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From this viewpoint, the US system appears well-designed. In Europe, the interaction between macroprudential and microprudential authorities may be relatively complicated: the latter include the Basel Committee, the European Banking Authority, the other European supervisory authorities and the national supervisors.

As a result, economic activity over the past three quarters has been disappointing, with growth in GDP and gross domestic income each averaging less than 1 percent, a significant step-down from the same period in 2015. Looking ahead, the stabilization of the dollar and oil prices suggests that growth in these components should move higher over the second half of the year.

I would like to take this opportunity to thank you for your cooperation. Today, before exchanging views with you, I would first like to explain the Bank's view on Japan's economic and financial situation, as well as its thinking behind the conduct of monetary policy.

I will start with developments in the world economy and then move on to economic activity, financial conditions, and price developments in Japan. In view of these issues, I will briefly explain the Bank's thinking behind the conduct of monetary policy, and lastly express some of my views on medium- to long-term issues that the Japanese economy now faces. I.

Impact of crises on India 15. These crises impact India in various ways. Firstly, increased volatility in the exchange rate and equity markets could lead to depletion of foreign exchange reserves, weakness in the economy, increasing threat of rating downgrades, diminishing investor confidence and volatility in capital flows.

Second, Balance of Payment (BoP) parameters come under stress due to moderation in growth of major trading partners and commodity price volatility impacts macro-economic parameters, such as, inflation and fiscal deficit. Third, corporates are unable to raise foreign capital which imports financial problems from off-shore to on-shore and unhedged foreign currency exposures translate into on-balance sheet concerns impacting the credit worthiness of the corporates.

Since joining the Board, and increasingly over the past year, I have met with many state member bank CEOs who share these challenges with me. These CEOs have expressed frustrations with ever-increasing compliance burden, which distracts their attention from prudent revenue generating activities.

At the moment, the UAE is looking at experiences of other jurisdictions and recently we have at a GCC Banking Conference which was held at the beginning of this month, discussed the experience of Korea. We are also looking at the experiences of Italy and Malaysia. We believe that SME Financing is very important for job creation.

This analysis suggests, somewhat surprisingly, and in contrast to other advanced economies, that the euro area specialisation overall has not changed much over last one and a half decades. There has been neither a decline in the specialisation in labour-intensive products, nor the expected shift towards more research-intensive production.

This might reflect structural rigidities that constrain the ability of euro area firms to adjust rapidly, but it could also mean that euro area firms have so far not been under significant pressure to make substantial changes in their specialisation – particularly in medium-high-tech exports. But this general picture for the euro area does however not necessarily hold for all euro area countries.

The global economic slowdown and market liquidity in search of yield may lead to additional risks in the financial sector. And we are also keeping a very close eye on the challenges that emanate for insurance companies and banks from the low-interest rate environment. Dr Dombret will come back to that question in greater detail later on.

* * * 1 Introduction Finance Minister Dr Schäuble Mr Fahrenschon President Müller Dr Gerlach Ladies and gentlemen It is more than apt that so many of us should have gathered here today in Bochum to pay tribute to Dr Gerlach as he leaves office. For my part, I intrinsically associate the city of Bochum with Herbert Grönemeyer.

That is, in the eyes of the lenders, declining house prices diminish the quality of the borrowers' collateral, which effectively reduces the availability of credit to households that can be used to finance consumer purchases. This effect is another reason to be concerned about the possible consequences of greater-than-expected house price declines.

Mario Draghi: Trade, competitiveness and Europe Opening remarks by Mr Mario Draghi, Governor of the Bank of Italy and Chairman of the Financial Stability Board, at the 2nd EFIGE (European Firms in the Global Economy) Scientific Workshop and Policy Conference, Rome, 18 June 2010.

But just as employers bear a social responsibility for their employees, banks bear a social responsibility for savers and for society as a whole. Reforms must be targeted at internalising this social responsibility in business strategies so that what is collectively optimal is selected by profit-maximising business units.

I see three elements at the core of efforts to reform the international financial system:  The first ingredient is a mechanism that enforces transparency in financial structures. This is essential for the financial industry to return to its prime mission of assessing the quality of investment. The trend towards more sophisticated financial instruments has not been matched by increasing disclosure requirements.

Unlike what happened in the years even before the crisis, labour market reforms must be preceded – or least accompanied by – product market reforms, otherwise wage adjustments will not be fully passed on to prices.

Moreover, this is the same level as in June 2007, prior to the global financial crisis, indicating that the DI remains at a favorable level. Thus, business sentiment has stayed at a favorable level even after the consumption tax hike, indicating that the stance of the corporate sector remains proactive. In addition, corporate profits have continued to improve.

Today we face another crisis. And over the last six months, we have seen the European project deliver. Fiscal, monetary and financial sector policies were deployed when faced with this common challenge.

But while the financial system withstood the initial effects of the pandemic, and we are now seeing a gradual economic recovery, the resilience of the financial system and indeed Europe’s resilience may be tested further.

Such a framework should adopt a system-wide perspective with a focus on building resilience ex ante, rather than relying on ex post measures. It should aim to ensure that non-banks can provide a stable source of funding in both good times and bad.

And it should be developed with the flexibility to respond to risks as they evolve, given the diverse set of entities and activities in the non-bank financial sector. In terms of the international policy agenda, we have seen considerable progress on MMF reforms over the past year.

* * * The Director General, Financial Institutions Training Centre (FITC), Chairmen and Members of Board of Financial Institutions, Chief Executives of Banks, Captains of Industry, Distinguished Ladies and Gentlemen. I feel deeply honoured to be invited to this important seminar, as the Special Guest of Honour and for the privilege to deliver this keynote address.

I should also start by congratulating the Financial Institutions Training Centre (FITC), which has put this seminar together, for its impressive contribution to capacity building in the financial services sector.

As I will discuss in a moment, banks' role as liquidity providers is particularly crucial when markets are under stress. By pooling the assets of many depositors and offering term loans and credit lines to borrowers, banks effectively provide insurance against the uncertain liquidity requirements of households and firms.

