diff --git "a/Audiences/BIS_prelabelled.csv" "b/Audiences/BIS_prelabelled.csv" new file mode 100644--- /dev/null +++ "b/Audiences/BIS_prelabelled.csv" @@ -0,0 +1,7989 @@ +,Parsed_Text,label +0,the unemployment rate last year averaged just under 4 percent the lowest such annual figure since 1969,0 +1,"in addition the end of extended unemployment insurance benefits +and other factors likely have decreased the natural rate of unemployment that is our target",0 +2,"for persons with only a high school diploma both the rates of j oblessness and the disparity between t he rate for blacks and that for +whites were greater an unemployment rate of 85 percent for blacks versus 4 percent for whites",0 +3,but once the shortterm unemployed pool is depleted then the longterm unemployed will become more relevant to the labor market supply so their impact on wages and the labor market will likely increase as the labor market tightens,0 +4,"this is almost the same level as the structural unemployment rate which is +estimated to be around 35 percent",0 +5,"if we include those in labour market +policy measures unemployment still amounts to almost 7 which indicates about 3 more +unemployed now than in the 1970s and 1980s",0 +6,"the unemployment rate is almost 1 percentage point lower than it was a +year ago but we are still far from full employment",0 +7,"if these structural conditions change over time the long run +sustainable rate of unemployment will also change",0 +8,the unemployment rate has come down to 36 percent for the first time in nine years,0 +9,euro area unemployment declined to 81 in august its lowest level in almost ten years,0 +10,"the unemployment +rate has fallen from a peak of 84 to 6",0 +11,"given our forecasts for labour force growth this implies that the unemployment rate will drop to 49 per cent this year and 47 per cent next year6 +so our central forecasts indicate that the current economic prospects for the irish economy are quite robust",0 +12,the severely adverse scenario is anticipated to feature an unemployment rate over the first six to eight quarters of the scenario that increases between 3 percentage points and 5 percentage points which is the amount by which unemployment has increased in the most recent three severe recessions,0 +13,"the rate of unemployment is likely to +rise further",0 +14,"youth unemployment still contrasted sharply +with overall unemployment",0 +15,unemployment is at historically low levels,0 +16,"moreover t he unemployment rate +has been declining and is in the range of 30 35 percent for the first tim e in 18 years since +1997",0 +17,the unemployment rate has moved up a little over recent months and wage growth remains subdued,0 +18,this number is much larger than we would expect at 67 percent unemployment based on past experience and the existence of such a large pool of partly unemployed workers is a sign that labor conditions are worse than indicated by the unemployment rate,0 +19,"the social safety net must guarantee adequate income support to anyone who loses a job +and is actively seeking another",0 +20,the time lag between gdp and unemployment also appears to have increased during the 2000s,0 +21,"on the +other hand the unemployment rate albeit falling still remains above 10 amid a continuous + +2 bis central bankers speeches + increase in the participation rate in the labour force since the crisis",0 +22,in addition the unemployment rate is not the only gauge of labor market slack and other measures have been suggesting there is some room to go,0 +23,in america the unemployment rate peaked at 10 per cent in october 2009 and is now at 5½ per cent,0 +24,"registered unemployment has remained steady at +about 2½ per cent since the beginning of 1998",0 +25,the unemployment rate currently at around 12 remains unacceptably high,0 +26,"if these jobless workers were to become less employable the natural +rate of unemployment might rise or to the extent that they leave the labor force we could +see a persistently lower rate of labor force participation",0 +27,"in the event the +unemployment rate in the uk peaked at 85 or 27 million people",0 +28,the unemployment rate is expected to keep falling in 2016 although at a slow pace that should pick up in 20172018,0 +29,in fact spanish data in may showed unemployment falling to just under 20 per cent for the first time since the global financial crisis,0 +30,as i noted earlier the unemployment rate is now at a fiveyear low of 434 percent,0 +31,"for example the cha nge in the unemployment rate in a county can +be used as a proxy for disruptions in family incomes and subsequent financial stress",0 +32,in the second quarter of 2009 the unemployment rate unfortunately increased to 236 per cent,0 +33,and yet as i said most of them have singlefigure unemployment rates at less than half the spanish rate,0 +34,"this can also be seen by +the comparatively large number of longterm unemployed",0 +35,finally you can see unemployment by historical standards is quite low,0 +36,the recent developments in nominal wages have been mostly consistent with those suggested by the wage phillips curve which shows the historical relationship between the wage growth rate and the unemployment rate,0 +37,the unemployment rate for those without a high school diploma is 112 percent,0 +38,second labor market conditions are becoming tighter as indicated by the decline in the unemployment rate,0 +39,"but it is not unreasonable to expect this margin of +potential hours worked to move in line with unemployment",0 +40,as a result the unemployment rate is likely to decline over the near term at a very gradual pace if at all,0 +41,"youth unemployment has more than doubled i n some countries +the rise of youth unemployment since the start of the crisis is stupefying",0 +42,"indeed although i expect that growth will pick up and unemployment will decline somewhat next year we cannot rule out the possibility that unemployment might rise +further in the near term creating added risks for the recovery",0 +43,registered unemployment is projected to remain at about todays level to the end of the year,0 +44,in france its the opposite less inequality but higher unemployment,0 +45,the labor market has been tight and the unemployment rate was 35 percent declining to roughly the same level as the structural unemployment rate,0 +46,"moreover the unemployment rate has already dropped to around 3 percent a level closer +to the natural unemployment rate and along with the decline in the working age population +the labor shortage is increasingly evident",0 +47,"in the unit ed states employment levels have continued +to decline during the autumn with unemployment rising to approximately 10 per cent",0 +48,"as the economy strengthens prospects for labor markets will continue to improve with the unemployment rate descending to between 7 to 7½ percent by the end of +2012",0 +49,we expect the unemployment rate to decline further to an average of 52 per cent next year down from 67 per cent last year and the 2012 peak of 155 percent,0 +50,when estimating the sustainable rate of unemployment it is also important to include the assessed effects of labourmarket reforms forslund 2008,0 +51,ohios unemployment rate has declined even more during the recovery than the nation as a whole and at 52 percent in may it was somewhat below the us average in that month,0 +52,"current conditions in the labor market +as i noted the national unemployment rate has declined markedly during the economic recovery",0 +53,the unemployment rate remained low at 55¼ per cent,0 +54,employment has steadily increasedand unemployment has fallen to its lowest level for 25 years,0 +55,the population aged over 15 that are working or are available for work,0 +56,at present unemployment is at a higher level than it was prior to the 1990s crisis,0 +57,"chart 3 plots these estimated compositional effects on average wage growth against the +change in unemployment",0 +58,our expectation is that this pattern of job creation and of gradual reduction in the unemployment rate will continue although perhaps somewhat more slowly,0 +59,"despite this rather tepid increase in jobs the unemployment rate fell a +cumulative 05 percentage points from september to december",0 +60,it is projected that unemployment in the us could soon reach doubledigits,0 +61,at a time that us unemployment is very high this is a particularly unacceptable outcome,0 +62,"unemployment in the eu and the euro area has reached historic levels +especially amongst the youth",0 +63,employment growth has also remained firm although an increasing mismatch between the number of unemployed and job vacancies points towards more slack in the labour market,0 +64,the unemployment rate further fell to 81 per cent in 2022q2 from 87 per cent in 2022q1,0 +65,the unemployment rate remained elevated in may at 58 percent and this figure understates the shortfall in employment particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year,0 +66,"however the unemployment rate is an inadequate indicator of +labour market slack particularly when the participation rate fluctuates",0 +67,"however the unemployment rate continues to be high and hence the employment and income situation of +households overall still remains severe",0 +68,in particular if the unemployment rate were already below its longerrun natural rate as may be the case currently the impact on wage growth and price inflation would still likely take some time to become evident,0 +69,improved matching is reducing the natural rate of unemployment,0 +70,the biggest concern is the job market in particular youth unemployment,0 +71,i expect the unemployment rate to fall slightly below 35 percent next year the lowest level in nearly 50 years,0 +72,"it is true that even without the great recession demographic forces would have led to some +decline in the employment topopulation ratio since 2007",0 +73,"as shown in figure 1 the unemployment rate rose from around 5 percent in the spring of 2008 to about 10 percent +by the autumn of 2009 and has stayed well above 9 percent since then",0 +74,historically there has been a clearly negative relationship between unemployment and wage shar es,0 +75,our central forecast is for the unemployment rate to decline to below 4 per cent later this year and remain below 4 per cent next year,0 +76,"the unemployment response is even more lagged remaining +steady for almost 2 years before increasing",0 +77,the unemployment rate has declined and wage growth should firm as remaining slack diminishes,0 +78,"meanwhile the latest +registered unemployment rate stands at 42 in june",0 +79,"unemployment in the us above +8 per cent has been persistently high",0 +80,a low employment rate implies that a significant part of the working age population is either unemployed or inactive outside the workforce,0 +81,of course this effect may be larger if rigid labour market institutions complicate the task of finding a new job while the literature also finds that the level of the tax wedge or the inadequate design of unemployment benefits are important drivers of structural unemployment,0 +82,formal employment has maintained a positive trend and the unemployment rate has fallen to its lowest level since 2009 even though it remains above precrisis averages,0 +83,while the various jobretention schemes introduced by governments have so far been effective in cushioning the fall in income and preventing a more precipitous decline in employment and the numbers of people enrolled in those schemes are falling as activity picks up keeping job support schemes in place is critical to avoid a sharp increase in unemployment later in the year,0 +84,"with sustained strong labour demand the level of long +term unemployment ie",0 +85,and once the unemployment rate starts falling it rarely returns to the previous low,0 +86,the unemployment rate was 63 percent in april about 14 percentage points below where it was a year ago,0 +87,the unemployment rate for us workers with less than a high school education almost doubled rising from 10 to 19 per cent,0 +88,"in the past four months +the unemployment rate has fallen about threequarters of a percentage point",0 +89,unemployment is almost at the same level as in the usa,0 +90,"in particular the labor +market has been gradually improving and the unemployment rate has declined somewhat",0 +91,"however at the same time some countries have experienced only moderate increases in the +youth unemployment rate and in germany it has actually fallen from 11 to 8",0 +92,the unemployment rate fell to 59 percent marking its lowest level since july 2008 and well below the 67 percent we experienced in december 2013,0 +93,the recovery path remains fragile and unemployment is too high particularly in europe,0 +94,we were experiencing the longest expansion on record and unemployment had reached historic lows,0 +95,there are obviously