sentenceA
stringlengths 2
7.69k
| sentenceB
stringlengths 2
7.69k
| label
float64 0
1
|
|---|---|---|
Sweden remains a ‘pre-in’; we will have to consider euro adoption again at some point in the future. Therefore the evolution and enlargement of the euro area concerns us. Secondly, Sweden is probably one of the EU nations that will benefit most from the enlargement of the European Union. Our economy is one of the EU’s most integrated with acceding countries, with surging East-West trade and FDI. Also, should Estonia, Latvia and Lithuania adopt the euro, we would be directly affected because Swedish banks own most of the Baltic banking system. I would therefore like to share some reflections with you on two subjects of relevance to euro area enlargement: the risks associated with ERM II membership and long-term frameworks for fiscal policy. However, before doing this let me stress two things: First, the long-term advantages of euro area enlargement are evident. I believe the advantages would be roughly the same for acceding countries as they would be for Sweden: integration of trade and capital markets stimulates growth for both the euro adopter and the euro area. In the case of acceding countries, there are probably additional advantages of monetary integration; it gives added stability after the difficult years of transition and is important for their underdeveloped financial sectors. So the issue is not really euro area enlargement as such, but rather its timing and preconditions. Second, from the perspective of the euro area itself it is hard to see how acceding countries could pose any major risks to price stability. | The obvious solution to speculation against the upper band is to reach an agreement in ERM II to revalue. But this is often difficult in practice. When political decision-makers are forced to choose between the inflation and exchange rate targets, it takes courage - and good analyses - to give priority to low inflation and opt for revaluation. As the case of Ireland has demonstrated, this does not exclusively apply to acceding countries. In the end, the result can be inflationary pressures once inside the euro area. However, the most acute risk with ERM II is probably when the exchange rate is in the lower part of the band. Virtually all the currency crises that we have experienced in recent decades have been due to speculation against weak currencies. ERM II, of course, is different from these previous failed regimes of pegged exchange rates in the sense that it has a clear exit strategy with regard to euro adoption. But this does not mean that ERM II is immune to large fluctuations in short-term financial flows. I do not think this should be a big problem for the currency board regimes or the so-called hard pegs in the new Baltic member states. In their case, ERM II membership would merely be confirmation of a credible regime that has been successfully maintained for nearly a decade, even when confronted with severe shocks such as the Russian crisis. | 1 |
The two most noteworthy examples of this are the Commercial Paper Funding Facility, which was introduced in October 2008, and the Term Asset-Backed Securities Lending Facility (announced in November 2008, but not up and running until last month.) Third, once policy rates were near the zero-bound, we expanded the type of assets that the Fed purchased. In order to put downward pressure on general longer term borrowing rates, particularly mortgage rates, the Federal Reserve has purchased the debt of the GSEs, namely, Fannie Mae and Freddie Mac and the mortgage-backed-securities they issue, and, more recently, longer-term Treasuries. So why has the Fed done so much in terms of special programs? As I see it, there are four major reasons behind the dramatic expansion of the Fed’s liquidity programs: • To provide liquidity to banks and dealers in order to slow down the deleveraging process. • To expand the balance sheet capacity of the private sector to counteract the shrinkage underway in the non-bank financial sector. • To restore and improve market function. • To ease financial market conditions. This financial crisis has been marked by the rapid deleveraging of the non-bank financial sector. This deleveraging has been driven mainly by the collapse of securitization activity, pressure on dealers to reduce leverage and the spillover of these efforts on to other financial players such as hedge funds. This deleveraging process, in turn, has put intense pressure on the balance sheet capacity of the banking sector. | Both regimes may be prone to fluctuations in interest rates in response to shocks, but with inflation targeting, which requires a flexible exchange rate even if managed to a degree, the central bank has a measure of discretion in the magnitude and timing of its response, whereas, with a fixed rate, defensive reactions must be more immediate and may hence be potentially sharper. Hong Kong context Recent criticisms of Hong Kong's currency board have focused mainly on two aspects - the implications for the competitiveness of Hong Kong vis-a-vis other economies and the problems of living with falling price levels. The remainder of this paper is directed mostly at these issues. Competitiveness Changes in competitiveness are typically measured by comparing movements in some appropriate measure of costs or prices at home and abroad, and adjusting for shifts in exchange rates. The BIS Review 17/2002 1 1 measure of competitiveness thus produced is commonly referred to as the real exchange rate. A 2 stronger real rate means higher relative prices and therefore implies weaker competitiveness. I detect two common misconceptions about the real exchange rate. Influencing the real rate The first is the belief that the real rate is amenable to control by the central bank or government and that the chosen regime for the nominal exchange rate is therefore an important determinant of the real rate. Let me explain what I believe to be some flaws in this view. | 0 |
Even though the current account surplus is increasing from 2003 to 2004 as a result of high oil prices, the adjusted basic balance is falling. In isolation, this is contributing to a decline in demand for the Norwegian krone. The decline is due to high import growth, which is reducing the current account surplus. In the Government’s budget proposal, the use of petroleum revenues remains virtually unchanged between 2004 and 2005. In spite of this, the krone exchange rate has appreciated recently. This reflects short-term capital inflows and may indicate that foreign exchange market operators expect that the use of petroleum revenues will increase in the years ahead. A levelling off or a fall in oil prices and a stable use of petroleum revenues could reverse these short-term capital flows. Inflation has been low this year. Consumer price inflation adjusted for tax changes and excluding energy products (CPI-ATE) was very low up to the end of the summer, but moved up slightly in September. Inflation is still being curbed by the fall in prices for imported consumer goods, in spite of the depreciation of the krone through 2003 and the global rise in producer and commodity prices. This is partly due to the increasing share of Norwegian imports from low-cost countries. Strong competition and high productivity growth in many industries in Norway have also exerted downward pressure on inflation. | Ravi Menon: Introducing Agustín Carstens Introductory remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Monetary Authority of Singapore Lecture 2013, Singapore, 5 February 2013. * * * Dr Agustin Carstens, Emeritus Senior Minister Goh Chok Tong, Ambassadors, distinguished guests, friends and colleagues, good morning. 1. Welcome to seventh MAS Lecture. 2. Since its launch in March 2000, MAS Lecture has provided platform for distinguished members of international financial community to offer perspectives on significant economic and financial issues of the day. 3. And today, we are honoured to have as our speaker, Dr Agustin Carstens, Governor of the Banco de Mexico. Dr Carstens has an outstanding record of service and achievement in his country as well as on the international scene. 4. He was a Deputy Managing Director at International Monetary Fund between 2003 and 2006. From 2006 to 2009, he was Mexico’s Minister for Finance. And in 2009, he was appointed Governor of Banco de México, returning to an institution where he had started his career and served with distinction in several key positions. 5. Dr Carstens’ topic today is The Quest for Successful Policy Responses to Sovereign Crises. It is a topic that he is eminently qualified to expound upon. 6. As a former Minister for Finance, he would be familiar with issues related to sovereign debt and fiscal policy. And as a life-long central banker, he has dealt with crises first-hand. | 0 |
But since the target is set at 2.5% on a symmetrical basis, the concept of “prudence” cannot be applied in the same way. The result is that we worry as much about being below the target as we do about being above it. And I believe this makes good economic sense: the problems of severe deflation are at least as great as severe inflation. The particular indexed measure of inflation the Chancellor has chosen is RPIX, that is the headline RPI number after excluding - this is the X bit - mortgage interest payments. Some believe that we should move to the Harmonised Index of Consumer Prices (HICP), widely used in Europe and, accordingly, making comparison with Euroland inflation easier. HICP inflation in this country has been running consistently below RPIX by about 1%. This reflects differences in the construction of the index, in particular the treatment of depreciation of property costs. Some have argued - most recently the Engineering Employers’ Federation - that if we moved to HICP, then interest rates could immediately be lowered. But this does not follow. If we moved to a different calculation of inflation, it would seem natural to revise the target at the same time. A 2.5% target for HICP would mean that we are targeting a higher level of inflation than we are at present. | Along with the flatter rank structure, we have introduced a more discretionary and merit-based pay system, removing some of the barriers to rapid advancement of the very best people. At the same time, we reformed our benefits arrangements, removing a system that geared benefits in part to length of service and replacing it with one geared to contribution to the organisation. In particular we removed subsidised mortgages, arguing that the Central Bank, now responsible for interest rates, should not insulate its staff against the effects, for example, of rising interest rates which might affect the rest of the country. The approach to the new flexible benefits is modern, offering staff a menu of benefits up to a percentage of their salary; if none of the choices appeal, they can take cash instead. Many of these management issues are dealt with in our Annual Report - and I hope this gives comfort that the Bank of England is not hiding behind its unique role to limit disclosure. Rather we recognise that we should play our part in being open and accountable. In aiming to achieve a high degree of efficiency we must recognise that we will never reach any absolute goal - but we do want to stand up well in comparison to other organisations in the public sector. We have set ourselves the goal of seeking excellence as one of the leading central banks in the world; and at home to stand out as one of the leading UK public sector institutions. | 1 |
This development demonstrates the bank’s strong and long term commitment to be a significant player and contributor to the development of our financial sector, and the growth of the economy as a whole. The Bank of Zambia wishes to commend the Board of the Bank, Managing Director and his Team for these commendable developments. Ladies and Gentlemen, you will no doubt be aware of the crucial role that banks play in financial intermediation. The real challenge therefore is for all financial sector players to play their honest part in enhancing savings mobilization and to effectively channel the public’s savings to support financing of viable economic activities. as our economy continues to grow and per capita incomes increase, demand for financial services from both the corporate sector and the general public will continue to grow rapidly. Therefore, Zanaco’s wide branch network will strengthen its capacity to meet this growing demand for financial services. Managing Director, Distinguished invited Guests, Ladies and Gentlemen, the Bank of Zambia is always pleased to be invited to occasions such as the one we are witnessing today, because it gives us an opportunity to share with you and the public some of the key developments that are taking place in our financial sector and the economy at large. In this regard allow me to say something about what is currently the most topical issue not only in the financial sector but in the national economy as a whole. | A fiscal capacity for the euro area There are many ways a euro area fiscal capacity could be implemented, ranging from simple macro insurance or an unemployment benefit scheme to a fully-fledged euro area budget that could include the provision of public goods. Each of these options entails its own technical and political challenges and opportunities. In the end, the choice as to which option or combination 2 BIS central bankers’ speeches of options should be adopted will need to be a political one. This is in fact an opportunity to have a debate about Europe’s collective goals; such a debate is more necessary than ever and goes beyond the economic sphere alone. 3 From the perspective of the economist and of the central banker who has a keen interest in making EMU as a whole work better, the crucial question behind the discussion about a fiscal capacity for the euro area is how to maximise its positive effects on the functioning of EMU, while at the same time preserving incentives for sound fiscal policy-making and addressing structural weaknesses at the national level. To start with, we should all be able to agree that the objective of the fiscal capacity should be to make EMU more resilient by increasing the capacity for automatic stabilisation in the euro area. The aim should not be to actively fine-tune national economic cycles or to equalise revenues. | 0 |
The target range for our reference interest rate, the three-month Libor for Swiss franc investments, thus remained unchanged at between –1.25% and –0.25%, and we confirmed the interest rate on sight deposits at the SNB of –0.75%. We also reaffirmed our willingness to intervene in the foreign exchange market as necessary. The SNB’s policy of negative interest and foreign exchange market interventions – measures that are intended to relieve upward pressure on the Swiss franc – is helping to stabilise price developments and 4 BIS central bankers’ speeches support economic activity in our country. The SNB thus continues to take account of the exchange rate situation in formulating its monetary policy. Conclusion The SNB – like the ECB and many other central banks – has been deploying unconventional monetary policy measures in recent years. These were prompted by the financial and debt crisis, which caused the central banks to reduce short-term interest rates to near zero and significantly expand the monetary base. In Switzerland, the crisis led to a very substantial appreciation in the Swiss franc, particularly against the euro. The SNB thus took targeted unconventional measures to ease upward pressure on the Swiss franc. Between September 2011 and January 2015, it maintained a minimum exchange rate against the euro. Since the discontinuation of this measure, monetary policy has been based on negative interest and the willingness to intervene in the foreign exchange market. Logically and quite rightly, the central banks were major economic protagonists during the financial and debt crisis. | As a result of the Maastricht convergence criteria, the central banks of these countries were increasingly aligning themselves with the Bundesbank. Exchange rates between the affected currencies, as well as exchange rates to the Swiss franc, consequently stabilised. This phase of low exchange rate volatility continued in the years immediately following the launch of the euro. The most recent period of exchange rate volatility against the euro has its roots in the international financial and debt crisis, which rapidly evolved into a euro crisis. Doubts about the viability of some euro area member states’ sovereign debts caused markets to lose confidence in the euro. As in past crises, the mounting uncertainty triggered substantial upward pressure on the Swiss franc. Why Switzerland doesn’t have the euro Considering its close economic ties to the euro area, why didn’t Switzerland ever seriously contemplate joining the single currency? Politically and legally speaking, the answer is simple: a country can only join the Eurosystem if it is already an EU member state. Swiss voters and cantons rejected accession to the European Economic Area in a referendum in 1992, and in 2001 followed this up by voting against a popular initiative favouring a “Yes to Europe”. These decisions settled the question of whether Switzerland should join the EU for the foreseeable future. Quite apart from these political and legal factors, the economic case for joining the euro had always been weaker for Switzerland than for many other European countries. | 1 |
These would include reforming the treatment of debt under corporate income tax, and advances in the capital markets union project that would help provide for the integration and development of capital markets in the EU. The growth of equity markets can afford various benefits to the business sector and the economy in general. The resort to equity funding strengthens the soundness of firms’ balance sheets, given that a greater proportion of these capital instruments reduces firms’ vulnerability to adverse shocks such as an increase in interest rates or a decline in revenues.8 8 See, for example, A. Kraus and R. H. Litzenberger, (1973): “A State-Preference Model of Optimal Financial Leverage”, Journal of Finance. 28: 911–922. 8 Conclusions I should like to conclude by pointing out that the COVID-19 pandemic has prompted an unprecedented economic contraction in Spain and in other economies. Non-financial corporations have been seriously affected, although the forceful measures adopted by the national and supranational economic authorities have prevented the materialisation of a wave of defaults stemming from short-term liquidity problems. However, some firms have seen their solvency impaired as a result of a decline in their revenues and an increase in their debt. The current phase of the crisis, marked by an incomplete and uneven economic recovery, warrants continuing public support to firms. Nonetheless, these policies should be adjusted so as to focus more on firms in sectors that continue to be severely affected by the crisis, and through means other than the accumulation of greater debt. | These firms tend to find it more difficult to access credit, especially in periods of high uncertainty and growing credit risk concerns. Overall, these results suggest that the pandemic is generating substantial liquidity risk for Spanish firms. In this setting, national and supranational economic policies in the different (fiscal, monetary and financial) areas responded rapidly and robustly to address these risks. After the initial stress, this resulted in an improvement in financing conditions recorded in both bank lending and debt securities markets. In the fiscal policy area, two public guarantee programmes managed through the Official Credit Institute (ICO) are noteworthy. The first, with a total of € billion, was designed to finance firms’ liquidity needs, while the second, with up to € billion, was mainly focused on investment in fixed assets. The aim of both these programmes was to encourage financial institutions to grant funding to firms and the self-employed, in a setting in which these agents were facing high liquidity needs, against a backdrop of rising uncertainty and growing credit risk concerns among lenders. Since the Royal Decree approved on 17 November came into effect, the maximum term of loans granted under these programmes has been extended to eight years and the maximum grace period, which was initially 12 months, has been extended to 24 months. Similarly, the deadline for granting of guarantees, which was originally 31 December 2020, has been extended to 30 June 2021. | 1 |
The activities will be largely focused on drafting of the new law and the new bylaws on payment services and payment systems – in cooperation with the Ministry of Finance. The new regulation will entail transposing the latest European legislation in this area and setting grounds for significant changes to our payment landscape. Opening the door to fintech companies will provide opportunities to strengthen competition in the payment services market, and thus to enrich the offer of new, innovative and easily accessible products at a competitive price. Reflecting on the scope of this project, we have had in mind that, inter alia, the recent global economic crisis has clearly demonstrated that macroeconomic stability does not necessarily 1/2 BIS central bankers' speeches ensure financial stability. It acknowledged though that financial instability has long-term adverse effects on economic growth and macroeconomic stability. This explains the large step taken by the EU - a banking union set up on two pillars: the single supervisory mechanism and the single resolution mechanism. Undeniably, countries heading towards the EU and the European Monetary Union will have to work hard to harmonize the supervisory setup as well as other institutional and structural elements relevant for the smooth financial sector functioning. Therefore, the second component addresses the banking regulation and supervision and aims to improve our supervisory capacities. | For us at the National Bank, the achievement in the fourth component - research, knowledge and skills in policy analysis - will be of immense importance. Emphasis will be on assessing the relationship between real and financial cycles and identifying the implications of financial factors for the economic fluctuations in the Macedonian economy. This topic has been particularly relevant since the outbreak of the global economic crisis, and undoubtedly, analyzing it will improve the recommendations of decision makers. Distinguished guests, It is a great pleasure for us to partner with the central banks of Germany and Croatia in delivering such a large and significant project. I thank them for being part of this project and for supporting us in the process of European integration. I also thank the central banks of Belgium, Lithuania, Portugal, Romania and the Netherlands who have also accepted to support our way towards European values. I believe in the not too distant future we will be partners not only in implementing projects, but also equal partners in the creation of European standards in central banking. Finally, let us remember what Robert Schuman said in the 1950 Declaration, “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.” I hope that the achievements we make during the project delivery will reaffirm our readiness to be active and beneficial participants in the further construction of Europe. Thank you for your attention. | 1 |
We have received similar concerns about conservatism in the securitisation proposals and in the treatment of “double default” risk, which is the risk that both a borrower and a guarantor would default on the same obligation. Other questions have been raised on the incentive structure and on the recognition of insurance within the operational risk proposals. It is perhaps natural that the majority of comments address the minimum capital requirements, or pillar 1. This section of the New Accord defines the capital charges in monetary terms for banks’ exposures and activities. But one should not forget that the New Accord is premised on three pillars, not just one. So I would like now to turn to the other two pillars, beginning with the importance – and benefits – of the proposals for the supervisory review of capital and home/host issues. Afterwards, I would like to spend a moment on another topic which has been raised in the comments, namely the New Accord and harmonisation of accounting standards. Finally, I will conclude my presentation with some remarks about the current status of our discussions and our future work. Supervisory review & home/host issues As you know, under the New Accord the Basel Committee will recognise formally the role that supervisors play in ensuring that banks manage their risks and their capital needs appropriately. In the past, supervisors in each jurisdiction found their own ways to evaluate capital. | For instance, albeit with an orientation to the specific conditions of the US economy, the academic contributions to the June conference at the Federal Reserve of Chicago show the vibrancy of current international research on meeting the challenges of low inflation. Some of these themes were also identified in President Draghi’s recent Sintra speech. There should be no doubt that the ECB is committed to ensuring that our monetary policy is built on frontier-level and robust theoretical and empirical analysis. Conclusions Together with the extended nature of macro-financial adjustment in the wake of a major financial crisis, we have seen a substantial downward shift in the realisation of shocks to inflation in recent years. In the context of the euro area, the ECB has been active and creative in deploying nonstandard measures, in addition to extending the range for the policy rate into negative territory. Our assessment is that this policy package has been effective and further easing can be provided if required to deliver our mandate. At the same time, an extended phase of below-target inflation poses a communication challenge in maintaining focus on the medium-term inflation goal. It is obvious that it is easier to demonstrate commitment to the target if the actual track record of inflation outcomes corresponds more closely to the declared objective. Accordingly, it is essential that a central bank shows consistency in its monetary policy decisions by proactively responding to shocks that might delay convergence to the target or move inflation dynamics in an adverse direction. | 0 |
Another important area is to raise the professional standards of the industry that reflects the highest standards of professional conduct, knowledge and competence. In this regard, the grand design of the industry, the Financial Sector Blueprint, clearly emphasized on the need to develop talents across all levels of an institution, spanning from the entry level to senior management and the board of directors. Indeed, a holistic talent development and management is a good example of an initiative that combine art with science which a visionary institution must be able to master to achieve its goals. The second imperative is the ability of the industry to effectively leverage on technology to build strong, innovative and competitive businesses. This includes developing a deep understanding of how changes in technology impact people’s lives and transforming how consumers and investors behave and view the value proposition of businesses. For instance, mobile phone penetration in Asia alone makes up 52 per cent of total global penetration. The highly developed telecom markets of Asia with 3.6 billion people across Asia having mobile phones spread across a diverse range of markets, capitalising on mobile data/wireless broadband services would mostly likely chart the way of the future. Growth across Asia in high speed access to the internet by mobile wireless devices has been largely driven by highly competitive markets combined with a general population who are prepared to embrace new mobile technologies. | It goes without saying that it is not only a quantitative issue and that at the same time the efficiency of research and development in terms of industrialisation 12 See P. Hartmann, F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation for productivity and growth in Europe”, ECB Occasional Paper forthcoming. 13 Some authors have calculated that if the average size of capital markets in the EU was bigger - in the US for instance this size is around 450% of GDP instead of 220% in the EU (based on an overall indicator measuring total financing in the economy by aggregating bank credit to the private sector, stock market capitalisation and the outstanding amount of domestic debt securities issued by the private sector) - then annual GDP per capita growth in the EU could be positively influenced (see G. Favara (2006), “An empirical reassessment of the relationship between finance and growth”, mimeo). 14 See the European Commission’s Green Paper entitled “Entrepreneurship in Europe”, 21.01.2003. 6 BIS Review 82/2007 is crucial. In the longer term, GDP could be up by 4.2% in 2015 and 7.0% in 2020, equivalent to an additional growth rate of nearly 0.5% per year 15 . Finally, to make these measures most effective, they need to be accompanied by efforts to improve the labour force’s level of education and expertise. | 0 |
If assets market are booming and perceived returns are high, banks will always find the necessary capital. Conversely, capital dries up during downturns, when it is most necessary. Introducing counter cyclical capital requirements will certainly help. But we may not have looked enough into the interrelated dynamics of stock and credit markets; or, put differently, on how capital flows in and out of the financial sector during different phases of the economic cycle and what are the consequences on credit flows. Finally, tailoring capital requirements to the definition of economic capital by banks themselves strengthens the incentive function. But from, a macroprudential perspective, by replicating closely private risk management methods and metrics, this encourages uniformity in behaviour, which, by itself, is a source of instability. It is becoming increasingly clear, it seems to me, that if we want prudential supervision to effectively pre-empt the build up of imbalances, it has to act more directly on individual and collective incentives. This should push us to look more closely at the "accountingcompensation" nexus. When looking at revenues drawn from a financial investment, it is generally impossible to distinguish excess return from additional risk taking. Ignorance of tail risk fits perfectly in this framework. This points to a possible solution: regulatory systems should force the pricing of risk in all its dimensions, including liquidity risk. Again, there is a clear analogy with tax theory: "internalizing" the risk eliminates market failures. The conceptual challenges in quantifying, for instance, liquidity risk, are enormous. | Further, retail deposits cover a very significant portion (75%) of the total stable funding needs (60% for European banks as a whole). Assets - The Spanish banking industry’s consolidated assets grew by 2.1% in 2022. Financial instruments in Spain declined by 7.7% and those stemming from business abroad (expressed in euro) increased by 9.6% to 53.7% (up 4.3 pp on a year earlier). - Much of the decline in financial instruments in Spain owed to the reduction in balances held with central banks (-31.9%) and, to a lesser extent, to the drop in loans to the resident private sector (-2.5%). Meanwhile, the increase in financial instruments abroad was due to the growth in lending to the resident private sector in third countries (10.3%) and in debt securities (16%), against the background of a depreciating euro. - Debt securities grew by 11.7% and represented 13.6% of total assets at December 2022.3 3 At consolidated level, more than 80% of debt securities have a general government counterparty. 3 - As for the reduction in the stock of lending to the resident private sector in Spain (down by 0.7% in 2022), the results of the Bank Lending Survey (BLS) indicate that both supply and demand-side factors contributed to these developments. The decline came despite the larger volume of new loans (+8.9%) and the increased drawdown on existing credit lines (+12.9%). - The stock of loans to households was down by 0.2%, essentially due to lending for house purchase, while other lending to households held stable. | 0 |
All empirical studies confirm that much can be gained by embracing good governance and it is an essential component of crisis prevention efforts. Good governance is equally vital in both the public sector and the corporate world, and its merits are relevant in all countries. Recently, corporate governance issues have been prominent on the world economic agenda as financial markets have been recovering from scandals that came to the fore following a period of excesses in equity markets. In order to increase confidence in the markets, it is imperative that the corporate world adhere to the principles of good governance. Good governance in the public sector is also an essential tool for strengthening institutional capacity, which is fundamental BIS Review 42/2003 1 for economic and social development. The Fund has an important role to play in this field and we welcome the increased emphasis it has given to the issue of governance. Transparency and International Standards With the world economy having suffered a confidence crisis, it is important to continue to promote greater transparency and accountability. Various studies have demonstrated that transparency and adherence to international standards lead to easier market access and lower borrowing costs. There is much to gain by applying these simple principles. It is also important to continue developing international standards and codes that enhance transparency and facilitate comparison between countries and regions. | The situation only got worse when the sovereign crisis – that started in Greece in late 2009 – progressively spread to other euro area countries with vulnerable fundamentals. As we have seen in our discussions today, the trigger of the crisis in the euro area shows, to a certain extent, similarities to those that affected Latin America in the past: a stop in 2 BIS central bankers’ speeches foreign capitals inflows, which induced severe financial stress and real adjustment. But also differences, due to the fact that this reduction of capital flows took place in a highly integrated monetary union, with its own peculiar adjustment mechanisms, leading to the segmentation of the euro area capital markets. These peculiarities also contribute to explain the huge magnitude and depth of the crisis. The scale of the imbalances and adjustments surpasses those in Latin American past experience. Correspondingly, the challenges that individual countries and the area as a whole are facing are daunting. Indeed, the policy response to the crisis – both at the national level and at the level of the EU and the euro area authorities – has been substantial, particularly in the structural and institutional dimensions. The euro area authorities have realised that, in parallel to the management of the crisis, a reshuffling of the European governance and a strengthening of the institutional framework are necessary for the long term sustainability of EMU. | 0 |