However, further refinements to the draft Constitution are possible, and the ECB has made several suggestions. For example, we strongly believe that price stability should be added to the list of the Union’s objectives set out in the first part of the Constitution, as price stability is of great importance not only for the ECB but for the Union as a whole.

The global commodities boom, which has been stimulated by the emergence of the Chinese and Indian economies on the international scene, has been an important offset to the deflationary effects from their low-priced goods and services.

Analysis by the Board's staff, which weights the negative effect on U.S. inflation from cheaper manufactures against the positive effect from higher commodity prices, finds that the net effect in recent years could go either way but in any case is probably quite small.

Similarly, private investment according to the latest CAPEX survey is holding up well. We cannot expect a repeat of the 20 per cent growth we had last year, but a figure of the order of 10 per cent is likely, given the strength of investment in building and structures.

Falling prices and an impressive expansion of investment and profitability then go hand in hand, which is a fairly unusual phenomenon macroeconomically. The variety of products and their ever-shorter life cycle add to the risk that distortions in price indices increase over time. The second cause of statistical distortions in inflation is the growing importance of services; this is known as the services bias.

Policy trade-offs may require coordination across different authorities. The new rules for the recovery and resolution of banks in Europe can serve as an example, as they explicitly address such trade-offs.

The Bank Recovery and Resolution Directive (BRRD) is, in principle, distinct from competition law. [7] At the same time, its objective is to allow banks to be liquidated, and eventually resolved, without recourse to taxpayers’ money. If, however, financial stability is at risk, the BRRD allows for public support.

Protection of the parties to bank contracts requires swift-acting, effective and economical dispute resolution instruments. The law now asks intermediaries to subscribe to non-judicial mechanisms. The Bank of Italy, which will have to submit a proposal to the Credit Committee for the regulation of the matter, is about to begin a consultation with intermediaries and customers.

The proposal will be based on the experience gained in Italy and elsewhere and on a specific European recommendation; it will ensure that the adjudicating bodies are not only independent but also clearly perceived to be so. The Bank is ready to contribute by taking part in the appointment of disputes resolution panels and providing technical secretariat services.

We continue to refine the implementation of the IRC system to make it more marketfriendly. Our financial sector also demonstrates stability and robust growth. Domestic liquidity conditions remain ample to support lending. Banks remain strong, supported by a stable capital base and satisfactory asset quality. The non-performing loan ratio (NPL) is down to just 2.0 percent as of end-August 2017.

Actually, it’s negative if we net out the generous allowance for loan losses. As of end-June 2017, capital adequacy ratio (CAR) of universal and commercial banks is very healthy at 16.0 percent on a consolidated basis. Getting Personal The road to a resilient banking sector has not been easy. The Asian financial crisis revealed weaknesses in bank management and also banking supervision.

Bongini P. and Ferri G. (2007), Governance, Diversification and Performance: The Case of Italy’s Banche Popolari, paper given at the meeting on Corporate Governance in Financial Institutions, organized by SUERF and the Central Bank of Cyprus, Nicosia. Bonaccorsi di Patti E. and Gobbi G. (2001), “The changing structure of local credit markets: are small businesses special?”, Journal of Banking and Finance, 25, 2209-37.

Bonaccorsi di Patti E. and Gobbi G. (2003), “The effects of bank mergers on credit availability: evidence from corporate data”, Temi di discussione, Banca d’Italia. Cannari L. and Signorini L. F. (1997), Community Links, Co-operative Rules, and the Economic Efficiency of Italy’s Local Co-operative Banks, Proceedings of the European Regional Science Association, 37th Congress, Rome, Italy.

In the next step, we will lift the control BIS Review 105/2007 1 in terms of verification of sources of foreign exchange fund, examination prior to foreign exchange purchase, and repatriation of outward investment profit; we will allow enterprises to conduct outward investment with their own or purchased foreign exchange, and make it more convenient to use and transfer foreign exchange; research will be made to explore channels for domestic enterprises and financial institutions to support enterprises investing and operating abroad with foreign exchange.

Third, financial services will be improved to support eligible enterprises to invest and operate in other countries.

In reality, this success probably distracted central banks from confronting the hard questions about the buildup of financial risks that led to the global crisis. 4 It’s a stern reminder that we must resist confirmation bias and complacency. If the Bank’s history teaches anything, it’s that we must always be ready to consider questions that challenge our old answers. How do we do that?

By giving innovative thinking a central place in our strategic plan and by creating a corporate culture that fosters different perspectives and challenges the status quo.

In fact, the economy has been on a recovery trend in spite of the continuing decline of consumer prices year on year. This suggests that the current decline in prices is qualitatively very different from that experienced during 2001-02 when the fall in demand triggered anxiety about the economy falling into a deflationary spiral. VI.

Effects of quantitative easing The economic and price conditions confronting a central bank change with time. Under normal circumstances, the role of monetary policy is to respond to these shifting phases by making the appropriate adjustments to the tightness/easiness of the monetary policy stance.

Building up expertise in this new field takes time, and it also involves strategic planning on the recruitment side. But central banks are not the only employers wanting these skills, and competing against the private sector for the limited pool of highly sought-after experts is likely to prove challenging.

Apart from these operational considerations, there are also analytical, legal and ethical concerns related to the use of such data. For example, perennial pitfalls involved in analysing traditional data also apply to big data.

There are costs as well as benefits to using this tool, and so we have decided that forward guidance will be reserved for times when we believe the benefits to its use are clear – periods of market stress, periods when traditional monetary policy tools are constrained, and so on.

Climate Change Finally, climate change is another emerging risk that we are monitoring. Broad climate policy is 3/4 BIS central bankers' speeches the role of Congress and other federal agencies, not the Federal Reserve. The Board, however, expects all firms that it supervises, including insurance savings and loan holding companies, to manage all material risks, whatever the source—which can include climate risk.

Annexes 14 June 2022 Slides  ENGLISH 1. Aizenman, J., Hutchison, M. and Jinjarak, Y. (2013), “What is the risk of European sovereign debt defaults? Fiscal space, CDS spreads and the market pricing of risk”, Journal of International Money and Finance Vol. 34, pp. 37–59. 2.