cases where older people have difficulty finding work but the data show that the unemployment rate or those who despair of finding a job did not increase as a result of raising the retirement age,0 +96,although the unemployment rate is near longerrun norms other measures of labor utilization are not,0 +97,"there +are two other elements to consider the labour force participation rate and the demographic structure",0 +98,activity has been close to a normal level and unemployment has remained low,0 +99,"the challenges facing the employment situation are underscored by the fact that more than +40 percent of the unemployed or some 6 million people have been out of work for 27 weeks or longer",0 +100,true most economists believe that thecurrent unemployment rate of 4½ percent is below the level consistent with stable inflation andindeed may already be exerting upward pressure on labor costs,0 +101,"since then the unemployment rate has fallen by a +little less than 1 percentage point each year and wage growth has picked up by +02 percentage points each year",0 +102,the unemployment rate dropped to 58 percent in march this year from the peak of 176 percent in april 2020,0 +103,"based on all of these assumptions i expect a gradual decline in unemployment this year and +little change in the underlying rate of inflation",0 +104,unemployment in the us continues to fall at more or less the same rate,0 +105,"unemployment rates in the major advanced economies are at +levels substantially higher than those prior to the lehman shock",0 +106,they also mean that there may be times when although a rise inunemployment is undesirable it is unavoidable,0 +107,if the decline continues at about that pace in coming months the unemployment rate could be below 4 percent before too long,0 +108,the unemployment level is at its lowest level of the last 15 years in spite of a deceleration in job creation,0 +109,unemployment rates have been at historic lows employment creation has been strong and inflation has been hovering around our 2 per cent target,0 +110,workers had to accept this due to the labour market reforms which cut unemployment benefits and their duration and thereby increased incentives through replacement rates the ratio of unemployment income and expected income when employed,0 +111,"in that context it wouldnt be enough for me just to see the unemployment rate +decline a bit",0 +112,in fact the imf numbers show our unemployment deteriorating from about 25 per cent now to around 27 per cent in three years time,0 +113,"unemployment schemes for +instance could benefit from less emphasis on cash handouts and an increased focus on retrainingand on improving employability",0 +114,the unemployment rate is at a record low and below estimates of the nonaccelerating inflation rate of unemployment nairu while the participation rate is at a record high slide 5 righthand chart,0 +115,last october the unemployment rate dropped to 74 percent following a peak of 176 percent in april last year,0 +116,"we have also enjoyed an almost continuous monthbymonth fall in the rate of unemployment on a +claimant count basis from a peak of some 10 ½ at the end of 1992 to the present rate of just over 4 +or a little below 6 on the lfs measure",0 +117,from the peak of 176 percent in april 2020 the unemployment rate dropped to 64 percent in february and further to 58 percent in march this year the lowest since the pandemic,0 +118,the unemployment rate was 35 percent in december matching the low reached before the pandemic and the lowest in 53 years,0 +119,unemployment has remained low,0 +120,the markedly favourable trend is not confined to growth employment and unemployment,0 +121,profitability has been sustained and unemployment rates have fallen to levels not seen for 25 years,0 +122,unemployment is down from a peak of 10 percent but at 73 percent in october it is still too high reflecting a labor market and economy performing far short of their potential,0 +123,"thus it now takes longer before the full impact of a change in growth has an effect on unemployment +in sweden",0 +124,"figure 14 shows unemployment together wi th an average for the period 20002008 and an +assessment of longterm unemployment",0 +125,at the same time the recession has been deep and has left unprecedented and unacceptably high unemployment,0 +126,poverty incidence and unemployment rates are still high,0 +127,"the unemployment +rate has been at a low level in the range of 30 35 percent recently chart 4",0 +128,"the rate of unemployment +in the euro area has fallen throughout 1999 but still remains high",0 +129,spains unemployment rate remains well above precrisis levels and is roughly the double of the euro area rate,0 +130,why is youth unemployment generally higher than that of other age groups,0 +131,"6 bis central bankers speeches + the greater amount of permanent job loss seen in the recent recession also suggests that +there might have been an increase in the degree of mismatch between the skills possessed +by the unemployed and those demanded by employers",0 +132,"in a +situation with high unemployment lower wage increases are desirable since they stimulate growth in +employment",0 +133,the employment rate is at its highest for more than ten years,0 +134,the unemployment rate has changed little in the past four months at about 5½ percent with the levels of parttime workers for economic reasons and longduration unemployed remaining elevated,0 +135,the scale of excess in unemployment across europe was so high that it took a while even for wage inflation to pick up,0 +136,"during periods of high unemployment it is not unusual that wages are +not increased",0 +137,more inclusive societies with fewer unemployed and more even income distribution would most likely result in more dynamic demand,0 +138,us unemployment has fallen dramatically and is now close to its likely natural rate,0 +139,that should see the unemployment rate resume its gradual decline,0 +140,for instance in the euro area the broad unemployment rate which includes discouraged workseekers and employees working parttime but who would want to work fulltime rose considerably more strongly during the crisis than the conventional unemployment rate,0 +141,while this is unlikely to have a direct impact on the labour market thanks to buoyant economic conditions the inherent risk in the long term the magnitude of which will also depend on the framework set out by the minimum wage commission is that it will have a dampening effect on employment and cause structural unemployment to rise,0 +142,high levels of unemployment certainly owe something to the economic adjustment process,0 +143,nevertheless the recovery remains relatively weak and uneven and there is a long way to go to bring down the very high levels of unemployment,0 +144,"recall that the unemployment rate averaged 7 +54 in 1996",0 +145,the unemployment rate dropped to 66 percent in december 2021 down from a peak of 176 percent in april 2020,0 +146,"the ncr c ontinues to have the highest unemployment +rate nationwide result ing in poverty and inequality",0 +147,the overall unemployment rate was 35 percent the lowest level in a halfcentury,0 +148,"workers aged 25 to 54 have been particularly prone to dropping out which suggests that the decline in the unemployment rate may overstate the +improvement in labor market conditions",0 +149,as a result the unemployment rate fell back from 11 in 2005 to 79 in 2009,0 +150,higher unemployment has gone handinhand with lower real wage growth,0 +151,"longterm costs of youth unemployment +cyclical unemployment can turn structural if people remain unemployed for a long time",0 +152,"ive already noted that our unemployment rate reached the lowest level in some +time",0 +153,the unemployment rate is already at historic highs,0 +154,after taking account of both frictional and structural unemployment what unemployment rate is roughly equivalent to the maximum level of employment that can be sustained in the longer run,0 +155,this was sufficient to push the unemployment rate down by more than two percentage points over this period,0 +156,mays uptick in the unemployment rate to 91 percent was a bit disappointing but even with that the unemployment rate has fallen by 07 percent since last november,0 +157,"this model has contributed to generati ng high employment rates in combination of +with a low risk of poverty and relative income equality",0 +158,"the unemployment rate in the euro area stands at 118 percent and in the +united states despite coming down from its peak the rate is at 78 percent",0 +159,it is not just that the unemployment rate has fallen other measures of labor market conditions have improved as well,0 +160,in december the unemployment rate fell marginally in the euro area by 01 percentage points to 114 per cent and slightly more by 04 points to 129 per cent in italy where the number of persons in employment rose by over 90000 in the month,0 +161,"figure 16 shows the development of unemployment in a number of countries +that have been hit by major adjustments on the housing market",0 +162,"as a result the rate of +long term unemployment is low",0 +163,"on the other hand during 2012 the euro area fell into recession with unemployment rates at +record highs",0 +164,"in particular + +the currently high and persistent longterm unemployment raises inequality posing a risk for social cohesion and increases the risk that human capital is destroyed affecting longterm potential growth",0 +165,as a result unemployment seems to be falling at a pace that will reach our 7 threshold materially earlier than we had expected,0 +166,this is the biggest twomonth drop in the unemployment rate since november of 1958,0 +167,"indeed the survey data suggest that while unemployment is much more prevalent among those in +arrears almost two thirds of those in arrears are employed",0 +168,equally strikingly that 22 is about the same rate of wage growth as in 2011 when unemployment rose above 8 for the first time since the mid1990s,0 +169,claimant count unemployment was rising at the fastest rate on record,0 +170,at the same time sharp increases in unemployment are raising the incidence of financial stress among households chart 10,0 +171,"spain is forecast to suffer the highest unemployment within the euro area with 193 per cent +unemployment in 2010",0 +172,another portion of the recent outward shift in the beveridge curve is likely due to increases in the maximum duration of unemployment benefits which may have induced some unemployed workers to be more selective in the job offers they accept,0 +173,and with no adequate socialsafety net in place a steep runup in unemployment could unleash social unrest,0 +174,median household income grew and poverty fell significantly in 2015 although these measures were still lagging their levels from before the recession2 an improving economy may be especially important for you as new graduates,0 +175,"the unemployment rate which had reached 11 per cent in the early 1990s dropped to below 7 per +cent in 2000its lowest level in over 25 years",0 +176,the unemployment rate has fallen to its lowest level since 1991 the seasonally adjusted unemployment rate stood at 56 in october,0 +177,"at the same time +many measures aimed at lowering unemployment in general affect the young unemployed +more than other age groups",0 +178,"second wage growth becomes +increasingly sensitive to the unemployment rate as the unemployment rate reaches lower +and lower levels",0 +179,"the available estimates suggest that equilibrium unemployment in sweden moved +up in the early 1990s and in terms of registered unemployment is now somewhere in theinterval between 45 and 75 per cent",0 +180,"the level of unemployment to which an economy returns when inflation +expectations have adjusted is usually referred to as equilibrium unemployment",0 +181,"unemployment varied between +6 and 8 per cent around an average of 7 per cent during the ten years preceding the financial crisis",0 +182,the unemployment rate stood at 209 at the end of last year 28 percentage points lower than a year earlier and 54 percentage points below the peak at the beginning of 2013 but this is still a very high figure comparing it with europe or the eurozone,0 +183,"that means the unemployment rate currently 72 +is likely to reach that 7 threshold earlier than expected",0 +184,for instance a cyclical rise in unemployment may have longlasting effects especially if the labour market institutions do not support the unemployed in regaining work,0 +185,the nations unemployment rate is currently around 41 percent which is a relatively low level by historical standards,0 +186,"the unemployment rate in recent years has also been low at around +1 percent",0 +187,relative to the size of the shock the unemployment rate in the euro area barely budged,0 +188,the unemployment rate is down from its