sentenceA
stringlengths 2
7.69k
| sentenceB
stringlengths 2
7.69k
| label
float64 0
1
|
|---|---|---|
As an example, I would like to mention the work carried out by the ACPR with representatives of digital asset service providers (DASPs) on theapplication of anti-money laundering and counter-terrorism financing (AML/CFT) rules to the cryptoasset sector. As you have understood from these examples, at the Banque de France and the ACPRwe cannot envisage taking action without interacting with the innovative financial ecosystem that you largely represent. 3. This brings me to my last point: what are the challenges that we must not miss collectively? I would particularly like to emphasize here the issues related to the regulatory framework for the transformation of the financial system. The digital finance strategy published by the European Commission is already a year old and the roadmap includes many useful and structuring projects for the future. Already, the discussions on the MICA (crypto-assets) and DORA (operational resilience) projects illustrate the need to reconcile professionals’ knowledge and operational realities with the general risk control objectives in order to achieve the balance between innovation and financial stability that I mentioned earlier. From my point of view as a supervisor, progress still needs to be made on these texts to reconcile the necessary pragmatism and the necessary flexibility that the search for this balance implies with the requirement for risk control and the prevention of regulatory arbitrage. However, the projects that will be launched in the future are no less crucial. | Strengthening of the current account position is continuous, with gradual closing of the deficits. Some countries even exhibit surplus, such as the case of Slovenia, Czech Republic, Croatia, Bulgaria and Hungary. Chart 5 Current account Source: IMF, BOP database 6 The averaged numbers exclude data for Montenegro and Serbia due to the shorter time span of their BOP series. 8 Current account adjustment Source: IMF, BOP database Observing the adjustment, through structural lenses, one can notice that the adjustments in the current account, was predominantly driven by the balance of goods and services. The deficit in the balance of goods narrowed from an average of 15.6% of GDP in the 2000-2008 period to 10.6% of GDP, and in the following 2009-2013 sub-period to even lower share of GDP in the last four years of 8.2% of GDP. Additionally, the surpluses in the services shows steady increase, a dynamic that is more visible in economies with more developed tourism sector. While the initial adjustment in the acute phase of the crisis was through compression of imports, what followed afterwards was remarkable shift in export, which kept the trade deficit markedly bellow the pre – crisis level. Hence, in 2018 the average trade balance hovered around 8% of GDP, compared to 17% of GDP before the crisis. Imports is close to its pre-crisis level, while the level of exports surpasses it by close to 10 p.p. of GDP. | 0 |
18.09.2019 Monetary policy and bank profitability in an environment of uncertainty 10th Conference on the Spanish Banking Sector, organised by the IVIE and the University of Valencia Pablo Hernández de Cos Governor Ladies and gentlemen, good morning. I should like to thank the Valencian Economic Research Institute for the invitation to speak at this conference on the Spanish banking sector, which this year marks its tenth anniversary. I am honoured and delighted to participate in this event and share some reflections with you regarding the current profitability of Spanish banks and the main challenges that will shape their future. As you know, this is a subject that is attracting a lot of attention in Europe, both on the part of analysts and supervisors and the industry itself, owing to the concern about banks’ low profitability. Before I address this issue, allow me to start by describing the economic situation in the euro area and, in particular, the decisions taken by the Governing Council of the European Central Bank (ECB) last week. This is very relevant for the financial system, insofar as it is the context in which its activity will be carried out over the next few years. 1. The economic situation in the euro area and the monetary policy response The international economic context has undoubtedly become more unfavourable over the past year, with a slowdown in growth and, in particular, in trade. | In addition to having an impact on profitability through higher legal costs, this situation has been accompanied by a reputational deterioration which, if not reversed, may lead to a loss of business in the medium term. This is particularly significant in a setting such as the present one with the emergence of new competitors described above. Consequently, it is essential for the sector to recover customers’ trust as soon as possible, this being a key asset in the financial business. Also, Spanish banks have to complete their adaptation to the new international regulatory and supervisory framework. As indicated, although their capital ratios are above the minimum requirements in the area of solvency, the Spanish banking system still remains below other European countries in the case of the highest quality ratio (CET1). Strengthening capital would not only lead to greater resilience to adverse shocks but it would also bring down issuance costs.5 In addition, higher solvency would help facilitate compliance with MREL requirements (Minimum Requirement for own Funds and Eligible Liabilities) that Spanish banks will have to gradually meet over the coming years. It will be a considerable challenge for smaller banks to comply with these requirements since they do not usually obtain funding by regularly tapping the capital markets. Lastly, another significant challenge is that associated with climate change and the transition towards a more sustainable economy which, although it affects all economic agents, has a particular impact on the financial sector. | 1 |
This year's conference will feature a very important topic, given the current economic context marked by a sharp increase in energy prices and the uncertainty regarding the war in Ukraine and the related sanctions. As a sad digression, I recall that last year's NBR-EIB conference was on the Eve of the war, on February 23rd. Coming back to the effects that can already be seen in the households' and investors' confidence, there is a deterioration of the economic climate expectations, there are pressures in the economies of our major trading partners and the risk perception towards economies in the region, with impact on the financing costs. 1/3 BIS - Central bankers' speeches As we know, this event centers on the EIB's Investment Survey, an excellent country analysis conducted by the Bank. The conclusions of this survey are relevant for both companies and authorities, including the National Bank of Romania, as they capture appropriately the opinions of the real sector on some key issues, such as: (i) the most pressing problems that firms are facing in their activity; (ii) the investment needs and priorities; (iii) challenges raised by climate change and energy efficiency. The survey shows that firms in Romania have become less optimistic regarding investment conditions for the year ahead. While this is a worrying trend, we are rather positive that Romania will be able to overcome the main problem identified, the energy costs, in the near future. | The total capital ratio remained adequate, above the EU average, but the capital reserve shrank once with the marking to market, because of the fast-paced interest rate rise. Asset quality continued to improve, with the non-performing loan ratio falling to European levels and the NPL coverage by provisions staying at significantly higher levels than the European average; profitability increased. Yet, Romania's banking sector faces a number of vulnerabilities: (i) expectations on a higher risk of default on private sector loans amid worsening macroeconomic conditions, the uncertainty about future developments, and growing debt service due to higher interest rates, (ii) the close link between the banking sector and the government sector, and (iii) the polarization of credit institutions by size. The slowdown in lending, which started in the second semester of 2022, was also due to the rise in financing costs amid the tightening of both monetary policy stance and 2/3 BIS - Central bankers' speeches credit standards. In the second quarter of 2022, banks tightened credit standards for loans to non-financial corporations and to households, and were expected to continue to do so in the third quarter of 2022. The prolonged energy crisis, the heightened geopolitical tensions and the mounting uncertainty about the economic outlook prompted banks to reassess the level of risk. In respect with challenges raised by climate change and energy efficiency, as of May 2022, the NBR started collecting information on green loans from banks. | 1 |
The return generated by Norges Bank’s investment management in 2008 was 3.4 per cent lower than the benchmark portfolio used as performance measure. This is considerably weaker than might have been expected in light of our investment strategy, which relies on a large number of small, independent positions. In the period since 1998, the Fund has recorded a cumulative annual excess return of 0.04 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance. Norges Bank’s aim is to generate added value through our investment choices. After many years of high performance, the Fund is now right back where it started. The Fund’s underperformance and the fall in overall return can largely be attributed to the financial crisis. Assessment of the results of our active choices should, in our opinion, also take into account the long-term perspective on which the Fund’s investment strategy is based. Norges Bank’s investment results since 1998 are different for the two asset classes equities and fixed income instruments. Although active equity management generated negative results in 2008, these were well within the limits predicted by our risk models for any one year. However, since the beginning the annual excess return on equities has been close to ½ percentage point. We have established an equity management strategy that seems to be fairly robust to market fluctuations and that has, as we have seen, generated solid returns viewed over a longer period. Developments in the Fund’s fixed income portfolio have followed a different path. | Of course, there is no reason to ban books, but the unrest caused by this book is actually a positive thing. It is a sign of changing times, enhanced understanding, and diminishing prejudice. When that book was published in the mid-20th century, hardly anyone thought of it as being hurtful or offensive in any way. But now we see that it can indeed be those things, and this is why the publication of the book and the ensuing discussion are a positive indication of new times and changed perspective. Actually, recent decades have seen a fervent effort to recast well-known terms and names for all sorts of phenomena so as to avoid injuring those who, either temporarily or for the long term, might be vulnerable. This is also positive, though some of these philanthropic efforts have gone a bit too far in their enthusiasm. Another phenomenon we see is that newly coined terms soon become cloaked in a sort of semi-divinity in Iceland – like the term “international expansion,” which no one dares oppose lest he be accused of being an anachronism, devoid of a sense of “vision,” as it is now called, and of not knowing when the time is ripe for action. Upon closer scrutiny, the term “international expansion” seems to be nothing more than investment abroad – together with utilisation of knowledge and talent, of course. | 0 |
As with climate disclosure, such strategic assessments will need to go global if the world is going to stabilise temperatures below two degrees. That is one reason why the Bank is developing its stress testing approach in consultation with industry, the Credit Rating Agencies and the Network for Greening the Financial System (NGFS) – a group of 42 central banks and supervisors (including the JFSA) that represent half of global emissions. Fourth and finally, the TCFD should consider how asset owners could best disclose how well their portfolios are positioned for the transition to net zero. construction; automobiles; and food, agriculture, and forest products. The United Nations Environment Programme Finance Initiative worked with 16 large global banks to pilot the TCFD recommendations and develop a scenario-based approach for assessing the potential impact of climate change on the banks’ lending portfolios. 17 The Bank of England set out in its July 2019 FSR its intention to test the UK financial system’s resilience to the physical and transition risks of climate change. It will gather views on the design of the exercise and, as a first step, will publish a discussion paper in autumn 2019. More information available at: https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2019/july-2019.pdf. 10 All speeches are available online at www.bankofengland.co.uk/news/speeches 10 For sustainable investment to go truly mainstream, it needs to do more than exclude incorrigibly brown industries and finance new, deep green technologies. Sustainable investing must catalyse and support all companies that are working to transition from brown to green. | It provides them with a more stable environment than the former dollar-based regime. Today, the euro and the dollar act to some extent like mutual shock absorbers. As a result, small currencies are closer to their economic fundamentals than earlier, which gives third countries a real opportunity to implement independent monetary policies aiming at price stability. BIS Review 72/2004 5 | 0 |
The Spanish economy Spain, as I said earlier, has been one of the euro area economies that has continued to post high growth rates, compared with the relative slackness of the area as a whole. The new base-year 2000 National Accounts estimates for Spain, released a few weeks ago, indicate that its GDP grew in 2004 at a significantly higher rate than the previous estimate (3.1% against 2.7%), albeit with a more unbalanced composition. Moreover, the growth rate has remained on a mildly accelerating path, which has continued into 2005 Q1, when output stood at 3.3% compared with the same period in 2004. As indicated in the Annual Report, it has not yet been possible to analyse in depth the new National Accounts series, although the first comparisons with previous estimates indicate that both datasets offer a fundamentally similar diagnosis of the economy’s performance. In particular, the higher growth the new figures - available so far from 2000 - show has confirmed the continuity of the long expansionary phase in train since the mid-nineties. The expansion has been the result of the notable momentum of domestic demand combined with high employment-generating capacity and the extension of the supply side of the economy, two mutually reinforcing phenomena over these years which have provided a sound base for growth. Spanish euro area membership lay at the root of the significant expansionary impulses experienced by household and corporate expenditure. | Thus in 2004 Spanish credit institutions again achieved very high levels of profitability, whether measured as growth on the previous year or as ROE, which was more than 14% higher than the average reported by their international competitors. The high business volumes, which more than offset the negative effects of low interest rates on net interest income, and the tight control over operating expenses, which enabled the efficiency ratio to be further improved, are the two basic factors behind this favourable performance. Moreover, business activity has been stepped up precisely through instruments that provide institutions with collateralised assets, specifically mortgage loans, which are characterised by lower default rates. Finally, this favourable earnings performance is also a result of the diversification of income sources, with significant growth of those associated with the provision of collection, payment and non-banking product services. Solvency remains at levels comfortably above the minimum regulatory requirements, although the strong growth of business, and therefore of capital requirements, meant that the bank solvency ratio decreased slightly in 2004 with respect to 2003. In the case of Spain, this solvency was strengthened by a rigorous bad debt provisioning policy. That said, the more optimistic and favourable the central scenario, the greater the need to pay careful attention to potential fragilities. | 1 |
This will equip supervisors to deal with the future evolution of Basel II in a constructive and coordinated way. I also foresee greater transparency surrounding the risks faced by banks, and in how banks are measuring and controlling them. In the future, I expect banking supervisors to place greater emphasis on the techniques of securities regulators by requiring more information to be disclosed to the markets and the public. We will likely place even greater reliance on market processes and corporate governance to ensure that banks are soundly managed and well capitalised. Sound precepts of risk management and prudential supervision While there will inevitably be ongoing challenges to the vision of capital adequacy embodied in the new framework, particularly to its more technical aspects, I have no doubt that the sound precepts of risk management and prudential supervision that underpin the new framework will be an enduring feature of future versions regulatory capital requirements for banks. Alas, the requirements and modeling of certain types of risks may get excruciatingly complex. Indeed, for some of us, they have already reached that point. But in selecting and imposing such requirements, supervisors will be practical, and will look to the best risk management practices of banks and other financial institutions as the basis for setting risk sensitive capital requirements. And as supervisors become confident that the risk management processes of an institution are appropriate to match its risk appetite and operations, minimum capital requirements will edge downward. | The charge that central banks are out of monetary ammunition is wrong, but the widespread absence of global price pressures demands that our firepower be well aimed. Indices of policy uncertainty are about 1¼ times their pre-crisis averages in the US and Japan, and as high as three times in China. In the UK, progress since the financial crisis has been more than totally unwound this year with the measure having risen to five times its precrisis average by the start of the official referendum campaign (Chart 3). 5 A closely watched measure of economic uncertainty – the VIX – spiked when the global financial crisis hit. Measures that combine this with other sources of economic uncertainty, such as dispersion among forecasters’ growth projections, households’ unemployment expectations, and currency volatility, show clear variation over time, and rise at times of economic stress. See Haddow, A, Hare, C, Hooley, J and Shakir, T (2013) “Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?”, Bank of England Quarterly Bulletin, Q2. 6 One way some of this has been measured is again to count occurrences in media articles of references to economics, uncertainty, and policy terms like “deficit”, “regulation” or terms relating to monetary policy. See: Baker, S, Bloom, N and Davis, S (2015), “Measuring economic policy uncertainty”, NBER Working Paper No. 21633, October. BIS central bankers’ speeches 3 While clearly these three uncertainty measures are related, distinct movements are visible. | 0 |
A number of data sets have already been, or are about to be, made available by the ESAs: banking sector data, collected by the European Banking Authority (EBA) on a quarterly basis, relate to: supervisory data on solvency, credit risk and asset quality, earnings risk and balance sheet structure ( key risk indicators), as well as to data on large exposures, broken down by instrument and by sectoral and geographic counterpart, for samples of EU large banking groups; insurance sector data collected by the European Insurance and Occupational Pension Funds Authority (EIOPA) on an annual basis and, possibly, at a higher frequency relate to aggregate solvency and profit-and-loss data for large EU insurance groups; quarterly data provided by the European Securities Markets Authority (ESMA) refer to the number of shares admitted to trading in the European Economic Area (EEA), by country and by market, as well as to the list of EEA markets. 1 Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board (Official Journal of the European Union, L 331, 15.12.2010, pp. 162 ff.). 2 BIS central bankers’ speeches The ECB, in turn, is in the process of making datasets available to the ESRB and the ESAs that meet their requirements. | The analysis of financial institutions’ sovereign debt exposures constitutes another example where (regular) publicly available information has proved to be insufficient to carry out a reliable macro-prudential analysis. On the eruption of the sovereign debt crisis, market participants reacted abruptly to any news concerning those exposures. Analysis on the basis of aggregated data on banks’ consolidated foreign claims vis-à-vis the public sector in several countries proved to be too imprecise. When the individual exposures to sovereign debt of the largest players in the 4 BIS central bankers’ speeches European banking system were released by the EBA in the context of the stress test exercise in July 2011, spillover effects diminished and markets started to differentiate across the banks. In this case, enhanced transparency proved to be helpful in influencing markets and market participants’ behaviour. Examples of indicators where individual bank data would sharpen macroprudential analysis are numerous. In the context of the analysis and assessment of funding vulnerabilities, reporting on banks’ reliance on retail and wholesale funding has ample scope for improvement. Details of banks’ deposits, interbank, senior and subordinated debt are poorly disclosed, and the analysis based on loanto-deposit ratios, currently the best proxy for maturity mismatches, can provide an only incomplete picture of possibly emerging imbalances. A critical area is also that of asset quality indicators, the comparability of which is very poor across banks in Europe on account of different definitions of non-performing assets and loan loss provisions. | 1 |
Early last year, renminbi was estimated to represent 1% of the global foreign exchanges reserves, and the share will grow. Recently, we have also started to see interests in SDR bonds, with the inaugural issuance by the World Bank in China’s domestic bond market, followed by subsequent interests from commercial entities. Having this seminar thus at this juncture is indeed very timely. Uneven global growth with gravity shifting to Asia, particularly China For the past couple of years, the global economy had softened, with a marked slowdown observed throughout both the developed and emerging economies. The International Monetary Fund (IMF) recently revised their global growth forecast to 3.1% for 2016, from 3.2% previously, reflecting softer-than-expected growth in advanced economies and the impact of Brexit. Global trade continued to be subdued, with the World Trade Organization (WTO) expecting only a 1.7% expansion in 2016, marking the slowest pace of global trade growth since the global financial crisis. While China is also contending with moderation in growth during its economic transition, it continued to become the largest contributor to global growth. The gravity centre of global growth has for now, shifted to emerging economies, particularly Asia. China’s slowdown is not all negative – as China’s economic transformation, through various efforts to restructure its economy and internationalise its markets, are important towards a more sustainable path of development. Furthermore, a 6.7% growth rate is an economic performance many would aspire to. | Liquidity needs to be deployed and invested to generate returns. As the liquidity pool increases, financial institutions should capitalise on this and develop the range of renminbi money, bonds and equity products, which can leverage on the RQFII access. The impact of the Chinese economy on Asia, including Malaysia has been significantly broadbased and encompassing. Financial linkages with China have strengthened. China’s financial markets, already among the world’s largest markets, will be home to a growing number of global Chinese multinational companies with global outreach. The strong interest and commitment to infrastructure building and financing will be a long term theme that will shape Asia and China’s presence in the global markets. There are huge potential that lies ahead and we must be ready to tap the opportunities in all these initiatives. Our financial institutions, corporations and businesses should work together to ensure the readiness of our businesses and economy to keep up with the developments and capture these opportunities. With this, I wish you will have a fruitful discussion and insightful conference today. 4/4 BIS central bankers' speeches | 1 |
A feature of the current stage of the development of the euro money market, which is particularly worthy of note, is that differences in overnight interest rate spreads mainly reflect differences in the credit standing of banks rather than that of the country in which the transaction takes place. 1 BIS Review 63/1999 These structural developments are, of course, positive. For the Eurosystem (i.e. the ECB and the national central banks of the 11 countries participating in the euro area) the existence of a deep and liquid money market enhances the efficiency of monetary policy operations. In this respect, I should like to draw your attention to the “market friendliness” of the framework applied by the Eurosystem to the conduct of monetary policy operations. By this I mean that the framework is based on tenders in which markets decide who receives the liquidity. The standing facilities are open and recourse to the marginal lending facility is not subject to scrutiny. In addition, the list of eligible collateral is extensive. Prospects for the development of financial markets in the euro area Looking now at the financial markets from a broader perspective, it is important to remember that the financial markets of the euro area began the process of integration before the start of Stage Three of Economic and Monetary Union. An indication of the pace of integration before January 1999 is provided in particular by the evolution of spreads between yields on the bonds issued by the various central governments of the euro area. | In this regard, the smooth changeover of the financial system to the euro demonstrates the virtues of efficient and careful forward planning. Third, I do not view efficiency and stability of the financial system as being contradictory. In many ways these qualities actually support each other by laying a firm foundation for the financial system. An inefficient financial system, in addition to being costly to society, can be more vulnerable to shocks. At the ECB, we play our part in the evolution of the euro area financial system by providing it with stable monetary conditions. By creating an environment of price stability, we allow private sector agents to focus their attention on the questions that are most relevant to their activities and to take advantage of the benefits of this stable environment, such as the lengthening of their planning horizons. 5 BIS Review 63/1999 | 1 |
So the economics of banking do not suggest that bigger need be better. Indeed, if largescale processing of loans risks economising on the collection of information, there might even be diseconomies of scale in banking. The present crisis provides a case study. The desire to make loans a tradable commodity led to a loss of information, as transactions replaced relationships and quantity trumped quality. Within the space of a decade, banks went from monogamy to speed-dating. Evidence from a range of countries paints a revealing picture. There is not a scrap of evidence of economies of scale or scope in banking – of bigger or broader being better – beyond a low size threshold.12 At least during this crisis, big banks have if anything been found to be less stable than their smaller counterparts, requiring on average larger-scale support.13 It could be argued that big business needs big banks to supply their needs. But this is not an argument that big businesses themselves endorse, at least according to a recent survey by the Association of Corporate Treasurers.14 Take Grameen Bank – not a household name in the UK, I realise. This grew out of a microfinance project in Bangladesh which began in 1976.15 Grameen operates as a set of local credit cooperatives, often comprising as few as five members. The bank’s relationship with its borrowers is bound not by legal contract but by trust. | For those aspiring to senior roles in technology, such postings may even be necessary, as the competition for such jobs is at a global level. Next, what can financial institutions do to help grow the pipeline of Singaporean technology professionals? One, they can collaborate with polytechnics and universities on apprenticeships to prepare students for technology jobs. JP Morgan is looking to hire more than 30 polytechnic graduates in their 1-year Apprenticeship programme for the Tech and Ops function this year. Apprentices will receive on-the-job training in product knowledge, personal development and professional skills, as well as exposure to top professionals across different businesses within the bank. Two, financial institutions can hire individuals from a broader range of backgrounds and upskill them into technology roles. DBS Bank has a skills development programme to train individuals with STEM backgrounds or have taken some STEM modules in specialised technology skills. Individuals will be trained to take on roles in areas such as product development, platform infrastructure, or information security. Three, financial institutions can set up specialised facilities to build up technology capabilities in their workforce. Standard Chartered Bank launched its global learning hub diSCover Lab in Singapore, in December last year. The aXess Academy, one of nine academies within the Lab, aims to train over 2,100 of its Singapore-based technology talents in areas such as cloud transformation, open banking solutions, cybersecurity, and client digital journeys. Finally, how is the government helping to grow the tech talent pool? | 0 |
In more stressed market conditions complexity and lack of transparency might lead investors to turn away from regulatory measures of risk and rely on simpler but cruder approaches. Progress towards an International Capital Standard should help. More generally, it is vital that insurers maintain discipline in underwriting, reserving and capital management, notwithstanding tough trading conditions in some parts of global insurance markets. 9 All speeches are available online at www.bankofengland.co.uk/speeches 9 Appendix: Breakdown of insurer capital generation used for PRA business model analysis This Appendix sets out a generic break-down of the change in an insurer’s capital surplus over the Solvency Capital Requirement (SCR) from one reporting date to the next, used by the PRA to understand how an insurer generates Solvency II capital. The example shown is for a life insurer. Separate reporting of capital generated from new business as opposed to existing business is key. Supervisors also find it valuable to see this split by material product line. Separating out the effect of the Risk Margin and Transitional Measures on Technical (TMTP) provisions means supervisors can see the underlying business returns. Experience variations and changes in operating assumptions are combined into one line item, alongside the line for economic variance. Each combines several possible items to show the result of market factors or those items under management control. Here this also includes the insurance assumptions built into the pricing of business and feeds into the assessment of management forecasting. This item could sensibly be split further at the cost of simplicity. | 3 https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-insurer/new-insurer-start-up-unitguide.pdf?la=en&hash=310E7B09C241113F97CDDCC36F339DAF90911057 4 https://www.bankofengland.co.uk/prudential-regulation/letter/2018/market-conditions-facing-specialist-general-insurers-feedback-fromrecent-pra-review-work 5 All speeches are available online at www.bankofengland.co.uk/speeches 5 Chart 3: Progression of claims by accident or underwriting year Responses to Anna’s letter have acknowledged almost universally the concerns raised about the wider market. The quality of insurer’s individual responses has, however, been more variable. Where we have concerns over a firm’s response to our Dear CEO letter, we will follow these up, including with the Board where appropriate. Insurers must have effective controls to assess and monitor pricing and reserving adequacy. We also expect boards to consider seriously the sustainability of their business plans. Capital management, market risk sensitivities and disclosure A further concern for prudential regulators is that insurers will take more risks with capital, seeking to improve ‘return on equity’ by lowering equity if they cannot boost returns. Of course, that can be perfectly legitimate if insurers genuinely reduce risks. But amber lights flash when I read stories about brokers setting up teams to help insurers ‘optimise’ capital, including through ‘innovative’ use of reinsurance. We will also be alert to insurers seeking to reduce capital requirements through aggressive changes to internal models or over-optimistic business plans. This includes using our internal model output data to compare across insurers and monitoring model ‘drift’ indicators, such as the ratio of internal model to standard formula capital requirements. | 1 |
Philipp Hildebrand: Current state of the financial system in Switzerland Introductory remarks by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Berne, 14 June 2007. * * * I would like to use today’s publication of our Financial Stability Report as an opportunity to share some thoughts with you on the current situation of the financial system. I will start with the most important message – the Swiss banking sector and the financial system in general are in very good shape at the moment. Based on our analysis, the outlook for the future is also essentially positive. As stated in our report, the favourable situation in the Swiss banking sector comes as no real surprise. Developments in the economy and the financial markets in recent years have been very positive, both in Switzerland and abroad. Although economic growth has been strong, it has had practically no impact on inflation to date. The credit standing of borrowers remained high. In addition, despite repeated, significant short-term price corrections – as was the case last week – the stock markets rose sharply overall in an environment of low volatility. How can these positive developments be explained? And are there any risks involved – in particular for the stability of the Swiss financial sector? The good performance is not solely attributable to the favourable economic situation. Structural aspects have also played a role. | With that I mean first and foremost the increased level of efficiency that has been achieved in the financial system in the past few years. This rise in efficiency can be ascribed to the innovativeness of financial markets. New financial instruments, such as credit derivatives, enable banks to separate their credit risk and transfer it either completely or partially. This facilitates a better distribution of credit risk in the financial system and means that the risk is borne by those who want to and are able to bear it. The improved efficiency has resulted in a reduction in the financing costs of companies and households. Lower financing costs help the economy and stock markets to achieve greater growth. The increased efficiency also appears to have improved the ability of global financial markets to absorb shocks. The downgrading of General Motors’ credit rating in 2005, for instance, or the major losses suffered by the hedge fund Amaranth last year had no lasting impact on stock and credit markets. All in all, global financial markets are currently better able to absorb shocks, at least small to mediumsized ones. Accordingly, serious turbulence in the financial system seems less likely today. From a financial stability perspective, this is a positive development indeed. However, the greater the stability of the financial markets, the greater the risk appetite of market participants tends to be. This in turn can increase the likelihood of a crisis and, in the event of one occurring, the extent of the damage. | 1 |