77 81 85 89 93 97 01 05 09 13 Chart 5 Education and Training Cost of Education and Training 2.0 thous.

Let me assure all current and prospective operators in the industrial sector that the Central Bank of Nigeria stands ready to continue to provide the needed support, financial and otherwise, to fast-track the development of our industrial sector.

For those seeking to invest in new greenfield or existing brownfield projects, the Bank will continue to provide all the needed support, both in Naira and dollars specifically for the importation of plants and equipment to actualize these investments.

The broad approach has been to facilitate outward foreign direct investment by domestic companies through joint ventures and wholly owned subsidiaries up to 400% of their net worth; restrictions apply only in respect of investments abroad in real estate and banking.

Interest rates are gradually coming down (with average lending rate at about 16.9%, down from 25%). Currently, commercial bank branches have gone up from about 3,200 before reforms to over 4,100, and total employment in the sector has gone up from about 55,000 before reforms to over 61,000 currently.

Last but not least, as regards the sequencing of reforms, the appropriate strategy is: product market reforms come first and are then followed by labour market reforms (whereas in the case of Greek MoUs the exact opposite took place). {In my latest two-volume book “The Double Sovereign Debt – Banking Crisis”, 2015) I explain all the above in more detail.} 2.

On how to revive the Greek economy In response to Paul Volcker’s earlier remark that Greece is a relatively small country and it wouldn’t be difficult to achieve a turnaround of its economy, I would like to say a few words. Indeed, Greece is a small country, only accounting for 1.76% of the euro area’s GDP [and just 0.38% of the world’s GDP].

As we move toward greater risk sensitivity in our regulatory capital framework, and greater alignment with what banks are doing internally to manage risk, the way in which we as supervisors assess the adequacy of capital levels must consider the sources of these fluctuations more than ever before.

I did not do myself any favours either by talking of a financial stability czar, with an oversight of work across various divisions of the Bank and indeed beyond the Bank. Since then, the Bank has published three Financial Stability Reports at six-monthly intervals.

As regards the Financial Stability Committee which is being installed today, in accordance with the intentions of the legislature I see it as: • the pilot for the collection and development of expertise relevant to the professions of both supervisor and central banker; • a place for dialogue and consultation, certainly for providing warning of financial instability but also, if necessary, for managing such situations; BIS Review 34/2003 1 • a body in charge of organising certain synergies between the three institutions (tomorrow it will be two: the BFIC and the NBB), in order to achieve economies of scale in their operation, all without affecting the specific responsibilities of each institution.

To quote an expression used by my colleague at the European Central Bank, T. Padoa-Schioppa, macro- and micro-prudential supervision are nowadays two sides of the same coin: distinct but inseparable.

My speech today describes the distinguishing features of commodity price movements over different time horizons, running from the very long run to the very short run. It then explores the various factors – both fundamental and speculative – that might account for their unusual behaviour.

Lessons of the crisis for central banks So, what are the lessons of the Crisis with respect to our approach to markets?

Notes: The real rate is constructed by subtracting the ten-year inflation-linked swap rate (ILS) from the nominal ten-year OIS rate. The vertical event lines refer to 19 February 2020 and 18 March 2020. Latest observation: 18 September 2020.

To give an idea of how our measures have helped, we estimate that the pandemic emergency purchase programme (PEPP) and the additional envelope under the asset purchase programme have reduced the term premium in the average ten-year euro area sovereign yield by between 45 and 80 basis points. The impact on lending conditions has been significant.

It has achieved this by reducing the number of distressed borrowers who would be forced to sell their homes and by lowering house price inflation during the housing market upswing, thereby bringing house prices more in line with economic fundamentals. 9 Lu, 2019.

6 We estimate that, had we not imposed the LVR restrictions, mortgage losses in a severe economic downturn involving a fall in house prices would absorb nearly all the capital banks hold against their housing loans (figure 4).

To illustrate, the share of housing in incremental bank credit has increased from 2.9 per cent in 1995-96 to 11.1 per cent in 2004-05, while the share of industry went down from 64.9 per cent in 1995-96 to 25.6 per cent in 2004-05.

4 Data for retail credit is not available prior to 1998-99; its share too has increased from 19.4 per cent in 1998-99 to 24.3 per cent in 2004-05. Nonetheless, in the light of high credit growth, there is a need to ensure that asset quality is maintained.

Ultimately, this re-introduced risk through another channel: the financial structure of economies changed in a way that was more likely to amplify certain types of shock once they occurred. The great moderation has ended for many of the world’s most advanced economies.

They have become re-acquainted with the business cycle, in its most unstable and unpredictable form, where financial shocks and real economic activity become highly, or even dangerously, connected, through balance sheets. It’s an old lesson, but worth re-stating. No country has managed to eliminate the business cycle.

The classic reference, Meese and Rogoff (1983), showed that existing exchange rate models based on economic fundamentals could not reliably out-predict the naïve alternative of a “no-change” forecast for year-to-year changes in major-industrial-country exchange rates. Some more recent models can out-predict a “no-change” forecast (for example, MacDonald and Taylor 1993) but the basic empirical fact remains largely intact.

No-one has yet been able to uncover macroeconomic fundamentals that explain more than a modest fraction of year-to-year changes in industrial-country floating exchange rates. Frankel and Rose (1995, p 1707) summarise the dismal state of exchange rate empirical research: “… the case for macroeconomic determinants of exchange rates is in a sorry state.

Perhaps the gap series produced by the Council of Economic Advisers was viewed skeptically by some contemporary observers, but it was the “official” series published by the Commerce Department, and it was referred to by the Federal Open Market Committee (FOMC) in its policy deliberations.

It does not surprise me that forecasters took several years to catch up to the adverse developments in trend productivity and the demographic factors that boosted the NAIRU; in the 1990s, we took a while to realize the implications of favorable movements in both variables even though we were aware from the experience of the 1970s that such changes were possible.

It would adopt a value chain approach to lending and banks would be free to choose which part of the chain they would be interested in lending.

It would build the capacity of banks to engage and deliver loans by providing technical assistance, reduce counterpart risks facing banks through innovative crop insurance products, reward performance in agricultural lending and would be managed with performance based incentives.