In 1995 and 1996, however, the growth of real wages, which - if aggregated over all sectors - was faster than the increase in productivity, became one of the potential inflationary dangers. The nominal anchor of the fixed exchange rate played an important role in the relatively good Czech results in fighting inflation. Instead of repeated smaller devaluations as in Poland or Hungary, the Czech Republic used a combination of a large initial devaluation and a subsequently fixed nominal exchange rate. In 1990 - before the start of the full transformation programme - the currency was devalued by more than 50%. That subsequently enabled us to keep the nominal exchange rate stable for five years. After the introduction of a wider 7.5% fluctuation band in 1996, the exchange rate is within the band. Transformation involved so much fundamental change that its start inevitably led to an initial fall of output and GDP. However, part of the former higher output level was simply feeding the enormous waste which went on throughout the command economy. In 1993, GDP stagnated partly due to the split-up of Czechoslovakia. Economic growth was resumed in the Czech Republic in 1994 and continued in 1995 and 1996 as a fast growth period. Unemployment has been kept low during the whole transformation period, thanks mainly to the rapid emergence of new private firms, and a large shift of labour into the previously underdeveloped service sector. | In this environment, macroprudential policies that slow the build-up of household leverage ex-ante can be 32 All speeches are available online at www.bankofengland.co.uk/speeches 32 welfare-improving in avoiding this outcome. Farhi and Werning (2016) also offer a model of macroprudential policy in the face of aggregate demand externalities. Another strand of the literature emphasises behavioural sources of pro-cyclicality. For example, powerful narratives, such as a collective belief in a ‘new paradigm’, might manifest themselves in over-exuberance in the financial system (Tuckett (2011), Shiller (2017)). Myopia about risk might also drive excessive risk-taking, especially as memories of past financial crises fade (Guttentag and Herring (1986), Herring (1998), Haldane (2009b), Gennaioli, Schleifer and Vishny (2012)). And such behaviour might be amplified by contracts that reward short-term performance excessively and by herding in financial markets (Avery and Zemsky (1998), Lakonishok et al (1992), Bikhchandani and Sharma (2001)). Aikman, Nelson and Tanaka (2015) show how reputational concerns and peer benchmarking can drive credit cycles. The case for macroprudential interventions to address build-ups in leverage also has empirical support. Mian and Sufi (2010) argue that the persistence of the decline in US GDP after the crisis was caused by excessive household leverage. Jordà et al (2013) report that credit booms not only increase the likelihood and severity of financial crises, but also make normal recessions more painful. | 0 |
By the time Bank Rate had exerted its full influence on the price level, the effect of the shocks was likely to have already dissipated, if not reversed. Second, Bank Rate would have dampened inflation by adding even more downwards pressure on demand on top of the existing recessionary forces. The consequent fall in output and rise in unemployment would have been greater. These two considerations mean that a monetary policy response would most likely have only injected extra volatility to inflation: by the time the price shocks wore off, we would have been facing a severe undershoot of the inflation target and deflation would have been a distinct possibility. The path of output would have been unnecessarily volatile and the deviation of inflation from target might have been different but no more acceptable. The possibility of such shocks, and indeed the ability to respond as we have done, was foreseen when the inflation target regime was conceived. Indeed our Remit from the Government is clear on the consequences. The Remit says that (with my emphasis): “The framework takes into account that any economy at some point can suffer from external events or temporary difficulties, often beyond its control. The framework is based on the recognition that the actual inflation rate will on occasions depart from its target as a result of shocks and 4 The latter would affect CPI directly though its impact on imported consumer goods and services, and indirectly by affecting the cost of domestic production reliant on imported intermediate inputs. | Adnan Zaylani Mohamad Zahid: Ethics & professionalism - leaders as role models for the next generation of Islamic finance professionals Speech by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Chartered Institute of Islamic Finance Professionals (CIIF) 4th Anniversary Dinner and Conferment Ceremony, Kuala Lumpur, 6 November 2019. * * * I wish to extend my sincerest thanks to the Chartered Institute of Islamic Finance Professionals (CIIF) for inviting me here this evening to join the celebrations for the 4th anniversary of the Institute as well as the conferment ceremony of the Chartered Professional in Islamic Finance (CPIF) professional designation. I understand that this evening will also see the conferment of the first ever Fellows from amongst the existing Chartered members of the Institute, all of whom have served the Islamic finance industry with distinction over the years. The Institute’s efforts to support the professionalisation of the Islamic financial services industry is part of a long journey that we embarked on some time ago, forming a key step towards achieving a vision of an industry that is rich with talent. Developing talent development together as an industry Recognising that talent development is a long-term endeavour, Bank Negara Malaysia had set out the initial plan in the Financial Sector Blueprint 2011–2020 in which several affiliate institutions had been identified as having crucial roles to play in the development of talent for financial services industry as a whole. | 0 |
Basel II represents a significant step towards achieving a more risk-sensitive supervisory approach. It will enhance banks’ safety and soundness, thereby strengthening the stability of the financial system as a whole and ensuring that it can better serve as a source for credit and growth for the economy. I believe that the framework should be adopted as soon as possible, according to the proposed implementation date, to realise the benefits of a stronger and more stable financial system in a global competitive world. I like to think of the new capital framework as an opportunity. An opportunity to ensure that regulation and supervision takes a forward-looking approach to capital and risk management, that it remains up-to-date with sound practices in the industry and that our supervisory framework motivates sound capitalisation, responsible risk-taking, transparency and prudent behaviour. It also represents an unparalleled opportunity for banks to improve their capital strategies and risk management systems. And finally, it provides supervisors with an opportunity to improve their dialogue with the industry and to enhance co-operation among banking supervisors across jurisdictions. This last point is crucial to achieving effective and consistent implementation and it is an area in which I strongly believe that the European Union is in a unique position to lead the way. As I will comment BIS Review 3/2005 1 later, I believe that the EU can make faster and more tangible progress in this area than is currently possible on a wider international basis. | This is understandable because, under the prolonged period of quantitative easing by the major central banks in the advanced economies, bank deposits and bonds offer rather low and unattractive interest income. As for the stock market, the volatility in share prices will expose the retirees to significant market risks. As a result, there can be a fairly large group of retirees who find them not having enough cash flows to support a decent retirement life, despite the fact that the properties they own and occupy are worth quite a lot. 1/4 BIS central bankers' speeches At the same time, their cash savings are basically left idle, yielding very little, if any, cash flow income. Many old folks would feel apprehensive to dip into the principals of their bank savings to meet daily expenses, as this would expose them to the uncertain but rather scary longevity risk. This situation is not unique in Hong Kong as there are many places that have similar problems. So it may be useful if I share with you the Hong Kong experiment in helping this group of retirees through some market based and financially sustainable solutions. HKMC and Market-based Financial Solutions for Retirees 4. These market based retirement protection solutions are developed and operated by the Hong Kong Mortgage Corporation (HKMC), which was set up in 1997 and is fully owned by the Government through the Exchange Fund managed by the Hong Kong Monetary Authority (HKMA). | 0 |
Ladies and Gentlemen, Today's launching of the Citigroup Malaysian Government Securities Index and the Dow Jones-RHB Islamic Malaysia Index, marks another step forward in the development of Malaysia's capital markets. The importance of these two indices should not be underestimated. This initiative by the Citigroup and RHB and Dow Jones is an important contribution to the development of our domestic markets. With globalization, increased connectivity and rapid financial market integration, investors are no longer restricted to investing within their own domestic borders. Indeed the 'home bias' or tendency of investors to invest almost all their assets domestically, has been rapidly dissipating. Investors look abroad for enhanced returns and diversification opportunities. For more than a decade now, the pace of diversification across borders by pension and insurance funds, asset management companies, hedge funds and high net worth individuals has increased dramatically. A region that has emerged strongly in the international investors radar screen is the East Asian region. Strong, sustainable economic growth, rapid expansion in intra-regional trade and investment have led to a correspondingly accelerated pace of development of the capital markets and to an increase in the BIS Review 49/2005 1 pace of financial liberalization and integration. In this environment, it becomes important to promote well-developed, deep and liquid capital markets. Today's launch of the Malaysian Government Securities index will assist investors who have increasingly been attracted to Malaysian fixed income securities as an important asset class. | Liquidity, profitability and capitalisation indicators are at good levels, while the ratio of non-performing loans has trended down. The Bank of Albania has continued to work for the regulation and prudent supervision of the banking system, pursuant to the legal obligations, as well as to sustain its steady development. Also, we have cooperated with: (i) other public agencies, to improve the legal framework, align regulatory practices, and identify measures for withstanding systemic shocks; (ii) international financial institutions, to develop loan restructuring programmes; and, BIS central bankers’ speeches 1 (iii) foreign regulatory institutions and parent banking groups operating in Albania, to exchange information. I would like to reiterate that the banking system is solid, liquid and well capitalised for conducting its intermediary function. However, credit growth continues to appear sluggish, due to tight bank lending policies. Maintaining and strengthening banking system soundness is to everyone’s benefit, as this is the only system that, with its funds, may sustain long-term economic growth. Lending is expected to improve slightly during 2015. The Bank of Albania, however, expects an increasingly active role of the banking system in lending and will also take all the needed measures to encourage it. At the conclusion of discussions, the Bank of Albania shares the view that economic policies are performing overall in the right direction. | 0 |
As I see the Czech Republic a part of the developed world, I believe this is a topic that is relevant to the Czech National Bank. The key constraint or dilemma – or even puzzle, if you will – for us in the central banking community has been one key real variable which we believe is beyond the reach of central bankers. That variable is the real equilibrium, or natural, interest rate. We believe that this variable is absolutely key for the economy and that it is exogenous (i.e. not in hands of anybody, or at least not central bankers). At the same time, it critically influences both the financial sector and the real economy. I have tried to depict what I want to say on this very stylised chart (Chart 1). Chart 1: The role of the equilibrium interest rate 1/5 BIS central bankers' speeches It basically shows that if you have got the natural real equilibrium interest rate at a certain level – and, of course, it is not directly observable, we can only estimate it, like the output gap, for instance – monetary policy must take this variable into account and must in fact respect it. Given the inflation outlook, the movements of nominal interest rates or policy rates should, in an ideal world, imitate those of the equilibrium rate. Or at least they should not deviate much from equilibrium. Why? Because this interest rate interconnects the future, the present and the past. | Broadly speaking, economic and monetary developments and prospects provide growing signs of an ongoing recovery, mostly indicating that the upswing will gain momentum during the coming winter. Some slack still exists in the economy, however. There are no clear signs of a turnaround in the labour market and seasonally adjusted unemployment has still not decreased. Leading indicators such as credit growth, business surveys of labour demand, and growing turnover and imports nonetheless strongly suggest that demand will rise in the near future. Boosted by increased quotas during the 4 BIS Review 45/2003 coming fishing year, more public sector construction projects and aluminium industry investments, a reasonable level of output growth can be expected this year. However, since the growth rate is below estimated potential, the slack in the economy will increase slightly compared with 2002. The growth rate in 2004 is expected to exceed estimated potential at 3½%, meaning that the output gap could turn positive next year. Inflation will nonetheless remain below the Central Bank’s target until the final quarter of 2004, according to the forecast. This is explained by the low current rate of inflation and excess output potential. Two years ahead, inflation is forecast to creep above the target. On the whole the future looks fairly bright, but as always we should not allow the celebrations to get out of hand. BIS Review 45/2003 5 | 0 |
In line with the spirit of Sasana, our meeting point today for the learned and the wise, I look forward to the exchange of ideas at this Conference. In this regard, I would like to humbly offer some thoughts on three areas where the gains from globalisation can be safely acquired, more equitably dispersed, and impose the least cost to society. Firstly, we must make financial globalisation safer and its benefits distributed more equitably. The Global Financial Crisis, and the Asian Financial Crisis, clearly demonstrated the risks and the damage that could be wrought by financial globalisation. It amplified the costs of policy and regulatory lapses and failures in crisis prevention and management. It is interesting to observe that despite consequences primarily associated with financial globalisation, trade has received the brunt of the blame. Let me illustrate – in the wake of the GFC, between November 2008 to December 2009, 390 trade protectionist measures were announced or implemented by 19 of the G20 members. Ironically, financial globalisation channels were not addressed as quickly. It is surprising how policymakers, particularly in the advanced economies, have yet to arrive at a consensus in recognising the harmful effects of free capital mobility that is disconnected with the real economic activity. This is an issue that many remain divided on until today. While we have instituted policy reforms to better manage our financial systems and institutions, more can be done. | François Villeroy de Galhau: New Year wishes to the Paris financial centre New Year wishes to the Paris financial centre by Mr François Villeroy de Galhau, Governor of the Bank of France, Paris, 15 January 2020. * * * I would like to welcome you for this for this happy tradition of extending my New Year wishes to the Paris financial centre. But there are not just financial players here, there are also elected representatives, the press, and many associations that work with us. I would like to start by extending to you, on behalf of the Banque de France and the ACPR, our warmest wishes for 2020, for you and all of your staff. And a special thought goes to all those who are struggling with transport difficulties, or those who have, sadly, been the victim of the unacceptable attacks on branches. Within this tradition, I would like to welcome some new developments: the arrival of Dominique Laboureix as Secretary General of ACPR, alongside Patrick Montagner, Bertrand Peyret, Frédéric Visnovsky, and Emmanuelle Assouan, who will now be in charge of financial stability issues. In a world as hectic as ours, it is risky to make professional wishes. However, I will hazard three wishes for the financial sector in our country: that 2020 will be a year of stabilisation, a year of adaptation and a year of inclusion. | 0 |
Board members must also be able to participate actively in strategic discussions, to facilitate the flow and cross-fertilisation of ideas, and exercise effective oversight over the management. Thus in the US, the Federal Reserve Board inspects banks’ board minutes to determine if all board members are active and contribute to discussions on important matters. BIS Review 130/1999 1 Singapore banks are prudently managed and financially sound. According to the latest Moody’s ratings, they were collectively rated the ninth best in the world and best in Asia. But benchmarked against international best practices of corporate governance and disclosure, they still have some way to go. One major step we have taken is to require all local banks to appoint nominating committees within their boards, following common practice in the developed economies. The task of the nominating committees is to ensure that only the most competent and qualified individuals, who can contribute actively to the bank and discharge their responsibilities in the interests of all shareholders, are appointed to the board and to key management positions. Such appointments are not a one-off exercise, but a continuing requirement. In Singapore politics we have made self-renewal of leaders a norm. As a result the political leadership belongs to the same generation as the population, and stays vigorous, up to date, and in tune with the electorate. But self-renewal is necessary in every field, including banking. The boards of Singapore banks have done commendable jobs discharging their responsibilities. | MAS will follow up by allowing $ OTC interest rate derivatives, such as interest rate swaps, forward rate agreements, interest rate options and swaptions, to be transacted freely without consultation. Banks will, however, be required to submit monthly reports on details of interest rate derivative transactions exceeding $ million with counterparties outside Singapore. Credit rating of foreign entities issuing $ bonds So far, we have required foreign entities which wish to issue $ bonds to be of good credit standing. Up till now the lowest credit rating of foreign entities that have tapped the $ bond market has been single A. Debt intermediaries have told us that investors in the $ market would like to see a wider credit spectrum of $ bonds. MAS recognises that allowing more diversely rated bond issues would increase investment opportunities for investors with different risk-return appetites, allow portfolio diversification, and create more investor interest in our debt market. To widen the credit spectrum of foreign entities tapping the Singapore dollar bond market, MAS will allow the following to issue Singapore dollar denominated bonds: a) all rated foreign corporates; b) all sovereigns, rated or unrated; and c) unrated foreign corporates, provided the investor base is restricted to sophisticated investors.1 However, the requirement for the non-resident issuers to convert or swap the $ proceeds into foreign currency for use outside Singapore remains. MAS still does not allow $ funding of non-residents where the proceeds are to be used outside Singapore, or for purposes which do not generate economic value to Singapore. | 1 |
Information technology In 2015, the aspect of Information Technology saw several achievements. The AFISaR system started to operate. It is a central electronic register for the documentation of each element involved in the issue and transactions with securities by the Albanian state. Other achievements include: - automation of the reporting system for banking activity indicators; - integration and optimisation of the IT network utilisation, reducing therefore operational costs of the Bank of Albania; - automation of accounting transactions in Bank of Albania branches and improving information processing and storing capacities. xii. Internal audit In 2015, in addition to planned audits, auditing and non-auditing commitments were carried out, upon the request of the Supervisory Council, Audit Committee, Administrators and Inspector General. Another important development in this regard was the Quality Assessment for the Control [Internal Audit] Department at the Bank of Albania by the De Nederlandsche Bank (DNB). Conducted for the first time, the assessment serves as an important development plan for strengthening the audit activity in the future. During 2015, nine full-scope audits were conducted. In addition, three full-scope audits started in 2015, but were completed in the first months of 2016, bringing the total number to 12. The findings and recommendations of each audit have been addressed to the heads of the respective units, the Administrators of the Bank of Albania, the Audit Committee and the Supervisory Council, as part of the periodic reporting by the Inspector General. xiii. | Switzerland will only be able to preserve its economic competitiveness and prosperity if its companies continue to be highly flexible and innovative, and if our politicians succeed in maintaining our country’s particularly favourable economic conditions. Turning now to the second part of my speech, I would like to once again take a look back at the global financial crisis. Regulation ten years after the UBS incident Banking system weaknesses exposed by financial crisis Almost ten years ago, the federal government, FINMA 1 and the SNB were forced to take steps to stabilise UBS and the Swiss financial system, with the state and taxpayers having to temporarily take on the big bank’s risks. Many other countries found themselves confronted with similar problems and also had to rescue banks. The financial crisis brought to light fundamental weaknesses in the international financial system. As regards the banking system and regulation, two aspects stand out in particular. First, at that time many banks’ resilience was inadequate. Relative to their risk exposure, their liquidity and equity buffers were insufficient to absorb major outflows of funds and losses. 1 At that time, Switzerland’s financial market supervisory authority went by the name of the Swiss Federal Banking Commission. Page 3/8 Second, certain banks were so large and interconnected that their collapse would have triggered a chain reaction, dragging down other – fundamentally healthy – financial institutions with them. This would have resulted in considerable costs to the economy. | 0 |
Looking further ahead, and taking into account temporary effects, the Governing Council continues to expect real GDP to grow at a moderate and still uneven pace over time and across economies and sectors of the euro area. Ongoing growth at the global level and its impact on the demand for euro area exports, together with the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system, should continue to support the euro area economy. However, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors and labour market prospects. In the Governing Council’s assessment, the risks to the economic outlook are broadly balanced in an environment of uncertainty. On the upside, the global economy and foreign trade may recover more strongly than is now projected, thereby further supporting euro area exports. On the downside, concerns remain relating to the emergence of renewed tensions in BIS Review 104/2010 1 financial markets, renewed increases in oil and other commodity prices, and protectionist pressures, as well as the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation increased to 1.7% in July, according to Eurostat’s flash estimate, from 1.4% in June, most likely owing to upward base effects in the energy and food components. In the next few months annual HICP inflation rates are expected to display some further volatility around the current level. | European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 5 August 2010. * * * Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting. Based on its regular economic and monetary analyses, the Governing Council views the current key ECB interest rates as appropriate. It therefore decided to leave them unchanged. Considering all the new information which has become available since our meeting on 8 July 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon, benefiting from low domestic price pressures. The available economic data and survey-based indicators suggest a strengthening in economic activity in the second quarter of 2010, and the available data for the third quarter are better than expected. Looking further ahead, and taking into account a number of temporary factors, we continue to expect the euro area economy to grow at a moderate and still uneven pace, in an environment of uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. | 1 |
Flow of funds data suggest that the US corporate sector is holding around $ – or 7% of total corporate sector financial assets – in cash. That has led to a reduction in US investment grade net bond issuance and an associated shortage of high-quality corporate assets, at a time when relative demand for those assets is strong. And there has also been a reduction in US T-bill issuance, amid ongoing concerns about the extension of the US government’s debt ceiling. Similarly, serious concerns about the creditworthiness of a number of euro-area sovereign issuers have led to a reduction in the quantum of euro-denominated assets perceived to be “safe”, with some US money funds reducing their exposures to European banking sectors. And a number of other structured and synthetic assets, which had been rated AAA prior to the crisis, have recently been shown to be unworthy of that accolade. 7 As described by Janet Yellen in her recent speech “Assessing potential financial imbalances in an era of accommodative monetary policy”. | Already before the 2008 crisis, central bankers firmly believed that price stability is a necessary – and for some even a sufficient – condition to ensure financial stability. This view is referred to as the ‘Jackson Hole consensus’. Following the financial crisis, financial imbalances were seen as a huge source of disruption which decision-makers needed to remedy, questioning the relationship between monetary and financial policy tools and objectives. Let me give two polar views on that. A first approach, in line with the ‘Jackson Hole consensus’, is to clearly separate monetary stability from financial stability. In line with the Tinbergen rule and the Mundell efficiency principle respectively, one policy should fulfil one objective and each policy tool should be assigned to the objective it can fulfil the best. In this regard, monetary policy would not be efficient at mitigating financial imbalances but would not generate them either. On the other side, an extreme approach is to consider that both policies are strongly intertwined and that their respective objectives could be merged: in this case, monetary policy could reduce risk taking and target asset price bubbles. I consider that full adherence to the separation principle and the combining of objectives are both approaches that are too radical to conduct monetary and financial stability policies. The implementation of unconventional policies has blurred the frontier between the two objectives. Let me quote here my colleague Vice-President Vítor Constâncio: “Macroprudential policy and monetary policy rely on separate tools and aim to achieve different objectives. | 0 |
At the external level, the relevance of a long-term external rate rise scenario stands out. At home, the lost dynamism of recent years has reduced the financial strength of firms, eroding the quality of the commercial portfolio in certain economic sectors. Stress tests for the banking system show less capital leeway to confront adverse scenarios. Likewise, issues are arising that should be considered in the analysis of risks threatening financial stability. A normalization of risk aversion in international markets could increase 1 Consumer Price Index excluding food and energy components. 2 credit costs in emerging countries, including Chile. Locally, mitigating the deterioration of the commercial portfolio's quality by demanding greater guarantees rather than making provisions or capital aggravates the vulnerability to systemic events. These risk factors make it possible to appreciate the importance of our coherent macroeconomic policy framework, where fiscal and monetary policy can operate countercyclically and the exchange rate acts as a buffer against external shocks. The need to update banking legislation is also evident, to incorporate modern standards of capitalization and mitigation of systemic and cyclical risks, as well as to have good systems of consolidated debt information, all of which are part of the legislative agenda now being discussed at the National Congress. The Monetary Policy Report Headline inflation has been more volatile in recent months, accumulating a negative surprise that placed it at 1.9% in October, close to 0.4 percentage points below the September forecast. The CPIEFE has evolved in line with projections although with significant ups and downs. | In particular, because even though expectations have improved in general, they have done so by anticipating a better future economic performance rather than by current results. In this context, we have held the Monetary Policy Rate (MPR) at 2.5% since May and we expect that, if the baseline scenario comes true, we will keep the monetary impulse near its current levels, to begin withdrawing it only once the economy begins to close the activity gap. Anyway, it is important to carefully monitor any downward deviations of inflation in the short term, because in the context of a weak economy, low inflation and some measures of medium-term inflation expectations remaining somewhat below 3%, the convergence of inflation could be affected, in which case it would be necessary to make the already expansionary monetary policy more so. The financial conditions have helped to shape the macroeconomic scenario described above. Borrowing remains accessible and inexpensive, in line with the orientation of monetary policy. The local financial market has seen no major disruptive events and the internal and external payment systems have functioned normally. Non-financial companies maintain their levels of profitability and indebtedness, while the increase in household debt is concentrated in mortgage credit, which covers long periods, at fixed rates and with a prudent loan-to-value ratio, which keeps the financial burden fairly constant. For its part, in the residential real estate sector, sales of new homes stabilized and prices continued to rise, albeit modestly. Nonetheless, some financial risks identified in past reports are still important. | 1 |
Challenges still remain. For example, we have to work out and implement efficient solutions across countries that have different start points, practices and regulatory frameworks. But it is encouraging that governments are more seized with this problem, and more ready to collaborate with one another, than ever before. Singapore has taken the lead in several of the regional initiatives. Financial institutions here should also take part actively. This is the time to engage regulators and government officials in the region, to enter their growing markets and position yourselves for the business opportunities that the initiatives create. As a leading foreign exchange centre with a critical mass of global fixed income and equities expertise, Singapore can service international investors operating in Asia. Our market is well placed to facilitate the hedging activities that are essential for risk management and improving market efficiency. BIS Review 39/2004 5 These will complement the domestic markets in the countries of the region. Our strong legal system and the availability of international legal expertise and product structuring teams equip us to structure complex cross-border transactions. The growing wealth management industry will also generate a steady source of funds for regional investment products. Human capital A major issue that concerns all parts of the financial sector is human capital. A distinguishing characteristic of a successful financial centre is that it attracts talented and dynamic professionals from a broad range of disciplines and experiences. They make the financial centre what it is. | The relaxation on the policy on payment gateway would promote greater competition in the payments system while the flexibility accorded on the issuance of credit cards would enable the partnering of licensed institutions with non-banking institutions in offering greater choices to consumers. Ladies and Gentlemen, In conclusion, I would like to re-emphasise that banks should continuously seek to educate and familiarise consumers in the use of electronic and other technology based banking applications which are more efficient and cost effective. The occasion today is an important step towards maximising banking convenience that technology can offer to the consumers. I am delighted to take part in today’s 2 BIS Review 22/2003 launch and would urge the participation of all financial institutions in this effort to promote the use of electronic payments in the country. Thank you. BIS Review 22/2003 3 | 0 |