BIS Review 159/2010 7 Recent data suggest that the recovery in domestic demand is slightly stronger than expected and that a more moderate growth process was assumed in the second half of the year. Indicators pertaining to private sector demand indicate that private sector consumption and investments continued to rise rapidly in the third quarter in annual terms (Figure 21). Consumption and investment expenditures are likely to accelerate in the final quarter of the year with the support of the counter-cyclical stance of monetary and fiscal policies as well as strengthening capital inflows. The steady rise in credits confirms continuing recovery in economic activity (Figure 22). Another noteworthy point about this period is that credit expansion continues to extend across a greater part of our economy in terms of both sectors and scale. Low interest rates and easing credit risk indicators suggest that credit growth will be strong, and therefore, the credit channel should continue to underpin domestic demand over the forthcoming period. 8 BIS Review 159/2010 As supply-side constraints have widely subsided, we believe that credit realizations rather reflect the dynamics pertaining to credit demand. The Loans Tendency Survey suggests that the borrowing motivation of firms tends to change in the post-crisis period. Firms used to demand credits to facilitate debt rollover or to finance their working capital during the crisis. However, as the effects of the crisis tapered off, loans for rolling over debts decreased while loans for investment purposes increased (Figure 23). | Finally, in order to be more flexible against the variability of capital flows, a new method for foreign exchange purchase auctions was designed and put into effect on 4 October 2010. To this end, a total of USD 1.76 billion was purchased in the first three weeks, USD 1.2 billion of which was additional purchase. Within the framework of these developments, while the yield curve has shifted down across all maturities during the third quarter, the decline was more significant for longer-term interest. Although surging capital inflows towards emerging markets have been effective, factors specific to Turkey have also contributed to the downward shift in the yield curve, as I BIS Review 159/2010 5 mentioned at the beginning of my speech. Lower-than-expected core inflation has contributed to the downside movement in the short term, while the drop in longer-term interest rates mostly reflects perceptions that the improvement in the relative creditworthiness of Turkey would become permanent (Figure 15). Dear Guests, Along with decreasing nominal interest rates, real interest rates have continued to hover at historically low levels during the third quarter. Moreover, Turkey’s real interest rates do not differ significantly from those of other emerging markets (Figure 16). 6 BIS Review 159/2010 Meanwhile, with the removal of extra tightness in financial conditions that emerged during the crisis, the effectiveness of the monetary policy on credit market enhanced; thus, the low level of real market rates were better reflected in credit interest rates (Figure 17). | 1 |
A number of foreign banks have already given up their banking licences but this has been largely due to problems in their home market or mergers with other institutions. The Asian crisis is likely to result in further rationalisation among the banks from the region as they are merged and restructured in their home countries. The reduction in business activities such as syndicated lending and trading in regional debt securities may cause other marginal players to leave Hong Kong, simply because they can no longer make money. However, I am sure that the bulk of foreign banks remain committed to Hong Kong and will want to retain a substantial presence here. This is not wishful thinking, but rather founded on hard logic. First, it simply does not make sense to suggest that within the space of a few months Asia, as a whole, has become less relevant to banks with global aspirations. Second, within Asia, Hong Kong retains its unique attractions as the main centre for banks to do business with China. Leaving aside short-term cyclical fluctuations, the economy of the Mainland is clearly on an upward path. Foreign, and indeed local, banks will want to share in the financing and advisory opportunities which this brings, and Hong Kong will remain the best location from which to launch these activities. The costs of doing business in Hong Kong must however be reasonable; and that it is why the current adjustment process is necessary as well as painful. | In the words of Alan Greenspan, “what turns otherwise seemingly minor imbalances into a crisis is an actual or anticipated disruption to the liquidity or solvency of the banking system”. When banks are already weak, for example because of a high level of non-performing loans, an external shock such as an attack on the currency will further damage confidence in the banking system. Banks will lose domestic deposits and will find themselves unable to rollover short-term external borrowing. The resultant capital outflows will put further downward pressure on the exchange rate, force up interest rates and drive down asset prices. The customers to whom banks have lent will get into financial difficulties, further weakening the position of the banks. With their capital and liquidity impaired, the banks are in no position to lend, and this leads to the “credit-crunch”, and resultant shrinkage of the real economy that we are seeing in so many countries in the region. The reasons for the banking sector weaknesses are various. Lending excesses drove up asset prices and allowed companies to become over-leveraged. Poor risk management on the part of the banks themselves was compounded by ineffective banking supervision and lack of transparency which provided little scope for market discipline to be exercised until the problems were glaringly obvious. At that point, the market reaction was extreme. Even if supervisors did have the will to tackle banking sector problems in their countries, they were often subject to political interference that stood in the way of prompt corrective action. | 1 |
While these results are specific to the model and should not to be taken literally, they do suggest that policies should be assigned to the frictions that they have a comparative advantage in addressing. In the model, the limit on leverage always binds. So it is unsurprising that when adjustments to credit supply are called for, an instrument which acts directly on that friction – the macro-prudential instrument – is more effective than one working through several channels, namely monetary policy. So, to the extent that movements in bank capital and leverage are key factors driving risk taking and aggregate lending, the deployment of macro-prudential policy is likely to be more effective than trying to “lean against the wind” using monetary policy. The experiments shown in Chart 8 assume a single policy maker, who is able to commit to future policies. In practice it is probably more plausible to assume an inability to commit, as well as the possibility that decisions on monetary policy and macro-prudential policy are made by different actors. In particular, the latter allows us to investigate the risk of a “pushme, pull-you” outcome, in which the macro-prudential authority tightens the availability of credit and then the monetary authority just offsets that by lowering interest rates in order to stimulate aggregate demand to keep inflation on track. We first consider the case of a single policy maker who controls both instruments, but who is unable to tie his hands over future policy actions (Chart 9, red dashed line). | Adrian and Shin (2008) point out that even small policy rate changes can have a large impact if financial intermediaries are highly leveraged and the changes in the policy rate affect the relevant market interest rates. And there may be times when a mixture of words and modest interest rate action is effective at cooling excessive market exuberance; both the Reserve Bank of Australia and the Riksbank attempted to take some of the steam out of the house price boom in this way. But, generally speaking, monetary policy seems too weak an instrument reliably to moderate a credit/assetprice boom without inflicting unacceptable collateral damage on activity. Instead, with an additional objective of managing credit growth and asset prices in order to avoid financial instability, one really wants another instrument that acts more directly on the source of the problem. That is what “macro-prudential policy” is supposed to achieve. There are multiple dimensions to macro-prudential policy. On the one hand, it encompasses actions to make the banking system more robust to shocks, recognising the interconnectedness of financial institutions. This interconnectedness was somewhat neglected in the run-up to the crisis, when it was assumed that if banks were individually safe, then the system would be too. The presence of network externalities meant this was far from being the case. A key ingredient here is increasing not only the quantity of capital available to absorb losses but also its quality, as some capital instruments have turned out to be ineffective loss absorbers unless the bank is liquidated. | 1 |
In this regard, of course, this lending was also facilitated by special preferential programs issued by the government. The government adopted large-scale programs to support small- and medium-sized businesses, and we introduced our own mechanism: a special mechanism for preferential loans, which was in high demand. And we can see that banks, within the framework of such special instruments, issued about 18% of all loans to small- and medium-sized businesses. But the remaining increase in loans to small- and medium-sized businesses was carried out under normal market conditions, which is also a good factor. Moreover, in the first quarter of this year, we can see that the portfolio of loans to small- and medium-sized businesses 1/5 BIS central bankers' speeches has also continued to grow adding another 5%. Mortgages grew at a high rate — as in the segment of small- and medium-sized businesses, there was and still is incentive offered by preferential programs. The mortgage portfolio also grew significantly, by more than 20%. Moreover, it already reached almost half of the total retail portfolio, and in the first quarter, it also continued to grow, also by 5%. As you can see, the figures are quite similar for both mortgages and small- and medium-sized businesses. That is to say that there are positive trends in both. However, when it comes to mortgages (we have talked about this repeatedly), we are worried about the accompanying rise in housing prices in the primary market. | Elvira Nabiullina: Speech at congress of Association of Banks of Russia Speech by Ms Elvira Nabiullina, Governor of the Bank of Russia, at congress of Association of Banks of Russia, 28 May 2021. * * * Good afternoon, dear congress attendees, The pandemic is slowly but abating, there are signs that life is returning to normal, and in-person conferences are gradually coming back. All the same, we are lacking in real-life communication, so I am very glad to welcome you here today. Of course, there are changes taking place not just in how we communicate. We can see that the actions taken as part of our anti-crisis agenda are gradually being replaced by those on a development trajectory, as before. With account for the fact that the pandemic has had a serious impact on society, on the economy as a whole, and on the financial sector, we must think about the future, and about how the financial sector will help the development of the economy. Last year, the banking sector made a positive contribution amid pandemic conditions. It supported the economy, its clients, and, I am sure, will be able to further support the development of the economy. I would like to take this opportunity to thank the entire banking community for their wholly responsible behaviour during the pandemic. It is thanks to you, really, that we managed to greatly mitigate the negative effects of the pandemic. | 1 |
All of these factors reflect the design and intent of the new framework as well as the process that we followed to develop it. The third and final topic that I would like to address this morning concerns what supervisors are doing right now to prepare for Basel II’s implementation - and what banks can do as well. 4. What are we doing to prepare for Basel II’s implementation? Now that the framework has been published, the Basel II project has entered a new phase focusing on implementation. Over the coming months and years, reality checks will continue to play a role for both bankers and supervisors in ensuring Basel II’s validity and feasibility as we implement the new framework. For our part, I believe that we can divide supervisors’ preparations into three main areas of BIS Review 66/2004 3 focus. These include reviewing the calibration of the new framework; adjustments to the framework to reflect advances in risk management practices; and fostering a more consistent application of Basel II across jurisdictions. I’ll take a few moments to outline our work in each area. a) Evaluate calibration of Basel II First, the Committee has long expressed its commitment to ensuring that the framework performs as intended before it is implemented. This includes reviewing whether the framework delivers the amount of capital that we believe is necessary to protect the safety and soundness of individual banks on the one hand, and the broader banking system on the other. | We might view the entire three-pillar structure of Basel II as a series of built-in reality checks for management’s decision-making. In this regard, the three pillars of Basel II are intended to make sure that management assesses and controls its risks carefully and that it takes the steps necessary to allocate the appropriate capital. As you know, in the first pillar, the minimum capital requirements focus management’s attention on identifying, assessing and quantifying risk within a specified framework. This puts the onus of analysis and decision-making on the right set of shoulders: bank managers are in the best position to evaluate their risks and are ultimately responsible for responding to them. When banks consider their risks more comprehensively and work to evaluate rigorously the magnitude of losses that they may face, they are improving the quality of the information at their disposal. That, in turn, should improve their ability to arrive at sound decisions regarding the amount of capital that they may need to weather potential losses in the future. Considerable attention has been paid to some of the formulas and techniques that we have adopted in Pillar 1 to help quantify the potential for losses related to credit and operational risk exposures. We BIS Review 66/2004 1 must remember that these formulas are not revolutionary. | 1 |
the government on organic In line with the international appetite to agriculture, mainly due to the promote green financing, the Central multiple benefits that accrue from it, Bank has also joined the Sustainable the Central Bank expects to promote Banking Network (SBN) of the commercial scale organic agriculture International Finance Corporation (IFC), and dairy entrepreneurs through the which is a knowledge and capacity establishment of formal agribusiness societies and multi-stakeholder enterprises. building platform for financial regulators and banking associations of emerging markets on sustainable finance. As a A Loan Scheme for Promoting Rooftop member of the SBN, we would focus on Solar Power Generation: A new loan sustainable banking practices to help scheme, funded by ADB, will be banks to effectively manage Central Bank of Sri Lanka – ROAD MAP 2017 31 environmental and social risks in the finance, with the support of IFC, we projects they finance and support intend to conduct a workshop for the businesses that are greener, climate senior staff of banking institutions in Sri friendly and socially inclusive. As an Lanka during the first quarter of 2017. important step towards sustainable Central Bank of Sri Lanka – ROAD MAP 2017 32 6. | There was a similar experience in 2015 when the currency depreciated by 6.5 per cent after spending US dollars 2.1 billion of our reserves. Wasting large amounts of 5 3 August, Thursday the country’s external reserves, much of 6 26 September, Tuesday it borrowed, in a vain effort to defend 7 7 November, Tuesday 8 28 December, Thursday the currency, which has to be ultimately depreciated anyway, is clearly unsustainable. It is time to stop this pattern and commence building up of external reserves through sustainable Volatile global market conditions and Sri foreign exchange inflows. Lanka’s vulnerability as a twin deficit country underscore the vital importance The impact of global developments, of having a flexible exchange rate policy such as Brexit, recent Presidential to adjust to external pressures. Recent elections in the United States (US) as experience has clearly demonstrated well as interest rate hikes by the US that it is unsustainable to maintain an Federal Reserve, the forthcoming overvalued exchange rate at the elections in France and Germany in expense of external reserves. | 1 |
We will closely monitor inflation expectations, pricing behaviors and other factors affecting inflation in the upcoming period and maintain our tight BIS central bankers’ speeches 3 monetary policy stance by keeping a flat yield curve until there is a significant improvement in the inflation outlook. We aim to support the continuity of the balanced growth and capital inflows in Turkey during the global monetary policy normalization. To this end, we have changed the foreign exchange deposit rates that the banks pay when they borrow from the CBRT within their limits through the Foreign Exchange Deposit Market. As of 9 October 2014, the rates applied to banks' one-week maturity borrowings from the CBRT as a last resort facility have been reduced from 10 percent to 7.5 percent for USD and from 10 percent to 6.5 percent for EUR. Moreover, considering the increase in the size of the banks’ balance sheets and the CBRT’s international reserves, we announced that we will revise the banks’ USD 10.8 billion transaction limits in the Foreign Exchange and Banknotes Markets at the press meeting on “Monetary and Exchange Rate Policy for 2015”. In addition, we stated that it is crucial to further strengthen the currently solid structure of the banking sector for financial stability purposes. In this context, we announced on 21 October 2014 that we will provide further support to core liabilities to spur balanced growth and domestic savings. As an incentive, we decided to remunerate the Turkish lira component of required reserves of financial institutions. | However, the main drivers of this third-quarter fall in inflation were energy and core goods. Annual inflation continued to decline across the core goods category thanks to decreased negative effects of exchange rate developments. Regarding underlying inflation trends, there has been a significant improvement in the core goods category. Meanwhile, the services category produced a relatively negative outlook. In the third quar ter, the core inflat ion tren d reco rded a decli ne BIS central bankers’ speeches 5 following the favorable impact of the macroprudential measures and our tight monetary stance (Chart 11). Accordingly, the marked first-half inflation increase in core indicators was reversed in the third quarter. Yet, I would like to note that underlying trend indicators are still above the target-consistent levels. In this period, international commodity prices, especially oil, fell in line with the weak global growth outlook and USD-denominated import prices dropped. In addition to this favorable outlook of import costs, aggregate demand conditions and the relatively slow pace of growth in consumer loans alleviate the pressures on inflation. In fact, excluding food products and associated services subcategories, we see that annual consumer inflation declined considerably in the third quarter (Chart 12). In sum, the negative effects of cumulative exchange rate developments continued to wane in the third quarter, yet food prices remained on a relatively unfavorable track. The prolonged high level of consumer inflation and the ongoing deterioration in inflation expectations adversely affect pricing behaviors in certain categories, particularly services. | 1 |
Going a step forward, it is also noteworthy that emerging market economies, and in particular Asia – with China at its centre – may become some kind of a “spare engine” to world growth, buffering the impact of the turbulence on global activity. This idea of a “second pillar” for growth relies mainly on the observed strength of domestic demand in Asia, and the key issue here is whether this strength could be self-sustaining. Maybe, we will not be able to answer this question thoroughly until the macroeconomic impact of the turbulence unfolds completely and the trade channel works itself out. But, one aspect that is clear – even now – is that some rebalancing from the current investment-led pattern to a more consumption-based model is required. This is not a simple task, since the underlying causes of the current growth pattern in some Asian countries – including China – 2 BIS Review 56/2008 are manifold. Issues such as the catching-up process, the need of a large part of the population to secure future incomes, or the role of the public sector in providing schooling and pensions, have all a role to play as has been widely discussed in recent years by scholars and policymakers in the region. In fact, the recently published Asian Development Outlook delves on some of these issues at great length. As we will have the opportunity to discuss today, more developed financial systems can also greatly help to rebalance growth. | Let me start with labor income, which for most households is the dominant source of household income. As one would expect, differences in labor income across individuals of a given age tend to increase as people get older. Some of this is due to education and occupation choices – and how they impact income growth―and some is due to various events that individuals face in their working lives. Unemployment risk is an example of an adverse development that can substantially affect people’s careers and labor income during their lifetime. Over the period from 1976 to 2015, the overall unemployment rate averaged around 6.5 percent, but unemployment varied substantially across regions and across worker backgrounds. Unemployment was especially high for workers with lower earnings, a group that tends to have little savings to draw upon. Looking across demographic groups, younger workers, less-educated workers and those in manual occupations, as well as workers who identify as Black or Hispanic, experienced significantly higher average unemployment rates when compared to older and college-educated workers. These stark differences across demographic groups in terms of levels of unemployment are also evident in terms of how unemployment changed over business cycles, including the Great Recession. While the overall unemployment rate increased from 5 percent in December 2007 to 10 percent in October 2009, it increased substantially more for workers with lower earnings. In other words, looking at the national unemployment rate tells only part of the story of the labor market experiences for different groups of individuals. | 0 |
In my view—and I really cannot say this strongly enough—ensuring that the largest and most systemically important banks do robust capital and liquidity planning, have strong internal controls, do good risk identification and have very healthy amounts of capital (especially common equity) and liquidity resources is fundamental to fostering a stable banking system that can perform its critical financial intermediation role in both calm and stressed economic environments. What I hoped to do today is simply to point out that one of the key objectives of the original SCAP stress program—leaning into the wind during a severe economic downturn— might be getting less emphasis as the time since the financial crisis grows, the economic expansion continues, and the supervisory stress testing regime evolves. Thanks for your attention this morning. I hope that you enjoy the rest of the conference. 1 See, for example, Viral Acharya, Irvind Gujral, Nirupama Kulkarni and Hyun Song Shin. 2012. “Dividends and Bank Capital in the Financial Crisis of 2007 2009.” CEPR Discussion Paper No. 8801. February 2012; Beverly Hirtle. “Bank Holding Company Dividends and Repurchases during the Financial Crisis.” Federal Reserve Bank of New York Staff Report No. 666. March 2014; and David S. Scharfstein and Jeremy C. Stein. 2008. “This Bailout Doesn’t Pay Dividends.” New York Times. October 21, A29. 2 Beverly Hirtle, Til Schuermann and Kevin Stiroh. Macroprudential Supervision of Financial Institutions: Lessons from the SCAP, Federal Reserve Bank of New York Staff Report no. 409. November 2009. 3 Randal K. Quarles. | In the medium term, the renewed service will enable access with a simpler and more proportionate onboarding processes including streamlined testing requirements and interfaces such as Application Programming Interfaces (APIs). And increasing capacity significantly to facilitate more participants. This in turn should support greater innovation and competition within the payments sector in the future. Wider interoperability: Further down the line the CHAPS implementation of ISO 20022 will align with the UK’s forthcoming new retail payment system – the New Payments Architecture (NPA) for retail payments. The implementation of a common messaging approach – through the UK’s ISO 20022 Common Credit Message (CCM) – will deliver wider interoperability between payment types and makes it easier to switch between payment systems should the need arise. The Bank also continues to work with other central banks and operators to ensure that as a global standard, this provides greater interoperability and harmonisation with other international payment infrastructure – leading to an improved user experience, more efficient fraud detection and increased efficiency. Improved user functionality: The new system will be designed to better support the needs of users, for example enhanced liquidity management, the introduction of APIs and greater data availability. 3/6 BIS central bankers' speeches Strengthened end-to-end risk management: Since the operation of CHAPS was brought inhouse in November 2017, we have introduced a more robust system with greater oversight and governance. | 0 |
In the meantime, however, there are significant implications for emerging market economies, as global investors search for better returns – better than the near-zero rates they get on cash and treasury bills. With large amounts of liquidity now moving between markets, short-term shifts in investor sentiment leads to volatility in capital flows. We have seen how a shock in the European periphery can send money that was invested in emerging markets rushing back to the US or other safe havens. To be clear about it, there is a lot that is good about capital flows, including even short term flows. They add liquidity to markets, by bringing more buyers and sellers together. However, we know too that capital inflows can also be too much of a good thing. They can lead to asset prices, or exchange rates, becoming disconnected from fundamentals. And the sudden withdrawal of capital from emerging economies when investors switch from ‘risk on’ to ‘risk off’ in their portfolios can be destabilising. As I mentioned, the current global condition is unprecedented. The policy responses in the advanced countries too are without precedent. Globally therefore, we need some humility in understanding the benefits and costs of QE3 and easy monetary policies in the advanced countries. But it will be wise to strengthen our policy toolkits in Asia, so that we can deal with unpredictable and often excessive capital flows. There are some lessons that come out of our experiences in Asia and elsewhere, and policy responses that we can learn from each other. | As a matter of fact, the faster-than-expected economic recovery and falling interest expenditures have helped to improve Turkey’s fiscal outlook. The increase in tax revenues amid rapid economic growth and tax adjustments were the major drivers of the improved budget balances in 2010. Moreover, the relative slowdown in the growth of non-interest expenditures as well as the significant decline in interest expenditures driven by falling domestic borrowing rates contributed to the improvement in fiscal balances. 10 BIS central bankers’ speeches 31. Fiscal indicators in the MTP suggest that the positive outlook, which was also underpinned by the stronger-than-expected recovery in 2010, would continue in the upcoming period. Indeed, the recent data imply that the favorable outlook persists in tandem with the robust economic activity. Nevertheless, I would like to remind that in order to maintain fiscal discipline and ensure that Turkey continues to have more positive readings than other emerging economies, implementation of the institutional and structural reforms set out in the MTP remains critical. Esteemed Guests, 32. In the last part of my speech, I would like to mention monetary policy decisions in 2010 and the monetary policy strategy that we currently implement. In this context, I will first summarize inflation developments, and then, I will move on to monetary policy implementations within the inflation targeting framework. Monetary policy decisions and implementations 33. Inflation was mainly determined by tax adjustments and the course of unprocessed food prices in 2010. | 0 |
During the lockdown phase in March and April, it was of particular importance to support workers and firms affected financially. Unnecessary bankruptcies had to be avoided and the ties between employers and employees maintained. The fact that the Norwegian economy has weathered the crisis fairly well reflects the strong contribution of targeted fiscal measures, along with good welfare arrangements. The primary task of monetary policy is to maintain low and stable inflation, with a target of annual consumer price inflation of close to 2% over time. But monetary policy shall also contribute to high and stable output and employment and to counteracting the build-up of financial imbalances. By lowering the policy rate quickly and sharply, we helped to dampen the downturn by making it easier for indebted Norwegian firms and households to weather a demanding period. A policy rate cut generally strengthens household finances given the large proportion of residential mortgages, primarily at floating rates. Even though containment measures constrain activity in some sectors, low interest rates contribute, all else equal, to boosting consumption and investment. An example is the lift in housing investment from high turnover and price rises in the housing market, which then boosts overall economic activity. The interest rate level also has an impact on the krone exchange rate, which in turn is important for firms that compete in a global market. | At yesterday’s monetary policy meeting, the Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at zero percent. At the same time, we stated that the policy rate would most likely be raised in the latter half of 2021. In the Bank’s latest Monetary Policy Report, which was published in March, we presented a policy rate forecast that indicated that the policy rate would be raised gradually over the coming years. The forecast implied a somewhat faster rate rise in Norway than expected among our trading partners. Developments in the real economy and inflation in the coming years suggest a gradual approach. Raising the policy rate too quickly may stifle the recovery. We would then run the risk that the unemployed would remain out of work longer than necessary. The low level of global interest rates also has a bearing on how quickly it would be appropriate to raise the policy 3/4 BIS central bankers' speeches rate in Norway. An interest rate differential that is too wide may result in a stronger krone, which in turn will have a dampening effect on both economic activity and inflation. The economic outlook is still clouded by uncertainty. The pace of vaccination and relaxation of containment measures are crucial for when we can begin to live more normally. | 1 |
With our unique advantages and strengths – including the common law system and world2/4 BIS central bankers' speeches class financial regulations and market practices – Hong Kong will remain the leading portal for international investors seeking opportunities on the Mainland. 21. T he second trend that is creating opportunity in – and for – Hong Kong is fintech development. We already have a thriving ecosystem for finance and technology businesses here. This has been bolstered by the HKMA’s Smart Banking initiatives, which have catalysed digitalisation in the banking sector, driving faster and more efficient services for customers. I’m sure many of you are finding banking and payments much more convenient than before. 22. We will continue to work with the banking industry to apply technology to enhancing finance for customers in Hong Kong. We will explore greater use of artificial intelligence and data analytics in banking operations. We will also explore improvements to Hong Kong’s data infrastructure so that bank customers, particularly small businesses, can make better use of their own digital footprint to enhance their access to finance. And we will adopt the latest technologies for cross-border applications, such as international payments and trade finance. Our vision for Hong Kong to become a leading global fintech hub will create a wealth of opportunities for local and international players. 23. The third trend driving opportunity is green finance. Hong Kong is already at the forefront of promoting the role of finance in driving the transition to a more sustainable economy. | For a relatively 2/3 BIS central bankers' speeches small market, such as Albania, it is proved that the costs of non-performing clients are borne by the whole system, and individual strategies have no effective results. To provide an effective restructuring for clients in distress, it is indispensable to have an honest collaboration between banks, which ensures not only a more fair assessment of the client’s repayment capacity, but also optimises the time and cost of assessment for both the bank and the client. The Bank of Albania remains committed in supporting energetically such collaborative projects, by guaranteeing impartiality; meanwhile banks should show a good will in this regard. Last, in these days of daily technology advancement, banking business would not be able to survive without investing in technology, in the right time. All banks are fully aware of this, but the pace of development in each of them has been different. Thanks to the strong relations and exchanges with our European neighbours, and the firm aspiration to be part of the EU, a postponing of the necessary investments in this regard would be at the cost of competitiveness. But, investments in technology only, without the support of internal human resources, may expose banks to high operational risks and irreparable consequences. | 0 |
