as much continuity as possible with the former strategies of the ncbs. in this respect and with regard to the overriding objective to maintain price stability in an environment of flexible exchange rates, our strategy is broadly similar to that of sveriges riksbank, although there are important differences. in particular, the riksbank follows a direct inflation targeting strategy in which monetary policy is almost exclusively guided by inflation forecasts of about two years ahead. in contrast, the eurosystem relies on two pillars, thereby focusing on the medium term, and does not give such a predominant role to inflation forecasts as the riksbank. in our view, the riksbank has achieved high standards with regard to transparency and accountability, as is for example evidenced by its comprehensive quarterly inflation report. in more recent years, the ri | 0 |
told that the first step to running a marathon is to tell everyone of your intentions. commit. you have just been told of our intentions to work collectively β locally, regionally, and globally β in pursuit of maximising our mandate. we desire to be a great team and the world β s best central bank. the resounding results that past and present people at the reserve bank have achieved provides a fantastic platform to progress this work. me mahi tahi tatou mo te oranga o te katoa. work together for the wellbeing of everyone meitaki thank you national review ) on the national implementation of the sdgs. several sdg targets can be mapped to the core functions of central banks, for instance : inclusive access to banking, insurance and financial services ( target 8. 10 ), regulation and monitoring of global financial markets ( 10. 5 ), reducing transaction costs of migrant remittances ( target 10. c ), reducing illicit financial flows ( 16. 4 ), enhancing macroeconomic stability ( 17. 13 ) and providing data capacity - building support to developing countries ( 17. 18 ) ( https : / / unstats. un. org / sdgs / indicators / indicators - list / ) 34 reserve bank climate change strategy, https : / / www. rbnz. govt. nz / financial - stability / climatechange / strategy 35 reserve bank of new zealand act ( 1989 ). page 11 of 11 | especially in the face of persistent shocks. our ongoing analysis of household responses to high inflation and income variability ( lydon ( 2022 ), arrigoni et al. ( 2022 ), adhikari ( 2022 ) ) as well as to interest rate rises ( lyons et al ( 2022, fsr 1, box c ) ) will continue to highlight groups that are most vulnerable, allowing for appropriately target measures to be implemented. next, i want to move onto price stability and monetary policy, and how this interacts with inequality. price stability, monetary policy and inequality though central banks actions can have an impact on the distribution of wealth and income over shorter horizons, over the longer run their impact is likely to be small. as a tool that is primarily aimed at tackling cyclical fluctuations, monetary policy is unlikely to be a substantial driver of structural inequality. we know that downturns can lay bare the different types of inequality that are lurking beneath β as i mentioned above β but, the sources of inequality run deeper and, i believe, are more structural in nature than they are cyclical. but this does not mean that, as monetary policy makers, we should ignore it. this was one of the key messages we heard from the general public and representative groups when we conducted our own β listening exercises β as part of the ecb β s 2021 strategy review. to the extent that monetary policy has significant redistributive effects, it will of course impact inequality, at least in the short term. but an equally β if not more β important issue is how inequality can also impact monetary policy. in other words, how pre - existing levels of inequality β either in income and / or wealth β impact how monetary policy is transmitted to households, firms and overall economic activity. there has been an explosion of research on this issue in recent years. 10 much of it focuses on the how monetary policy changes β for example, increasing or decreasing interest rates, or purchasing assets β affects different types of households according to income, job - type or wealth. when i talk about β conventional β monetary policy, if there are more households in society whose consumption is very sensitive to income changes β typically those with limited access to credit, or fewer savings β then the transmission of monetary policy to the real economy tends to be stronger. our recent central bank quarterly bulletin article on β household economic resilience β, emphasised this issue by quantifying for the first time the joint distribution | 0 |
with the call by the leaders of the group of twenty ( g20 ) in april 2009 to strengthen accounting recognition of loan loss provisions by incorporating a broader range of credit information. one of the consequences of this new framework is the fact that while, in the past, a loss event had to have occurred before an impairment was raised by a bank. the standard now requires that loss provisions be raised earlier and take into account not only past and present page 3 of 9 information but also forward - looking information, which emphasises the future probability of credit losses in determining them. this standard is aimed at resolving the weaknesses identified during the global financial crisis of β too little, too late β referred to above, and this will hopefully result in a more robust financial system that is more resilient and hence better able to withstand shocks. the adoption of ifrs 9 will give rise to higher levels of credit impairments. a study undertaken by the european banking authority estimated that the implementation of ifrs 9 would give rise to an average increase of 13 % in loss provisions compared to the current levels under ias 39 ; it is further expected that the core equity tier ( cet ) 1 ratios will decrease by an average of 45 basis points. smaller banks, which mainly use the standardised approach to measuring credit risk, estimate a larger impact on their own fund ratios than the larger banks. estimates of the exact impact differ, however, and only time will tell which of these estimates was accurate. there are those that argue that the adoption of ifrs 9 may in fact increase procyclicality, because during recessionary conditions there may be a sharp fall in cet 1 capital levels and this, in turn, may lead to a sharp easing in credit extension due to the so - called β cliff effect β of the staged approach prescribed by ifrs 9. others, notably the bis, reject this argument on the basis that banks, after the global financial crisis, are now better capitalised with higher buffers and thus are better able to absorb losses. they further argue that the early loss recognition of credit losses enables a quicker β clean - up β of banks β balance sheets, thus enabling them to support economic recovery. this debate is clearly not yet settled and we will need to wait and see how this plays out during the next recession. the economic impact is, however, not only limited to the level of losses and the timing of the recognition ; the implementation of ifrs 9 is also likely to impact on the | launch of the ngfs conceptual framework β to guide action by central banks and supervisors on nature - related risks β β paris, 7 september 2023 speech by francois villeroy de galhau, governor of the banque de france page 1 sur 5 ladies and gentlemen, it is a great pleasure to introduce, together with dnb β s president klaas knot, this ngfs conference that launches its conceptual framework on nature - related risks. one year ago, we were together in amsterdam for a pioneering conference on biodiversity from a central bank and supervisor perspective. at the time, our grasping of nature - related risks was roughly the same as on climate change some years earlier, and we acknowledged the need to refine our understanding and methodology. indeed, our economic reliance on natural resources such as wateri, and more broadly on services provided by nature and, at the same time, the impact our economies have on nature, are becoming more and more obvious and are increasingly documented. as ravi menon, chair of the ngfs, stressed it recently, β along with the climate crisis, the nature crisis is the existential challenge of our times. we cannot focus on one and hope the other will take care of itself. β ii the new conceptual framework released today by the ngfs therefore marks an important milestone. it offers a shared language and sketches out a common method to assess nature - related financial risks and ensure that our collective work is both consistent and joined up. the common understanding we have reached together is both science - based and geared toward bridging the gap with assessing the economic and financial implications of nature - related risks. as frank elderson recently put it, β this is not some kind of a flower power, treehugging exercise. this is core economics. β iii according to one estimate, reversing the decline in nature loss could require approximately 500 billion dollars per year until 2030, while the world currently spends less than 150 billion dollars on nature conservation and harmful subsidies represent 300 billion dollarsiv. whatever the right figures, the gap is such that it is all the more important that financial actors start acting on nature - related risks to shift nature - blind financial flows. at banque de france, we have started doing so through our sustainable investment policy by partnering with a data provider to page 2 sur 5 carry out a detailed assessment of impact on biodiversity of the equity and corporate bond components of our non - monetary portfolios. as you can see, the impact of our equity portfolios | 0 |
, if a wage - price spiral takes place, this will likely cause a sizable increase in medium - to long - term inflation expectations and high inflation could become chronic. for this reason, the european central bank ( ecb ) has also been aggressively raising policy rates. in the meantime, the united kingdom appears to be moving into a tough situation. on top of the surge in energy prices, it has encountered a grave labor shortage amid the pandemic, due in part to a decline in immigrants following brexit. this has been accompanied by a surge in wages and is beginning to induce a wage - price spiral. until lately, the bank of england ( boe ) was out ahead of the federal reserve in implementing aggressive monetary tightening. yet, in late september 2022, the u. k. government announced a large - scale fiscal stimulus package featuring massive tax cuts, and this in turn engendered a sharp interest rate hike. furthermore, even though monetary tightening has pushed up interest rates in the country, the british pound hit its lowest level against the u. s. dollar since the adoption of the floating exchange rate system. to address the market turmoil, the boe is taking action to ensure financial stability by, for example, carrying out temporary purchases of long - dated u. k. government bonds and postponing the beginning of the planned gilt sale operations. such market turmoil was largely unthinkable until quite recently ; i now consider it necessary to keep a close eye on its impact, particularly on the u. k. economy and global financial and capital markets. as i have described, risks to the global financial and economic environment surrounding japan have rapidly become skewed to the downside. crude oil prices, which had seen a surge until lately, have recently shown signs of a decline ( chart 13 ). i believe that this most likely reflects concern over the risk of a slowdown in the global economy. history suggests that there is considerable risk in making a shift toward monetary tightening in such cases where the possibility of " a storm landfall " cannot be ignored. in the current situation where downside risks are significant, i believe that any move to revise the direction of monetary policy toward tightening should be considered with caution. foreign exchange rates next, i will touch on foreign exchange rates. i am closely monitoring the effects of exchange rate movements on economic activity and prices. in light of these movements, let me share what approach i think monetary policy should take. first, monetary | as a useful cross - check to the outputs of the more structural model. 12 the distinguishing feature of the model suite is the emphasis placed on the feedback effects induced by market liquidity risk and funding liquidity risk and their interactions in a network context. in addition, the potential feedback to the macro economy from the behavioural responses of banks individually and collectively to an impairment of their balance sheet position ( eg, through a β financial accelerator β effect ) will be incorporated explicitly. the development of the suite is at an early stage but preliminary results from prototype work seem to promise some useful insights. chart e shows an illustrative distribution of future uk bank system assets from the prototype model ( the right - hand panel expands the lower tail of the distribution ). notice that the distribution is explicitly bi - modal β as one might expect of a system where losses on interbank exposures, and pressures on asset prices and market liquidity from failing firms, may be transmitted through the financial network and may trigger a cascade of defaults. our suspicion is that the firesale of assets by institutions facing default is the source of much of the action here, but more research is needed to be properly certain and before we can ascribe quantitative meaning to the distribution. 13 chart f illustrates how such distributions might also be tracked over time and compared in successive financial stability reports. when operational, such distributions should help guide judgements on how overall financial system vulnerability is changing. but the approach should also provide considerable additional information on pressure points within the system and on the channels of transmission and potential contagion. 14 i believe that this broad approach offers an important step forwards in the development of an analytically and empirically robust framework for financial stability work. of course it is analytically hugely challenging β modelling non - linear tail events with endogenous strategic interactions is always going to be tough! the results will inevitably be subject to major uncertainty. but the approach does start to provide a consistent and coherent framework which should substantially improve the value of top - down stress tests and of risk assessment work. 15 a particular β operational β aim is to use the results to help improve the focus of risk reduction work and crisis management planning, for example through the identification of β weak points β in the financial system and through improved assessment of the impact of policy interventions. an important element of risk reduction work is to influence the behaviour of financial firms. β bottom - up β or firm - level stress - testing practices have developed rapidly in recent | 0 |
players entering the market with aggressive expansion plans in very near future. the challenge will however be to develop suitably qualified and trained hr to man this growth ; while sbp will be further intensifying its efforts to build the industry β s hr capacity through its regular and specialized training programs, the ibis would also have to significantly increase their investment in hr development. another challenge would be diversification of assets mix and taping non - traditional sectors like agriculture and smes to deploy the growing deposit base in productive avenues. presently the ibis β exposure in these bis central bankers β speeches sectors is nominal that needs to be increased significantly, which would not only improve their repute amongst the masses but would also provide them an attractive avenue to develop and expand their assets portfolios. sbp would be willing to provide necessary support to ibis to build portfolios in these non - traditional but strategically important sectors. my thanks and appreciation again to redmoney for organizing this event and i hope such collaborations will continue in future. i wish all the foreign delegates to have pleasant stay in karachi and a safe journey back home. thank you. bis central bankers β speeches | kazi abdul muktadir : islamic finance developments in pakistan keynote address by mr kazi abdul muktadir, deputy governor of the state bank of pakistan, at the islamic finance news ( ifn ) roadshow 2012, karachi, 4 september 2012. * * * distinguished guests, ladies and gentlemen! assalam - u - alikum and a very good morning. it is my great pleasure to welcome you all in this ifn road show. i would like to congratulate and thank redmoney for organizing the show in pakistan, which is one of the fastest growing islamic finance markets across the globe. such events not only enhance islamic finance awareness and stimulate its demand but also provide a platform to islamic finance stakeholders to share their experiences and insights about this fast emerging segment of the financial system. i hope that today β s discussions and deliberations would help in addressing the key challenges being faced by the industry and contribute towards sustaining the growth momentum. ladies & gentlemen! since the inception of modern islamic finance in 1960 β s, islamic banking has evolved from its relatively modest size to a vibrant industry with an increasing global footprint. with a size of us $ 1. 35 trillion ( according to global islamic finance report 2012 ) and annual growth rate of more than 20 percent, the islamic financial industry now comprises 430 islamic banks and financial institutions and around 191 conventional banks having islamic banking windows operating in more than 75 countries. the relative resilience and stability of the industry during the financial crisis and its flexibility and responsiveness to changing business needs has helped the industry to establish itself as a viable financial system. the tremors and aftershocks of the financial crisis are still on either in the form of european debt crisis and / or weakening global economic outlook and the policy makers are still looking for answers to fix these issues. islamic finance, with its roots in a moral economic model that supports productive economic activity and discourages excessive leveraging and imprudent risk taking, can play an important role in rebuilding the financial system. i believe that this is high time for islamic economists and scholars to highlight the inherent strengths and potential of islamic finance in addressing the existential challenges faced by the global financial and economic systems. ladies & gentlemen! the evolution of islamic finance industry in pakistan has followed the same trajectory as global islamic financial industry ; with growth mainly intensifying over the last decade. despite having introduced landmark changes during 1980s including amendment in the banking companies ordinance, enactment of mudaraba companies and | 1 |
tensions. we hope for the best here, but we also need to be prepared for further setbacks in what remains a highly uncertain world. the rba will be releasing a full set of updated economic forecasts on friday. today, i can provide the key numbers. in preparing these forecasts we have assumed a rollout of the vaccines in australia in line with current government guidance and that international travel remains highly restricted for the rest of this year. our central scenario is for the upswing in the australian economy to continue, with above - trend growth over the next couple of years ( graph 6 ). gdp is expected to increase by 3Β½ per cent over both this year and 2022. given the recovery we have seen so far, we are expecting the level of gdp to return to its end - 2019 level by the middle of this year, which is 6 to 12 months earlier than we previously expected. graph 6 notwithstanding this recovery, we are not expecting the level of gdp to return to its previous trend over our forecast period. this is largely because of lower population growth. when we prepared the forecasts a year ago, we were expecting the population to grow by 1. 6 per cent per year over 2020 and 2021. the actual outcome is likely to be around 0. 2 per cent in 2021, the lowest since world war i ( graph 7 ). this slower population growth has a direct effect on the size of our economy and means that we will not get back to the previous trend any time soon. in per capita terms, we expect more, but not all, of the lost ground to be made up. graph 7 in the labour market, we are expecting the rate of unemployment to continue to decline. in the central scenario, it is expected to reach 6 per cent by the end of this year and around 5ΒΌ per cent by mid 2023 ( graph 8 ). job vacancies, job ads and business hiring intentions are at 3 / 7 bis central bankers'speeches high levels, which suggests continuing solid employment growth over the next few months. beyond that, some slowing in employment growth is expected when the jobkeeper program comes to an end in march. graph 8 given this outlook, wages growth and inflation are forecast to remain subdued. in the central scenario, wages growth is forecast to pick up from its current low rate, but to do so only very gradually and still be below 2 per cent at the end of next year. consistent with this, and the ongoing spare capacity | in the public interest and, if so, to ensure they go ahead. industry - level decision making may be only part of the answer. along with these questions of governance, the critical decisions of the review are likely to relate to the architecture of the payments system. by that i mean in particular the question of whether there is a place for additional centralised architecture in the australian payments system. a possible argument for that proposition is that centralised systems may be better able to innovate than bilateral systems. they may also be structurally more efficient when a network has a large number of participants, and better suited to providing open access to new players. the possible need for a centralised architecture is also relevant to the question of faster ( or real - time ) payments at the retail level. the consultation process has brought out a range of views on this subject. some argued that the existing architecture provided a sufficient level of centralisation, or pointed to the potential cost of moving existing systems onto a hub. others focused on the potential for some form of hub to provide real - time retail transfers and went as far as proposing a governance framework for such a system. we should be in a position to announce some conclusion on that in the near future, along with the other matters i β ve outlined today. let me turn briefly to the third and fourth areas of current policy work. issue number three is the regulatory framework for the eftpos system. one of the very significant developments in recent times has been the establishment of epal as a national scheme for eftpos payments. the reserve bank has welcomed that development because we see it as strengthening competition among card payment schemes in the domestic market. as a consequence of the establishment of epal, the eftpos system now works largely as a multilateral network. but much of the existing framework β the access regime and interchange fee standards β was designed in reference to the earlier bilaterally - based system. as a result, the relevance and applicability of the existing framework will need to be reviewed. one change that has already been made was the decision in november 2009 to bring multilateral eftpos fees under the same interchange fee standard as applies to scheme debit cards. but further changes to all elements of the regulatory framework for the eftpos system will need to be considered. some of the reasons for that are purely technical, because the regulations as they stand do not reflect the system β s current structure. but there are also | 0.5 |
focused on efficient management of risk and capital. mas is developing a regulatory framework for ils and will consult the industry in due course. development of more advanced risk management techniques has to be supported by more sophisticated research. for example, more reliable estimates of catastrophic losses will allow insurers to better price and write larger risks. for ils to be priced and rated, more robust risk models are needed. singapore is well - placed to serve as a centre for asian insurance research. we therefore encourage the industry to deepen its ties and collaboration with academia, and identify the relevant areas where greater research can make a difference. mas is prepared to consider supporting worthy projects financially. conclusion ladies and gentleman, the success of our initiatives to grow the insurance industry is contingent upon active participation from the industry. as new products are introduced and more players enter the market, there will be greater vibrancy in our insurance industry. there will be greater cross - fertilisation of ideas and upgrading of skills, which will underpin the continued growth of singapore into a thriving insurance marketplace. mas and gia have enjoyed an excellent working relationship over the years, and we look forward to many years of close and fruitful cooperation. it is our collective aim to continue to grow the vibrant insurance industry in singapore and to bring it to even greater heights. thank you. | , to the code. one year on, the gfxc has done a β stock - take β of our achievements, and i will share some of these with you today. 6 first, on awareness and commitment to the code. on this front, the gfxc, together with the fxcs in each jurisdiction, has made good progress. a key part of the code is the statement of commitment. this is a single, common basis by which each market participant can demonstrate that it commits to adhere to the code. one year on, we have seen a significant number of market participants from all over the 1 / 5 bis central bankers'speeches world using the statement as a means to demonstrate adherence to the code. to lead by example, many central banks, including mas, have also issued statements and published these on our websites. central banks have also requested that our fx counterparties issue the statement. many fxcs have linked membership of the fxc with code adherence. these efforts have resulted in a β bumper crop β of statements being issued at the one - year anniversary of the code. we have also seen about 12 public registers being established in response to market demand. these are repositories where market participants can publish their statements, to publicly demonstrate adherence to the code. in addition, the gfxc launched a global index of public registers ( or the global index ) in may this year, which links these public registers. the global index has a search function which enables the quick identification of market participants that have published statements on the participating public registers. as at mid - august, the global index had about 420 statements, from 9 participating public registers. the gfxc is continuing with efforts to include more public registers, and this will be an important and highly visible way to track adherence progress to the code. the gfxc has also been expanding its membership to include more jurisdictions. from the original 8 fxcs, we have seen a number of new fxcs being established in the last year. these include the fxcs in mexico, south africa, scandinavia and switzerland. through the membership expansion, the code will become more global as these fxcs promote the adoption of the code within their jurisdictions. 7 second, on embedding the code and integrating it into the fx market. if done well, we should see market behaviours reflect the good practices set out in the code. we have seen that the process of issuing the statements has prompted internal reviews within | 0.5 |