Last spring, giving a virtual keynote speech in an online conference was something new and exciting. Today, over a year later, it is not like that anymore. Hopefully, it won’t be too long before we get back to a bit more of a normal situation again.

Ladies and Gentlemen, a decade ago the importance and criticality of payment systems was only heard and understood exclusively within banking circles. Payment 2 BA ES O F GH A NA NK T. 1 9 5 7 services were entirely a space dominated by banks.

Chart 15 Bank Lending Amount Outstanding of Bank Loans (lending by domestic commercial banks) 10 y/y % chg. Bank Lending Rates 2.0 1.8 8 1.6 6 % Bank lending rates (long-term) 1.4 1.2 4 1.0 2 0.8 0.6 0 0.4 -2 Bank lending rates (short-term) 0.2 -4 CY 05 06 07 08 09 10 11 12 13 14 15 16 17 Source: Bank of Japan.

It is noteworthy that as European banks sought to pull back from some activities in the region, including trade finance, banks from within the region have stepped up. So this is a point for confidence. This is not to say that there are no sources of vulnerability.

Following the collapse of Lehman Brothers, the ECB further strengthened cooperation with other central banks in order to facilitate the access of euro area banks to liquidity in USD and Swiss Francs.

I wish you well on your IFRS 9 implementation journey and hope you will enjoy the workshop. Thank you. Page 9 of 9

Such a step-down in non-housing core inflation, if sustained over several months, would be a big improvement in inflation, and I think it is quite possible to get there because of the considerable tightening of monetary policy that has occurred so far and additional anticipated tightening.

But this exercise shows why it is so important for the FOMC to maintain its focus on the appropriate path of monetary policy in order to moderate demand.

If we did not, we would typically be over-reacting, and pushing interest rates around more than medium-term considerations would warrant - and that might even exacerbate exchange rate fluctuations over time.

Some, of course, would suggest that we should be more active and should adjust the OCR, not just to offset the dampening impact of the exchange rate, but to try actively to reverse, or slow, the rate of increase in the exchange rate.

What also concerns us is that, while pass-through is relatively low, there may well be non-linearities in pass-through coefficients. In other words, if we were to see significant downward movements in the exchange rate, the effects on 4 inflation could be a bit more serious. This is, however, a low probability scenario, but it could have a high impact.

And if anything, COVID-19 has taught us to take low probability, high impact shocks seriously. Lastly, and linked to the above, is the impact of fiscal policy on the country’s risk premium.

Despite the dominance of the diamond sector, other sectors of the economy, including tourism and financial services, have grown in importance over the years.1 Several indicators suggest that the development process pursued by Botswana has been very successful. For instance, per capita income grew at an average annual rate of 8.4 percent between 1966 and 1990.

Despite a slowdown in the 1990s, Botswana has registered annual GDP growth rates which few other countries have matched, particularly in the past 20 years. As a result of the good economic performance, the country has graduated from being very poor at Independence to one of the relatively rich in the region, and has achieved middle-income status.

In this context, the European Council called for the operational framework for direct bank recapitalisation by the ESM to be ready by the first semester of 2013.

[17] Despite significant progress in recent years to develop a more coherent policy framework for cross-border banking, namely with the single rulebook and the creation of European supervision and resolution. [18] See De Haas, R. and Popov, A. (2019), “Finance and Carbon Emissions”, ECB Working Paper No 2318. [19] Just 20% of euro area equity holdings are issued in other euro area countries.

Meanwhile, government spending is likely to increase steadily through fiscal 2020, mainly due to (1) expenditure such as for disaster-related restoration and reconstruction as well as national resilience, both of which reflect the Comprehensive Economic Measures to Create a Future with Security and Growth decided by the Cabinet in December 2019, and to (2) Olympic Games-related demand.

Thereafter, it is expected to remain at a relatively high level and underpin economic activity.

Changes in the global financial market have swelled global excess liquidity, exacerbated by more varied sources of liquidity for funding, cheaper financing cost as a result of a permanent decline in global inflation over the last decade, and the emergence of new growth centers that support wealth creation of the growing middle-class (“new money”) in the global economy, especially in emerging countries.

With its free foreign exchange regime, changes in the global financial system and increased global excess liquidity have made our domestic financial system appear shallow, with instruments limited to mainly shares, SUN and SBI. Problems then arise as, despite its lack of depth, our financial market in the past few years have provided yields that attract shortterm investors.

In the paper, we discussed the benefits and costs of a variety of policy options that have been proposed to respond to these difficult housing issues, including increasing credit availability for households seeking to purchase a home or to refinance an existing mortgage; exploring the scope for further mortgage modifications, including encouraging short sales and deeds-in-lieu of foreclosure in cases where foreclosure cannot be avoided; and expanding the options available for holders of foreclosed properties to dispose of their inventory responsibly.

Any policy proposals, though, will require wrestling with difficult choices and tradeoffs, as initiatives to benefit the housing market will likely involve shifting some of the burden of adjustment from some parties to others. I greatly appreciate the leadership that the Senate Banking Committee has shown on the profound challenges facing the housing market.

The latest financial crisis clearly underscored that financial markets need strict and prudential regulation. Otherwise, they cannot perform their function of serving the real economy, and the stability of the financial system could be put permanently at risk. A prosperous economy needs a healthy and efficient financial system. Well-designed financial services help economies to grow.

However, John Kenneth Galbraith also warned: “Financial disaster is quickly forgotten”. We should take his words seriously. Complaints of overregulation should not be raised because of short-term concerns about one’s own profitability. On the other hand, our regulatory efforts should be subject to cost-benefit analyses, and any assessment of their impact should also take into account the interactions between different regulations.

Stanley Fischer: (Money), interest and prices – Patinkin and Woodford Speech by Mr Stanley Fischer, Vice Chair of the Board of Governors of the Federal Reserve System, at “A Conference in Honor of Michael Woodford’s Contributions to Economics”, cosponsored by the Federal Reserve Bank of New York, Columbia University Program for Economic Research, and Columbia University Department of Economics, New York City, 19 May 2016.