This has a direct bearing on ensuring financial stability. But because Basel II is developed from the current practice among banks in developed countries, some banks in emerging markets may have a large gap to fill. For example, in moving away from collateralbased to credit-based loan approval, banks must focus more on the ability to pay of customers and to make loan decisions in a forward looking manner. This requires a different set of expertise that focuses on risk assessment in the environment of changing economic cycle and asset quality. Next is the information system which is the most important foundation for achieving financial stability through capital adequacy. Whereas developed countries generally already have in place the necessary infrastructure in this regard, financial institutions in emerging countries have to build the system from the ground up, involving areas such as data collection, storage, analysis, and ways to effectively embed the information in the decision-making 8 BIS Review 98/2008 process. This step may take more time and effort because it involves building a knowledge base for quantitative analytical skills and ability to apply international best practices to the unique local settings of emerging markets. Another difficulty in Basel II implementation is that other players in the wider financial industry will be playing more active roles in the banking sector’s risk assessment. | However, market fluctuations, accompanied by shifts in saving behaviour, are nonetheless a source of business cycle 2 BIS Review 8/2010 fluctuations and substantial losses when banks have to write off loans to firms selling goods and services to households. With low risk weights for residential mortgages, banks can lend extensively, operating with a substantially reduced equity ratio. As a result, banks are more vulnerable to disturbances in funding markets. Thus, low risk weights for residential mortgages also lead to higher liquidity risk in our banking system. A high level of tax incentives for house ownership and a large volume of adjustable-rate mortgages contribute to wide fluctuations in activity and prices in the Norwegian housing market. 1 The rise in house prices over the past two decades has also been very strong compared with countries where housing bubbles have burst. We have been through the longest period of uninterrupted house price inflation. In real terms, house prices in Norway have tripled since the trough in 1992. House prices fell in 2007 and 2008, but have picked up again and have, in nominal terms, surpassed the summer 2007 peak. Norwegian household debt is high compared with households in other countries. The number of residential mortgages with a high loan-to-value ratio, i.e. above 80 per cent, has also increased. Periods of sharply rising house prices have historically been followed by periods of declining prices. House prices can fall considerably over only a few years. Loan-to-value ratios will then increase. | 0 |
Since the middle of 2003, inflation has been below the target of 2 per cent, and periodically far below this (Figure 2). It is really only during the past six months that inflation has once again begun to approach levels reasonably in line with the target. At the same time, growth has been high. Since 2004, GDP has increased by slightly more than 3 per cent a year on average. This is a fairly remarkable figure, both in historical terms and in comparison with many other countries, in particular Europe. All in all, inflation has been remarkably low, while growth has, if anything, been higher than usual. Despite the good growth, employment has developed weakly. The high demand for goods and services does not appear to have resulted in any great demand for labour. However, the labour market situation recently appears to have begun to improve. So, how can inflation have become remarkably low and employment have developed as weakly as it has, despite economic activity chugging along nicely? The economy appears to have been affected by forces that have held back both inflation and employment. What can these forces be? To begin with, it is worth noting that it is not only in Sweden that inflation has been unexpectedly low in recent years (Figure 3). In Norway, for instance, inflation fell heavily a few years ago in a similar manner to Sweden. In Finland inflation has been even lower than in Sweden. | As a result, they have been forced to rationalise and make their operations more efficient. This could also explain why employment has developed so weakly. More efficient production processes have enabled companies to meet rising demand without needing to recruit new staff to the same extent as in previous economic upturns. The fact that inflation has been below target for a good three years indicates that this was a development the Riksbank had not succeeded in predicting, although we did assume that inflation would fall when the previously rapid upturn in energy prices rebounded. Had we been able to foresee that inflation would be as low as it has been, we would possibly have maintained a lower interest rate than we did. However, we were far from the only ones to make inaccurate forecasts (Figure 6). On the whole, in recent years, analysts of the Swedish economy appear to have been surprised by both the strong growth and low inflation. For example, it was not until some way into 2005 that most analysts began to assume that inflation for the year would be below the Riksbank’s tolerated deviation interval. Of course, all analysts were aware that the economy was affected by, for instance, globalisation and the rapid developments in information technology. But it is a long step from there to being able to predict exactly how great the impact of these forces will be on, for instance, productivity and prices. | 1 |
Preference of traditional channels of service provision over e-banking In terms of service distribution channel, brick banks still have competitive edge over click banks as consumers still prefer to conduct banking transaction with human contact at bank branches or sub-branches. E-banking is not yet well-accepted by consumers on account of: • uncertainty surrounding accuracy of the services; • lack of transaction evidence that might be useful in case of dispute settlement; and • lack of knowledge among some retail customers. The use of automated teller machines is quite well-spread while the use of phone banking and Internet banking is still limited to a small fraction of customers. According to the survey, high-income retail customers tend to make use of phone banking and Internet banking more often than do low income customers. Usage of phone banking and Internet banking by corporate customers is still low, though 2 BIS Review 22/2004 large and medium corporate tend to use phone banking and Internet banking more often than do small corporate. Financial service needs expected in the next few years Due to the current low return on savings with commercial banks, both individual and corporate consumers revealed preference towards alternative saving instruments such as saving bonds and government bonds. As for financing, the needs expected by individual customers are those for the purposes of working capital, residential, education and business expansion, while those of corporate customers remain financing for long-term investment for business expansion and short-term working capital requirements. | Mindful of the importance of consumer protection, the Bank of Thailand already issued a regulation requiring financial institutions to disclose information, especially on effective interest rate and fee charged, financial position and operating results, so that customers can make well-informed decisions. Additionally, financial institutions will be required to have in place clear procedures for handling customer complaints. On a system-wide scale, the authorities will introduce a deposit insurance scheme in place of the existing blanket guarantee to ensure protection of retail consumers. BIS Review 22/2004 3 3. Supervisory concerns and challenges I have already touched on regulators’ concerns that directly affect consumer benefits. Now allow me to go through the concerns and challenges of retail banking from a wider perspective. First, we are concerned for those considering jumping onto the booming retail credit bandwagon without having sufficient skills and resources to capitalize on the key drivers of this market segment. Second, the risks inherent in credit extension, which have to be adequately monitored and managed. Third, the one that directly concerns us, regulators, - how to achieve a balanced objective of financial institution stability and fostering development, competition and level playing field. Drivers of retail banking business The gaps of financial services provided by financial institutions in Thailand reflect untapped opportunities in the retail sector awaiting those having the capability to fill in these gaps. The opportunities are open to banks with the right business models for the identified niche markets. | 1 |
Lim Hng Kiang: The Singapore financial services sector Address by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of Singapore and Minister for Trade and Industry, at the ABS Annual Dinner, Singapore, 29 June 2007. * * * Chairman, ABS Council Members of ABS Ladies and gentlemen It is good to be here tonight. The ABS Dinner is an excellent opportunity for the Singapore financial services community to get together, catch up and look ahead. State of the Singapore financial sector 2006 has been a good year for Singapore. The financial services sector has done particularly well. All in, financial services grew 9.2% in 2006, outperforming Singapore’s overall GDP growth of 7.9%. This momentum has carried into this year. 2007 first quarter growth for the financial services sector came in at 13% on a year-on-year basis. Growth has been broad-based, with brokerage, treasury and advisory-related services being the largest contributors. Volumes in the Singapore foreign exchange market have also grown steadily. The equity markets have been hot. Volume of securities traded has gone up sharply. The local debt market has also registered good growth in 2006. In the latest Annual Corporate Debt Review for 2006 which MAS released today, the total market capitalization of the Singapore bond market has reached $ billion. Indeed, the Government’s efforts to grow the Singapore Government Securities (SGS) market have produced results. Since 1996, outstanding SGS has grown from $ billion to $ billion in December 2006. This year we issued the first 20-year SGS. | This is what we have assumed in our latest Inflation Report forecast, where conditional on a smooth Brexit investment growth resumes in 2020 and 2021 (Chart 9). But we are unlikely to achieve full certainty until the final outcome of negotiations is known, and there is a risk that more persistent uncertainty could push out the pick-up in investment and continue to drag on growth. The weakness of investment also casts further doubt on how durable the resilience of the labour market has been. Usually business investment and employment rise and fall together – in aggregate, businesses either increase hiring and investment at the same time, or they cut them both. For businesses to be increasing employment at the same time that they are reducing investment suggests something unusual is going on. One explanation would be if they are substituting labour for capital, perhaps on the grounds that hiring would be easier to reverse in the event of a shock than capital expenditure. Another would be if demand is shifting away from capital-intensive, export-oriented businesses and into labour-intensive, domestically-focused ones. Either way, this shift away from capital and towards labour matters for the economy. Bank staff calculations suggest it has left the economy around 1½% less capital-intensive than we were forecasting ahead of the Brexit referendum. By itself that reduction in capital intensivity accounts for a ½% reduction in labour productivity, even before allowing for the additional impacts of foregone innovation and process improvement. | 0 |
Let me now inform you further on the monetary policy implemented by the Bank of Albania. 2. Bank of Albania’s monetary policy The primary objective of the Bank of Albania is to achieve and maintain price stability. In quantitative terms, the Bank of Albania aims to keep the CPI inflation at around 3.00%. The inflation target is set to be achieved in the medium-term period, while the actual inflation may be subject to short-term deviations from the target, due to unexpected shocks or shocks independent from the monetary policy. Monetary policy decisions are forward looking and in line with market principles. In 2013, the weak inflationary pressures were reflected in lower annual inflation, which averaged 1.9%, ranging close to the lower bound of Bank of Albania’s tolerance band. It pursued a downward trend during the year, being more pronounced in the second half of the year. Unprocessed foods inflation accounted for around 90% of the headline inflation, hence determining the direction and fluctuation of the CPI inflation. From the viewpoint of macroeconomic factors, consumer prices have reflected, first of all, the weak demand for goods and services, a factor that has generated low inflation over the last two years. Increase in demand, which was significantly below Albania’s production capacity, 2 BIS central bankers’ speeches generated weak pressures for rise in the labour and production costs, and in the profit margin. Supply-side factors also influenced inflation on the downside. | It will continue to be stimulating for the economy in the period ahead, as stated in our public communications. I must underline, however, that not all things can be solved by the monetary policy, and the central bank alone cannot achieve all. Many economies are facing the difficult situation of sluggish economic growth and low inflation rates. These conditions require all authorities at home to coordinate active policies and approach a new economic thought. This approach should aim at establishing a favourable climate for investments, boosting demand, increasing productivity in competitive sectors, supporting technology development, improving education level and implementing reforms in the labour market. In particular, I would like to draw the attention on the implementation of FSAP recommendations, to develop further the Albanian financial system and enhance its stability. I think that 2014 poses new and difficult challenges for sustainable and all-embracing economic growth. These challenges require long-term solutions and the work to face them must continue, without delay. Thank you. 6 BIS central bankers’ speeches | 1 |
Banks must not be able to reduce capital below a minimum level even if they extend loans that, according to the models, seemingly involve low risk. Second, regulation must to a lesser extent contribute to amplifying cyclical fluctuations. With losses now rising, as a result of the abrupt and pronounced turnaround, banks must increase equity capital. Consequently, the rules governing capital requirements amplify cyclical fluctuations. The rules must therefore require banks to build up strong capital buffers over and above the minimum requirement in normal times. Then the banks would not have to 4 BIS Review 60/2009 increase capital when a turnaround occurs, but on the contrary be able to absorb losses. This will counteract the need for banks to ration credit in adverse periods. Many Norwegian banks do not have sufficient buffers today to safeguard their own, their shareholders’ or the economy’s best interests. Third, banks’ funding methods make them vulnerable. Earlier, the two main sources of bank funding in Norway were retail and wholesale deposits. In recent years, banks have borrowed heavily in both domestic and foreign markets. During the crisis, this proved to involve high liquidity risk for banks. In the future, in regulations and in practice, deposits must again take precedence as the largest funding source for banks. We also anticipate that bonds collateralised by high quality mortgages will become important. The credit swap arrangements can be seen as building a bridge to such a market. | It means measures to reduce disruption to financial markets if a bank is wound up. And crucially it means agreement between the authorities in the countries in which these global banks operate on how they should be resolved if they fail. We have made a lot of progress on too big to fail. But we are not yet there. I do not think we can say with confidence now that we could resolve a failing global giant. Getting agreement on international standards to end Too Big to Fail is perhaps the most important regulatory priority for the G20 Summit in Brisbane in November this year. When you stand back and look at the progress of this unprecedented programme of international financial reform, on the capital and liquidity framework, on inter-connectedness, on shadow banking and on too big to fail, a huge amount has been achieved. 4 BIS central bankers’ speeches If we can get the progress that G20 leaders committed to this year by the Brisbane G20 summit in November we will have “completed the job” of agreeing most of the key international standards and rules. And, in many areas, we will have gone a substantial way to implementing them. And I am very pleased to say that the Bank of England has played a key role – and in many areas a leadership role – in moving this programme forward. And I hope we can continue to do this as, increasingly, we move into the implementation phase. IV. Have we succeeded? | 0 |
Because after the recent crisis, no one can have missed noting how much Sweden is affected by financial developments in other countries. So it is a major step forward that there is now international agreement on the need for tougher bank regulation. The reform package that has been agreed is called Basel III, and the proposed regulations will appear both in EU directives and Swedish legislation. In brief, the Basel Committee’s proposals entail tightening the regulations in four important respects. Firstly, the banks must hold more capital. Secondly, this capital must have better quality. Thirdly, a minimum requirement for the banks’ liquidity is being introduced, and this is completely new. There has been no regulation on this previously. Fourthly, there are stricter requirements regarding the banks’ risk management. This is what I will talk about today. It has not been easy to reach agreement on these issues. The process has been punctuated by negotiations and compromises all the way to the end. The reform package has nevertheless been produced relatively quickly, given the complexity of the issues and the many different interests involved. Some would probably say too quickly. But we at the Riksbank welcome the fact that the work was completed quickly. When the first spark of a crisis appears, awareness dawns at first slowly and only to a few, then the spark becomes a blaze and the drama begins. | They claim these involve too much cost. But these are the rules of the game. The fact is that we at the Riksbank have spent considerable time estimating the effects of the regulations to be introduced. Next week we will publish some our estimates of the effects in our Financial Stability Report. And our calculations show – even if they, like all estimates are somewhat uncertain – that the negative effects will be fairly limited. Above all, the costs for the banks are expected to be slightly higher. It is expensive to create new systems and establish new routines to manage risks and money flows. Holding more capital means that one ties up money that could otherwise have been lent out and generated interest income. And the same applies to holding more liquid assets; there is a cost in the form of lower interest income than one would have had if the funds were instead lent out. The banks will probably pass on a small part of these costs to their customers in the form of slightly higher lending rates. But here we are talking about changes of some few tenths of a percentage point for the average customer – perhaps slightly more for households and less for companies. One can probably also expect a dampening effect on the banks’ profits, and it is fairly natural that the required rate of return for bank shares will decline as the banks become more secure. The banks may also experience increased costs for long-term funding. | 1 |
Regions with a higher concentration of college graduates tend to be more innovative, have higher living standards and experience more rapid economic growth.2 So a college education plays an important role in helping individuals prosper, as well as in strengthening the broader economy. More recently, though, rising costs, increasing student debt and widespread reports of recent college graduates not being able to find good jobs have raised some troubling questions about whether going to college is still a good investment. In fact, some of our own research, including material that we discussed at our last press briefing, has shown the dramatic increase in student debt over the past decade.3 In today’s briefing, we’re going to take a 2 See, for example, Edward L. Glaeser, Jose A. Scheinkman, and Andrei Shleifer (1995) “Economic Growth in a Cross-Section of Cities,” Journal of Monetary Economics, 36, 117–43; Gerald A. Carlino, Satyajit Chatterjee, and Robert M. Hunt (2007) “Urban Density and the Rate of Invention,” Journal of Urban Economics, 61, 389–419; and Jaison R. Abel and Todd M. Gabe (2011) “Human Capital and Economic Activity in Urban America,” Regional Studies, 45, 1079–90. | According to Eurostat’s flash estimate, euro area annual HICP inflation was 0.3% in November 2014, after 0.4% in October. Compared with the previous month, this mainly reflects a stronger fall in energy price inflation and a somewhat lower annual increase in services prices. Taking into account the current environment of very low rates of inflation, it will be important to assess the broader impact of recent oil price developments on mediumterm inflation trends and to avoid spillovers to inflation expectations and wage formation. Against the background of recent oil price developments, it is crucial to recall that forecasts and projections are based on technical assumptions, especially for oil prices and exchange rates. On the basis of information available in mid-November, at the time the December 2014 Eurosystem staff macroeconomic projections for the euro area were finalised, annual HICP inflation was foreseen to reach 0.5% in 2014, 0.7% in 2015 and 1.3% in 2016. In comparison with the September 2014 ECB staff macroeconomic projections, they have been revised significantly downwards. These revisions reflect mainly lower oil prices in euro terms and the impact of the downwardly revised outlook for growth, but they do not yet incorporate the fall in oil prices over the past few weeks following the cut-off date for the projections. Over the coming months, annual HICP inflation rates could experience renewed downward movements, given the recent further decline in oil prices. The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. | 0 |
As part of such a resolution process, regulators are working to ensure that systemically important firms have viable recovery plans and that such firms have “living wills” that can help guide how such firms can be managed through a resolution situation. Second, to reduce the likelihood of disruptive and highly costly failures, regulators around the world are evaluating whether bail-in forms of capital might be used to help recapitalize firms when they would otherwise lose their viability, or, alternatively, to help facilitate the orderly wind-down of a firm. Bail-in capital might consist of a well-identified tranche of debt that would convert to equity only if and when a particular set of trigger conditions were met. Such triggers might include breaching a certain level of regulatory capital and/or a regulatory determination that without conversion the firm would no longer be viable. One considerable challenge is how to define a set of triggers in a way that is sufficiently transparent and objective so that the bail-in process does not act as a catalyst and precipitate a run on other firms that might appear to have similar characteristics. In principle, however, by helping to recapitalize the firm, bail-in capital could help to forestall the need for a forced, rapid liquidation of assets and this might help to facilitate the orderly wind-down of a large, global firm that otherwise could not otherwise be easily resolved. | Residents are also allowed to purchase, through authorised financial institutions, shares quoted on foreign stock markets, and are permitted to transfer foreign exchange abroad to pay for purchases of such securities. 3. By the same token, non-residents are allowed to buy and sell Turkish securities quoted on the Turkish stock market. They are also allowed to buy and sell Turkish government securities through intermediary institutions operating in Turkey. 4. A substantial part of the controls on capital movements were removed, greatly easing inflows and outflows of credit. Turkey has accepted the provisions of Article VIII of the Articles of Agreement. 5. To avoid excessive risks for the banks, new regulations were adopted governing the foreign exchange position of the commercial banks. The banks are free to set their own rates for buying and selling foreign exchange. Our foreign exchange system, described above, is very convenient for foreign capital flows. Now let me describe the main characteristics of our financial system. Even though our efforts to liberalise the financial system did not begin until 1980, the Istanbul Exchange Market has existed and operated since 1858. It grew out of the activities of Non-Muslim bankers in the Galata district of Istanbul. These operators, mostly Levantines, Jews, Armenians, and Greeks, used to risk their own capital by extending credit to the government, secured by pledges of future tax collections. | 0 |
18 See the Communique of Finance Ministers and Central Bank Governors, on which the Bank sits, March 2018, https://g20.org/sites/default/files/media/communique_-_fmcbg_march_2018.pdf. 19 See page II of the executive summary of the Financial Stability Report November 2017, https://www.bankofengland.co.uk//media/boe/files/financial-stability-report/2017/november2017.pdf?la=en&hash=F6D65F714A7DC28394BC4FCC9909CCD39E28AD10. 7 All speeches are available online at www.bankofengland.co.uk/speeches 7 Other reforms that form part of Basel III, as well as other elements of the post-crisis regulatory framework, will be implemented as part of the forthcoming new Capital Requirement Directive and Regulation. These are likely to be implemented in around 2020-21. Table 1 sets out the pipeline of policies to be implemented. New risks Turning now to the identification and handling of new risks. Regulators must avoid the temptation to keep on fighting the last war while failing to recognise other, new risks. The last war was mainly focussed on the inadequacy of bank’s capital and liquidity, the inadequacy of frameworks to tackle too big to fail, and the lack of individual accountability. And these issues are and will continue to be important in any future prudential regulatory regime. But the world has also changed since. As my colleague, Lyndon Nelson, has recently set out, technology is transforming the payments and banking industry and, together with opportunities, it brings with it new risks. 20 And his answer to fighting this new war was that PRA-regulated firms need to be on a WAR footing; that is, they should be able to withstand, absorb, and recover from operational shocks. | Decisions about whether or not to make an adjustment will be made on the basis of a careful weighing up of evidence of benefits and costs. In doing this we need to bear in mind that regulatory costs will often be easier to quantify than the financial stability and safety and soundness benefits. And depending on the case we may need to look beyond the banking system to capture all of the costs and benefits. For instance, unintended consequences of bank regulation might be felt not in the banking sector but in financial markets, financial infrastructures, and other parts of the financial system. Principle 3: we should aim to match a dynamic adjustment to the problem that has been identified. If we identify an unintended consequence of a particular regulation we should first seek to adjust that regulation to deal with the consequence. Similarly with any new risks that emerge. For instance, if a new risk that is identified is threatening the stability of the system as a whole it would seem appropriate to look to use a macroprudential tool to reduce that risk. Adjustments we have made already The Bank has already made several changes to the regulatory framework that can be thought of as dynamic adjustments. Two such changes have been made to the leverage ratio requirement. In response to a recommendation by the FPC, central bank reserves have been removed from the calculation of the denominator of the leverage ratio since summer 2016. | 1 |
That distinction has become the standard framework within which to analyse the optimal constitution of central banks. But such a distinction presumes the existence of a 16 Source: compiled by the Central Bank of Iraq, based on data collected by the United Nations World Food Program. BIS Review 5/2004 11 policy instrument that is uniquely available to the central bank. That instrument is the level of official short-term interest rates. But when interest rates are constrained at their lower bound of zero, the position is much less clear. Indeed, I shall argue that in such circumstances both instrument and goal independence are impossible. Rather when interest rates are at their zero lower bound, policy relies on successful cooperation between central bank and finance ministry. I shall assume that, when interest rates are zero, monetary policy takes the form of open market purchases or sales of government securities using central bank money. A well-known policy prescription, which has become known as unconventional monetary policy, is that the central bank should buy long-term Government bonds rather than the more conventional shortterm bills. The Bank of Japan did indeed follow this prescription. The logic of such a proposal is as follows. Long-term bonds are likely to contain a significant premium to compensate investors for their lack of liquidity - the fact that, in practice, investors face significant costs when switching between bonds and goods. | BIS Review 5/2004 5 while the peg was being defended, they were soon lowered to more sustainable levels. The expectations that had been built into forward exchange rates were proved correct. Chart 1: Exchange rates and monetary policy in Brazil, Jan 1998-Dec 1999 50 $ Per cent 0 45 40 35 0.5 Spot exchange rate (rhs) Overnight interest rate (lhs) 30 25 1 1.5 20 15 10 5 Implied forward exchange rate (rhs) 0 Jan-98 May-98 Sep-98 2 2.5 3 Jan-99 May-99 Sep-99 Source: JP Morgan and Banco Central do Brasil In the literature on target zones for exchange rates, it is assumed that raising interest rates is a successful method for supporting the exchange rate because of uncovered interest parity. But this ignores the possibility that raising interest rates to defend a fixed exchange-rate regime will simply call into question the durability of the regime itself and raise the probability that the peg or target zone will be abandoned. In such circumstances an increase in interest rates may lead to a fall in the exchange rate. A second example of the same phenomenon is the pressure on sterling during 1992 and its forced departure from the Exchange Rate Mechanism on 16 September of that year. | 1 |
Our welldeveloped social security system also fulfilled its role as an automatic stabiliser. Discretionary fiscal policy, by contrast, played a relatively minor role. One reason for this is that we have a federal system with extensive decision-making powers in the hands of the people. Another is the extensive global integration and openness of the Swiss economy. This means that much of the impact of any fiscal programmes designed to stimulate the economy would have been felt abroad rather than in Switzerland. There are certainly positive sides to the fact that fiscal policy in Switzerland was not used actively, or to a large extent, for crisis management – as is evident if we think of the problems of sovereign debt currently afflicting other countries. Yet we should not forget that monetary policy had to bear the lion’s share of the adjustment burden in its place. As I mentioned before, article 6 of the National Bank Act constitutes the foundation stone of our independence. However, the principle that the SNB should be an independent central bank is actually established at the highest level of all, in article 99 of the Swiss Constitution. This shows the importance attached to the independence of the SNB by the constitutional 2 These findings were taken into account when the European Monetary Union was founded. Under the Maastricht Treaty, a country planning to join the union must have an independent national central bank. | Philipp Hildebrand: The independence of the Swiss National Bank Speech by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at Avenir Suisse, Zurich, 21 June 2011. * * * The speaker would like to thank Peter Kuster for his support in preparing this paper. In addition, his thanks go to Rita Kobel Rohr for her helpful comments when drawing up the speech. Is the independence of the Swiss National Bank so extensive that it stands outside the reach of our democratic system based on the separation of state powers, on checks and balances? The topic of central bank independence is a matter of discussion beyond the borders of Switzerland. Around the world, a debate has started on the limits to power, in general, and the independence of central banks, in particular, and in some cases radical demands have been made.1 Because many central banks found themselves obliged to resort to large-scale unconventional measures during the financial crisis, it is not surprising that the debate is raging now. Central banks are indeed very special institutions. They hold the banknote-issuing monopoly and provide the domestic money market with liquidity. Consequently, they can never really be short of money. In Switzerland, the state has conferred the banknote-issuing monopoly on the SNB. This means that it always has the requisite means for meeting its obligations in Swiss francs. However, that does not stop it from making losses. As you know, the SNB had to report a large annual loss in 2010. | 1 |
That spiral defined the pre-crisis arms race in financial returns. It generated an equilibrium of synchronously high returns and pay, as banks unilaterally militarised as defence against their competitors. But as in military arms races, the resulting outcome was a sub-optimally risky one. High equity returns came through risky leverage. And high pay, especially in equity-based forms, further encouraged risk-taking.17 The resulting high-leverage equilibrium sowed the seeds of the financial crisis. With hindsight, it was easy to spot this market failure, the co-ordination problem. Banks and the financial system as a whole would have been better off had there been a benign, enlightened regulatory planner, able to co-ordinate banks on a lower return equilibrium. Unfortunately, there was not. ************ Over the past decade, trading in financial markets has undergone a technological revolution.18 The frontier of this revolution is defined by speed. A decade ago, trade execution times were measured in seconds. A few years ago, they were measured in milliseconds. Today, they are measured in microseconds. Tomorrow, it will be nano-seconds or pico-seconds. For technologists, this is a “race to zero” – the promised land of zero 12 Haldane (2011a). 13 Haldane (2011a). 14 Gabaix and Landier (2008). 15 Aikman, Haldane and Nelson (2010) provide a formal, multiple equilibrium model of this phenomenon. 16 McLean and Nocera (2010). 17 Cheng et al (2010), Fahlenbrach and Stulz (2009). 18 See, for example, Foresight (2011). | Georgsson, M., A. Vredin and P. Åsberg Sommar (2015), ”The modern central bank's mandate and the discussion following the financial crisis” Economic Review No. 1, Sveriges Riksbank. Haldane, A. (2020), ”What has central bank independence ever done for us?”, speech on 28 November, available at What has central bank independence ever done for us? - speech by Andy Haldane (bankofengland.co.uk). Heikensten, L. (2005), “The role of academics in monetary policy,” speech at Umeå University on 28 October, Sveriges Riksbank. 13 [20] Ingves, S. (2015), “The central bank’s objectives and means throughout history – a perspective on today’s monetary policy”, speech to Swedish Economics Association, Stockholm School of Economics, 6 May, Sveriges Riksbank. Jonung, L. (ed.) (2003), “På jakt efter ett nytt ankare. Från fast kronkurs till inflationsmål” (Hunting for a new anchor. From fixed exchange rate to inflation target), SNS förlag. Kydland, F. and E. Prescott (1977), ”Rules Rather Than Discretion: The Inconsistency of Optimal Plans,” Journal of Political Economy. Melander, O. (2021), “Effects on financial markets of the Riksbank’s government bond purchases 2015–2017”, Economic Review No. 1, Sveriges Riksbank. Norges Bank (2021), “Central Bank Independence. Lessons from History”, Nicolai Rygg virtual panel debate, 8 April, available at Central Bank Independence. Lessons from History (norges-bank.no). Rogoff, K. (1985), “The Optimal Degree of Commitment to an Intermediate Monetary Target”, The Quarterly Journal of Economics. Skingsley, C. (2016), “Developing the central bank mandate”, speech at the Austrian central bank, 13 September, Sveriges Riksbank, available at Skingsley: Developing the central bank mandate. | 0 |