Figure 3 CPI Inflation (*) Core inflation (*) (annual change, percent) (annual change, percent) 6 6 6 6 5 5 5 5 4 4 4 4 3 3 3 3 2 2 2 2 1 1 1 1 0 0 0 11 12 13 14 15 16 17 18 19 0 11 12 13 14 15 16 17 18 19 Dec. 2016 Report Mar. 2017 Report (*) The grey area, starting from the first quarter of 2017, corresponds to the forecast. Sources: Central Bank of Chile and National Statistics Institute. 6. Activity has been somewhat weaker than expected. According to recent data the output gap is currently larger than we anticipated in December. GDP grew by 1.6% in 2016, in line with what was anticipated. However, revised national account data suggests the economy was somewhat stronger towards the beginning of 2016 and weaker towards the end of the year, leaving a low starting point for 2017 and a higher base of comparison for the beginning of the year. The new data also point to weakness in investment-related areas and in sectors that tend to be more persistent, such as business services (Figure 4). | Measured in real terms, its current value does not seem to be an outlier either (Figure 7). 5 Figure 7 MSCI: Latin America Real IPSA (fixed-base index: January 2013=100) (fixed-base index: January 2001=100) 120 Colombia Peru 30 13 14 15 350 90 250 250 60 150 150 30 50 Brazil 90 60 350 120 Mexico Latin Chile America 16 50 01 03 05 07 09 11 13 15 17 17 Sources: Central Bank of Chile and Bloomberg. 13. The prolonged strike at La Escondida, the world´s largest open-pit copper mine, will have a very important effect on the first quarter GDP figures. It already did in the Imacec of February, which showed a yoy contraction of 1.3%, with a fall of 17.1% of its mining component. Since the strike ended in late March and resumption of production is not immediate, figures for that month will also be affected. Adding up the continued weakness in construction, the economy could experience an expansion close to 0% in the first quarter of the year. However, one should not forget that the strike at La Escondida, while very relevant to explain the first quarter figure, is a one-off event that is not expected to generate significant spillovers on activity elsewhere in the economy, nor on inflation. 14. | 1 |
4 Commodity cycles may be linked to global business and financial cycles at critical junctures, but commodity long cycles are more related to technological progress, changes in the composition of demand, and global trade patterns (see Figure 2). 20 15 10 5 0 -5 -10 -15 -20 -25 -30 1980 Figure 2: Commodity super cycles and global conditions (†) 1985 1990 1995 2000 2005 2010 2015 40 30 20 10 0 -10 -20 -30 -40 -50 -60 EMEs Business Cycle AEs Business Cycle VIX (inverse, standardized, 10x) Comm. PX Cycle (excl. Fuel) [RHS] (†) Business and commodity prices based on HP filter. Source: Central Bank of Chile based on IMF and FRED databases. The experience of Chile since 2000 Chile has been traditionally exposed to global cycles, speeded-up growth in the mid-1980s, once a major financial crisis led to a major upgrade in financial regulations. This bonanza period was halted by the Asian Crisis in mid-1997. The Central Bank tried to sustain the Chilean currency, by then under crawling bands, in the middle of a substantial external shock. This led the Central Bank to raise the interest rate to 14%, by then a real interest rate. Thus, the financial system face overnight rates of nearly 100%. The Chilean economy enters into a recession in late 1998. Floating ER was added to forward-looking inflation targeting, and then complemented by a Structural Balance-based fiscal policy in the early 2000s. | This makes the connection between financial flows and economic activity operate through changes in the composition of demand and output, rather than “internal devaluations” which became especially fruitful for several Eurozone and EME countries in the past decade. The role of commodity prices Some EMEs, in particular those with large commodity sectors, may at certain episodes display a decoupling of capital flows from global financing conditions. This seems to have been the case in the aftermath of the Global Financial Crisis, in which the general risk-off attitude contrasted with the relative strength of commodity exporters due to China’s contribution to global growth. Indeed, the quick recovery in energy, food, and metal commodities beginning in 2010 led to a surge in growth and capital inflows to commodity-exporting EMEs that starkly contrasted with the depressed macroeconomic conditions that characterized the slow recovery of AEs. It is tempting to link the decoupling of economic and financial conditions of the 2010-13 episode as a sign that EMEs were beginning to overcome some of their past institutional weaknesses and policy mistakes. But the events triggered by the taper tantrum episode recommend taking this interpretation with a grain of salt. Indeed, such events mark a clear reversal in the outlook of EMEs and the direction of external financing to these economies, once again following closely the downward trend of global commodity prices. 2 See Elías Albagli, Luis Ceballos, Sebastián Claro, and Damián Romero (2018), “Channels of US Monetary Policy Spillovers to International Bonds Markets,” forthcoming, Journal of Financial Economics. | 1 |
Overall, real gross domestic product (GDP) grew at a bit under a 3-1/2 percent rate in the second half, up from an average pace of growth of about 2 percent over the previous three years. Moreover, we’ve seen some more solid consumer spending, which should provide further impetus to overall growth this year. In the labor market, job growth has been solid and the unemployment rate is down to 6.7 percent. That is well below the 8.1 percent rate that BIS central bankers’ speeches 1 prevailed when we instituted the latest round of large-scale asset purchases in September 2012. However, we aren’t out of the woods yet. The harsh weather of this past winter – by which I mean the North American polar vortex – makes the recent data difficult to interpret. That said, some of them have been on the soft side. Balance sheet scars from the financial crisis are still weighing on the economy. Fiscal policy is a restraint on economic growth. And economic activity abroad is not robust. The good news is that all of these headwinds appear to be dissipating. But risks remain. And we still have large resource gaps. For example, the unemployment rate is still well above the 5-1/4 percent rate I think it should be in the long run. At the same time, inflation is only 1 percent – well below the FOMC’s longer-run target of 2 percent. Accordingly, monetary policy is highly accommodative, and needs to remain so for some time. | Your Honour, apart from Zambian delegates, this international seminar has drawn participation from several other countries including: Angola, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius and Mozambique. Other participants are from Namibia, 2 BIS Review 26/2008 Nigeria, Sweden, Tanzania, Swaziland and Uganda. With this wide participation, I have no doubt that the seminar will be thought-provoking and highly participatory, given also the high calibre of resource persons from institutions such as the International Monetary Fund and the Bank of International Settlements. I therefore wish all of you good deliberations and a memorable stay in Livingstone and Zambia in general. It is now my privilege to call upon His Honour the Vice President of the Republic of Zambia, Mr Rupiah Banda to deliver the official opening speech for the seminar. Your Honour Sir! Thank you. BIS Review 26/2008 3 | 0 |
Øystein Olsen: Use of models and economic theory in Norges Bank Lecture by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Department of Economics, University of Oslo, Oslo, 8 September 2011. * * * The lecture is based on previous speeches and newspaper articles. A brief comment on recent developments is included in the final section. Please note that the text below may differ slightly from the actual presentation. Allow me to start by thanking you for your invitation to give this year’s Schweigaard lecture. Anton Martin Schweigaard was one of the leading statesmen of 19th century Norway. He was a jurist, a politician and an economist. Although “revival of productive forces” and “expansion of national wealth” were to Schweigaard important objectives for economic policy, most important was the promotion of “moral progress”, “public decency” and “the perfection of political and legal institutions”.1 I doubt that Schweigaard was always impressed by the perfection of political institutions, perhaps in particular the institution of Norges Bank. Schweigaard grew up in modest circumstances in the small market town of Kragerø on the coast of southern Norway – a town severely affected by the British blockade of Norway during Denmark-Norway’s involvement in the Napoleonic Wars in the early 1800s. Norges Bank was established in 1816, the year after the Wars ended. The Storting decided that a compulsory silver tax would be levied to provide capital for Norges Bank. | That could potentially create some turmoil for international markets including ours and in the process we could see some potential for dislocation which is why Sri Lanka has decided to reach out to multilateral agencies like the IMF and the World Bank to assist us in terms of sheltering or protecting the economy against any adverse developments that may occur in the near future as a consequence of any turmoil in international capital markets if and when US policy makers decide to raise interest rates. That is one hurdle we have to look at. The second hurdle I would say is the lack of a structural change the way international, particularly developed countries of the world, are managing their economic affairs. A lot of the changes that we have seen in the last 5 years has had to do with monetary policy and the aggressive easing of the monetary policy. But on the fiscal side, you haven’t seen any structural changes in countries like the United States and most European countries that took the world into the great recession in 2008 as a consequence of their housing 2 BIS central bankers’ speeches bubbles. That structural change in terms of improving productivity, reducing the size of social security programs and retooling their economies to become more productive has still not started and until that happens we don’t have a sustainable basis for global growth to grow apace. | 0 |
The role of the central bank in this process is the comfortable one of a knowledgeable observer, posing relevant questions in working groups and committees and pointing out inadequacies in suggested solutions. There is much to say about this process, but I shall have to leave it for a different occasion. 2. Day-to-day oversight The second strand of financial stability work is the day-to-day oversight. This may be described as resting on three pillars: • the first pillar is the supervision of individual banks, • the second pillar is the surveillance of systemic stability, • and the third pillar is payment system oversight. The first pillar is clearly the responsibility of the supervisors, whether they are a separate FSA or, as in many countries, a department within a central bank. The supervisors collect data from the banks, analyse these data and make on-site inspections. Prudential supervision performed by a competent authority must be the basis for all day-to-day oversight. The second pillar is the joint responsibility of the FSA and central bank. The division of responsibility is really one of perspective. While the FSA bases its work on individual institutions, the central bank looks at the banking system as a whole and attempts to assess the risks that could arise in it both in the short and the long run. Of course, there is overlap in the tasks of the FSA and the central bank, but it is often fruitful to approach a problem from somewhat different angles. | Central banks need to acquire a better understanding of how the banks manage their liquidity, how they select their sources of funding and the effects this has on their resilience to disturbances. The analysis of stability also needs to be supplemented with methods for stress tests, that is, ways of analysing the sensitivity of banks to shocks. Another area that will prove challenging for both stability analysis and risk management preparedness in the future is the ongoing integration in Europe and, more generally, banks’ tendency to set up cross-border establishments in many countries. I see great scope for close international cooperation on these issues, both in terms of developing methods for analysis and for other aspects of stability surveillance and crisis management. I would like to thank the Bank of Indonesia once again for devoting an international conference to these important topics. Thank you! 4 BIS Review 58/2003 | 1 |
Jean-Claude Trichet: The European Monetary Union and the euro Speech by Mr Jean-Claude Trichet, Governor of the Bank of France, at the Financial Forum 2003, organised by The Wall Street Journal Europe and The New Economy Forum, Madrid, 25 February 2003. * * * Ladies and gentlemen, it is a great pleasure and an honour to be with you today, on the occasion of the “Financial Forum 2003”, organised by the New Economy Forum and the Wall Street Journal Europe. I would like to present my views on the successful set-up of the euro, on the economic and financial integration of Europe and on the challenges that the euro-zone will confront going forward. The Euro: built on a successful set up Set-up of the Eurosystem The single monetary policy is formulated and implemented within a sound institutional framework, the Eurosystem, comprising the European Central Bank and the twelve national central banks of the euro area. Three principles underpin the Eurosystem: independence, transparency and decentralisation. The independence of both the European Central Bank and national central banks is enshrined in the Treaty. When exercising their powers and carrying out their tasks and duties, neither the central banks of the Eurosystem nor any member of its decision making bodies shall seek or take instructions from Community institutions, from any government of a Member State or from any other body. Independence refers to institutional, operational and financial independence. | The growing interest for attending the Conference confirms once again the significant contribution of the Conference to the enrichment of the knowledge and exchange of experience of the representatives of the central banks in regional and international frames. Nevertheless, the Conference would not be a unique treasure of knowledge and experience, if it did not include the representatives of the domestic financial system and the payment service providers, which by their continuous active participation and involvement in the panel discussion, contribute to the thematic comprehensiveness of the Conference. The Conference will cover the latest developments in payment and securities settlement systems, as well as payment services on global, European and national level. In the global context, Mr Klaus Löber, the esteemed expert from the European Central Bank, will elaborate on the new developments in the area of implementation of the PFMIs, work on retail payments, cyber security, digital innovations and correspondent banking. These are very important issues for central banks given that we also promote the safety and efficiency of payment, clearing and settlement, thereby supporting financial stability and the wider economy. In addition, the developments in the compliance area regarding the prevention of money laundering, financing of terrorism, insider dealing, fraud, corruption and other criminal offences are in the focus of the Conference, as well. In this context, we appreciate the contribution of Mr Oliver Schufmann, the representative of Commerzbank, who will present their experience regarding the compliance activities. | 0 |
This confidence in the euro obliges us to act together. I would like here to welcome another recent positive commitment from political leaders: the Franco-German agreement in Meseberg. The message is clear and threefold: i. The Eurozone needs, besides Monetary Union, a strengthening of the Economic Union. If not, monetary policy would remain the only game in town, and be at risk of being overburdened by the next recession. ii. Economic Union needs public risk sharing – an enhanced ESM and a euro-zone budget – as well as private risk sharing. Let me also stress this one, adding Banking Union – with a fully credible resolution mechanism – and Capital Market Union. CMU – which we strongly advocate with President Jens Weidmann and the whole Governing Council - fortunately is in the Declaration too, with a commitment to realise “decisive progress”. iii. Europe needs a Franco-German impetus. Both countries took their responsibility, still on time. It is now up to the 19 to elaborate a common and operational package. The Euro-zone should seize this moment: it’s now or never. II. Policy-induced uncertainty The global and European economy is confronted by two possible policy shocks: trade and fiscal policy. Since we are currently enjoying the World Cup, it seems appropriate to call these policy-induced own goals. Rise in protectionism The first of these is the risk to the global trading system of the rise in protectionism. | Page 2 sur 5 The Euro-system staff projections of economic growth of 2.1% in 2018, 1.9% in 2019 and 1.7% in 2020 remains consistent with an ongoing solid and broad-based recovery; the French economy, which is sometimes considered to be a good proxy for the Euro-area average, is likely to follow a similar growth path with 1.8%, 1.7% and 1.6% in 2020 according to the Banque de France. On the inflation outlook, as part of the SAPI criteria, recent ECB and Euro-system staff projections have become more and more stable giving us increasing confidence that the improving economic growth we have seen will translate into rising wage and price inflation. In other words, whilst we might be a bit less certain precisely where we are in the cycle, we are more confident that we are heading in the right direction on inflation. Monetary policy decisions When would the Governing Council end the net asset purchases? When would it announce this decision? These were questions left hanging and the subject of market speculation before our meeting in Riga. Besides the famous and important three “Ps” – perseverance, patience and prudence - the Governing Council’s decisions were also guided by three “Cs”: credibility, consistency and clarity. Each element is important. Credibility: Our actions are credible because they stick to our mandate and our economic forecasts, in particular with respect to the inflation outlook. | 1 |
This issue matters considering that, compared to our September 2019 estimates, the damaged caused by the social crisis and the Covid-19 crisis combined will add up to a loss of almost 10% of GDP by 2022 (Figure 14). This is complemented with the fact that these two crises combined have caused dismay among the economic agents, whose equity position has worsened as they have used up their slack and reserves. Thus, from September 2019 and through this year to date, companies increased their indebtedness by 16 points of GDP; the capitalization of the stock market fell by nearly 25 points of GDP; the government has used its sovereign wealth funds and issued new debt to raise it in net terms by almost 8 points of GDP, and households will have reduced their pension savings by about 10 points of GDP when the second withdrawal of funds is completed. All of this makes these agents more vulnerable to future stressful scenarios. The impact of these factors is already apparent in our economy. Our currency, for example, recovered only partially the parity and stability of before the social outbreak, reducing some of its capacity to cushion our capital market from external shocks. The long-term rates, which used to be more stable than those of comparable countries, are now more volatile, bringing home the changes in external financial conditions (Figure 15). | However, we will evaluate its possible extension and changes in access parameters to facilitate their use to respond to the needs of the economy at this stage. As always, the CBC will remain on the alert for financial stability risks, acting promptly and decisively with the instruments at its disposal whenever required. For the time being, the entry into force of the law that allowed a second withdrawal of pension savings will involve a significant liquidation of assets by the administrators of these funds. An orderly liquidation is crucial to preserve the stability of the financial markets and the efficiency of the price formation process, which is why we have established several measures. Among them are the reopening of the special programs of CC-VP and Term Deposit Purchase Program. These measures have preset caps and a limited duration, the same that were used for the first withdrawal. The macroeconomic scenario continues to show more uncertainty than usual, so projections are highly conditional on the evolution of the pandemic and its effects on the income of businesses and individuals. There are scenarios where the evolution of the national economy could deviate from our forecasts. The risk Page 5 of 19 of a significant increase in infections remains fully valid and could have important economic effects if it becomes necessary to re-impose stricter sanitary measures. In the medium term, this scenario is not as severe, given the advances in the development of a vaccine. | 1 |
Since the benefits are mainly the result of structural improvements and the costs are due largely to the greater difficulty in steering inflation and economic activity, it is difficult to offset the advantages of a monetary union against its disadvantages. Whether a monetary union, on balance, creates benefits or causes costs depends on a whole range of factors. Robert A. Mundell can be summarised as follows: in order to form a so-called optimal currency area, the member countries must be structured along similar lines and exhibit a high degree of flexibility. The benefits of a monetary union consist in a reduction of transaction costs for changing money, the elimination of internal exchange rate uncertainty, tighter competition thanks to easier price comparisons, the expansion of trade within the common currency area, the prevention of competitive depreciation and speculative attacks on a currency, and growth in the liquidity of the financial markets. The most significant costs of a currency union arise from the loss of the individual countries’ independent monetary policies. The loss of monetary policy autonomy is particularly felt when the size or number of asymmetric shocks is large. Such disruptions affect the economic structure, business activity and inflation of member countries in different ways. Thus, they cannot be combated with a uniform economic policy. A controversy that has not yet completely died down is this: was the reunification of the two Germanys after 1989 a shock that significantly impaired the prospects for a successful integration of Germany into the European Monetary Union? | In this way, we ensure that SARON and the other secured short-term money market rates remain close to the now positive SNB policy rate. To absorb liquidity by way of open market operations, we will use two proven monetary policy instruments: SNB Bills and repo transactions. Participants in the Swiss franc money market are familiar with both instruments. We have used repo transactions regularly in previous years. SNB Bills are debt certificates issued by the SNB, typically with a term of up 1 Further information is available in the ‘Instruction sheet governing interest on sight deposits’. Page 1/2 Zurich, 22 September 2022 Andréa M. Maechler News conference to one year. We last used SNB Bills for the implementation of monetary policy in 2011 and have since conducted tests to ensure operational readiness. We expect the volume of SNB Bills issued to increase within a short period of time on the back of the weekly auctions. The new interest rates on sight deposits apply as of tomorrow. The open market operations to absorb liquidity are being conducted with immediate effect. To ensure that our monetary policy is being implemented effectively, we will subject the instruments used to regular review. Further adjustments may be made if necessary. Page 2/2 | 0 |
The sum of our crisis experience – as painful as it may have been at the time – has helped us to avert what would have been the greatest crisis of them all. There are three lessons from the past crises that I would like to reflect on today. First, the importance of effective financial regulation for sustainable growth. Then, the importance of credible commitment in times of great uncertainty. And lastly, the importance of proper policy alignment. The importance of financial regulation The first lesson came by way of the great financial crisis, which was already brewing in 2007, just a few months after I took office here, and unfolded in 2008. This crisis laid bare many issues, but perhaps most relevant is what it showed us about why we needed effective financial regulation. Before the crisis, some saw a trade-off between effective financial regulation and an innovative financial sector that supported growth. The belief was that keeping the financial sector reined in tightly would come at the cost of less innovation and slower growth of lending to the economy. That notion was shattered very quickly when the financial crisis plunged us into a deep recession. It became clear that the lack of regulation did not really support lending over the longer term. In fact, banks were forced to start rebuilding capital in the middle of a slump, which amplified the credit crunch facing the economy and prolonged the recovery from the crisis. Europe learnt the lesson. | Christine Lagarde: Learning the right lessons from the past Speech by Ms Christine Lagarde, President of the European Central Bank, on the occasion of the awarding of the Prix Turgot 2021, Paris, 2 June 2021. * * * It is a great pleasure to be here once again in Bercy, which brings back so many memories. I am very grateful to Jean-Claude Trichet and the Cercle Turgot for bestowing this prize on me. It is an honour to join such an illustrious group of recipients. Anne-Robert, Jacques Turgot himself said that “the whole mass of humanity … marches constantly, though slowly, toward greater perfection”. When I reflect on my career as a policymaker in Paris, Washington and Frankfurt, these words resonate with me greatly. History never moves in a straight line. Day-to-day, it can be hard to perceive any direction at all. But I do believe that, in retrospect, we can make out a clear path towards progress. After two decades working in the private sector, I have held public office throughout two decades of crises – a period when Europe has been severely put to the test. But each crisis has taught us a valuable lesson – and we have had the humility to learn. It is thanks to those past lessons that we have been able to respond to the pandemic effectively. | 1 |
Looking ahead, the transition to a greener economy will entail a sharp reduction in aggregate energy dependence, from around 60% today to 10% in 2050 in a zero-emissions scenario. However, this same policy, as well as the digitalisation of the economy, will increase the EU's need to import so-called “critical raw materials”. These materials (such as rare earths, palladium or cobalt) are considered critical by the European Commission due to their economic importance, the difficulty in replacing them with other materials, the high import concentration and other supply-related risks. 5 For example, China controls about half of global rare earths mining capacity and 85% of the refining capacity. Russia is the EU’s main supplier of these raw materials (accounting for 18% of the total value of such imports in 2019). According to the European Commission, the demand for some of these critical raw materials could increase more than fivefold by 2030, which will cause the EU's external dependencies in this field to increase dramatically in the near future. A second vulnerability concerns export concentration. This is a key aspect for the European economy, which has historically maintained a strong trade surplus, and whose exports have compensated some of the recent large terms of trade loss stemming from high energy prices. In this regard, EU exports of various pharmaceutical and chemical products and some high-tech manufacturing goods are highly concentrated in the US and the UK, and are also characterised by relatively low domestic demand. | For their part, governments have become more concerned that trade and financial openness may create dependencies on third countries that increase vulnerability to geopolitical shocks. Accordingly, they have started to include geopolitical considerations in their economic decision-making, with policy initiatives that aim to limit such external vulnerabilities, for example, by encouraging the local production of strategic products such as semiconductors or by screening incoming foreign direct investment on grounds of national security. These issues are particularly important for the EU, given its high degree of trade and financial openness, which is larger than that of other geopolitical powers such as the United States or China. For example, in 2019 the share of foreign trade reached 54% of GDP in the euro area (up from 31% in 1999), which is double that of the US (26%), while the share of global value chain participation in trade is 20 percentage points higher in the euro area than in the United States. Likewise, the euro area is more financially open than the US, as measured by the stock of gross external assets and liabilities with respect to GDP. This openness has been a major advantage for Europe for many years and one of the main reasons for its prosperity. This openness has allowed the EU to benefit from lower import prices, larger export opportunities, more foreign competition, technology diffusion and, ultimately, productivity gains. But it has also become an element of vulnerability in a more volatile global geopolitical environment. This is currently evident in the EU's external energy dependence. | 1 |
Then, in September 2011, the FOMC announced that repayments from these securities would instead be reinvested in agency MBS to help support conditions in mortgage markets.29 The FOMC then maintained reinvestments, including Treasury rollovers, until commencing balance sheet normalization last month.30 Keeping the Fed’s holdings of longer-term securities at sizable levels helped to maintain accommodative financial conditions as economic conditions strengthened. This is because, in addition to the acquisition of securities through asset purchases, the period over which the central bank intends to hold its securities helps to shape market participants’ expectations about the size and duration of assets available to the public. Extending the holding period through reinvestments prolongs this so-called stock effect. The 2010 episode when the Fed was not reinvesting agency-related principal payments demonstrated both term premium effects that might have been expected to be associated with a reduction in the Fed’s securities holdings and the risks associated with an unexpected increase in the publicly-held stock of agency MBS. As we normalize the size of the balance sheet, maintaining redemption caps throughout the process (and continuing to reinvest any principal payments received in excess of those caps) provides an insurance mechanism that limits the amount of variation in the pace at which securities, particularly mortgages, will flow back into private hands. Lesson 5: Credible communications influence the effectiveness of asset purchase programs As a general matter, monetary policy transmits more smoothly when market participants are able to understand and anticipate central bank actions. | First, balance sheet policies can serve as a signaling device that strengthens forward guidance and reduces expectations for the path of short-term interest rates. Putting actions behind its words—either through new asset purchases or by maintaining reinvestments—helps the central bank to establish a credible commitment to maintaining monetary easing.33 Second, balance sheet actions transmit through a portfolio balance channel, which—through the stock effect I described earlier—reduces term and risk premiums embedded in bond yields by reducing the supply of long-term bonds in the market. Many studies conclude that this channel is likely the dominant one. | 1 |
It is good business to say “no” to the customer who wants help in evading taxes. And it is good business not to corrupt government officials. Companies with a reputation for a sound culture of compliance tend to do well at harmonizing their organizational value system and their compliance rules. If you look at those companies, you see success. Thanks for listening. 1 E. Norman Veasey and Christine DiGuglielmo, Indispensable Counsel: The Chief Legal Officer in the New Reality (Oxford Univ. Press 2012). 2 http://www.politico.com/story/2014/06/bnp-paribas-to-plead-guilty-sudan-sanctions-108438.html. BIS central bankers’ speeches 3 | Philipp M Hildebrand: Liquidity - a challenge for banks Public lecture by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Swiss National Bank Conference “Liquidity - a challenge for banks”, Zurich, 11 January 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). * * * The resilience of the international financial system has been strengthened in recent years thanks to the extensive efforts of financial institutions, central banks and regulatory bodies. Nonetheless, given the steadily increasing volume of transactions in global financial markets, securing liquidity remains a fundamental task for banks. During times of crises, liquidity can suddenly contract or dry up altogether. The challenge for banks is to set up liquidity planning procedures to secure reliable liquidity sources for exceptional circumstances. Liquidity risks must be correctly assessed and assets must be secured to serve as collateral when necessary. In Switzerland, the repo market is the forward-looking liquidity management instrument for the banks. It minimises counterparty risk in lending and provides access to a crisis-resistant, collateralised interbank market. The Swiss National Bank is itself a participant in the repo market. It uses the repo platform to implement monetary policy and to provide for liquidity in both normal and exceptional circumstances. BIS Review 1/2005 1 | 0 |