peak but at 88 percent it still remains quite elevated,0 +189,in september 2021 however the countrys unemployment rate increased further to 89 percent from 81 percent in the previous month,0 +190,"because of these and other factors the ec onomic recovery is likely to be relatively +slow at first with unemployment declining only gradually from high levels",0 +191,"at the same time unemployment will decline steadily to 4½ near the end +of the forecast horizon and according to the forecast the slack in the economy will have vanished by 2014",0 +192,the unemployment rate in the euro area has declined from almost 11 in 1997 to slightly more than 8 in 2001 which is still too high,0 +193,"although unemployment has remained around 8 per cent since +the middle of 2012 employment has increased and the employment rate has risen around +half a percentage point since then",0 +194,this means the unemployment rate continues to fall faster than many policymakers had been forecasting,0 +195,"however developments during the recent period show that large groups who have previously been +unemployed have been able to return to the labour market",0 +196,"during the 1980s there is a clear negative relationship with higher unemployment gaps +associated with lower outcomes for inflation",0 +197,the unemployment rate would remain in the neighborhood of 44 ¼,0 +198,"the counterpart to the modest rise in +unemployment is a much smaller fall in employment than would have been expected on the +basis of past experience in part reflecting a high degree of wage moderation in the private sector",0 +199,"the +unemployment rate for example has declined to a 30year low",0 +200,if the trend prevailing in the past year and a half continues the rise in employment may put the unemployment rate at around 20 in 2016 q4,0 +201,"citbis review 692001 570 per cent currently and unemployment while higher than anybody feels comfortable with is +already approaching levels which are relatively low by oecd standards",0 +202,"as a result our unemployment rate has fallen +steadily most recently to 93 which is lower than the euro area average",0 +203,"we can thus say that t he cost in terms of unemployment of the fact that the +average rate of inflation has fallen below the target is approximately 38000 unemployed",0 +204,it may thus be assumed that here the non accelerating inflation rate of unemploymentis relatively high because a large cohort is close to retirement age,0 +205,in germany the unemployment rate has hardly moved during the recession whether at the aggregate level or among the under25s,0 +206,the distributional impacts of lower unemployment and higher participation are positive,0 +207,"a substantial body of evidence demonstrates that morehighlyeducated +individuals are happier on average make better personal financial decisions suffer fewer spells of unemployment and enjoy better health",0 +208,2 in september 2016 youth unemployment stood at 371 in italy and 426 in spain,0 +209,at the same time we need to monitor carefully developments in longterm unemployment labour force participation rates and hours worked with a view to informing our assessment on the likely evolution of structural unemployment,0 +210,despite a rapid fall in the unemployment rate wages have remained stubbornly low,0 +211,that is a legacy of a long period following the crisis in which unemployment has been high and wage growth muted,0 +212,this measure is the unemployment rate which is consistent with stable wage inflation the nawru nonaccelerating wage rate of unemployment if unemployment is higher than this equilibrium rate increases in wages will be slower if lower wages will go up faster,0 +213,over the past year the unemployment rate rose by considerably less than was expected,0 +214,at 51 percent in september the unemployment rate has declined 12 percentage point since december,0 +215,the seasonally adjusted resident unemployment rate has declined to 30 the lowest rate since end2018,0 +216,is rising equilibrium unemployment the main problem in the labour market,0 +217,consequently unemployment rate fell to 66 in august 2011 from 71 in august 2010,0 +218,"the prompt this +time has not so much been rising rates of unemployment",0 +219,"underneath this low and steady unemployment rate there is a great deal of movement at the +individual worker level",0 +220,"at the same +time unemployment has fallen to near 4 levels this low have not been witnessed since the 1960s",0 +221,more than 40 percent of the unemployed have been out of work six months or longer nearly double the share of a year ago,0 +222,moreover as these factors evolve the maximum employment level may change over time,0 +223,"the number of people willing to work can be usefully defined as the unemployed component of the +labor force plus those not actively seeking work and thus not counted in the labor force but whononetheless say they would like a job if they could get one",0 +224,"the high youth unemployment levels in the crisish it countries in the south of the euro area +are partly attributable to minimum wages",0 +225,in april the unemployment rate was 44 percent a level not reached since may 2007 and below most current estimates of the natural rate of unemployment figure 1,0 +226,during this transition inflation pressure will build if the unemployment rate remains unchanged,0 +227,"the mean squared gap for unemployment measures how mu ch the rate of unemployment deviates +from the sustainable rate",0 +228,historically unemployment has been high when the wage share was low,0 +229,"the size of the labor force depends on a +combination of two factors the size of the work ingage population and the likelihood that members of +this population join the labor force a likelihood that economists refer to as the labor force participation +rate",0 +230,"in the usa which has seen its aggregate unemployment rate double from about 5 to about 10 per +cent youth unemployment went up only slightly faster from 12 to 19 per cent",0 +231,unemployment has fallen sharply in the past few quarters,0 +232,"it is cause for relief that the +directorate of labours analysis indicates that most people leaving the unemployment +register at present are going back to work",0 +233,unemployment in both jurisdictions which had spiked in the early phase of the crisis levelled off and began to decrease,0 +234,however labor market performance remained stable with the latest unemployment rate remaining at 37 percent,0 +235,and unemployment is at a 25year low,0 +236,"we have seen the unemployment rate print higher in july after several months where it had +not changed much",0 +237,the unemployment rate has been steady in the past few months near its historical low and was 36 percent in june,0 +238,the unemployment rate which reached a high of 10 percent in the fall of 2009 has since come down 2 12 percentage points to 75 percent in april,0 +239,"italy spain is commonly seen as an important factor behind the spectacular +rise in youth unemployment during the crisis in eg",0 +240,the unemployment rate was 55 percent in march analysis by my staff suggests that the unemployment rate is nearing the point where we may begin to see a pickup in the pace of real wage gains,0 +241,"although most spells of unemployment are disruptiv e or costly the persistently high rate of +longterm unemployment we have seen over the past three years or so is especially +concerning",0 +242,high inflation leads to lower growth fewer jobs and moreunemployment,0 +243,"the unemployment rate for +1619 yearolds for example was about 20 in 1992",0 +244,unemployment is now higher than in the recession year 2009 the unemployment rate standing at around 95 ,0 +245,"16 if the current rate of fall in unemployment continues it will reach a normal level in the +autumn of 2011",0 +246,the unemployment rate continues to decline and now stands at close to a nineyear low of 87 down by 33 percentage points from its highest level,0 +247,insolvencies and unemployment have been relatively subdued until now,0 +248,"since the start of emu to the end of last year the number of employ ed people has increased by 157 million in the +euro area compared with an increase of approximately only 5 million in the nine preceding years and the euro area unemployment rate has fallen to its lowest level since the early 1980s",0 +249,"despite the recent partial recovery the unemployment rate is still quite high compared +to the precrisis period",0 +250,consequently unemployment fell by a total of 5 percentage points in nms and 3 percentage points in eu15 over the same period,0 +251,while this is an improvement in labor markets everyone will readily agree that the longterm unemployed remain a serious concern,0 +252,youth unemployment declined also during this period from 440 to 242,0 +253,"the us unemployment rate +currently stands close to 1 percentage point above canadas and a full 2 percentage points +higher when measured on a like forlike basis",0 +254,a flexible inflation targeting regime can reduce the risk of unemployment becoming entrenched at a high level following economic contractions,0 +255,first other measures of labor market conditionssuch as the fraction of workers with parttime employment who would prefer to work full time and the number of people out of the labor force who would like to workindicate that more slack may remain in labor market than the unemployment rate alone would suggest,0 +256,the threat is bankruptcy unemployment and welfare loss,0 +257,to a certain extent the different employment outcomes across the states have been mirrored in the behaviour of unemployment rates,0 +258,first wage growth responds to the unemployment rate with a lag,0 +259,"the +rate of unemployment on a claimant count basis is as low as it has been for 25 years",0 +260,however the natural rate of unemployment is uncertain and can vary over time,0 +261,"and the unemployment rate has continued to fall over the past 12 months + from 83 to its current level of 75",0 +262,unemployment is at its lowest level since german reunification and employment remains on the up,0 +263,"the unemployment +rate at 75 percent in april has declined more than 12 percentage point since last summer",0 +264,"the unemployment rate has also risen by 04 percentage points over the past fe w months after having been steady at around +5 per cent for much of the year",0 +265,past experience suggests that the passthrough from labour market tightness to inflation tends to accelerate as unemployment falls below the natural rate,0 +266,its unemployment rate for example remains near 9 percent,0 +267,while this unemployment rate is still too high the direction has been pleasing,0 +268,"bis review 1232009 1 + figure we see that the only demographic group whose unemployment rate appears less than +awful is that for college graduates at 49 percent",0 +269,"a large and growing young population can be a driver for economic growth and social progress provided they access quality education and health and are engaged in decent +employment without which many young people will not be able to escape negative social +vices and poverty",0 +270,the central forecast is that the unemployment rate gradually increases from here due to slower growth to reach 4½ per cent by mid2025,0 +271,"the latest euro +area seasonally adjusted unemployment rate was 122 in may 2013",0 +272,recall that during the great depression the unemployment rate rose to 24 percent,0 +273,"the area of labour markets is particularly important if the unemployment rate is to be lowered in a +lasting manner",0 +274,the unemployment rate is at its lowest level since december 2008 despite an increase in the labour force of more than 2,0 +275,"as you +might expect the slow recovery in the labor market has been mirrored in only a modest +recovery in households wage and salary income",0 +276,pay growth has been subdued during the recession and that has helped to ensure that unemployment has risen far less than many commentators feared,0 +277,"unemployment is no longer falling +and is expected to rise in the period ahead",0 +278,"the unemployment rate is likely +to remain close to its recent very low levels",0 +279,are we going into a recession and does that mean a big rise in the unemployment rate,0 +280,participation in the labour force and employment has increased the unemployment rate decreased to 124 in 2018 q2 and wages have started to trend upward,0 +281,"more important unemployment rates in my judgment are likely to remain higher and +linger longer than in recent recessions",0 +282,"as that chart shows outturns for wages in 2013 and 2014 were considerably below the past +relationship which would otherwise suggest that unemployment would be expected to be +around 10 given the observed decline in w ages",0 +283,it is there that measures must be taken in order to tackle problems withemployment and unemployment,0 +284,"let