rate. the natural counterpart to that would be a real depreciation of sterling in order to improve uk international competitiveness, boosting net exports and leading to a re - balancing of the composition of output away from meeting domestic needs and towards internationally tradable sectors. moreover, the crisis has probably also resulted in a loss in net foreign earnings by some parts of the financial sector, necessitating an even larger decline in the real value of sterling to re - balance the economy. in order to get a handle on the likely impact of the depreciation of the exchange rate, we can follow a couple of approaches. one approach is to compare inflation rates here with those in other jurisdictions with stable exchange rates. as the euro area suffered a broadly similar fall in activity to the uk, is similarly exposed to global price shocks, and probably has a similar inflation process, it represents a natural comparator. the goods price inflation differential between the united kingdom and the euro area is shown by the green line in chart 7. a second approach is to compare the inflation rates of services with that of goods in the united kingdom. as goods are typically more import - intensive than services, the inflation rate of goods should rise relative to that of services after depreciations and vice versa ( there is a differential between the two on average, because productivity tends to rise faster in the goods sector than in the services sector ). the inflation rate of goods ( excluding energy ) relative to that of services is the blue line in chart 7 and has the same general profile as the green line. that is somewhat reassuring, since there are factors other than the exchange bis central bankers β speeches rate that could affect one or other of these relative inflation rates, but usually not both together 4. the fact that the two series move broadly in step suggests that the exchange rate is probably a dominant common driving factor. if one has an estimate of the relative import intensities, then one can go a bit further and back out a direct estimate of the contribution of the exchange rate to inflation 5. input - output data suggests that goods are between two and three times more import intensive than services. the implied contributions of import prices to inflation under these two assumptions are shown in chart 8, with import prices contributing between 2 and 3 percentage points to inflation in late 2009 / early 2010. back in 2009, our central view, embodied in successive inflation report projections, was for inflation to oscillate around the 2 % target over the | mr. george comments briefly on the global economy and on recent economic performance in the united kingdom speech by the governor of the bank of england, mr. e. a. j. george, at the dinner with the lord mayor for bankers and merchants of the city of london on 11 / 6 / 98. the past year, since we last enjoyed the generous hospitality of the mansion house, on this great city of london occasion, has been a testing time. it has been characterised by major imbalances in both the global economy and here in the united kingdom - which have complicated the task of policy - makers everywhere, including the task of the bank of england β s now legitimised monetary policy committee. internationally there has been good news in the enviable performance of the united states - goldilocks - economy, with continuing robust domestic demand growth and further falls in unemployment, with so far remarkably little inflationary pressure. to the extent that this performance can be sustained, it provides substantial underpinning for the global economy as a whole. and there has been encouraging news, too, in the re - emergence of domestic demand growth in the continental european countries as they prepare to take the final step to monetary union. that is a promising context for the launch of a strong, credible, currency and i wish the european central bank every success in its historic task. domestic expansion with monetary stability within europe is in the interest of us all. elsewhere though the international situation has been decidedly less benign. a combination of financial fragility and weak business and consumer confidence has weighed heavily on the japanese economy, and on the yen ; and the financial thunderstorms, which broke initially last year over a number of other countries in asia, are still intermittently rumbling around the region and elsewhere. the economic fallout from these developments poses a serious downside risk to the growth of world activity and threatens the emergence of potentially large international payments imbalances. it is a dangerous environment. all of this has prompted a far - reaching re - examination of the international monetary structure, and in the meantime it presents the international monetary authorities with some difficult immediate management challenges. it also, of course, represents an uncertain international background for the conduct of monetary policy in this country. our own overall economic performance over the past year was again very encouraging. output growth ( on the latest data, to the first quarter of this year ) was 2. 9 % significantly above the rate of inflation ( measured by the gdp deflator | 0.5 |
for policy - makers will be to design appropriate responses to enhance the stability of the financial system β including improving the detection and understanding of risks and vulnerabilities and translating these into concrete risk warnings and policy recommendations β without imposing restrictions that would unnecessarily hamper financial innovation and reduce the efficiency of the system. many improvements, including the new basel ii capital accord, were already under way when the crisis erupted, and they address several of the weaknesses that have been identified. however, the ferocity of the financial turmoil and its fall - out which spread well beyond the financial sector call for more far - reaching reforms in the area of macro - prudential supervision. in this context, a key initiative is the proposal for the establishment of a european systemic risk board ( esrb ), which will be supported analytically and logistically by the ecb and for which lucas has already initiated a lot of groundwork. the esrb will be an independent body responsible for conducting macro - prudential oversight of the eu β s financial system as a whole. once the legislative process is completed, the creation of this new european policy function will fill a significant gap in the ability to detect, assess and ultimately contain the build - up of risks. in particular, the esrb will be tasked to collect information relevant for systemic risk from across the eu. this should help overcome the significant information gaps which have hindered a comprehensive risk surveillance thus far, for instance with regard to the interlinkages among the major crossborder financial institutions. the esrb should be seen as the component of a global framework of macro - prudential oversight. this should support its effectiveness by also allowing it to contribute to the assessment and containment of global risks, which in turn may also contribute to the mitigation of risks in europe. the financial stability board, the imf, as well as national authorities, are all actively engaged in the development of a comprehensive framework of macro - prudential supervision, which also takes into account the risks arising from systemically important financial institutions. the crisis demonstrated that only internationally coordinated initiatives are truly effective in addressing risks and vulnerabilities in the closely integrated financial system. lessons for monetary policy with regard to monetary policy, in many respects recent events have served to confirm the approach adopted by the ecb since the outset of monetary union in 1999. most fundamentally, the primacy of price stability as the objective of monetary policy has been confirmed. indeed, at times of | of the commitment towards supporting regional monetary and financial surveillance, and in advancing efforts to institutionalize cross - border crisis management and resolution arrangements. these developments will contribute towards reducing any procyclical impact of basel ii and facilitating over time, refinements to the risk parameters that are more appropriate to local and regional experiences. the continuation of such efforts at the national and regional levels will reduce the prospects for potential disruptions in the regional financial systems. one of the most important consequences of basel ii lies in the effect that it will have in sharpening the focus on corporate governance in banking institutions. while there has been considerable attention focused on the quantitative implications and operational aspects of the basel ii framework, there has been less attention given to the corporate governance dimensions associated with its implementation. the expectations on the board and senior management oversight are significantly higher under basel ii. the board of directors is expected to ensure that a sufficiently strong risk control framework is in place before banks can adopt the more advanced approach. boards and senior management must have a sound understanding of the risk profile of the respective banking institution and ensure that it holds sufficient capital that is commensurate with that profile. this is reinforced by the greater attention being accorded by supervisors to the risk management control functions within the banking institutions and how they are effectively governed. improved market disclosures under the third pillar of the framework further subjects the banking institutions governance practices to closer market scrutiny. these developments have challenged governance practices that may have been tolerated in the past, but which would be grossly inadequate to provide the oversight that is demanded in today's far more complex business environment. such practices have included vague reporting of risks to the board, boards that are disengaged, and boards that have no or little expertise in risk and financial matters. boards and supervisors need to confront these issues with firm resolve. this will entail the more rigorous scrutiny of board members and senior management, both prior to their appointments and on an ongoing basis. boards need to also assert themselves more actively in advocating and driving risk reforms, and demanding the appropriate level and amount of information from management that would enable the oversight responsibility to be discharged effectively. in many respects, basel ii remains a work in progress. as we continue to ponder its broad and complex dimensions, platforms such as this for open and active dialogue between public and private interest groups are important to provide further insights on the many issues that will provide the direction forward for the wider and effective global implementation of basel ii. on that note | 0 |
popular among central banks, and canada was an early adopter. under our current agreement, we aim to keep inflation around a target of 2 per cent, and we usually try to accomplish this over six to eight quarters. even in the absence of financial stability threats, the practice of monetary policy requires the central banker to deal with vast amounts of uncertainty. think of the most important aspects of a macroeconomic model β the level and growth rate of potential output, the real neutral interest rate, and the transmission of terms - of - trade shocks. none of these can be observed ; they all must be estimated. the assumptions that we make in running our models inject uncertainty throughout the policy - making process. and, since the crisis, we have also been confronted with the risk that our models have been distorted because of fundamental shifts in economic behaviour. now, on top of all this uncertainty, we have to add the uncertainty represented by risks to financial stability, a concept that is difficult to quantify. adding this whole other dimension of uncertainty complicates the practice of monetary policy by forcing us to weigh both sets of risks, the probabilities that they will be realized and the potential consequences of a policy error. so how do we manage the risks? at the bank of canada, we try to be realistic about the things we don β t know and do a thorough examination of the related risks. every time we come to a decision, there are a number of potential paths for policy that could be consistent with the inflation goal. in the process of formulating policy, we weigh these possibilities and focus on those that fall into a zone where the range of likely outcomes makes us reasonably certain that we β ll achieve the inflation target over an acceptable time frame and that financial stability risks will evolve in a constructive way. still, we know there can be times when setting policy to achieve the inflation target within the usual time frame can increase the level of financial stability risk to an unacceptable level. this would take us out of the zone where the risks are essentially balanced. because the flexibility in our framework allows it, we reserve the right to choose our policy tactics so that our actions don β t significantly worsen financial stability concerns by opting for a policy path that aims to return inflation to target over a longer time frame than normal. bis central bankers β speeches risk management, then, does not mean that the central bank will adjust policy to try to lean against every emerging financial imbalance. since we are an inflation | of demand towards the desired mix of investment and consumption. softer tradeoffs than implied by the trilemma are suggested by some of the empirical evidence on interest rate co - movements. for example, there is ample evidence that domestic short - term interest rates become progressively less correlated with short - term interest rates in large foreign countries, and that monetary policy is more autonomous, as countries move from high capital mobility to low capital mobility, and from rigid currencies to flexible currencies. 5 using foreign exchange reserves to support currency stability is unlikely to be as effective in enabling the country to attain domestic growth and inflation objectives. if losses of foreign reserves are not sterilized, the effect will be similar to that of domestic monetary tightening, and as already discussed, might work against domestic growth and inflation objectives. if reserve losses are sterilized and the underlying cause of capital outflows is not addressed, reserves losses can be persistent. macroprudential policy provides an additional tool that can add degrees of freedom and help soften the tradeoffs of the trilemma. macroprudential policy can potentially temper spillovers by modulating the type of buildup of financial imbalances that contributed to the asian crisis of 1997, countless other emerging market crisis, the global financial crisis of 2008 and the subsequent euro area crisis of 2011. progress continues to be made in designing macroprudential policy frameworks, in definition of objectives, and in developing appropriate instruments, calibration and communication. capital flow management can be viewed as the part of the macroprudential toolkit that operates across borders. over the last five years, capital flow management has received increased attention, first in managing inflows and, more recently, in managing outflows. 6 a consensus has emerged that capital flow management can be useful as part of a broader set of policy tools. in fact, the effectiveness of capital flow management may be limited if not appropriately supported by monetary, fiscal, exchange rate and prudential policies, or the obstfeld, shambaugh and taylor ( 2005 ), goldberg ( 2013 ), klein and shambaugh ( 2015 ) and obstfeld ( 2015 ). g20 ( 2010 ), imf ( 2012 ), farhi and werning ( 2014 ) and imf ( 2015 ). bis central bankers β speeches warranted macroeconomic adjustment. also, capital flow management practices that are transparent, temporary, and targeted seem to work best. spillovers | 0 |
times a year. statistics was one of the first areas in which such co - operation was established. this is entirely logical, since without the creation of a basic statistical framework it would not have been possible to communicate on monetary policy matters. among the most important outcomes was a creation of monetary survey. this survey made it possible to compile monetary and credit aggregates. one of the preconditions for influencing the money supply was to establish what is known as the β monetary base β. the ongoing liberalisation process meant that it was no longer important to divide the balance of payments statistics into koruna and foreign currency transactions. this classification was replaced by a standard breakdown into transactions between residents and non - residents. numerous statistics linked with regulation were gradually abolished as individual areas of economic activity were liberalised. these examples merely illustrate how the central bank β s entire statistical system was rebuilt from scratch. let me now move on to the more recent past. in 1999 we began to co - operate closely with european institutions. the main topics included monetary and banking statistics, balance of payments statistics and more recently also financial accounts, government financial statistics and general economic statistics. the development of statistics was influenced by a need to standardise each area to ensure compatibility between the eu member states and the candidate countries. hand in hand with these contacts, we began to work much more closely with the czech statistical office. in the area of statistics the czech statistical office is the natural and closest partner of the czech national bank, since these two institutions are the major producers of statistical information in the czech republic. the czech statistical office conducts a far wider range of statistical surveys, providing aggregate information on the national economy, territory, climate, environment, population, elections and other areas of life and activity of our country. the czech national bank is above all a user of economic statistics and collaborates most closely in this area. as both a user and a partner, we can affirm that the quality of the office β s statistical output has increased immensely over the transformation period. examples include the publication of national accounts according to international standards and the compilation of data on the government debt and deficit. the czech national bank focuses mainly on monetary and banking statistics and balance of payments statistics. the harmonisation of the monetary statistics with european standards was recently completed in both main components balance sheet statistics and interest rate statistics. monetary and credit aggregates and interest rates are now methodologically comparable with the data of other eu member states. speaking of harmonisation, i | out of your window as you take off from prague airport on your way home. so this is about lifestyle : good beer, heavy food and bathing. actually, many czechs would say that this is the very definition of how to relax and be cool about the world and life. but this would also be a rather simplistic caricature. so let β s go further. ours is a country with a long and entrenched tradition of industrial production and manufacturing. this goes back to the 19th century, to the time of the austro - hungarian monarchy, when this part of the empire used to be its industrial undisputed powerhouse. this tradition has survived through wars and totalitarian regimes to the present day. even now, the czech republic is the country with the highest ratio of industrial production to gdp in the whole of the eu and the ratio is higher than in germany, a fact which many do not know. and it has actually been rising rather than falling over the last 10 years or so. this is manifested in the fact that the czech republic is the second biggest producer of cars per head in the world. moreover, the czech republic and slovakia β which formed a single state until 1993 β are together by far the biggest car - producing countries in the world in per capita terms. with 150 cars produced per every 1, 000 citizens these two countries are well ahead of south korea and germany combined in per head metrics. so whenever you drive your skoda, hyundai, peugeot, kia, volkswagen or even porsche, don β t be surprised to learn that they were actually manufactured within a radius of 300 kilometres of prague. by the way, ferdinand porsche, the 1 / 2 bis central bankers'speeches founder of the porsche car manufacturer, was also born here, 100 kilometres north of prague. many of my friends in the real economy say that the czech republic is a country where everything is produced, from wings for airbus and embraer aircraft ( we are also the biggest producer of ultralight planes in the world, for instance ), through turbines, cars, buses, locomotives and guns to bearings, brushes and semtex. whatever you need to produce you will always find at least one factory capable of making it, the anecdotic evidence seems to be suggesting. as exports obviously feed this country, and as we are so close to germany and the germanspeaking world, you won β t be surprised to learn that germany is by far our biggest trading partner, with more | 0.5 |
words, there has been a marked decline in the money multiplier. 9 the increase in base money reflects the rise in demand for the swiss franc, which is seen worldwide as a safe haven in times of crisis. without an expansion in the monetary base, money would have been excessively scarce and its price would have risen massively. this would in turn have led to a marked drop in the level of prices, our currency would have appreciated even more, and economic activity would have declined. can this strong expansion be reversed when necessary? yes, it can. if the demand for swiss francs weakens, the supply of money can be reduced at any time, thus ensuring that the currency retains its value. the snb has a wide range of ways and means at its disposal for absorbing liquidity. however, one important condition for a successful reduction in money supply is that the snb must have unrestricted control over its balance sheet. and in particular, it must, if necessary, be able to sell foreign currency for swiss francs, in the same way as it has been able to make foreign currency purchases in recent years. we therefore must also firmly reject any ideas aimed at channelling our assets into a sovereign wealth fund, even though we may be highly sympathetic to the matters in question, such as securing pension provision. 10 summary and outlook in conclusion, allow me to stress once again how valuable it is to have a dialogue on the core issue of sound money. in my remarks, i referred to the crucial importance of the three mainstays of a robust paper money system : a central bank mandate focused on price stability, the independence of the central bank in setting monetary policy, and solid state finances. as we have seen, sound money is always subject to latent threats. it is essential that we remain on our guard if we are to identify these threats in good time and ward them off. what are the biggest threats to sound money at present? in my view, there are two developments in particular that we need to be watchful of. on the one hand, any move to make central banks an instrument of state financing would undermine the second mainstay, namely central bank independence. on the other hand, the consequences of the coronavirus crisis could also impact on the soundness of money. overall, state financing needs and thus government debt have increased considerably as a result, and this could undermine the third mainstay if countermeasures are not taken over the medium term | to a high level of trust in central banks. the fact that inflation has been held in check for so long may also explain the increasing popularity of ideas from an entirely different perspective. the proponents of modern monetary theory would like to see central banks being put at the service of state financing. their take is that independent central banks are merely a troublesome relict and that monetary policy should largely be determined by the government β s financing needs. but experience from throughout history shows that this would, sooner or later, end in an economic policy fiasco. as you can see, the positions are far apart, with diametrically opposed interpretations of facts. the aim of my speech is to provide some clarity from the perspective of switzerland β s central bank. to this end, i will set out some fundamental thoughts on the properties of sound money and the various types of money. i will then address the question as to whether, against the backdrop of our current monetary policy, the swiss franc can still be described as sound money. page 2 / 8 sound money is stable money but let us first take a step back and look at money as a concept. money is a generally accepted medium of exchange, and performs two other important functions, namely as a unit of account and as a store of value. as a unit of account, money serves to make economic transactions comparable. in this function, it is also used for representing the nominal value of all kinds of claims and liabilities. as a unit of account for determining value, money plays a prominent role in virtually all walks of life β from the workplace to healthcare and pension provision. for money to be a generally accepted medium of exchange, it must be possible to use it to buy goods or services not only today, but also tomorrow, and the day after, and so on. money can therefore also be used as a store of value. however, money is not the only means of holding and growing wealth, and it is often not the most profitable. although it does offer security and flexibility, unlike risky financial investments it generates little or no return. so what constitutes sound money? my answer is unlikely to come as a surprise : money is sound if it fulfils its functions as well as possible. and this depends on its value being stable. only if this is the case will it be broadly accepted as a medium of exchange over the long term. furthermore, as a unit of account, money that is stable in value makes it possible and easier to plan | 1 |