Zeti Akhtar Aziz: Fostering leadership role in Islamic finance Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of Hong Leong Islamic Bank Berhad - “Fostering Leadership Role in Islamic Finance”, Kuala Lumpur, 19 July 2005. * * * Bismillahirrahmanirrahim Y.Bhg. Tan Sri Quek Leng Chan, Chairman of Hong Leong Bank and Hong Leong Islamic Bank Encik Daud Abdullah, Managing Director, Hong Leong Islamic Bank Ladies and Gentlemen, It is my pleasure to be here today to commemorate the official launch of "Hong Leong Islamic Bank Berhad". This establishment of the Islamic subsidiary represents the on-going institutional transformation in the Islamic banking system in our Islamic financial system. The underlying philosophy for the incorporation of an Islamic subsidiary is for the further strengthening the institutional structure for Islamic banking business operations. The emergence of Hong Leong Islamic Bank in the Islamic financial landscape will further increase the diversity of players in the Islamic financial system and enhance its potential to contribute to the further development of our Islamic financial services industry. Ladies and Gentlemen, Today, the Islamic financial services industry in Malaysia has emerged as a viable and competitive component of the financial system that contributes towards enhancing wealth creation and the nation's economic development. The advancement and progress that have been achieved thus far have opened new frontiers for the Islamic financial services industry. | This dialogue will now be held annually to serve as a platform for cooperation among the Shariah scholars to promote greater understanding on emerging developments across the world in the area of Islamic finance. This is to promote a greater understanding on the approaches taken by different jurisdictions in their Shariah interpretations. To support the Shariah scholars' activities especially in the areas of research and capacity building, Bank Negara Malaysia has also allocated a RM200 million endowment fund to meet the financing requirements of the Shariah Scholars' Dialogue research activities and the provision of scholarships. It is hoped that this will contribute towards greater understanding in the process of harmonizing the international implementation of Shariah in Islamic finance. These initiatives have contributed to the success in the creation of a robust Islamic financial environment. It is further supported by the requisite financial infrastructure that includes the financial markets and that is reinforced further by a comprehensive regulatory, prudential, legal and accounting 1/2 framework. These elements have provided an enabling environment that increases the potential for Malaysia to evolve as an Islamic financial centre. These measures, however, need to be reinforced by efforts by the Islamic financial institutions to take on a more active role in promoting Islamic finance. Indeed, the rapid progress of Islamic banking over the last two decades would not have been possible without the pioneering efforts of the Islamic financial institutions in building up a successful and vibrant industry. | 1 |
Notable innovations that came under Mr. Masud’s time include the commissioning of the bank’s Branch Queue Management System at its Mutaba and Kafue House branches and Northend ATM Lobby, as well as the launch of Premier Banking. Barclays Bank Zambia Plc may have not pioneered all of these innovations, but they have provided reasonable competition to their colleagues which we at Bank of Zambia believe will be of benefit to the Zambian financial sector in the medium to long-term. It is my expectation that Barclays Bank Zambia PLC will continued to contest the market in a meaningful and beneficial way. Let me also acknowledge the contribution made by Barclays Bank Zambia Plc under Mr. Masud through the bank’s partnering with the corporate world to cosponsor the first ever Euromoney Investors’ Conference in Zambia. In addition, it is worth mentioning that BAZ, under the chairmanship of Barclays Bank Zambia Plc and Mr. Masud, helped initiate the beautification of Cairo Road by adopting the maintenance of its wonderful gardens. The positive change to our immediate surroundings particularly around the Bank Square is there for all to see. Further, Barclays Bank Zambia has continued to work closely with Junior Achievement Zambia where I serve on the Board. The bank has been providing office space as well as hosting the meetings of Junior Achievement at its premises. As a matter of fact, on 22 February, 2009, the Junior Achievement Worldwide/Barclays Bank partnership was launched in Dubai. | I urge you to be part of the conversation and engage in the dialogue. I pray that the event will be of great benefit to all participants. 3/3 BIS central bankers' speeches | 0 |
We have already seen significant consolidation and increased efficiency of the banking sector as the first phase of FSMP ended. In addition to FSMP, the amendments and introduction of a number of legislations, such as the new Financial Institutions Act and the Deposit Insurance Act, will foster a more efficient financial sector. On the supervisory side, we have also continued our efforts to enhance financial sector's resiliency to unfavorable disturbances through an early adoption of IAS 39, currently underway, and the new Basel Capital Accord at the end of next year. FSMP and improved supervision will complement structural reforms in the real sector to bring about strong foundations for further economic growth and stability. Structural reforms in the real sector continue to need concerted efforts from both the private and public sectors as well as support from foreign investors like all of you here. The BoT is committed to doing all the necessary work for a strong financial sector that will provide a supportive environment and infrastructure for the private sector to prosper. Ladies and gentlemen, the essence of my talk today is to reassure you that the performance of the Thai economy has been satisfactory and that, despite the adverse environment and challenges facing the Thai economy, I strongly believe that the Thai economy will be able to continue to perform favorably while moving forward. We are strongly committed to implementing the most appropriate policies to help foster growth, stability and resiliency of the economy and to further strengthen its solid foundation. | It is an original member of the IMF and the World Bank, and is represented on the Executive Boards of both institutions together with seven other countries in the Nordic-Baltic Constituency. In line with its long-held policy of supporting multilateral institutions, Norway entered into a bilateral loan agreement with the IMF in the first half of 2009, when the IMF urgently needed to strengthen its lending capacity. Later in 2009, Norway agreed to raise its commitment under the New Arrangements to Borrow (NAB) and expanded its voluntary transactions in SDRs following the large allocations. It also committed to support IMF lending facilities for low-income countries. Thus, Norway has actively backed the multilateral responses to the global crisis, in large part stemming from decisions of the G20 at the London Summit in April 2009. Norway has a strong external and fiscal position based on large petroleum revenues. The lion’s share of the revenues is invested abroad through our sovereign wealth fund. 1 The membership of the G20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Korea, Japan, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. The G20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization. | 0 |
However, this favourable set of circumstances has co-existed until recently with numerous signs of over-abundant monetary and market liquidity: robust money and credit growth; high transaction volumes and small bid-ask spreads; low credit spreads and term premia; and reduced volatility across virtually every asset class. Those vulnerabilities have not gone unnoticed by central banks, as testified by past analyses in the ECB Financial Stability Review publication. Although market sentiment had proved extraordinarily resilient to events which in the past would have triggered sharp corrections (including the shift to less accommodative monetary policies in the major economies), the analyses identified the risk that the prolonged period of low rates might have created incentives for excessive risk taking and that a sudden tightening might leave, using Rajan’s words 6 , “a number of participants stranded on a limb of illiquidity”. In my view, all of this warns against excessive focus on a fixed, excessively short-term time horizon for inflation targets. The Eurosystem’s monetary policy strategy abstains from specifying a fixed time horizon for policy. Through its diversified approach, it also accords due importance to assessing medium- to long-term risks to price stability. It is therefore well equipped to deal with the perils of short-termism, the temptations of excessive fine-tuning and the risks of asymmetric responses during upswings and downturns. | 8 BIS Review 132/2007 | 1 |
We are working hard to build a diverse workforce because we believe it will allow us to build trust with the people we serve, and help us to make better decisions. We are striving to create a workforce that reflects the diversity of the society we serve, and we think diversity and inclusion go hand in hand. In order to achieve this, we have several initiatives in place that address various areas of diversity and inclusion. This year we renewed our diversity targets, set for the end-February 2028. These include the proportion of staff we want to be of a Black, Asian and Minority Ethnic background, and female, at various levels. We also considered how we expand our public commitments beyond gender and ethnicity. Our ultimate aim is also to work towards ensuring appropriate representation for other protected characteristics, such as disability and sexual orientation. At this point, as with many other organisations, we do not feel there is sufficient data available internally to support this and are working to address this over the next few years. This is an issue we have also noted in many other organisations in the financial sector, where data on the progress on diversity and inclusion across the sector is fairly limited. Firms have been recently contacted about participating in the pilot survey on diversity and inclusion. | Even though the analysis of the cumulative impact and the interactions between regulations is still in its early days, vigilance is required to ensure that the implementation of reforms does not result in a reduction of financial activities, such as market making that are vital for preserving market liquidity, financing investments and firms and ultimately the real economy. The foreseen banking structures reform and European Financial Transactions Tax (EFTT) are cases in point. In both projects, an appropriate approach should strike the right balance between limiting risks associated with trading activities and the need to preserve financial activities that are useful if not essential to the development of the real economy. Doing so would be fully compliant with the overarching objectives of the Capital Markets Union. 2 BIS central bankers’ speeches Having better integrated markets within the European Union (EU) would also mean the emergence of more reciprocity issues as regards macroprudential policies. At the macro level, authorities should then closely review the potential additional vulnerabilities and risks attached to the CMU both at the domestic level and on a cross-border basis. Authorities will also have to strengthen their analytical framework and possibly complement their macroprudential instruments which are mainly bank-based at the current juncture. I will conclude with some remarks regarding longer term work, namely how to harmonize further domestic legal regimes and the institutional architecture. The Commission’s green paper has identified some areas for longer term work, including the need for further harmonization of insolvency regimes, securities laws and tax regimes. | 0 |
Not to act, however, would be to squander the lessons of the past decade and mortgage our futures. It is simply not an acceptable option. We face today probably the best macroeconomic environment in decades to put our economies on a sound economic and financial footing to meet the surprises we will inevitably face in the new century. The opportunities provided by rapid technological change are available to all in the global marketplace. The flexibility and adaptability we build into our respective economies today will ultimately determine the success we are able to achieve for the generations that follow us. The challenge could not be more important. 7 BIS Review 29/2000 | Infrastructure Asia harnesses the networks and collective capabilities of public sector agencies and private sector firms across the region to meet Asia’s infrastructure needs by (i) connecting partners in the 2/5 BIS central bankers' speeches ecosystem; (ii) building capacity in demand markets; and (iii) providing top-level project advisory to improve bankability. Infrastructure Asia provides an open platform for Chinese (including Shanghai-based) infrastructure developers and financial institutions to partner players in Singapore in regional infrastructure projects. b. Furthermore, as infrastructure demand and foreign investments along the Belt and Road region increase, we expect a boost in demand for commodities and growth in commodity trade. Singapore’s strategic location in the crossroads of key trade flows has enabled commodity traders in Singapore to capture such opportunities. Shanghai Pudong Development Bank (“SPDB”) opened its first overseas commodity centre in Singapore in October this year, providing global commodity businesses with commodity-related financial services and solutions. c. Singapore banks are also embarking on BRI collaborations with Shanghai banks. UOB signed a MOU with SPDB in September this year to serve companies hoping to tap on BRI opportunities, providing financial solutions covering investment advisory, cross-border RMB transactions, syndicated loans, project and trade finance, and cash settlement. OCBC Bank signed its second MOU with Bank of Shanghai in April this year, leveraging each other’s strengths, networks and platforms to support customers in their BRI expansion plans, including access to OCBC’s funding and risk management solutions for Bank of Shanghai’s corporate clients. | 0 |
The need to focus attention on the level of economic activity is of course well understood by the academic community. It is now standard practice in the literature on monetary policy to assume that the authorities seek to minimise a social loss function, defined in terms of the deviation of the level of output or unemployment from their equilibrium values, and in terms of the deviation BIS Review 103/1998 –6– of inflation from its desired value. But if this is so obvious, why, in discussions of the economic conjuncture and economic policy, is so much attention placed on growth rates rather than on levels? Why are commentators and pundits so concerned with whether economic growth is going to be above or below its trend rate, or even whether it is likely to be above or below zero? That is not what matters for economic policy nor, more importantly, for social welfare. An excessive focus on growth rates of output and employment, rather than on their levels, may reflect a rather natural, but dangerous, optimism about the degree of spare capacity in the economy. After all, is not the belief that we could always achieve lower unemployment without an increase in inflation the mark of a kinder, gentler, altogether more civilised approach to economic policy? Or is it simply wishful thinking? | Are the 16 million unemployed people in the European Union merely an equilibrium, on the one hand, and a statistic, on the other? But for most people the labour market is the market where – for better or worse, in sickness or in health – they sell their time and their skills at a market price. That price determines, in large part, their opportunities and economic welfare. Wage rates have a much greater significance in influencing the distribution of real incomes than do the prices of almost anything else. As a result, the labour market cannot be divorced from broader social and political considerations. If their terminology and language are sometimes insensitive, what do economists have to offer by way of ideas about unemployment? The prize for the most important idea and most insensitive terminology surely goes to Milton Friedman for the concept of the natural rate of unemployment. I shall discuss shortly the significance of this idea for monetary policy. But for a more elegant advocacy of a similar position it is necessary to delve further back in history. This month sees the 75th anniversary of the publication of what Milton Friedman described as John Maynard Keynes’ best book: A Tract on Monetary Reform. It is undoubtedly one of the most persuasive polemics ever written on the subject of monetary policy. To coincide with publication in December 1923, Keynes gave a lecture to the National Liberal Club in which he talked about “the triple evils of modern society”. | 1 |
The measures recently announced by the European Central Bank (ECB), aimed at containing the risk of the euro area running an excessively low inflation rate over a prolonged period, likewise contribute to bolstering the growth outlook for our economy and assisting the adjustment under way. But let us not forget that the crisis – complete with double-dip recession – in the Spanish economy has had a most severe impact on employment and income levels, and has caused a most pronounced setback in terms of real convergence with Europe. Merely restoring pre-crisis levels of well-being will take several years. Evidently, here, maintaining the reform drive is crucial for speeding the process of recovery of the levels of economic prosperity lost due to the crisis. BIS central bankers’ speeches 1 2. Banking sector: situation following the reform The Spanish banking sector has concluded a far-reaching transformation, entailing the cleanup, restructuring and recapitalisation of the most vulnerable banks, all resulting from the transformation of the former savings banks. The consequences of this reform have been reviewed on various occasions, so I need not detail them here. Allow me merely to summarise the three key elements of the process. i) Firstly, the reform has driven an intense restructuring and re-sizing of the banking industry, enabling its excess capacity to be corrected. Of note has been the integration of savings banks into existing or newly created banking groups, which has enabled the number of credit institutions to be reduced by over 30. | Hence, to estimate the direct cost to the taxpayer of the aid provided to banks, we should first consider the amounts paid out by the FROB to these banks, add this to the expected cost of the APSs extended by the FROB (at Banco de Valencia and Caja Sur) and of other guarantees and coverage offered by it in connection with resolution processes, and subtract the amounts recouped or expected to be recouped. That is to say, we should firstly calculate the funds paid out by the FROB to purchase shares or contingently convertible bonds, which amount to € million, adding these to the estimated cost of the APSs and other guarantees granted in resolution processes which, on the latest valuations available, account for € million. From this amount it would be necessary to subtract the recovery of the amounts disbursed through the redemption of convertible bonds subscribed by the FROB or the disposal of the FROB’s shareholdings in the banks receiving aid. Here, the € million from the sale of 2 As at 30 April 2014. BIS central bankers’ speeches 3 NCG and the return of the aid granted to Banca Cívica by Caixabank3 should be recorded. Further, the convertible bonds subscribed by the FROB in Caja3 (absorbed by Ibercaja), CEISS (absorbed by Unicaja) and Liberbank, are highly likely to be redeemed before 2017, entailing the return of € million. | 1 |
The credit default swap premium indicator, showing the markets' concern for the banks' solvency, which according to many experts is the most significant individual diagnostic statistics, started to decline. Especially the CDS premium (commercial debt securities premia) dropped significantly. The progress with the guarantees, although gradual, is also encouraging, with more banks issuing bonds even without utilization of guarantee (government) being registered. The LIBOR spread also shrunk, and it is expected to "continue to narrow gradually compared to the period before the measures were undertaken" (this primarily pertains to England). Many banks continue to face with deleveraging and rebalancing in order to lower the dependence on financing through the central banks. The stronger capital and financial position of the banks will be possible in a period of several years. In wider terms, the financial system remains to be under acute clench, tension. The real economic sector bears the consequences. The unemployment increases. The business financing is getting harder and more expensive. The economies' growth decreases. Also the so-called emerging economies started to feel decline in the growth. It seems that we are entering into recession. The central banks of the developed economies transfer the focus of their measures from the inflation control to recession prevention. BIS Review 18/2009 3 What conclusions can be derived from this crisis? 1. | Muhammad bin Ibrahim: Some thoughts on the new economy Speech by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Institute of Economic Research’s (MIER) 30th Anniversary Dinner, Kuala Lumpur, 26 September 2016. * * * Distinguished Guests, Ladies and Gentlemen, I am honoured to speak here at the Malaysian Institute of Economic Research’s (MIER) 30th Anniversary Dinner. I would like to commend MIER on the institute’s continuous efforts in expanding economic knowledge, and the commitment to research over the past 30 years. Today, we meet at a time where the global economy is becoming increasingly dynamic and challenging, underpinned by complex global interlinkages and shifting trends. The challenges posed to policymakers are immense. The rapidly evolving world also necessitates swift, yet pragmatic policies in order for us to remain ahead of the competition. Against this backdrop, a deep understanding of the core issues is absolutely critical in supporting evidence-based policy responses; not only to manage risks but also to better leverage on opportunities. Tonight, I will be sharing some thoughts about this “new world economy” that we are in, and along the way, share some policy insights and research ideas for the many economists and policy thinkers in this room. Global macroeconomic environment is becoming increasingly challenging The periods of strong global growth have become something of a distant memory to us. Global growth for the past 5 years has averaged 3.5%, well below the pre-crisis average of 5.1%. | 0 |
Over the next few months, the data are likely to be dancing particularly vigorously under the influence of the reversal of the VAT cut, a turnaround in the stock cycle and even the effects of the recent cold weather. Added to that, the MPC is acutely aware that initial data releases are often later heavily revised, and there is uncertainty over the timing of fiscal consolidation. The patience of UK households is likely to be sorely tried over the next couple of years. There is little scope for growth in real take-home pay, which may remain weak even as output recovers. It is clear that inflation is likely to pick up markedly in the first half of this year, a message reinforced by this morning’s news that CPI inflation reached 2.9% in December. The continuing pass-through of the earlier significant depreciation of sterling, while part of the necessary rebalancing of our economy, is offsetting to some extent the downward pressure on inflation from the large amount of spare capacity. And the rise in VAT back to 17.5% means that CPI inflation is likely to rise to over 3% for a while, or even higher for even longer were energy prices or indirect taxes to increase further. Although such price level effects do not constitute a continuing source of inflation, and hence should be temporary, they remain in the official measure of inflation for a full year. | Whether for time-sensitive transactions as part of the often intricate choreography of global financial stability operations or for more routine official payments, the insights developed and experiences with the policies, environments, and constraints of other central banks provide the Federal Reserve with enhanced capabilities to formulate and execute policies. The dedication, skill, and expertise of this staff transform on a daily basis the abstract principle of safe, confidential, and reliable service provision into an operational reality. So, to the current and former staff here today, I pay tribute to your service to the global official community, to the Federal Reserve, and to the U.S. You are worthy heirs to the legacy of Benjamin Strong, Montagu Norman, and other early giants of central bank cooperation. The evolving risk environment in cross-border payment operations Even as we hold this commemoration and celebrate the legacy of central bank cooperation in this most tangible of forms, the evolving risk environment in cross-border payment operations requires us as central bankers to continually rededicate ourselves, in word and deed, to the mission of providing safe, confidential, and reliable services to each other. As we are all no doubt aware, risks in cross-border payment operations have undergone major shifts in recent years, with cyber threats in particular emerging as one of the most critical security issues facing our community. | 0 |
The basis for this was the Bank’s task of promoting a safe and efficient payment system – what we in practice define as financial stability.10 In 1997 the Riksbank began publishing its assessment of the stability of the financial system, in the form of the Financial Stability Report, published twice a year. It was one of the first central banks in the world to do this. The special Macroprudential Policy Division at the Riksbank’s Financial Stability Department has as one of its tasks to assess the need for specific macroprudential policy measures. The Riksbank’s Monetary Policy Department has long conducted macroeconomic analysis to provide a good guidance for interest-rate decisions, which are based on macroeconomic analyses and forecasts. The analysis of financial stability, combined with the monetary policy analysis, provides good grounds for understanding the repercussions between the financial and real economy, which is essential for successful macroprudential policy. In recent years the cooperation between the Financial Stability and Monetary Policy Departments at the Riksbank has intensified. There are also clear links between monetary policy and macroprudential policy. Both policy areas ultimately aim for a stable macroeconomic development – macroprudential policy by limiting systemic risk and monetary policy by keeping inflation low and stable and stabilising the real economy. But they also affect the conditions for one another (see Figure 10). 9 Sveriges Riksbank (2012), Financial Stability Report 2012:2. | They are also to consult with one another prior to decisions on applying macroprudential tools. The committee does not offer any suggestions as to which macroprudential tools are needed or how they should be divided between the authorities. My assessment is therefore that the Financial Crisis Committee’s proposal, which means that both the Riksbank and Finansinspektionen will become macroprudential bodies, does not fulfil the important criteria regarding decision-making powers, independence and accountability. And nor does the proposal appear to be in line with the ESRB’s recommendation. …and differs from the practice that is emerging in Europe Moreover, the Financial Crisis Committee’s proposals differ from the structures emerging in other EU countries. Two models are predominant in this context, and both of them are in line with the ESRB’s recommendation. Either the responsibility for macroprudential policy is given to the central bank, as in the United Kingdom, or it is given to a number of authorities, with the central bank playing the leading role, expressed for instance in the form of a chairmanship or right of veto, as in the case of Germany. If the council’s solution is chosen, the council normally also confers the right of making recommendations regarding macroprudential measures. | 1 |
And had Jane been living in the euro area today, in Germany for example, she would only have been able to invest for the long term at a negative interest rate – the 30 year bund yielded minus 0.27% in August. Nominal interest rates do vary through time of course. Since the Napoleonic wars and outside wartime, UK long term nominal rates moved mainly in a 2-5% range until the decades of inflation following the Second World War, during which they rose above 15%, before falling back as inflation was brought under control. They have been falling ever since. The fall in long rates is a phenomenon that has been building since the late 1980s, gathering pace after the financial crisis (Chart 1). During the past couple of months, UK long nominal rates have dropped to around, and sometimes even below, 1%. They have not been this low in the past 200 years. The same is true, more generally, for other advanced economies. 1 See Avery Jones (2019). 2 All speeches are available online at www.bankofengland.co.uk/news/speeches 2 Some of this likely reflects low current and expected inflation. But it is a great deal more than just an inflation story. Long term real rates – in the United Kingdom and in other advanced economies – are extremely low and indeed are negative. I want to look briefly today at why we are in a period of low interest rates and why we might expect it to persist – ‘low for long’ in other words. | Financial sector debt in advanced economies advanced economies Per cent of GDP 400 Japan UK Mature markets US Euro area Per cent of GDP 250 350 230 210 300 190 170 150 250 130 Excluding financial sector debt 110 200 90 Including financial sector debt 70 150 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: IIF Global Debt Monitor. 50 Source: IIF Global Debt Monitor. Moreover, debt in emerging markets grew much faster than GDP between 2011 and 2016. Chinese debt-to-GDP ratios have risen particularly sharply and are now very high. Whilst the growth rate of the aggregated global debt stock has moderated more recently, the level remains high by historical standards – as one might expect in a low for long world. While this may not in itself cause or presage a correction, it could well amplify one, making the global economy more vulnerable to adverse macro-economic shocks26. 26 Research suggests that it is the growth rate of debt rather than its actual level that is the leading indicator of financial crises. Bank of England work based on 130 downturns in 26 advanced economies since the 1970s suggests that a rapid build up of debt is the best early warning indicator of a recession. See for example Bridges et al (2017), Carney (2019b) and Schularick and Taylor (2012). | 1 |
On the banking, as opposed to trading book side of the assets of major banks, the search for yield often took the form of loans which included too much equity-like 2 BIS central bankers’ speeches risk because the equity stakes of the owners of the companies were too small. This was not equities themselves, but rather equity components embedded in loans. Commercial property lending in the UK is a good example, as it was in Ireland. Commercial property prices in the UK have over time tended to vary more than, say, prime residential house prices and that points to a need for larger equity-like component of funding to absorb losses from that variability. The search for yield however meant that banks were more happy to lend against equity risk of this sort. Since the crisis in the UK we have seen a shift in commercial property finance towards a larger share coming from funds which explicitly take this equity-like risk. This strikes me as a good thing in terms of reducing the exposure to such risks of banks, whose liabilities tend more to be in the form of deposits. I sometimes hear comments that banks are losing the race to new innovations such as peerto-peer lending for the supply of what I would describe as finance with a heavy equity component. | Let me stop the story of the past for a moment and draw out one message: when we hear people say things like, “credit isn’t back to pre-crisis growth rates”, “there is a gap in the stock of credit to the economy relative to the pre-crisis trend”, “the level of national output is this much lower than it would have been had the crisis not intervened”, “banks’ so-called market making in financial assets is much less than it was immediately pre-crisis”, just pause and consider that all of these statements imply that the pre-crisis years were sustainable. They were not. Let’s turn to the balance sheet of banks in a little more detail, starting with the liabilities side. In this respect, banks are different from other firms because they provide deposit contracts. A deposit is a very particular form of debt contract. For all of us the essential feature of a deposit contract is simple – we put our money (our asset) on deposit at a bank, and we expect all of it back, with whatever rate of return is agreed, and we expect to have access to it, in part or whole, in line with the terms of the contract. Some deposit contracts provide for more ready availability than others, and this affects the return on the deposit. Of course, there is also insurance on a deposit contract up to a well publicised level. Let’s contrast that with non-deposit debt (bonds) and equity contracts. | 1 |