me stress that social partners share responsibility for ensuring that wage settlements fully +take into account the need to reduce unemployment and to enhance labour market access +and employment",0 +285,with the return to positive growth rates last year the upward trend in the unemployment rate came to an end in most euro area countries,0 +286,i would suggest a reading where wage inflation accelerates significantly only once unemployment and economic slack have sufficiently been reduced,0 +287,"estimates of monthly job gains needed to keep the unemployment rate steady +range widely from around 75000 per month to 150 000 per month depending on what +happens to labor force participation among other things",0 +288,in fact the unemployment rate for december 2013 reached 37 percent close to the lowest point in recent years of 36 percent which was attained in july 2007,0 +289,our unemployment rate is the lowest it has been in about 30 years and a greater proportion of the population is now working than ever before,0 +290,"then for a given number of job openings the number of the unemployed who are qualified for those jobs is smaller and the unemployment rate is higher than it would have +been before the mismatch problem worsened",0 +291,the unemployment rate has risen to 98 percent,0 +292,prepandemic forecasts for the 2020q4 unemployment rate ranged from 32 to 4 percent,0 +293,unemployment was in double digits and still rising,0 +294,"this has contributed to +maintaining low unemployment",0 +295,"although this outcome reflects in part a cyclical rebound part of the +decline in the unemployment rate may well be due to the impact of structural reforms",0 +296,"for example under this scenario the unemployment rate is +anticipated to average more than 10 in 2010 considerably higher than the consensus economic forecast",0 +297,but even at plausible stretch targets its effects on resident labour force growth will be quite limited,0 +298,high levels of debt and high housing costs can also reinforce the existing distribution of wealth in our society making social and geographic mobility more difficult,0 +299,and the unemployment rate is at a near 20year low notjust for the uk as a whole but in nearly every region in the kingdom,0 +300,"and unemployment has fallen from a peak of 10 ½ on a +claimant count basis at the beginning of 1993 to the present rate of 4",0 +301,the unemployment ratefor adults with a high school education or less fell from 4¾ percent in 1998 to around 4 percent by themiddle of last year,0 +302,the number of unemployed in the eu has reached around 22 million,0 +303,we should appreciate the achievements the number of jobs in the euro area has now passed the precrisis peak of 2008 and the unemployment rate is continuing to fall,0 +304,while people can disagree about the extent to which the labor market has healed it is clear that the labor market is in much better shape than it was in 2009 when unemployment reached its peak of 10 percent,0 +305,the 54 unemployment rate in 1996 was thelowest annual rate since 1988 and before that since 1973,0 +306,unemployment rates in all three countries have nonetheless been on a downward trend since 2009,0 +307,and i anticipate the unemployment rate to edge up over the next year to between 4 and 412 percent,0 +308,"there exists the real possibility that cyclical unemployment could evolve into structural +unemployment while the social implications of persistent high unemployment levels +especially among the youth in the euro zone should not be underestimated",0 +309,the resident unemployment rate should continue to gradually decline,0 +310,"differences in unemployment experiences and youth unemployment reflect shocks and +institutions +the impressive aggregate figures mask large differences across countries and across worker +groups",0 +311,as of october 2019 unemployment and underemployment rates in the country are both at a historic low of 45 percent and 130 percent respectively,0 +312,during the past three months unemployment has been around 9 per cent as a share of the labour force,0 +313,their latest unemployment rate is roughly 27 percent,0 +314,"ou r assessment of unemployment was that it would +fall relatively quickly over the coming quarters and then decrease at a slower rate",0 +315,"unemployment has declined +significantly dropping from 9 in 1999 to 73 recently a development which is particularly +welcome",0 +316,"this contradicts the view that the unemployment rate has understated labor +market slack",0 +317,personally i expect that over the long run the unemployment rate will converge to just over 5 percent,0 +318,and conversely the smallest increases in saving have been for those who have become less concerned about losing their job,0 +319,"many families fo und themselves trapped in negative equity +and the unemployment rate was above 8",0 +320,"labour market policies geared towards greater flexibility and +increased incentives to work are contributing to a reduction in structural unemployment and to higher participation rates",0 +321,although the unemployment rate is still too high notably among young people our latest projections forecast a steady decline until 2020,0 +322,"in particular even though the natural rate of +unemployment may have i ncreased somewhat a variety of evidence suggests that any such +increase has been modest and that substantial slack remains in the labor market",0 +323,us unemployment rate has fallen to 41 well below the feds estimated nonaccelerating inflation rate of unemployment nairu of 46,0 +324,is it possible to sustain the combination of low unemployment and a low wage share,0 +325,this disparity suggests that there likely is an extra margin of slack in labor markets beyond that indicated by the unemployment rate alone,0 +326,at 86 the unemployment rate has fallen to its lowest level since the end of 2008,0 +327,"the estimated +slope is 07510 this means that a one per cent higher average rate of unemployment is +associated with a 075 per cent lower average rate of inflation",0 +328,"for a given natural rate of unemployment wpc traces +out the relationship between wage growth and unemployment",0 +329,in other words one in every two of the more than 15 million currently unemployed face the risk of becoming increasingly detached from the labour market,0 +330,certainly the fact that us unemploymenthas recently been falling markedly and now stands at 49 percent its lowest level in nearly aquarter of a century strongly suggests that recent us growth has also been dependent onmining the unemployment rolls for additional workers and is likely to slow as findingadditional workers becomes increasingly difficult,0 +331,in the labour market this is the flipside of the resilience of employment and a lower level of unemployment relative to the early stages of previous recoveries,0 +332,"the unemployment rate is +very low compared internationally since while unemployment in israel is in decline it has +risen in many countries",0 +333,this consistent pace of job growth was enough to drop the unemployment rate to 67 percent in december,0 +334,unemployment at that stage was not for me a statistic,0 +335,joblessness in some member states rocketed to levels hitherto unseen in the postwar era,0 +336,"youth unemployment in the euro area was 22 in +march 2012",0 +337,"the average annual amount that would be required to keep the mortgage current +for these households while unemployed and receiving unemployment insurance is around 21000",0 +338,the number of unemployed has risen least in the county of finnmark in the last year,0 +339,"unemployment has been close to a low +historical average",0 +340,the unemployment rate peaked at close to 20,0 +341,that progress continued in september with the unemployment rate moving down to 48 percent,0 +342,the fraction of those now jobless who have been without work for six months or more stands at a very high level,0 +343,the unemployment rate declined to 49 percent,0 +344,indeed my own expectation is that while the trend in unemployment will be gradually lower the path to get there might be choppy,0 +345,"unemployment is expected to remain well above precrisis levels for a long while and therefore to exert no significant pressure on unit labor +costs in the upcoming period",0 +346,"indeed as shown in chart 1 the +relationship between wages and unemployment over the past three years looks pretty similar to what we experienced in the mid 90s when the unemployment rate was similar to what it is +today",0 +347,unemployment continues to grow despite a prospect ive economy,0 +348,"2 the natural rate of unemployment can be thought of as the unemployment rate at which the labor market is at +its long run equilibrium and inflation is stable",0 +349,"notably +the unemployment rate remains fairly close to last falls peak and is currently about +5 percentage points above the rates that prevailed just before the onset of the financial crisis",0 +350,ingermany and france for instance unemployment is expected to rise even further this year,0 +351,this development is fully consistent with the labour force survey data of the hellenic statistical authority elstat for 2015 which point to a 37 rise in dependent employment and a respective decline in unemployment to 249 in 2015 from 265 in 2014,0 +352,and in the last two years the unemployment rate has been at its lowest level in 25 years,0 +353,"repeated attempts to reduce unemployment by allowing inflation to rise +would result in everincreasing inflation with unemployment returning to its natural rate",0 +354,"unemployment has been very low lower than most economists thought it could +remain for long without igniting inflation",0 +355,"although the unemployment rate is projected to peak at the end of this year the projected declines in 2010 and 2011 would still leave unemployment +well above fomc participants views of the longerrun sustainable rate",0 +356,"the unemployment rate has fallen +rapidly and is now below its historic average",0 +357,"unemployment has been +pushed up by the recession but by less than in earlier downturns",0 +358,"before the crisis the youth unemployment rate was twice the averag e rate of +overall unemployment it is now 26 times higher",0 +359,in the euro area the seasonally adjusted unemployment rate fell to 96 in december,0 +360,"7 given the personal difficulties and waste of resources created by high +unemployment the fact that employment has held up well in the recession and is now rebounding is very encouraging",0 +361,"the unemployment rate +has declined from a peak of 10 percent in october of 2009 to just under 8 percent recently +due largely to the fact that the labor force participation rate has declined by considerably +more than would be suggested by underlying demographic trends",0 +362,it continued to decline substantially after the recession ended with the pace of those declines slowing only over the past year or so even as the unemployment rate has continued to fall,0 +363,over the past year the unemployment rate has fallen considerably and at a surprisingly rapid pace,0 +364,"on a human level the contraction in the economy is impacting +directly on households incomes and resulting in very significant levels of unemployment",0 +365,its unemployment has fallen from close to 11 in 2005 to under 4 today and that was during the worst recession since the 1930s,0 +366,"the decline in the unemployment rate from its +historical peak at 116 in 1983 to today s 32 is indeed impressive",0 +367,         the high longterm unemployment rate which generates inequalities threatening social cohesion and increases the risk of human capital erosion,0 +368,"unemployment has fallen in every uk region since 2012 by at least +2 percentage points",0 +369,"nevertheless current data are impressive at a rate of 73 german unemployment is now below its precrisis level and the average number of employed +persons was at its highest ever in 2010",0 +370,"18 +specifically the banks latest forecast expects real wage growth to resume around the +middle of next year and then to accelerate as the unemployment rate continues to fall to +around 5½ over the next three years",0 +371,consistent with this the rate of unemployment remains essentially unchanged from this time last year,0 +372,however the labour market reforms undertaken give us confidence that unemployment will start falling faster once the recovery picks up,0 +373,but it is likely that the unemployment rate will remain above 6 per cent over the next couple of years,0 +374," the unemployment rate has fal len slowly to +61 percent",0 +375,the beveridge curve which shows the relationship between unemployment and job vacancies can be used to illustrate matching in the labour market see diagram 5,0 +376,in the wake of the recession the unemployment rate reached at an astonishing peak of 100 percent,0 +377,this is a different