its parts : the asset quality assessment and the baseline and adverse scenarios of stress tests. banks not exceeding any of these thresholds had to submit within two weeks a capital plan for remedying their capital shortfall within a period of six to nine months. with the methodology used, 25 of the 130 banks assessed had a capital shortfall, which for the whole of europe amounted to β¬24. 6 billion. it should however be noted that, in anticipation of the exercise, many european credit institutions strengthened their solvency over the past year. of the aforementioned 25 banks, 12 increased their capital sufficiently in 2014, so only 13 of them, with a capital shortfall of β¬9. 5 billion, will have to take additional action to reinforce their solvency. we consider the results of the spanish banks to be positive. only one bank was below the threshold in one of the parts of the exercise, specifically in the asset quality review. in this case the estimated shortfall was very small and, during 2014, the bank took measures to strengthen its capital by an amount well in excess of that needed to cover its shortfall. taking bis central bankers β speeches into account these actions, at present all spanish banks amply exceed the thresholds set in the exercise. it should also be noted that spanish banks were the ones that had to make the smallest adjustments as a result of the asset quality review : a total of only 0. 14 % of their riskweighted assets. in conclusion, the results of the comprehensive assessment show that the restructuring process undertaken in the spanish financial system from 2012 has been successful and that our credit institutions face the future with healthy balance sheets and a sound solvency position. similarly, the structural reforms undertaken in recent years have played a crucial role in providing for a firm recovery and in correcting imbalances. it is imperative to stay the course and ensure sufficient growth to reduce the unemployment rate and anchor the economic underpinnings needed to sustain domestic and foreign demand. thank you. bis central bankers β speeches | governments should adjust their fiscal imbalance by 0. 3 pp of gdp and local governments should run a balanced budget. in 2015, the improvement in the cyclical position and the reduction in government debt yields will contribute to enhancing public finances. on the estimates available, meeting the deficit target for the coming year will require a budgetary adjustment drive, measured by the change in the primary structural balance, that is appreciably less than that made in previous years. overall, what we have is a more favourable macroeconomic scenario for the adjustment than that in place in 2012 and 2013. in terms of composition, under the budgetary programme the brunt of the adjustment is borne by government spending, since, as a proportion of gdp, it will be reduced by nearly 1 pp, basically due to cuts in government consumption. notable among the other expenditure items is that pensions rise by 0. 25 % as a result of application of the indexation formula included in the reform approved in december 2013. the budgetary plan envisages that the relative weight of revenue in gdp will increase by 0. 4 pp, despite the fact that the phasing - in of the personal and corporate income tax reform is estimated to have a budgetary cost in 2015 of some 0. 4 pp of gdp. the budgetary plan anticipates that the loss in tax takings associated with this reform will be offset by tax increases of the regional and local governments, the anti - fraud scheme of the social security system and a pick - up in tax revenue attributable to the economic recovery. meeting the spending targets will call for a very strict budget outturn by all levels of government, as well as the achievement of savings from the reforms approved, particularly by local government. finally, the budget envisages a public debt ratio of 100. 3 % in 2015, up 2. 7 pp of gdp on the projection for 2014. these figures illustrate the continuing importance the reduction of fiscal imbalances will have in the economic policy agenda for the coming years. the european banking union allow me to conclude with a reference to the process of banking union in europe. as you know, on 4 november the first pillar of the banking union project, namely the single supervisory mechanism, came into being. the single supervisory mechanism aims to harmonise banking supervision in the euro area so as, among other things, to sever the negative link between confidence in banks and doubts over the sustainability of public finances. bis central bankers β speeches | 1 |
judged as necessary, based on the principles i have just mentioned, very careful design is required in actual implementation. deep involvement of a central bank in credit allocation of individual financial markets and individual firms might lead to a paradoxical consequence, such that markets which are functioning relatively normally would be impaired by the central bank β s own action. in that regard, it is not the case that more purchases are more effective. in addition, if the central bank incurs losses, it might undermine confidence of general public in the central bank β s policy conduct and ultimately in the currency. keeping those points in mind, the bank has laid out three elements to be considered. the first element is a perspective of neutrality, which prevents discretionary credit allocation to individual firms. the second is to conduct the purchases for a necessary period and on an appropriate scale. that would ensure that the purchases are a bridging measure until the market function recovers. the third is to ensure the bank β s financial soundness. since the losses of the purchases impose costs on taxpayers, it is important to avoid the concentration of credit risks in a specific firm. the specifics of the cp purchasing scheme is as follows. from the first perspective of neutrality for credit allocation, the bank will purchase from financial institutions that are the counterparties of the bank by fair and transparent means of competitive auctions. in addition, from the second perspective, the purchases will be conducted for a limited time up to march this year, and the bank uses an auction in which somewhat a high minimum bid rate is set. the minimum bid rate is set to be more favorable than the market interest rates when the market is malfunctioning, but not more favorable than the market interest rates of normal times. with this setting, bids will naturally decrease in number as the market function recovers. in addition, from the third perspective of ensuring the bank β s financial strength, the bank will purchase a - 1 rated cp that are eligible as the bank β s collateral, with setting upper limits by each individual firm. keeping in mind that the outright purchases could be a means of meeting firms β funding needs including the redemption of corporate bonds toward the end of a fiscal year, the total amount to be purchased is set so as not to exceed three trillion yen and will be temporarily conducted until the end of march this year. the actual purchases of cp will start this month. in addition, the bank is now considering the outright purchases of corporate bonds with a remaining maturity of up | and the variety of corporate bond issuers has increased. new issuance of corporate bonds has recently been steady except for industries related to electric power, which have faced difficulties with new issuance due to uncertainty concerning their business environment. japan β s situation is quite different from that in the united states and europe where credit spreads have widened remarkably and new issuance has decreased sharply since summer. although comprehensive monetary easing was introduced last fall, stock prices and j - reits have not risen, partly due to a deterioration in the external environment. however, some market participants have observed that the bank β s purchases of etfs and j - reits helped markets to support some confidence right after the earthquake and also during the period of high uncertainty since this summer. as i have stated, comprehensive monetary easing has been effective in that it has encouraged a decline in longer - term interest rates and helped market participants from becoming too pessimistic. i believe that this is one reason why japan β s financial conditions have been stable compared to those in the united states and europe. iv. financial institutions β efforts to strengthen the medium - to long - term growth potential of japan β s economy let me use the remaining time to talk about efforts made by financial institutions to strengthen the medium - to long - term growth potential of japan β s economy. i will share with you some examples of regional financial institutions supporting firms β movement toward renewed growth with the cooperation of research institutions. i brought up this topic because i think that firms β positive efforts in high - growth business areas are necessary in order to strengthen the medium - to long - term growth potential of japan β s economy. the decline in the medium - to long - term growth potential of japan β s economy is also part of the background to a protracted period of stagnant demand and ensuing prolonged deflation, notwithstanding an extremely accommodative financial bis central bankers β speeches environment. based on this recognition, since last summer, the bank has been supporting the private sector β s efforts to strengthen the medium - to long - term growth potential of japan β s economy through the provision of long - term funds at a low interest rate to financial institutions under the new framework of the growth foundation strengthening facility ( fundprovisioning measure to support strengthening the foundations for economic growth ). financial institutions are now requested not only to meet demand for funds from existing mature firms, but also to actively identify efforts made by newer, growth - oriented firms, making use of the bank β | 0.5 |
fragmentation. second, climate change and the necessary decarbonisation of the economy will require far - reaching adjustments. macroeconomic developments are therefore highly uncertain. here, we can learn from history. the period of high inflation in the 1970s was also accompanied by geopolitical turmoil and energy supply challenges. with hindsight, we can now see that unanchored inflation expectations were a key reason why inflation remained so persistently high at that time. 4 some important lessons from that period are : don't let inflation expectations become unanchored, don't shy away from a strong monetary policy response and don't ease up too soon. however, geopolitical and thus also geo - economic fragmentation could also cause a lasting increase in price pressures. for example, uk economist charles goodhart suspects that globalisation β above all, china's integration into the global economy β has been an important factor in the low inflation rates of recent decades. 5 economic fragmentation could therefore increase price pressures over an extended period of time. and a lasting increase in price pressures would also require a lasting tightening of monetary policy. overall, however, empirical evidence for the impact of globalisation on inflation is mixed. 6 above all, the extent of this effect is subject to dispute and difficult to distinguish from other factors. for example, the subdued inflation dynamics since the early 1990s could also have resulted from the increasing stability orientation of monetary policy in many 3 / 4 bis - central bankers'speeches countries. that would, of course, be good news for us ; price stability could then be achieved with less effort. but i will not count on it. in these complex circumstances, i am wary of declaring a new era of high interest rates. 6 closing remarks ladies and gentlemen, it is only human to zone in on the latest news when assessing a situation. it is easy to overemphasise the present. in behavioural economics, this effect is called recency bias. i think a prime example of this is the economist article i mentioned at the beginning of my speech, which assumed there would be zero interest rates forever. one thing is clear : the era of zero interest rates is over for now. but the truth is also that we don't know what the future holds or what circumstances we will face in a few years'time. what we do know, however, is that monetary policy will do what is needed to overcome high inflation. it is important for banks and other financial market players to be prepared | parliaments have given their consent. secondly : the mandate of the independent central bank must be unambiguous. political value judgements among various competing aims may be made only by those who have acquired direct democratic legitimacy as a result of elections. it is precisely for that purpose that elections give a mandate. the decision - making body of an independent central bank, which is not elected directly, may not make any autonomous value judgements among various competing aims. an overriding objective has to be specified in advance. that is precisely what the maastricht treaty does. it specifies the primary objective of price stability. hence, the independent central bank remains anchored in the democratic structure of the state. in my view, the limitedness of the central bank β s mandate is thus a corollary of its political, democratic and constitutional legitimacy. for that reason alone, i believe that broadening the mandate would lead to problems for the european system of central banks. that applies, for example, to the idea of extending the scope of the central bank β s mandate beyond price stability to include growth and full employment as additional objectives. that is quite apart from the fact that i do not perceive any trade - off between those aims β at least in the longer term. assigning other tasks can also cause difficulties for an independent central bank, however. assigning sole responsibility for banking supervision or a lender - of - last - resort function, for instance, may give rise to difficulties. such a plurality of mandates might give rise to a situation in which the independent ecb has to choose among different objectives, say between the objective of stable prices, on the one hand, and the consolidation of individual financial institutions, on the other. fundamentally, that would be a political value judgement. therefore, caution β at least β should be exercised in terms of delegating additional tasks to the ecb. in addition to those two basic preconditions β the democratic assignment of tasks and an unambiguous mandate β tying the independent central bank into a democratic system naturally requires something more : it calls for transparency and accountability. independent monetary policy cannot and must not be remote from the general public. in saying that, it is essential to distinguish precisely what is meant by transparency. does transparency mean full disclosure of the deliberations, arguments and motives behind a decision : in other words, transparency of the situation in which a decision is taken? or does transparency principally aim at disclosure of the process by which is a | 0.5 |
, will provide a framework through which we will jointly determine effective policy solutions to advance mfs across the african continent while recognising the unique circumstances, environments, conditions and needs of each country within the region. specifically, ampi will seek to launch new, or expand on existing mfs policy, regulatory initiatives and strategies with the objective of deepening the penetration of mfs across africa in line with our national agendas and policy priorities, including the maya declarations, where they apply. further, ampi will provide a platform for regional networking and cooperation. african afi members will be in a position to share experiences and address policy issues which are common in nature. this is expected to help us develop effective solutions, policy strategies and regulatory frameworks that will be beneficial not only to africa but also to the wider afi network. ladies and gentlemen, it is envisaged that ampi β s broad objectives will be achieved through tailored activities which include ; β’ tapping into the synergies and experiences of the afi african members ; bis central bankers β speeches β’ mapping of comparative case studies on policies and regulatory implications of new business models ; β’ advancement of research, studies and exchange of knowledge and experiences around mfs ; β’ supporting the implementation of the maya declaration commitments relating to mfs ; and β’ secondment / attachment of staff / members to different organisations of african afi member countries for further learning. to successfully operationalise the ampi initiative, we propose to establish an ampi help desk, but not necessarily a physical one, which will provide all technical coordination towards the implementation of ampi β s objectives and activities. the key mandates of this help desk will be focused on facilitating communication of the results and progress of ampi, enabling engagement among the afi members and external stakeholders and ensuring synchronization of the overall afi strategy towards enhancing mfs in africa. in addition, it will contribute to our fulfilment of the maya declaration commitments relating to mfs. we will discuss, sharpen and adopt this proposal over the next two days. ladies and gentlemen, it is my ardent belief that this initiative will go a long way in enhancing financial inclusion in africa. ampi will pave the way for us to create an enabling environment to support the delivery of financial services through mobile phone technology and other emerging technologies, leading to increased penetration of mfs in africa. in addition, through the interaction between members and the external stakeholders, ampi will serve as a peer learning and knowledge platform for afi | central bank of kenya impact investment forum : african rural and agricultural credit association ( afraca ) 4oth anniversary kenya school of monetary studies, nairobi keynote address by dr. patrick njoroge governor of the central bank of kenya november 21, 2017 as prepared for delivery ladies and gentlemen, good morning! forty years is a milestone. some argue that it is when middle age begins β you look back fondly at the things of your youth, but also look forward to using your experience and wisdom to achieve long - held goals. i am thus glad that you welcomed me to your birthday celebrations, and allowed me to share in such a significant moment. in 1977 the african rural and agricultural credit association ( afraca ) was created in response to a request made to the united nations food and agriculture organisation ( fao ), during the 1975 world food conference. this request, was that fao assist developing member countries establish regional agricultural credit associations ( racas ). the purpose of this racas was to promote cooperation and facilitate mutual exchange of information and expertise in the field of rural finance. some background research into afraca unearths a number of gems that indicate that you have been at the forefront in driving the rural and agricultural finance agenda in africa. you have had, and continue to have, a strong desire to turn regional diversity into a powerful driving force and catalyst for exchange, capacity building and cooperation to promote rural finance. i am deeply honoured to be part of this campaign to revolutionize finance for african agriculture. and we have something in common, for we at the central bank of kenya, share a similar vision, β of a rural africa where everyone has access to sustainable financial services that support economic development, while maintaining social and environmental balance β. that said, the task is enormous β nearly two - thirds of africa β s population depend on agriculture for their livelihood and the sector contributes over 40 percent of the continent β s gdp. i am very pleased today to be part of this first impact investment forum commemorating afraca β s 40th anniversary. the theme of the conference β unlocking private sector capital to scale up impact investments in african agriculture β promises to be a story of shifting the reality of agricultural finance as we know it today. africa has in the past relied largely on official development assistance and domestic public funding to address socio - economic challenges, many of which have few market - based solutions. we all know that these traditional funding flows have been on the decline over the last decade ; and | 0.5 |
derived more than half of their overall income from activities outside iceland and the biggest bank derived about two thirds of its income from operations outside iceland. they are therefore much less sensitive to cyclical developments in iceland than before, or in any one country for that matter. the risks are much better spread than before. central bank of iceland : monetary bulletin 2008 / 1. in their expansion, the banks exploited the particularly favourable opportunities offered in the global financial markets in the form of abundant liquidity at historically very low prices. thus, they relied on capital markets funding for their operations, raising the share of borrowed funds on the liability side of the balance sheet. the rapid expansion of the banks did not go unnoticed. it drew the attention of many observers at the end of 2005 and the early part of 2006, resulting in considerable headwind for the banks in that period. questions were raised about their business model, their reliance on wholesale funding in international markets and low level of deposits, lack of transparency and cross ownership among other things. the banks responded effectively to the criticism levelled at them. they increased transparency, reduced cross ownership, and placed emphasis on raising the share of deposit on their funding side. they also significantly strengthened their capital base and last but not least greatly improved their liquidity position. as a result they were much better prepared for the sudden change in global financial conditions after the middle of last year. most importantly, they had a strong liquidity cushion. the icelandic banks have been the focus of considerable international attention in recent months. questions have been raised about their viability and those have been reflected in their extraordinarily high cds spreads since late last year. these spreads began to rise following the turnaround in the international markets and they had a tendency to rise more on the icelandic banks than on other banks with every event or news that prompted a general rise in risk aversion and in cds spreads. the spreads peaked around the end of march and have come down quite considerably this month. the cds market is an opaque and unregulated one but, nevertheless, cds spreads are a reference for the terms that would be available to the banks if they were to go to the market. in our view, the cds levels on the icelandic banks have been out of proportion to their underlying financial strength, their credit rating and spreads on comparable banks in other countries. it also seems that the cds market is thin, turnover in cds transactions on icelandic banks appears to be limited. one reason behind relatively high cds | ranee jayamaha : governance, risk management and compliance keynote address by dr ranee jayamaha, deputy governor of the central bank of sri lanka, at the seminar on β governance, risk management and compliance and the roadmap for financial services industry β, colombo, 7 february 2008. * * * the chairman and the organizing committee ; i would like to begin by expressing my gratitude for being given the opportunity to address a gathering that includes impressive groups of representatives from the financial services industry, risk management professionals, regulators and businesses. as you are aware, the year 2008 has started off with the continuation of some of the challenges that resulted in significant disturbances in world financial markets : the impact of the sub prime market turmoil which originated in the us is still spreading across europe and other financial markets ; the northern rock crisis in the u. k. has raised serious regulatory issues ; and the large frauds in global banks have highlighted the repercussions of the lack of internal controls and accountability in financial institutions. as in the past, many of these have been due to lapses in governance and risk management practices. although sri lanka β s financial markets have been insulated from these disturbances, they underscore the need for good corporate governance, better risk management and compliance in our financial industry. it is also important for us to learn from the bitter lessons experienced by others as our financial services industry too is tempted to provide low quality credit, which has been the root cause of the subprime issue. the topic therefore is very relevant and it is time to generate a wider discussion on governance, risk management and compliance β in short β grc, which are considered to be the three key pillars or imperatives of financial management. 1. what is grc? 1. 1 by itself, grc is not new or unknown. grc has always been of fundamental concern to businesses, the financial service industry and to regulators and supervisors. all stakeholders realize that there are enormous benefits of observing grc and that such benefits would outweigh the cost of putting in place processes, procedures and controls that enable effective implementation of grc. 1. 2 governance is all about self - discipline. it is the process by which the board of directors sets the objectives for an organization and oversees progress towards achieving those objectives. put it simply, it is the set of procedures and processes that keeps the organization alive and allows it to operate as a β going concern β. the higher the sophistication of | 0 |