If they are not satisfied with the response received, they may then apply to the claims departments of the financial supervisors – the Banco de España, the National Securities Market Commission (CNMV) or the Directorate General of Insurance and Pension Funds (DGSFP), according to the subject-matter of the claim – which will issue a non-binding opinion. This system has several problems. On the one hand, it is not sufficiently flexible to provide customers improperly treated with due satisfaction in a reasonable period of time. And on the other, there is no arrangement in place for a third party to issue an opinion that is binding on banks if they are unable to reach an agreement with their customers. Accordingly, consumers are all too often obliged to go to the courts to obtain due reparation. Certain regulations recently passed in Spain, such as Law 10/2014 of 26 June 2014 on the regulation, supervision and solvency of credit institutions, and Law 5/2015 of 27 April 2015 on the promotion of business financing, include provisions designed to foment improvements in the existing institutional arrangements for customer protection. In any event, irrespective of any present or future legislative changes in this respect, I believe that banks have the capacity to drive improvements in the short term. For the moment, they appear to be readier to comply with the non-binding opinions issued by the Banco de España’s claims system. | Thus, while each policy must act on the basis of its individual objectives, the consequences each has for the other should be taken into account. Macroprudential policy in practice identification and monitoring of systemic risk Timely activation of macroprudential tools calls for indicators that enable the risks arising in the financial system to be monitored and which, in parallel, allow the use of the instruments and their effects to be calibrated. 12 In particular, these indicators should be capable of capturing the financial cycle. The literature has identified various indicators that can play this role. For example, Terrones et al. (2011) consider three main variables on the basis of which these indicators can be calculated: credit to the non-financial private sector, house prices and stock market prices. Thus, in the case of the CCyB, current regulations give a special role to the credit-to-GDP gap (also known as the “Basel gap”). This indicator measures the difference between financing received by the non-financial private sector as a percentage of GDP and its longrun equilibrium trend, estimated using statistical procedures. Positive credit-to-GDP gap values would indicate that we are in the expansionary phase of the financial cycle, since the volume of credit, once the economy’s level of income is taken into account, stands above its equilibrium level. Consequently, activating the CCyB or increasing it might be considered. Negative values would denote a contractionary phase in the financial cycle, whereby the CCyB should be deactivated under normal conditions. | 0 |
In reality, the problem is further complicated by the fact that inflation must be stabilised. Here I assumed for the sake of simplicity that inflation would entirely follow the business cycle. As the credit cycle and the business cycle develop in different ways, a change in the repo rate intended to affect one cycle will sometimes have an undesired effect on the other. Although a stable credit cycle – one that does not “go wrong” – is ultimately necessary for a stable business cycle, in the short term it may be necessary to make a trade-off between them. This is not without its problems. An ambition to hold the credit cycle in balance may require a slightly higher policy rate. This would also dampen the economic cycle and inflation could undershoot the target. This can be regarded as normal and acceptable for a period of time. But if the period becomes prolonged, it may sooner or later become difficult to gain understanding and support for this policy – despite its purpose being to prevent a much worse development further ahead. This could be a dilemma. 8 One of many examples is Petterson and Hållö (2013). 9 It is not entirely clear how inflation will develop in connection with a recession. One possibility is that the krona would weaken substantially and that imported products would thereby become so much more expensive that one had a higher inflation rate in the short term. | When it became apparent that impaired loans were in circulation but that no one really knew where they were and to what extent, confidence in the banks disappeared. The market participants stopped lending to the banks. The banks also stopped lending to each other and when it also became impossible to sell previously liquid assets or to use them as collateral for loans the liquidity crisis had definitely arrived. One lesson that we have learned from this is how quickly liquid markets can become illiquid. We also know that the participants and the authorities underestimated how seriously the markets would be affected by the crisis. But, when the price of an asset falls it is no longer possible to borrow as much money on this asset. Participants are then forced to sell the asset to acquire liquidity. If many small – or a few large – participants sell at the same time then prices fall even further. From the point of view of an individual participant it is rational to decide to lend less or to sell the asset. However, the collapse in market prices that is a consequence of these decisions affects everybody. The impact this has on the market is, in other words, a negative external effect. Selling assets at “bargain-basement” prices should normally attract buyers. But exactly the opposite happened. There was uncertainty about the actual value of some complex and untransparent assets, which explains why the buyers disappeared. | 0 |
Global adjustments are characterised by synchronous, large capital inflows in a great number of countries, followed by their relative reduction for the entire group. Usually, the number of countries facing large capital inflows simultaneously is relatively small. However, from time to time, simultaneous episodes of massive capital inflows occur in a relatively great deal of countries. Over the past few years, very many countries, Romania included, were faced with the capital inflows problem. For this reason, I will refer to synchronous, large capital inflows. As recently pointed out by Reinhart and Reinhart (2008), there may be a relationship between these synchronous, large capital inflows and external sovereign defaults, currency crashes, inflation crises and banking crises. The authors defined the crises for each of the BIS Review 5/2010 1 above-mentioned components and constructed specific probabilities of crisis emergence for the 1960–2007 period in 66 countries. The probabilities were defined both conditional and unconditional on the episodes of heavy capital inflows. The final outcome is that, for low- or middle-income countries, the conditional probabilities for a crisis to emerge are significantly higher than unconditional ones. In other words, the number of crises is higher around the episodes of large capital inflows. One may conclude, in practice, the ensuing magnitude of adjustments and financings is different from that seen in quasi-individual episodes of substantial capital inflows for a given period, followed by their reduction. | Foreign demand continued to contribute to the expansion of the economy in the first quarter of 2012, albeit to a markedly lower extent. The sluggish increase in exports remains a concern as long as it affects the performance of the economy during 2012. It also provides evidence for Albania’s strong reliance on certain geographical markets or products. The analysis of monetary data suggests that the performance of monetary indicators was in line with the developments in the real economy. Money supply maintained the growth rate of end-2011, recording in March an annualized growth of 8.8%. Our analyses suggest that its growth is in line with the demand of the economy for real money, signalling contained monetary inflationary pressures in the medium run. Lending to the private sector recorded an annual growth of 9.0% in March. Its performance, particularly in the recent months, was determined by the low private sector demand for credit and the cautious bank lending behaviour. Financial markets were liquid and stable. Interbank market rates dropped significantly in April and the trading volume in this market increased. The pass-through of easing monetary policy signals persisted in the lek deposit market as well, as reflected by the lower interest rates. Government security yields in the primary market remained at similar levels to the previous month. Their increase in the first quarter of 2012 reflects the developments in supply and demand-side structural factors, hence signalling no added inflation premiums. | 0 |
BIS Review 37/1998 ˝ | Plus high investment levels that will help us sustain this growth trend into the future. Still, there are big challenges ahead. Risks are present and the policies we need to adopt to confront them are not always evident. So it is essential that we keep the road clear and take good care of that which has taken so much effort to achieve. Let me say again what I said at the beginning: self complacency is one of the worst mistakes the entities responsible for our country’s economic policies can make. Thus we must pay close attention to events. As a central bank our focus is on ensuring the stability of prices and the financial system. This is the best contribution we can make to the well-being of our population. Thank you. 6 BIS central bankers’ speeches Figure 1 GDP and demand (annual change, percent) 18 18 12 12 6 6 0 0 -6 -6 -12 -12 09 10 GDP 11 GDP minus natural resources 12 Domestic demand Source: Central Bank of Chile. | 0 |
Saudi banks have benefited greatly from the Universal Banking Model permitted by SAMA and offer a range of financial services including investment management, mutual funds, brokerage, and other services. During the past decade, the volume of business of Saudi banks has grown at a phenomenal rate. In the ten years period 1996-2005, the banks’ assets grew by 213 per cent, deposits by 224 per cent and capital and reserves by 248 per cent. During this period the profits for the banking system showed strong growth and the return on equity averaged well over 20% and return on assets was over 2%. The strength of Saudi banks is further underlined by their average risk-based capital adequacy, which has been high according to Basel capital adequacy standard, and averaged 18% during the past decade. If we review our long history of foreign investment in the financial sector since early 1950, a number of foreign banks were granted licenses to open branches in the Kingdom. In 1976, there were 12 banks in the Kingdom including 10 foreign banks. To Saudize the banking system and benefit from foreign expertise of the banks operating in the Kingdom, the government invited foreign banks to convert their branches into Saudi-foreign joint stock companies with an equity share of 40% for the foreign partner. Technical Management Agreements were also entered into to manage the new banks by the foreign partners. | For this reason, the SNB welcomes the Federal Department of Finance’s decision to set up a commission of experts to draw up proposals on macroprudential oversight and to determine the associated institutional responsibilities. 1 SNB’s comment on the recommendations made by the business audit commission of the National Council and the Council of States. 2 IMF Country Report No. 11/115 within the framework of the Article IV Consultation of May 2011. BIS central bankers’ speeches 3 | 0 |
Harmonization of standards and codes to international best practice must be done. Hedging markets must be available for both currency risk and interest rate risk, and this may mean a rethink on capital controls. Perhaps a gradual step-by-step relaxation in needed. 2 BIS Review 28/2003 Transparency is also required both in price discovery and the management of both the macroeconomy and the individual corporates. The legal system must respect creditors’ rights, and for investment products to be available for sale across Asian countries, a uniform single passport of consumer production by the SEC’s must be made. Now comes the final question. What is the purpose of the Asian Bond Fund? You may recall that the Asian Bond Fund was announced on 2 June 2003 at US $ billion by 11 central banks in East Asia and Pacific countries. Initially it will invest in sovereign and quasi-sovereign bonds issued by Asian governments in the international markets. This by itself already sparked a keen interest in Asian bonds. I know of at least one Asian central bank that had not invested in Asian bonds before, other than in JGB’s, but has now started buying directly in addition to investment in the Asian Bond Fund. Thailand is now looking at doing this also. I am sure there will be more central banks both in Asia and outside looking at Asian bonds at the international level because of this initiative. | I am sure there will be very interesting and fruitful exchange of views and ideas on the major financial stability issues, including those that I have mentioned earlier. Once again, thank you all for being with us today. BIS central bankers’ speeches 1 | 0 |
The resolution authority could, in turn, better take into account certain strategies, and thereby accept a certain level of risk. A likely effect of recovery options or transfer tools is that the structure of the remaining group might become less complex and therefore carry less risk. Besides, the stance on waivers of internal requirements for entities located in the same Member State (or even in the same Banking Union) has proven overly conservative. We need pragmatism, and consistency between the SRB and the SSM: when an entity has been waived from capital requirements, or is simply not subject to capital requirements, the resolution authority could apply the same on MREL. Proportionality to risk could entail other changes, such as the calculation of banks’ contribution to the SRF. As of today, the size of institutions has an overwhelming importance in the determination of these contributions. This is more than questionable: size does matter in order to bring an institution under the scope of resolution, but size and risk are two different notions and they should be more clearly differentiated in technical implementation. In order to ensure the fairness of contributions, and greater adherence to the SRM overall, it is necessary to adapt formulae accordingly. Beyond fairness, penalising the largest banks or groups prevents the emergence of pan-European groups, which is one of the Banking Unions’ objectives. Here let us acknowledge that Page 5 sur 5 we have collectively failed so far; we have a Banking Union without really crossborders European banks. This is a major weakness. | Finally, some efforts should be made Page 3 sur 5 to harmonise the main features of national insolvency proceedings, such as creditors’ hierarchy, rather than creating parallel crisis management paths which would simply duplicate the existing resolution tools while triggering significant level playing field issues. Once these steps are taken, the probability of recourse to the Single Resolution Fund (SRF) could increase. However, while the initial objective was to reach 1% of the covered deposits, such a goal being evaluated at an amount of EUR 55 billion, this amount has been constantly revised, and the SRF represents today EUR 66 billion and will reach around EUR 80 billion next year. This sharp increase can be mechanically explained by the surge in deposits in the wake of the Covid crisis and “forced” savings. The fact remains that this very high amount has never been used so far: we cannot completely ignore this question. It can be discussed whether this amount is disproportionate compared with European banks’ level of risk. If the answer is yes, then we should contemplate introducing a ceiling in absolute terms – the level of which would have to be determined. We should also use the flexibility offered by the current regulation to alleviate the burden of the contributions for banks, so that irrevocable payments commitments can represent up to 30%. All these questions need to be examined. II. | 1 |
People who lack good health or healthcare often struggle to participate fully in the economy. On top of that, social determinants of health—economic stability, housing, and education—can be barriers to employment and affect the kinds of jobs people get. Of course, we at the Federal Reserve are neither healthcare workers nor healthcare policymakers. But a major part of our core mission is to foster a strong economy and promote maximum employment. And to put it simply, we need healthy people to have a healthy economy and workforce. That’s why understanding the nexus of race, health, and the economy is central to achieving our goals. We are deeply committed to doing so, both in this series and beyond. The pandemic demonstrated just how acute many of the connections are between physical and economic health for individuals and communities. And it exposed just how dramatic racial disparities can be, especially in accessing healthcare and other critical resources. The convergence of a health crisis, business closures, and job losses created tremendous hardships for many Americans, and was especially devastating for communities of color. We know that people of color, and Black people in particular, experienced higher rates of illness and death.1 Significant representation in essential services work—jobs that required close contact with others—contributed in part to these tragic outcomes.2 Over the past 18 months, we learned how these issues played out for families through regular conversations with community leaders in our district and beyond. Separately, our research shone a spotlight on many of these painful realities. | The business representatives surveyed by our delegates are also confident about 2019. Risks remain to the downside, as is the case with the global economy. In particular, a sharp slowdown internationally would quickly spread to Switzerland. Exchange rates, inflation expectations and interest rates Let me now move on to address the monetary conditions – that is to say, exchange rates and interest rates – as well as inflation expectations. As I mentioned at the start, the Swiss franc depreciated slightly in the third quarter. Overall in 2018, however, it has appreciated by 3.5% against the currencies of our trading partners, largely driven by a weaker euro. Analysis of the exchange rate situation as a whole indicates that the Swiss franc remains highly valued. The real trade-weighted exchange rate, which is relevant for the economy, is still high. Given the economic and political uncertainties, there is also the risk of major and sudden movements in the exchange rate, which would significantly alter monetary conditions. We therefore continue to regard the situation on the foreign exchange market as fragile. This leads me to our inflation expectations, as derived from surveys of households, companies and forecasting institutions. It is our mandate to ensure price stability while taking due account of economic developments. We equate price stability with a rise in consumer prices Page 3/4 Berne, 13 December 2018 Thomas Jordan News conference of less than 2% per annum. | 0 |
It was only founded a year ago and we believe it will continue to develop and be fully fledged as a legacy of our national memory. In mid 1800s, announcing the competition on American banknote, the US Secretary of the Treasury, specified two obligatory requirements to participants about the design: it had to be original, and unpublished previously, and have a national character. Since at the beginning, the banknote is thought as not only a means of exchange, but also as an education tool for the public. As such, it should bear important moments of the history. The banknote performs this function through complicated techniques of subtly fine lines, to prevent reproduction, attributable also to robust security features. Although we frequently have these valuable papers on our hands, seldom do we concentrate for a few minutes and enjoy the art embedded in them. We very rarely focus on examining how the work of a talented painter is intertwined in a sort of a miniature canvas with that of a talented engraver, turning that piece of paper into an elegant expression of creative art. The image is familiar, but it is hard to believe that 14% of interviewers in advanced countries are able to remember recognise the picture designed on each banknote. Even less people may recognise the portrait depicted on 1000 Leke or 2000 Leke Albanian banknotes. | Dear guests, The International Council of Museums was established in 1946. Every year, since 1977, the ICOM organises the International Museum Day, a worldwide event held on and around 18 May. In 1992, ICOM decided to choose a socially relevant theme for International Museum Day, each year. The theme chosen for 2017 is “Museums and contested histories: Saying the unspeakable in museums". Joining this worldwide celebrating day, in our museum, we have formulated it as “Interesting facts from the treasury: Art in Albanian Banknotes". And to say the unspeakable, we have invited today Mr Mark Bundy, a master of designing working for over 40 years at De La Rue, pioneers of banknote printing in the world. De La Rue is frequently heard by everyone visiting our museum, as it relates to the first company printing the Albanian banknote. Mr Bundy will show the unspeakable on the designing, techniques and art of conceiving the Albanian banknote, illustrated by photos and sketches. In the end, we invite you to explore our temporary exhibition on this topic and see the unspeakable through your own lens. 2/2 BIS central bankers' speeches | 1 |
The consequences, quite naturally, were first evident in the US financial market which plays an exceptionally important role in the funding of the banks and the private sector. It also became clear that the banks' off-balance sheet activities, in environment of illiquidity of entire segments in the global financial market, will cause enormous losses which will have to be funded with the banks' capital. This, understandably, further increased the mistrust with respect to banks' capital adequacy rate. In a short period, the markets went dry. The ghosts typical for the crisis of the thirtieth (1929-1933) flied over, although I agree with those asserting that any comparison between that and this crisis is virtually unsuitable. In mid-October 2008, the governments of the developed countries started taking measures to get the trust in the financial system back. On October 8, the Government of Great Britain disclosed a complex plan for recapitalization of the banking system. This measure followed the first coordinated measure for cutting the interest rates, undertaken by the six most influential central banks. Moreover, the governments of the Euro-area states adopted a joint decision to issue guarantees and inject capital for stabilization of the banking system. In mid-October, the US Treasury Department also announced that it will invest US Dollar 250 billion to recapitalize the major banks. The undertaken measures for stabilization of the banking system helped curbing the global trust crisis in the international financial system, but gaining it back goes slowly. | Now let me touch briefly on risk management in Turkey’s banking sector. From the risk management standpoint, we are well supplied with well-developed methods for managing risk and supervising the risks that we do accept. As to the financial standing of Turkey’s banking sector, Turkish banks have achieved a level of financial and institutional development not to be underestimated. But besides these strengths, there are various threats to the well-being of the Turkish banking sector which should be mentioned. Turkish banks, are mostly exposed to credit risk, liquidity risk, interest rate risk, and foreign exchange risk. This is true even when there is no global crisis or macroeconomic risks stemming from political uncertainty. I should mention that all these different kinds of risk have been thoroughly monitored by the supervisory authorities, who put preventive measures in place before the effects of any problems that were found could threaten financial stability. Under this regulatory system, the banks must submit annual, quarterly, BIS Review 41/1999 4 and even daily financial data to the Central Bank and the Treasury. And besides frequent financial evaluations of banks by off-site examiners, on-site examinations are conducted to verify the accuracy and reliability of the data reported and clarify any special issues found during off-site examinations. Let me conclude my remarks by underlining once again how important it is to assess, manage, and reduce financial risks to ensure a sound financial system. | 0 |
But from the onset of the crisis in August 2007, the ECB took swift and decisive action to provide liquidity in the interbank money market in order to alleviate the stresses and ensure, to the maximum extent possible, that liquidity problems would not turn into solvency problems, and that systemic risk would be effectively contained. During this first phase of the crisis, the Eurosystem engaged in active liquidity management adjusting the intertemporal distribution of liquidity provision within the reserve maintenance period, but without changing the total supply of bank reserves over the entire maintenance period. At the same time, the maturity profile of the refinancing operations was altered, but the overall supply of central bank money was kept broadly unchanged. As a result, between the end of June 2007 and the end of September 2008, the balance sheet of the Eurosystem increased only moderately by about 100 billion euro. 4 Therefore, for more than a year since the eruption of the financial market turmoil, the unfavourable combination of, on the one hand, persisting and increasing inflation risks and, on the other, substantial stresses in the financial systems and risks to its stability required a “separation” of the monetary policy stance from the management of liquidity. The former was defined so as to achieve the primary objective of preserving medium-term price stability. The latter aimed at, and was effective in, mitigating pressures in the money market and tensions in other financial markets, as measured, for example, by CDS spreads and corporate bond risk premia, which gradually eased. | After the licensing of Popular Bank, with Albanian capital, the number of banks increased from 15 to 16, and a preliminary license is granted to Union Bank, which is expected to raise the number of banks to 17 over 2005. The system assets have further increased by 14 percent while there was an increase of banking products and an expansion of their network. During this year there will be sold the public shares of both the Italian Albanian Bank and United Bank of Albania, which will lead to an increase of effectiveness and banking competition, paving the way to the processes of selling, merging and acquisitions towards a new consolidation of the banking system. The lending activity increased by 38 percent where one can distinguish inter alia the significant growth of medium-term and long-term loans compared to short-term loans. The map of coverage of the country with the banking system has further expanded, including new areas ever covered before. At the end of 2004, the total number of branches reached 88, or 11 branches more that the end of the previous year, while the number of agencies recorded for the first time a full three-digit number, 100 and the number of the employed people increased by 26 percent. BIS Review 44/2005 1 The high increase of the number of branches relative to agencies shows that banks are not interested only in providing the service of collecting deposits but also in providing other products like crediting to the economy. | 0 |
Third, the authorities have ruled that banks may effectively use the capital buffers available to absorb unexpected losses. It has also been announced that banks will have a lengthy period for the subsequent reconstruction of these buffers, in the event they are used. Fourth, the European financial authorities, including the Banco de España, have recommended that banks temporarily eliminate dividend payouts and that they apply prudent criteria in the variable remuneration of their staff. The aim is to channel the resources generated towards strengthening their capital positions. These measures will be reviewed before the end of the year. In any event, however, banks’ dividend payout and staff remuneration policy should continue to be highly prudent until the current uncertainty clears and a sound economic recovery takes root. Fifth, there has been a regulatory reform of capital requirements (known as Quick Fix). The fix includes permanent measures, such as adapting the SME support factor in the calculation of risk-weighted assets, and temporary measures, such as the application of a prudential filter to changes in the value of sovereign debt instruments. As a result, banks’ shock-absorption capacity has been enhanced and, in turn, assistance has been given to financing to firms and to the investments that may be most affected. | Acting through these channels, monetary policy helps to ensure that the downturn is not needlessly protracted and helps to reduce the risk that unemployment becomes entrenched at too high a level. Inflation is now above the inflation target, but we have always held the view that this has been a transitory consequence of the sharp krone depreciation in spring 2020. Low economic activity and high unemployment have a dampening effect on wage and price pressures, and we expect inflation to fall below the target in the coming year. An expansionary monetary policy stance contributes to normalising economic activity, which will in turn contribute to pushing up price and wage inflation further out. Last year we were concerned that a fall in house prices would amplify the economic downturn. The situation has since reversed. High house price inflation over the past year reflects low interest rates, but the Covid-19 pandemic itself has likely increased the willingness to spend money on housing. We are at home more and are less able to spend money at restaurants, on travel or on other experiences. A sharp rise in house prices tends to be followed by faster growth in household debt. This may lead to a build-up of financial imbalances, which in turn could amplify a future economic downturn. Weight is given to this consideration when making monetary policy trade-offs. As economic conditions normalise, it will be appropriate to raise the policy rate. | 0 |
Before explaining why I hold such a view, and therefore why we at the Federal Reserve were so concerned when these markets faltered this past summer, I would like to stand back for a few moments and highlight how the global capital markets have changed over the past several decades. No one doubts that there has been a sea change in the global capital markets in recent years and the ways business is transacted in these markets. These changes are, of course, rooted in the remarkable technological advances we have been witnessing. Today, the technology for processing information and making this information widely available has fundamentally altered the way the world channels saving into investment. No longer does the global economy rely primarily on loans from commercial banks to meet its financing and investment needs. Rather, more than ever before, the global economy of today looks to funds from the fixed-income and related capital markets to intermediate its credit needs. Because the global capital markets have become so important in the credit intermediation process, the economic well-being of us all depends on the orderly flow of funds in these markets. The flow of these funds, in turn, increasingly relies on price signals generated by trading activity that takes place daily in these markets. The reliance on secondary market trading for price discovery constitutes the fundamental difference between funds from securities markets and loans from banks. Let me be a bit more specific. | Nor can we control the functioning of the global debt markets or become the regulators of all financial market intermediaries. What we as central bankers can do, however, is to understand the dynamics of the global debt markets – how they are evolving and whether they are sufficiently liquid and transparent. We can also ensure that banks perform their proper role in supporting the trading process through making sound credit decisions. Furthermore, we can enhance the price discovery process by promoting transparency in our own actions. Finally, and most importantly, we can help create conditions in BIS Review 108/1998 –5– our own economies that will support sustainable, non-inflationary growth. In these ways, we as central banks can encourage the efficient functioning of the credit intermediation process in our countries, and in so doing, promote the welfare of the world economy, of which we are all a part. *** BIS Review 108/1998 | 1 |