4 See the Financial Times article “Draghi attacks bankers over ECB fears” from 9 February 2012. 5 Philippon, T., and P. Schnabl, (2013) “Efficient Recapitalization”, Journal of Finance, 68(1), 1–42. 2 BIS central bankers’ speeches bank resolution, which are founded on a strong change of culture – from easy public bailouts to a new culture of private bailing-in 6 – clearly go in the direction of preventing these distortions, while retaining the possibility of direct recapitalisation to safeguard financial stability. 7 The new resolution framework that is going to be implemented in Europe will help to support a sustainable growth of the financial sector by inducing financial institutions to internalise the negative spillovers originating from their failures. Thomas Philippon and his co-authors – among whom is the winner of the 2011 Germán Bernácer Prize, Lasse Heje Pedersen – have also contributed to the literature on systemic risk, a topic of particular policy relevance in which the ECB has also invested considerable research efforts. 8 In this paper, the authors argue that a financial institution’s contribution to systemic risk might be measured by its propensity to be undercapitalised when the system as a whole is undercapitalised – the “systemic expected shortfall”. They also advocate the introduction of a “tax” proportionate to each bank’s systemic expected shortfall which should cover losses in the event of a crisis. Let me now turn to Thomas’s second research area, namely dealing with the efficiency of the financial sector. | This line of research points to the wide range of subjects that interest Thomas Philippon already shown in his 2007 book “Un capitalisme d´héritiers: la crise française du travail” 12 6 See speech by Vítor Constâncio: Banking Union: meaning and implications for the future of banking at the Banking Union Conference, Navarra University, Madrid 24 April 2014. 7 See the opening speech entitled “The implications of bail-in rules for bank activity and stability” by Benoît Cœuré at the conference “Financing the recovery after the crisis – the roles of bank profitability, stability and regulation”, held at Bocconi University on 30 September 2013. 8 Acharya, V., L. H. Pedersen, T. Philippon and M. Richardson, (2010) “Measuring Systemic Risk,” working paper. 9 See, for example, the Vox article entitled “Finance and growth: Too much of a good thing?” by Thorsten Beck, 27 October 2013. 10 Philippon, T., (2010), “Financiers versus Engineers: Should the Financial Sector be Taxed or Subsidized?”, American Economic Journal: Macroeconomics, 2(3), 158–182. 11 Philippon, T. and A. Reshef, (2012) “Wages and Human Capital in the U.S. Finance Industry: 1909–2006”, Quarterly Journal of Economics, 127(4), 1551–1609. 12 Philippon, T., (2007) “Un capitalisme d´héritiers: la crise française du travail”, Éditions Seuil. BIS central bankers’ speeches 3 where he musters a lot of empirical evidence to show that the labour crisis in France stems from bad employers-employees relations associated with a system that “preserves inheritance, direct or sociological”. | 1 |
They do not reflect the underlying investment approach of the MAS which is conservative and emphasises steady, long-term returns. The profit outturn for the last FY reflects positive currency translation effects and higher investment gains. MAS’ underlying foreign investment gains remain fairly stable at $ billion on average. In FY2016/17, MAS made a gain of $ billion from its investment of the official foreign reserves. 5 / 10 BIS central bankers' speeches Currency translation effects, reflecting the depreciation of the Singapore Dollar against some major currencies, amounted to $ billion. Foreign investment gains therefore amounted to $ billion, compared to $ billion the previous FY. The increase was due to higher interest and dividend income, higher realised capital gains and lower valuation provisions made as global markets rose over the period. In fact, taking the two FYs together, the foreign investment gain averaged $ billion, not much higher than the average of $ billion recorded in previous years. A CLEAN AND TRUSTED FINANCIAL CENTRE Last year, I spoke about how the growth of Singapore’s financial centre has been underpinned by its reputation as a clean and trusted jurisdiction. Upholding high standards of integrity in the financial industry is an absolute priority for MAS. That is why we took very seriously the lapses in anti-money laundering controls among some of our financial institutions with respect to suspicious 1MDB-related transactions. | Working closely with the Commercial Affairs Department and the Attorney-General’s Chambers, MAS undertook a rigorous probe of these transactions which were part of a large, complex, cross-border money laundering scheme. Last year, I said that the findings on the 1MDB-related transactions that flowed through here had made a dent in our reputation as a clean and trusted financial centre. I believe we have begun the process of restoring that reputation. We have taken tough and unprecedented enforcement actions and sent an unequivocal message that MAS will not tolerate the criminal abuse of Singapore’s financial system. Just last month, we announced the completion of an intensive two-year long review of banks connected to 1MDB-related transactions known to-date. All in, we have closed 2 merchant banks and fined 8 banks nearly $ million – the heaviest aggregate financial penalties to-date. We have also issued prohibition orders (POs) against 4 individuals and served notices of intention to issue POs against 3 others for various regulatory breaches. MAS also issued lifetime bans, for the first time, against 2 of these individuals. MAS’ regulatory actions so far are based on what we know to-date. Thanks to excellent co-operation we have had with overseas jurisdictions, Singapore authorities were able to obtain good intelligence and piece together most of the significant flows from end to end. We have found nothing new in the latest filing by the US Department of Justice that warrants further action by us. | 1 |
The banks, which are particularly important because of the role they play in the payment system, are better capitalised than they were a decade ago. Credit risk management has also improved considerably. This applies in particular to the Swedish banks, which are now much better equipped to manage risks than they were prior to the bank crisis at the beginning of the 1990s. Central banks and financial supervisory authorities have also become better at assessing risks. Looking back, the really devastating bank crises have stemmed from a combination of soaring property prices and rapid growth in bank lending, and they have often taken place in countries with a fixed exchange rate. A growing number of central banks now closely follow macroeconomic factors that could lead to a build-up of imbalances in the financial system and publish their conclusions in special stability reports. The Riksbank is one of the forerunners in this field, based on the experiences gained from the Swedish bank crisis. For some years now, the IMF has carried out assessments of the functioning and safety of the entire financial sector in both developing countries and industrial nations. Sweden was subject to one of these FSAPs (Financial Sector Assessment Programs) last year and this year it will be the turn of Japan and the United Kingdom. These assessment programs compare the entire financial systems of the countries; banks, clearing houses, payment systems, legislation, supervisory authorities, central banks, etc. with the "best practice" in the world and any shortcomings are pointed out. | Low interest rates and household indebtedness I would like to conclude by saying something about my view of household indebtedness. However, before I discuss the last of the three risks that I associate with a low real repo rate I would like to clarify a matter of principle. I am one of those who believe that a long period with low interest rates can lead to various imbalances. Such imbalances can arise, for example, if credit growth is too rapid, if asset prices increase too much or if the price of financial risk is set too low.8 Unbalanced development is characterised by the fact that, for one reason or another, an excessive level of indebtedness arises in the economy. If the economy has fallen into a recession following such a period, the recovery may be very slow as households and companies will spend a larger part of their incomes on amortization payments rather than on consumption and investment. The financial crisis of 2008–2009 is the latest example that clearly demonstrates 8 For a similar discussion see, for example http://www.norges-bank.no/en/about/published/speeches/2012/annualaddress/ or 80th Annual Report, June 2010. BIS. BIS central bankers’ speeches 11 how important it is to avoid such a situation. The US economy fell into recession in early 2008 as a result of problems on the housing market and an excessive expansion of credit in the household sector. | 0 |
At the end of 2007, it accounted for about 60 percent of the global sukuk outstanding which now amounts to about USD100 billion. The sukuk market has been an important source of financing for productive investment activities, while for investors, it provides great potential for diversification into new asset classes. The issuance of sukuk has not only become a means of raising financing but it also provides access to a wider base of investors, both Islamic and conventional. The Malaysian bond market has also been liberalised to enable non-resident corporations to raise ringgit and foreign currency denominated funds from our market. International issuers may thus issue multi-currency sukuks or alternatively have the flexibility to swap domestic currency funding into other currencies. Stamp duty exemption for ten years beginning 2007 has been granted on these instruments. There is also withholding tax exemption on income earned by non-residents for investments in ringgit and non-ringgit Islamic securities. With the growing maturity of the market, it has been able to efficiently manage significantly large size issuances. Recently, a Malaysian telecommunications company issued the largest-ever sukuk in the world market that amounted to an equivalent of USD4.7 billion. Though the size was large, the issue was two times oversubscribed, indicating the depth of the market. As an investment destination, the Malaysian capital market offers a wide range of world class products. More than 85 percent of the companies listed on the Stock Exchange are Shariah compliant, representing about 60 percent of total market capitalization. | Zeti Akhtar Aziz: Economic outlook and business opportunities in Malaysia Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 5th IFSB Summit "Economic Outlook and Business Opportunities in Malaysia", Amman, Jordan, 12 May 2008. * * * It is my pleasure to welcome you to the Malaysia Country Showcase held in conjunction with the 5th Islamic Financial Services Board Summit. On behalf of the Malaysian delegation, I wish to thank you for your presence here to give us this opportunity to share with you the Malaysian business proposition and our drive to strengthen trade and investment ties between our regions. We have with us today a special panel to discuss the business potentials and opportunities in Malaysia. We are very pleased to be here in Jordan and to be given this opportunity to hold this event in this beautiful country. The current global economic and financial environment is being confronted with new challenges and uncertainties. The financial crisis in the United States has spread to other parts of the world, increasing the prospects for a global economic slowdown. We are seeing in the global financial markets, banks continuing to de-leverage and reducing lending activities, resulting in a contraction in credit supply. Going forward, financial markets are expected to continue to be volatile. In this environment, the fear of contagion is prompting investors to spread their investment and business risks and to search for new asset classes and for markets that provide stability. | 1 |
By comparison, we are still in the Stone Age in respect of deploying macroprudential policies. There is lots of scope for academia to help us out here, on both the theoretical and empirical fronts. Even so – indeed, in large part because of that state of relative ignorance – I think one can lay out some key principles that should govern the deployment of the FPC’s tools. It will be very easy for the future FPC, particularly during long periods of tranquillity, to slip into the temptation of neurotically twiddling the dials on its instruments or issuing recommendations left, right and centre. But what will determine the worth of the FPC will be whether it is successful in heading off the really big risks – in other words, avoiding a repeat of the sort of crisis we have just experienced. Ensuring resilience, rather than fine-tuning the credit cycle, must be the name of the game. Second, when the FPC does find it necessary to act, it will need to show resolution in taking the punchbowl away as the party is just getting going. With recent events so fresh in everyone’s memories, this may not seem much of an issue now. But in a decade or two’s time, when recent events have receded into history, such actions will be less welcome. No doubt there will be plenty of people willing then to claim that “this time is different” and that the FPC’s actions are unnecessarily inhibiting growth. | So, as yet, we do not seem to be in a liquidity trap in which yields can be pushed down no further. What to my mind is a more open question, though, is the degree of traction these lower yields have on demand at the present juncture. Looser monetary policy works in large part by encouraging households and businesses to bring forward future spending to the present. It is plausible, however, that such intertemporal substitution will be weaker when uncertainty is elevated and when banks and some households are concentrating on repairing their balance sheets. For instance, a modest fall in the cost of capital may do little to boost investment spending when the environment is so dominated by uncertainty about the outlook for demand. To illustrate this, Chart 9 shows the results from CBI business surveys of the factors holding back investment spending at the current juncture. Uncertainty about the outlook for demand is far and away the dominant factor. That does not mean that quantitative easing is impotent, as demand will still be affected by the wealth effect from the higher asset prices, as well as by any related exchange rate depreciation. But I think there are reasons to believe the effect of lower yields may be weaker than usual at the current juncture (in old speak, the IS curve may be quite steep, even though the LM curve may not be absolutely flat). | 1 |
Regulation and home-host issues There are many issues at the table, but in the context of this presentation I would like to divide them into two categories. The first category includes the issues of what regulations should be imposed on institutions and markets in the EU. How can we design laws and regulations that are flexible enough to fit all countries reasonably well, while strict and “harmonised” enough to support a single market? The second category is essentially about the relationship between supervisors and central banks in different countries – the division of labour, power and responsibilities. This category of issues has come to be broadly referred to as the home-host issues. I will just give a short comment on the regulatory issues, while devoting the rest of my time to the home-host issues. Regulation Regulation on the EU-level first of all faces the same basic trade-off as on the country level. The Riksbank’s view is that since almost all regulation involves costs – in terms of lower efficiency and growth – it should be the last resort and used only when there is a clear case of market failure. Some regulation is surely needed to ensure a stable and sound financial system and necessary consumer protection. But too much or too strict regulation will give rise to new costs that are higher than the original costs that regulation initially aimed to address. | In the event of a crisis it can only hope that the home country will take the host country’s situation into account when managing the crisis. The home country, on the other hand, faces a situation where it could be necessary for its central bank to provide emergency liquidity assistance (ELA) to support a bank which has a large part of its activities in other countries. Should the bank need to be reconstructed it would be the home country’s tax payers that would have to foot the bill – either by supplying the necessary capital to the bank or by supporting the deposit guarantee system with the funds needed to pay out insurance to the bank’s depositors. The imbalance between home and host countries may be further deepened by differences in size between the two countries. One case will be that of a big home country and a smaller host country. The banking group’s exposure to the host country is then probably relatively small on a consolidated basis. This results in the home country authorities spending relatively limited resources – in terms of staff – on the foreign subsidiary’s activities in the host country. If such a banking group runs into problems, the home country authorities will not necessarily view it as systemic, while the host country authorities certainly will do. How to deal with the home-host asymmetry? | 1 |
The draft Budget and the Stability Programme Update have introduced measures to increase pensions above the level established by the Revaluation Index, in 2018 and 2019, and to delay the entry into force of the Sustainability Factor, from 2019 to 2023. Allow me to reiterate what I have said in various addresses regarding this matter: it is a priority that we define, in accordance with social preferences, the substitution rates for the pension system that it is sought to ensure; and then, that we adjust revenue accordingly, so that sustainability is ensured. I believe this is a structural issue, requiring a debate not confined to the habitual discussions of an annual budget. Conclusions To conclude, I wish to highlight the fact that the Spanish economy is in its fifth consecutive year of growth, with the prospect that this trend will continue in the coming years, albeit at progressively more moderate rates. Set against this baseline scenario are a series of risks, which might shorten or moderate the current upturn. Accordingly, efforts to continue improving the Spanish general government budgetary position should not be delayed, so as to be able to effectively withstand potentially negative future developments. In this respect, fulfilment of the objectives set in the draft State Budget for 2018 and in the recent Stability Programme Update is crucial. Success will require strict implementation of spending policies and the continuous monitoring of revenue. | With respect to welfare benefits, the Stability Programme reflects the 1.6% settlement for the revaluation of public pensions, both in 2018 and 2019. This increase will be 3% this year, 2018, in the case of minimum and non-contributory pensions. I shall later return to this. In any event, given the trend growth in the number of pensions and the substitution effect arising from the new pensions replacing those that are terminated, which are generally higher than was earlier the case, the forecast growth in the budget earmarked for welfare benefits in 2018 (3.7%) may also be surpassed. Among the remaining expenditure items for this year, goods and services purchases will notably continue to be contained, and interest payments to decline, while there will be a significant increase in public investment. This latter development is partly in response to the inclusion in 2018 of the expenditure associated with amounts for which the government may be liable under the insolvency-related legal proceedings currently affecting certain toll motorways. But even after adjusting for this effect, public investment is expected to be more expansionary than other items, as was the case in 2017. All told, public investment is expected to stand at 2.1% of GDP in 2018, excluding the temporary effect arising from the above-mentioning legal proceedings, a level far below the average for the previous two decades, which was 3.6%. Overall, it may be concluded that the attainment of the budget deficit target for this year, namely 2.2% of GDP, is subject to significant risks. | 1 |
An increasing number of households experienced problems meeting their payment obligations, which led to problems in the US mortgage market. The 2 BIS Review 162/2009 problems then spread quickly to other countries with banks that had invested in the new financial products. These banks were not able to estimate the contagion risks in full, as the risks in these products were difficult to assess and even the credit rating agencies underestimated them. Uncertainty over the size of the problems led the banks to tighten their lending, which in turn impaired consumption and investment. Inadequate supervision and regulation With regard to the supervision and regulation of the financial markets, there has clearly been a lot left to desire in several areas. Supervision in the United States in particular appears to have been inadequate. The trade in OTC derivatives 2 exploded and many new, complicated financial instruments were introduced onto the market. This made the banks’ counterparty risks larger and less transparent. Nor were the financial supervisory authorities fully aware of the contagion risks in these new instruments. The complex financial instruments created in the search for yield when interest rates were very low did not comprise a problem as long as the situation on the financial markets was stable, but when the turbulence increased, it became very difficult to understand and evaluate these new instruments. | 3 Today, with my focus on the mortgage and real estate markets, I would like to explain the cyclical dimension of systemic risks in greater detail. Experience shows that cyclical systemic risks often stem from the mortgage and real estate markets. Upheavals on these markets after periods of excessive price and credit growth have repeatedly triggered chain reactions with a negative impact on the banking system, public finances and the economy as a whole. History also shows that crises originating in mortgage and real estate markets entail particularly high costs for the economy as a whole, for example by causing recessions that are typically long and severe. 4 3 4 Cf. Zurbrügg F., After the storm: ten years on, how weatherproof is the Swiss banking system today?, speech held at the University of Lucerne, 6 September 2018. Cf. Jordà, O., M. Schularick, and A.M. Taylor (2015), ‘Leveraged bubbles’, Journal of Monetary Economics, vol. 76(S): 1–20. Page 3/12 Let me remind you of the example from Switzerland in the early 1990s. After a long period of rising real estate prices, mortgage interest rates increased and prices declined significantly. This triggered a banking crisis, which in turn led to a recession and a lengthy phase of economic stagnation. The global financial crisis of 2008 was also closely connected with declining prices on real estate markets, particularly in the US, the United Kingdom, Spain and Ireland. In this case, lax lending standards prior to the crisis proved to be a key factor. | 0 |
Developments in house prices and household indebtedness are regularly analysed in the Riksbank's Financial Stability Reports. Of course, any assessments of the valuation of the house market are connected with a large measure of uncertainty. However, the calculations we have made so far do not indicate that the pricing of houses in Sweden as a whole is significantly out of balance. Price trends can be explained fairly well by the increase in household incomes, the decline in interest rates and a low construction rate, despite strong demand. However, one should be aware that the rate of price increase varies substantially between different regions. House prices have increased at a much faster rate in metropolitan areas than in the rest of the country. The possibility that price increases may have been exaggerated in certain individual regions or markets cannot be ruled out, although developments in Sweden as a whole appear to be balanced. Indebtedness, house prices and inflation forecasts What significance do house prices and household indebtedness have for the Riksbank's inflation forecasts? The inflation forecasts are based on an analysis of the various driving forces behind domestic inflation and the international rate of price increase, imported inflation. Domestic inflation is largely governed by cost trends and by how total demand develops in relation to production capacity, that is to say, resource utilisation. Household consumption comprises a significant part of total demand and this is where indebtedness and house price trends mainly come into the forecast work. | Of particular interest is that Indian actors are providing fresh interpretations of Ibsen’s work, both in India and in Norway. The topic of my speech today is Norwegian experiences in balancing economic development with macroeconomic stability from a historical perspective. As a background for the subject, let me start with a brief characteristic of Norway today from an economic perspective. First, Norway is a small, mountainous country with a population of only 4½ million people scattered across a land area that is one tenth of the size of India. Second, Norway’s economic growth has been favourable for many years, and the per capita income is among the highest in the world. An abundance of natural resources, not least oil and gas, and openness to trade and capital movements are important reasons for this. The petroleum sector’s share of GDP was approximately 24 per cent in 2005. Over the last 10 years, the government has earned higher petroleum revenues than it has spent. Today we have a sizeable Government Pension Fund, which invests all its funds globally. Globalisation and cyclical developments have been kind to the Norwegian economy. Prices for our imported goods are falling in relation to prices for goods we export. Norway’s terms of trade are improving. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains for the mainland economy have also been high. One aspect of this is that trade in services with India is increasing. | 0 |
In short, the banking sector will have to live with a structure of higher financial costs, which will squeeze the net interest margin and, therefore, the capacity to generate revenues. This situation, common to all financial institutions at the international level, may be partly relieved in Spain, insofar as a high percentage of the financing of Spanish institutions is granted at a variable rate, which allows them to adjust interest rates more rapidly to the general market risk premium, helping to keep their interest rate spreads more stable. The second challenge is lower demand for credit both from households and businesses. The lower demand for credit is a natural response to a weaker economic climate than in previous years. However, this response will be larger in the case of those economic agents who, after years of very notable growth in their indebtedness, have begun a process of financial deleverage. For banks, this will mean a smaller volume of activity, that is to say, slower growth or even contraction of their business. In the past, banks responded to narrowing margins (income less financial costs) by increasing their volume of lending. However, this lever will not be available in the coming years, or at least not with the same strength, since lending can be expected to continue to decelerate, and to grow at below the economy’s nominal growth rate. Also, a smaller volume of activity puts further pressure on results, since overheads cannot be spread across a larger volume of activity. | That, in turn, would have provided some offset to the global inflationary pressures we have been experiencing over the past year. Instead, as Chart 5 shows, sterling has remained relatively weak, both against the full trade-weighted basket of the currencies of our trading partners, and particularly against the euro – which is the most important currency for UK trade, with the euro area accounting for around half of our total exports and close to half of total UK imports. Chart 5 Sterling depreciation since 2007 Rebased to 100 in January 2005 110 105 100 95 90 Euro-Sterling exchange rate 85 Sterling EER * 80 Average EER *, 97-07 75 70 2005 2006 2007 2008 2009 2010 2011 *: Effective exchange rate Source: Thompson Datastream and Bank for International Settlements This weakness of sterling is one of the key reasons why UK inflation has been much higher than our peer group of European economies. As Chart 6 shows, the differential between inflation in the euro area and the UK is closely associated with the relative strength and weakness of the sterling/euro exchange rate. And there are good reasons for this. While the BIS central bankers’ speeches 7 UK has an independent monetary policy, it is a member of the Single European Market which covers all European Union economies. | 0 |
Inflation developments Distinguished Members of the Press, The second quarter of 2009 was marked by persistence of the adverse effects of the global financial crisis that erupted in developed markets and then spread across the world during the last quarter of 2008. In this period, economic activity maintained its weak course despite the counter-cyclical effects of fiscal and monetary policies implemented extensively in a coordinated manner at global level so as to remedy the excessive shortage of liquidity in markets. While recent data releases on the global financial system and economic activity indicate that the worst may be over, improvements in leading indicators have been slow, problems in credit markets linger, and employment remains in a precarious state, suggesting that the recovery will be anemic and protracted. The sharp contraction in aggregate demand and the fall in commodity prices since the last quarter of 2008 has led to plummeting inflation rates all over the world. In Turkey, a similar trend has also been observed in the said period and CPI inflation has edged down to 5.73 percent over the last three quarters. Thus, as of June, inflation remained at 6.8 percent, well below the lower limit of the uncertainty band set around the target path (Figure1). | It is timely, therefore, for you to consider what type of leader you want to be, what type of firm you want to lead, and what type of industry you want to work in and influence. I have some views on all three, which we will get to in a moment. I am encouraged that members of the industry have convened here today to engage on these issues. I think it is important that the industry tackle this together. You can learn from one another. And, given the scandals of recent years, you really do have to sink or swim together. Before the recent spate of conduct problems, there were times when one might be secretly happy when a competitor stumbled through some sort of misconduct. All the better if such a stumble generated negative publicity and headlines. Today, the situation is vastly different. When each new scandal emerges, the industry is painted with the same broad brush. This underscores the importance of taking both individual and collective responsibility for reform. You have a personal stake in improving bank culture. Your firms have a stake too. And so does the industry. There are three messages I am going to focus on today: First, stay in banking and be good role models of the behaviors and conduct that we all want to see. It’s important. The banking industry needs your talents. And, if done the right way, it will result in a fulfilling career. | 0 |
The second point is that Iceland is a small, open economy, where domestic demand is often less of a driver of GDP growth than foreign demand than is the case in much larger economies. There is a tendency in Iceland to forget this in discussions of economic policy. Honoured guests: We are at a turning point with respect to monetary policy implementation. For most of last year, inflation and inflation expectations were well above the inflation target, and the economic recovery was gaining momentum, while inflation forecasts suggested that it would remain above target for a sustained period, provided that the exchange rate remained close to the level prevailing at the time. It would have been possible to conclude from this that the monetary stance was too loose. Actually, several critics maintained that the monetary stance was too tight, but economic developments have shown no signs to support 2 BIS central bankers’ speeches that argument, nor is it consistent with common measures of the appropriate stance of monetary policy. The Monetary Policy Committee considered the monetary stance sufficient to bring inflation back to target in the near future. In February, we were gratified to see inflation subside to target for the first time since early 2011. As far as monetary policy is concerned, there are three factors that have contributed to this achievement. The first is the interest rate hikes between August 2011 and November 2012, a response to the foreseeable inflation spike following the spring 2011 wage settlements. | In the long run, monetary policy can affect inflation, and in the short run it can smooth out cyclical fluctuations, particularly when it is credible; i.e., if inflation expectations remain close to target even during attempts to mitigate recessions. Once the slack disappears, however, monetary policy cannot deliver output growth beyond the growth potential of the economy, and any attempts to do so will ultimately lead to inflation persistently above target. By law, the Central Bank of Iceland has two main objectives. The first is to promote price stability, the main task of monetary policy. The second is to promote financial stability. As regards monetary policy implementation, the Central Bank is independent and stands alone. It is also independent as regards its contribution to financial stability; that is, its own analysis and decisions on the prudential rules it is tasked with setting; i.e., concerning liquidity and BIS central bankers’ speeches 3 foreign exchange risk. In addition, like other central banks, it plays a key role in crisis management through its liquidity facilities and its role as lender of last resort. But it is emphatically not alone in this regard, as there are other bodies that make important contributions – the Financial Supervisory Authority in particular, but also the relevant ministries. The legislature also plays a larger role here than in monetary policy, as the statutory framework for monetary policy seldom changes, while amendments to financial system legislation are much more frequent. | 1 |