alternatively, results could be published individually or in ranges, such as grouping banks into solvency categories that could be compared with bottom - up, bankby - bank results. there is also a range of model - based results that could be produced and published. a simple exercise would be the equivalent of the bottom - up view using a static balance sheet assumption. at the other end of the spectrum, more comprehensive exercises could inform macroprudential analysis and incorporate amplification effects caused by interbank contagion or feedback loops between the real economy and the financial sector. macroprudential stress testing this leads me to the second point i would like to emphasise today, the advantages of taking a macroprudential perspective with stress testing. the exercises coordinated by the eba, using the constrained bottom - up approach, are microprudential in nature. they aim to assess individual banks β resilience to adverse financial and economic circumstances. they inform and help determine bank - specific capital requirements, in particular the components of pillar 2 capital. but it is also possible to carry out a macroprudential exercise that instead focuses on the 2 / 4 bis central bankers'speeches system - wide impact of adverse shocks on the banking sector as a whole. macroprudential stress testing is characterised by a number of key elements. first, it applies a top - down perspective to model the impact of a stress scenario on banks and the wider economy. a top - down approach helps ensure that all banks in the system are treated impartially and consistently. this approach is necessary in macroprudential stress tests to be able to model the aggregate implications of banks β dynamic responses to stress. second, macroprudential stress tests operate under the assumption of dynamic balance sheets. this enables the model to account for any amplification effects that banks β reactions to the initial shock may entail at the aggregate level. as an example, we estimate that the responses of banks to the adverse scenario in the 2018 stress test would exacerbate the fall in gdp by a further 1. 6 % beyond the initial shock. that deeper economic contraction would itself further deplete banks β capital, something that would not be picked up under the static assumptions of the microprudential exercise. 5 third, macroprudential stress testing typically aims to capture a comprehensive view of systemic risks affecting the banking sector and beyond. just as microprudential stress tests can help banks improve their internal risk | . schuler and t. a. peltonen ( 2015 ), β characterising the financial cycle : a multivariate and time - varying approach β, ecb working paper series no. 1846. bis central bankers β speeches directly considered by central banks with a dual mandate, like the u. s. fed. it is considered indirectly by central banks with a hierarchical mandate, like the one of the ecb. more generally, though, no central bank has objectives explicitly referred to asset prices in its mandate. there are different reasons why monetary policy cannot, and should not, be used to deal with financial instability in asset markets. one relates to the fact that the monetary policy objective may require an expansionary stance when asset markets would require restrictive measures, reflecting different positions in the business and financial cycle. 3 a second argument questions whether monetary policy, through its main policy instrument β the short term interest rates β can effectively target asset market prices. 4 finally, monetary policy affects all sectors simultaneously and is therefore a too blunt or even an ineffective tool to cope with specific imbalances in the financial sector. all these reasons imply that monetary policy needs to be complemented by an additional policy, with a differentiated set of instruments, in order to ensure financial stability. this is the remit of macroprudential policy. indeed, after the crisis, there has been a trend to attribute an explicit goal of financial stability to central banks. in order to fulfil this objective, central banks have to be entrusted with a new set of granular tools of a macroprudential nature that can be applied to the financial system as a whole. macroprudential policy has two main objectives : enhancing the resilience of financial institutions and the whole financial system and, second, smoothening the financial cycle as captured by the fluctuations in credit, leverage and asset prices which may else lead to boom - bust episodes. the instruments available for macroprudential policy include most of the micro - supervision instruments related to capital and liquidity requirements when applied to counter systemic risks related. but they extend also to other categories, like limits to loanto - value ratios in housing credit, counter - cyclical capital buffers, global leverage ratios, or haircuts and margin requirements in securities β transactions or clearing activities. macroprudential policy is essential in any economy to complement monetary policy as the business and financial cycles are not synchronised. this is all the more important in a monetary | 0.5 |
could ultimately unbalance the world financial system. the recent experience in asia underscores the importance of financially sound domestic banking and other associated financial institutions. while the current turmoil has significant interaction with the international financial system, the recent crises would arguably have been better contained if long - maturity property loans had not accentuated the usual mismatch between maturities of assets and liabilities of domestic financial systems that were far from robust to begin with. our unlamented savings and loan crises come to mind. these are trying days for economic policymakers in asia. they must fend off domestic pressures that seek disengagement from the world trading and financial system. the authorities in these countries are working hard, in some cases with substantial assistance from the imf, the world bank, and the asian development bank, to stabilize their financial systems and economies. the financial disturbances that have afflicted a number of currencies in asia do not at this point, as i indicated earlier, threaten prosperity in this country, but we need to work closely with their leaders and the international financial community to assure that their situations stabilize. it is in the interest of the united states and other nations around the world to encourage appropriate policy adjustments, and where required, provide temporary financial assistance. | benoit cΕure : β towards retail payments 2. 0 : the new security challenges β opening remarks by mr benoit cΕure, member of the executive board of the european central bank, at the joint european central bank / bank of france conference β towards retail payments 2. 0 : the new security challenges β, paris, 22 october 2014. * * * ladies and gentlemen, dear conference participants, first of all, i would like to apologise for not being with you today in paris. you all know the common fraud security check based on the fact that one person cannot be in two places at the same time. unfortunately, i am no exception to this rule and so cannot be with you in person today, but i am pleased to be able to use this video message to share some of my thoughts on innovative payment methods and the challenges that they pose for central banks. to begin with, i would like to recap some of the history of secure pay and why it was created. back in 2011, the standardisation of sepa credit transfers and direct debits was well afoot, and cards had been migrated to the emv standard. however, we soon realised that the implementation of secure online payment methods was too slow, despite the fact that technical solutions were widely available. at the same time, we saw that internet fraud was increasing. the situation was particularly bad when it came to cards. our latest ecb card fraud report shows that 60 % of fraud involves so - called β card - notpresent β payments, mostly in the form of internet payments. moreover, we observed that market pressure tends to make people take a race - to - thebottom approach to security. payment service providers fear that their competitors will use less secure but more convenient and cheaper solutions, thereby compromising too much on payment security. with respect to fraud, i believe that this is only the tip of the iceberg. in order to safeguard their reputation, many market players may have a tendency to understate major attacks or a high incidence of fraud to which they may have been exposed. moreover, we have come to realise that self - regulation has not been very successful in improving internet payment security. we have to remember that it also took a very long to make point - of - sale payments secure. for a central bank, whose task it is to promote the safety and efficiency of payment systems, this was quite a worrying trend. and we were not the only ones to be concerned | 0 |
. the delors report of 1989 already highlighted that in a single market for financial services within a monetary union, a single monetary policy could make a positive contribution to financial market integration. 2 i consider the banking union to be an important and necessary extension of monetary union. it closes a vulnerable gap in the single currency by harmonising rules for the supervision and resolution of credit institutions at the european level and establishing european supervisory authorities. this is important, regardless of whether you wish to continue monetary union in the spirit of a β maastricht 2. 0 β with decentralised responsibility for fiscal policy or to develop it into a fiscal union with mutualisation of liability and control. in the eurosystem, the ecb provides banks with liquidity in its capacity as lender of last resort. supervision organised purely along national lines is no longer fitting with the times. liquidity assistance from national central banks can have an impact on the single monetary policy. the restructuring or resolution of financial institutions can overstretch the individual member states β financial means. the banking union does not mean an extension of joint fiscal liability, however β its aim is anything but that. rather, the banking union can play a role in establishing the liability principle at the european level in a better way than before. in future, private investors will have to shoulder losses. by contrast, public funding mechanisms may only be used in very tightly restricted exceptional cases, for example if the stability of the entire financial system is at risk. and if public funds have to be used, these should be national funds in the first instance. in this sense, the comprehensive assessment serves to ensure that apparent legacy risks do not fall within the scope of the new supervision and resolution regime. they should instead remain where they arose β at the national level and under national control. so is the banking union the solution to our problems? it could be an important part of the solution. but further steps are needed to make it a success. first, we must β as previously addressed β ensure that private investors are adequately liable for losses incurred. second, the banking union on its own is not the key to better separating the risks of banks and governments. we must also make further progress in regulation and put an end to the preferential treatment afforded to government debt instruments. third, earlier reforms of the financial markets in europe have focused on the banks. it should not be overlooked here that the integration of the markets for capital can make an important contribution to sharing opportunities and risks in | are able to exit the market? see s agarwal, d lucca, a seru and f trebbi ( 2012 ), inconsistent regulators : evidence from banking, nber working paper no 17736, cambridge. bis central bankers β speeches the second pillar of the banking union, the single resolution mechanism, was designed to provide the answer to these questions. national solutions can normally be found for smaller ailing banks. in germany, for example, there were a good 4, 700 banks in the market at the start of the 1990s β today there are around 1, 800. the bulk of these changes came about through mergers of smaller institutions with economically stronger ones. there are hardly any tried and tested mechanisms for restructuring and resolving major banks, however. risks to financial stability can be posed if key business areas fail. furthermore, coordination across national borders is required. these problems are not easy to resolve. all too often, stressed banks were given too much time to resolve the economic problems they faced. in earlier crises, finance ministers and supervisors often acted too late and too indecisively. some shied away from the consequences of banking crises for government budgets, others from the loss of reputation for supervisors. empirical studies indicate that banking crises come at a high real economic and fiscal cost. 7 a wait - and - see strategy is the most expensive approach of all, however. that β s why the bank recovery and resolution directive ( brrd ) is an important step towards better handling troubled banks. it harmonises the legal framework for bank resolutions in europe. the brrd defines the liability cascade : shareholders are liable first, followed by the creditors of subordinated and unsecured bonds. depositors are protected up to euro100, 000 by the statutory deposit guarantee scheme. if the capital freed up in this way is insufficient, funds from the single european resolution fund can be used, under certain conditions. this fund is intended to hold euro55 billion. it is to be built up over time and funded by bank levies. the exact structure of this bank levy is currently being negotiated. regardless of the details, it is particularly important in my view that the bank levy is as clear and simple to calculate as possible and does not allow for any exceptions. to ensure that liability and control are kept in balance, banks that are subject to european supervision also need to be resolved at the european level. but this also means that losses originating from the time before the launch of the banking union need to | 1 |
iii is fully implemented in 2019, regulatory capital requirements will be significantly higher and tougher than under basel ii, and i am sure that the financial system will be more stable than before. but are higher capital and liquidity requirements enough? 2. 1 some missions almost accomplished β¦ certainly not. and therefore, besides the basel iii regime, many other regulatory projects have been tackled in response to the financial crisis. let me mention three of the most bis central bankers β speeches current ones : regulation to solve the β too - big - to - fail β problem, regulation of sovereign exposures and efforts in regulating the shadow banking system. we all know that one problem of the crisis was that banks were perceived as being β too - bigto - fail β. the consequence was the perception that whenever a β too - big - to - fail β bank runs into trouble, the government might be compelled to bail it out in order to prevent a financial crisis. this means that these banks were implicitly insured β contrary to all market - based economic principles. so, the decisive point is that banks must be able to fail without dragging the entire financial system down with them. what we need, therefore, are effective resolution mechanisms for banks. and the regulators are working on that problem. at the global level, the g20 have just agreed to a proposal that global systemically important banks will have to fulfil in future regarding their capital structure. in particular, these banks will need to ensure a minimum amount of total loss - absorbing capacity, tlac for short, which may be as high as 20 % including the minimum capital requirements and the g - sib buffer. this will make global banks more resilient, and it will allow for their orderly resolution. work on tlac is making good progress. last november, the fsb published a consultative document on tlac. at the moment, impact assessment studies are being conducted in order to gauge the effect of tlac on global systemically important banks. i am quite optimistic that we can finalise the requirements by the end of 2015. it goes without saying that the final rule must not be less stringent than what the g20 leaders agreed upon in brisbane. we need a binding international minimum standard of at least 16 β 20 % of risk - weighted assets. at the same time, the financial stability board ( fsb ) is working on requirements for crossborder resolution. when this framework, consisting of tlac and cross | ##g β s real estate management and decisions relating to large real estate investments. the gpfg is a long - term and responsible owner. our work on responsible investment is an integral part of the investment process. as of this year, the council on ethics issues recommendations on company exclusion directly to norges bank. norges bank β s executive board will on the basis of these recommendations assess exclusion against other tools in the exercise of ownership. the aim is to establish a unified chain of tools. climate change has been among the focus areas of management since 2006. our work on financial risk as a result of climate change is incorporated in the investment strategy and the financial objectives of the gpfg. the ministry of finance is now working to introduce a new behavioural criterion for companies β climate emissions in the guidelines for observation and exclusion. such a criterion must then be managed in line with the highest defined threshold for exclusion. bis central bankers β speeches it is important that the overriding principle for norges bank β s investment management continues to be that the gpfg is a responsible investor with a financial objective. if the gpfg is increasingly used as an instrument for pursuing objectives other than financial ones, it may reduce the clarity of the gpfg β s role as a financial investor. if the gpfg investment scope is subject to considerable restrictions, it may entail increased risk or lower returns. the management of the gpfg has been successful to date. the total return since the establishment of the gpfg amounts to more than nok 2 500 billion, or about 40 percent of gpfg capital. through its management, norges bank will continue to promote its overriding objective : to safeguard the fund β s assets over time. thank you for your attention. bis central bankers β speeches | 0 |
although examiners have long considered institutions β mortgage pricing as part of the fair lending review process, public disclosure of this pricing data appears to have given additional impetus to institutions β compliance efforts. many institutions have reexamined their pricing policies and procedures to ensure that they do not permit, even inadvertently, pricing differences that violate the fair lending laws. many institutions have also reevaluated their controls to ensure that proper policies are followed. this increased attention by institutions to their own fair lending compliance is one of the principal benefits of hmda. research by federal reserve staff and others supervision for fair lending compliance deals with lending patterns at the institution level. but the hmda data also reveal lending patterns at aggregate levels, across institutions. disclosure of aggregate patterns can raise and focus attention on important policy questions concerning access to credit. to that end, researchers at the federal reserve have published numerous papers and articles. most recently, staff published an article about patterns in the new loan - pricing data. 1 i will review a few of their findings. first, most home lenders make few, if any, higher - priced loans. in 2004, only about 500 out of the 8, 850 reporting institutions made 100 or more higher - priced loans ; the ten lenders with the largest volume of higher - priced loans accounted for about 40 percent of all such loans. ( the ffiec has not finished reviewing, processing, and editing the 2005 data, which were submitted in march of this year. ) the 2004 data also show that 16 percent of borrowers took out higher - priced loans that year in the nation as a whole. this proportion may have increased from 2004 to 2005. for most loans, the board β s regulation uses long - term interest rates to set the thresholds for reporting loan - price data, but mortgage loan rates more closely track short - term rates. thus, a narrowing of the difference between short - term and long - term rates, such as occurred from 2004 to 2005, may increase the proportion of loans reported as higher - priced loans. the proportion of borrowers obtaining higher - priced loans is not geographically uniform but varies widely by region and by city. for example, in many of the metropolitan areas of the south and the southwest, 30 percent to 40 percent of homebuyers taking out conventional loans in 2004 took out higher - priced loans. in other areas of the country, the proportion was much smaller. these differences may not be that surprising - other data show that credit scores tend to | to gather information about, among other things, how consumers select their lenders and loans. the board β s 2007 biennial community development research conference will also provide a forum for research that may help explain differences in the incidence of higher - priced lending. robert b. avery, glenn b. canner, and robert e. cook ( 2005 ), " new information reported under hmda and its application in fair lending enforcement, " federal reserve bulletin, vol. 91 ( summer 2005 ), pp. 344 - 394. the federal reserve β s promotion of community development and financial literacy i have discussed the federal reserve β s roles in regulation, supervision, and research. now i will turn to its role in promoting community development and financial literacy. the federal reserve system uses hmda data to help banks, community organizations, and other interested groups identify community development needs and opportunities. for example, the federal reserve bank of boston tabulates hmda data for the new england region to help regional financial institutions, community organizations, and state and local governments access and use information about their area β s regional lending patterns. in addition, the community affairs offices of the federal reserve system encourage and facilitate collaboration among financial institutions, governments, and community organizations to improve access to mortgage credit in traditionally underserved communities. the federal reserve also promotes financial literacy. board staff provide strategic advice on developing financial literacy policies, programs, partnerships, and marketing to national initiatives, such as the jump $ tart coalition, operation hope, and the dollarwi $ e campaign of the conference of mayors. in a parallel effort, the federal reserve banks support similar regional initiatives. the federal reserve also collaborates with other groups on research to develop successful financial education programs and identify the most effective way to deliver these programs to intended audiences. by these and other means, the federal reserve seeks to address gaps in consumers β understanding of not only home loan transactions but also financial management more broadly. these gaps in consumer understanding may be contributing to disparities in the availability and price of home loans. in closing, i appreciate this opportunity to discuss the federal reserve β s regulation requiring lenders to disclose price and other data on home loans ; how the federal reserve uses the data to improve fair lending supervision ; and the federal reserve β s promotion of research, community development, and financial literacy. | 1 |
yannis stournaras : 2023 - a year of continued uncertainty in the global economy, but also of hope speech by mr yannis stournaras, governor of the bank of greece, to the staff of the bank of greece at the new year ceremony, athens, 12 january 2023. * * * dear colleagues, i am delighted that we are all here today to welcome the new year. the past year was marked by russia's savage invasion of ukraine, which revived the nightmare of a great war in europe. for the global economy, it was a period of great challenges, during which the focus of global attention was on central banks'key mandate : the maintenance of price stability. after remaining very low for a long period, inflation picked up suddenly and escalated sharply, mainly as a result of two unpredictable supply - side shocks that hit the economy in successive waves : the pandemic and the war in ukraine, leading to rising fuel and other commodity prices. these two shocks are what we call " unknown unknowns ", i. e. they cannot be modelled with probability distributions and thus could not have been predicted by central banks, economic and financial organisations, academics or governments. as long as the war in ukraine continues and keeps shaking the world, along with other geopolitical tensions, uncertainty about economic developments remains heightened. high inflation affects all citizens, but especially the most vulnerable, and can trigger a vicious circle of price increases. as a result, consumption and investment planning becomes difficult for households and businesses alike. also, trust in the currency weakens, as money gradually loses its value. in such circumstances, as has happened in the past, citizens turn their eyes to central banks, from which they expect effective action to restore the stability of the purchasing value of the currency. in the euro area, businesses, investors, workers and consumers should feel confident that, we, not only at the governing council of the ecb but also everyone working in the eurosystem, will do whatever it takes, within our mandate, to ensure a timely return of inflation to the 2 % target in the medium term. our primary monetary policy instruments remain the policy rates of the european central bank, which are expected to rise further until the recent tentative signs of an abatement of inflationary pressures turn into certainty that inflation will fall back to the 2 % target over the medium term. it is important, however, to know that a central bank cannot control several factors that drive inflation, | economic destiny β 5. now, austria has not become a bigger country than it was in those unhappy days, but something else has changed in our favor since then : we are now members of the european union and part of the euro area. in contrast to previous crises, this time our efforts to fight the recession are part of a coordinated european macroeconomic recovery plan upon which the european commission and the eu member states already agreed in november 2008. if we compare the situation with our last recession before entering the eu, which took place in the early 1990s, monetary union with our key trading partners is very helpful as it prevents competitive devaluations by some neighboring countries that harmed our economy back then. in that sense, the euro has worked as a shield for small open economies all over europe. what needs to be done now? policy makers are confronted with two main tasks at the moment. on the one hand they must restore stability in financial markets by bringing back liquidity, recapitalizing banks and getting toxic assets off banks β balance sheets. in europe, we have some examples that can serve as guidance for how to deal with a banking crisis, for instance the swedish and the finnish experience of the early 1990s. ( if anything, our own austrian experience from the 1930s would rather qualify as an example of how not to save banks. ) in austria we have already taken measures to establish confidence among savers, and our government has also presented a stabilization package for banks, to which it has allotted 100 billion euro, which is roughly 1 / 3 of the austrian gdp ; 15 billion euro are reserved for recapitalizing banks, 75 billion for bank guarantees and an additional 10 billion for insuring the domestic deposit protection. in terms of gdp, the austrian banks β stabilization package is among the biggest in the eu. paul krugman ( 2009 ) β the return of depression economics and the crisis of 2008 β, norton, page 4. the second task we now face is to fight the global recession and prevent it from turning into a lasting depression. this is a challenge for both monetary and fiscal policy. the main objective of monetary policy in the euro area has always been to preserve price stability, in the current state of affairs means to prevent deflation. i can assure you that, at the governing council of the ecb we will take all available measures to stabilize the inflationary expectations in the euro area and keep them anchored in positive terrain. we will keep the interest rate very low for as long | 0 |