Complementing these three components is Islamic insurance or takaful, that provides the necessary risk protection to its policy holders and to serve as an efficient mobiliser of long-term funds. The spectrum of participants and the diversity of instruments are among the key attributes in creating the enabling environment for a dynamic Islamic financial system. This has been the approach adopted by Malaysia at the very onset of our journey in the development of a comprehensive Islamic financial system that is sustainable and progressive. In the initial stage during the early years of the development of the Islamic financial system, the focus of attention was on the development of the Islamic banking system and to expand the number of players and the volume of banking activity. This has increased significantly when the dual banking system was introduced. This was subsequently expanded to the specialised non-bank institutions, including the development financial institutions, and the savings banks and housing credit institutions, where Islamic financial products and services are being offered. The other core components of the Islamic financial system comprised the Islamic money market, the Islamic capital market and the takaful market. Today, the Islamic money market has become an integral part of the Islamic financial system, with transactions of more than RM2 billion BIS Review 43/2003 1 a day and a broad spectrum of instruments, among which included the Government Investment Issues, Bank Negara Negotiable Notes, Islamic accepted bills and the Islamic private debt securities. | The players in the Islamic financial industry must therefore, have in place robust risk management practices and system. In this regard, the establishment of the Islamic Financial Services Board has been timely. The IFSB has the important mandate of developing the prudential standards in accordance with the unique features of the Islamic financial institutions. Given that the IFSB and the existing standard setting body embraced common objectives, l do not see any difficulty in integrating the international standards with the Islamic prudential standards. This will contribute towards the development of a robust and resilient Islamic financial system that can effectively preserve financial stability and contribute to balanced growth and development. This will also facilitate the integration of the Islamic financial system as a viable component of the global financial system. Over the years, the Islamic financial industry has adopted the adaptation approach in the formulation of Islamic financial products and services. Although there are Islamic financial instruments that are distinct from the conventional financial instruments, the numbers are still few. In most instances, the Islamic financial products are repackaged along the features of the conventional financial products, while eliminating the elements that are not in-compliance with the Shariah. While this adaptation can continue, the downside risk is that Islamic financial instruments will always have to “catch-up” with the pace of product development in the conventional system. Efforts should therefore be intensified to develop new financial products that embodied the virtues of Islamic banking. This would evolve Islamic financial instruments into distinct, innovative and cutting-edge products. | 1 |
The nature and quality of the financial services and the nature of the participation in the financial system is equally important. The poor are confronted with challenging circumstances, such as low and irregular income that makes monthly debtservicing difficult, or living in remote rural areas which have no financial services access points, or long working hours that prevent visiting bank branches within the conventional operational hours. As a result, many of the marginalised may have financial services made available to them, but it may not be at the needed conditions or quality that can provide the real promise of upward economic mobility. Access, therefore needs to be complemented by the quality of the financial services. Of importance is the innovation and design of consumer products which have characteristics BIS central bankers’ speeches 1 that are linked to the goal of welfare improvements for the underserved. There is a greater need for features that are responsive to the constraints faced by those that have been marginalised. Flexible microfinance for the agricultural sector for example, addresses the cash flow mismatches between fixed repayments to banks and the irregular income flow of the farmers due to the seasonality of crops. A further innovation has also involved the creation of platforms for matching savers with those that need financing. | I could have quoted one of our famous French bildungsroman, such as Sentimental Education by Flaubert, but I will give primacy to the German master Goethe, who created the genre with his Wilhelm Meister's Apprenticeship: "One ought, every day at least, to hear a little song, read a good poem, see a fine picture, and, if it were possible, to speak a few reasonable words." I have endeavoured to follow this last piece of advice with this speech. Thank you for your attention, and have a good conference! i See the FIS Worldine Global Payments Report 2022 as regards Europe and Asia, and the FSI Insights on Big tech interdepency – a key policy blindspot (July 2022) as regards India ii Big techs' "DNA feedback loop": data, network effects, activities iii Digital payments make gains but cash remains, Bank for International Settlements, 30 January 2023 iv FIS Worldine Global Payments Report 2022 v Villeroy de Galhau, F., Anchors and catalysts: central banks' dual role in innovation, speech, 27 September 2022 4/5 BIS - Central bankers' speeches vi Centre for Economic Policy Research (CEPR), A policy triangle for big techs in finance , 23 October 2021 vii Big tech in financial services: regulatory approaches and architecture, International Monetary Fund, 24 January 2022; and Big techs in finance: regulatory approaches and policy options, Bank for International Settlements, 16 March 2021 viii TARGET Instant Payment Settlement 5/5 BIS - Central bankers' speeches | 0 |
Should this trend continue, Thailand will not be able to maintain its competitiveness and output level. Fortunately, many technological advancements available at much lower costs today hold huge promises for raising productivity. Cloud computing, robotics and automation have allowed businesses to save significant costs. Big data, artificial intelligence and machine learning capabilities can now offer insights that enable more targeted services. I urge you all to seize this opportunity and leverage on new technologies to improve the productivity of your firms, your industries, and eventually our country. Second, on immunity: for growth to be sustainable we must have sufficient immunity to withstand unexpected shocks. We are living in a time of great changes, where outcomes can be sudden, unpredictable, and volatile, bringing 3 with them new forms of risks. Not only will firms face risks related to strategy, finance, and operation, but they will also face risks associated with driving digital transformations. Managing the transformation process in the digital environment requires fostering an organizational culture that is agile and nimble—to gain flexibility and speed that drives productivity and innovation. But, at the same time, a strong culture on risk management must also be instilled to safeguard firms’ resilience. As industries increasingly rely on data and data-driven technologies, cyber security must be considered a top priority. Globally, the number of threat incidents have been rising, with increased frequency, sophistication and scale of their impacts. | This completes our network of 12 regional agencies across the UK - with the purpose of keeping ourselves more closely informed of regional economic developments. Previously Neil Kemsley covered Northern Ireland from our Agency in Liverpool and is here to make his farewell - and I am grateful to him for all that he did in reporting on developments here. But Nigel Falls - one of our most experienced regional Agents - is now established here in Belfast itself. He is also with us today. I very much hope that many of you will establish regular contact with him so that he can inform our Monetary Policy Committee each month of the particular problems that exist in Northern Ireland, so that we can take them into account in our monetary policy process. His reports will complement those which Roy Bailie, our Non-Executive Director here in Ireland, gives regularly to our Court of Directors. In our monetary policy role the Bank operates essentially on the demand side of the economy - aiming to keep aggregate demand in line with the supply-side capacity of the economy to meet that demand. But we can also contribute directly on the supply side, by helping to ensure that the financial system properly supports the needs of the wider economy. | 0 |
Firstly, households and the economy as a whole need functioning financial services. Secondly, all experience shows that the consequences of a financial crisis are very costly for households, employees, taxpayers and bank customers. As citizens of a modern society, we thus have a right to expect that the authorities will do their best to prevent and manage financial crises. In turn, the authorities need tools and a clear responsibility structure to prevent crises, as far as is possible. It is equally important that there be efficient tools to manage crises if they break out anyway. Sweden cannot afford to go through another crisis like that in the 1990s. Neither can the world afford a new 2008. This is why it is so important that we constantly strive to ensure that new financial crises do not break out. This is in the interests of every citizen. | However, given that vulnerabilities on these markets are still high, the resilience of the banking system remains crucial. In January 2022, the Federal Council approved the SNB’s proposal to reactivate the countercyclical capital buffer. This buffer will come into effect at the end of September and will contribute to maintaining banking system resilience. Page 1/1 | 0 |
Speeches Published Date: 19 May 2022 "A Future Ready Workforce for an International Financial Centre" - Opening Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Singapore Financial Forum 2022 on 19 May 2022 Good morning from Singapore. I am pleased to join all of you, including our overseas Singaporeans and their friends, as well as leaders and professionals from Singapore’s financial centre at today’s forum. Singapore’s financial centre is doing exceedingly well, and prospects remain bright for the years ahead. The financial sector performed strongly throughout the Covid-19 pandemic. The sector [1] grew by an annual average of 7.2% during 2020-21, four times faster than the overall economy. The last two years also saw 5,800 net jobs created in financial services. Growth has been broad-based – across banking, insurance, asset management, and payment services. We have grown steadily as a leading fund management and domiciliation hub, with 500 variable capital companies incorporated in Singapore since we introduced this new investment fund structure just two years ago. We are now Asia’s leading foreign exchange centre, with FX trading volume growing an average 13% every year from 2017 to 2021, with a modern e-FX trading ecosystem taking deep root. We are powering Asia’s development, with infrastructure investment growing five-fold and project finance by 80%, from 2016 to 2020. The Singapore economy remains on track to grow by 3–5% in 2022 barring a further worsening in the external environment. The Russia-Ukraine conflict has generated both growth and inflation risks globally. | Today, we are in a much better state. We have reopened our borders and business travel has substantially resumed. Global firms are now once again able to build up the necessary staff capacity to meet their expanding business needs. Second, public discussions on growing the Singaporean Core, and some recent changes in work pass policies have also added to concerns about whether Singapore continues to be welcoming to foreigners. As I have said earlier, growing the Singaporean Core is not a zero-sum game with attracting the best of global talents. An internal MAS study shows that there is generally a high degree of complementarity between high-skilled employment pass holders and local professionals in the financial sector. In fact, staying open to global talent has been critical to the growth and success of our financial centre. Our financial sector will not be where it is if we had not been welcoming of talents from around the world. As we become an even more international and sophisticated financial centre pursuing cutting-edge developments in technology and sustainability, it is even more critical that we remain open. The recent changes in employment pass policies will not hinder firms from continuing to have access to the talents that they need for their growth in Singapore. There are no quotas on Employment Pass holders. The purpose of the new Employment Pass Complementary Assessment or COMPASS framework is not to reduce the intake of employment pass holders. | 1 |
The objective of the central bank’s control is to stabilise CCM, to avoid a liquidity collapse and to manage the institution for as short a time as possible with a view to finding an orderly solution. Ultimately, the viability of CCM’s future business may be achieved in different ways (for example, through a merger with other credit institutions), with the Banco de España currently not ruling out any options. The response to these options will be swift, but not immediate, and will require the collaboration of authorities, financial institutions, employees and creditors. I would not like to forgo the opportunity of appearing before this Committee without highlighting some of the messages recently conveyed by the Banco de España. Firstly, I would like to reiterate that involving savings banks in the political debate makes it immensely difficult to find flexible and effective solutions. Opinions become distorted, suspicions, demands and expectations of the parties involved grow and solutions become increasingly complicated. We should not forget that past experience in Spain and abroad shows that prudence and discretion are prerequisites for reducing the costs of possible solutions for troubled institutions. Otherwise, we will make the authorities work more difficult and, ultimately, taxpayers will pay a higher price. In finding a solution to the difficulties encountered by CCM, the Banco de España has adhered to its tradition of adopting decisions based solely on the objectives of preserving the stability of our financial system, minimising the cost in terms of public funds and maintaining the availability of sufficient financial services. | In 2001, average inflation rates in the region as a whole fell to single figure levels for the first time since the fall of the iron curtain and, thereafter, they have continued to decline. In this context, let me highlight that, bearing in mind the potential inflationary pressures that might arise from completing structural reforms, the conduct of a BIS Review 58/2002 1 monetary policy in the accession countries aiming at price stability should be seen as a medium-term objective, rather than as a short-term target. However, the sound management of macroeconomic policies cannot rely on monetary policy alone. In particular, stability-oriented policies in accession countries need to be supported by sound fiscal policies. Prudent fiscal policy management has been key to making sustainable progress in terms of macroeconomic stabilisation in the accession countries. At the beginning of the transition to a market economy, poor tax collection and governments' limited access to financial markets led to substantial monetisation of public deficits. However, from the mid-1990s onwards, fiscal policy has focused on macroeconomic stability. Therefore, a key lesson from the accession countries' experience is that responsible fiscal policy has been a crucial element in achieving and maintaining macroeconomic stability. Looking ahead, the best contribution that fiscal policies can make to sustainable noninflationary growth is by pressing ahead with fiscal consolidation, as is necessary to ensure the flexibility needed to deal with potential domestic and/or external economic shocks in the medium term. | 0 |
Levels of savings If we follow the consumption smoothing theory, individual savings behavior is driven by the life-cycle: individuals tend to increase their savings as they earn more and then decrease their savings until they actually become negative when they retire and earn less, thus leading to a hump-shaped pattern for their accumulated wealth. Consequently, as the proportion of the aged population increases, private savings, as a proportion of income, should decrease. However, this decline may be gradual with the negative impact of ageing on the levels of savings prevailing in the longer run. Structure of savings In terms of structure, the fact that elderly people account for an increasing share of the population could change savings habits and have an impact on the demand for certain classes of assets. In particular, given that elderly people are more risk adverse, this could increase the already high demand for low-risk assets. Investment The standard production function exhibits two productive inputs: labour and capital. If the labour force tends to decrease or decelerate because of demography, then the production process may become more capital intensive, leading to a fall in the productivity of new capital and, in theory, a decline in the rate of capital return. Investment could be less dynamic and negatively impact potential growth. This would in turn have an adverse impact on the real interest rate, so that domestic savings and investments would balance. | The knock-on effects of distress at one of the current large global players would presumably be much bigger. Conclusions Let me briefly conclude, ladies and gentlemen. Central banking and payment systems are inextricably linked. Central banks all around the world are involved in payment systems and market infrastructures in many different ways owing to their roles and responsibilities in BIS Review 130/2007 5 relation to monetary policy and financial stability. Indeed, payment systems disruptions would not only affect financial stability, but may potentially also have an impact on monetary policy implementation. Central banks have found ways of safeguarding price stability, while at the same time ensuring the smooth functioning of the payment system, by drawing a clear line between providing intraday liquidity for payment system purposes and providing credit for monetary policy implementation. Moreover, the sufficient availability of collateral is important today as a contribution of central banks to financial stability. The roles of central banks in the field of payment systems are changing in a number of ways as a result of progressing globalisation, increasing complexity, and the emergence of new players and services: • The approach of central banks to analysing financial stability is changing. A comprehensive view of the key sources of risk and vulnerabilities facing the payment systems and market infrastructures cannot be formed without taking due account of developments at the global level, such as the emergence of cross-border payment systems and offshore centres. | 0 |
It is the ability of capital markets to efficiently mobilise financial resources that has made possible the large investments needed for the Industrial Revolution of the 18th century, and the risk capital that funded the global Internet Revolution more recently. Like other markets, capital markets are prone to volatility as demand and supply fluctuate. But unlike other markets, turbulence in capital markets can have far wider consequences on the rest of the economy. From the Wall Street Crash of 1929 to the Global Financial Crisis of 2008, we have seen how dislocations in capital markets can have devastating effects on financial stability, economic growth, and the welfare of citizens. Capital markets must therefore be regulated, but in a way that does not unduly undermine their efficiency and effectiveness. This morning, I want to share with you Singapore’s approach to the regulation of capital markets. Why we regulate capital markets We can think of the capital market as an ecosystem comprising four key components: one, issuers – those who issue securities to raise capital; two, investors – those who invest in these securities; three, intermediaries – those who advise issuers or investors and facilitate the trading of securities; four, infrastructure – the platforms or systems through which securities are traded. Each component of this ecosystem is prone to market failure – hence the need to regulate. | Apart from our continuous efforts to put in place a conducive platform, it is also crucial for market players to maximize their readiness to grasp the opportunities brought by the development of Islamic finance in Hong Kong. After all, market players will be the ones who drive the growth of the market ultimately. So, I highly encourage you all to gear up for the new opportunities ahead of us. On this, I am pleased to note that some financial institutions have already started to get ready by mobilizing their staff in the Middle East or Malaysia to Hong Kong, as well as providing training to their staff in Hong Kong. The fact that you are here today is also a good indication that you are keen to prepare yourselves. I hope you would take the most out of this workshop. 14. Thank you. BIS central bankers’ speeches 3 | 0 |
The Spring Budget Bill noted that in many households it is still not profitable for unemployed persons to seek a job or for those in employment to work longer hours because of the way the tax and benefit systems are designed. These marginal effects have, moreover, increased since 1991. The system of wage agreements also has a bearing on the possibility of combining price stability and satisfactory employment growth. The fact that several agreements concluded at the national level do not include any individual pay adjustment guarantees, or very low ones, should increase the possibility of determining wages locally and gearing them to productivity development in various sectors. The cross-sector agreements that have been concluded, including the Industry Agreement between about 20 labour market organisations, include rules that reduce the risk of periods without valid pay agreements and the risk of conflicts. This is also a change which should help to improve wage formation. Let me conclude with a classic quotation from a previous president of the US Federal Reserve, William McChesney Martin. He is supposed to have said that the role of the central bank was to “take away the punch bowl just when the party gets going”. That is one way of putting it. The central bank is always on its guard, always ready to pounce! But look at the story from another angle. It is in the guests’ own interests not to let things get out of hand. | With economies and markets always moving between equilibria, it is the journey that matters. By working together we can make that journey as pleasant and as prosperous as possible. The need to work together extends beyond policymakers to all in the City. So I am delighted to take up co-presidency of Heart of the City with you, Lord Mayor. This umbrella group for City charities, co-founded by Eddie George fourteen years ago, is a great example of how cooperation and social responsibility can be at the heart of business, building the social capital necessary for vibrant and inclusive capitalism. Fiona, you are to be commended for the energy and enthusiasm you have brought to your role – as well as the excellent hospitality you have provided tonight. So let me invite everyone here to rise and join me in a toast of good health and prosperity to “The Lord Mayor and the Lord Mayor’s Consort”, Fiona and Nicholas Woolf. References Del’Ariccia, G, Igan, D, Laeven, L, and Tong, H (2012), “Policies for macrofinancial stability: how to deal with credit booms”, IMF Staff Discussion Note 12/06, June. IMF (2014), World Economic Outlook, April. Lim, C, Columba, F, Costa, A, Kongsamut, P, Otani, A, Saiyid, M, Wezel, T and Wu, X (2011), “Macroprudential policy: what instruments and how to use them?” IMF Working Paper No. 11/238, October. 8 BIS central bankers’ speeches | 0 |
Using a nationwide information campaign, we were able to inform the public about the new 50-franc note’s design and security features in a very short time. This campaign helped members of the public across the country to familiarise themselves quickly with the new banknote. When new banknote series are issued, the demand for information is always greatest at the launch of the first denomination. Third, the return rate of the old 50-franc notes is within the expected range. We anticipate that, six months after the launch date, around two-thirds of the old notes in circulation will have been exchange BIS central bankers’ speeches 3 | Crucially we now have a credible framework for setting monetary policy to meet the inflation target in the medium term. Monetary policy cannot prevent the short-run ups and downs of economic cycles. In the current climate, the Committee believes that, if Bank Rate were set to bring inflation back to target too quickly, the result would be unnecessary volatility in output and employment. Instead we are focused on returning CPI inflation to the 2% target in around two years, when the present sharp rises in energy and food prices will have dropped out of the CPI inflation rate. We judge that in order for inflation to return to target it will be necessary for economic growth to slow this year, reducing the pressure on supply capacity of the economy and dampening increases in prices and wages. But the risks to both the upside and downside remain large and the MPC will continue to make its judgement about the appropriate level of Bank Rate month by month. The next year is not going to be comfortable for anyone and we already hear calls to change the system, the target, and our focus on inflation. But the new framework and the independence of the Bank was designed for difficult times as well as for plain sailing. I hope we can look to you and other businesses for support in doing what is needed to bring inflation back to target. BIS Review 80/2008 5 6 BIS Review 80/2008 BIS Review 80/2008 7 | 0 |
Zeti Akhtar Aziz: Strengthening the banking sector for further competition Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the dialogue session with banking institutions, Kuala Lumpur, 17 February 2005. * * * Bismillahirrahmanirahim Distinguished Guests, Ladies and Gentlemen, Economic transformation, a more competitive environment, advances in technology, strengthening international linkages, and more discerning customers will be the important forces that will drive changes in the domestic financial landscape in the years ahead. Economic transformation can be expected to be more pronounced as efforts intensify to shift resources to new areas of growth. A more competitive environment will emerge from increased deregulation and further liberalisation. Advances in technology will continue to increase the potential for creating new instruments, new business processes and enhance the ability to measure and manage risks. Strengthening international linkages will come as foreign presence and participation in the domestic financial system increases and as initiatives are taken by domestic groups to operate beyond domestic borders. Against this background, more demanding customers with higher expectations will see greater consumer activism exerting their influence on the financial landscape. These developments will indeed present a dynamic environment with new challenges for the banking industry. Ladies and Gentlemen, It is my pleasure to welcome you to the dialogue session between Bank Negara Malaysia and banking industry. | Ladies and Gentlemen, Moving forward, consumer and SME financing will continue to be two important areas of growth. The overall macroeconomic and interest rate environment would continue to be supportive of growth in these two sectors. The challenge for banking institutions is to ensure that consumers and the businesses have access to a wide range of products, while at the same time ensuring that the necessary infrastructure is in place to manage risks arising from these businesses. This is to ensure that lending to these sectors would be sustainable and avoid the risks that have recently been experienced in a number of other countries in this region. While focusing on consumer and SME financing, banking institutions should also recognise the emergence of a number of new growth sectors in the economy, including activities in the services sector, and the agriculture and agro-based industries. These areas represent opportunities that can be capitalised upon by the banking institutions. While these may be viewed as non-traditional areas, banking institutions that introduce new lending models and products to cater to the financial requirements of these areas would have the early advantage in capitalising the potential of these new markets. In this regard, the main theme of this year's dialogue, is "Tapping Opportunities in the New Growth Areas - Fostering Best Lending Practices", for discussion by the banking community. We are very pleased to have four distinguished speakers to share with us their expertise and experiences in building successful and sustainable portfolios in consumer lending, SME financing, microcredit and agriculture financing. | 1 |
From a cyclical perspective, a proposal to ensure that banks implement countercyclical capital buffers was part of the recent consultations and is also pending approval by the Federal Council. The proposal foresees that the ultimate decision to activate or modify the capital buffer requirement will lie with the Federal Council. This decision will be made on the basis of the SNB’s proposal and the FINMA’s response to it. Finally, in order to enhance the SNB’s capacity to assess the stability of the financial system and to take appropriate measures, the Bank has also called for improved access to information on financial institutions. VI. Conclusion The preceding discussion has, I hope, clarified some of the complex interactions between price and financial stability. Within the Swiss legal framework, I am convinced that the central bank has been given an appropriate mandate. In order of priority, the SNB must ensure price stability, while taking due account of the developments of the economy. It must also contribute to the stability of the financial system. One important lesson to emerge from the analysis of the recent crisis is that an interest rate policy cannot be the sole, or even the main instrument, used to promote financial stability. It is imperative that central banks be endowed 20 6 Borio (2011). BIS central bankers’ speeches with alternative “macro-prudential” instruments. This assessment is not only the product of careful application of the “Tinbergen principle”, according to which one needs as many instruments as one has objectives. | Every one of them suggests that, while low interest rates might be the natural consequence of price stability, they may ultimately compromise financial stability. The first hypothesis, is that hedge-fund and wealth managers, who tend to be paid according to the nominal returns on their investments, might be prone to taking additional, possibly excessive, risks when interest rates are low and, as a result, they might receive lower levels of compensation.11 To the best of my knowledge, empirical studies which support or dismiss this claim have been yet to be carried out. The second hypothesis12 is that low interest rates increase the value of the collateral backing up loans. Banks thus have less incentive to monitor their clients’ loans.13 This view is empirically better documented, but the supporting evidence is ambiguous.14 8 Bean (2006). 9 Borio and Zhu (2008). 10 See, for example, Altunbas, Gambacorta and Marqués-Ibáñez (2010). 11 Rajan (2005) 12 Dell’Ariccia, Laeven and Marquez (2010) 13 Note that this theory closely resembles Ben Bernanke and Mark Gertler’s “financial accelerator” model. However, in this model the increase in collateral value prompts investors to borrow more whereas in the model of the “risk-taking channel”, increased collateral value induces banks to monitor their existing loans less. BIS central bankers’ speeches 3 Finally, the third hypothesis is that banks with access to cheaper external funding increase their leverage to achieve higher returns on equity. | 1 |
At the present point in time, however, we know neither if nor when such an accession scenario will become a reality. But even in the event that accession negotiations with the EU were started relatively soon, for example as early as 2008, and proceeded rather swiftly, transition periods would still apply. Even if such negotiations were concluded as early as 2011, for example, and if they entailed the adoption of the euro, Swiss banknotes would remain in circulation at least until 2015. The National Bank is thus compelled to tackle the development of new banknotes as a precautionary measure. This step has become necessary because of the development of new technologies and the typically high demands on the design quality of Swiss banknotes. Both aspects necessitate an adequate preparation period. Our current decision to intensify the preliminary work already under way was decisively influenced by the awareness that the work can be halted at any time, whereas it is impossible to initiate it or catch up on it within a short period. The National Bank's decision must, therefore, not be mistaken for a statement on its European policy; it is solely a precautionary measure. Banknote security With progress being made in counterfeiting technology, a note-issuing bank, which has to ensure the security of its banknotes, must always strive to maintain a technological advantage over counterfeiters, or copy machines and scanners. | Switzerland is to be represented as an entirety, as a country open to the rest of the world and also as a meeting place for the world. The focus should not be on any individuals, inventions or achievements. Much rather, a basic attitude and its manifestations should be conveyed: Switzerland as a platform for dialogue, progress, humanitarian commitment, exciting experiences, creativity and the search for practical approaches to solutions within organisations. It is envisaged that these topics will be dealt with through the lens of economics, education, research and development, human rights, tourism and recreation, culture and, lastly, sports. Six topics have to be depicted, namely the activities of negotiating and exchanging, teaching and researching, helping and mediating, enjoying and relaxing, creating and designing, and deciding and implementing. Each of these topics will be assigned to one denomination of the new banknote series. The artistic representation must emphasise the topics rather than specific events or institutions. The traditional portrayal of personalities and the depiction of institutions and previous achievements should be dispensed with. The illustration of a university, for example, should not serve as a self-portrayal but could symbolise “progress”. As previously, the banknote series should form a “family” both with regard to content and design. In other words, although each banknote type must have its own characteristics, they must at the same time share sufficient features to be easily recognised as part of the new series. | 1 |