* * * The Footnotes can be found at the end of the speech.

In fact, as I have noted, Japan’s economy has continued to recover moderately, and the underlying trend in inflation has been improving steadily in a situation where wages have increased moderately.

The willingness of governments to bail-out failing financial firms and their creditors in the crisis has exacerbated the temptation for financiers to take excessive risks. Heads they win, tails the Government picks up the tab. (To be sure, this is not the whole story.

The argument here has two parts: On the one hand, there should be no doubt that the rules that are in place have to be respected. This is not some kind of theological dogma.

-5used of the models the Board staff has at its disposal.8 FRB/US is an estimated, largescale, general-equilibrium, New Keynesian model.9 Each of the adjectives is noteworthy, so I will briefly cover each in order.

4.1 Direct quantitative easing When the central bank decides to expand the size of its balance sheet, it has to choose which assets to buy. In theory, it could purchase any asset from anybody. In practice, however, quantitative easing has traditionally focused on buying longer-term government bonds from banks.

The idea is twofold: first, sovereign yields serve as a benchmark for pricing riskier privately issued securities. When long-term government bonds are purchased, the yields on privately issued securities are expected to decline in parallel with those on government bonds. Second, if long-term interest rates were to fall, this would stimulate longer-term investments and hence aggregate demand, thereby supporting price stability.

The forecasts by international organizations and private institutions were constantly revised upward and U.S. and European stock prices were on an uptrend. When looking at the yield curve of interest rates in the U.S. dollar markets, up to early spring 2010, it factored in a possibility that the Federal Reserve will raise the federal funds target rate by the end of 2010.

3 However, after overcoming initial problems and period of adjustment to local conditions, foreign investors successfully run businesses for a long time and we are very proud that most of investors are staying and reinvesting in the country.

3 See the Monetary Policy Handbook (Williams, et al., 2019). 4 See Hawkesby (2019). Inflation Dynamics: Upside Down, Down Under?

Mortgage arrears have now fallen for 13 successive quarters and by 44 percent from peak, with over 121,000 mortgage accounts restructured, and 88 percent meeting the terms of their restructured arrangement. As discussed at this Committee two weeks ago, the scale of mortgage distress means that mortgage lending is inherently riskier in Ireland than other euro area member states.

Lower inflation begets lower interest rates; higher inflation begets higher interest rates. Having made the case for low inflation, let me also argue that the Reserve Bank is not populated by inflation nutters. Within our mandate, we have been tolerant of periods of higher inflation when we think that higher inflation would be temporary or has been caused by an external shock.

8 BIS central bankers’ speeches aggregate demand is expected to be broadly matched by lower growth of the economy’s productive capacity, which in turn follows from less growth in the labour force. While that is what we expect, there is considerable uncertainty about both the rate of population growth and its effects on spare capacity. An example might be helpful here.

This is important because low unemployment brings with it very real economic and social benefits for many Australians and their communities. Full employment is one of the RBA's legislated objectives and the Board is committed to playing its role in achieving that objective, consistent with also achieving the inflation target.

Monetary policy in Canada has one objective – achieving and maintaining a low, stable and predictable level of inflation. This objective was formalized in 1991 in an inflation-control agreement between the federal government and the Bank.

It is always useful to start with the facts. This first graph (Graph 1) shows the average rate of inflation for a range of countries over the past two years (the blue bars) as well as the average rate over the past 20 years (the black dots). In almost all economies, inflation has recently been noticeably below its long-term average.

1 / 13 BIS central bankers' speeches This second graph (Graph 2) shows a time series of headline and core inflation rates averaged across the major advanced economies. Again, the picture is clear.

b) Corporate imprudence The imprudence of the corporates can be attributed as the second most important factor for poor asset quality in the system. Some of the major failings that the corporates exhibited are: c) • Overleverage – All debt, no equity; Veiled corporate structures impeded assessment by banks • Obsession for higher growth- Excess capacities, Unrelated diversification.

The liquidity generated due to ultra-accommodative monetary policy stance by Central Banks in advanced economies also created misaligned incentives. • Chasing profits eg. ignoring risks inherent in unhedged forex exposures Corporate misdemeanors Not all promoters/borrowers have had a clear conscience and some of them were out to dupe the system by using foul means.

As a result, the increase in interest rates should be the combined response to a slight increase in the estimate of the NAIRU and to an increase in the inflation rate at an unchanged estimate of the NAIRU.

A final component of the strategy, in my view, should be that policy should tighten further - above and beyond what is presumed to be necessary to slow the economy to trend - to the extent that efforts to stabilize the output gap fall short.

After short-term interest rates in major economies including Japan declined to virtually zero, the scope of the operational tools of monetary policy has expanded from a traditional way of “raising and cutting interest rates” to the area of unconventional policy tools such as the purchase of various financial assets. Therefore, please forgive me if some parts of my speech inevitably become somewhat technical. I.

“The Price Stability Goal in the Medium to Long Term” Numerical Expression of Price Stability I will begin with “the price stability goal in the medium to long term.” This is the inflation rate that the Bank judges to be consistent with price stability sustainable in the medium to long term.

Monetary policy has only a modest role to play there – other policies will be much more important, and they will be tested. There is also the question of how all that adjustment will dovetail with policies towards climate change, which are in the formative stages at present.

Those charged with constructing such policies are dealing with hitherto unimagined degrees of uncertainty and the challenges seem to be of an order of magnitude bigger than the ones faced by monetary policy.

Here in New Zealand, for example, the Government recently opted to increase and bring forward its infrastructure investment. 16 This action has supported monetary policy in meeting its mandate, increasing activity and employment. The nature of the economic shock that authorities may be looking to mitigate will inform the choice of tools.

6 European Systemic Risk Board, op. cit. 7 Oswald, A. and Stern, N. (2019), “Why are economists letting down the world on climate change?”, VoxEu contribution, 17 September 2019. 8 Parker, M. (2018), “The impact of disasters on inflation”, Economics of Disasters and Climate Change, 2(1), pp. 21–48.