end of the 1980s, more than 200 banks were failing annually, and there were more than 1, 000 other problem banks. this experience provided important lessons and forced supervisors and bankers, alike, to reconsider the way they approached their jobs. for their part, bankers recognized the need to build their capital and reserves, strengthen their internal controls, and improve practices for identifying, underwriting and managing risk. supervisors were also reminded of the need to remain vigilant and of the high costs that bank failures can bring, not only to the insurance fund but to local communities as well. the fdic improvement act of 1991 emphasized that point, requiring frequent examinations and prompt regulatory actions when serious problems emerge. beyond these largely domestic, institutional events, banks and businesses throughout the world were dealing in the 1980s and 1990s with new technologies that were leading to a multitude of new and increasingly complex financial products that changed the nature of banking and financial markets. these technologies have brought many benefits that facilitate more efficient markets and, in turn, greater international trade and economic growth. they may also, however, have raised macro - stability concerns by concentrating the growing volume and complexity of certain activities within a small number of truly global institutions. it is essential that these largest firms adequately manage the related risks of these activities and that they remain adequately supervised. for it is these institutions that have the potential to disrupt worldwide payment systems and contribute most to systemic risk. in addition to the formal supervisory oversight exerted by regulators, concerns may be eased somewhat by the strong counterparty discipline being brought to bear world wide on banks and other financial institutions dealing in these new products. the scrutiny among counterparties in the global market place has contributed to improvements in capital positions and in overall risk management practices. in many ways, u. s. banks have been in the vanguard in applying technological advances to their products, distribution systems, and management processes, with such applications and innovations as atms, home banking, securitizations and credit derivatives. such efforts, combined with greater attention to pricing their services and measuring their risks, have had material effects on the increased strength and profitability that our banks have seen. within the united states, our banking system has also experienced a dramatic consolidation in the number of banking institutions, with the number of independent commercial banking organizations declining from 12, 400 in 1980 to 7, 400 in june of this year. 1 that structural change has also contributed to industry earnings by providing banks with greater opportunities to reduce costs. the challenge | an economic advisor to the government puts the bank in a constantly contentious position vis a vis the government and may undermine the banks β independence in its core responsibility. i was the director of the research department at that time, and argued in favor of maintaining the role of economic advisor in the law, which was eventually what was decided. several years later, when i became governor, i met stan ( in basel, at a bis meeting ) following one of the heated debates i had with the government, and told him that now i understand and sympathize with his initial view against having the role of the economic advisor. stan surprised me when he said that looking from the outside, he is even more convinced of the importance of this role of the bank of israel. this question was also posed to an independent evaluation committee which was invited to evaluate the boi β s research department back in 2012. in their report, they said, and i quote : β we came to the bank very skeptical of any central bank having the responsibility of being an advisor, much less the advisor, to the government on economic policy ". following a thorough discussion 1 / 3 bis central bankers'speeches with many relevant stakeholders within and outside the bank, they concluded : β absent fundamental changes in other israeli institutions, we agree that the bank must continue to play the critical role of advisor to the government policy " indeed, the argument against the cb β s role in economic policy advice because it enhances the friction between the bank and the government and thus may undermine the bank β s independence in its core responsibilities is not unique to the role of economic advisor. in fact, this debate resembles the discussion regarding the question that is debated extensively among central bankers as to how wide should our responsibilities and mandates be defined. i have heard the argument that in some issues the decisions reflect political priorities as opposed to pure economic welfare maximization decisions, and therefore should be left to the politicians, or that they may undermine the central banks β credibility or independence. these are valid arguments, and certainly, my tenure as governor has demonstrated that providing a wellgrounded position on some sensitive or publically debated policy issues does raise the level of friction with the government. however, when we think about designing institutions, we should not think in the abstract, and we never start from scratch. we should take the starting point into account, and asses what is the likelihood that a change will get us closer to some β ideal institutional design β ( if such exists ). | 0 |
run in terms of real growth or employment by accepting higher inflation rates. the opposite is more likely to be true. higher inflation will in the long run militate against growth and job creation. the objectives of external balance, growth and employment will over time be served best by creating and maintaining a climate of reasonable domestic price stability β. ( par 47 ) 2. the changing financial environment the deliberations of the de kock commission took place in an overall sociopolitical and economic environment that was completely different from what we have to contend with in south africa today. with his wisdom and his foresight, gerhard de kock may have envisaged, and surely wished for, an environment in which monetary policy could be applied without the shackles of sanctions, boycotts, exchange controls, high inflation, social unrest and political distortions that characterised the period of his domain. over the past decade, the situation has changed dramatically. the major socio - political reforms of the early 1990 β s opened up the way for a normalisation of south africa β s position in the world environment. also in the field of economic and financial relations, south africa has been reintegrated in the international community from which it was excluded over the preceding two decades. the international economic punitive actions against south africa were repealed in great haste after the government of national unity took power in april 1994, and south africa took its rightful place again in international forums such as the united nations, the bretton woods institutions ( imf and world bank ), the organisation of african unity, and the british commonwealth of nations. south africa became reintegrated into a world financial system that was vastly different from the one it had left in the late 1970 β s and early 1980 β s. the explosive developments during its absence in electronics and in communications, and the revolutionary trans - formation from mainly manufacturing / trading economies to a new service / information based culture, led to a strong movement of globalisation in financial market activity. this process forced the liberalisation of domestic and international financial markets in many countries, led to the abolition of exchange controls and exposed countries more directly to the disciplines of international markets. today in south africa, there are more than 60 foreign banks that compete through representative offices, branches and subsidiaries with the domestic banks to provide financial services to the south african community. we are in the process of gradually removing our exchange controls to join the other approximately 60 ( out of 185 ) countries of the world, that have already succeeded | mr. stals looks at the effects of the changing financial environment on monetary policy in south africa address by the governor of the south african reserve bank, dr. c. stals, at the annual dinner of the pretoria branch of the economic society of south africa held in pretoria on 15 / 5 / 97. 1. the objectives of monetary policy the gerhard de kock commission of inquiry into the monetary system and monetary policy in south africa laid the foundation for the monetary policy model applied in south africa over the past decade. although the de kock commission β s final report on monetary policy was submitted in may 1985, it was only since 1986, when money supply targets were first introduced, that the implementation of the model took its course. indeed, full implementation only came about after the untimely death of gerhard de kock in august 1989. in line with monetary policies applied in most developed economies, the south african monetary policy model is firmly directed towards the overall objective of creating and maintaining a stable financial environment. for central bankers, the ultimate price of a stable financial environment is a low rate of inflation - - a rate that, in the words of alan greenspan, will have no material effects on the macroeconomic decisions of consumers, investors, traders, producers and all other participants in total economic activity. this monetarist approach to monetary policy does not imply that central bankers have no interest in or sympathy for the national objectives of economic growth, job creation and the improvement of the living conditions of the people. on the contrary, central bankers believe that maximum economic development can only be achieved and sustained in an environment of stable financial conditions. the efforts of monetary policy must therefore be directed towards what central bankers can do best in support of the national objectives, and that is to manage the money system of the country in the interest of overall economic development. a stable financial environment is a precondition for sustainable economic development, but provides no guarantee that the real economy will indeed perform at maximum capacity. there are too many other macroeconomic ( and non - economic ) factors that will in the end determine the actual economic growth performance. there is, however, convincing theoretical logic and much empirical evidence to confirm that persistent unstable financial conditions are detrimental for growth, particularly in a country with an economy based on the principles of the market mechanism. the de kock commission therefore in 1985 summarised its findings as follows : β ( the commission ) does not believe, for example, that anything can be gained in the long | 1 |
, science and literature, and inspired magnificent progress in all these areas. it was a way of thinking that emanated from a renewed interest in the art and values of classical antiquity, as well as from a drive to understand the world and change it. it was in such a context that there emerged the scientific revolution, and the works of francis bacon and john locke, among others. the renaissance also sowed the seeds for the upcoming movements of neoclassicism and, of course, the enlightenment. neoclassicism was born in rome in the 18th century, after the discovery of pompeii and herculaneum, but its popularity spread all over europe, as a generation of europeans, who visited italy as part of their grand tour, returned home with newly refound greco - roman ideals. the primary neoclassical belief was that art should express the ideal virtues in life, which were aligned with ancient greek ideas, such as purity and simplicity of form, decorum, verisimilitude or realism, and should serve a purpose. art was also seen as 2 / 4 bis - central bankers'speeches capable of improving the viewer by imparting a moralising message that resonated with these ancient ideas. neoclassicism in its most part coincided with the enlightenment, which centred around ideas such as the value of human happiness, the pursuit of knowledge obtained by means of reason and the evidence of the senses, and also ideals such as natural law, liberty, progress, tolerance, fraternity, constitutional government, etc. of course, our world today is very different from that of the golden age of athenian democracy. however, important dimensions of the bond that unites us, as europeans, harken back to ideas and developments which first emerged, albeit in fledgling form, in the streets, groves and civic meeting places surrounding the acropolis of athens. so, as europeans today, we believe in democracy, we strive for science and knowledge, we have faith in human accomplishment, we admire beauty, we go after excellence. certainly, our contemporary european values have also been enriched with fresh ideas, new trends and norms. the contemporary world has been shaped by multiple revolutions and long processes of evolution, producing often disruptive, but mostly positive, change which could not have been imaginable in 5th - century athens. this is not to say that there aren't other aspects, emerging from ancient greece, that could serve as points of inspiration today. the victory after the naval | all, if it becomes revealed to the market that a financial institution is to be treated as a sifi, this could in fact induce moral hazard. in addition, looking back at the experience of japan β s financial crisis, whether an institution is systemically important or not depends on the condition of the financial system, and also on the effectiveness of the existing resolution regime. furthermore, considering the essence of the moral hazard problem, the question of how to deal with sifis needs to be contemplated from various perspectives. for example, we need to take into account perspectives on containing the crisis as well as preventing it, and the balance between regulation and supervision. to be specific, capital surcharges should not be the only measure for dealing with sifis. there are many, not mutually exclusive, alternatives to capital surcharges, such as liquidity surcharges, strengthened supervision, and improvements in resolvability. i believe it would be appropriate for each country to choose the best practice from such measures or their combinations, depending on the environment surrounding its own financial system. balance in the size of financial safety nets among jurisdictions ; need for global coordination thirdly, balance in the size of financial safety nets is needed among jurisdictions. with the globalization of financial institutions β operations, they have become more interconnected. likewise, households now have more foreign assets such as foreign currency deposits and foreign bonds. these circumstances indicate the increasing importance of having a crossborder perspective when developing financial safety nets. for example, regarding deposit insurance, a large - scale deposit shift between countries in europe was observed in the fall of 2008 due to gaps in deposit insurance coverage. some asian countries raised their coverage limits in order to maintain the competitiveness of their banks. these examples demonstrate the importance of global coordination in the designing of deposit insurance. another issue revealed in the aftermath of the failure of lehman brothers is the need for a resolution regime that facilitates the orderly wind - down of failing financial institutions in a cross - border context. obviously, each country β s legal system depends substantially on its particular social framework, and convergence of resolution regimes is not easy. it is also not necessarily appropriate. however, it is becoming more important for authorities to have a good understanding of their respective resolution regimes and to communicate closely in the actual resolution process. in the aftermath of the recent crisis, the establishment of crisis management groups among supervisory authorities and central banks for internationally active financial institutions has been an important step forward in this regard | 0 |
) ; effective collaboration that breaks away from working in silos ; and an appropriate level of risk - taking that is compatible with a more agile and responsive organisation. and so we have taken pains to be specific and deliberate in our approach to building a digital culture within the bank. this starts with being clear across the organisation on our tolerance for higher risks associated with disruptive innovations β through the development and communication of our digital risk appetite. we are shifting conversations on new digital initiatives away from the technical solutions themselves, to a greater focus on the business process transformations that they are intended to serve, and that is what we measure and track. we are also investing heavily in equipping our people with the knowledge, skills and confidence to make sound judgment calls in an environment where the pace of change is occurring at a dizzying speed, and our ability to anticipate risks is likely to be more constrained. at a practical level, this means being more precise about escalation, decision and communication protocols, while allowing more flexibility in internal policies to allow business lines to respond swiftly to emerging situations. it also means allowing more dynamic structures to evolve within the organisation to support specific strategic business use cases, such as our cloud centre of excellence. in an era of disruption, efforts to reduce the complexity of financial products and services to the average person could become more challenging. a key reason for this is the dramatically increased access to financial solutions for people from every walk of life, whether they are suited for them or not. to reap the promise that such access brings of opportunities to reduce inequality and improve standards of living, it is imperative that individuals are sufficiently confident and capable of making wise financial decisions. this brings me to the fourth strategic priority of the bank β which is building financial capability among the malaysian public to navigate opportunities and risks in the changing financial landscape. it has long been our conviction that encouraging a population that is both financially and digitally literate is a necessary and vital condition to harness the full potential of fintech and contain its risks. to that end, the government recently launched malaysia β s national strategy for financial literacy which includes a specific focus on helping consumers protect themselves against fraud and exploitation, and embrace innovation more confidently in the digital era. in the area of remittances, our work to improve conditions for the use of formal remittance channels by leveraging on technology, particularly by workers and small businesses across the country, has led to substantial reductions in the cost of remittances. | tripled from 2002 to 2004, but they actually fell a bit last year as production disruptions in a number of countries limited supply and as consumers in other countries competed for available cargoes. thus, natural gas prices are likely to remain elevated for at least the coming few years. it is possible, however, that within a decade new supplies from previously untapped areas of north america could boost available output here, while imports of lng will increase to more substantial levels as countries seek to bring their isolated natural gas reserves to market. given time, these developments could serve to lower natural gas prices in the united states significantly. nonetheless, because of the higher costs of producing these supplies relative to the traditional sources of natural gas, as well as the elevated cost of other energy sources such as oil, natural gas prices seem unlikely to return to the level of the 1990s. thus, the supply - demand fundamentals seem consistent with the view now taken by market participants that the days of persistently cheap oil and natural gas are likely behind us. the good news is that, in the longer run, we have options. i have already noted the scope for improvements in energy efficiency and increased conservation. considerable potential exists as well for substituting other energy sources for oil and natural gas, including coal, nuclear energy, and renewable sources such as bio - fuels and wind power. given enough time, market mechanisms are likely to increase energy supplies, including alternative energy sources, while simultaneously encouraging conservation and substitution away from oil and natural gas to other types of energy. economic and policy implications of increased energy prices what are the economic implications of the higher energy prices that we are experiencing? in the long run, higher energy prices are likely to reduce somewhat the productive capacity of the u. s. economy. that outcome would occur, for example, if high energy costs make businesses less willing to invest in new capital or cause some existing capital to become economically obsolete. all else being equal, these effects tend to restrain the growth of labor productivity, which in turn implies that real wages and profits will be lower than they otherwise would have been. also, the higher cost of imported oil is likely to adversely affect our terms of trade ; that is, americans will have to sell more goods and services abroad to pay for a given quantity of oil and other imports. for the medium term at least, the higher bill for oil imports will increase the u. s. current account deficit, implying a greater need for foreign financing. under the assumption | 0 |
recently that β the euro is a done deal β. the euro area has in fact been a zone of stability in turbulent currency markets - and that performance puts in proper perspective earlier excited talk about spectators waiting to rip the euro apart. that never was in my view a serious issue, given the political commitment to the process - the economic issue has, as i say, been about the sort of regional tensions that might subsequently emerge. the big questions now - for all of us, not just for the euro countries - are, first, and most immediately whether we can avoid new financial shocks ; and, secondly, how we should manage the economic fall out from the financial shocks that have already occurred. developments since the imf / ibrd meetings in washington have in my view been quite encouraging. the japanese financial package is reassuring, and the strengthening of the yen has brought welcome relief to much of the rest of asia. united states congressional approval of the imf quota increase and of the new arrangements to borrow ( nab ) has paved the way to a vitally necessary increase in imf resources. brazil - which has been widely seen as the next potential emerging market domino - is clearly committed to taking strong corrective domestic policy action, which would command broad international support. and while there evidently has been a sharp contraction of wholesale market lending, within the financial sector in particular, in the united states, and suggestions there of a possible wider credit crunch, no new problems on anything like the scale of ltcm have in fact been uncovered. we are certainly not yet out of the wood, but the financial situation looks rather better than might have been expected two or three weeks ago. if we can avoid a new financial shock - and i am hopeful that we will - we still have to manage the global economic slowdown already underway. in that context there has been a good deal of talk about concerted interest rate cuts in europe and the united states to stimulate domestic demand and offset the effects of recession elsewhere. and it is true that those effects - both lower world commodity prices and falling external demand - do mean that interest rates in the industrial countries generally can be lower than they would otherwise be, which in turn will help to sustain global demand. but we do not all start from the same point. rates have in fact been cut in the united states and the united kingdom, where underlying domestic demand growth also shows signs of slowing. in continental europe, on the other hand, domestic demand growth has, as i say, | mr. sherwin reviews economic prospects and challenges for asia and the pacific region address by the deputy governor of the reserve bank of new zealand, mr. murray sherwin, to the new zealand institute of international affairs in wellington on 15 / 10 / 98. i was asked to discuss the economic prospects for asia and the pacific. i β m going to take a fairly liberal interpretation of the topic. you will not be surprised that my comments are framed within a high degree of uncertainty about the direction of the global economy. events of the past year or more have been dominated by a growing sense of contagion spreading from the initial thai problems, and now affecting most parts of the world. even over the last couple of months, we have seen russia and latin america faltering, and a substantial re - rating of corporate profit prospects in the usa and europe. as we look forward to 1999 and 2000, we can do no better than guess at when these downward influences will run their course, and when robust, sustainable, recovery will commence within the asian region. however, i will offer a few guesses on asia β s prospects. i will also offer some observations on the nature of the adjustments and transitions now being worked through in asia, especially within the financial sectors of the affected countries. the asian growth story the asian growth story, over three decades or more, has been extraordinary, with sustained annual expansions of the order of 7 to 10 percent. that is more than just a statistical nicety. not only has asian economic success supported growth in the rest of the world, it has been the driving force in the most profound process of poverty alleviation in human history. by world bank estimates, where 60 percent of east asians lived in absolute poverty ( i. e. less than us $ 1 per day ) in 1975, 20 percent were living in absolute poverty in 1995. the numbers living in poverty have declined, the severity of poverty has declined, life expectancy has climbed, infant mortality rates and literacy indicators have all improved in tandem with economic growth. growth created jobs for the poor, and provided opportunities to expand their productivity. the asian miracle was real and tangible. of course, paul krugman made himself famous, and unpopular in some parts, by arguing that while asia had generated extraordinary growth over an extended period, there was no magic formula that the rest of us could borrow in order to imitate that growth performance. to use krugman β s now - famous line | 0 |