The size of these effects will depend heavily on the eventual design of any systemic digital currencies, their attractiveness relative to bank deposits, the availability and price of alternative funding sources for banks, and borrowers’ ability to substitute between types of credit. It is not a foregone conclusion that these effects will necessarily be large. Indeed, an illustrative scenario published by the Bank of England in 2021 suggested that the steady state impact could be quite modest, with lending rates rising only slightly, and credit provision falling by a little over 1% – though varying the assumptions can generate somewhat larger results (Chart 5). 6 See for example, ‘Money creation in the modern economy’, Bank of England Quarterly Bulletin 2014 Q1. Bank of England Page 8 Source: Bank of England Discussion Paper: “New Forms of Digital Money” More serious disruption to credit supply could occur if deposits transferred into digital currencies in an unexpectedly rapid or disorderly way, for example during a stress event. But a range of design choices, including potential holding limits, could in principle be deployed to deal with such situations. And banks suffering sudden deposit outflows may also, as now, draw on market-wide central bank liquidity insurance facilities7 – though the pricing of such facilities, and their implications for encumbrance, make them less well suited to providing long-term structural support. A particularly sensitive question is whether central banks may seek to use CBDCs, or other forms of digital currency, to enhance monetary policy implementation – e.g. | Mr McDonough discusses the changing nature of banking, risk and capital regulation Speech by the President of the Federal Reserve Bank of New York, Mr William J McDonough, at the 29th Annual Banking Symposium, Bank and Financial Analysts Association, New York City, on 17 March 1999. Good afternoon. I am pleased to be here today to discuss the changing nature of banking, risk and capital regulation. With the new millennium on the horizon, it seems a particularly fitting time to discuss some of the key trends that are affecting the way both bankers and supervisors think about these issues. Also, as I’m sure many of you are aware, the Basle Committee on Banking Supervision currently is engaged in a fundamental review of the Accord, which is the cornerstone of existing capital standards. In many ways, the changing nature of banking and its risks have led supervisors to revisit the current capital framework, and so I welcome this opportunity to provide my perspective on these risks and how they relate to the future of capital regulation more generally. In the last several years, we have witnessed an increase in the diversity and complexity of businesses in which banks are engaged. While lending and deposit-taking are still the mainstays for a majority of commercial banks, many banks have grown their derivatives trading, securities underwriting and corporate advisory businesses. Some banks have expanded their traditional credit product lines to include asset securitizations and credit derivatives. | 0 |
Ravi Menon: Monetary Authority of Singapore's Annual Report 2019/20 Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS' Annual Report 2019/20 Virtual Media Conference, Singapore, 26 July 2020. * * * Good morning, and welcome to MAS’ first virtual media conference for the annual report. I hope everyone has been keeping well. GLOBAL ECONOMY Let me begin with the global economy. There are three points I’d like to make. The world is facing an unprecedented economic situation. The outlook is highly uncertain. Recovery will be uneven. The world is facing a public health crisis and a consequent economic crisis. The COVID-19 virus has now spread to all corners of the world. Measures necessary to contain the pandemic – lockdowns, movement restrictions, border controls, and safe distancing – have brought many economic activities to a grinding halt. We are now in the midst of an economic recession without modern precedent. The global economy contracted nearly 14% q-o-q [1] in the first quarter of 2020 – this is almost three times deeper than the sharpest decline seen during the Global Financial Crisis. The contraction in the second quarter is likely to have been even deeper, since this is when economies outside China were most severely affected by the virus and shutdown measures. The policy responses to the COVID-19 crisis have been equally unprecedented – in scale and in speed. Governments injected massive fiscal stimulus, estimated on average to be twice the fiscal impulse in 2009. | As conservative central banks, our involvement in the forex markets is limited to strategic investments and stabilising the exchange rate. Following this role, the Central Bank of Sri Lanka does not get involved in speculative type of trading. However, it plays a major role in the development of the country’s forex as well as other financial markets. We know that in a market-oriented economy, all financial market segments, namely, the foreign exchange market, money market, government debt securities market and the stock market are inter-linked. The Central Bank, while watching the operations of each market segment individually, needs to take a macro view of all the market segments to ensure financial market stability. The focus today, however, should be on the foreign exchange market. In the exchange rate area, it is appropriate to mention at this juncture, Sri Lankan authorities made a fundamental change to its policy on 23rd January, 2001 by moving to a freely floating exchange rate arrangement. This was necessitated by the inability of the then prevailing exchange rate system and the crawling band regime to sustain themselves. Immediately after the float, the market experienced some volatility as is usually expected. However, this volatility has been contained overall since then. This, not only brought confidence to the market, as evidenced by increased foreign exchange inflows, but also allowed greater flexibility and market opportunities to foreign exchange dealers of commercial banks. | 0 |
This was to enable a single entity to manage risks right across the system, increasing resilience and positioning the UK at the leading edge of global best practice in terms of technology, governance and risk management for payment systems. And from a regulatory perspective, the Bank’s FMI Directorate continues to supervise the HVPS to the same standards as other systemically important payment systems. Since the transition, the Bank has introduced new mechanisms to maintain openness, accountability and challenge in the operation of the HVPS. 7 As part of the wider renewal programme, the Bank has also broadened RTGS settlement account eligibility 8 to non-bank payment service providers, subject to appropriate safeguards. Non-bank payment service providers are now eligible to apply for direct access to payment systems, with TransferWise and Ipagoo becoming the first non-banks to join FPS and Bacs, respectively. Here, more diverse payment arrangements with fewer single points of failure, and increased settlement grounded in central bank money, all contribute to enhanced financial stability. And we cannot ignore the game changer that wider access represents for the promotion of innovation and competition in the payment market. Taken together, these examples illustrate the Bank’s work to stay in touch with the evolving payments sector and to facilitate innovation, wherever possible, in a thoughtful and proactive way. Conclusion To conclude, we in payments are working through a period of extensive change, on a journey to reinforce the UK as world leading in delivering best in class payments. | Ladies and Gentlemen, In the Turkish context, the Islamic finance practices are embodied in a uniquely defined compartment of the banking system. These banks are called as the “participation banks” in Turkey and they constitute an integral part of the Turkish banking system. There are four Islamic banks categorized as participation banks, and 45 conventional banks in Turkey as of BIS Review 124/2009 1 September 2009. It is crucial to highlight that the participation banks are not considered as an alternative to the conventional banks. While they are functioning similar to deposit banks, their fund collecting and lending processes differ significantly. Participation banks are authorized by the Turkish Banking Act to collect funds from the public under the “profit and loss participation accounts” and the “special current accounts”. The profit and loss participation accounts are essentially a version of the Islamic financial instrument, where the bank utilizes the funds deposited by account holders to fund specific business activities. Any profits earned are shared between the account holder and the bank, in proportion to an agreed ratio. Participation banks in Turkey mainly offer two types of lending. The first type of financing is Murabaha, which is a transaction consisting of two sales contracts. The first contract involves a bank client requesting the bank to undertake a Murabaha transaction and promising to buy the commodity specified by him or her if the bank acquires that commodity. | 0 |
Compared with our June staff projections, the outlook has improved for 2021 and is broadly unchanged for 2022 and 2023. Inflation Inflation increased to 3.0 per cent in August. We expect inflation to rise further this autumn but to decline next year. This temporary upswing in inflation mainly reflects the strong increase in oil prices since around the middle of last year, the reversal of the temporary VAT reduction in Germany, delayed summer sales in 2020 and cost pressures that stem from temporary shortages of materials and equipment. In the course of 2022 these factors should ease or will fall out of the year-on-year inflation calculation. Underlying inflation pressures have edged up. As the economy recovers further, and supported by our monetary policy measures, we expect underlying inflation to rise over the medium term. This increase is expected to be only gradual, since it will take time for the economy to return to operating at full capacity, and therefore wages are expected to grow only moderately. Measures of longer-term inflation expectations have continued to increase, but these remain some distance from our two per cent target. The new staff projections foresee annual inflation at 2.2 per cent in 2021, 1.7 per cent in 2022 and 1.5 per cent in 2023, being revised up compared with the previous projections in June. Inflation excluding food and energy price inflation is projected to average 1.3 per cent in 2021, 1.4 per cent in 2022 and 1.5 per cent in 2023, also being revised up from the June projections. | Finance has come a long way- from serving the basic societal needs to save and borrow at its infancy to its role today as the backbone of the global economy. In ancient days, kings and rulers look to astronomers, magicians and soothsayers to tell them about the future. The Greeks for example, consulted the Oracle at Delphi before embarking on major decisions. The world today is much wiser I hope, and we no longer believe that the future can be predicted with absolute certainty. What finance and technology can bring for the future of human kind is so exciting that it can go beyond containment. Yet if left on its own, the outcome can be perilous. Resisting them, however, is not an option. While we embrace them as they synthesise and evolve, we also need to shape and control them such that they would not lead us to face extreme financial market fragilities and devastation. In the words of Nassim Taleb, we need to make ourselves “antifragile” – not only able to withstand shocks, disruptions and volatility but able to position ourselves to take advantage of it. But I always like the quote by Peter Drucker, “The best way to predict the future, is to create it.” 5/5 BIS central bankers' speeches | 0 |
Such an access could foster competition and innovation in the payment industry but would obviously multiply the risks of cyber-attacks. In addition, there is a need to strike the right balance between the requirement to adequately prevent and address the cyber threats and the need for financial players to implement solutions that are economically viable. For instance, implementing a dual contingency software may be an efficient answer to some cyber attacks but does not go without costs. Finally, cyber-security is also a global issue: for a more effective response, it is necessary to establish cooperation at an international level and across sectors, well beyond the financial sector. In that perspective, initiatives from the Financial Stability Oversight Council (FSOC) in the US to improve cooperation between sectors, particularly those dependent on the financial sector, such as the utilities or telecommunications sectors, or the establishment of European Network and Information Security Agency are much welcomed. II. Against that background, understanding the threats, organizing protection and prevention as well as the coordination of the private and public actions are prerequisites for effectively fighting cybercrime. The aim of today’s seminar is to reflect collectively on this and to share experience. The first important step is to understand why the financial sector is a popular target of hacker attacks. That’s one of the objectives of the first panel of distinguished speakers. They will attempt to answer such questions as: What are the factors making the financial sector a privileged target for cybercrime? How to identify and quantify cyber-attacks? | I should add that there are other initiatives being developed, with the aim of positioning the banking system of Hong Kong to take advantage of further financial liberalisation in the Mainland. I hope they can be agreed, announced and introduced soon. Short-term risks However, the generally good news in recent months should not blind us to the problems that remain in our economy or to the risks that face us. While the economy has been recovering strongly, it has not been creating as many jobs as we all would like to see. It is also uncertain to what extent the budget deficit will be reduced, as government revenues recover along with the economy. To be sure, the difficult investment environment is not helping us in our attempt to meet the budgeted investment income for the fiscal reserves. Disappointments on these fronts may affect market sentiment in the short term, although the determination and ability on the part HKSAR government in tackling the remaining, structural components of these problems should not be in doubt. Furthermore, there is a risk that our financial markets could over-react to external developments, notably stronger than expected monetary tightening in the US, macro-economic adjustments in the Mainland and sharp increases in oil prices. Although it is unlikely that these external factors would derail our economy, and so this risk seems small, under extreme market conditions, short-term volatility in financial markets could have a bearing on monetary and financial stability in Hong Kong. | 0 |
The establishment of this new body in charge of macro-prudential oversight is expected to bring significant improvements to the EU institutional framework for financial stability. The participation of the European Supervisory Authorities (with voting rights) and all the EU national supervisory authorities (without voting rights) will allow enhancing the capacity of the ESRB to identify systemic risks and to define areas for recommendations for policy action. Indeed, it is expected that the recommendations of the ESRB would primarily concern the supervisory and regulatory field. It is important to note that macro-prudential oversight should not be regarded as a substitute for the responsibilities of other authorities, namely supervisors. It should instead facilitate and complement where required the conduct of micro-prudential supervision by the competent authorities. The effectiveness of the ESRB warnings and recommendations will rely on their quality, the act or explain mechanism between the ESRB and the addressees, the possibility of the ESRB to publish its warnings and recommendations, and also the possible role of the 4 BIS Review 125/2010 Council of Ministers and the European Supervisory Authorities in supporting the implementation of the warnings and recommendations. The combination of these elements should provide an adequate framework of incentives and mechanisms, which will greatly benefit the compliance with risk warnings and recommendations. In this context, it has been considered not necessary to provide a legallybinding nature to the ESRB risk warnings and recommendations, as this would lead to a certain overlap of responsibilities and tasks, particularly with micro-prudential supervisors. | 2 BIS Review 6/2007 The SEC regulates the investment companies, merchant banks, venture capital companies, unit trusts and the rating agencies. Under the provisions of the Act, the SEC issues financial regulations to ensure that companies listed in the Stock Exchange operate in an orderly manner preserving the stability of the capital markets and, as a whole, the financial system. The registered insurance companies, the insurance broking companies and ancillary service providers are regulated by the IBSL to safeguard public interest. The insurance policies consist of long-term savings of the public and, therefore, the sustainability of insurance companies is important for longterm savers. All financial institutions operating in Sri Lanka are required to comply with the recently enacted Money Laundering Legislation, Countering the Terrorist Financing Legislation and the Financial Transaction Reporting Act. Relevant regulations will be issued shortly. The recently introduced Payments and Settlements Act provides wide powers to the Central Bank to regulate the national payments system. Despite these legislation and financial regulations, there are many operations by the financial intermediaries which cannot be captured by one or more financial regulation. One such category is financial conglomerates, which engage in banking and finance, insurance and stock market transactions. They still have a leeway to take advantage over others. Regulating these conglomerates is a real challenge. There is a limit to impose rules on all aspects of operations which will lead to overregulation and that should be avoided. Improved understanding of potential risks may bring in better results. | 0 |
Like 3/5 BIS central bankers' speeches financial institutions, we need to balance the significant benefits of financial innovation with its risks. We are also mindful that the calls we make in regulating and supervising the industry can themselves sometimes, restrain innovation. Our responses to new financial technologies will continue to be primarily concerned with the risks that they pose to financial stability and consumer protection. In finding the right balance in our overall regulatory and supervisory posture, we will continue to consult widely with the industry and experts in the field. A key priority for the Bank is to ensure that our regulatory and supervisory system is appropriately calibrated to encourage innovation, but also has the agility to shift gears when required to respond to new risks. This recognises that innovation without stability ultimately destroys value, confidence and undermines our future. What does this mean in practice? There are at least three things, which are each a reflection of our ongoing efforts to build an enabling, yet safe environment for innovation: First, building interoperable infrastructures. This will start with open and fair access to a shared payment infrastructure for banks and non-banks alike. It is also important to recognise the need for other digital public infrastructures as key enablers to harness the full potential of fintech. These include having a national digital identity system, framework for open API and open banking, clear cloud policy and nationwide broadband connectivity. | The depreciation of the RMB, alongside a pullback of foreign funds from the region, triggered downward pressures on the region’s currencies. Since the RMB move on 11 August, Emerging Asia currencies have depreciated by an average of 3.2% against the US Dollar, with some falling by as much as 7%. 2 While markets seem to have calmed somewhat, a sense of uncertainty prevails and the risk of renewed volatility remains. What is happening? Financial markets are essentially coming to terms with four significant “re-pricings”. • First, the stock markets in China are adjusting downwards from unsustainably high levels. • Second, the RMB has become de-coupled from the US Dollar and is moving towards a more market-determined exchange rate. • Third, oil and commodity prices have eased considerably this year, marking the end of what some have called a “super-cycle”. 1 Emerging Asia economies refer to China, India, Korea, Hong Kong, Taiwan, Singapore, Thailand, Malaysia, Indonesia and the Philippines. 2 Excluding the Hong Kong Dollar. BIS central bankers’ speeches 1 • Fourth, the effects of an impending interest rate hike in the US – the first after seven years of extremely easy monetary policy – are being priced in across Asian markets. These are not necessarily unwelcome developments. The correction in China’s stock market is not surprising given the stretched valuations that had developed over the preceding year. | 0 |
The liabilities side was therefore mainly not remunerated (we do not pay any interest on notes and coins), while we collected interest on government bonds. With interest rates around 4 per cent, the Riksbank could finance its current operations and yet deliver a surplus of several billion SEK a year to the central government budget. Today, the balance sheet looks completely different (see Figure 11). The balance sheet total now corresponds to 28 percent of GDP, and the liabilities side is dominated by debt securities. And since the debt has a very short maturity (overnight or one week) while the bonds on the asset side have long maturity, the interestrate risk is considerable.29 The rapidly rising interest rates recently therefore mean that the Riksbank will report a large loss this year. There are different ways of explaining how the level of interest rates affects the Riksbank's results. The easiest way is probably to use market values as a base: The Riksbank has purchased fixed-rate bonds. When interest rates rise, the market value of the bonds falls. Another approach is based on the Riksbank's liabilities side: On the assets side. the Riksbank has fixed-rate bonds. The return on bonds therefore does not change when interest rates rise. But our bond purchases have been financed by an increase in our monetary policy debt – the monetary base. In other words, we have paid for the bonds through the commercial banks having received a claim on the Riksbank. | Credit volumes, house prices and the level of economic activity should only affect monetary policy to the extent that they affect the forecasts for inflation and resource utilisation. Credit volumes and house prices are not targets for monetary policy. One can claim, however, that the repo-rate path chosen should not threaten financial stability. This may mean that one avoids repo-rate paths with very high repo rates in a situation in which financial stability is fragile and there is a lack of instruments to deal with this. It is also possible that in certain situations this can justify the avoidance of very low repo rates. But, as long as financial stability is not threatened I see no reason to rule out any reporate path at a monetary policy decision. The extended repo-rate path has the same effects as the lower repo-rate path This leads me to the latest monetary policy decision. One of the reasons why different people may prefer different repo-rate paths is of course that they have different views about underlying – of monetary policy independent – economic developments in Sweden and abroad. One may for example have different views about international growth, wage bargaining outcomes and productivity growth. Here I would like to make it clear that I share the view of underlying economic developments in Sweden and abroad presented in the latest Monetary Policy Update. | 0 |
In the same spirit, recent ETFs innovations underline the need for securities regulators to work closely with bank supervisors and macroprudential authorities on shadow banking and what I earlier called “financing markets”. For both physical and synthetic funds, the underlying collateral pools are being swapped to provide financing for dealers and banks. It is not clear whether bank supervisors have caught up with this, or whether the risk of the collateral swaps being called is treated appropriately in regulatory maturity-mismatch ladders. Who would have guessed that vanilla collective investment schemes, could be turned to this purpose? The truth is that any pool of assets can be. While the FSB has already called for authorities to act to keep the evolution of ETFs on a sustainable path, the broader lesson is that securities regulators need to be alive to the need 11 Securities and Exchange Commission, Release No. 33-9117, Asset-Backed Securities (April 7, 2010). 12 The FSB took a small step towards addressing this issue in its March 2011 publication, “Thematic Review on Risk Disclosures Practices: Peer Review Report”. This did not get much traction at the time, but the FSB’s Vulnerabilities Group, chaired by Jaime Caruana and on which I sit, plans to draw on that Review in its own work programme. In the US, as noted, the SEC has begun to grapple with this set of issues. Its April 2010 notice proposed enhanced disclosures requirements for asset-backed securities sold privately as well as via the public (registered) transactions. | The same in Japan, which has the most active OTC derivatives market in Asia and where the country’s first repository was approved in March this year. In Europe, it is expected that the European Securities and Markets Authority will adopt a decision on the registration of trade repositories still this month and that counterparties will start to report all asset classes to the repositories as of January next year. So, on the surface, it appears we have achieved our goal. But have we really? Does, for example, the supervisor responsible for the supervision of a large cross-border financial institution at the consolidated level have direct and immediate access to information on OTC derivatives transactions that encompass all transactions entered into by all entities of this group? Is the information accessible, in other words can it be easily aggregated across trade repositories and jurisdictions? My answer would be a clear no! 2 BIS central bankers’ speeches In the Single Supervisory Mechanism, the ECB, as I’ve already said, will be responsible for the supervision of such large banking groups, some of which are global systemically important financial institutions (SIFIs) with large derivatives businesses. The access to data relating to foreign (that is non-EU) subsidiaries of financial groups, where an authority – in this case the ECB – has supervisory responsibility at a consolidated level, is key to assessing the overall risk exposure of a given banking group. | 0 |
However, there are notable differences across the region: the Baltic states (especially Latvia and Estonia) and South-East European countries (especially Croatia and Bulgaria) seem to have approached or even reached the equilibrium by 2004 or 2005, whereas in the case of the Visegrad countries (especially the Czech Republic and Poland) the credit-to-GDP ratio seemed to remain below its estimated equilibrium level at that time. Of course, it might well be that some of the CEE economies have overshot the 1 Kiss, G., Nagy, M., Vonnák, B.: Credit Growth in Central and Eastern Europe: Trend, Cycle or Boom?, MNB Working Paper No. 2006/10, November 2006 and Egert, B., Backé, P., Zumer, T.: Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?, ECB Working Paper No. 687, October 2006. BIS Review 137/2007 1 equilibrium only recently, but one has to wait for a while until the relevant data become available before this overshooting can be captured in empirical analyses. The general upshot of these papers is that the rapid credit expansion in CEE economies has mainly been fuelled by demand factors: the buoyant economic growth and the ensuing increases in disposable incomes, rising expectations with regard to future income prospects related to EU accession, remarkable decreases in interest rates, and falling or low and stable inflation rates. | This assessment should according to me follow a four-pronged approach, with four key indicators: First, actual inflation data, focusing on underlying inflation, as this is the part for which monetary policy is relevant. In particular we should look at measures of HICP excluding energy and food, and at negotiated wage growth: by the way, we don’t see so far signs of a generalised wage-price spiral. A turning point – which we don’t see yet – will be when underlying inflation is peaking. 7 Page 8 sur 14 Alternative measures of underlying inflation are less noisy than the standard index excluding food and energy and thus can better signal the medium term inflationary pressures. Indeed, in the aftermath of the pandemic, the three alternative measures shown on this slide (persistent and common component of inflation, trimmediii and finecoreiv) have turned up earlier than the standard core index. And both in 2008 and in 2011-2012, they have also signalled earlier the easing of inflationary pressures. Second, future inflation. We will obviously use our models and forecasts, but we should also give a strong attention to inflation expectations by financial markets and still more by economic agents: entrepreneurs and households are the real price- and wage-setters. Here so far, 3 to 5 year inflation expectations remain well anchored in markets, but with some mixed signals from businesses and households. Any sign of stronger de-anchoring would call for a stronger monetary reaction. | 0 |
As I see it, an organization’s culture gets into trouble when it equates “what is right” with what is legally permissible, and when “what is wrong” becomes viewed as what is legally impermissible. A proliferation of rules—followed by the gaming of these rules—can be ultimately self-defeating. The end result may not only be a loss of trust, but also over time a more burdensome regulatory regime than would otherwise be the case. So, while regulation and supervision are necessary to ensure a resilient and robust financial system, I very much doubt that they are sufficient. They need to be supplemented by bank management that pays close attention to incentives, conduct, and culture. As I have previously said, incentives drive conduct, which establishes the social norms that help define a firm’s culture.11 The first step is for firms to evaluate the incentives that they have in place with respect to personnel evaluation, compensation, and promotion and to make sure they are consistent with the type of behaviors they want to encourage. For example, how are compliance violations treated in compensation and promotion decisions? Are incentives in place to encourage people to speak up early, when problems are smaller and more manageable? When employees do speak up, how are they subsequently treated? | Total lossabsorbing capacity, or TLAC, of the old parent company would be available to absorb losses and could be used to recapitalize the new parent company. But, the task of operationalizing resolution for large, global banks—including achieving full clarity on the roles of the home and host supervisors—is still not complete. It is key that work continues on this front to ensure that a systemically important firm can fail without threatening to topple the rest of the financial system— an important step toward ending “too big to fail.” Third, some of the obvious systemic vulnerabilities exposed by the financial crisis have been remedied. Important changes include mandatory clearing of standardized over-the-counter derivatives through central counterparties, or CCPs; more intensive supervision of systemically important CCPs; and reforms of the tri-party repo system and the money market mutual fund industry. But, even as we reduce or eliminate old vulnerabilities, we must not rest on our laurels, for new vulnerabilities will inevitably take their place. These accomplishments notwithstanding, I have no doubt that the current regulatory framework could be improved. Indeed, the official sector should assess the efficiency and effectiveness of regulations on an ongoing basis. I agree with Vice Chairman Quarles’ observation that there is more we can do to make the regulatory regime more efficient, transparent, and simple— including relief for small banks, greater tailoring based on a firm’s level of systemic importance, and simplifying the Volcker Rule. 5 Some of these changes have already been adopted or are in process. | 1 |
Jacqueline Loh: Enhancing linkages between Asia and the Middle East Welcome address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the 6th World Islamic Banking Conference Asia Summit, Singapore, 3 June 2015. * * * Your Excellencies, distinguished guests, ladies and gentlemen, good morning. To all our foreign guests, a warm welcome to Singapore Introduction 1. I am very honoured to be invited to deliver the Welcome Address for the 6th World Islamic Banking Conference Asia Summit. I am pleased that this conference continues to attract a growing number of industry professionals from Asia and the Middle East, with total attendance more than doubling since it was launched in 2010. This underscores the bright prospects for Islamic finance in Asia. Growing Asia-Middle East connectivity 2. Trade and investment flows between Asia and the Middle East have grown substantially over the last decade, supported by strong domestic demand and investment opportunities in both regions. This growing connectivity is expected to strengthen in the coming years, notwithstanding uncertainties in the global outlook. Let me share 3 key observations. 3. Firstly, trade between the two regions continues to grow strongly. In the past decade, exports from the Gulf Cooperation Council (GCC) to Asia expanded five-fold, and growth of GCC’s exports to Asia has surpassed that to the rest of the world. Asia’s exports to GCC have also increased five times, registering an annual growth rate of 15% over the past ten years. 4. Secondly, inter-regional investments are growing. | Singapore has already concluded a comprehensive FTA with the GCC, which recognises Islamic finance in the definition of financial services. Cross-border Islamic finance set to grow 6. The global Islamic finance industry has been on an upward trajectory in the past decade, with total assets exceeding $ trillion in 2014, from $ billion in 2005. Most of this demand stemmed from Middle East and Asia, and stronger trade and investment linkages between these regions will reinforce the growth momentum in Islamic finance. Looking ahead, the following key trends will also augur well for the outlook for cross border Islamic finance: 7. First, increasing wealth accumulation in the Middle East region. This will expand the pool of Islamic funds seeking diversification into foreign investments. Asia will be a key investment destination, as stronger growth prospects compared to developed economies present opportunities for higher investment returns, which would in turn, increase the demand for Shariah-compliant assets in Asian markets, including Singapore, Malaysia and Indonesia. Reflecting this trend, GCC banks have already been expanding their operations in Singapore in recent years to support the deployment of Islamic funds to corporates in the region, through Islamic bank financing, and sukuk issuances. 8. Second, more countries are boosting their Islamic finance services and capabilities, in response to the growing demand for Islamic finance solutions. Singapore, for instance, has seen a steady increase in Islamic finance activities, while Hong Kong has recently issued its second sukuk and Japan is amending its financial regulations to facilitate Islamic financing. 9. | 1 |