picture than what other countries are experiencing and an indication that the labor market is showing relative robustness as is also reflected in an international comparison of unemployment rates,0 +378,using broader measures of unemployment reveals that the labour market is less tight than the general unemployment rate suggests,0 +379,what has happened to what hitherto in the uk has been a relatively stable relationship between pay and unemployment,0 +380,the economy has been growing since the second quarter of 2010 and unemployment has fallen from a peak of over 9 to around 5½,0 +381,whats more longterm unemployment remains at historically high levels,0 +382,the unemployment rate is at its lowest level in almost ten years while the number of people employed in the euro area has increased by some eight and a half million since mid2013,0 +383,"gdp fell about 5 per cent and +unemployment rocketed from levels around 23 per cent to twodigit figures",0 +384,inflation is close to target the unemployment rate is near historic lows and wage growth has picked up,0 +385,nevertheless the unemployment rate remains high and the highest in the eu,0 +386,the red curve in the figure is actual unemployment,0 +387,monetary easing seems to reduce unemployment most among lowincome households while also boosting the general wage level which benefits proportionately more highincome households,0 +388,"all of these include +elements that promote the fall in youth unemployment",0 +389,"an even higher +rate of inflation would by now have reduced unemployment by even more than +65000 people15 +the long run sustainable rate of unemployment depends on how the labour market +works and on structural conditions +if we are to stabilise unemployment around a long run sustainable rate we must have a view +of what this rate is",0 +390,"and the +share of unemployment that represents spells lasting more than six months has been higher than 40 percent since december 2009 figure 12",0 +391,unemployment has edged up over the last six months,0 +392,some stress that the development of unemployment has been less favourable,0 +393,as a result the unemployment rate moved progressively lower,0 +394,"that means it has fallen to the level of +the structural unemployment rate which is estimated to be around 35 percent chart 1",0 +395,"the unemployment rate began to decline in the second half of 2003 and by the fourth quarter of last year +stood at a relatively low 412 percent",0 +396,yet the recovery began over five years ago and the unemployment rate has declined from 10 percent in october 2009 to 59 percent now,0 +397,"ir elands unemployment rate is now one of the +highest in the oecd and over half of the jo bless have been unemployed for over twelve +months",0 +398,however the unemployment rate remained elevated in june at 59 percent and this figure understates the shortfall in employment particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year,0 +399,to counter the dampening effects of the demographic development we have to boost employment by increasing labour force participation by allowing for labour marketoriented immigration and by improving the integration of longterm unemployed,0 +400,they focus on the level of shortterm unemployment those workers unemployed for less than 27 weeks which has returned close to its average longterm level and argue that it is the shortterm unemployed that are critical in driving compensation trends,0 +401,"and unemployment has fallen from a peak of 10 ½ on a +claimant count basis to the present rate of 4",0 +402,this is close to the unemployment rate generally regarded as the full employment rate of unemployment,0 +403,it is only in the short term that high inflation may lead to lower unemployment,0 +404,add a significant uptick in unemployment and the problem could spread,0 +405,"of course the jobs gap is +presumably even larger if one takes into account the natural increase in the size of the working age population over the past three years",0 +406,"a worrying development is that the percentage of unemployed with only secondary school education has increased +substantially in the age groups below 35 years",0 +407,"despite these positive signs the rate of job loss remains high and the unemployment rate +has continued its steep rise",0 +408,even so it is discouraging that jobless rates for those minorities remain significantly higher than the rate for the nation overall,0 +409,"since last fall the jobless rate has been hovering around 412 percent a relatively low level +by historical standards and it fell to 44 percent this past month",0 +410,in addition the unemployment rate has remained at a low level,0 +411,"the flattening of the unemployment curve in recent months is partly due to the seasonal +adjustment methods",0 +412,"so overall changes in the +unemployment rate are we think likely to provide a reasonable guide to the evolution of labour market slack",0 +413,the unemployment rate fell from 122 to 115 from theend of one year to the next,0 +414,"indeed for many people the very language of +economists equilibrium unemployment marketclearing wages seems incompatible with thehuman dimension of unemployment and deprivation",0 +415,in my view this is a level that is much higher than what can be considered a longrun sustainable unemployment rate,0 +416,"not only is +unemployment an immediate social loss but it is a stressful life event that reduces individual wellbeing in many persistent ways",0 +417,one important difference between now and 2013 is that the labor market is very healthy with unemployment close to levels most associate with full employment,0 +418,unemployment stood at 91 in july down from its peak of 121 in 2013,0 +419,over the past few years meanwhile unemployment has fallen from a high of 85 to a forty year low of just 42,0 +420,over the following 6 years unemployment has fallen quickly and continuously but nominal pay growth has largely remained bound between 1 and 3,0 +421,reflecting this the banks composite labour market indicatorwhich is designed to capture broad labour market developmentshas fallen by less than the unemployment rate,0 +422,it is also possible that the natural rate of unemployment has moved lower or that the unemployment rate still may be overstating the strength of the labor market,0 +423,"and it has also enabled the growing incorporation of the +population particularly the female population into the labour market to be compatible with further cuts in the unemployment rate which stood at 85 on average in 2006 the lowest level since the late +1970s and practically on a par with the euro area average rate",0 +424,since the beginning of the year the rate of unemployment hasstabilised at around 10 in the euro area,0 +425,"in contrast in the 198182 recession the prime age male unemployment rate +peaked at 93 percent rising by 42 percentage poi nts from the start of that recession",0 +426,the unemployment rate fell to 96 in december its lowest rate since may 2009,0 +427,a moderate wagesettlement this spring with the social partners taking future developments into account maycontribute to maintaining the level of employment,0 +428,overall unemployment remains elevated at around 25 per cent of the workforce,0 +429,the mediumterm unemployed are those unemployed five to 26 weeks,0 +430,"labor mark et conditions have continued to tighten as seen in the fact that the unemployment rate +has declined to the range of 30 35 percent which we think corresponds to full employment +chart 7",0 +431,"and the rate of claimant count unemployment fell from over 10 to +35 still somewhat above the rate for the uk as a whole but again the lowest rate for over 25 years",0 +432,the counterpart to strong job growth has been a steady decline in us unemployment rates,0 +433,the unemployment rate was 36 percent in octobernear a halfcentury low,0 +434,"unemployment would thus remain high even if the number of vacancies corresponded to the number +of people looking for work",0 +435,unemployment has declined markedly and is now ve ry low,0 +436,the costs of doing so in terms of higher unemployment can be substantial,0 +437,"although the unemployment rate has declined by 25 percentage +points from its peak of 10 percent in october of 2009 much of this decline is due to the fact +that the labor force participation rate has fallen by 15 percentage points over this period",0 +438,and then there are the young people who are out of work underemployed or trying to improve their job prospects by extending their education,0 +439,the unemployment rate currently stands at 7 per cent and we are expecting it to be still above 6 per cent in two years time,0 +440,"normally unemployment is below its socalled long +term equilibrium level when economic activity is good",0 +441,this is particularly relevant in spain where unemployment declined by almost 11 percentage points from the peak of the crisis to 154 currently,0 +442,unemployment has declined considerably and is now very low,0 +443,"3 +in germany we have a situation where early retirement very often is preceded by a period of +unemployment",0 +444,the resulting unemployment particularly longterm unemployment is exacerbating inequality,0 +445,"at the same time the euro area unemployment rate has +fallen to its lowest level since the early 1980s",0 +446,the unemployment rate has come down by a full percentage point since its peak,0 +447,in 1996 despite the sharply lower unemployment rate and the demonstrablytighter labor market the same survey organization found that 46 percent were fearful of a joblayoff,0 +448,the tides are also turning in our favour with respect to the unemployment rate with unemployment in the euro area falling consistently,0 +449,"it is also noteworthy that the unemployment ratedifferential is particularly large in younger age groups youth unemployment rates were around 30 in +1997 in france and italy for example",0 +450,the unemployment rate more than quadrupled from a 50year low of 35 percent in february to 148 percent in april,0 +451,i need not elaborate here on the significant relation between the rate of employment and the incidence of poverty,0 +452,"two large +countervailing forces have influenced measured relative poverty rates since the peak the rise in unemployment and the offsetting growth in social transfers jobseekers supports and the like",0 +453,many households in turn will be stressed as the risk of unemployment increases and incomes fall,0 +454,slide 5 in france too the ongoing recovery has led to a strong decline in the unemployment rate which fell to 89 in the fourth quarter of 2017,0 +455,unemployment is now less than 4 and income prospects remain positive,0 +456,however during the second recessionary dip unemployment increased although aggregate vacancy rates remained close to longterm averages,0 +457,the key point here is that unemployment remains low,0 +458,in fact inflation and unemployment had a tendency to rise in tandem,0 +459,"coming out of a deep recession it +takes time for the unemployment rate to reach levels where wage growth picks up noticeably",0 +460,in other words looking at the national unemployment rate tells only part of the story of the labor market experiences for different groups of individuals,0 +461,this consistent pace of job growth was enough to drop the unemployment rate 12 percentage points last year,0 +462,"and painful as it is for those directly affected new zealands unemployment rate in the last few years has risen to +only around the average for the las t 25 years",0 +463,"even though the region has somewhat higher unemployment than the national average the rise in +unemployment in northern norway has been relatively low in the last year",0 +464,"they also take into account the current behaviour of economic agents for example participation rates in the labour market are +based on the most recently observed trends by age and sex",0 +465,"employment has grown strongly over the pas t year and the unemployment rate has fallen +back to a range of 55½ per cent which historically has indicated a degree of tightness in +the labour market",0 +466,unemployment which jumped in many economies during the crisis and remains very high in most of them increased relatively moderately in israel and resumed its decline immediately following the crisis so that we are currently at historically low unemployment levels,0 +467,"our assessm ent was that unemployment will remain +unchanged in the coming year and then begin to fall when the higher gdp growth causes +employment to increase faster than the labour force",0 +468,at any given rate of unemployment wages growth appears to have been lower than would have been expected based on historical relationships,0 +469,"the unemployment rate has held at 97 percent for the past few months and job market +conditions remain weak",0 +470,even more worrying was the sharp increase in youth