a target to be met sometime in the future. and by then things will have improved, or so we assume in our planning. now the structural balance will be an annual target which can only be deviated from in exceptional circumstances or in the event of a severe economic downturn. will the new fiscal compact mitigate the debt crisis? first and foremost, the new fiscal compact is aimed at preventing a recurrence of the present situation in the euro area β with a debt crisis in several euro area member states that is threatening to spread. here it could be argued that serious observance of the existing rules combined with responsible macroeconomic and macroprudential policies could have provided the same result. the fiscal compact and other initiatives will ensure that deviations are to a larger extent exposed β and addressed. bis central bankers β speeches so agreement between the euro area member states and other member states on the fiscal compact may help to boost market confidence in europe in general. but the present debt crisis should primarily be addressed through direct measures in the member states in question and via the international assistance programmes already in place. so what are the advantages of the compact? the main advantages of aiming for and realising a structural balance are that growth in government debt over the business cycle is curbed and that each member state has fiscal scope to stimulate its economy in a recession. the foundations must be laid when the economy is not under pressure. the fiscal scope is greater if the structural balance is positive. but it is important to realise that aiming for sound public finances is not enough. wage and productivity developments and other structural factors impacting on competitiveness, the labour market and the balance of payments must also contribute to a sustainable development. this is also an element of fiscal policy. viewed in a broader perspective, the fiscal compact β together with the new six - pack, which focuses on issues such as member states β broad macroeconomic development and tightens the sanctions regime against euro area member states β is a prerequisite for preventing future debt crises that bring the coherence of the euro area into question. like other eu member states, denmark has benefitted hugely from the european project, including the single market and the euro. this project cannot be rolled back without substantial costs. so it is very much in denmark β s interest that the european project does not strand. are there no drawbacks or reservations in relation to the fiscal compact? in an ideal world, i believe that each member state should be free to conduct responsible economic | nils bernstein : the fiscal compact speech by mr nils bernstein, governor of the national bank of denmark, at the hearing on the fiscal compact conducted by the european affairs committee of the danish parliament, copenhagen, 9 february 2012. * * * what is the essence of the fiscal compact? the new element is that there will be even more focus on the structural budget balance and that the commitment to fiscal discipline will be anchored in national legislation. the structural balance is the cyclically adjusted budget balance stripped of the effects of cyclical developments and special circumstances. in denmark β s case, special circumstances include pension yield tax, proceeds from north sea oil and this year also reimbursement of early retirement contributions. in future, it will be a requirement that the structural deficit for a single year does not, as a main rule, exceed Β½ per cent of gdp, and that any substantial deviation will trigger an automatic adjustment mechanism to restore the structural deficit to balance or surplus. as i have already mentioned, these provisions are to be incorporated into national legislation. at a later point, the commission will issue guidelines for the content of the automatic adjustment mechanism. indications are that it will be an obligation to take action, not an automatic mechanism as such. the structural deficit is an expression of the β sustained β balance situation, be it a budget deficit or surplus. until now, the main focus area β besides observing the 3 - per - cent requirement for the actual budget balance β has been to ensure continuous annual improvement of the structural balance by at least 0. 5 per cent of gdp for member states not observing the medium - term objective of balance or surplus. in practice, one of the weaknesses has been that the adjustment process has been too slow. another weakness has been that the structural balance was overestimated in the good times before the financial crisis. the value of currentaccount deficits, housing bubbles and loss of competitiveness as indicators that output and employment were well above the underlying potential was underestimated. this pattern has exacerbated the deficit during the cyclical downturn so that, on aggregate, debt has increased over the business cycle. if the government budget must, as a main rule, be structurally in balance every year, this reduces the likelihood that the total debt grows over time. deficits in bad times must be matched by surpluses in good times. under the existing stability and growth pact, the structural balance has mainly been used to lay down a medium - term objective β that is, | 1 |
jean - claude trichet : the role of money β money and monetary policy in the 21st century ( panel discussion ) speech by mr jean - claude trichet, president of the european central bank, at the panel intervention at the fourth ecb central banking conference β the role of money : money and monetary policy in the twenty - first century β, frankfurt am main, 10 november 2006. * * * your first question was whether monetary analysis has helped us to anchor inflation expectations in the euro area. as i have stressed on previous occasions, 1 i am convinced that a thorough monitoring of monetary developments is important for the anchoring of inflation expectations. on the empirical side, there is ample evidence that there is a strong long - run link between money growth and inflation. this has recently been re - emphasised in the academic literature. 2 on the theoretical side, professor woodford very eloquently told us yesterday 3 that money does not play an important role in the conduct of monetary policy in standard modern - style macroeconomic models. and i have particularly appreciated his elegant and nuanced exposition of the present intellectual debate. i have noted also that professor christiano has pointed out in his convincing presentation that, when such models are extended in a realistic way, also good theoretical arguments in support of a clear commitment to take monetary developments into account in the conduct of monetary policy emerge. this is because it directly helps to stabilise long - term inflation expectations, and as lucas also pointed out yesterday, because it can help to mitigate the effects of boom - bust cycles in asset markets. 4 in fact, the ability of monetary developments to indicate imbalances in the financial system and the implied potential risks to long - run price stability has recently been stressed in particular by the bis 5 and is confirmed by recent research at the ecb. 6 the money pillar of our monetary policy strategy constitutes a visible commitment to take the long - run link between monetary developments and inflation into account in monetary policy decisions. from my experience i can tell you that this has indeed played an important role in our success in anchoring inflation expectations in the euro area. at the time of the transition to emu, giving money an important role in our strategy ensured continuity with the most credible central banks joining the eurosystem. i am convinced that the monetary pillar was crucial to stabilising inflation expectations in the euro area at the low level prevailing in the countries with the most stable currencies at that time. given the historical | to the long period during which we maintained rates at the level of 2 %, from july 2003 up to december 2005. a period, by the way, during which we had made no pre - commitment to maintain rates at this historically low level during a β considerable period of time β. on the contrary, the governing council had made it crystal clear that we could change rates at any time during 2004 and 2005 11 and the markets had pretty well understood that posture. my understanding of our decision - making during this period was that it was sometimes a very close call as regards the balance of risks to price stability stemming from the economic analysis. we experienced two periods, around the turn of 2003 / 2004 and around mid 2005 β before the slight recovery of early 2004 was perceived and when it became clear that this start of recovery had aborted β where the balance of risks to price stability from the economic analysis was starting in our minds to slightly tilt on the downside. on behalf of the governing council i made clear during these two periods, in the questions and answers of the press conferences, that all our options were open, including a decrease of rates. if this option did not materialise, it was in my understanding because the monetary analysis was not only not confirming the downward risks to price stability suggested by the economic analysis but was tilting in the other direction. we maintained rates at the level of 2 % and again, with the benefit of hindsight, that decision seems to me clearly vindicated. my third example refers to the recent sequence of policy rate increases. in december 2005, when we first increased policy rates, many commentators judged our move premature against the background of a seemingly fragile economic recovery. in fact, at that time the signals coming from the economic analysis were not yet so strong. but the continued expansion of money and credit through the course of 2005 gave an intensifying indication of increasing risks to medium - to longer - term price stability which played fully their role in our decision to start increasing policy rates in late 2005. in retrospect, the strength of the economic recovery unfolding in the course of 2006 has also shown that our decision was well timed. without our thorough monetary analysis, we could have been in danger of falling behind the curve. your last question referred to the communication challenges related to monetary analysis. we have consistently communicated the results of our monetary analysis and any uncertainty surrounding it to the public. the conference paper by fischer, lenza, pill and reichlin helps in this respect. | 1 |
' speeches processing, distribution and trading! while there will, no doubt, be rich business opportunities as new markets are tapped by new tools and technology, the ultimate goal is to reach the unbanked and underserved populace. jack ma, founder and executive chairman of alibaba said the goal of β fintech or techfin is to rebuild the system with technology β¦ to solve the problem of a lack of inclusiveness. β this is clearly generativity in action, both in terms of the psychological need to build beyond oneself, but also in terms of how techonology can produce and influence new ( and hopefully productive and positive ) behaviours. how auspicious! how exciting! we, at the bangko sentral ng pilipinas invite you to share our enthusiasm. thank you for your kind attention. 1 coined by the psychoanalyst erik erikson in 1950. 4 / 4 bis central bankers'speeches | peru and bolivia. further, the philippines ranked 1st overall in the area of regulatory framework. ladies and gentlemen, the survey results reflected the gains we have made together in microfinance. let us therefore give ourselves a well - deserved round of applause! with the continuing support of all stakeholders, the new policies and programs we have crafted are bound to further expand and deepen our microfinance sector. i refer in particular to the following circulars the bangko sentral ng pilipinas issued this year : circular 678 on housing microfinance and circular 680 on micro - agri loan products which address the needs of microfinance clients beyond enterprise loans. these circulars give banks the opportunity to expand the range of services they provide their clients, even as they maintain microfinance privileges. this includes no collateral requirements or the acceptance of collateral substitutes, cash flow and character based lending, small and frequent amortizations, as well as simple documentary requirements. in march, the bangko sentral issued circular 683 which allows thrift, rural and cooperative banks β subject to certain rules and regulations β to sell, market, and service approved microinsurance products by licensed insurance providers. thrift, rural and cooperative banks are ideal distribution channels for microinsurance products as they are the trusted financial institutions in the countryside and have a deeper understanding of the low income market. recent calamities from flooding and destructive typhoons underscore the importance of having adequate insurance protection especially for the poor who are more vulnerable to various risks. for thrift, rural and cooperative banks, therefore, microinsurance is a groundbreaking initiative that allows them to participate in a business that was once limited only to universal and commercial banks. on the other hand, bangko sentral β s circular 685 provides the rules for the recognition of microfinance institution rating agencies or miras. this should improve access to financing and capital as ratings have proven effective in enhancing the quality of microfinance institutions in terms of transparency, discipline, and overall governance. this should also promote investments in the philippine microfinance industry. these are the circulars the bangko sentral issued this year to promote the further development of our microfinance sector. with the support of all stakeholders, we should start seeing positive results from these initiatives. i also look forward to the participation of more banks in the microfinance sector. as of december 2009, there were more than 200 banks engaged in microfinance with total | 0.5 |
benjamin e diokno : the bsp β s role in economic recovery and lessons in monetary policy speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at kapihan sa manila bay, 5 january 2021. * * * ladies and gentlemen, good morning. the bangko sentral ng pilipinas ( bsp ) welcomes this opportunity to discuss its role in cushioning the adverse impact of the covid - 19 crisis. we are indeed pleased to help the national government in steering the country towards a gradual and sustainable path to recovery. i will also share key lessons in monetary policy, which, i believe, will serve the country in good stead moving forward. the shock from the covid - 19 pandemic is unprecedented. after exhibiting 84 consecutive quarters of growth, real gdp declined by 0. 7 percent year - on - year for q1 2020. by the second quarter of 2020, real gdp contracted by 16. 9 percent. in q3 2020, real gdp also declined but at a slower rate of 11. 5 percent. year - to - date, real gdp growth is at β 10. 0 percent. the slower pace of gdp contraction is expected to continue in q4 2020. allow me to point out that crafting swift, timely and well - calibrated policy responses requires a clear understanding of the nature of the shock. what we are experiencing is a public health crisis. as such, the primary response of policymakers should be towards containing the virus and providing adequate care for the infected. the shock called for a bold and coordinated response from the national government. to mitigate adverse effects of the pandemic, fiscal and monetary policy authorities must play distinct yet complementary roles. in particular, fiscal policy plays a crucial role as it can respond in a more targeted manner to the most affected sectors of the economy. meanwhile, the role of monetary authorities has been to ensure the proper functioning of credit and financial markets, and that there is ample liquidity to support domestic demand. given the abruptness and scale of the pandemic, the bsp deemed it necessary to provide additional emergency support to the government β s broad - based health and fiscal programs related to covid - 19. the bsp has deployed a wide range of monetary instruments and extraordinary liquidityenhancing measures to support the economy. bsp reduced the policy rate by a cumulative 200 basis | amando m tetangco, jr : transforming potential into reality speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the baiphil's induction of officers and general membership meeting, manila, 15 july 2009. * * * distinguished officers and members of the bankers institute of the philippines led by incoming president susan uranza and outgoing president lydia king, sec chairman fe barin, mbm ignacio bunye, pm cesar virata, fellow bankers, colleagues from the bsp, special guests, good afternoon! on behalf of the bangko sentral ng pilipinas, i congratulate baiphil β s new set of officers led by president susan uranza. ladies and gentlemen, let us wish them well and cheer them on with a long round of applause! to the bangko sentral ng pilipinas, the baiphil is a long - standing partner in strengthening the philippine banking sector by enhancing productivity through research, information exchange and education. indeed, through its continuous development and conduct of appropriate training programs, baiphil has been upgrading the knowledge and expertise of banking professionals. in other words, baiphil plays a major role in keeping philippine bankers abreast of global bank standards and practices. this is a very important function. the banking sector is the pillar of our financial system as it remains the primary source of funds for our business sector, drawing, in turn, from funds entrusted to it by investors, creditors, and depositors. it is essential therefore that our bankers are able to adapt and respond appropriately to a constantly changing and ever challenging environment. this is particularly true today when the global financial landscape continues to be redefined by the ongoing financial crisis and the most severe global economic downturn in decades. new challenges have emerged, even as new opportunities surface. it is crucial, therefore, that bankers should be ready to take on these new challenges and opportunities. for instance, it is important to note that while other countries struggle with tight credit, our banking sector remains liquid and able to sustain lending at double - digit growth rates. as of may 2009, outstanding loans of commercial banks, including reverse repurchase agreements, reached p2. 1 trillion, over 10 % higher than the year - ago level. this is a positive trend that indicates continuing support from the banking sector for productive activities that sustain economic growth. having said this, banks must make sure | 0.5 |
edward scicluna : central banks on the way out of the covid - 19 crisis but facing new global challenges speech by mr edward scicluna, governor of the central bank of malta, at the 2022 conference of mediterranean central banks " building resilience in uncertain times : safeguarding financial stability, encouraging investments ", jointly organised by the central bank of the republic of turkey, the organisation for economic co - operation and development ( oecd ), the european institute of the mediterranean ( iemed ) and the bank of spain, session " central banks on the way out of the covid - 19 crisis but facing new global challenges ", istanbul, 31 october 2022. * * * fellow governors, ladies and gentlemen i would like to thank our host, governor kavcolu and his team, the oecd, iemed, and the bank of spain for their invitation and for their warm welcome. i have come to share my views at this seventh annual conference of mediterranean central banks on the challenges we monetary policymakers are facing in the current macroeconomic and geopolitical environment, because as mediterranean countries we have an obligation to explain our respective position and its relevance to our region. because financial instability in any one country does not help the attractiveness of the whole region in the eyes of the investor. let me start with what is relevant to any central banker wherever he or she comes from. i think that what is sharply standing out today is the sharp trade - offs confronting us central bankers. the biggest being that between containing inflation and avoiding a recession. and in spite of the uncertainty surrounding the outcomes, the decision cannot be put off, since a wait - and - see approach is likely more costly, and certainly riskier. what is the price of not tackling inflation decisively? that we know. the high tax on the disadvantaged, on those on fixed incomes, incentivising rent seekers, the waste of dog chase tail wage - price spirals. at the same time we hear that a recession is not just around the corner but on our door step. we hear that certain indicators are also giving out the message that certain prices have peaked and some are even falling. so why all this unrelenting rush to kill off inflation when the recession has started to do the work itself. let us be careful. my understanding is that the financial markets and economic forecasters do not believe that the recession as seen today will be so deep that it will do all our | participation in monetary union by making further progress on the path of reform. the national reform programme provides a good basis for this purpose, as do the recent reports by the commission, the ecb and the imf. a common conclusion of these reports, and one which is shared by the central bank of malta, is that further fiscal consolidation is necessary in order to achieve a balanced budget by the set date. in this regard, there needs to be a greater emphasis on expenditure - based adjustment, particularly in view of rising pressures caused by ageing - related factors such as pension and health care costs. it will be equally important, in both the private and public sectors, for wage growth to be compatible with productivity growth, labour market conditions and cost developments in competitor countries. the further strengthening of competition in both product and resource markets and the creation of more incentives to work are also necessary in order to raise the participation rate. it also needs to be realized that these reforms are essential for safeguarding our social model. in recent decades we have been successful in reducing income inequality and in securing universal access to all levels of education, to health care and to pensions. these benefits, however, can only continue to be enjoyed by future generations if today β s generation implements the necessary reforms. the next phase in malta β s economic history, therefore, promises to be a challenging one, but it should also be an exciting time. for a country with a population of 400, 000 and a gdp of just four - and - a - half billion euro, having a major reserve unit as its domestic currency is indeed a significant advantage. we thus have good reason to feel encouraged and, as a people that has suffered repeatedly as a consequence of divisions on the european mainland, also reassured that we are about to reinforce our integration in europe with full economic and monetary union. for, while the eu has for fifty years brought peace and stability to the peoples of europe, the single market and economic and monetary union have created a congenial environment in which economies can grow and people prosper. | 0.5 |
would be action and without starting the action, our overall visions and missions would never be realized. second, nikkhama dhathu. that is, the action should continue. there are many actions that we commence, but stop quickly. it is like the opening of a bottle of soda ; a lot of hiss ; a lot of gas ; a lot of noise, but becomes flat after some time. very often, we do not have the energy, the drive, the motivation or the staying power to continue with the actions that we start. therefore, we need to ensure that actions are continued, if the performance is to be achieved. thirdly, parakkama dhathu. that means, the action should not be affected by interruptions and challenges. in the performance of any action, we will definitely encounter resistance and opposition. often, at the first whiff of opposition, we retreat. if we are to perform, we need to build in ourselves, the ability and the courage to meet with obstructions and move forward, in the face of challenges. otherwise, our performance would not be realized. fourth, thithi dhathu. that is, stay firm in the intended path. even in the midst of opposition or challenges, we have to develop the ability to be focused and move with a clear vision and determination. we should not be distracted. we should not dilute the impact of our performance. fifth, is the thawara dhathu. that is, the action should convey a strong stable message of commitment and dedication. such a strong signal is often infectious and when the leader shows such firm commitment, performance often improves. sixth, upakkama dhathu. that is, being wise to cleverly steer the path and induce others to also support the performance of the particular action. that is not easy, but it is vital. inducing all within the team to move towards a single goal is the best assurance of success. we are today living and working in an unforgiving world. in this unforgiving world, the business sector in which we operate is intolerant of failure. failure or even suggestion of failure invokes harsh penalties and abrupt ends to promising careers. we show how many important heads rolled after the β sub - prime β issue hit the market. however high and mighty a person may be, failure or non - performance or sub - performance is not forgiven. all past victories are erased with a single failure. a single failure | ajith nivard cabraal : management accountants β focusing on the repositioning of the profession special address by mr ajith nivard cabraal, governor of the central bank of sri lanka, at the global summit, organised by the institute of cost and works accountants of india on β repositioning the management accountant β, new delhi, 12 january 2008. * * * the theme of the conference suggests that the management accountants of today are de facto doing something different to the traditional role of the management accountant. the new de facto role seems to be more of that of a strategist and a performance management specialist, rather than a historical β information supplying β or even a β decision facilitating β role of an accountant. if one were to drill down, we may perhaps note that the education and training of those who have become strategists and performance management specialists may not have necessarily been intended that way. but yet, it happened. how did this happen? β’ perhaps the training, although intended to create management accountants, was appropriate to create a strategist. β’ perhaps the training, coupled with business developments and public expectations, shaped management accountants to become strategists or the deliverers of outputs rather than contributors of inputs only. β’ perhaps the ability of the management accountant, as a result of his core disciplines, enabled him to respond effectively to unfolding developments and then deliver new outputs, and such abilities were recognized by the business community in the course of time. if all this happened without anyone consciously or deliberately β positioning β the management accountant in that role, what is the need to β re - position β the management accountant now? now that some re - positioning has already taken place, albeit accidentally, need we do more? should we let the status quo remain? why should we tinker with the management accountant now? by the time we do that, would the goal posts have shifted due to the rapid developments that are always taking place? to answer these questions, we may need to take a long hard look at the future of the global business environment over the next 10 years. what do we see? we see β’ new developments : tremendous change and a rapid rate of changing ; β’ blurring of traditional roles : different people doing old jobs ; new people doing new jobs ; β’ new skills and multi - disciplinary teams at work ; β’ status quo being challenged all the time and impermanence becoming a feature ; β’ volatility becoming a given fact and chaos being the | 1 |