For this purpose, they will have to undertake the downsizing of the sector and, at the same time, push through measures to raise efficiency through cost containment and through the introduction of improvements in their risk control and management mechanisms and of ongoing innovation in product marketing and in the implementation of technological and organisational improvements. And 4 BIS Review 27/2010 the government could crown the significant financial reforms made so far with one directed at savings banks. I am thinking of the reform needed so they can raise high-quality equity funds that enable them to grow and continue serving Spanish society while complying with the requirements to which they will be subject in the new international regulatory environment in the coming years. The financial system reforms adopted to date might suffice for the Spanish banking system to get through the crisis and be in a position to extend credit to those needing it in the recovery phase. But this will only happen if the reactivation of the Spanish economy comes in a form that substantially reduces the number of unemployed, improves its competitiveness and increases productivity. If this does not happen, obviously the restructuring task that we would have would be much greater than that facing us at present. Thanks to the reforms adopted, the Spanish banking system has not been an additional problem during the crisis. | The same can be said of the banking system, since if we undertake sufficiently extensive reform, we will be able to reasonably negotiate the current crisis; otherwise, banks would have to ultimately focus on the battle against bad debts and on the difficulties in obtaining external funding, and the authorities would have to focus on restructuring the banks that have deteriorated to the point of being clearly inviable. However, if we take advantage of this historic moment and carry out far-reaching labour reform, we will face a more positive scenario in which Spanish firms could promptly raise their competitiveness in the difficult (for these purposes) environment of a monetary union. Spain would enter a scenario in which increased productivity would provide a significant boost to its best firms. This would be particularly positive for SMEs, which find it most difficult to take advantage of the flexibility mechanisms offered by the current institutional framework, and they would benefit enormously from the implementation of a more flexible and simpler system. Meanwhile, budgetary consolidation could be achieved without swingeing cuts in expenditure and the banking system would be in a position to support this new growth phase. It would thus be a mistake to opt for small-scale labour reform, as if we could even afford to tackle this reform slowly, in various phases over various years. This would have been possible 5 or 10 or 15 years ago, when the last expansion phase started and the need for labour reform was not pressing. | 1 |
3- Indeed, it is quite clear that crypto-assets undergoing technical and economic trials bring about not only opportunities to improve our payment systems but also material risks which on the contrary might weaken them if unaddressed, both from an efficiency perspective and a safety perspective through the introduction of new sources of fragmentation, instability and fraud. As many central bankers have pointed out, today’s crypto-assets do not satisfactorily offer the qualities expected from a settlement asset to be used interchangeably with commercial bank money and central bank money, let alone to displace central bank money as the central reference of value, as the privileged settlement asset for wholesale transactions and as the last recourse settlement asset given its legal tender status. The reasons for this assessment are well known and documented and boil down to stressing that there are misnamed as « currencies » for three reasons: First, their value fluctuates enormously, preventing them from being used as units of account. For instance, the value of Bitcoin (not however representative of all crypto-assets) went up to more than 19 300 euros in December 2017 and has since fallen down to 7400 euros in September this year. And stablecoins represent an imperfect improvement in this field: their value aims to be relatively stable based on backed assets, but in fact fluctuates, in particular if they are not backed on safe assets. | This improvement in the functioning of payment systems represents a huge step for liquidity circulation. Third, a broader range of participants: the payments market has expanded to include competition from big techs and major retailers, which are following a wide range of strategies in this respect. The flipside of this trend is that the increasingly global nature of the market is raising sovereignty issues, including those relating to the control of data when the providers are located outside the region or jurisdiction where they offer their services. Last, the crave for blockchain technology: all around the world, market participants and big techs have launched or are preparing to launch new projects for tokens designed to serve as means of payment or settlement using the blockchain technology. We all have in mind firstgeneration crypto-assets like Bitcoin and Ethereum, but there are now many others coming or foreseen, like the JP Morgan Coin, the UBS’ Utility Settlement Coin or The Facebook’ Libra. 2- The development of crypto-assets are part of the innovations fueled by these underlying trends affecting payment instruments and systems, combining the search for anonymity, management of non-intermediated peer-to-peer payments and the use of entirely web-based technologies. But they also have their specificities. Actually, they have unique financial, monetary and technical features which set them apart from the currencies and payment instruments issued by financial institutions and central banks. | 1 |
Annex: Chart 1: Probability density estimates Chart 2: Probability density estimates for UK GDP Growth for UK RPI Whole sample (1857-2007) Golden Decade' (1998-2007) Density 0.60 Whole sample (1857-2007) Golden Decade' (1998-2007) Density 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 -15 -10 -5 0 5 10 Annual GDP Growth (%) 15 0.00 -40 -20 0 20 Annual RPI (%) 40 Chart 3: Probability density estimates Chart 4: Probability density estimates for UK Unemployment for Annual Earnings Growth Whole sample (1857-2007) Golden Decade' (1998-2007) Whole sample (1857-2007) Golden Decade' (1998-2007) Density 0.80 Density 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 -5 0 BIS Review 18/2009 5 10 15 Unemployment (%) 20 -40 -20 0 20 40 -0.10 Annual Earnings Growth (%) 11 Chart 5: Probability density estimates Chart 6: Probability density estimates for UK Base rate for UK House Price Inflation Whole sample (1857-2007) Golden Decade' (1998-2007) Whole sample (1954-1997) Golden Decade' (1998-2007) Density 0.40 Density 0.08 0.35 0.07 0.30 0.06 0.25 0.05 0.20 0.04 0.15 0.03 0.10 0.02 0.05 0.01 0.00 -5 0 5 10 Base rate (%) 15 20 0.00 -20 0 20 40 House Price Inflation (%) 60 -0.01 Chart 7: Probability density estimate for Chart 8: Probability density estimate for FTSE All-Share Index UK 2.5% coupon consol yield Density Whole sample (Jul 1700 - Nov 2008) Whole sample (Jan 1693 - Nov 2008) 'Golden Decade' (Jun 97 - Jun 07) 0.24 'Golden Decade' (Jun 97 - Jun 07) Density 0.10 0.09 0.08 0.20 0.07 0.16 0.06 0.05 0.12 (a) (b) (c) (d) (c)(d) 0.08 (a) (b) 0.04 0.03 (e) 0.02 0.04 0.01 0.00 -80 -60 -40 -20 0 20 40 Price return (%) 60 80 Sources: Global Financial Data and Bank calculations. | As after the previous two episodes of systemic failure, in October 1987 and August 1998, a third wave of technological transformation in the standards of risk management is now needed as a matter of priority. Firms themselves admit as much. That calls for a new agenda. I have outlined some elements of such an agenda, to address some of the failures exposed by the crisis. These measures involve a greater degree of engagement both between risk managers and senior management within firms, and between financial firms and the authorities. They would also involve much greater transparency to the wider world about risk metrics and accompanying management actions. These measures 14 Aikman, Alessandri, Eklund, Gai, Kapadia, Martin, Mora, Sterne and Willison (2008). 15 House of Commons Treasury Committee (2008). BIS Review 18/2009 9 would not prevent a next time –nor should they – but they might help make risk management roughly right. References Adrian, T, and Brunnermeier, M.K (2008), “CoVaR”, FRB of New York staff report no. 348. Aikman, D, Alessandri, P, Eklund, B, Gai, P, Kapadia, S, Martin, E, Mora, N, Sterne, G and Willison, M (2008), “Funding Liquidity Risk in a Quantitative Model of Systemic Stability” paper presented at the 12th Annual Conference of the Central Bank of Chile on Financial Stability, Monetary Policy and Central Banking (Santiago, 6-7 November 2008). Anderson H.C (1846), “The Emperor’s New Clothes”, Danish Fairy Legends and Tales (1846), Pickering. London. | 1 |
30 9 All speeches are available online at www.bankofengland.co.uk/speeches 9 During the first three Industrial Revolutions, the skills workers needed to keep one step ahead of the machine were largely cognitive. Machines undertook largely manual (“doing”) tasks, which had previously used labour-intensive technologies. Cognitive (“thinking”) tasks remained, by and large, the exclusive domain of humans. So institutions emerged to nurture thinking skills, largely in children and young adults, to increase the chances of successful transition to the cognitively-intensive future world of work. In children, the most important of these institutional innovations was probably compulsory schooling. For children between the ages of 5 and 10, this was formally introduced in the UK with the Elementary Education Act of 1880. It was extended to age 11 in 1893 and age 12 in 1899. The Fisher Act of 1918 provided for compulsory education to age 14 and part-time education to age 18. Compulsory full-time education was extended to age 15 in 1947 and age 16 in 1972. 33 As these pieces of social infrastructure developed, so too did standards of educational attainment and cognitive skills. The fraction of the population aged 15 and over that attended secondary school rose from 23% to 60% between 1950 and 2010. 34 In the 1950s, less than 11% of the relevant age group passed five or more GCSE O levels in England and Wales. By 2010, that had reached almost 80%. | I am sure you will all agree with me when I say, in today’s integrated markets when any country catches a cold there will be many others sneezing. In such an environment we are now increasingly aware of contagion risk. Financial security and financial stability… Within this framework, I would like to emphasize the close linkage between financial security and financial stability. In my opinion, financial security can be enhanced by the existence of a smoothly operating infrastructure. This actually is a comprehensive concept and includes the payment system, the technological infrastructure, as well as the regulatory and supervisory framework. Overseeing the payments system is an essential duty of the central banks. In this respect, a basic continuing responsibility of any central bank is to assure stable and smoothly functioning payment 2 BIS Review 76/2007 systems. Linked to this is the lender of last resort function of the central banks. Emergency liquidity assistance, perhaps the most traditional function for dealing with financial instability, is a way out provided by central banks. Central banks can have a calming influence on markets in case of a market disruption simply by standing ready to provide liquidity assistance if necessary. It includes both the provision of liquidity to the financial system as a whole through market operations, as well as emergency lending to individual banks. Altogether these two important functions facilitate the security in the system. Technological infrastructure is another component to secure financial operations. | 0 |
It is highly likely that pricing behaviour in a low inflation regime differs from that when inflation is high. Another circumstance worth mentioning is that both external and domestic competitive pressure have increased and led in many cases to downward price adjustments or just a slow increase. The most recent figures for inflation are one of several illustrations of this phenomenon. While this is strictly speaking a matter of a series of one-off effects, the increased competition can continue to leave its mark on the general price level for some time to come. Another point worth noting is the prominent part that investment has played in the Swedish economy over the past six years. Increased investment tends to generate higher productivity growth. That in turn raises expectations of future corporate profits, which often leads to higher share prices. Higher corporate valuations stimulate additional investment by the firms in question and also give enterprises better access to risk capital for further expansion. Meanwhile, share-owning households perceive an increase in the net value of their assets. Increased wealth and optimistic expectations lead in turn to a stronger growth of consumption. BIS Review 41/2000 2 In this way, a growth process that is driven by investment can create a good circle. The supply side of the economy generates increased demand and a favourable composition of demand tends to strengthen the supply side still more. In the twenty years from 1974 to 1993, the annual growth of labour productivity averaged only 1.4%. | 04/12/2020 "Gearing up for New and Evolving Jobs in Financial Services" - Remarks by Mr Ravi Menon, Managing Director, Monetary Authorit… Speeches Published Date: 26 November 2020 "Gearing up for New and Evolving Jobs in Financial Services" - Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at “Growing Timber” MAS-IBF Webinar Series on 26 November 2020 Good morning and thank you for joining us. MAS and IBF are launching today the “Growing Timber” project – a series of monthly webinars and events focused on jobs and skills in the financial services sector. Jobs – the Central Economic Challenge of Our Times In August this year, at the Jackson Hole Economic Policy Symposium discussing the economic challenges facing the world, Senior Minister and Chairman MAS, Mr Tharman Shanmugaratnam, said: “The central problem is in creating enough jobs in the first instance, and in raising the quality of jobs for more people over time”. https://www.mas.gov.sg/news/speeches/2020/gearing-up-for-new-and-evolving-jobs-in-financial-services 1/18 04/12/2020 "Gearing up for New and Evolving Jobs in Financial Services" - Remarks by Mr Ravi Menon, Managing Director, Monetary Authorit… I can’t agree more: jobs are the central economic challenge of our times. The success of economic policy is not measured by how well financial markets are doing, not by how well companies are creating new products, not even by how fast GDP is growing. The ultimate measure of economic success is this: are we creating enough good jobs for our people? | 0 |
As indicated, the lower use of IRB models by our banks means they will not be affected by this concept. However, other changes, such as the new operational risk and Credit Valuation Adjustment (CVA) frameworks, or the introduction of changes in the standardised approach, will indeed affect our banks, which should prepare themselves to absorb the new requirements. 8/15 MREL Another challenge banks face stems from the introduction of the new eligible liabilities requirements, known as MREL. As you will be aware, the introduction of MREL is the consequence of the change in paradigm in crisis resolution. We have now moved from the bail-out to the bail-in. The aim is to ensure that banks have sufficient unsecured liabilities on their balance sheet, whether own funds or “bailinable” debt, if you will allow me to use this expression, so as to avoid the use of public funds in the event of failure. The Single Resolution Board (SRB) has set MREL objectives for each significant institution at the European level. It has also informed them of the maximum time available to cover these requirements, which must be met through organic growth of specific liabilities and new issues. It is essential that each institution should plan the issues to be made appropriately. It is worth recalling here that the characteristics of these liabilities make them rather unsuitable for distribution among retail customers. | Smaller and midsize firms participating in the facilities can offer additional services to their clients, and more broadly, these firms may develop new business relationships and skills and deepen their expertise when operating in the markets for these facilities. With this as the motivation, let me review how we are broadening access to the facilities for two primary types of service providers: vendors and counterparties. Starting with vendors, in our effort to contain the damage from the pandemic and speed the launch of the facilities, the Fed directly negotiated with several outside vendors to accelerate the rollout of various facilities and to supplement our areas of internal expertise. Our initial vendor selections prioritized scale and, in many cases, the ability to dedicate a large team of personnel behind a wall of confidentiality. This approach proved successful in launching our facilities at maximum speed, but our strategy from the beginning has been to diversify our vendor base in the post-launch phase. Importantly, all of the contracts the New York Fed has signed are short term; each has a provision to cancel with 30 days' notice. Given this flexibility, we are evaluating all contracts after 90 days, with 3/4 BIS central bankers' speeches priority on re-bidding those that were not competitively bid. The New York Fed will shortly commence a competitive bidding process for some of these vendor roles. | 0 |
Speculation in construction was also less prevalent during the upswing at the end of the 1990s than during the rise in activity a decade earlier. Production of property has been relatively low, and projects have had pre-contracted tenants to a greater extent. In addition, the property crisis at the beginning of the 1990s was affected significantly by the structural changes that occurred during the period. The deregulation of the credit market together with the changes in economic policy required substantial adjustments in the market. So the present situation is not a cause for concern in the same way as the situation at the beginning of the 1990s. Some thoughts on the future The fact that the situation is not a source of concern does not mean that I am predicting a significant recovery in property prices. An increase in economic activity will of course stimulate demand, which sooner or later will apply upward pressure on prices. But at the same time I can see several factors which could restrain a rise in property prices, especially with regard to office premises. BIS Review 38/2003 3 Firstly, there is a risk that demand for office premises will be weaker than the general level of demand in the economy. From the mid 1990s, there was a gradual improvement in economic activity in Sweden, which resulted in higher employment in general, but particularly within office-intensive businesses such as IT and telecommunications. | The trend here has also been more closely correlated to the level of economic activity, with prices falling over the last three years. However, the price decline in Malmö [9 per cent] has been considerably gentler than in Stockholm [24 per cent] or Gothenburg [18 per cent]. These declines have been mainly caused by lower rents, which essentially have been a result of lower demand for office premises due to the subdued economic activity. It also makes sense that Malmö has been affected less than the other major cities given that the slowdown has not been as severe here. The rapid rise in prices and their subsequently rapid decline points to a trend not all that dissimilar from that experienced during the property crisis at the beginning of the 1990s. Nevertheless, there are many differences between the two situations. There is no doubt that we experienced a bubble at the beginning of the 1990s, when prices largely lost their relationship to fundamentals and were instead underpinned by expectations of future price rises. For a period of time the direct yield on property was 8 percentage points lower than the yield on a government bond. So investors must have expected prices to increase a good deal more than 8 per cent in order to compensate them for the risk of investing in property rather than bonds. In this case, you can really say that expectations of price rises were high! This is not the situation today. | 1 |
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’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. | As a sign of Malaysia’s commitment towards this agenda, the ratification of ABIF commitments was completed in March this year. I hope that the ratification process can be concluded swiftly to enable Indonesian QABs to operate in Malaysia in the near future. Dawn of a new era The operationalisation of the ASEAN Banking Integration Framework represents the dawn of a new era of banking relationship between Indonesia and Malaysia. We are privileged to be a witness and contributor to this historical event. Financial integration is a key agenda for the ASEAN region and will only intensify further in the future. As an ASEAN bank embodying the ASEAN spirit, and the largest bank in Indonesia, Bank Mandiri can bring much experience and leadership across the region. Bank Mandiri’s current scope of activities covering trade financing, SME and micro banking products is highly relevant towards advancing the interests of both Malaysia and the broader ASEAN region. The entry of Bank Mandiri into Malaysia via the ABIF Framework would also provide an opportunity to further enhance the regional integration in payment systems between Malaysia and Indonesia. The current collaboration between the ATM switches in Malaysia (MEPS) and Indonesia (ATM Bersama) to facilitate cross-border cash withdrawals can be enhanced to facilitate cross-border remittances leveraging on over 11,000 ATMs in Malaysia and 17,000 ATMs in Indonesia. This can be leveraged upon by both the Malaysian and Indonesian population including the diaspora groups to undertake safe and efficient cross-border remittances. | 0 |
During its lengthy preparation we held numerous consultations with the Czech Banking Association, individual Czech banks, the FAU, further financial regulators and other parties concerned, so as to transpose the international standards into the Czech practice in an optimal way. The CNB regulation covers all the standard elements of the AML measures I have already mentioned. One of its last paragraphs - but definitely not least - concerns the training of bank staff in AML issues. Given the emphasis on training, let me express the delight that your training course is taking place here in Prague. Given what I have said about the necessity to co-ordinate AML activities internationally, I am also glad to see that those attending the course come from numerous different countries. I hope that you will learn as much as possible here and that you will then have an opportunity to use your new knowledge actively in anti-fraud and AML activities in your home countries. Thank you for your attention. BIS Review 40/2003 3 | With its long history and impressive membership, ACI has developed very much into an icon of professionalism in finance, contributing to "market development through education, market practices, technical advice and networking events for the financial practitioners of the world". The Association therefore has a very important role to play and faces in the coming years much greater challenge than before in promoting and upholding professional and ethical standards in finance. One interesting, perhaps even perplexing, aspect of the current financial turmoil is that emerging markets, particularly those in Asia, have only been lightly affected, so far. One reason is that financial innovation, in the form of credit risk transfer through securitisation by the "originate and distribute" model, has not caught on in Asia to the same extent as in the United States. Indeed, economies in different stages of financial sector development face different issues, notwithstanding the clear trend of globalisation in finance. Correspondingly, in promoting and upholding professionalism in finance, there may be a need for different emphases and approaches, having regard to the different development stages that individual regions and economies are undergoing. But it is also important that these different emphases and approaches should be developed within the framework of global standards. I therefore wholeheartedly support regional outreach initiatives of international standard setting bodies such as the ACI. Asia, of course, is region of rising importance in the global context, particularly in terms of finance. | 0 |
But I draw upon my own experience in the corporate world and upon the insights offered by Goodhart to suggest that you simply take all this forward guidance and forecasting a year or more out with a big grain of salt, bearing in mind that the policy statements and forecasts issued by the FOMC are tactical judgments of the moment, made within a broader strategic context. 6 “Longer-term Central Bank Forecasts Are Step Backwards,” by Charles Goodhart, Financial Times, Feb. 2, 2012. BIS central bankers’ speeches 5 The most important announcement Which leads me to what I consider the third and most important announcement we made last week: the statement of our longer-range goals and strategy. For the first time, the entire 17-member committee stated that, given inflation over the longer term is primarily determined by monetary policy, we are able to specify that an inflation rate of 2 percent, as measured by the index for personal consumption expenditures, is most consistent with our mandate. | Richard W Fisher: A report on the Texas economy and a hawk(s)eye view on recent Fed pronouncements – what does it all mean? Remarks by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, before the Headliners Club, Austin, Texas, 2 February 2012. * * * Thank you, Patti [Ohlendorf]. I am flattered that such a great group of Austinites has turned out tonight. I am especially pleased that Alejandro and Rosa Laura Junco are here. Alejandro is CEO of the print media company Grupo Reforma. He has earned a sterling reputation for journalistic independence in a part of the world where independence is a rare and sometimes dangerous thing. Columbia University, the University of Missouri and Michigan State University have honored him for his journalistic accomplishments, and the University of Texas at Austin has named him a Distinguished Alumnus. Alejandro’s company and its flagship paper in Mexico City take their name from La Reforma, a period of liberalizing reforms that transformed Mexico into a nation state in the mid-19th century, beginning with the overthrow of the man Texans know best and like least – Santa Anna – and ending with the ascension to power of a good general gone bad, Porfirio Diaz. As a child growing up in Mexico City, I was taught about La Reforma in school. | 1 |
This will allow investors to avoid the foreign exchange risk temporarily, although creditor risk vis-à-vis the Treasury will still exist. It is too early to speculate on the duration of the bonds that would be offered. That would be determined by the conditions prevailing at the time. The more successful the authorities are in reversing the trend in public sector debt, the more likely investors will be to buy long-term bonds and the better protected BIS central bankers’ speeches 3 the Treasury will be against the short-term exchange rate volatility that could accompany capital account liberalisation. Implementation of precautionary rules is also an important part of the preparation for ultimate removal of the controls. Ladies and gentlemen The capital controls are harmful. No one knows that better than those who must enforce them. They are even more harmful if they are not enforced. There are those who want precisely dated schedules for more rapid liberalisation than is currently planned, and their impatience is understandable. But a precisely dated schedule would not necessarily speed up the removal of the controls – not without correspondingly greater willingness to take on risk. I welcome the constructive criticism and exchange of opinions that come to the fore at meetings such as this one, however, and I urge others to air their views. In my opinion, the capital account liberalisation strategy is based on sensible arguments, which I have described briefly in my presentation today. | Gent Sejko: Do crises change economic fundamentals in SEE Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the Conference “Do crises change economic fundamentals in SEE?”, hosted by the Bank of Albania, organised in cooperation with the South East European Studies at Oxford, Tirana, 30 October 2015. * * * Your Excellency Prime Minister, Dear Governor Hamza and senior central bank representatives, Your excellencies ambassadors, Dear guests, friends and colleagues, I am delighted to welcome you to the annual conference of the Bank of Albania organised in cooperation with the South East Europe Studies at Oxford. It is a pleasure to see that this cooperation brings together old and new partners. This has been a tough year full of challenges for the Albanian economy, consequently for the work of the Bank of Albania. The full recovery of economic growth and its further improvement in the future are and remain one of the top priorities of our work for the year. The prolonged crisis has impelled us and homologous institutions across the world to review many of the economic axioms, which we had taken for granted for a long time. It is not by accident that the main topic of the conference focuses on the causality and solutions for long-term problems we are facing during this period. Over the five year period, the Albanian economy has been growing in positive territory, yet, below its potential. | 0 |
If there are prospects that inflation will become too low at the same time as debt and house prices are rising, the key policy rate’s main task is to ensure that inflation is again brought up towards the target. Several economic policy instruments makes it easier to achieve several objectives at the same time. Stricter banking regulation helps reduce systemic risk, but we cannot act on the assumption that tighter regulation alone will suffice to prevent future crises. There is considerable uncertainty with respect to potential shocks that may hit the economy in the future. Turbulence can arise abruptly and from unexpected events. Hence, it is important to guard against particularly adverse outcomes. 5 In recent years, Norges Bank has chosen to keep the key policy rate at a level that has consistently been a little higher than implied by medium-term inflation and output considerations. Financial stability considerations have played a role, without asset prices or debt having an independent role as target variables. The goal has been to achieve an improved path for inflation, output and employment over time. Let me explain further. 5 See Adrian, T. and N. Liang (2014): “Monetary Policy, Financial Conditions, and Financial Stability”, Federal Reserve Bank of New York Staff Report No. 690, for a further discussion. | Such surveillance efforts could also lead to discovery of parties trading on privileged insider information. SGX has the power to suspend or de-list a counter if conditions for orderly trading are found to be absent. • MAS will carry out independent surveillance on a selective basis, to ensure that SGX is performing its responsibilities effectively. • The MAS will have the power under the proposed SFA to pursue civil prosecution of listed companies which fail to make timely disclosure of material information, and of any participants suspected of market misconduct. The recently introduced civil remedy regime for insider trading will be extended to cover other forms of market misconduct such as market manipulation, or the employment of fraud and deceit in dealing. Civil remedy, which lowers the burden of proof against offenders, will complement the present framework of criminal remedy for offences under securities law. d. Supervision of brokers • SGX supervises and inspects brokers to ensure that they comply with SGX's rules, are prudentially sound, and uphold high standards of market integrity. SGX has to act swiftly and firmly to deal with any unprofessional conduct by brokers and their representatives. • MAS conducts continuous off-site review of brokers' operations to check if they comply with statutory licensing requirements. Such off-site reviews will be complemented by MAS' selective, on-site inspection of brokers to assure itself of the competence and effectiveness of SGX's supervision. | 0 |
The discretionary component of budget policy, by contrast, can be measured by the variations in the primary balance adjusted to account for cyclical effects. According to the OECD’s figures, the budget balance in the United States, adjusted for the economic cycle, as a percentage of GDP shifted from a break-even situation in 1998, to a 0.9% surplus situation in 2000, and then to a 4.5% deficit in 2003 (and a 3.2% deficit in 2007; Figure 2). The aggregate deficit in the euro area adjusted for the cycle fluctuated between 2.7% in 2002 and 0.7% of GDP in 2007. The budget balance fluctuation range has thus been significantly 23 narrower than in the United States. To summarise, automatic budget stabilisers are more important in the euro area, while in the United States there is greater recourse to discretionary policies. 3.3 Shocks As with monetary policy, the difference in the shocks hitting the two economies may explain the varying degrees of fiscal activism. In theory, an economy which is hit principally by demand shocks should make greater use of anti-cyclical budget policies than an economy hit mainly by supply shocks. This is a topic on which, as far as I know, no empirical studies have been conducted to date and it is thus a particularly interesting field of research. A hypothesis worth examining is the extent to which the greater frequency of demand shocks in the United States has justified greater fiscal activism in an anti-cyclical direction. | Second, the Committee stands ready to make further asset purchases should the outlook warrant them. Just as with movements in Bank Rate in more normal times, a pause in monetary loosening does not necessarily mean that loosening has come to an end. It will all depend on how the outlook for inflation evolves. Looking further ahead, the Committee at some point will need to reduce the current exceptional degree of monetary stimulus. Some commentators have suggested that the MPC has been less forthcoming than other central banks in explaining its exit strategy. But to a large extent this reflects the fact that we have less to communicate. The Committee has two instruments through which it can withdraw the stimulus, raising Bank Rate and selling assets. Unlike some other central banks which need to create new instruments to drain excess reserves or alter the terms of existing facilities, the structure of the Bank’s operating framework means these two instruments can be used at any time, in any order. And the strategy guiding our policy decisions will be unchanged – monetary policy will continue to be determined by the outlook for inflation relative to target. The most difficult decision will be to decide the timing of the withdrawal, but that is always the case. The aftermath of the financial crisis posed many questions for the theory and practice of monetary policy. | 0 |