It endorsed the account I have read from the Approach Document, but added one important further condition, namely that we do not wish to see non-EEA branches undertaking critical retail banking functions (like taking deposits) beyond de minimis levels unless there is some good reason and importantly there is a very high level of assurance on resolution. In particular, we think that new non-EEA branches should stick to straightforward wholesale banking, of the type that supports world trade and capital flows. Resolution will be a key deciding factor in the PRA’s judgements, and it is thus where we will place emphasis when forming a view on our risk appetite towards branches operating in the UK. We will therefore expect assurance from the home state regulator over the recovery and resolution plans and assess if the plans adequately cover the UK branch’s activities. For banks with small UK activities we will expect to gain a level of assurance that is relative to the scale of the UK activities. The PRA’s policy towards branches is part of our general approach set out in the light of the experience of the crisis. It places emphasis on recovery and resolution, and we will expect very clear and credible assurances from the parents of banks wishing to operate as branches and from the home state authorities. | Why does this historical detour matter? The five or six years since the outbreak of the financial crisis have seen signs of a reversal of some aspects of the greater openness we had seen in the 1980s and 1990s. And probably none more so than the decline in crossborder bank lending. Moreover, the UK experience in terms of lending has been amongst the more pronounced. But again, does this matter? My answer is yes. First, because many of us do believe in the economic benefits of free trade and capital flows, as well as the contribution of migration to balancing supply and demand in the economy. Second, and closer to home, the City of London and its financial markets benefit hugely from, and are at the hub of, the open world economy. For example, whatever you think about the more troublesome recent innovations of banking, basic trade finance remains a core, simple and essential service provided by banks, and the City has for a very long time been a leading centre for providing this finance to support world trade. International wholesale banking is therefore an important part of maintaining and developing the world economy, just as it was in the nineteenth century. Yet, we have to recognise that in the last five or six years of the crisis we have gone backwards. Cross-border bank lending has declined more sharply than overall lending – home preference has set in. | 1 |
In the case of monetary policy, it is essential that it should be completely geared to the ECB’s mandated objective of keeping inflation at very moderate levels, and in this respect I think that the ECB is fully complying with its task. It would have been very negative if the European Central bank had fallen into the temptation of forgetting its objective of containing inflation, attempting to alleviate the painful adaptation by households and firms to the very substantial increases in commodity and oil prices that we have experienced. Fortunately, there is complete confidence that the ECB will ensure that inflation returns to its target level, and this is helping to somewhat reduce the uncertainty surrounding the financial system, growth and other variables. In the case of budgetary policy, one positive element of the Spanish case is its favourable starting position. This is based on the notable budget surpluses recorded in recent years and on the sustained decline in the ratio of government debt to GDP to 36%, a very low figure in comparison with other developed countries. This initial situation has made it possible for automatic stabilisers (i.e. the reduction in revenues due to the slowdown and the increase in spending on unemployment as a consequence of the rise in the numbers of unemployed) to be allowed to operate freely, providing a significant counter-cyclical component in the adjustment phase. | But if there is a perception starting to spread that the inflation target is irrelevant and should be scrapped, we have, given our mandate, an obligation to bring this up to discussion and point out that we consider it to be a problem. When it comes 10 See, for instance, Calmfors (2018) and Calmfors et al. (2019). It should be pointed out that there are studies indicating a certain amount of wage flexibility with regard to changes in unemployment at a regional level, see Carlsson et al. (2019). 11 [17] down to it, Sweden is not the only country with an inflation target of 2 per cent and an industrial sector exposed to international competition. Important to have perspectives on the krona development Let me now go over to the other area I wish to delve deeper into; the exchange rate and development of the krona. When Sweden introduced an inflation target in 1993, we chose an exchange-rate regime at the same time. As I just pointed out, a fixed exchange rate and an inflation target with a floating exchange rate are two different ways of trying to provide the economy with a nominal anchor, that is, a benchmark for price-setting and wage formation. An inflation target tries to steer expectations in the economy directly, while a fixed exchange rate tries to steer them indirectly, by virtue of it becoming more costly if price increases and wage growth are higher than abroad. | 0 |
This is consistent with a lower degree of matching efficiency post-crisis, with the unemployment level still remaining high despite rising labour demand over the duration of the recovery. Hysteresis effects and monetary policy So what is the role of monetary policy as regards hysteresis effects? Though our primary mandate is price stability and not employment, in conditions of weak aggregate demand there is typically a “divine coincidence” between those two variables, since unemployment rises while inflation falls after adverse shocks hit the economy. So, only by reducing labour market slack can we create the conditions for wage and price pressures to emerge and for inflation to return to our preferred aim within our definition of price stability. This is largely what we have seen in the euro area. Since the adoption of the ECB’s credit easing package in June 2014, around five million jobs have been created in the euro area. Model-based evidence indicates that our policy has contributed meaningfully to this increase: the current recovery has, by and large, been driven by monetary policy, with additional temporary support from the fall in oil prices. So, forceful policy action in the face of risks to our price stability mandate has measurably reduced the risks of hysteresis by creating the financial conditions necessary for growth and employment to flourish. What is more, our actions have also defeated a potentially very nasty form of hysteresis, namely a destabilisation of inflation expectations. | Rerunning our Phillips curve models using this broader measure of slack, or equivalently, a measure of “core” employment only, leads to the prediction errors for inflation becoming measurably smaller. Look at how the gap between actual and predicted inflation largely disappears on slide 5, in particular for the recent history. All this essentially means that it may take longer for inflation to gain steam and wage pressure might only start to rise meaningfully once adjustments in the “intensive margin” take hold – that is, once those who want to work more hours also succeed in doing so and once those who are still willing to work, but not currently counted as unemployed, are reabsorbed. Indeed, hours worked per employee have not recovered since the double-dip recession. So what is the link between these developments and hysteresis? To be sure, the increasing prevalence of part-time and temporary work reflects several factors – including, in part, important structural reforms in many euro area economies that have helped strengthen the resilience of the euro area. 4/9 BIS central bankers' speeches Yet, the compositional effects we are seeing in the labour market may also reflect more crisisrelated factors, in particular uncertainty about the strength and durability of the recovery and pessimism about the long-term impact of the downturn on growth. | 1 |
This over-indebtedness was moreover accompanied by a strong bias towards the construction and real estate development sector and, inevitably in an economy as strongly banked as Spain, this also led to excessive growth in bank lending and excesses in banks’ risk concentration. The relative ease with which these debts built up and their subsequent effects on activity, employment and financial stability were not, in any event, an exclusively Spanish phenomenon. Indeed, these and other similar developments have given rise to widespread initiatives at the international level to strengthen the economic policy tool box, with a new instrument – namely macroprudential supervision – being incorporated to head off this type of situation. In any event, the losses in competitiveness and excessive debt led to a large-scale imbalance in our foreign trade, resulting in a deficit of 10% of GDP in 2007 and requiring the resort to large volumes of external saving to ensure trade financing. But other elements of fragility emerged with the crisis. The worsening macroeconomic scenario and, in particular, the collapse in employment had a most adverse influence on public finances. The characteristics of labour market regulation meant that the effects of the adjustment to the sudden change in the business cycle fell basically on employment, and hardly on wage conditions or on greater hiring flexibility. In turn, the marked deterioration in public finances revealed weaknesses in the institutional workings of the public sector; in particular, the insufficiency of the disciplinary framework in place to ensure compliance with budget targets. | For 2012, the inflation rate will amount to –0.7%. For 2013, we expect inflation of –0.1% and for 2014, 0.4%. In the foreseeable future, therefore, there is no risk of inflation in Switzerland. The third quarter of 2012 saw weak growth and a decline in trading activity worldwide. Although growth in the US economy and some of the emerging economies picked up, a mild recession persisted in the euro area. In Switzerland, real GDP in the third quarter increased again following a temporary downturn. For the fourth quarter, however, we expect significant weakening in growth. Consequently, economic growth in Switzerland for the year 2012 is likely to remain unchanged at around 1.0%. For 2013, we expect growth of 1.0–1.5%. The downside risks for the Swiss economy remain considerable. Although the measures announced by the European Central Bank (ECB) have significantly reduced the probability of extreme developments in the monetary union, there is still substantial uncertainty in connection with the management of the debt crisis in the euro area. It also remains to be seen how far the upcoming budget consolidation in the US will hamper growth. This question is weighing on the sentiment in the financial markets and the real economy. Moreover, momentum in the Swiss residential mortgage and real estate markets remains strong, and has led to a further increase in risks for financial stability. Global economic outlook I would now like to outline the outlook for the global economy and Switzerland in more detail. | 0 |
All in all, the monetary policy stance suggests a gradual increase of the repo rate towards more normal levels (see Slide 12). This is a precondition for the balanced development of the Swedish economy. As I mentioned two days ago, housing prices and debts among households have increased heavily for a longer time. The rate of increase of household debts has far exceeded the rate of increase of incomes. If this development continues, imbalances may arise in the Swedish economy over the long term. Consequently, in this regards, the normalisation of the repo rate level may also contribute to promoting a stable economic development in the future. Even if the development of Sweden’s economy is favourable, it is naturally not risk-free. What risks can we see at present? Firstly, the krona may appreciate more than we had expected. The assessment we have made is that the krona, to a significant extent, already reflects the high growth rate of GDP and the strong state of public finances, for example. However, I would like to point out that forecasts of exchange rates are always associated with significant uncertainty. It cannot be ruled out that the favourable development of the Swedish economy has led many investors to reappraise their view of investing money in Sweden. So could an excessively strong exchange rate form a problem? Yes, it may form a “problem” in so far as demand for Swedish exports will decrease and inflation may not increase in line with expectations, as imported goods become cheaper. | [9] That gives us unique bargaining power to shape openness in a European direction and strengthen ties with key partners, such as those on whom we rely for critical resources. And where we see our interests being threatened, we can use our economic weight more strategically – something we have already started to see with the unprecedented sanctions placed upon Russia. But we must also be prepared for a future in which the global economy could fragment. And the best insurance against a more uncertain world is building more resilience at home. So, the second challenge for Europe is to develop more our own sources of growth. Here, the new global map presents Europe with an opportunity. As energy security becomes imperative, we can put climate-related investment needs – especially in clean energy – at the centre of our growth model, strengthening domestic demand. These investment needs will amount to almost half a trillion euro on average per year until 2030. [10] We can also use the green transition as a spur to digitalise the European economy, since digital technologies could reduce global emissions by one fifth by 2050. [11] That could increase productivity growth and help ensure that green investment does not put excessive pressure on prices. But the ambitions of this new growth model will require an enormous amount of financing. And here the financial sector can play a crucial role, if the enabling policies are put in place. | 0 |
Moreover, the adjustment of the sector must be monitored before Law 20,958 on Contributions to Public Space comes into effect, aimed at making real estate projects accountable for the impacts they have on local mobility. Regarding housing credit, the stock of mortgage loans showed a rebound in the last quarter (figure 11). The number of bank mortgage debtors with more than one housing loan continued to grow, reaching 29% at the statistical close of this FSR. A subset of such debtors are investors who buy properties for rent. Household financial indicators show no change in the risks identified in the last FSR, which are mostly related to the future evolution of the labor market. Since the last Report, bank mortgage debt increased, while consumer debt with banks decelerated, and accelerated with other sources. Thus, as of the second quarter this year, the aggregate debt of the sector stood at 45% of GDP (figure 12), placing Chile in the upper segment of a sample of emerging countries but below developed economies. However, the median financial burden has remained stable at around 20% of income due to lower interest rates. In terms of financial gaps, there was a greater use of credit and rolling lines, reflecting tighter conditions in some households. Non-compliance indicators have remained relatively stable at low levels for mortgage loans and have risen for consumer loans. In particular, consumer credit write-offs and delayed repayment of retail lending have both increased (figure 13). | Fortunately, the financial guillotine is not preordained, for Benoît did not spend his days in power as did Louis XV. Where the king grew idle, Benoît remained frenetic (189 public speeches during his eight years). Where the king was conservative, Benoît was radical. Where the king became nostalgic, Benoît always looked forward. If central banks are to rise to their challenges and serve our citizens, we will need to build on Benoît’s legacy. I. Improving market functioning Let me start with market functioning. Before the crisis, financial alchemy appeared to have sliced, diced and distributed risk to those who wanted it most. The revolutions in securitised and derivative finance were cheered on by policymakers who saw more markets as the solution to any market failures and who believed the lie that markets always clear. But of course markets always clear only in textbooks. In reality, people are irrational, economies are imperfect, and nature itself is unknowable. The pre-crisis system had merely spread risk, contingently and opaquely, in ways that often increased it. 2 All speeches are available online at www.bankofengland.co.uk/news/speeches 2 Once the crisis began, risk quickly concentrated on the balance sheets of intermediaries that were themselves capital constrained. And with the fates of borrowers and lenders tied together via hyper-globalised banks and markets, problems at the core spread violently to the periphery. The post-crisis response included major reforms to simplify markets and make them more robust. | 0 |
Sustained buying of government paper by the central bank would only postpone problems and delay the necessary fiscal adjustments, ultimately resulting in a build-up of inflationary pressures. The ECB has never hesitated to reaffirm and remind all Member States, in very concrete terms, that compliance with the principles of budgetary discipline is absolutely fundamental. Naturally, since member states do not control their currency alone, they are vulnerable to liquidity episodes and multiple equilibria. Creditors’ assessments can change, e.g. via contagion effects, even when the fundamentals would not justify it. The high degree of financial integration within EMU means that, if left unchecked, contagion in the banking sector can spread rapidly via cross-border holdings of sovereign debt. For the sovereigns themselves, sudden shifts in market re-pricing of risk can lead to unexpected liquidity challenges. These dynamics underscore the importance of strengthening the mechanisms that prevent such risks – the SGP, surveillance of broader macroeconomic imbalances and stronger financial supervision. However, the liquidity dry-ups and the contagion risks also call for stronger backstop mechanisms, to provide significant, albeit temporary, liquidity assistance. The SMP aims to create a better functioning transmission mechanism of monetary policy to all parts of the monetary union and is therefore in full compliance with the prohibition of monetary financing. Also, we sterilise the impact of the SMP on our total liquidity provision. | However, aside from monetary policy, it lacks powerful decision-making institutions. This means that rules-based frameworks must act a substitute for centralised authority. For fiscal and economic issues, a unitary state would have a finance ministry which both defines and vetoes fiscal and broader economic policies. EMU must achieve the same effect through its economic governance framework. We know from BIS central bankers’ speeches 3 research, including some by Professor Rogoff, also corroborated by experience, that softrules will not achieve the desired outcome. Strengthening the rules governing fiscal and broader macroeconomic policies is thus essential. The Stability and Growth Pact (SGP), which was created to discipline fiscal policy, has not worked well and is now being strengthened and complemented by a macroeconomic imbalances procedure. Greater automaticity in the implementation of the SGP is needed when unsustainable policies put the stability of the euro area as a whole at risk. Credible economic governance needs to be consistent and predictable. It also needs to be backed by timely, tough sanctions to encourage compliance. Fiscal surveillance should set ambitious benchmarks for excessive deficit and for setting the adjustment path towards a country’s medium-term budgetary objective. The liquidity dry-ups and contagion risks also call for stronger backstop mechanisms, to provide significant, albeit temporary, liquidity assistance. Stronger financial supervision at euro area level is also essential. Finally, national authorities need to take ownership of their European commitments. This means anchoring EU rules in their national legislation and making them mandatory and being held to account by domestic parliaments. | 1 |
Finally, in the financial field, the restructuring initiated a year earlier was accelerated to overhaul the savings bank sector. Thanks to these measures, the recovery of the Spanish economy remained on track, although it continued at a slow pace, due to the very need to undertake unavoidable adjustments. In this respect, the weight of real estate activity in output continued to decline and the external deficit was also further corrected. There was no significant progress in inflation, but this was due to the influence of temporary factors, such as the rise in VAT in 2 BIS central bankers’ speeches July last year and the hike in oil and other commodities prices. Once these effects have worked through, inflation should fall again in the coming months, although for this to happen it will be vital no second-round effects should come about, as these would harm the economy’s competitiveness. Write-downs of the balance sheets of non-financial corporations and households have continued, with a slight decline in the outstanding balance of credit extended to these agents. In the case of non-financial corporations, behaviour has differed across the productive sectors, with modest increases in financing to companies other than those in real estate development and construction. In the case of households, deleveraging will no doubt be slower, insofar as the bulk of household debts are in mortgage loans extended over long terms, whereby repayment will be gradual. | Rising trade tensions and the growing use of sanctions as an instrument of foreign policy have meant that the laws of the United States are increasingly being applied outside its jurisdiction. This takes the form of penalties for societies outside the United States and the prevention of access to the US payment system and is based on the central role played by the US financial system and the US dollar in global trade. Several European governments believe that this situation could be mitigated by increasing the international role of the euro. But if markets are to entertain the possibility of an enhanced role for the euro, we need to consider what the conditions are that underpin the dollar’s dominance. The list is long, but the fact that the dollar is an expression of an integrated capital market is certainly one of those conditions. [34] For the EU to meet that condition – which, at this stage of its development, is more achievable than others – would require a complex programme of legislative and institutional harmonisation, which however could be put in place in short order. 6 / 10 BIS central bankers' speeches The second reason why an institutional approach can help produce better outcomes is that institutions and their actions can be subject to more clearly defined democratic control. Precisely because those institutions are invested with a mandate and defined powers, it is possible to make a more direct link between decisions and responsibility. | 0 |
This is the most important reason why the implementation of monetary policy has been delegated to central banks. In Norway, the responsibility for interest rate decisions was delegated to Norges Bank in 1986. The differential between Norwegian and German implied forward rates 10 years ahead provides an indication of how successful we have been in creating confidence that we will attain the inflation target. Implied forward rates are calculated using the yield curve and can be interpreted as the expected three-month rate ten years ahead. The forward rate differential can be interpreted as the expected inflation differential in the long term plus a risk premium. In the euro area, the objective is to keep inflation below 2 per cent. If we assume that this gives an average inflation rate of 1½ per cent, the inflation differential against Norway will be about 1 percentage point. This means that an investor that is seeking the same real return must have a one percentage point higher interest rate in Norway than in Germany. After the introduction of the inflation target, the differential between German and Norwegian forward rates remained at about 1 percentage point for a long period. The differential has recently narrowed to about 0.8 percentage point. This indicates that there is confidence that we will attain the inflation target. Monetary policy shall contribute to smoothing fluctuations in the economy that are due to changes in demand. | Today’s flexible inflation targeting regime establishes a firm framework for monetary policy and provides clear guidelines on how monetary policy is to respond in different situations. The fiscal policy authorities can thus internalise the monetary policy response pattern. This is only natural, since the mandate for monetary policy was laid down by the Government and the Storting. In other words, the proper framework is in place for delegating interest rate decisions, but the central bank’s response pattern must be known, so that the fiscal authorities can take this into account. Game situations that may arise with an independent central bank with an inflation target are further discussed in Leitemo (2000) and in Steigum (2000). Norges Bank analyses the inflation outlook three times a year in its Inflation Report. The Executive Board discusses the economic outlook at a separate meeting three weeks before the Inflation Report is presented. The following day, the Executive Board summarises its discussions and assesses the consequences for monetary policy for the next four months. This assessment constitutes an important internal reference when the Executive Board later makes a decision regarding the interest rate. It will also provide the basis for our external communication through speeches and the media. The key rate is assessed by the Executive Board every sixth week. Monetary policy decisions are announced in a press release followed by a press conference. | 1 |
The Bank’s Decision Maker Panel also suggests that employers’ expectations have shifted, with the share of firms expecting their employees to work from home at least one day a week beyond 2022 tripling relative to 2019. A structural shift in more working from home is likely to lead to preferences for larger homes, with less weight attached to considerations around commuting times relative to pre-pandemic. There is also likely to be a regional dimension to any such behavioural shift in the housing market. Remote working considerations would point to a shift away from urban areas like London and towards suburban areas and further out. Post pandemic health-related concerns about densely populated metropolitan centres might also encourage such a shift. 20 Estimates vary as to whether such holidays have any aggregate impact. For example, Best and Kleven (2013) estimated that about a third of the impact of the 2008-09 holiday was solely due to timing, but that there was an aggregate increase in transaction volumes. In contrast, Besley et al (2016) look at the same episode and find no aggregate impact, only a shift in transaction timing. See https://obr.uk/docs/dlm_uploads/Working-paper-No.10-1.pdf for discussion. 14 All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice 14 Financial considerations may accentuate any such effect, given the gap in affordability in London and the South East relative to other parts of the UK. Credit constrained renters in high cost areas might take advantage of new norms of working to move from high-price areas of the UK to lower-price ones. | Finland responded by devaluing its currency by 6 per cent. In Norway, industrial leaders and industry organisations also pressed in favour of a devaluation of the Norwegian krone. Norway’s finance minister Rolf Presthus characterised the Swedish decision as a serious setback for Nordic cooperation3, and chose not to change the value of the Norwegian krone. In much of the 1970s and 1980s, economic policy in Norway and Sweden lacked a long-term approach and credibility. This contributed to wide swings in production and employment. With a policy of low interest rates and devaluation, inflation became entrenched at a high level. Frequent devaluations in the period following 1976 could not prevent a weakening of the manufacturing sector in the long run. On the contrary, they proved to be self-reinforcing. The wide fluctuations culminated in a borrowing spree that started in the mid-1980s, first in Norway and then in Sweden. The borrowing spree was succeeded by deep economic crises. Both Norway and Sweden had to abandon their fixed exchange rate policy in 1992. Important reasons were freer capital flows, deeper financial markets and hence a surge in cross-border capital movements. Sweden switched to inflation targeting in 1993 and was among the first countries to introduce a system that would later become the norm for small and medium-sized economies. The Riksbank succeeded fairly quickly in anchoring inflation expectations and keeping inflation low and stable in Sweden. Norway followed suit in March 2001. | 0 |
Lessons from the pandemic: Has the simpler post-2008 financial system held up? And where do we go from here? Speech given by Christina Segal-Knowles Executive Director Financial Market Infrastructure Directorate Official Monetary and Financial Institutions Forum 29 January 2021 I am grateful to Stephanie Haffner, Paul Brione, Pavel Chichkanov, Sarah Crowley, Harpal Hungin, and Barry King for their help in preparing these remarks. I am also grateful to David Bailey, Paul Bedford, Lee Foulger, Andrew Hauser, Matt Roberts-Sklar, Nick Jackson and Gerardo Ferrara for their helpful comments 1 All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice The topic of my talk today is lessons we can draw from the market turbulence we saw in March and April 2020. But before we get there I want to talk about an earlier crisis. Let’s rewind to 2008. On September 15th, Lehman brothers collapsed taking with it one side of $ trillion in derivatives contracts. Most of these derivatives were bilateral contracts – a spaghetti bowl of interconnectedness. As Lehman collapsed and others teetered near the edge, no one knew who was holding the bag. The result was panic, which, as explained by Ben Bernanke, may have been a key driver of the severity of the Great Recession. Its early stages would have been significantly less severe without the confidence collapse on Wall Street.1 1. Simpler Now let’s fast forward to 2020. Pandemic. Economic crisis. Market turbulence. But no panic in the banking system. There were a number of reasons. | V. Safety nets: crisis resolution In free market economy, no policy and no supervision can prevent the possibility of financial distress in any particular financial institution. What the public policy can do is to minimize the likelihood of systemic crisis. Crisis resolution is the key to avoid systemic disturbance. As we know, the ultimate policy choice for the authorities is to find the balance between the public sector and private sector solution from the one hand and between the pre-determined schedule and ad hoc approach from the other hand. Estonia's currency board regime sets for Bank of Estonia clear and strict limits that exclude several options available for the authorities in many other countries. By limiting the money supply to net foreign assets of the central bank, the room for emergency liquidity support is very limited. Therefore, in our case, the private sector solution is preferable and particular modalities of crisis resolution will depend very much on the circumstances. At this point, I would like to refer back to previous parts of my speech and underline that this particular approach rests upon a few strong fundamentals. Continuous analysis of financial system developments and early warning indicators, importance of strong owners and sound risk management in banks, high liquidity and capital requirements – these basic principles are a necessity for us. By combining the principles just mentioned, we can now describe a few hypothetical crisis resolution situations in Estonian financial system. | 0 |
Jon Cunliffe: Regulatory reform and returns in banking Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at Chatham House, London, 20 October 2014. * * * On 13 October 2008 – just over 6 years ago – the UK government injected nearly £ of public funds to stabilise Royal Bank Scotland and Lloyds Banking Group. Parts of both banking groups had started the year in a precarious position, with swollen, highly levered balance sheets and a reliance on short-term wholesale funding. By October, losses had left them dangerously undercapitalised. Absent a resolution regime for dealing with failing banks, and given the importance of these two banks to domestic lending, the government was left with no choice but to inject public funds, bailing out the banks’ creditors. In the intervening 6 years the landscape of banking has changed beyond recognition. Some of this is due to a very different approach to regulation and supervision. Some is due to a very different commercial environment. And most important, there has been a sea change in public attitudes towards banking and bankers. Bankers should not expect to be popular. But the outburst of public anger that accompanied the crisis and its very painful and protracted impact on the real economy – families and jobs – has not abated much. The latest polls put public trust in bankers at nearly the bottom of the class – only marginally above politicians. | BIS Review 72/2010 9 Figure 6 Interest rate differentials (*) (percentage) 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 07 08 Brazil Mexico Chile Poland 09 10 Colombia Malaysia Korean Rep. (*) Difference between each economy's reference rate and the US Fed Funds rate. Sources: Bloomberg and Central Bank of Chile. Figure 7 Current account balance (percentage of GDP) 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 80 84 88 Emerging economies 92 96 00 Emerging Asia 04 08 LAC - 7 (*) (*) Simple average for Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Source: WEO, April 2010. For 2009-2011, estimate and forecast. 10 BIS Review 72/2010 Figure 8 Latin America: Change in international reserves (billions of dollars) 150 150 125 125 100 100 75 75 50 50 25 25 0 0 -25 -25 -50 -50 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 (f) (f) Forecast. | 0 |