christine lagarde : interview with france 2 interview with ms christine lagarde, president of the european central bank, conducted by mr jean - paul chapel and broadcast on 24 january 2020. * * * good morning, christine lagarde. this is your first television interview in france since taking up your new position at the european central bank in november. thank you for giving it to france 2 and telematin. french people knew you as the minister of economy and then as managing director of the international monetary fund ( imf ). and now, as head of the ecb, you have an even more powerful role and the financial markets scrutinise everything you say. do you have to weigh every word? you have to speak sparingly enough for your message to remain solid and credible. and central bankers obviously have to be careful in sending out signals because financial markets and analysts are watching and will draw certain conclusions in order to decipher what they should focus their efforts on and where they should move their funds to. let me briefly touch on france. today is a day of strikes in protest against the pension reform which will be presented to the cabinet today. are you in favour of this pension reform? at the moment i am not in a position to assess the structure of the text. in terms of price stability, of the main economic indicators, we know it β s important for each and every citizen to have enough certainty as to what will happen when they retire in 10, 15 or 20 years β time. so any reform that helps bring about that certainty and clarifies the future retirement landscape, and which does not generate any inequality, will be good for economic policy and for monetary policy. and that applies to all products involving future payment or returns. turning to monetary policy now, to the interest rates that are set by the ecb. these interest rates are persistently low, practically zero. so europeans are earning next to nothing on their savings. in france, the interest rate on the livret a is 0. 5 % and the return on life insurance is not much better. inflation is eroding the savings of those on the lowest incomes. that β s true. both rates need to be seen in parallel : the rate of return and the rate of inflation. above all, we need to ask why the rates are low. we are in an environment, in europe but also in all of the advanced economies, where the rates are generally low and have fallen | , the governor β s closing address for the la granda courses. for an analysis of the impact on the financial markets of the various milestones linked to the eu recovery fund, see box 5 of the " quarterly report on the spanish economy ", economic bulletin, 3 / 2020, banco de espana. see also arce et al. ( 2020 ) and box 3. 4 of the 2019 annual report of the banco de espana for a discussion of the role of fiscal policy coordinated at european and international level in the current context. supply of safe european assets, facilitating the general functioning of financial markets and the specific conduct of monetary policy. references aguilar, p., o. arce, s. hurtado, j. martinez - martin, g. nuno and c. thomas ( 2020 ). β la respuesta de la politica monetaria del bce frente a la crisis del covid - 19 β, occasional paper, banco de espana, forthcoming. andreeva, d. and m. garcia - posada ( 2019 ). the impact of the ecbΒ΄s targeted long - term refinancing operations on banks β lending policies : the role of competition, working paper no. 1903, banco de espana. arce, o., r. gimeno and s. mayordomo ( 2017 ). making room for the needy : the creditreallocation effects of the ecb β s corporate qe, working paper no 1743, banco de espana, forthcoming in review of finance. arce, o., i. kataryniuk, p. marin and j. j. perez ( 2020 ). thoughts on the design of a european recovery fund, occasional paper no 2014, banco de espana. arce, o., m. garcia - posada, s. mayordomo and s. ongena ( 2018 ). adapting lending policies when negative interest rates hit banks β profits, working paper no 1832, banco de espana. arce, o., g. nuno and c. thomas ( 2019 ). β the eurosystem β s monetary policy following the end of net asset purchases β, analytical articles, economic bulletin 1 / 2019, banco de espana. bernanke, b. s., m. t. kiley and j. m. roberts ( 2019 ). β monetary policy strategies for a lowrate environment β, aea papers and proceedings, no 109 | 0 |
but also high levels of risk. experienced investors know, or should know, that in any given year some hedge funds lose money for their investors and some funds go out of business. those occurrences are only normal and to be expected in a competitive market economy. the working group's recommendations were aimed, instead, at ensuring that when hedge funds fail, as some inevitably will, the effects will be manageable and the potential for adverse consequences to the broader financial system or to real economic activity will be limited. effectiveness of the working group's approach has the approach proposed by the president's working group worked? any answer must be provisional, but, to date, it apparently has been effective. since the ltcm crisis, ongoing improvements in counterparty risk management and the resultant strengthening of market discipline appear to have limited hedge fund leverage and improved the ability of banks and broker - dealers to monitor risk, despite the rapidly increasing size, diversity, and complexity of the hedge fund industry. many hedge funds have been liquidated, and investors have suffered losses, but creditors and counterparties have, for the most part, not taken losses. the general perception among market participants is that hedge funds are less highly leveraged today than in 1998 though, to be sure, meaningful and consistent measurements of leverage are not easy to come by and many newer financial products embed significant leverage in relatively nontransparent ways. according to bank supervisors and most market participants, counterparty risk management has improved significantly since 1998. some of this progress is due to industry - led efforts, such as two reports by the counterparty risk management policy group ( crmpg ) that lay out principles that institutions should use in measuring, monitoring, and managing risk. reviews conducted by bank supervisors in 2004 and 2005 indicated that banks have become more diligent in their dealings with hedge funds. in most cases, substantial resources have been devoted to expanding and improving the staffing of the risk - management functions related to hedge fund counterparties. dealers universally require hedge funds to post collateral to cover current credit exposures and, with some exceptions, require additional collateral, or initial margin, to cover potential exposures that could arise if markets moved sharply. now, risk managers can more accurately measure their current and projected exposures to hedge fund counterparties, and more firms use stress - testing methodologies to assess the sensitivity of their exposures to individual counterparties if the market moves substantially. despite this progress, some concerns about counterparty risk management remain | and portfolios. it is commonly observed that hedge funds are " opaque " - - that is, information about their portfolios is typically limited and infrequently provided. it would be more accurate to say that the opacity of hedge funds is in the eye of the beholder ; the information a fund provides may vary considerably depending on whether the recipient of the information is an investor, a counterparty, a regulatory authority, or a general market participant. from a policy perspective, transparency to investors is largely an issue of investor protection. the need for counterparties to have adequate information is a risk - management issue, as i have already discussed. much of the recent debate, however, has focused on the opacity of hedge funds to regulatory authorities and to the markets generally, which is viewed by some as an important source of liquidity risk. liquidity in a particular market segment might well decline sharply and unexpectedly if hedge funds chose or were forced to reduce a large exposure in that segment. concerns about hedge fund opacity and possible liquidity risk have motivated a range of proposals for regulatory authorities to create and maintain a database of hedge fund positions. such a database, it is argued, would allow authorities to monitor this possible source of systemic risk and to address the buildup of risk as it occurs. various alternatives that have been discussed include a database maintained by regulators on a confidential basis, a system in which hedge funds submit position information to an authority that aggregates that information and reveals it to the market, and a public database with nonconfidential information on hedge funds. i understand the concerns that motivate these proposals but, at this point, remain skeptical about their utility in practice. to measure liquidity risks accurately, the authorities would need data from all major financial market participants, not just hedge funds. as a practical matter, could the authorities collect such an enormous quantity of highly sensitive information in sufficient detail and with sufficient frequency ( daily, at least ) to be effectively informed about liquidity risk in particular market segments? how would the authorities use the information? would they have the authority to direct hedge funds or other large financial institutions to reduce positions? if several funds had similar positions, how would authorities avoid giving a competitive advantage to one fund over another in using the information from the database? perhaps most important, would counterparties relax their vigilance if they thought the authorities were monitoring and constraining hedge funds'risk - taking? a risk of any pre | 1 |
grounded in such basic questions as : where does the firm make money ; are the revenue streams sustainable ; how well does the firm stand up to tests of stresses on its balance sheet ; does it generate cash flow to cover dividends ; is the leverage of the firm sustainable ; what are the risks from competition on premium income ; are there conduct risks which could pose a prudential threat? these are basic questions, but in another field, if the answers to such questions had prompted action in the past by banks, history would be different. what i have just described is judgemental supervision that must be forward - looking to the risks that may arise. this is crucial, and was not properly a part of the pre - crisis approach to supervision. let me give a few current examples of this for insurers. we are focused on the impact of very low interest rates staying with us for a protracted time, and when i say this i am offering no view whatsoever on the likely course of monetary policy. likewise, we want to know that the prudential position of firms also captures the possible impact of an unexpected upward shift in the slope of the yield curve, and again i am offering no view on monetary policy. the fpc in its most recent recommendations, from last month, has asked us, working with the fca and other areas of the bank, to provide an assessment to the fpc of the vulnerability of borrowers and financial institutions to sharp upward movements in long - term interest rates and credit spreads in the current low interest rate environment. there will be a report back to the fpc in september. this work will include insurers, and it will go along with the stress testing under way, which also β rightly β includes a β rates stay low for long β outlook too. another example of business model risk i would give comes from the impact of conduct issues. i am a very strong advocate of our new system, not least because it recognises that conduct and prudential supervision of insurers are different specialisms. my interest is in the possible prudential threats from any conduct issues. i am therefore keenly interested in martin wheatley β s assessment of these consequences and threats. finally, on business models, the work that we are doing to assess risks at an individual firm level and a sector level is complementary to the work that we expect firms to be undertaking. we believe that it is important that senior management of all insurers, big and | to fulfil the convergence criteria and to be allowed to join the euro, almost all of them became more lax as soon as they entered. in the first ten years of emu, they ran up deficits and debts, including during times of growth. as a result in 2008, when the crisis started, these countries had no more fiscal room and their public finances deteriorated substantially. member states β individual discipline has therefore been too weak, and collective discipline, which was nonetheless provided for in the stability and growth pact, was not applied in practice. i would like to recall the spirit of this pact. it was designed to be the fiscal pillar of monetary union. it was based on a peer - review mechanism. but, on the one hand, it was deliberately misinterpreted : whereas countries were required to maintain a fiscal balance over the cycle, without bis central bankers β speeches breaching the 3 % of gdp reference value for the annual public deficit, they interpreted this to mean : β we can constantly run a 3 % deficit β. and, on the other hand, the pact was not respected, as sanctions were not imposed on member states that breached these rules ( including france and germany around 2002 ). 2. the second cause of this crisis lies in the competitiveness gaps that had widened for a long time before the crisis. the economic rationale is easy to understand : when joining a currency area whose goal is to achieve an inflation rate of just below 2 %, changes in unit production costs must be in line with this central bank objective, modulo the productivity gains. in all countries that did not abide by this calculation and this discipline, year after year, there was a loss of competitiveness that ultimately proved very significant. as regards these budgetary slippages and competitiveness losses, i hasten to add that markets did not play their role. as soon as the euro was adopted, they ceased to differentiate between countries and sovereign yield spreads narrowed, even aligning themselves at the lowest levels, i. e. those of germany and france. for the first decade of emu, the single currency appeared to play a buffer role that in addition to protecting countries against monetary instability β which the euro successfully did and was its raison d β etre β also protected them against the economic reality. member states were labouring under the illusion that they could, without ever suffering the consequences, allow themselves to flout the rules for budgetary discipline or make no efforts to remain | 0 |
monitoring, regulatory reporting, risk management and compliance. according to a recent report, investment in regtech companies reached us $ 1 billion globally in 2017. but why is regtech gaining popularity? i believe there are three key drivers : 1. first is the increase in the complexity and scope of more stringent regulations globally such as basel iii and enhanced standards for combating money laundering. a few recent studies have suggested that the volume of global regulatory changes went up by at least five - fold in the past decade. hence, there has been a growing desire of the banking industry, particularly in jurisdictions with more daunting regulatory requirements, to explore the use of new technologies to enhance the effectiveness and lower the cost of their compliance efforts. 2. the second driver is the sheer volume of transactions and data that many banks need to handle as the economy and business continue to grow. if we take the mobile wallet market as an example, research predicts cumulative annual growth of 32 % in global e - wallet transactions between 2017 and 2022. such a scale of transactions means it would simply be impracticable for some banks and e - wallet operators to effectively manage the associated risks using traditional or manual risk management approaches. 3. the third and final driver is the higher availability of regtech solutions. increasing computing powers, together with accessibility of data and applications of new technologies, have contributed to an increased commercialisation of regtech solutions available to the banking industry. 13. recognising the growing need for, and developments of, regtech solutions, we at the hkma consider it timely to work with the banking industry and the technology community to further facilitate the adoption of regtech in hong kong. to help develop the regtech ecosystem here, the hkma will open the fintech supervisory sandbox to regtech projects or ideas raised by banks or tech firms. i am also pleased to say that the hkma will soon launch a series of regtech - specific projects, through its banking made easy initiative, focusing on four areas : ( a ) aml / cft surveillance technologies ; ( b ) regtech for prudential risk management and compliance ; ( c ) study on machine - readable regulations ; and ( d ) hkma β s exploration of suptech. 14. let me explain each initiative in greater detail. aml / cft surveillance technologies 15. about aml / cft surveillance, one should bear in mind that the financial system is the gateway through which criminals must | s theme, β banking for a smart society β, reminds us not to be complacent. we should continue to work collectively to further develop the ecosystem. 9. while we naturally pay more attention to new or innovative digital financial services that become available to bank customers as a result of the smart banking initiatives, let β s not forget that fintech is not only about the interface between banks and customers. the importance of a key fintech segment, regtech β regulatory technology β in supporting and facilitating the interface between banks and the regulators, should not be understated nor overlooked. i would like to therefore provide a supervisor β s perspective on regtech in the smart banking era. 10. when we look at regtech, some may immediately start to envisage the substitution of us, banking supervisors, with technologies such as artificial intelligence ( ai ) or β robo - regulators β. while some of you might indeed prefer a robo - regulator delivering this speech, this is not something that regtech is intended or able to deliver at this point, unfortunately. frankly, i hope that you would still prefer listening to my sharing, rather than from a tall and handsome roboregulator, even if such a robot were a reality today. joking aside, regtech does offer a tremendous potential to complete the smart banking ecosystem. 11. before i discuss our plan for regtech, i would like to reiterate what regtech means. as i have mentioned, from the perspective of banks, there are two interfaces that they have to address : one between banks and customers, and the other between banks and the hkma. the general priority of banks under the smart banking initiatives so far has been to concentrate on the interface between banks and customers to offer better digital financial services to users. however, some meaningful progress has been made to streamline the interface between banks and their regulators, such as the work under the banking made easy initiative and the balanced and responsive supervision programme that i explained at this conference last year. we do see a need to further facilitate banks β use of technologies for compliance with regulatory requirements of the hkma and other regulators and for risk management purposes. regtech, which essentially means the use of innovative technologies by banks to achieve regulatory compliance or better risk management in a more effective and automated manner, is well positioned to further enhance the interface between banks and regulators. 2 / 4 bis central bankers'speeches 12. regtech developments are growing rapidly particularly in the areas of transaction | 1 |
gent sejko : remittances from albanians abroad positively influences the albanian economy speech by mr gent sejko, governor of the bank of albania, at the high - level meeting on the remittances from the albanian diaspora, tirana, 11 december 2017. * * * dear minister majko, dear guests, welcome to the premises of the bank of albania! i would like first to thank the minister of state for the diaspora, mr pandeli majko, for his initiative for higher attention to drawing in and effectively using the remittances sent by albanians abroad. today β s meeting is the first in a series of common steps to be taken by albanian institutions, in an effort to give its due place to the financial contribution by albanian emigrants to the welfare of their families at home. this contribution is also vital for the sustainable and long - term development of the albanian economy. the bank of albania has always considered the remittances as a very important contributing factor for the economy of albania and beyond. in this light, the bank of albania measures and analyses the available statistics, and conducts non - quantitative assessments related to the geographical distribution of the sources of remittances, at the national and international level. the assessment of factors contributing to the level of remittances and the cyclical volatility of their flows over the years remains at the focus of our work. for albania, remittances represent a steady and considerable source of inflows, which surpass foreign direct investments, being thus a substantial source of financing economic growth in albania. in this regard, the bank of albania considers remittances as an important source of income in the economy and a contributor to the balance of payments. from a narrower perspective, remittances are estimated to have a significant impact on albanian households, for reducing the poverty and improving the quality of life. even in the case of albania, the studies performed by the bank of albania and the world bank show that the income from remittances are allocated mainly for consumption, medication, and education, as well as for savings and investments, the latter mainly for residential properties. in addition to the above, the bank of albania treats remittances also from the perspective of their inflow channels in the albanian economy. recent studies show that the formal transfer channels dominate, mainly through money transfer financial institutions, and less through banks. in the meantime, remittances in cash | impact of asymmetric shocks, and also to discover new regional markets for our exports. as you are aware, we are currently implementing the two track approach to the ecowas single monetary zone concept. the gambia, ghana, guinea, nigeria, sierra leone, and recently liberia have been working for the formation of a second monetary zone that will ultimately merge with waemu for the formation of the ecowas - wide single monetary zone. the second monetary zone project, like the single monetary zone programme was postponed a number of times due to the inability of its members to meet the macro economic convergence criteria and the structural benchmarks. at the 24th meeting of the convergence council of ministers and governors of central banks of the west african monetary zone ( wamz ), it was yet again agreed that the dateline for the single currency and monetary union in the wamz should be postponed to january 1st 2015. indeed, our economic and regional integration efforts continue to face challenges as countries struggle to meet and sustain the convergence criteria. but in spite of the adverse impacts of the global financial crisis on our economies, it is gratifying to note that member countries of the zone are making progress in containing the adverse impacts of the global crisis and stabilizing their economies to restore it to a path of stronger growth and poverty reduction. clearly, we must continue to implement sound macroeconomic policies so as to sustain progress toward convergence. we must all commit to work on the roadmap towards the introduction of the single currency, be it in the areas of harmonization of convergence criteria, or harmonization of the regulatory and supervisory framework for banking and other financial institutions, or harmonization of monetary policy frameworks, payments system infrastructure, trade liberalisation, exchange rate stabilisation, capital account liberalisation, or integration of financial markets in the zone, etc. ladies and gentlemen, i know that we can continue to count on management of waifem for building the capacity of technical staff of central banks and ministries of finance, as well as other public servants in member countries in the various areas connected to the successful implementation of the single currency framework both within the zone and indeed in ecowas. in conclusion, let me again thank the management of waifem for bringing this important course to our doorstep, and i urge you all to take time off to explore some of the tourist facilities and other landmarks that we have available. i know that you have an intensive training programme ahead of you and your desire to commence the technical | 0 |