The emerging economies group contains Argentina, Brazil, China, India, Indonesia, Korea, Mexico, Poland, Russia, Saudi Arabia, South Africa and Turkey. Sources: IMF, Bank for International Settlements.

At the country level, China represents the greatest risk to global growth given its impact on global trade volumes and commodity prices, the rapid build-up in corporate indebtedness and the difficult switching strategy (away from investment and manufacturing towards stronger private consumption and services) that is underway. China accounted for 40 percent of global growth in 2014.

The PBC and the financial community will continue to support the advancement of the GEM in the future. At present, China’s economy is at the key juncture of stabilization and recovery.

Having said all these, I am looking forward to a productive, open, and stimulating discussion with you and will be receptive to your insights. Thank you and mabuhay. 3/3 BIS central bankers' speeches

It is a happy stroke of fate that Europe today largely reconciles both approaches: - Adenauer’s desire for lasting Franco-German friendship, embedded at the same time in joint institutions; - and Erhard’s desire for the merging of the whole of free Europe, basically along market-oriented lines.

Our banks maintain their ratios of capital to risk exposures, and high-quality liquid assets to possible cash outflows in case of financial stress, at levels way beyond domestic and global standards. This ensures the banks’ ability to continue to finance the growing economy and their resilience in times of stress. How long will our banks’ positive performance last?

Initially, during the late summer, there were deep concerns that a cut in the Russian energy supply would cause a severe recession, at least in some euro area countries. Fortunately, European countries and Germany in particular made considerable progress in finding alternative gas suppliers and in filling gas storage facilities before the winter. Thus, the most negative scenario was avoided.

If educational policies increase school enrolment rates, how does one quantify the benefits of reduced youth unemployment and perhaps even reduced youth crime rates? The need to quantify benefits of (economic) policies without knowing the counterfactual is not unique to financial sector reforms.

To make matters even more challenging, potential REO inventories may be larger than the current inventory numbers indicate. The Brooking Institution’s Alan Mallach provides us with an article that focuses on the growing number of properties that are delinquent or in the foreclosure process, but have not yet entered the market as REO.

4 BIS central bankers’ speeches So, when we say our measures intend to bring our balance sheet back to levels seen in early 2012, what we are really saying is that – given the current composition of the unconventional monetary policies that we have put in place – this is the amount needed to bring inflation in the medium term back to levels closer to 2%.

This can be both time consuming and resource intensive for a bank. Second, the differences in the roles and responsibilities of home- and host-country supervisors can create challenges.

The existence of a long term credit yield curve enables businesses and institutions to gauge cost of capital and rates of return, and thus facilitate informed investment decisions. Ladies and Gentlemen, the Bank of Ghana is especially interested in the domestic capital markets also because it acts as a transmission channel for monetary policy.

In particular, the replacement of short-term debt by long-term bonds means that less debt will have to be rolled over in the near term at higher rates. In addition, because much of the long-term debt has a fixed rate, interest payments typically are unaffected over the life of the bond.

A growing number of firms are looking to cut costs by importing more inputs. We've certainly seen this type of adjustment taking place among manufacturers of telecommunications equipment. Other firms are phasing out the production of goods and services with low profit margins and concentrating on those that yield higher returns.

Of course, although it is vital, we cannot take any legislative solution for granted until it becomes law. The continued publication of LIBOR will help provide more time to make sure that we are fully ready with the necessary solutions when LIBOR stops. It will also potentially allow other jurisdictions more time to craft their own legislative proposals.

The European Union has already passed legislation that is similar to the ARRC’s proposals. The United Kingdom is considering legislation that would grant the FCA powers to require IBA to produce a synthetic LIBOR, and the FCA has said that it will consult on using these powers to require IBA to produce synthetic sterling LIBOR and Japanese yen LIBOR rates.

• Still, the impact of turbulences on the real economy is the current focus of attention. As you know, in recent decades many countries have experienced some financial turbulences and banking crises. Much of the economic literature reveals that financial turbulences involving the banking or financial sectors may lead to disruptions in the real economy.

The past banking crises in the developed countries illustrate the importance of the damage, both in terms of direct fiscal costs relating mainly to managing the crisis and loss of economic activity.

On behalf of Banco de Portugal and the organising team, a very warm welcome to you all! As you are aware, this workshop, hosted by Banco de Portugal, was organised in the context of the annual meeting away from Frankfurt of the Working Group on Public Finances of the European System of Central Banks.

In parallel the financial deepening process triggered by financial liberalization reinforced and was supported by the rising economic growth and activity. 5. Financial liberalization process in Pakistan has been remarkable.

While potential gains from the reforms may be to the advantage of the entire Mexican economy, certain sectors such as energy and telecommunications are likely to emerge as highly attractive destinations for FDI. 7 4 See Banco de México (2014), Quarterly Report, April – June 2014, Summary, August; and Blue Chip Economic Indicators, September 2014.

BIS central bankers’ speeches Finally, recent developments reveal that the Mexican economy has begun to rebound, and higher expected growth in the United States provides a foundation for the widely held forecast of Mexico’s gradual economic recovery. Some inflation risks should be watched, since if they materialize, they could make convergence to the 3 percent permanent target difficult.

A few months later, in March 2021, I made my first submission for the Summary of Economic Projections as an FOMC member. My projection had inflation above 2 percent for 2021 and 2022, with unemployment close to my long-run estimate by the second half of 2022.

Given this projection, which I believed was consistent with the guidance from December, I penciled in lifting off the zero lower bound in 2022, with the second half of the year in mind.

They need to ensure that their personal resources, along with what they expect to receive from government, will be sufficient to meet their retirement goals. Conventional advice from personal-finance professionals is that one should aim to accumulate sufficient resources to provide an overall replacement rate of about 70 percent to 80 percent in retirement.

Under current law, Social Security promises a replacement rate of about 42 percent for workers who earn the economywide-average wage each and every year through their careers and about 56 percent for low-wage workers who earn 45 percent of the economywide-average wage.2 Assuming that taxes are capped at the current 12.4 percent of payroll, revenues will be sufficient to pay only about 70 percent of current-law benefits by the middle of this century.