If the world is to meet the goals of the Paris Agreement, carbon emissions must be reduced, which means the combustion of fossil fuels, including oil and gas, must also be reduced. But the world will still need energy. How much and what share will have to be covered by oil and gas are uncertain. That will depend on a number of factors, including climate policy and technological developments. Much remains on the technological front. There is still far to go before carbon capture is truly profitable. Alternative energy sources are not being developed fast enough, even if they are becoming more cost-efficient. At the same time, long-term investments lock in emissions for a long time to come. 3 Source: Norwegian Petroleum Directorate (2019) The Shelf 2019. 10 A stricter climate policy is needed, with expanded carbon pricing measures so that it will be profitable to put into use new solutions. In the EU, there are signs of a more ambitious climate policy. Permit prices have increased, and much is being done to promote investment in alternative energy. NORGES BANK ECONOMIC PERSPECTIVES 13 FEBRUARY 2020 The European Commission also recently launched a plan to introduce a tax on imports based on a product’s carbon footprint.4 The ambition is an equal carbon price for all products whether produced in or outside the EU. Even though the EU accounts for a diminishing share of global CO2 emissions, this could also affect emissions in other parts of the world, including emerging economies. | The climate issue is therefore in large part about how poor countries can achieve solid economic growth without a continued rise in greenhouse gas emissions. With the rise in emissions we have seen, the world will have to prepare for and adapt to a warmer climate. At the same time, climate change impacts are becoming increasingly evident. This may lead to abrupt policy shifts. 4 Von der Leyen, U. (2019): Political Guidelines for the next European Commission 2019–2024. 11 The outlook for future oil demand reflects considerable climate and energy uncertainty. Businesses, banks and investors are paying more attention to this risk. The outlook for offshore activities on the Norwegian shelf has also become more uncertain. NORGES BANK ECONOMIC PERSPECTIVES 13 FEBRUARY 2020 The oil price decline in 2014 brought to light once again the important role of the petroleum sector for the economy. Rather than being in a unique position, the Norwegian economy had to restructure and adjust to lower demand in the oil industry. The oil price collapse marked the beginning of the restructuring that we had long known would come, but it started more abruptly than assumed earlier, for example by the Holden III Commission5 (Chart 12). Chart 12 Business sector less dependent on oil. Oil sector demand. 1) Share of mainland GDP. | 1 |
Many observers feared then that, if the crisis were allowed to run its course, it could be near catastrophic for the region and extremely dangerous for the European banking system. But I am pleased to say that this potential “catastrophe” was avoided and I would like to devote my remaining time to the question of how this was done – the third aspect of the convergence process I previously mentioned. I believe answering this question may provide lessons for countries that are currently facing similar challenges in the euro area. 3. The reaction of CEE countries to the global financial crisis: what can be learnt? In my view, the return to the convergence path is being achieved thanks to a combination of four main elements. First and foremost, there are domestic policy actions to address macroeconomic imbalances at the national level. The precise policy actions differ across countries, reflecting the different country-specific challenges and policy frameworks in place. But the actions generally require a strong fiscal adjustment and/or measures to maintain confidence in the soundness of the financial sector. Second, the reaction of the international community has been essential. Where funding challenges became more acute, international financial assistance led by the IMF – jointly with the EU in EU Member States,– has been crucial in supporting market confidence and avoiding financial crises. The balance of payments support facility available for EU Member States has been reactivated, while the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank have supported several countries. | Leaving aside differences across countries, a long and challenging process of economic transformation brought countries in the region significant improvements in incomes and living standards. Full membership of the EU – or the prospects of accession – provided an important stimulus for the process of transformation as well as an anchor of stability. In Western Europe, completion of the three stages of EMU led to the establishment of the European Central Bank (ECB) and the introduction of the euro in January 1999. Having started originally with 11 participating countries, the euro area has since expanded to include 17 EU Member States including some previous transition economies, namely Estonia, Slovenia and Slovakia. The changes Europe has seen over these past 20 years are enormous. Equally enormous have been the challenges along the way, not least of course due to the global financial crisis. But there have also been enormous achievements. In my remarks today, I would like to take stock of some of those achievements and focus on three main aspects of the process of economic convergence in Central and Eastern Europe. BIS central bankers’ speeches 1 Three main aspects of the process of economic convergence 1. Nominal and real convergence: what has been achieved? The first aspect of convergence relates to developments in terms of nominal and real convergence between the countries of Central and Eastern Europe and the euro area. | 1 |
Many of our banks have embraced sustainability goals while our Islamic Banks are striving actively to adopt Value-Based Intermediation; banking and financing based on Principles of Shariah that encompass not just sustainability but also the wider goals of Maqasid Shariah and social economic well-being. Financial markets should not be left behind. We should strive to work towards adopting sustainable and ethical practices where we can in the Malaysian financial markets. Extra support can be given to market activities that nudge the economy towards sustainable development, inclusivity and social welfare. Again, the industry can think of ways and means of how you can play a role in this. Lastly, having experienced heightened uncertainties in recent years, we continue to need to improve the financial market environment to ensure that markets are resilient against any form of shock. A part of this is that market players themselves need to be agile. This has become a necessity in the landscape of the financial world today which has shorter visibility on what we can expect due to the ever changing nature of the financial markets. The ability to adapt and react immediately is a must to thrive in future years. Data science analytics and greater expertise will increase the agility of financial institutions to acclimatise to not only new demand but also new regulations or developments. Alongside that, the development of talent with forwardthinking capabilities would be instrumental in elevating the quality of financial services. | In so far as financial markets are concerned, these recent times have seen us avoid major and abrupt market movements or disruptions. Besides the 2016 measures that stabilised our markets, this growth is also the result of the many initiatives implemented since then. One key fundamental strategy has been our steps to enhance market transparency and visibility, which provides us with information and data for targeted development efforts. The operationalisation of the RENTAS Segregated Securities Account which enables us to observe the activity in the Malaysian bond market has also provided investors with improved efficiency and a reduced reporting burden, lowering the cost of investing in this area. On this topic, I am pleased to share that on Monday this week, Clearstream launched their revamped solution which will provide an internal settlement link to facilitate greater access to the Malaysian market. They now rejoin a host of International Central Securities Depositories and Global Custodians that provide such access. This is yet another positive development for our financial markets. With greater oversight capabilities, we were able to introduce the dynamic hedging programme in 2016, which successfully enabled institutional investors’ active management of their foreign 1/4 BIS central bankers' speeches exchange exposures in the onshore market. The programme currently records participation of 104 registered institutional investors managing USD37 billion total asset under management, and has led to the migration of these investors’ former offshore strategies to the onshore market which has increased the level of transparency and orderliness of the ringgit market. | 1 |
We can see that these restructured loans, coupled with the safety cushion accumulated over previous periods, help protect the banking system and prevent a situation where last year’s crisis could turn into a problem for the financial system in the future. We believe that loan restructuring has already passed its peak. Since the outbreak of the pandemic, banks have restructured approximately 10% of their loan portfolio, which is quite a considerable amount. As estimated by banks themselves, up to one-third of these restructured loans may turn into non-performing ones. Banks consider that this figure may reach 20– 30%. This would imply that non-performing loans could make 2–3% of the entire loan portfolio, 1/7 BIS central bankers' speeches and banks would need additional provisioning for them. We do not consider that this could entail any systemic risks since loss recognition would be gradual. Judging by the previous crisis period, this process takes about two years, that is, provisions will not be created immediately in any case. Most banks have sufficient revenues to form provisions without the need to use their capital. The sector also has a significant capital cushion maintaining it at six trillion rubles, which is three times more than the potential amount of additional provisions for restructured loans. In other words, we can see no problems in this respect for the banking system as a whole. There is also an unevenness in terms of both capital and income distribution and the process how nonperforming loans will be recognised in banks’ balance sheets. | However, it should be noted that not only large banks are searching new business models largely shifting to ecosystems, but there are also smaller banks striving to find their niches, developing 4/7 BIS central bankers' speeches innovative products, and extensively deploying advanced technologies. Unfortunately, and I should now discuss problems in this regard, we can see that, sadly though, a part of market participants, comprehending that their previous business models are no longer efficient, are trying to find opportunities not to invest in their future — probably because the owners refuse to accept these risks, and banks thus do not invest in their future and their clients — but are rather attempting to gain more money. There are some banks, and disappointingly, there is quite a number of them, who are seeking to increase their incomes through unfair practices using various abusive schemes or misselling. There were also some banks that, so to say, threw caution to the wind and got involved in illegal operations, for instance, providing online casino services. Last year, we revoked licences from those banks for which this became their core business. Therefore, we will be closely monitoring this situation, including illegal operations as well. Still, today I have to detail this issue of unfair practices. I would like you to know that we do not simply see negative practices, but are also going to respond to them. | 1 |
04.10.2022 The situation of Spanish banks in the new macro-financial environment* V Foro Banca/elEconomista Pablo Hernández de Cos Governor *lEnglish translation from the original in Spanish. * Good morning. Allow me to begin by thanking El Economista for inviting me to participate, once again, in this banking forum, which represents an excellent opportunity to discuss the present situation of the banking industry and the implications of the current macro-financial environment. Our societies have been hit by several global events (the pandemic, Russia’s invasion of Ukraine) in quick succession, generating a highly complex macro-financial environment in which the risks of a global cyclical downturn have been magnified by persistently high global inflation, the tightening of financing conditions stemming from the widespread normalisation of monetary policy and the heightened uncertainty prompted by a broad-based downward revision of growth forecasts. The question of how the banking industry could be affected by this complex setting is an important one. The starting point: a banking industry with lower non-performing loan ratios and profitability above cost of capital To answer that question, I should first emphasise that the Spanish banking sector started out from a relatively favourable position. Allow me to illustrate this point with a few figures. First, the quality of banks’ balance sheets continued to improve through to 2022 Q2. Nonperforming lending to the resident private sector fell by 12.4% in 2022 Q2, seeing the pace of correction return to pre-COVID-19 levels after easing to rates of 5% following the pandemic. | Nonetheless, the most recent data could suggest a change in trend in this market stemming from the macro-financial setting that I have described. Specifically, housing transactions contracted in July, which is significant given that this month usually has a positive seasonal component. Also, house prices ceased to accelerate in Q2, posting growth similar to the first three months of the year. In any event, we will have to wait for new information to assess this behaviour more accurately, meaning we will need to keep a close eye on this market. As for the public sector, fiscal policy has clearly played a key role since the outset of the pandemic to soften its impact on household and corporate income, thus avoiding more persistent negative effects. The corollary of this has been a significant increase in public debt relative to GDP, which was already high before the pandemic. This high government indebtedness and the likewise high structural budget deficit evidently represent vulnerabilities when faced with a tightening of financing conditions, as is the case at present, and reduce fiscal policy headroom to respond to future shocks. Mitigating factors include most notably the higher-than-initially-forecast reduction in public deficit in 2022 and the significant lengthening of the average government debt maturity in Spain, which stands at more than eight years and delays the impact of interest rate increases on the public debt burden. In any event, Spain’s annual public sector financing requirements stand at high levels, around 20 pp of GDP. | 1 |
Jon Cunliffe: Market liquidity and market-based financing Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the British Bankers Association International Banking Conference, London, 22 October 2015. * * * According to Oscar Wilde, there is only one thing in life worse than being talked about and that is not being talked about. Wilde of course was not a banker. And although he retained his notoriety until well after his tragic and unjust end, even he probably never experienced the sustained and hostile public attention which bankers and the banking system worldwide have experienced over the past eight years. So it will probably come as a relief to those of you here at the BBA International Banking Conference that I do not today intend to talk – in the main – about banks and bankers. Rather, I want to talk about market not bank-based finance and about market liquidity. I hope you will not find that worse than being talked about. I will, however, make some important points at the outset about the reform of the regulation of the banking system. That is not just for any of you that would otherwise have withdrawal symptoms. | First, there is increasingly persuasive evidence that emissions, and so climate risks, are systematically underpriced in financial markets. This means that continuing to replicate the structure of the sterling corporate bond market, without taking explicit account of the climate impact of bond issuers, is no longer in fact a truly ‘market neutral’ approach. And second, the remit of the MPC was updated in March this year to clarify that, subject to achieving price stability, the Committee should support the transition to net-zero as part of the government’s economic strategy.11 The CBPS will remain a monetary policy tool, with its overall target stock of assets set by the MPC in order to achieve its primary inflation objective. However, from Q4 this year we intend to modify our approach to the composition of assets we buy, in order to take account of climate considerations. Our approach will be guided by three principles. First, we will look to incentivise companies to take decisive actions which contribute to an orderly transition of the overall UK economy to net-zero. Second, given the relatively small scale of the CBPS in the context of capital markets, we will seek to influence the thinking of other, larger investors, as well as learning from them. Thirdly, our requirements of firms will become more demanding over time, including as improvements in data and metrics allows us more precisely to monitor climate behaviour, and further to sharpen the incentives we set. | 0 |
In addition, both house prices and debt accumulation are affected by structural changes in capital and credit markets and by changes in lending willingness, demographic trends and migration patterns. It is difficult to determine to what extent house prices have risen as a result of structural changes and wealth gains and to what extent house prices have been pushed up by expectations of a continued high rise in house prices. Developments since the beginning of the 1990s may have engendered expectations that house prices will only continue to rise. This may have increased house purchases for pure investment purposes and induced younger buyers to enter the housing market earlier than otherwise. The pronounced fall in 4 BIS Review 102/2007 saving over the past few years indicates that households take greater chances. The housing market may have been in a state of euphoria. We can influence house prices through the interest rate, but if the interest rate had been increased to a markedly higher level in order to curb house price inflation, the krone would have been significantly stronger and CPI inflation significantly lower. Yet it is low and stable inflation that is the operational target of monetary policy. There is symmetry here as well. Should house prices fall sharply, we will in interest rate setting concentrate on dampening the effects on inflation and overall activity in the economy. | And the continuing efforts of the banking sector also represent challenges of their own: banks filed over 68,000 or 90% of the suspicious transaction reports (STRs) with the JFIU in a year. And that is just the STRs: we all know what that means in terms of the massive amount of data that banks are monitoring, screening and analysing on an ongoing basis. 5. The more difficult part of the answer to my question therefore means looking forward and requires vision and – dare I say it – aspiration – because we know that FATF evaluations represent a snap shot. There are always new and emerging risks, to which the HKMA and banks have stayed vigilant and agile; criminals are also exploiting new technology and innovations to create terrible harm to consumers and the integrity of the financial system. Banks that play a frontline role in combating that harm, not only by applying preventive measures when on-boarding customers, but increasingly through the value of information they are able to extract and feed into the AML/CFT eco-system and the close cooperation with the LEAs and the HKMA in converting STRs and intelligence into actions like arrests and asset recovery. 6. This is the challenge we face so we’ve taken a step back from the FATF evaluation report and asked ourselves some potent questions: is our system working as well as we would like it to be? Are the supervisory tools and techniques we have been using for years still fit-forpurpose? 7. | 0 |
Real short-term interest rates were reduced around the world, following a nearly decade long secular decline in inflation rates, a slowdown in growth at the turn of this decade and subsequent deflation. As central banks raised their policy rates when the outlook improved and deflation risks had dissipated, both real and nominal long-term interest rates remained anomalously low. Global savings appeared to rise faster than did perceived real investment opportunities, and this development helped to push down real long-term interest rates around the world. At the same time, many emerging market economies built up very large levels of official reserves to reduce external vulnerability and to hold the value of their currencies stable against the dollar. The exchange rate policies in these economies – economies that together accounted for a increasing share of global GDP – made overall global financial conditions more accommodative, even as the United States and other countries tightened their monetary policies. Expected and realized volatility in both debt and equity markets were remarkably low for most of the last half a decade. Term premiums declined and remained low over much of this period. Credit spreads across a wide range of asset classes fell to levels that assumed unusually low levels of future losses. In the United States, credit, and mortgage credit in particular, expanded relative to GDP. | The policymaker’s “loss function” in any particular time period is: 𝐿𝑜𝑠𝑠𝑡 ≡ (𝜋𝑡 − 𝜋 ∗ )2 + 𝜆(𝑦𝑡 − 𝑦𝑡∗ )2 where 𝜋𝑡 is inflation, 𝜋 ∗ is the inflation target, 𝑦𝑡 is output and 𝑦𝑡∗ is ‘trend’ output, so that 𝑦𝑡 − 𝑦𝑡∗ is the output gap, and 𝑡 subscripts denote time periods. 13 The policymaker’s objective is to minimise the discounted sum of these losses over time. In this formulation, a lambda of zero would imply no weight on the stabilisation of real activity – so-called “inflation nutter” preferences. When lambda is positive, in contrast, the policymaker is willing to strike at least some trade-off between output and inflation stabilisation, as directed by the MPC remit. This objective function is optimised subject to the constraints implied by the aggregate behaviour of the economy, including the relationship between interest rates and activity; and the relationship between activity and inflation – the Phillips curve shown in Figure 1. In essence, these suggest lower interest rates raise activity; 14 and higher activity generates higher inflation. Under this simple framework, in certain circumstances, the optimal policy balances inflation overshoots with shortfalls of activity relative to potential, and vice versa for inflation undershoots. (A derivation appears in the Annex.) | 0 |
Mr. Heikensten examines economic policy and the fight against inflation in Sweden Speech by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikensten, at the Meeting of Almega-Affiliated Employers’ Associations on 27/5/98. Thank you for the invitation to attend your meeting and talk about economic policy and inflation. Today I shall begin with a brief review of the historical background to the fight against inflation in the Swedish economy. It is worth recalling that more than eight years have passed since it was decided in Sweden that combating inflation would have top priority. This policy has been pursued consistently ever since. After a couple of initial years that were troublesome in many ways, the results have been encouraging and Swedish stabilisation policy now looks good even in a European comparison. This will be followed by a discussion of three policy fields—fiscal policy, labour market and wage formation—that are closely linked to monetary policy, as well as some remarks about competitive conditions in Sweden’s economy. Successful results in these policy fields enlarge the room to manoeuvre in monetary policy. In conclusion I shall consider some topical monetary policy issues, including our current appraisal of inflation and monetary policy’s construction. 1. The fight against inflation and its results High inflation characterised Sweden’s economy for a number of years in the 1970s and 1980s, a period that clearly illustrates an inflation economy’s negative consequences. Repeated attempts were made to rectify the economic imbalances by means of devaluations and fiscal stimuli but development remained unstable. | I therefore wish to thank, from the outset, Celpay for organising this timely conference and to welcome most warmly our foreign participants who I’m sure will bring a rare insight to this conference with their own experiences. It is widely acknowledged that expanding access to financial services for Zambia’s unbanked population remains one of the biggest challenges confronting the financial sector in this country. Findings from the last FinScope Zambia Survey which was conducted in 2009 showed that 62.7% of Zambian adults still remained financially excluded compared to 66.3% reported in 2005. This slight increase in access to financial services, however, fails to match the significant increase in the number of banking and non-banking institutions which over the same period increased from 14 to the current 19 banks and to over 90 in the case of the nonbank sector. The mismatch in growth between the supply side and the demand tells us a story that the physical increase in the number of the traditional financial service providers does not necessarily translate into a corresponding increase in access to financial services among the population. I believe it is this mismatch that calls for the need to examine the role that the non traditional platforms, such the mobile phones, can play in enhancing greater access to financial services. | 0 |
Developing Asia is still growing at double the global average. Rising affluence and a growing middle class will underpin a steady increase in insurance penetration rates that are still well below the global average. Continued industrialisation, expanding cross-border trade, and infrastructure development will drive demand for insurance solutions to mitigate a variety of business risks. Second, Asia is vulnerable. Asia is highly prone to natural catastrophes. • Asia accounted for 52% of global economic losses from disasters between 2000 and 2009, and 81% in 2011 alone. • Only about 35% of the economic losses from 2011 were insured, resulting in a heavy economic burden for affected countries. A growing risk awareness, coupled with rising asset values, will lead to greater demand for catastrophe insurance and reinsurance, including alternative risk transfer solutions. Following the 2011 catastrophes, several Asian countries have already established insurance pools for key catastrophe risks. Third, Asia is ageing. Asia is facing a rapidly ageing population. By 2050, Asia and the Pacific will be home to 62% of the world’s elderly population, with one in four persons aged 60 and above. This will lead to greater demand for health insurance, annuity and other retirement security products. BIS central bankers’ speeches 1 As the leading insurance centre in Asia, Singapore is well-placed to serve the burgeoning insurance needs of the region. The insurance industry is one of the brightest stars in the constellation of Singapore’s financial sector. The industry has done remarkably well, but its story is not well known. | The number of global and regional positions in Singapore has grown. Most underwriting decisions can be made on the ground instead of being referred back to headquarters. This has enabled the Singapore market to respond more quickly to clients’ needs. Most Asian risks, including entire large reinsurance programmes and specialty risks, can now be fully placed in Singapore. Towards becoming a global marketplace Our vision is for Singapore’s insurance industry to become a global marketplace by 2020, with the ability to accept not just regional, but global risks. To achieve this, we are pursuing four strategies with clearly laid out initiatives. • First, to increase supply-side capacity, in both volume and expertise. • Second, to promote insurance demand, both locally and in the Asia-Pacific. • Third, to develop a true marketplace, where sellers and buyers come together to negotiate and trade risks. • Fourth, to foster a conducive business environment. Increase capacity Let me begin with our plans to increase supply-side capacity. 2 BIS central bankers’ speeches We are focused on increasing the quality and diversity of underwriting expertise here. Having expert underwriters on the ground enables insurers to be more responsive to their clients and make underwriting decisions quickly. They will also have a better understanding of the market environment and underlying risks. Recent events highlight the need to build up a deeper understanding of Asian risks. For example, prior to the devastating floods of 2011, Thailand had not been viewed as catastrophe-prone. | 1 |
In fact policy documents, such as the 2018 Pre-Budget Document and the Budget for 2018, have stressed the need to upgrade infrastructure and enhance environmental protection. Similarly, international institutions have emphasised the need to shift attention towards sustaining growth and making it more inclusive. Going back to the latest IMF Article IV mission, their recommendations focus on addressing housing market pressures, closing the infrastructure gap, upskilling and reskilling the labour force and strengthening innovation. We would like to discuss some of these challenges, before outlining how we think that our financial sector can play a role in helping to tackle them. The housing market In last year’s speech, we touched upon the need to avoid the formation of asset price bubbles. We quoted Central Bank research indicating that house prices were still below their equilibrium fundamental value, but warned that price trends would nevertheless continue to be closely monitored. House prices, as you know, have continued to rise. Page 4 of 10 National statistics data suggest an increase of 5.3% during the first half of this year, as against 6.1% in the same period of 2016 and 3.2% in 2015. That said, housing supply is responding to the high demand that is contributing towards house price inflation. In the first seven months of 2017 building permits were 62% higher than they were in the same period of 2016 and 153% higher than in 2015. This increased supply, unless there is a further acceleration in demand, should result in housing price inflation moderating. | With the advent of the EU’s internal market in the 1990s, however, the issue of a common currency was revived. National currencies came to be seen as the last major barrier to the internal market’s full impact, which would pave the way to even greater European integration. To a large extent, the driving force behind the Werner Plan and the Maastricht Treaty was political. Experience has taught us that institutionalised economic cooperation can be an antidote not just to trade conflicts but even to war. A common currency is a strong political symbol that can render cooperation durable in the daily economic round. Instead of being just a topic for solemn speeches on television, European cooperation with a single currency could be something real that people carry around in their purses and pockets. 1 BIS Review 102/2000 But the Maastricht Treaty was, of course, also backed up by the strong economic forces that lay behind previous attempts at monetary union. By reducing exchange risks for firms, a single currency facilitates cross-border trade and investment. It also helps to integrate capital markets, rendering them larger and deeper, which aids the supply of corporate capital in Europe. These considerable effects are accompanied by others that we ought not to underrate. In the present situation, moreover, they are likely to be enhanced by the internet and other new information technology. Not the least of these is that the monetary union eliminates the psychological barrier that different currencies raise when we try to compare prices in different countries. | 0 |
There is no doubt that the spread of benchmarking allows fund managers and clients to better assess their performance against that of other funds. But, in a context of growing competition within the sector, it may well have increased mimetic behaviour. Some market participants operators (whose own compensation is closely linked to the relative, rather than absolute, profit and losses they generate) may indeed have come to the conclusion that it would be better to be wrong along with everybody else, rather than running the risk of being right alone. A striking example of rational mimetic behaviour is the influence that hedge funds enjoyed as "opinion leaders" and trend makers. By its nature, trend-following amplifies the imbalance that may at some point affect a market, potentially leading to vicious circles of price adjustments and liquidation of positions. Moreover, more and more participants are able to access directly to financial markets, while the expertise to deal with a larger set of technical information is not evenly distributed. This may also reinforce the role of “gurus”. · Third, index management: as a fund management technique, it has proven very popular on equity markets and may have contributed to exacerbating movements in financial asset prices. Because their goal is to mimic the performance of indices, “passive managers” try constantly to match the composition of their benchmark. They thus help to amplify market trends, buying more as the market rises and liquidating more as the market drops. | The recent “tech-stock bubble” provides us with an illustration of such a difficulty: while one was witnessing the “irrational exuberance” in 1996, the surge in capital spending associated with the development of new technologies resulted in a faster productivity growth, which in turn boosted equity prices. At that time, uncertainties about fundamentals (was there an American miracle?) made difficult a proper assessment of asset valuations, although the large movements in asset prices where a concern for central banks. However, when expectations reverse, for example due to the reassessment of expected profitability in the economy, and consequently asset prices decrease, the point is to determine whether the attitude of the central bank ought to be different in order to preserve monetary and financial stability. That is, some could argue that the central bank’s response should be asymmetric. In the booming phase, as long as price stability is not endangered, central banks do not react to the rise in asset prices. Conversely, in the recession phase or when a bubble bursts, central banks could consider reacting if they deem that monetary and financial stability is endangered. What could then restrain them from doing it? | 1 |
As we noted in the December FOMC statement, we anticipate that we will continue reinvestment “until normalization of the federal funds rate is well underway.” I think this policy makes sense not only because the decision to end reinvestment will represent a further tightening of monetary policy, but also because it is difficult to assess ahead of time the impact of such a decision on financial market conditions given the lack of historical experience. I also believe that continuing reinvestment until the federal funds rate reaches a higher level makes sense. We want to ensure that we have the ability to respond to adverse shocks by easing monetary policy by lowering the policy rate. Having more “dry powder” in the form of higher short-term interest rates seems more desirable than less dry powder and a smaller balance sheet. Now the words “well underway” in the FOMC statement are vague – what does that mean in terms of the level of the federal funds rate? Reiterating the disclaimer that I am speaking for myself, my view is that we should not set a numerical tripwire for ending reinvestment. If the economy were growing very quickly and the risks of an early return to the zero lower bound for the federal funds rate were deemed to be low, then I could see ending reinvestment at a relatively low federal funds rate. | The Czech Lands had been a key industrial and economic part of the former AustriaHungary and hence had a relatively well-developed banking sector. An awareness of the close links between government finances, the banking sector, firms and households shaped the economic policy of the First Czechoslovak Republic. Karel Engliš worked systematically to balance the budget and deserves most of the credit for sorting out public finances in the early 1920s. In 1927 he submitted three tax laws that substantially lowered corporate taxation and supported the creation of capital. At the same time, though, he tied the tax reform, which led to lower revenues, to cuts in government expenditure and a streamlining of the civil service. So, Rašín and Engliš established a trinity of traditions in our country: a stable currency, sound government finances and non-inflationary economic policy. These traditions became a theoretical, practical and moral legacy for subsequent generations of economic policymakers. It is unusual these days to look back to the communist period for economic inspiration. The socialist system was inefficient and cumbersome and discouraged initiative and innovation. Central planning by definition made the system less adaptable to change and created an economy of shortage. Despite this, the Czechoslovak version of socialism tried to eliminate the most glaring imbalances and preserve basic macroeconomic equilibrium. Fortunately, our central planners didn’t cause any major imbalances in the consumer market in the 1980s, so the savings surplus wasn’t as large as in other communist countries. | 0 |