it developments. for instance, mobile money agents are known to illegally hold money intended for money transfers. this introduces a new challenge for bou to re - examine the concept and definition of a β deposit β. do mobile money agents take β deposits β? what must be done to ensure that they do not illegally take deposits? the advances in technology demand that bou and other regulators world - wide re - examine financial regulations to facilitate the innovations in the banking industry. central bankers should put the risks and β security β concerns as a key priority and align these concerns with standard setting to promote the advancement of banking services. in addition, bou needs to work in close cooperation with other industry regulators like the uganda communications commission who licence and regulate the telephone and mobile money companies. the need to combat financial and economic crime is increasingly changing the role and mandate of the central bank which is required to honour various freeze order lists and requests from international stakeholders like the us embassy and local stakeholders like the criminal investigations department ( ciid ) in uganda. i hope that this workshop will prove stimulating and valuable to all who are participating. thank you for your attention. bis central bankers β speeches | booms. over the last decade new entry and regional economic integration have combined to spur competition in the financial services industry in uganda. furthermore, banks are embracing information technology to offer innovative financial products, such as mobile money, as well as improve the efficiency of their operations. several new banking products are on the market. innovation and growth in the banking market are essential for meeting the needs of consumers and businesses for financial services, but they also generate new sources of risks. bis central bankers β speeches traditionally credit risk was the major type of risk facing banks in uganda. the adoption of it increases the importance of operational risk, while the increasing integration of the uganda financial sector into global financial markets, through cross border banking and capital flows, also creates new sources of risk. the evolution of technology has made possible the issuance and innovation of many varied banking products including the visa, mastercard, online banking, mobile money and e - commerce. all these facilitate modern banking. it is a key driver of new banking products like mobile money transfers. today, it innovations have influenced our ways of living in many fields including banking industry and we all benefit from the new technologies. however, the growth of it investments and sophisticated products as well as advanced services in the banking industry comes with a concern on β security β and new risks which is the challenging key to propel the sustainability of such growth. what is the role of the central bank in the financial sector? the primary responsibility of the bou is to regulate the financial sector. regulation has two objectives. the first is to protect the interests of depositors. we do this by imposing prudential requirements on banks, under the framework of the financial institutions act ( fia ), 2004 such as minimum capital requirements and liquidity requirements and restrictions on risk taking such as limits on large loan and foreign exchange exposures. we also intervene in distressed banks, again under the framework of the fia, to ensure that banks do not collapse with insufficient funds to repay their deposits. the second objective of regulation is to preserve financial stability ; to prevent financial crises. this also involves ensuring that banks comply with the prudential regulations in the fia. but we are also intending to introduce additional regulatory measures, which are informed by the macroprudential approach that i mentioned earlier, which are aimed specifically at mitigating systemic risks. lessons learnt from the past crises have taught and reminded us not to ignore what adverse effects may come afterwards. admittedly, bou is just catching up with | 1 |
%. prices for grains and iron ore remained almost unchanged. uncertainty over the spread of the novel coronavirus, and stronger turbulence on financial and commodity markets saw the ukrainian fx market respond with deteriorated sentiment and 1 / 3 bis central bankers'speeches increased nervousness. this has led to a sizeable increase in demand for foreign currency, which exceeded the supply, starting last week. the nbu has been active on the interbank foreign exchange market since last week in order to smooth out large fluctuations of the exchange rate. this week alone, net fx sales by the nbu reached usd 700 million, and the central bank is ready to conduct more fx interventions if necessary. despite the fact that the psychological factor is the only reason for the fx market turmoil, it poses a risk of a deterioration in inflation expectations, which can later affect consumer prices. although so far the global spread of the novel coronavirus has had little effect on economic growth and inflation in ukraine, the nbu will most probably have to revise its macroeconomic forecasts in april. after all, the following consequences of the spread of the coronavirus have not yet impacted economic activity and inflation in ukraine : the downward pressure on prices and a cooling of the global economy monetary policy easing by central banks of the leading economies and ukraine β s trading partners in response to these processes measures taken by governments to prevent the spread of covid - 19. apart from the drop in global prices caused by the coronavirus, disinflation in ukraine will be driven by the recent rise in competition between crude oil producers. this will keep energy prices at record lows, which will also impact prices for ukrainian exports. overall, the effect of all these factors on economic growth and inflation in ukraine will be mixed, adding to the uncertainty. what other factors did the nbu consider when making its monetary policy decision today? the nbu board continued to rely on the key assumption that cooperation with the imf will continue. signing a new agreement with the imf will make the ukrainian economy less vulnerable in a time of turbulent global markets and during a period of heavy public debt repayments. investors β perception of ukraine will also depend on ukrainian court rulings on the responsibility and liabilities to the state of the former owners of insolvent banks. the risk arising from the global spread of the novel coronavirus could, if realized, drive the global economy into a recession and cause a significant slowdown in the ukrainian economy. a dramatic decline in global demand and investors | β revaluation of risks related to developing economies could negatively affect ukraine β s external trade and make it more difficult for ukraine to obtain financing. there are other significant risks. they include : an escalation of the military conflict in eastern ukraine and new trade restrictions being introduced by russia a drop in the harvest of grain, fruit and vegetable crops in ukraine in the wake of unfavorable weather the higher volatility of global food prices, driven by global climate change. therefore, the nbu board made its key policy rate decision when inflationary pressures were decreasing faster than expected, and the economy needed further support. 2 / 3 bis central bankers'speeches in view of the above, the nbu board continued its monetary policy easing cycle by cutting the key policy rate by 1 pp, to 10 %, as envisaged by the central bank β s january forecast. what matters to the nbu the most is that the cut will provide the necessary impetus to the economy, while also not preventing the central bank from achieving its inflation target, which is its priority. what will the nbu β s monetary policy stance be in future? as before, the nbu plans to decrease its key policy rate to 7 % by the end of the current year. in deciding on the pace of key policy rate cuts to that level, the nbu will closely monitor : the spread of the coronavirus around the world and in ukraine, and its impact on the domestic and global economy the response of governments and central banks to these developments any progress achieved in negotiating a new aid agreement with the imf, which will shape the expectations of financial market participants, and determine the prices of ukrainian assets. if there are favorable developments, and if the new ukrainian government speeds up reform, the nbu will be able to ease its monetary policy more quickly. conversely, if the above risks materialize, the nbu will respond quickly by deploying the monetary policy tools it has at its disposal. thank you for your attention! 3 / 3 bis central bankers'speeches | 1 |
to scarcity ), especially in the labour supplying states. total agricultural labour declined from 259 million in 2004 β 05 to 231 million in 2012 β 12. agriculture, which accounted for 60 per cent of total employment in 1999 β 2000, now accounts for less than 50 per cent ( chart 11 and table 2 ). e. female participation one of the more interesting possible explanations for the rise in rural wages is the changing female participation in rural markets. the female participation rate is down in all the age categories. improved living standards could lead rural families to withdraw women from the bis central bankers β speeches labour force ( chart 12 ). also, higher prosperity could lead to greater investment in educating girls ( for the age group 10 to 24 ) again leading to lower participation in the workforce. 3. to summarise in sum then, when we examine food inflation, a substantial portion stems from an increase in food production costs, primarily rural wage inflation. some of that is an increase in real wages, needed to attract labour to agriculture, away from construction, education, household work, or mgnrega. if, however, wages elsewhere also go up, the necessary shift in relative wages to keep agricultural work attractive will not take place, and we will continue to have a wage spiral. also, some of the agricultural wage growth may be because of more liquidity flowing into rural areas. somewhat paradoxically, to contain food inflation and get a strong increase in food production, we need to ( i ) contain the rise in wages elsewhere so that relative wages in agriculture can rise without too much overall increase in wages. ( ii ) contain any unwarranted rise in rural wages as well as the rise in other agricultural input costs ( though not through subsidies ) so that the farmer gets a higher return. ( iii ) allow food prices to be determined by the market and use minimum support prices to provide only a lower level of support so that production decisions do not get distorted or the price wage spiral accentuated. this means limiting the pace of msp increases going forward. ( iv ) reduce the wedge between what the farmer gets and what is paid by the household by reducing the role, number, and monopoly power of middlemen ( amend apmc acts ), as well as by improving logistics. ( v ) improve farm productivity through technology extension, irrigation, etc. note that of these steps, monetary policy has a direct role in ( i ) and ( ii ) by slowing the demand for labour and by anchoring | ##modative monetary policy, the swift and effective implementation of structural reforms, in line with the 2016 countryspecific recommendations recently approved by the european council, will not only lead to higher sustainable economic growth in the euro area but will also make the euro area more bis central bankers β speeches resilient to global shocks. fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the european union. full and consistent implementation of the stability and growth pact over time and across countries is crucial to maintain confidence in the fiscal framework. at the same time, all countries should strive for a more growth - friendly composition of fiscal policies. we are now at your disposal for questions. bis central bankers β speeches | 0 |
charles i plosser : the us economic outlook and the normalization of monetary policy speech by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the society of business economists annual conference, london, england, 9 june 2011. * * * the views expressed today are my own and not necessarily those of the federal reserve system or the fomc. introduction good morning. thank you for this opportunity to speak before your society. as business economists, you are well aware of the extraordinary economic times in which we live. a financial crisis and arguably the worst global recession of the post - war era have challenged policymakers in the u. s. and abroad. in many nations, monetary and fiscal authorities undertook extraordinary actions to mitigate the damage, and for most of the hardest hit countries, the recession trough has passed and a moderate recovery is underway. yet the actions taken leave a legacy of huge government budget deficits, short - term interest rates at record lows, and central bank balance sheets of unprecedented magnitudes. even as our economies recover, policymakers face some daunting challenges as we try to unwind these extraordinary actions and rebuild confidence and credibility in our monetary policy frameworks. today i would like to discuss my outlook for the u. s. economy and some thoughts about ways to begin the normalization of u. s. monetary policy. i believe there are several steps the federal reserve can take to ensure a successful exit from this period of extraordinary accommodation, including taking a page out of the bank of england β s book by announcing an explicit numerical goal for inflation. as always, my remarks reflect my own views and do not necessarily represent the views of the federal reserve board or my colleagues on the federal open market committee. economic outlook let me begin with an update on the u. s. economy. we are nearly two years into a moderate, sustained recovery from financial crisis and the worst economic downturn since the great depression. in the fourth quarter of last year, the level of real gdp finally passed its prerecession peak, but it did so with some 7Β½ million fewer workers, a reflection of strong productivity growth. this year β s first - quarter gdp growth, at just below 2 percent, was somewhat disappointing. but i believe that this weakness will likely prove to be a temporary soft patch and that the underlying fundamentals remain in place for the economy to resume growing at a moderate pace in the second half of this | earlier in the year when the prices of many commodities, including oil, were rising sharply. however, measured on a year - overyear basis, both total inflation and core inflation continue to advance. i do anticipate that with many commodity prices now leveling off or falling, and inflation expectations relatively stable, inflation will moderate in the near term. however, we must continue to monitor this situation, particularly in this environment of very accommodative monetary policy. indeed, it is good to remember that the current inflationary environment is quite different from the one we faced a year ago when we embarked on the so - called qe2 policy to purchase $ 600 billion of long - term u. s. treasuries. at the time, there were concerns about deflation, whereas now inflation is running above our long - run goal. i would also note that unemployment was higher last fall than it is today. thus, with inflation higher and unemployment lower, it is appropriate to ask what criteria we are using to justify further accommodation. in this environment, i think it is very important that we refrain from actions that risk fueling a steady rise in inflation or inflation expectations over the medium term. we must not become too sanguine that high unemployment will lead to low inflation. the lesson of the 1970s is clear β high unemployment or low resource utilization is not sufficient to prevent high rates of inflation. the current environment in the u. k. should also be a warning. the unemployment rate in britain is near 8 percent, having risen sharply during its recession, yet inflation is now approaching 5 percent and has been steadily rising for nearly two years. monetary policy this brings me to a discussion of the recent policy actions the fed has taken, why i dissented from these actions in august and september, and what i believe should be the long - term view of monetary policy. as i noted at the beginning of my remarks, the economic conditions of the past few years have led to extraordinary monetary policy accommodation. to date, our actions have led to a level of the federal funds rate β the traditional instrument of monetary policy β that has been near zero for almost three years. the fed β s balance sheet has grown more than threefold, from nearly $ 900 billion before the crisis to about $ 2. 9 trillion today, and its asset composition has shifted significantly from mostly short - to medium - term treasuries to longer - term treasuries, mortgage - backed securities, and | 0.5 |
and the enhancement of long - term shareholder value with the highest standards of integrity and ethics. each director, as well as each member of senior management, is therefore expected to lead by example in a culture that emphasizes trust, integrity, honesty, judgment, respect, responsibility and accountability. β the guidelines for this principle essentially call upon the board to ensure that senior management implements strategic policies and procedures that are designed to promote good and acceptable ethical behaviour. principle 3 β board responsibilities and composition β the board of directors β role is to oversee the proper functioning of the institution. in order to achieve this, the board shall have clear, well - defined and understood responsibilities. there shall be a balance of skills, knowledge, experience and perspectives among directors so that the board works effectively to ensure the long - term safety and soundness of the institution. β the guidelines in this respect expect the board of directors to exercise professionalism by having a formal charter that sets out its responsibilities, having a rigorous formal processes for evaluating its performance along with that of board committees and individual directors and, ensuring that the institution complies with all relevant laws, and codes of business practice, and that it communicates with its shareholders and relevant stakeholders openly and promptly principle 6 β roles of senior management β it is the responsibility of management, under the direction of the chief executive officer, to conduct the institution β s business and affairs in an effective, responsible and ethical manner, consistent with the principles and direction established by the board through the strategic plan. β apart from reflecting integrity in their management of the institution, the guidelines for this principle require that senior management be appropriately qualified to run the affairs of the institution. the expectation is that people of appropriate qualifications will reflect the professionalism that is required of their respective professions. principle 7 β reporting and disclosure β the board shall demand integrity both in financial reporting and in timeliness and balance of disclosures on the institution β s affairs. β the guidelines for this principle require that the institution β s financial statements fairly present the state of affairs of the institution as at the end of the financial year and the profit or loss and cash flows for the reporting period. furthermore, the annual report is expected to state whether the corporate governance guidelines have been adhered to or, if not, where there has not been compliance the institution is expected to give reasons. mr chairman, as you will note the four principles highlight the fact that the bank of zambia places a great deal of importance on integrity and professionalism in the financial | , fairness and justice while professionalism is characterised by expertise, generalised and systematic knowledge, a high degree of self control and governance by a code of ethics. mr chairman, the behaviours and characteristics described are virtues which are desirable in finance, industry and business. i note that this forum is for employers and one fundamental aspect about being an employer is that you may not be involved in the day - to - day operational issues of your organisation, hence the need to have professional employees of integrity. this gives comfort as regards reliability of financial reporting, compliance with laws and regulations, effectiveness and efficiency of operations and safeguarding of assets. these issues which give comfort are encompassed within the framework of corporate governance. mr chairman, in the recent past the world has witnessed a number of corporate failures such as enron, worldcom and parmalat brought about largely by fraud on the part of employees. this has brought the discussion of corporate governance to the fore in finance, industry and business. the behaviour of corporations and the people that run these corporations have come under increased scrutiny by stakeholders and the wider public, not least of all, the financial sector in zambia following the banking failures which we experienced in the late 90 β s. the financial sector thus provides a critical example of the need for integrity and professionalism, and the bank of zambia has a keen interest in ensuring that these principles are upheld by players in the financial sector. the bank of zambia β s interest stems from its mandate to protect depositor β s interests as well as to ensure financial system stability. as the examples of enron, worldcom and parmalat have shown us, poor corporate governance may lead to corporate failures. for the financial sector, this can cause significant public costs and consequences due to the potential negative impact on the payment systems and the loss of confidence in the financial sector as a whole. as a result, the bank of zambia issued β corporate governance guidelines for commercial banks and financial institutions β in november 2006 in an attempt to instil corporate responsibility in the financial sector. mr chairman, the corporate governance guidelines issued by the bank of zambia offer vital lessons to other economic sectors with regard to integrity and professionalism. in this regard, allow me, mr chairman, to outline just four of the principles out of a total of 15 principles that are contained in the guidelines : principle 2 β ethical standards and corporate values β the board of directors, in keeping with their responsibilities to the shareholders and other stakeholders, is committed to the achievement of business success | 1 |
tiff macklem : central banking - navigating in a new world remarks by mr tiff macklem, governor of the bank of canada, at the 30th conference of montreal " international economic forum of the americas ", montreal, quebec, 12 june 2024. * * * good afternoon. it's always great to be back in montreal, my hometown. and i could not be more pleased to be here with joachim nagel, president of the deutsche bundesbank. thank you for visiting us in canada. since i'm on my home turf, let me start us off with a few words about where we find ourselves in economic history. key lessons from high inflation canada and germany have just come through the biggest inflation we've experienced in 40 years. and as painful as this has been, it has highlighted some lessons. i will focus on three in the canadian context. first, we ignore the supply - side of the economy at our peril. as central banks, we tend to focus on the demand side because that's what we influence with interest rates. but coming out of the pandemic, we learned that it is much easier to restore demand than supply. high inflation was a stark reminder that supply shocks can cumulate and persistand when they intersect with periods of strong demand, the inflationary consequences can be large. looking ahead, technological change, geopolitical tensions, climate change, and shifting trade and investment flows all suggest we may experience more supply shocks than we did in the past. businesses and central banks need to be ready. second, inflation is painful - that's not a new lesson, but for many of our citizens it was their first experience with high inflation. and it has been painful. inflation harms people and the economy, and it corrodes trust in our market - based system. the rising cost of living made life harder for everyone, especially those who had less to start with. people were working hard, but their paycheques didn't buy what they used to. that made people feel cheated and angry. recent history has been a stark reminder that inflation is our common enemy. the third lesson is the value of central bank credibility and public trust. we did not have that in the 1970s, and the costs of unwinding inflation were very high. this time, our track record on inflation control combined with our forceful monetary response brought inflation back down at much lower economic cost. but public trust and central bank credibility | article 105 ( 5 ) ). in view of their institutional competences the ncbs have developed the capabilities, skills and toolkits needed to analyze the stability of the financial system. the new board must, from its inception, be firmly anchored to the ecb in order to benefit from the latter β s well - established reputation and the direct contribution of the specialist technical and operational know - how needed to monitor the financial stability of the eu area. appointing the president of the ecb as chairperson of the esrb would help to guarantee the adoption of a consistent approach in pursuing monetary stability and safeguarding the stability of the system. the legal basis for the esrb will be article 95 of the treaty, but it would be advisable to consider appealing also to article 105 ( 6 ), under which the ecb can be assigned specific tasks in respect of prudential supervision, so that the institutional nature of the link between it and the esrb and the modalities of the ecb β s involvement in the latter β s activities may be established clearly and with the appropriate guarantees. ( ii ) linkage with micro - prudential supervision. macro - prudential supervision by the esrb can be effective only if the analyses and assessments of the risks to financial stability serve to orient the priorities of micro - prudential supervision on intermediaries and financial markets. coordination between the esrb and the esas needs to be very strong even in the analysis phase, so as to ensure a sharing of approaches and speedy and efficient exchange of information. in particular, risk assessment should be based on the extensive direct involvement of the colleges of supervisors. if the aim is to have the results of macro - prudential analyses used in the supervision of financial groups, the colleges must be able to contribute actively to identifying the main risk factors and the policy options. on the other hand, the esrb must be in a position to acquire the micro - prudential information necessary for analysis of the risks, with a special focus on large banks. the exchange of information between the european supervisory authorities and the esrb should be governed by a protocol of cooperation, so as to ensure observance of the rules on the confidentiality of supervisory data. when highly confidential information is involved, it could be sent in anonymous form. ( iii ) effective macro - prudential instruments. the esrb β s main instrument will be the power to send recommendations to the competent authorities. separation between the entity | 0 |
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