unemployment in europe,0 +471,since 2012 the unemployment rate has fallen from five percent to less than four percent close to the longterm average,0 +472,unemployment in march was at 95 down from its peak of 12 in 2013,0 +473,"in the wake of the recession the unemployment rate reached a +peak of 10 percent in october 2009",0 +474,"the us unemployment +rate had risen to 534 percent by july about 1 percentage point above its level at the beginning of the crisis and household spending was weakening",0 +475,but the unemployment rate now nears 13 per cent twice as high as before the crisis and the highest on record since this statistical series began to be collected in the 1950s,0 +476,the ability to work from home is highly correlated to income so the risk of income loss or job loss has been much higher among lowerincome groups,0 +477,but a recent study has shown that the labour market in the euro area is in worse shape than the official job figures suggest with workers unlikely to see real increases in pay because of the level of underemployment2 a measure of slack in the labour market indicates that about 15 to 18 of the euro area workforce are without jobs or would like to work more which is nearly double the official unemployment rate,0 +478,the unemployment rate was 98 percent and was expected to be 9 percent a year later,0 +479,"and in fact this relationship measurably increases if one adjusts the +headline rate of unemployment for those who have become detached from the labour market +for a long time and who are likely to ex ert only a mild amount of downward pressure on +wage and price formation",0 +480,long spells of unemployment may thus easily turn into structural unemployment,0 +481,throughout these years and until very recently unemployment continued along a steadily declining path,0 +482,the unemployment rate declined to 58 percent last march from a peak of 176 percent in april 2020,0 +483,these reforms together with moderate wage developments have contributed to the strong employment growth and the considerable reduction in unemployment witnessed in many euro area countries in the last cyclical upswing,0 +484,"the unemployment rate has fallen +from 10 percent in the fall of 2009 to 7 percent recently",0 +485,"the chart indicate s that the unemployment rate in +japan has risen from 1990",0 +486,"and the unemployment rate which shot up after 1 997 has now returned to the level comparable to +the precrisis period",0 +487,in the four years thereafter the unemployment rate fell back only to slightly below 8 percent,0 +488,thus the beveridge curve the relationship between unemployment and vacancies is downward sloping,0 +489,the unemployment rate is set to decline from its second quarter peak of about 25 per cent as the year progresses and is projected to be around half that level by the end of this year,0 +490,indeed if unemployment continues to decline at its current pace it may take years before the euro area returns to its pre crisis unemployment rates,0 +491,"the fact that people with higher levels of education are more likely to be in work reflects +their increased propensity to participate in the labour market and in the case of adults the smaller risk +of unemployment",0 +492,"it is estimated that in +germany around one fifth of total unemployment is the result of oldage including the earlyretirement +regulations",0 +493,"in fact maltas unem ployment rate is at the lower +end of national unemployment rates across the euro area",0 +494," labour supply may be affected after unemployment has risen as steeply as it did in the early +1990s",0 +495,and unemployment as measured by the labour force survey has fallen from 107 atits peak in 1993 to a current level of 63,0 +496,unemployment has more than halved from over 10 in early 1993 to around 5 now on the internationally standardised measure,0 +497,data showingthe percent of the relevant population who are not at work but would like a job are aroundthe low for this series which started in 1970,0 +498,"specifically data collected by the bureau of labor statistics indicates the unemployed on +average are remaining unemployed longer than in the past",0 +499,and unemployment in the euro area is at its lowest point since may 2009,0 +500,a flexible labour market appears to be curbing the rise in unemployment,0 +501,to distribute the decline in the unemployment rate across households depending on their demographics such as age education marital status and the number of children a probit model is estimated at the country level with the employment status as the dependent variable22 such a model captures some heterogeneity in the probability of employment across households,0 +502,"fallick fleischman and +pingle 2006 estimate that shifts in the demographic com position of the labor force can explain a decline in the +unemployment rate of nearly 1 percentage point between 1977 and 2006",0 +503,in practice we are seeing positive signs in fact the difference between the overall unemployment rate and broader measures of slack on the labour market has declined somewhat over the past two years,0 +504,"unemployment is likely to rise modestly probably to about +5¼ per cent next year from an average of about 4¾ per cent this year",0 +505,the latest estimates for the equilibrium rate of unemployment also make us suspect that slack is bigger than we thought,0 +506,"if the wage share has +fallen solely because of a lag in wage formation both wage shares and unemployment may increase",0 +507,"personally i expect that over the long run the unemployment rate will converge to just over +5 percent",0 +508,"we also thought this would lead to a further gradual +increase in the unemployment rate and be accompanied by subdued growth of employment",0 +509,the unemployment rate in the third quarter stood at 212 down 25 pp in the past 12 months,0 +510,"that is the unemployment rate has risen +gradually over the past couple of years to a level that is high relative to its recent history +graph 3",0 +511,unemployment does remain disturbingly high over 9 percent,0 +512,"unemployment is instead determined in the long run by how +well the labour market functions for instance with regard to matching unemployed persons and job +vacancies",0 +513,but a fraction will trail as it will take time for the longerterm unemployed to adapt to the postcrisis dislocations in the labour market,0 +514,unemployment in both the advanced economies and in asia is at low levels and wage growth is picking up gradually,0 +515,the unemployment rate rose,0 +516,to the extent that workers do not yet feel confident in asking for a pay increase that might be one reason why wage growth has been relatively unresponsive to the sharp fall in unemployment,0 +517,"the unemployment +rate has fallen and reached 76 percent in the second quarter a far cry from the level of about 11 percent in 2003 and this has occurred in the time when the rate of participation in the labor force rose from 54 percent to 57 percent a very important development",0 +518,meanwhile unemployment rates have tick ed down across the region,0 +519,"the rate at which the long term unemployed are able to move +back into employment has remained around its historical average chart 2",0 +520,"unemployment has remained relatively low and household real incomes have mostly been +on an upward trend",0 +521,"the redundancy statistics suggest that +employment will level out or even fall next year which may involve an attendant increase in +unemployment",0 +522,"however it must be remembered that a drop in formal +unemployment does not necessarily imply an equal rise in the number of the unemployed",0 +523,"while households +expect unemployment to be much higher in a years time their stated expectations about economic conditions five years from now have barely diminished at all from what we have seen consistently over a number of years gr aph 3",0 +524,and unemployment has declined to 95 in february 2017 the lowest level since may 2009,0 +525,"meanwhile despite the unofficial figure of 225 million labour immigrants the unemployment +rate has been hovering around 15 during the past four months",0 +526,the unemployment rate has fallen from the pandemic peak of 147 percent to just 4 percent today,0 +527,a broader measure of unemployment isnt quite back to its prerecession level,0 +528,output gaps are closed unemployment is down and trend inflation remains below the lower limit of the targets tolerance range but gradually approaching three percent,0 +529,"these people +are not unemployed but they are under employed",0 +530,"the current level of unemployment +in the euro area despite some decline is still too high",0 +531,but i want to concentrate on young people for whom a long period of unemployment can leave a scar that could last a lifetime,0 +532,it is primarily among youth thatunemployment is high as shown in diagram 2 ,0 +533,all this is happening at a time when unemployment rates are as low as they have been for many decades and household budgets are under pressure,0 +534,"the weakest one at present is based on the unemployment rate which +could be influenced by immigration and structural changes in participation",0 +535,"but unemployment is still high and we are expecting a slow recovery in employment +in the coming period",0 +536,reducing the structural unemployment rate and increasing participation rates to the average levels of the top three economies in the euro area is in many cases sufficient to offset the demographic drag even assuming output per worker remains the same,0 +537,to name just one unemployment has remained at rather high levels hovering at around 8,0 +538,high levels of unemployment and weak income prospects are likely precluding many households from purchasing homes,0 +539,the unemployment rate in the euro area was 75 in july this year the lowest level since july 2008,0 +540,during the great recession and the corresponding cyclical downturn youth unemployment surged markedly,0 +541,it believed that there was a permanent tradeoff between unemployment and inflation,0 +542,"it is also likely t hat average unemployment has been higher in the +last 15 years because average inflation has undershot the target",0 +543,young people those under the age of 24 have been particularly affected by this instability with their rate of unemployment 325 and their share of temporary employment 695 standing well above the euro area average in 2019 156 and 524 respectively,0 +544,"of particular concern is the substantial increase in the share of unemployed workers who +have been without work for six months or more the dashed red line in figure 4",0 +545,as aresult the unemployment rate must rise during the transition to full employment in this case,0 +546,inflation rose at the same time as keeping total unemployment down provedincreasingly difficult,0 +547,but it remains below the uk average in contrast with the 1980s and 1990s when unemployment here was significantly above the national average,0 +548,the labor market and welfare reforms of the past few years have also reduced structural unemployment,0 +549,"similarly continued wage +moderation is important in order both to contribute to further decreases in the level of unemployment +and to maintain a favourable outlook for price stability",0 +550,the unemployment rate hasdeclined to the lowest level in a quarter century,0 +551,as for the labour market situation we do not expect any considerable increase in the unemployment numbers in comparison with the existing level,0 +552,"if my forecast is correct the unemployment rate will have stayed +at or above 8 percent for more than four years",0 +553,unemployment has increased since autumn last year but is still at historical low levels,0 +554,because debt will be higher employment is still to recover and inequality will be harder to curb,0 +555,while other countries have seen unemployment rising to unprecedented highs it is comforting to note that most people in mauritius can feel pretty safe in their jobs,0 +556,6 in the long run unemployment tends towards that rate,0 +557,but the unemployment rate has turned out to be very close to what we had expected and has moved sideways around 5¼ per cent for some time now,0 +558,similarly the unemployment rate decreased from roughly 28 in july 2013 to 195 in may 2018,0 +559,"moreover many other features of +the jobs market including the historically high level of long term unemployment the large +number of people working part time because they have not been able to find fulltime jobs +and the decline in labor force participation reinforce the conclusion that we have some way +to go before the labor market can be deemed healthy again",0 +560,when households carry a lot of debt they become less able to manage through a temporary period of unemployment,0 +561,"many of these +young indivi duals have relatively weak credit records and are more