That is a lot slower than would be needed to regain the level of output implied by a continuation of the pre-recession trend. The outlook for inflation For many quarters, the judgment about the outlook for inflation two to three years ahead has been shaped by two opposing factors – the balance of demand and supply in the economy, and the extent to which the resulting degree of spare capacity bears down on prices; and the extent to which price shocks cause higher inflation expectations to become embedded, prompting higher nominal wage and price increases. 6 BIS central bankers’ speeches On the economy’s potential supply, the evidence is highly conflicting (there are few aspects of the economy where the data are clear!) On the one hand, labour productivity remains around 8% below the level it would have reached had it followed its pre-crisis trend (Chart 9), implying a significant margin of spare capacity in the economy. But on the other hand, the main business surveys suggest that there is little spare capacity within businesses (Chart 10). Moreover, the expansion in output since the trough has been met by an increase in employment, rather than by productivity growth. Coming to a judgment about the degree of spare capacity in the economy is therefore difficult – but at the same time crucial. | Paul Fisher: The economic outlook – some remarks on monetary policy Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, to the Agency for Scotland, London, 23 May 2011. * * * I would like to thank Ronnie Driver for his help in preparing this speech. For most of us, the current outlook for the UK economy is not a very attractive prospect. After experiencing a precipitous fall in demand during 2008/09, the latest estimates suggest that UK output in 2011 Q1 remained around 4% below its peak pre-crisis level. The Monetary Policy Committee’s (MPC) central projection published in its May Inflation Report, is for output to grow at around its historical trend rate (Chart 1), such that it would be mid-2012 before that previous peak level is regained (Chart 2). At the same time annual CPI inflation, far from being subdued by the recession, has picked up to 4½%. In the short-term it is likely to go higher still before, we expect, falling back towards the 2% target (Chart 3). All this poses a significant challenge for policy makers, not least because of the genuine hardships slow growth and high inflation cause for businesses and households up and down the country. | 1 |
2 BIS central bankers’ speeches | The Riksbank believed this expenditure would be higher than estimated in the report and that small and medium-sized firms in particular would find it difficult. The Riksbank also drew attention to the risks of Sweden being discriminated against in various respects. One example was the disadvantageous terms for outsider countries in TARGET, the European payment system. Moreover, an outsider position for the time being would involve additional costs in various parts of the economy. Financial institutions, for instance, would have to operate twin systems in order to remain competitive. Negative long-term effects of remaining outside Such is the nature of the long-term effects that assessments of them are unlikely to change fundamentally in the course of a year or two. Still, there is new and additional information that may cast a somewhat different light on certain aspects. One major issue concerns the link between EMU and the single market. There is empirical evidence that the single market is exerting downward price pressure in the European Union. Some assessments suggest, moreover, that EMU may lead to a further price fall; figures as high as 10 to 15% have been mentioned. If the effects were to be of that magnitude, the welfare gains would be substantial. 3 BIS Review 92/1999 In practice, however, it is not easy to distinguish the parts that EMU and the single market are playing in price formation. Empirical data therefore have to be treated with caution. | 0 |
Prior to this, only real estates and certain types of movable property can be used as collateral. With this new Act, a firm can further gain access to funding by putting up inventories, machineries, and intellectual property as collateral. Given this, Thailand’s small and medium enterprises, which constitute 95 percent2 of the total number of firms and make up 30 percent of total employment3, are expected to gain better access to credit, thus representing a better distribution of economic opportunity. Ladies and gentlemen, allow me to reiterate that, although I group this set of laws as ones that promote governance and improvement in economic opportunity, in actuality, they all have positive spillover towards enhancing economic growth and productivity. After all, having a well-functioning capital market, better managed SOEs, a fairer and more competitive environment, and more access to credit will allow 1 Excluding activities to preserve national security 2 Source: The Office of SMEs Promotion, 2014 3 Average over 2015, National Statistical Office of Thailand calculated by the Bank of Thailand 4 greater efficiency among players both in the public and private sectors. I will now turn to the legislation that will help improve productivity. There are three laws in particular that I believe will be of your interest. First is the Licensing Facilitation Act, which is already in effect since July last year. The law intends to make acquiring a permit easier and more transparent for all businesses. | In response to this more competitive and challenging environment, banks could adopt various strategies such as greater income diversification, the containment of operating costs and increased investment in technology. From the regulatory standpoint, the main challenge will involve maintaining a level playing field for all financial system participants, so that similar activities posing similar are subject to a comparable level of regulation. As the supervisor of banks and guarantor of financial stability, the Banco de España also faces very important and specific challenges as a result of disintermediation. In this new environment, the relative importance of the main risks to financial stability will foreseeably change with an increase of those linked to market risk. As a result, the supervision and analysis of the financial risks arising outside the banking system and of the interconnections between banks and other financial system participants will become more important. These interrelations will not only take the form of cross-balance sheet or income statement positions; similarities between the portfolios of different types of participants may also mean that shocks initially affecting one institution or a group of institutions may ultimately have repercussions for all other financial market participants. In this respect, it should be borne in mind that the Banco de España is responsible for activating and deactivating certain macroprudential tools introduced under legislation to mitigate systemic risk in the financial sector. Most of these instruments are applied almost exclusively to banks. | 0 |
16 Goodhart (2013) argues that so-called countercyclical measures will need to be introduced at a time when they are likely to be opposed by many politicians, most borrowers and lenders, and many, probably most, commentators in the Press. He also doubts that the measures will be implemented with sufficient vigour and aggression to have any mitigating effect, as they would be operating against the prevailing trend of the financial market. 17 This objection of course applies to all policy areas trying to counteract financial risks, including a monetary policy that leans against the wind. But while this objection is often made against monetary policy, it has so far only been discussed to a minor extent with regard to macroprudential policy. 18 Stein (2013). 6 BIS central bankers’ speeches Little acceptance for this view in the Swedish debate To summarise: in my view, macroprudential policy should be the first line of defence against financial imbalances.19 But it is possible, and even quite probable, that in some situations it may need support from monetary policy. And there is thus, at least as I understand it, good reason to extend the strategy for monetary policy and allow greater consideration to be given to financial imbalances than was the case prior to the financial crisis. One of the main arguments against this view in the Swedish debate is that monetary policy in practice has little effect on the risks linked to financial imbalances. | Page 4 RTGS and ISO 20022: enhancing the quality of payments data In the UK the way that payments are made and settled is being transformed with the renewal of the Bank’s Real Time Gross Settlement (RTGS) Service. This is the critical infrastructure which delivers final and risk free settlement and virtually every sterling payment is settled over RTGS eventually. As an integral part of upgrading its hard payments infrastructure the Bank is joining to global push to enhance the soft infrastructure of payments by introducing ISO 20022 messages in the renewed RTGS and in CHAPS. As everyone at this conference will no doubt be aware ISO 20022 is a gamechanger for the financial system. It is an open international data standard that allows financial institutions to communicate through a common data language. It will enable financial systems to understand each other wherever they are in the world. One of you could walk down the road and send a payment from a local bank branch in Kaunas and the information conveyed within the message would be the same information as available to my local bank here in London. ISO 20022 also allows for more structured and enhanced data, which can be user driven. In other words it can develop according to the user’s needs either through adapting the language by adding new data fields or by adapting to meet different technology needs. | 0 |
The Baltic region Denmark Estonia Finland Latvia Lithuania Poland Sweden Germany 8 BIS Review 105/2009 Swedish banks in the Baltic states June 2009 Baltic operations’ share of lending and operating profit in each bank Market shares public lending Population 1.3 million Population 2.3 million Lending Population 3.4 million SEB 100% 19% 80% 47% 14% 60% 24% 11% 39% Swedbank 16% 10% Nordea 29% Operating profit, latest four-quarter period 3% 14% 40% 15% 43% 20% 25% 22% Latvia Lithuania SEB 0% Estonia Swedbank SEB Nordea Neg Swedbank Other Neg Nordea 1% Sources: Bank reports and the Riksbank Real GDP in the Baltic region and global Annual percentage change 6 4 2 0 00 01 02 03 04 05 06 07 08 09 10 -2 -4 -6 -8 Denmark Finland Sweden Germany World Source: Reuters Ecowin BIS Review 105/2009 9 Real GDP in the Baltic region Annual percentage change 15 10 5 0 00 01 02 03 04 05 06 07 08 09 10 -5 -10 -15 -20 -25 Estonia Latvia Lithuania Poland Source: Reuters Ecowin Unemployment in the Baltic states Per cent 20 18 16 14 12 10 8 6 4 2 Latvia sep-08 mar-09 mar-08 sep-07 mar-07 sep-06 mar-06 sep-05 sep-04 mar-05 mar-04 sep-03 mar-03 sep-02 sep-01 Estonia mar-02 mar-01 sep-00 mar-00 0 Lithuania Source: Reuters Ecowin 10 BIS Review 105/2009 Current account in the Baltic states Percentage of GDP 5 0 -5 -10 -15 -20 -25 Estonia Latvia mar-09 sep-08 mar-08 sep-07 mar-07 sep-06 mar-06 sep-05 mar-05 sep-04 mar-04 sep-03 mar-03 sep-02 mar-02 sep-01 mar-01 -30 Lithuania Source: Reuters Ecowin Harmonised index for consumer prices Annual percentage change 20 15 10 5 0 -5 jan-01 jan-02 jan-03 Estonia jan-04 jan-05 jan-06 Latvia jan-07 jan-08 jan-09 Lithuania Source: Reuters Ecowin BIS Review 105/2009 11 Nominal wages in the Baltic states Annual percentage change 35 30 25 20 15 10 5 0 -5 Estonia Latvia mar-09 sep-08 mar-08 sep-07 mar-07 sep-06 mar-06 sep-05 mar-05 sep-04 mar-04 sep-03 mar-03 sep-02 mar-02 sep-01 mar-01 -10 Lithuania Source: Reuters Ecowin Corporate debt, the Baltic states and Sweden per cent of GDP 70 60 50 40 30 20 10 Estonia Latvia Lithuania 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 0 Sweden Source: Reuters Ecowin 12 BIS Review 105/2009 Household debt, the Baltic states and Sweden Per cent of GDP 80 70 60 50 40 30 20 10 Estonia Latvia Lithuania 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1995 1996 0 Sweden Source: Reuters Ecowin Apartment prices and number of transactions in Tallinn N umbe r of tr ansactio ns with apartme nts in T allinn and me d ian price 1 400 28 000 1 200 24 000 1 000 20 000 800 16 000 600 12 000 400 8 000 200 4 000 n u m b e r o f tra n s a ctio n s (lh s ) 2009 2008 2007 2004 2006 0 2005 0 m e d ia n p rice (E E K /m 2 , rh s ) D a ta : L a n d B o a rd * f inal tra ns ac tio n data mus t be pu blis h ed late s t 10 day s af te r th e tr ans ac tion da te Sources: Land Board and Eesti Pank BIS Review 105/2009 13 Real prices of office premises in city centres, Sweden Index:1981=100 500 450 400 350 300 250 200 150 100 50 0 81 83 85 87 89 91 93 Stockholm 95 97 99 01 Göteborg 03 05 07 09 Malmö Sources: Newsec and the Riksbank Average yield levels for modern office premises in city centres, Sweden Per cent 16 14 12 10 8 6 4 2 0 85 87 Stockholm 89 91 93 Göteborg 95 97 Malmö 99 01 03 05 07 09 Five-year government bond yield Sources: Newsec , Reuters Ecowin and the Riksbank 14 BIS Review 105/2009 Real government bond yield, 5 years Per cent 10 9 8 7 6 5 4 3 2 1 0 -1 85 87 89 91 93 95 97 99 01 03 05 07 09 Sources: Reuters Ecowin, SCB and the Riksbank Real house prices Index 1980=100 450 400 350 300 250 200 150 100 50 0 1980 Sweden 1985 1990 Denmark 1995 2000 2005 2010 Norway UK Spain USA Sources: SCB, OFHEO, Case-Shiller and Reuters Ecowin BIS Review 105/2009 15 Basis spread The difference between three-month interbank rate and expected policy rate Basis points 400 350 300 250 200 150 100 50 0 jan07 apr07 USA jul07 okt07 jan08 apr08 Euro-area jul08 okt08 jan09 apr09 UK jul09 Sweden Sources: Reuters Ecowin and Bloomberg 16 BIS Review 105/2009 | I don’t need to remind you of the really miserable social as well as economic consequences - as right across the economy people lost their jobs, their businesses and their homes. More insidiously, repeated experience of boom and bust produced a pervasive short-termism in business behaviour which infected both industry and finance and - dare I say both employers and employees - however much we all like to blame everyone else. Everyone was tempted to grab what they could while the going was good. But we have learned from that experience. We’ve learned that in anything other than the short term there really is no trade-off between growth and inflation. What we are trying to do now through monetary policy is to keep overall demand in the economy growing continuously broadly in line with the capacity of the economy - as a whole - to meet that demand. Both the previous Government and the present one set a low inflation target as the immediate objective of monetary policy, not as an end in itself, but in effect as a measure of our success in keeping demand in line with supply. So the real aim is to achieve stability across the economy as a whole in this much wider sense. BIS Review 71/1998 -2- Now, there is not a lot, frankly, that we can do directly through monetary policy to affect the supply side - the underlying rate of growth that can be sustained without causing inflation to rise. | 0 |
François Villeroy de Galhau: With economic recovery underway in Europe, what monetary policy? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at a lunch-debate at the Centre des Professions Financières, Paris, 28 September 2017. * * * Accompanying slides Ladies and gentlemen1, It is a pleasure to be here with you for this lunch-debate of the Centre des Professions Financières. I would especially like to thank your chairman Michel Pébereau for his kind invitation. Today, I am delighted to be able to speak to you on a highly topical subject: monetary policy in Europe in the context of economic recovery. The prospect of a very gradual normalisation of our monetary policy gives rise to concerns and expectations. I will begin by focusing on what our accommodative monetary policy has already achieved today, before talking about prospects for the future. I. What is the situation today? Economic recovery in the euro area is here [slide]. It is robust and broadly based across countries and sectors. Our latest ECB forecasts2 confirm this: growth should stand at 2.2% in the euro area in 2017, i.e. a significant upward revision of 0.3 point compared with June’s forecast of 1.9%. This means that for the second consecutive year, euro area growth will be comparable to that of the United States. | Structurally, many studies 3 suggest that the Phillips curve, i.e. the relationship between inflation and fluctuations in economic activity or unemployment, appears to have flattened since the 1980s [slide]. Inflation seems less responsive to changes in economic activity in advanced countries, notably because of globalisation,4 which appears to exert downward pressure on inflation via the decline in imported goods prices and competition from low-wage countries. But a flatter Phillips curve does not call into question this relationship: we are in no doubt about the way we are heading: the recovery and job creations will lead to higher wages and, ultimately, more inflation. But we nevertheless remain less certain as to the speed of this adjustment. We are both confident about the effectiveness of our monetary policy and willing to be patient regarding the time it will take. II. What prospects for the future? Let me now turn to the consequences for our monetary policy. You are well aware that we at the ECB’s Governing Council will decide this autumn on the re-calibration of our policy instruments beyond the end of the year – and, I quote Mario Draghi, “probably the bulk of these decisions will be taken in October”. We are now faced with a simple requirement, in line with our mandate to maintain price stability, and the progress towards our inflation target: we have to reduce the intensity of our net asset purchases, while maintaining overall a substantially accommodative monetary policy. | 1 |
Brunnermeier et al (2009) use this framework to motivate levying a tax – a “Pigouvian tax” – on institutions posing systemic risk externalities. This tax would be set at levels which offset the effects of the bank’s actions on wider society. A number of academics have since proposed measures along broadly Pigouvian lines (Archarya et al (2010)). Rather remarkably, policy reforms in practice have followed closely in the spirit of these proposals. In 2010, the FSB announced its intention to introduce a “systemic surcharge” of additional capital on the world’s largest banks. In July 2011, the Basel Committee published a methodology for measuring systemic importance based on indicators of bank size, connectivity and complexity, with additional capital of up to 2.5% depending on this score. In November 2011, the FSB endorsed this methodology and announced the 29 systemicallyimportant entities to which it would apply. This framework will be finalised this year, before being phased-in from 2016. Legislation is already in place, or is being drawn up, to implement the systemic surcharge in the United States and Europe. These proposals are clearly a practical step in the right direction. By boosting levels of capital in the system, the probability of big bank failure will be reduced. You would have got good odds back in 2007 that something as seemingly elliptical as a Pigouvian tax on systemic risk would have found its way onto the regulatory statute books. Now we have it. “We are all Pigouvians now”, even if most of us cannot spell it. | 14 The Riksbank has communicated that the interval of 3.5 – 4.5 per cent is a reasonable assumption for the level of the long-term normal repo rate (Sveriges Riksbank, 2010). There is a great deal to suggest, however, that the normal level of interest rates has fallen (see, for instance, Armelius et al., 2014, and Holston, Laubach and Williams, 2016). For example, members of the US central bank’s monetary policy committee, the FOMC, have recently lowered their assessment of the level of the long-term US policy rate from just over 4 per cent to just under 3 per cent. 7 [12] Chart 5. Yield in accordance with the forward curve but funding at the repo rate Per cent 4 4 Repo rate Forward curve 3 3 2 2 1 1 0 0 -1 -1 12 14 16 18 20 22 24 26 Note. Projection of the repo rate extended from the forecast in the Monetary Policy Report in Oc tober 2016. The forward curve is estimated on 26 October 2016. Source: The Riksbank Changed interest rate environment directly impacts the Riksbank’s profit and dividend Up to now, the bond purchases have thus been profitable for the Riksbank. There are, however, good reasons to anticipate counteracting losses in the period ahead, but it is still unclear what the total effects on the Riksbank’s financial position will be. | 0 |
European firms were lagging behind US firms in terms of foreign direct investment and they are now catching up. European firms have entered a “globalisation process” whereby they aim to reach a global size through acquisitions. BIS Review 61/2000 6 Conclusion Allow me to conclude. The euro area has adopted a sound macroeconomic policy and has embarked upon a fairly comprehensive programme of structural reforms. These reforms will still take time to be fully completed. But they are well underway and have already boosted economic growth, job creation and corporate restructuring. This move has been triggered by the creation of a monetary union and a vast unified financial market. I am impressed by what has been achieved during the past years and the National Central Banks as well as the ECB are strongly encouraging governments and businesses to foster structural reforms in the future. The euro exchange rate is clearly misaligned relative to euro area fundamentals (robust domestic growth, steady implementation of the single market, abundant domestic savings, healthy external accounts). This is the reason why we consider that the euro has a strong potential for appreciation. The Eurosystem, which is the guardian of the euro on behalf of the people of Europe, knows that our fellow citizens want the single currency to be at least as solid as their previous national currencies. In France, to give but one example, 96% of the population want the euro to be at least as solid as the franc. | The tide will turn An orderly reversal of the euro’s exchange rate will take place as a result of a triple narrowing. • Narrowing of the growth differential between the United States and the euro area. This is because the current extraordinary growth rate of the United States is probably not sustainable in view of the widening of the external deficit. Euro area growth is well balanced, while the US economy is affected by imbalances. This will be progressively taken into account by the markets. • A narrowing of the interest-rate differential as a consequence of the narrowing of the growth differential. • Narrowing of the “restructuring differential” between the United States and the euro area economies. It seems to us that although corporate restructuring in Europe was lagging behind the United States a few years ago, we are now observing a catching-up process. This leads me to my last point: the undertaking (and speeding up) of structural reforms is a major condition for the euro to be a complete success. 4. The conditions for the complete success of the euro: sound macroeconomic policies and structural reforms In this regard, the Lisbon European Council meeting last month can be viewed as a further important step towards the necessary medium-term strategy for structural reforms in the Union. The labour market has become much more flexible in the past few years in Europe. | 1 |
Many of them have referred to it as the "Switzerland of the Balkans" or as the "rock garden of southeastern Europe." On the other hand, the country's uncommon isolation from the world, arising generally from its rugged, mountainous terrain, has led foreigners to speak of it as "the Tibet of Europe" or as a country more mysterious than central Africa. The great eighteenth-century British historian, Edward Gibbon, speaking of Albania, said that it is "a country within sight of Italy, which is less known than the interior of America." BIS Review 119/2007 1 The remoteness and isolation of the country became practically legendary and all too frequently gave rise to reports and descriptions of the land and of the people – even in books and encyclopedias – that were closer to legends than to reality. Perhaps because of its romantic remoteness and other reasons, Albania has exerted a continuous fascination on artists, including poets, playwrights, composers, and more recently film makers and producers of television programs. Shakespeare set his comedy Twelfth Night in Illyria – the name by which Albania was known in ancient times. Lord Byron, who visited southern Albania in 1810, wrote some stirring lines about her landscape in his poem “Childe Harold”. Morn dawns: and with it stern Albania's hills... Robed half in mist, bedewed with snowy rills. In Mozart's comic opera “Cosi fan tutte” the principal male characters, Ferrando and Guglielmo, appear for the most part as two "Albanian noblemen" in clever scheme to test the love of their fiancés. | This rapid credit growth has become the challenge of the moment. However I believe that efficiency and soundness of financial system is a dynamic process and a continuous challenge. Frequently this challenge might generate from international financial markets too. Globalization of financial markets has increased the risk of contagion. The recent developments in the sub-prime mortgage loans, must serve as a excellent reminder of the never ending surprises, which make the trade off between monetary policy and financial stability a difficult balance. I want to make it clear that by financial stability I do not assume only the absence of a financial crisis, but a well functioning financial system that performs well its functions. I think too tight regulations that definitely minimize all the risks are not conducive to sustained growth. Therefore the real challenge for which we are working hard is to find an optimal balance between deregulation which promotes market forces and financial innovations and negative consequences of possible market failures and financial crisis. 4. Balkan region: trends and major characteristics Dear students, The rest of my discussion will provide few remarks on the developments of the South East European region. I will briefly comment on the common problems and characteristics of the region and voice my opinion upon possible direction of progress and convergence in policies. Recently the Governors of the Region have been increasingly concerned regarding the issues related with banking system activity, market efficiency, financial stability, risk exposure and of course the role of central bank. | 1 |
And they have interacted with the forces unleashed by the Great Recession to challenge the durability of the expansion. The Great Recession led to enormous dislocations in advanced economy labour markets. In many economies unemployment unemployment reached perilous levels. and underemployment skyrocketed. Youth Central banks responded with unprecedented monetary stimulus. That was consistent with their price stability mandates. And it recognised the threat that the recession might permanently scar the workforce. As the recovery in many advanced economies has evolved, central banks are assessing the extent of structural changes in labour markets and are grappling with what they mean for monetary policy. The answer is not uniform across major economies. This is one reason why monetary policy in the US, euro area and the UK can be expected to be less synchronised than in recent years. 1. A tale of three labour markets Indeed, despite common underlying influences, differences in how the labour markets of major economies responded to the Great Recession have been striking (Chart 1). The US Take the world’s largest economy – the United States – as a benchmark. Unemployment there more than doubled during the recession. While that rate has recently fallen back, that headline is much better than the details. The number of Americans in work has only just returned to where it was before Lehman failed, even though there are now 14 million more people of working age. | It can be argued that such policy instruments should be on the law books by the time the auction of offshore krónur takes place because, if the auction is as successful as we intend, it is possible that confidence in Iceland will grow still further and capital inflows will increase. BIS central bankers’ speeches 3 Why do we need all of these additional tools and contingency measures? An important reason is the risk to financial stability that accompanies excessive and volatile capital movements that are unconnected to economic fundamentals. Another important reason is that in an increasingly financially integrated world, it is more difficult for small countries to deviate too far from the monetary policy pursued in the larger countries that determine global financial conditions. We saw this before the financial crisis, in New Zealand and here in Iceland. And we have seen it more recently, in countries like Switzerland and Sweden. We can better understand why this is so if we consider a situation where cross-border financial integration is nearly perfect, so that capital movements very quickly even out the difference in risk-adjusted real returns on assets in different countries. The interest rate channel of monetary policy transmission then becomes clogged up in small, open, and financially integrated economies, where long-term interest rates are determined by rates in large countries and transmission takes place largely through the exchange rate channel. | 0 |
However, an expansionary monetary policy could not explain by itself the severity of the financial collapse the world is seeing today. There are countries where the monetary policy was expansionary, with interest rates at their minimum, and no housing bubble occurred. A couple of examples are Canada and Chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the Fed Funds rate (Figure 3). Still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound. Furthermore, in some cases housing prices did go up high, with clear signals of a bubble being formed. However, their financial systems made it through and remained stable and, despite the current difficulties including very recessive episodes, have avoided acute financial crisis. This is the case with, for example, Australia and Spain. Naturally, when facing disproportionate increases in the price of housing, both the level of borrowing and the building boom associated with it are symptoms that the downturn that comes with the cycle will be severe. This is because of the deleveraging that households will have to undertake and the contraction of the building activity. Still, this need not result in a systemic financial crisis. In any case, monetary policy can and does help in the creation of bubbles, although not so much by the level of the interest rate but by the monetary policy strategy with which financial turmoil is dealt with. | I am not saying that attention must not be paid to the exchange rate beyond its effects on inflation. Excessive deviation from its long-term fundamentals may create problems in terms of resource allocation and the business cycle. The exchange rate should be influenced through accumulating or reducing reserves. Some conditions must be met, however, in order for this to be effective and convenient. In the first place, it must be consistent with the inflation target, in order for the intervention not to threaten the credibility of the monetary policy. Secondly, to safeguard monetary policy independence, once the intervention is announced it must be implemented mechanically. All this shields the conduct of monetary policy, typically carried out in regular pre-established meetings, from the extraordinary decision of buying or not buying foreign currency. In particular, the sterilization of intervention decisions permits to preserve both the credibility and the independent management of monetary policy. Finally, and because of this sterilization requisite, the cost of intervention must be properly considered, because it entails a quasi-fiscal component that could be significant. In any case, to the extent that the decision to intervene is taken because of evident real exchange rate misalignments, the risk of suffering quasi-fiscal costs should be limited. Intervention would occur within the context of an extraordinary episode where the central bank would estimate that there are sufficient elements to evaluate that the current exchange rate dynamics are unsustainable and the market is not properly internalizing the long-term prospects of the real exchange rate. | 1 |
There is no growth without credit, and without growth, savings lose their value. Therefore, it is imperative that short-term goals do not prevent the adoption of a strategic and longer-term vision. Banks should invest with a view to developing functions related to financial consultancy services for their clients. They need to persistently seek to explore the market, to identify potential clients – especially households and small enterprises – and, most importantly, to help them design bankable proposals and projects. At this phase, the reduction of concentration and the diversification of credit portfolios are key elements. This requires that you design and set up relevant structures, processes and products, and plan for adequate financial resources. In parallel, you should continuously assess the surrounding environment, which certainly affects your activity. Thus, if there are concrete proposals for additional legal amendments or supervisory practices, I invite you to formulate and submit them officially to us and other relevant public authorities, so that we can, together, make a swift decision on them. In 2/3 BIS central bankers' speeches this process, the Bank of Albania will always support initiatives that lead to an eventual improvement of financial intermediation levels and safeguard the stability of the banking sector and of the financial system. Second, our ambition should aim higher than the 3, 4 or 5% annual growth rate. The country needs more optimism, which means higher growth rates and more structural reforms. The banking sector has both a direct and an indirect role to play in this regard. | In such a situation the EU member states have a “common interest” in discussing how confidence in economic policy can be enhanced. During the spring there has been a discussion in Sweden about the exchange rate tendency in connection with the move to Stage Three of EMU. What will happen if, for instance, companies adopt the euro as their unit of account? The Riksbank has underscored that it does not see any strong reasons for large currency outflows on account of the monetary union. And if such outflows were to occur and the krona suddenly weakened, we consider that countervailing forces would act in financial markets. The value of a currency is determined by numerous factors, of which the most important is confidence in the country’s economic policy. The general trend towards internationalisation in recent years has entailed relatively large currency outflows due to portfolio diversification among resident investors. But at the same time the krona has displayed an appreciating trend as growing confidence in economic policy generated a compensatory currency inflow. All in all, conditions for a stable exchange rate between the krona and the single currency should be good. There are many indications that the European Central Bank will define a price stability target that resembles Sweden’s. Similar inflation trends, together with confidence in economic policy as a whole, should result not only in stable nominal and real exchange rates between the euro and the krona but also in conditions for a reasonable valuation of the krona. | 0 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.