As these examples illustrate, many of the things that impact on the quantity and efficiency of the factors of production are quite broader than monetary policy and the ambit of central bank influence. 1/4 As we all know, economic growth might be a necessary but not a sufficient factor in employment creation.

On the basis of the revised data, economic activity has been growing at a quarterly rate of 0.7% on average over the last four quarters, the unemployment rate has been on a falling trend, employment growth has recovered and employment expectations overall have remained favourable. All in all, the economic recovery now appears somewhat stronger than on the basis of earlier data.

Currency futures have also been introduced in recognised stock exchanges since August 2008 to facilitate hedging by residents. 50. The sudden change in the external environment that started around mid-September 2008 led to heightened volatility in the currency market.

The Rupee exhibited a sharp downward trend, like other emerging market currencies, in the backdrop of de-leveraging in global financial markets, sharp declines in equities markets and deterioration in the interbank money markets prompting investors to shun emerging market assets. While FDI flows exhibited resilience, access to ECBs and trade credits was rendered somewhat difficult.

Figure 12 Assets under management (per cent) Assets under management as a share of households’ financial assets (1) Main financial assets of institutional investors in 2020 (2) 45 45 100 100 40 40 90 90 35 35 80 80 30 30 70 70 25 25 60 60 20 20 50 50 40 40 15 15 30 30 10 10 20 20 5 5 10 10 0 0 0 Italy France 2012 Germany 2020 Euro area Italy France Italian government securities Investment funds Securities issued by resident firms Germany Euro area 0 Foreign government securities Securities issued by non-resident firms Source: Bank of Italy and European Central Bank.

Notes: (1) The assets under management figure includes shares in investment funds, insurance policies, pension funds and supplemental pensions plans, excluding severance pay; includes residents’ holdings of foreign funds; the comparison between the different countries is affected by heterogeneities in the classification of severence pay. (2) Excludes asset management companies.

The G20 postimplementation evaluation, which is being discussed in a plenary session at this conference tomorrow, is therefore a necessary exercise. Streamlining regulation is important. But at the same time, we must not forget to examine the question of whether we are all the way there yet in terms of financial stability, particularly with regard to the crucial issue of too-big-too-fail.

Central banks also need to put more collaborative efforts into making an analysis of global financial conditions and enhancing further information sharing. I find it increasingly important to monitor the international dimension of the risk-taking channels with regard to the transmission mechanism of monetary policy.

At the lower bound a fall in inflation expectations implies a rise in real interest rates, so this development risked generating a contractionary effect that would offset, at least in part, the benefits of the fall in oil prices.

Moreover, given high debt levels in parts of the euro area, this would be amplified if second round effects set in and real debt burdens increased, as borrowers tend to have higher propensities to consume and invest than lenders. It was in this context that we moved into the third contingency by engaging into outright asset purchases.

In fact, Japan is exhibiting the highest pace of growth in labor productivity among G7 countries (Chart 11). In order to further improve labor productivity, it is important to increase value added, which is the numerator of labor productivity. To this end, it is necessary to further create and exploit potential demand.

In taking these actions, BoG sought to:    protect the deposits (about GHS11 billion) held by these defunct banks; ensure that these defunct banks exited the market in an orderly fashion without creating disruptions to the rest of the system; and allow stronger institutions to operate and support the economy. 2 Q.

Maintaining and encouraging soundness and efficiency We strengthened the first pillar of self discipline, in the middle of last year, by implementing a policy of "fit and proper" review of appointees to positions as senior managers or directors of registered banks. Recruitment into these positions is still the sole responsibility of the banks' respective boards.

The `fit and proper' policy simply means that the Reserve Bank seeks a "negative assurance" when appointments to senior management or boards are made. In no way does this relieve boards of their responsibilities. Our outsourcing and local incorporation policies also reinforce that a bank's board must act in the interest of the New Zealand bank.

There are some promising lines of inquiry begun by academics, including funding-cost advantages enjoyed by large firms; possible diseconomies of scope resulting from firm 2 BIS central bankers’ speeches complexity; and the effect of market concentration and firm size on intra- and inter-firm diversification.

At this stage, the Reserve Bank staff are assuming that the terms of trade will fall in the latter part of the forecast horizon. The associated assumptions about key resource prices are toward the conservative end of current market forecasts, which typically assume a smaller fall in prices.

Currently, their assets account for about one third of all assets of non-bank financial intermediaries within the euro area. That is of course already a sizeable figure, but in view of our ageing societies, those institutions can be expected to be of further increasing significance for the economy and the entire financial system.

FMIs play an important role in financial markets, and any liquidity support offered by central banks should be to mitigate shocks emanating from the real economy, not from gambling in risky assets. Regulating banks Finally, we need to look at the banking sector.

To offset additional demand pressures, SBP had to further raise its policy discount rate by 50bp in July 2006 along with 4.5 percentage point upward revision in reserve ratios. In line with the evidence observed for developing countries, impact of monetary tightening on curbing inflation started to be visible after 12-18 months or so.

As aggregate demand pressures moderated, 2 BIS Review 42/2007 CPI fell to 7.9 percent in FY06 (remaining well within the annual target of 8%) and CPI continued to decline to 7.7% in March 2007 with core inflation being still low at 5.4%.

Enabling Access to MSME Credit To promote MSME access to finance, we have pursued continuing prudential reforms to improve the overall environment for credit allocation in the economy. We implemented the comprehensive credit risk management (CRM) guidelines for banks under Circular No. 855.

Government’s key priorities have therefore been investing in people through better schooling, skills development, extending municipal infrastructure, targeting support for industrial clusters, small business development, strategic trade linkages, extending electrification and telecommunication networks. 2 BIS Review 8/2002 4.

Changes in the Role and Uses of Credit Ratings Credit rating agencies should: • Implement the revised IOSCO Code of Conduct Fundamentals for Credit Rating Agencies to manage conflicts of interest in rating structured products and improve the quality of the rating process; • Differentiate ratings on structured credit products from those on bonds and expand the information they provide.

To prevent this confidence from being undermined, the country must 9 continue resolutely on this path: by improving the efficiency of the State and of the entire public sector in lawmaking, administration, and the delivery of services to citizens; by creating a businessfriendly environment; and by promoting research and innovation. Stability and reform are essential for development.