Robert Ophèle: Micro economic analysis of companies Introductory speech by Mr Robert Ophèle, Second Deputy Governor of the Bank of France, at the Plenary Meeting of the European Committee of Central Balance Sheet Data Offices (ECCBSO), Paris, 18–19 October 2012. * * * Mr President, Ladies and Gentlemen, It is a great pleasure for me to welcome you in our new conference center. I am delighted to receive so many distinguished participants to this meeting, coming from the same universe of statistical institutions or central banks – whether they are members of the Eurosystem or not – and sharing the same interest for micro economic analysis of companies. We are very happy indeed to organise this year’s ECCBSO regular meeting which will enable you to discuss in depth about the past achievements of your task forces and the prospects, drawing possibly some kind of action plans. Undoubtedly, we need to explore further a number of those issues where your Committee is fully and often very successfully involved. I am grateful that BDF can provide, in its turn, the opportunity to host this conference. As you know, Banque de France is one of the co-founders of the Committee and has always shown its commitment by actively contributing to these task forces. | Where development needs are identified through FIDE Forum’s screening process, it should be able to refer candidates to the existing director education programmes provided by ICLIF, or work with ICLIF to develop new ones to respond to an unmet need. To my mind, this clarity of role and purpose will significantly enhance the potential impact and influence of FIDE Forum and ICLIF, to the overall betterment of the industry. As members of FIDE Forum, directors have a critical role to play in setting its priorities and in driving future initiatives to ensure that FIDE Forum remains relevant and continues to add value. In this respect, members should be active in giving their views, including providing inputs to concept members, engage in propagating the common interest of the industry and enhancing the good image of the sector. Conclusion The Malaysian financial sector has taken important strides to strengthen boards, in particular through the ongoing education and increase in supply of top-quality directors. The success of ICLIF’s FIDE Programme and the industry-led initiatives by FIDE Forum in pushing frontiers in developing, sourcing and attracting board-level talent would very much depend on the collective efforts of all. It is from this perspective that the FIDE Forum should be commended for initiating this effort. I encourage the industry to continue to use FIDE Forum as a platform for promoting board-level talent management and through it, to build an effective partnership with ICLIF as the centre of excellence for directors’ education in the financial sector. | 0 |
An example of this is Germany’s decision to transfer its banking supervision into its central bank. The relationship between the Central Bank and the Financial Supervisory Authority (FME) is among the issues that must be examined thoroughly in Iceland in the coming period. The arguments in favour of closer collaboration between the Central Bank and the FME touch on the previously mentioned shortcomings in the regulatory and supervisory framework. In order for a central bank to perform its role as lender of last resort, it must at all times have information that allows it to assess whether a financial institution in distress is faced illiquidity or insolvency. It must also have thorough knowledge of the available collateral. Moreover, it is important that the central bank have an overview of large exposures in the system as a whole and that it be able to assess the risk of contagion between financial institutions. This requires that the central bank have access to information similar to that possessed by financial supervisors. In the event that it is decided to let capital adequacy ratios vary with reference to credit and asset price cycles, it will be necessary to join the tools of financial supervisors with the macroeconomic overview of central banks. Furthermore, it is widely held that in small countries, where the external sector plays a key role, there is a stronger argument in favour of close co-operation or merger between these institutions than there is in larger economies. | Work is currently being done, both in Europe and globally, towards reforming the regulatory framework for international banking operations. Until the framework for those operations is more secure, however, the wisest course for Icelanders may be to proceed with caution and adopt tighter rules on cross-border financial activities than are set forth in the minimum requirements. A clear example of this is a restriction on the accumulation of deposits in foreign bank branches. The long-term need for such more stringent rules will be determined to a degree by Iceland’s future currency and exchange rate regime. Experience shows that maturity mismatches between banks’ assets and liabilities that are not backed up by a lender of last resort represent a substantial risk. The global financial crisis has revealed a variety of weaknesses in the regulatory framework and the supervision of the financial sector. On the whole, the quantity and quality of financial 2 BIS Review 136/2009 institutions’ capital was insufficient to provide the necessary shock absorption. In particular, there should have been more unpledged common equity. The risk assessment of assets and liabilities was distorted because it was based on historical data that did not assign sufficient weight to bad states of the world. Liquidity risk was vastly underestimated, and the procyclical tendencies within the financial system were not sufficiently offset by the regulatory and supervisory framework. On the contrary, it can be argued that the interplay of regulatory provisions and financial reporting rules based on mark-to-market exacerbated these tendencies. | 1 |
While there is wide sympathy for our decisive action against market manipulation, we have been cautioned by some on the need not to be confused by herding behaviour. Others have challenged us to come up with hard evidence that manipulation existed, reminding us of the established academic theory of market manipulation, and urging us to examine carefully the history of the events leading to last August, collect data and conduct econometric research into them. While I agree that all these need to be done where possible, I must tell you that such advice reminded me of what Andrew Crockett, the General Manager of the BIS and Chairman of the Financial Stability Forum, once told me. He said that the economic theorists are those that attempt to look in a dark room to find a black cat. The economic historians are those that attempt to look in a dark room to find a black cat that is not there. And the econometricians, who conduct all those regression analyses from the data collected, are those that attempt to look in a dark room to find a black cat that is not there and say that they have found it. I certainly do not wish to be involved in that sort of thing. But there is surely one thing that ought to be done, if we are serious about the matter. Using the same analogy of the dark room and the black cat, why don’t we just light up the room and look? | Yet there is no equivalent of a World Trade Organisation to deal effectively with the problems that inevitably would spring up, even though the degree of complexity and time criticality of international finance far exceed that of international trade. There is, of course, the IMF, and the Bank for International Settlements (BIS). They perform useful roles respectively in providing assistance to individual economies in difficulty, and in setting international regulatory and supervisory standards, and they have done a good job in these areas. But, as very much part of the international financial architecture, they need to evolve to cope with the rapidly changing nature of international finance. They need to ensure that they are able to play the roles required of them in prudently managing the risks, and limiting the destabilising impact, of the increasing freedom of international finance. There is much catching up to do, and much international effort has been devoted to this task. But, presumably because of the difference of opinion on what exactly needs to be done, we now have a rather confusing picture of where all this effort might lead us to. There have been many new international forums created to look at the relevant issues and, together with the existing forums, everybody seem to be involved in this work - G3, G7, G10, G22, G26, APEC, EMEAP, etc., with multiples of working groups formed under each. More recently, there is the more authoritative Financial Stability Forum formed, in which the HKMA participates. | 1 |
New, cost-effective solutions such as QR payments and “Tap-on-Phone”, which leverage on the already high penetration of smartphones in Malaysia, may be preferred over traditional POS terminals. Indeed, we are encouraged to see that industry players are starting to roll out interoperable solutions. Notably, these include several pilot initiatives ahead of the nationwide roll-out of PayNet’s Interoperable 1/4 BIS central bankers' speeches QR payment solution. Such solution has the potential to become a game-changer by facilitating merchants to accept payments from customers of different participating banks and non-banks by using only a unified QR code. Beyond that, we should accelerate the digitisation of the value chain for both users and merchants. This could include digitising salary payments, and payments to suppliers, wholesalers and distributors. These developments would make it more compelling for consumers and businesses to maintain funds digitally, thereby providing a natural incentive to keep using and accepting e-payments. The second key area is on strengthening public confidence. Some segments of the population may still lack awareness and confidence in e-payments, despite fraud levels being relatively low in Malaysia. Some consumers are also concerned about overspending, as they are used to relying on cash withdrawals as a way to budget and control expenses. These are cognitive barriers that can be overcome with concerted efforts. Banks and non-banks alike should intensify efforts on awareness-building and education campaigns. These could focus on use cases that are central to day-to-day life, such as paying for fuel, groceries and F&B. | For example, there may arise situations in which the taxpayers in one country may be faced with the prospect of essentially bailing out the depositors of a branch in another country through their national deposit guarantee scheme. Incidentally, there is a recent example from my own country (although, technically, it concerns a bail-out under the investor compensation scheme rather than the deposit guarantee scheme). After a long and complicated investigation the Swedish Deposit Guarantee Board decided around two weeks ago to commence payments to a group of mostly Italian investors that were the unfortunate clients of the hair-raisingly ill-managed securities company CTA, which went bankrupt in 2004. Fortunately, CTA was not one of the bigger players – in fact I had never heard of it before it became an item for the Deposit Guarantee Board – and the fund will be able to cover the payments to the approximately 1 200 clients, amounting to around € million in total. However, if a larger institution had gone bust, the fund alone would not necessarily have been able bail out the investors. All deposit guarantee schemes – as well as investor compensation schemes – are typically underfunded and are not able to cope with failures in large cross-border financial institutions. In such events, additional government funding will be needed. | 0 |
Singapore has been included in the JP Morgan and Lehman Brothers global bond indices. Our challenge now is to sustain the growth in the local debt market. We need to work with market participants to broaden the debt markets’ investor base and improve swap market liquidity. But our most difficult problem is that our starting premise has yet to materialise. We had envisaged that as the region recovered, corporates and governments would again need funding, and this time their debt funding would be in the form of tradable paper rather than bank loans. This has not happened … yet. Wealth management Wealth management has been our most successful growth area. Since 1998, Singapore’s total assets under management have doubled, no mean feat in this climate. Singapore has overtaken Hong Kong in terms of discretionary assets under management. More players, ranging from large institutional fund managers to boutiques, have set up shop in Singapore. The local fund management community is now more diverse and covers a wider universe of investment styles, geographic foci and asset classes. Singapore as a financial centre In aggregate, we have made promising headway in a few fields, but Singapore still has not set itself apart decisively from other Asian financial centres like Hong Kong and Sydney. Southeast Asia’s predicament has a lot to do with this. In the long term, we have to rely on the region recovering its stability and vitality. But meanwhile we must do our best to differentiate ourselves. | MAS has developed sectoral leading indicators and a new macroeconomic model of Singapore, which help us to better anticipate events that could impact our economy, and give us time to work out appropriate policy responses. Of course, we must not forget the important deterrent role played by our strong reserves. We have to manage the reserves under our charge wisely, to deliver good long-term risk-adjusted rates of return while providing for unexpected demands on our liquidity. Hence, we have also strengthened our investment and risk management capabilities to diversify into different instruments and markets. V. Priorities moving forward Going forward, I would sum up our key priorities under five thrusts. Managing within a riskier environment First, we must manage within a riskier environment. The financial sector we now supervise is more unforgiving. Volatile markets and poor economic conditions have heightened the risks financial institutions face. Competition has put pressure on margins, inducing financial institutions to take on more risk to maintain their earnings to satisfy increasingly demanding investors. With liberalisation, our financial sector is no longer sheltered from these risks. Our response is not to avoid these risks but to learn to manage them. We have to continue enhancing our risk-based supervisory capabilities. The foundations are in place. We need to collect better information and use it more effectively to produce accurate risk profiles of the institutions we supervise. These risk profiles, constantly updated, will help MAS to detect problems early and take prompt corrective action. | 1 |
The need for credibility may therefore in itself indicate that cyclical considerations should only very seldom lead to discretionary deviations from the main rule. Automatic stabilisers will still have an effect. I believe that our politicians are aware of this risk. In the National Budget for 2002, the budget balance was cyclically adjusted by NOK 5.1 billion, which shows that we are experiencing a period of strong expansion. The plans nevertheless called for the use of petroleum revenues in 2002 that was identical to the expected real return on the Petroleum Fund at the beginning of the fiscal year. Hence, it is only via automatic stabilisers that fiscal policy will be adapted to the cyclical situation this year. I interpret this to mean that the threshold for departing from the main rule is high. 10 BIS Review 7/2002 Structural effects on the Norwegian economy As may be inferred from the presentation so far, it is monetary policy that shall address the second challenge: preventing the increased use of petroleum revenues from resulting in nominal instability. Despite many uncertainties, I do not believe that there are grounds for serious concern with regard to monetary policy’s ability to deliver nominal stability over time, at least as long as fiscal policy is stable and predictable. However, the interest rate level will naturally have to be adapted. | The budget for 2002 adhered to these guidelines. The implementation of monetary policy The inflation target is set at 2½ per cent. In the implementation of monetary policy, we aim at achieving this objective. The interest rate affects inflation through a number of channels. An increase in the interest rate will normally contribute to reducing inflation by curbing demand for goods and services and by strengthening the krone exchange rate against other currencies. A lower interest rate has the opposite effect. Generally, the effects of an interest rate change depend on the situation prevailing at the time and on how the market perceives the interest rate change in each case. The effects may also vary over time. Monetary policy influences the economy with considerable lags. Analyses performed by Norges Bank indicate that a substantial share of the effects on inflation occurs within two years. Two years is thus a reasonable time horizon for achieving the inflation target of 2½ per cent. The regulation says that in general, the direct effects on consumer prices of changes in taxes, excise duties and extraordinary temporary disturbances shall not be taken into account. However, knowledge of such disturbances two years ahead will be the exception rather than the rule. Normally, there will be a correlation between the projections of overall inflation two years ahead and such adjusted projections. However, an adjusted price index reflects where we are today in relation to the target in two years. | 1 |
At the same time, there is great uncertainty surrounding fiscal policy as there is a political deadlock between the Democrats and the Republicans in Congress that may remain after the presidential election in 2012. The uncertainty has caused analysts to talk about the US economy facing a fiscal cliff next year. The concern applies on the one had to whether earlier income tax cuts and reductions in payroll taxes will be extended beyond the end of the year, and on the other hand is linked to the automatic expenditure cuts that will come into force at the turn of the year unless Congress can agree on long-term sustainable budget consolidation. All in all, these automatic tax increases and cuts in public expenditure entail a tightening during 2013 of 3–4 per cent of GDP. A further element of uncertainty is the result of the presidential election in November. If the results of the election are inconclusive and no party gains a clear majority, there is a major risk that the political deadlock will persist. The lack of credible budget solutions at present, and the low confidence in the political system’s ability to deal with the fiscal policy challenge, could led to companies and households beginning to act with greater caution. This would subdue growth in the world economy. We have given consideration to these risks in our forecast, but it is of course possible that the situation will be more problematic than we have assumed. Realistic to believe in an orderly resolution of the euro crisis? | Mugur Isărescu: Hard landing unlikely for Romania Interview with Dr Mugur Isărescu, Governor of the National Bank of Romania, by Mediafax news agency, Bucharest, 8 September 2008. * * * Mr. Governor, foreign analysts have placed Romania along with four other states – Lithuania, Latvia, Estonia and Bulgaria – in a group of countries heading to a hard landing. In fact the economies of Estonia and Latvia have contracted sharply, with growth plunging from levels of around 10 percent into negative territory; inflation has reached two-digit levels and the external deficit exceeded 15 percent of gross domestic product. Is it possible for Romania to witness similar negative growth dynamics? Is it fair to include Romania in that group? Reading what those foreign analysts said, I have hardly found a solid rationale that would justify Romania's being placed within the hard-landing risk zone. On the contrary. Turning now to comments, I will underline that there are some similarities among the countries in this group: GDP per capita is below the EU average, they all have registered high growth rates in the catching-up process. However, there are also fundamental differences, among which the most important in my view is the monetary policy mechanism. Three of the four countries mentioned in the group have currency boards in place, and the fourth, i.e. Latvia, has a mechanism close to a currency board. Of course, currency board has its clear benefits. | 0 |
For the sample taken, the number of e-wallets rose to 1.3 million active accounts in 2018 from 86,066 in 2014 while the value increased ten-fold in the last five years, to K405.6 million in 2018 from K42.7 million in 2014. It is gratifying here to note that the gap between men and women has been reducing – from 89% male dominance in 2014 to 80% in 2018. Ladies and gentlemen, we can conclude from the above findings that the large gender gap in account ownership between men and women suggest that women inherently face more challenges in accessing formal financial products and services. Further, most financial institutions, especially non-banks have limited or do not have genderfocused product differentiation. This limited differentiation by gender is a missed opportunity for financial institutions considering that women are better savers and are less likely to default on their loans, and therefore good for the financial institutions’ bottom-line. Distinguished guests, financial institutions therefore need to place greater emphasis on segment performance to support individual women and women entrepreneurs who should be assessed as a profitable business proposition, not as part of corporate social responsibility. The market segmentation should go further to also devise age-specific products and services within the sex-differentiated products and services. We must however, take cognizant of the rapid rise in the use of mobile money as holding great potential to accelerate financial inclusion for women and help reduce the gender gap. Financial service providers must therefore, innovate gender-focused digital financial products and services that will bridge the gap. | It is available on our website along with other data and information useful to policymakers, business people and the general public. We use our website to share what we learn about our diverse District, and you will find detailed information about the region at the site. I invite you to visit newyorkfed.org to explore our highly localized maps and information on small business, credit and housing conditions and even the latest job openings at the New York Fed. 2 BIS central bankers’ speeches Finally, and crucially, in the aftermath of the financial crisis, we are working with our colleagues in Washington, D.C., and at other agencies to help put the nation’s financial system on a firmer footing. Our supervisors are working hard to ensure that our District’s banks are operating safely and soundly. Although much has been done, we are not finished and are determined to keep at it. I recognize fully that there can be no return to pre-crisis business as usual – whether on the part of the financial sector or on the part of regulators like ourselves. All in all, there is a lot to keep myself and my colleagues busy. National economic conditions Now I’d like to turn to the national and regional economy. The incoming data on the U.S. economy generally has been a bit more upbeat over the past few months, suggesting that the recovery may be finally establishing a somewhat firmer footing. | 0 |
The dispersion seen in this probability distribution can be attributed to two factors: disagreement across point forecasts and uncertainty around individual point forecasts.6 Uncertainty, which is calculated by first taking the standard deviation of each dealer’s distribution and then averaging these individual uncertainties, provides a sense of how confident respondents are about their individual point forecasts. Based on this calculation, the uncertainty around dealers’ expectations for the size of the SOMA portfolio at the end of 2014 is large. In fact, at around $ billion it is almost as large as the entire size of the large-scale asset purchase program announced in November 2010 or the MEP announced in September 2011. Moreover, this uncertainty has not changed significantly since the start of the purchases in September 2012. The dispersion around individual point forecasts likely reflects uncertainty about both how the economy will evolve and how the FOMC will adjust its purchases in response to changes in the economic outlook or changes in its understanding of the efficacy and costs of the policy. Disagreement among dealers about the likely amount of purchases is measured as the standard deviation across their average forecasts for the size of the SOMA portfolio at the end of 2014. In the January survey, disagreement was about $ billion, significantly lower than its level in October. | Investors’ disagreement and uncertainty about the overall stance of monetary policy will reflect their views on the future evolution of both the federal funds rate and the SOMA 5 See, for example, Question 8 in the January 2013 Survey of Primary Dealers. 6 The measures of forecast uncertainty and disagreement discussed here are based on Rich and Tracy (2006) and Wallis (2004, 2005). BIS central bankers’ speeches 3 portfolio. One way to get a sense of the overall level of policy uncertainty is to convert the SOMA portfolio into “fed funds equivalents”.7 With this translation, it is possible to estimate the hypothetical level of the federal funds rate that would provide a similar amount of monetary policy accommodation as both the actual level of the federal funds rate and the size of the SOMA portfolio. Figure 2 shows the disagreement and uncertainty around this measure of policy uncertainty 12 months in the future. Disagreement about current policy is quite low relative to the past few years, which likely reflects the effect of forward guidance on expectations about the federal funds rate and the relatively low disagreement about the size of the portfolio that I mentioned earlier. Uncertainty, on the other hand, is relatively high and larger than the amount of disagreement. Since there is very little uncertainty about the level of the federal funds rate one year from now, most of this effect comes from uncertainty about the size of the portfolio. | 1 |
At present, criticism is coming from both directions, and many critics maintain that interest rates are lagging behind developments in inflation and economic recovery. Whether this is true will come clear in the next few months, and if it is, remedial action will be taken. At its March meeting, the Monetary Policy Committee stated that further nominal rate increases were likely in coming months but that the scope of such action would depend on near-term developments in inflation and the exchange rate. Further ahead, it will be necessary to reduce the slack in monetary policy as the slack in the economy diminishes. The degree to which this takes place through higher nominal Central Bank rates will depend on future inflation developments. In order to understand current monetary policy, it is necessary to place it in the larger context of post-crisis adjustment and recovery. In a sense, it can be said that the inflation that has plagued Iceland since the crash is a three-fold phenomenon. First of all, it stemmed from the currency depreciation that was part of the economic adjustment that inevitably followed the overheating of 2005–2007 and the subsequent financial crisis. Monetary policy should not have quelled it, nor could it have done so. The real challenge as I mentioned in my speech at BIS central bankers’ speeches 3 the Annual General Meeting of 2010, was to allow the adjustment to take place without permitting inflation or unemployment to become entrenched afterward. | To that end, it is of key importance to move unstable offshore krónur out of the hands of those who cannot hold them and do not want them and into the hands of investors prepared to commit capital in Iceland for a long period of time. It is also important that the general conditions provided for in the liberalisation strategy be met as fully as possible, for this will reduce the risk of instability when the controls are lifted. These conditions include ample foreign exchange reserves, Treasury access to foreign credit markets, and a sound banking system that can fund its activities in an environment free of capital controls. Great strides have been made in this respect, as can be seen in the Treasury’s foreign bond issue last summer, the Bank’s sizeable foreign exchange reserves, the prepayment of loans from the IMF and our Nordic neighbours, improvements in Iceland’s sovereign credit rating, declines in Iceland’s CDS spread, and the banks’ sound capital position in spite of the court judgments handed down in cases involving exchange rate-linked loans. But it is also important that the Treasury’s net domestic borrowing need be as small as possible once liberalisation begins, as it is probable that financing costs will rise sharply at that point in time. In this context, it is interesting to note that the Treasury’s real domestic financing costs in 2011 were negative by roughly 0.7%. It is therefore vital to adhere closely to the plan to achieve an overall Treasury surplus in 2014. | 1 |
The improvement is visible for CEE and Baltic states, while SEE region registered worsening of the international position, albeit from initially lower levels. Despite the downward adjustment, at end 2015 the IIP in most of the countries is above the threshold set by the European Commission’s Macro Imbalance Procedure (-35% of GDP), which points to a still relatively high exposure to potential external shocks. Given the banks’ deleveraging process and their higher reliance to domestic sources, the credit growth in the region is still anemic without significant pressures on the aggregate demand and current account deficit. Furthermore, the analysis of the developments at the stock exchanges in the region also do not point to any sizable flows resulting in notable price changes misaligned with the general economic developments. The stock indices in the region have been gradually recovering especially since 2013, but in most cases they have not recovered to the pre-crisis levels. Concerning the real estate market, the prices have been also recovering, though they are still below the pre-crisis levels, with the fastest upward adjustment in Hungary and the Baltic States. | While the internationalisation of the banking industry holds the potential for efficiency gains, and increased household welfare, it has also added a score of new challenges. Perhaps the most serious of these challenges is what has been termed the home-host problem. This can, in all its essence, be described as follows: Suppose a bank, which is of marginal importance in its home country, sets up a branch in another country, which turns out to be systemically important for that country. Given that the bank is not important in its home country, the home supervisors, who have responsibility for the supervision, might not think that the bank merits close supervision. However, for the host country, which will foot the bill for the salvage operation in case the bank fails, the incentives to monitor the bank are huge. This dilemma is not new in theory, but has now become of great practical importance as financial globalization progressively is making national borders less relevant. Asset prices, financial stability and monetary policy Are there instances when these goals come into conflict with each other? This question has become particularly relevant in the last few years as asset prices have surged, while, at the same time, consumer price inflation has remained muted. On the whole, I think it is reasonable to assume that price stability in the long run reinforces financial stability. The main reason for this is that low and stable inflation reduces the risk of misallocating investments. | 0 |
The total banking sector assets in all new member states are only 345 USD billions at the end 2002 (thus just 31,5% of Citigroup, or 43,4% of Deutsche bank, or 45,5% of HSBC). Structure of ACs Banking Sector Assets 3% 2% 2% 1% 1% POL CZ 7% HUN 38% 7% CYPR SVK SLO LAT LIT 15% EST MALTA 24% * As of 31st Dec 2002, recalculated by market exchange rate BIS Review 53/2003 19 3 A look at financial depth [as measured by banking sector assets to GDP] of individual markets in five accession countries [Czech Republic, Hungary, Slovakia, Poland and Slovenia] shows that there is still significant space for growth of financial intermediation. Financial depth in the CR is the highest among the transition economies, but it is still significantly lower than in the EU [EU average 270%]. Financial Depth (Bank Assets/GDP in %) 130 120 110 100 CR HUN SVK POL SLO % 90 80 70 60 50 40 1996 1997 1998 1999 2000 2001 2002 7 Besides developments in banking, we can observe continuous growth also in non-banking financial intermediation [illustrated by Czech Republic]. In the Czech Republic, the share of non-banking financial intermediation on GDP increased over last two years from 19% to 21,7%. The highest increase was in the share of insurance companies and financial leasing institutions. | Fraziali Ismail: Non-performing loans in East Asia and the Pacific practices and lessons in times of COVID-19 Opening remarks by Mr Fraziali Ismail, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the webinar and the launch of World Bank’s Report on non-performing loans (NPL) in East Asia and the Pacific, 27 October 2021. * * * A very good morning to everyone! It gives me great pleasure to welcome you to this webinar in conjunction with the launch of the World Bank Report on “Non-Performing Loans in East Asia and the Pacific: Practices and Lessons in Times of COVID-19”. This event comes at a time where many of us in the region are still navigating through uncertainties with the pandemic. Recovery in many regional economies including Malaysia has begun to gather pace in recent periods in tandem with the recovery in global economic activity. However, the outlook remains subject to large downside risks as the potential for new variants of COVID-19 remains high. These developments are also happening amid the gradual expiry of policy support extended to households and businesses affected by the pandemic. The unprecedented level of support extended has so far helped to keep loan impairments at bay. But, as these measures are gradually unwound as the economy recovers, we would expect to have much greater visibility on the true asset quality of banks. | 0 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.