But in contrast to most cleared derivatives, the cash payments involved are very large because counterparties exchange cash for the delivery of the security on a gross basis. I will look at these risks from two perspectives, first in terms of the payments that CCPs must make, and then in terms of the payments they expect to receive.

Payment Flows from CCPs In the case of a member’s default, a CCP must be equipped to make the cash payments owed to non-defaulting counterparties when due. This requirement can be met as long as there is sufficient margin, mutualized resources such as the guarantee fund, or the CCP’s own resources held in cash and in the required currency.

TFP growth accounted for about 20 per cent of India’s aggregate GDP growth during this period, coinciding with the contribution of both capital and labour declining. GDP growth in India has remained relatively resilient, averaging close to 7.0 per cent during 2000 to 2022 with some ebbing of capital formation and employment growth in sync with the deceleration in TFP growth.

For the period 2022-30 the World Bank projects India’s potential growth to reflect the outlook for south Asia. Underlying the generalised productivity slowdown are several confounding puzzles, at least from the policy practitioner’s point of view. I will focus on a few important ones in the interest of time.

The increased trading of securitized credit instruments has accompanied, as both cause and effect, the explosive growth in the market for credit derivatives. Meanwhile, derivatives and structured products in other risk categories, such as interest rates, foreign exchange and equities, have also continued to grow in volume and complexity.

The nominal growth in such loans at community banks - $ billion - essentially accounted for all of the asset growth at these institutions, while amounting to only about one-seventh of asset growth for the industry as a whole. By the end of 2003, this lending had reached 25.1 percent of aggregate community bank assets.

That disproportionately affected youth, women and low-wage workers. The closure of schools and daycare centres also hit women harder, and they experienced a larger decline in both hours worked and their participation rate. Never before has so much of the economy been shut down, so suddenly and for so long.

Engen, Laubach, and Reifschneider estimated that the Federal Reserve’s asset purchases are currently holding down term premiums by about 60 basis points, less than the estimate of Bonis, Ihrig, and Wei, but their findings still imply a similar small effect of bringing forward the date of normalization by six months; see Bonis, Ihrig, and Wei, “Effect of the Federal Reserve’s Securities Holdings,” and Engen, Laubach, and Reifschneider, “Macroeconomic Effects,” in note 16.

Abolishing sector and bank credit limits, central bank adopted “3-day SBP discount rate” as a major policy instrument to signal easing or tightening of monetary policy which essentially responded to the demand pressures of the economy in line with the growth trends in monetary liabilities and monetary assets – with former capturing the growth in currency and deposit base and latter the growth in domestic credit (including both government borrowings and private sector credit).

Particularly in Europe, banks relied too much on wholesale funding reaching an average creditto-deposit ratio of 145% in 2007, a level that stands now at 120%. In this perspective, a mandatory NSFR is quite relevant and should not be weakened or delayed. Maturity transformation by banks is very much driven by housing financing and long-term mortgages.

Others have argued that higher safety buffers are not empirically associated with lower odds of banking crises in the long run (Jordà et 6 al., 2021). Moreover, in some parts of the world, initially stringent liquidity and capital standards devised in the aftermath of the 2007–2008 financial crisis have been significantly watered down since.

If one believes political economy explanations, this should not come as a surprise: deposit insurance can result from a political motive to subsidize risky banks (Calomiris and Haber, 2014). From this perspective, it would defy logic if prudential regulation were too effective in preventing risk-taking as this would diminish previously extracted economic rents.

Since May 2013, sentiment has shifted dramatically in global financial markets when US Federal Reserve Board Chairman Ben Bernanke made a small announcement that had big unintended consequences.

Accordingly, the second stage of our monetary policy challenge is to deliver this goal: once we have returned towards the pre-pandemic inflation path, we have to ensure that our monetary policy stance is appropriately calibrated in order to ensure timely and robust convergence to our medium-term inflation aim.

3 / 16 BIS central bankers' speeches Slide 3 Notwithstanding these improvements, the growing uncertainty surrounding the strength of the world economic recovery, and of the US in particular, makes the normalisation of inflation and unemployment levels in the euro area more difficult (see slide 4).

19 The morality of global imbalances If the gains to rebalancing are so considerable, why isn’t it assured that countries will take the necessary steps? There are two issues: misdiagnosis and coordination. Regarding the former, some view global imbalances, not as a missed opportunity but, rather, a modern morality tale.

Everything achieved in the past years – from the attained and preserved price stability and relative stability of the exchange rate, through anchored inflation expectations, orderly public finances and the improved external position of the country, to high FX reserves, a strong financial system and increased monetary policy efficiency – helped us tackle this unprecedented global crisis in a much better position.

Another could be that since rice and wheat are the primary food commodities procured at the MSP, production is distorted towards rice and wheat, leading to a suboptimal production mix by farmers – too much rice and wheat, and too little of other needed commodities. Both these explanations would suggest the need for more moderation as the government sets the MSPs in coming months.

Of course, I will be more than willing to take your questions afterwards. First of all, the most prominent example of European financial integration currently is the establishment of the “Single Euro Payments Area”– in short, SEPA. The SEPA project, as well as other integration projects in payment systems, pre-dated the current financial crisis.

BIS Review 39/2006 3 Moreover, financial entities have become increasingly conscious about risk management practices and have instituted risk management models based on their product profiles, business philosophy and customer orientation. Additionally, access to credit has improved, through newly established domestic banks, foreign banks and bank-like intermediaries.

In addition, the government's emergency guarantee scheme that takes on a portion of credit risks in place of private financial institutions and a framework established by the revision of law in December 2008 to enable injection of public funds into financial institutions seem to be contributing to forestall an intensification of the adverse feedback loop.

Furthermore, the Bank has introduced measures such as purchases of stocks held by banks and provision of subordinated loans to banks. The measures we have taken are aimed at providing financial institutions with means to secure necessary capital even if they become concerned about increases in credit risks and a fall in stock prices, thereby ensuring smooth functioning of financial intermediation.