likely to have had a +recent spell of unemployment",0 +562,there was some recovery in the early 1990s but it never returned to the level of the early 1970s1 in 2007 when total unemployment in the euro area declined to 75 its lowest level since the early 1980s the unemployment rate for young people was already very high at around 15,0 +563,the unemployment rate continues to improve more quickly than many had expected,0 +564,thanks to the improved economic conditions and to the reforms implemented since 2010 the unemployment rate though still high fell to 169 in the second quarter of 2019 from 278 at the end of 2013,0 +565,"but this does not mean that higher inflation results in permanently higher employment +and lastingly lower unemployment",0 +566,2 because of data revisions the unemployment r ate for may 1999 i s today recor ded at 70 per cent,0 +567,"it is a difficult period which has +notably resulted in very high unemployment across the whole area",0 +568,yet with high structural unemployment there is clear scope to increase quantities especially through labour market policies targeted at reactivating the longterm unemployed,0 +569,"and the resulting expansion in employment will likely improve +income levels at the bottom of the distribution",0 +570,with the unemployment rate at 42 percent in november i believe we are very close to meeting the fomcs maximumemployment goal,0 +571,employment has continued to increase relatively strongly in recent months and unemployment is still falling slightly,0 +572,the unemployment rate began to increase in the second half of 2007,0 +573,then unemployment rates rose well above 20 percent in many cases,0 +574,the favourable trend has contributed to rapidly rising employment and decreasedunemployment,0 +575,"the employment situation has significantly +improved and the unemployment rate has declined to 3 percent",0 +576,if so a lower level of unemployment might be needed to fully eliminate slack in the labor market drive faster wage growth and return inflation to our 2 percent objective,0 +577,"in addition during all postwar expansions the prime age male unemployment rate has fallen below 5 percent even during the short expansion of +198081",0 +578,unemployment in the euro area continues to improve marginally and is now at 112 per cent,0 +579,"it is clear from +this graph that the largest increase in saving ratios is for those households that have become +a lot more concerned over time about losing their job",0 +580,social mobility means that people can later find themselves in rooms of a very different quality than before,0 +581,and the number of persons who were unemployed for over 26 weeks has fallen by 57 percent since 2010,0 +582,unemployment can lead in the long run to increased social problems and illhealth,0 +583,"these actions also helped keep the unemployment rate from rising even +higher",0 +584,"the official data show that +unemployment rose from a low of 39 per cent in the last quarter of 2008 to 67 per cent in the first quarter of 2010",0 +585,while the headline unemployment rate has continued to fall the number of people who report being unemployed for more than six months has continued to rise suggesting a risk of scarringmeaning that some individuals could see an erosion of their skills and their connections to the labor market,0 +586,consecutive years of strong employment growth have brought the unemployment rate down to its current level of about 6 per cent,0 +587,interestingly the last time the unemployment rate fell by this much in one year was in 1995,0 +588,youth unemployment stood at 427 in greece in july 2016,0 +589,"the most recent unemployment rate for 2005 was a pproximately 27 per cent slightly higher than a +year earlier",0 +590,"the decline in the unemployment rate may in part reflect an unwinding of the earlier rise in +unemployment which was relatively large compared with the early 2000s slowdown for which average gdp +growth was similar",0 +591,"unemployment has come down +from a peak of 11 in the mid1990s to 7 today",0 +592,"the duration of unemployment has been exceptionally long in this business cycle a development that could erode worker skills and +decrease reemployment probabilities",0 +593,not only are they unemployed in larger numbers but the lifetime earnings of cohorts that enter the labour force in difficult times is lower,0 +594,though high for comparison the unemployment rate peaked at just over 16 per cent in 20112012 following the crisis a decade ago,0 +595,"unemployment rates among those aged 18 24 is still over 13 8 percentage +points above t he national average",0 +596,"the unemployment +rate declined to 104 per cent in the first three quarters of 2001 ie",0 +597,but to be fair other factors may have also contributed to the increase in unemployment,0 +598,the unemployment rate declined to 66 percent in december 2021 from a peak of 176 percent in april 2020,0 +599,"for some time now growth has been strong and we expect unemployment to fall towards 4 during +the coming year",0 +600,the unemployment rate has come down close to levels that many economists believe is sustainable in the long run without generating inflation,0 +601,the unemployment rate has also fallen over the past year although it has been steady at around 5½ per cent over the past six months,0 +602,in social terms the ranks of the unemployed have swollen to around 35 million,0 +603,"at the same time open unemployment has declined from around 8 per cent in 1993 to less than 4 per cent in +2002",0 +604,"for example over the past year unemployment has +declined notably more quickly than we or other forecasters expected even as gdp growth +was moderately lower than expected a year ago",0 +605,the unemployment rate remains above its pre crisis decade average,0 +606,over the period the unemployment rate fell from 9 per cent to a little over 5 per cent,0 +607,this modal projection for the path of the unemployment rate is according to the atlanta fed jobs calculator consistent with a rebound in labor force participation to its estimated demographic trend and is also consistent with cumulative employment gains this year and next that by the end of 2022 eliminate the 42 million employment gap relative to the previous cycle peak4,0 +608,unemployment rate fell to 64 percent in january 2022 from the peak of 176 percent in april 2020,0 +609,unemployment rates have indeed come down but in particular the number of young and longterm unemployed is still unacceptably high,0 +610,"the unemployment rate ticked down a few months ago and the participation +rate appears to have stabilised somewhat after a significant decline through 2013",0 +611,alan krueger judd cramer and david cho among others have shown that the relationship during this cycle between real wages and the shortterm unemployment rate that is those unemployed 26 weeks or less has been in line with historical norms whereas the huge spike in longterm unemployment exerted minimal pressure on real wage growth12 of course the shortterm unemployment rate is now close to its prerecession level,0 +612,the national unemployment rate has adjusted more gradually thanks to increased self employment so it is still low by historic patterns figure 5,0 +613,partly reflecting this abovetrend growth the unemployment rate has declined by around ½ percentage point over the past year,0 +614,one of the most gratifying recent developments is a steady decline of unemployment,0 +615,prior to the pandemic unemployment was at 50year lows,0 +616,at the time the latest reading on the unemployment rate was 81 percent and both we and most privatesector economists were projecting only slow reductions in unemployment in the coming quarters,0 +617,this indicates that there may be in the labour market long before unemployment comes down to a normal level,0 +618,if this view is correct then high levels of longterm unemployment could persist for quite a while even after the economy has more fully recovered,0 +619,for example we may need to enhance social safety net programs such as unemployment and disability insurance to better support some types of contingent work,0 +620,"the chart shows that in periods of falling unemployment wage growth +6 moves up fairly rapidly",0 +621,these low rates arent just a fluke of how unemployment is measured in the official statisticsthe broadest measure of underemployment called u6 is at its lowest level since 2000,0 +622,theory and empirical evidence predict that the structurally unemployed exert less downwards pre ssure on wage inflation,0 +623,unemployment is now decreasing rapidly,0 +624,"the uk unemployment rate has fallen like a stone +from 85 in 2011 to around 5 currently",0 +625,the unemployment rate declined to 232 per cent in september 2008 down from over 30 per cent in 2002,0 +626,and as the economy has strengthened we have indeed seen the unemployment rate falling significantly,0 +627,"the rate of unemployment which +increased during the crisis and declined during the recovery almost to its precrisis level has recently risen slightly",0 +628,so far we have seen unemployment fall sharply without generating sustained inflationary pressures,0 +629,in sweden the slowdown during 2001 had a limited effect on unemployment,0 +630,with higher nominal wage increases real wage costs will rise againand unemployment will tend to return to its initial level,0 +631,the unemployment rate after remaining near 412 percent in the first half of last year has moved up about 12 percentage point to nearly 5 percent its highest level since late 2005,0 +632,youth and longterm unemployment were also kept at comparatively low levels,0 +633,unemployment has declined to 65 per cent,0 +634,yet the recovery began over five years ago and the unemployment rate has declined from 10 percent in october 2009 to 61 percent now,0 +635,"finally with the help of germanys training system it has been possible to keep youth unemployment at a +comparatively low level by european standards",0 +636,the level of unemployment that is consistent with stable real wage growth is uncertain and probably varies over time,0 +637,"the unemployment rate is near historic lows and the participation rate of primeage workersthose +2554 years oldhas never been higher",0 +638,while employment participation rates increase further the trend of decline in the number of unemployed also continues,0 +639,"meanwhile the unemployment rate at 61 percent in september has risen 12 +percentage points since january",0 +640,"the uk unemployment +rate is currently around 8 of the labour force whereas it peaked at much higher levels bis review 992010 7 + following the last two recessions at nearly 12 in the mid1980s and between 10 and +11 in the early 1990s",0 +641,"the unemployment rate measured by the lfs fell +from close to 6 per cent in 1991 to almost 3 per cent in 1999",0 +642,"among other factors this lag +may reflect unemployment rates which on average have been approximately two +percentage points higher than their corresponding average before the crisis",0 +643,"of ending up with higher unemployment and higher inflation +alike",0 +644,the unemployment rate has remained steady in an environment where employment growth has been measured to be particularly strong,0 +645,its difficult to say today but we think there will be somewhat higher wage increases in 2017 in spite of a still high jobless rate because we expect the structural component of unemployment to remain large in 2017,0 +646,thanks to improved economic conditions and to the reforms implemented the unemployment rate though still high fell to 187 in the fourth quarter of 2018 from 278 at the end of 2013,0 +647,"unemployment has not +been as low since the last half of the 1980s and the number of vacancies is record high",0 +648,at the same time we need to resolve the issue of relatively higher unemployment rates among youths,0 +649,"this +has surprised many people for even though the previously high unemployment indicated that therewere a lot of unused resources in the economy there were many who doubted whether it would bepossible for so many to return to the labour market so quickly",0 +650,american families have not experienced such a prolonged and severe period of unemployment since the early 1980s,0 +651,the seasonallyadjusted unemployment rate fell to the lowest record in april,0 +652,given the recent trends an unemployment rate below 6 percent is certainly plausible,0 +653,despite a decline in our unemployment rate it remains high in doubledigit figures especially among our youth,0 +654,many especially the young unemployed have had their futures blighted,0 +655,the unemployment gap an established measure of labour market slack is now closed and employment has reached its highest ever level in the euro area,0 +656,"in this regard latest figures show an unfortuna te +rise in unemployment in the first quarter of 2012",0 +657,"it is +likely to take at least four years to return to full employment from the current unemployment rate +of 94 percent",0 +658,the unemployment rate started declining in 2012 falling from 14 in december that year to 12 a year later,0 +659,there are also other estimates of the longrun sustainable unemployment rate,0 +660," since 2013 the uk unemployment rate has fallen sharply to a rate of 53 or +18 million people",0 +661,"at the same time while income inequality may not seem fair unemployment is +not very fair either",0 +662,employment growth is in fact the strongest for several decadesconsidering how high unemployment has been this is welcome,0 +663,the unemployment rate declined by about¾ percentage point last year to a quartercentury low,0 +664,"unemployment is therefore +decreasing though it is still above the levels that were customary in earlier decades",0 +665,unemployment rates for young african american and hispanic men without a college degree remain especially high and one important benefit from further improvement in the labor market would be increased job opportunities for these men and other groups that currently still experience high unemployment,0 +666,given that the economic environment is likely to remain favourable the reduction in unemployment can be expected to continue this year,0 +667,we are also keenly aware that the harm from higher unemployment has fallen even more than usual on those lowincome households least able to bear it,0 +668,"these types of wage outcomes are much lower than what most +people had become used to and lower than suggested by the historical relationship between +wages growth and unemployment",0 +669,unemployment has steadily declined from its 10 percent postcrisis peak and has now remained at or below 4 percent for more than a year the longest stretch in a half century,0 +670,there is a risk that it may take a lower unemployment rate than we currently expect to generate a sustained move higher than the 2 per cent focal point evident in many wage outcomes today,0 +671,"this picture +is also supported by unemployment varying substantially between groups",0 +672,"during the period 19942000 several labour market reforms has played an important role in +reducing structural unemployment",0 +673,"this is because even if a minimum wage does not +affect unemployment directly it may still have a negative impact on em ployment dynamics",0 +674,the weak growth of the latter 1970s was associated with an upward trend in unemployment graph 4,0 +675,"available data suggest that the unemployment rate rose from 33 +in 1994 to 35 in 1997",0 +676,"although our country continues to endure high unemployment we see some signs of modest +improvement in the labor market",0 +677,it now seems likely that the rate of unemployment consistent with stable inflation in the medium term is somewhat lower than the mpc assessed back in august2 in part that is because rates of transition into jobs even for those who have been unemployed for more than a year have been sustained at high rates minimising the extent of skill atrophy,0 +678,alternative measures point to a recovery of one third to two thirds so far but their counterpart is not only higher unemployment but also lower labor participation,0 +679,unemployment is below the european averagethe progress on job creation in recent years is impressive and the outlook is good,0 +680,one possible explanation is simply a longerthanusual lag between falls in unemployment and pay pressure emerging,0 +681,"us unemployment remained unchanged at +the same time at 95 per cent",0 +682,some of the longterm unemployed will be absorbed back into the labour force as the recovery continues and some of the marginally attached will also rejoin,0 +683,the unemployment rate has remained close to 10 percent since mid2009 with a substantial fraction of the unemployed out of work for six months or longer,0 +684,the average unemployment rate in the euro area is at the same level as before the start of the pandemic and employment has almost returned to the prepandemic levels,0 +685,with overall growth slowing to below its trend level i expect the unemployment rate to move up from its very low current level reaching somewhat above 4 percent next year,0 +686,"wage moderationhas made an important contribution to the progress observed thus far in job creation and in reducing +unemployment",0 +687,during the crisis the rise in this measure was considerably stronger than that of the normal unemployment rate,0 +688,unemployment is now at a historically low level,0 +689,the share of workingage australians with a job has never been higher than it has been recently youth unemployment has declined and underemployment is the lowest it has been for decades,0 +690,"bis central bankers speeches 5 + prospects for labor markets will continue to improve with job growth strengthening and the +unemployment rate falling gradually over time ",0 +691,"over the past year we have had the rather unusual situation in which consumers have become quite concerned about rising unemployment yet the overall unemployment +rate has been steady graph 5",0 +692,"in 2003 unemployment at +65 percent was thought to be too high",0 +693,for example long islands unemployment rate is now below 4 percent its lowest level in nearly a decade,0 +694,having jumped from about 4 to 15 per cent unemployment is back in single digits,0 +695,unemployment is likely to climb in the months ahead,0 +696,this rate of unemployment i s quite simply dramatic,0 +697,"the unemployment rate currently standing at +121 remains unacceptably high and the risks around the outlook continue to be tilted to +the downside",0 +698,"equilibrium unemployment is +influenced by how well the match between jobseekers and job vacancies works",0 +699,the oppressively high levels of unemployment are also gradually decreasing,0 +700,unemployment rose to very high levels,0 +701,meanwhile unemployment remained unchanged at 77 percent in june 2021,0 +702,"in the labor market employment gains picked up beginning in the fall and in +recent months the unemployment rate has declined noticeably",0 +703,we can look at 3 concepts standard unemployment which represents the unemployed the unemployed and those on unpaid leave and the unemployed those on unpaid leave and those whove reported that theyve already stopped seeking work due to the coronavirus,0 +704,"at that level the unemployment rate is near the median of fomc +participants most recent estimates of its longer run normal level",0 +705,euro area unemployment stood at 88 in october well down from its peak of 121 in 2013 and the lowest level since january 2009,0 +706,"it is interesting to observe how much these unemployed people outside the registered +unemployment category will contribute to dampening wage inflation",0 +707,the recent downward revisions in the natural rate of unemployment here the european commissions nawru nonaccelerating wage rate of unemployment estimates are shown also make us suspect that slack in the euro area is bigger than we thought,0 +708,despite this response we estimate unemployment is likely to increase from 62 per cent in 2020 to an average of 93 per cent this year before declining to 78 per cent in 2022 a rate well above the prepandemic level of about 5 per cent,0 +709,this in turn risks aggravating the recession further which would result in a further rise in unemployment,0 +710,"the median duration of unemployment has declined from 23 weeks in the +second quarter of 2010 to 16 weeks recently",0 +711,we are moving with alarming speed from 50year lows in unemployment to what will likely be very high although temporary levels,0 +712,looking ahead i could well imagine that the natural rate of unemployment trends higher,0 +713,the main factor in the opposite directionis unemployment which is persistently high and even tended to rise in the autumn,0 +714,"compensation levels are a central factor in the economist s explanation of the +longterm rate of unemployment",0 +715,the unemployment rate had dropped to 6 percent by midyearwell below its great recession peak of 10 percentand other measures of labor market conditions were also showing significant improvement,0 +716,"in addition a historically large fraction of the unemployed have been out of a job for a very +long time",0 +717,having a job is one of the most important measures of an individuals economic and financial welfare,0 +718,"with skyrocketing youth unemployment and compensation under pressure the recession +sharply reduced the opportunity costs of additional y ears of schooling",0 +719,the labour market remains tight with the unemployment rate near a 50year low,0 +720,youth unemployment exceeds overall unemployment in all countries and for the whole area the difference is a staggering 12 percentage points,0 +721,the unemployment rate on the island has consistently exceeded the rate on the mainland by several percentage points,0 +722,the unemployment rate has declined to 50 percent,0 +723,"if unemployment is very high to start with +it is probable that it will also be high in a years time",0 +724,thepicture of unemployment is more disappointing though here too the recent trend points in the rightdirection,0 +725,"specifically i think the unemployment rate may reach 58 percent by the end of this year and 56 percent by the end +of 2015",0 +726,"of particular +concern is the increase in the youth unemployment rate to 529 in the first quarter",0 +727,so far unemployment has only shown a slight increase,0 +728,even when unemployment spiked during recent recessions the prevailing rate found its way to still lower levels,0 +729,the unemployment rate skyrocketed from 8 in 2007 to almost 18 in the third quarter this year when it stabilised due partly to the strong slowdown in the growth rate of the labour force,0 +730,over the past year unemployment has fallen by 28 percentage points and growth is estimated to be around 5 12 percent according to a variety of private forecasts,0 +731,"at the same time +there is evidence that a significant share of unemployment is also structural",0 +732,alan krueger judd cramer and david cho among others have shown that the relationship between real wages and the shortterm unemployment rate during this cycle has been in line with historical norms whereas the historical spike in longterm unemployment exerted minimal pressure on real wage growth10 of course the shortterm unemployment rate is now close to its prerecession level,0 +733,"the unemployment rate remains elevated despite a significant decline of the labor +force participation rate",0 +734,whats more the unemployment rate peaked at 12 in mid2013,0 +735,in addition as nominal wages in the euro area tend not to adjust downwards a 2 per cent inflation target allows for real wage adjustments and avoids severe increases in unemployment during economic downturns,0 +736,for the individual person unemployment can lead to a difficult period with tighter financial circumstances,0 +737,"the second recessionary episode +however led to a further strong increase in the unemployment rate even though aggregate +vacancy rates showed marked s igns of improvement",0 +738,"in other words while the us unemployment rate has declined to 5 recently it does +not mean the labour market has fully recovered",0 +739,other indicators however suggest that the overall labour market may not be as tight as suggested by the unemployment rate,0 +740,today in sweden the issue of unemployment is being discussed more and more,0 +741,"the duration of +unemployment also remains above its pre recession average and the number of people +working part time who would prefer to work full time has com e down only slowly",0 +742,i expect the unemployment rate to edge down to slightly below 35 percent next year the lowest level in nearly 50 years,0 +743,in this adverse macroeconomic landscape unemployment increased to historic postwar levels and disposable income dropped substantially,0 +744,but in greece and spain where unemployment is above 25 per cent and youth unemployment double that the expectation is ten months,0 +745,unemployment is at its lowest point since may 2009,0 +746,the impact of the 2012 spanish labour market reform on unemployment inflows and outflows a regression discontinuity analysis using duration models,0 +747,"the pace of privatesector job creati on has slowed this year but the unemployment +rate has moved up only a little from its recent lows",0 +748,however it risks being a costly route particularly with regard to unemployment which could stick at higher equilibrium levels than before,0 +749,an extrapolation of this trend would suggest that unemployment may approach 5 percent a rate consistent with longterm trends perhaps as early as this year,0 +750,high unemployment imposes heavy costs on workers and their families as well as on our society as a whole,0 +751,"in addition reforms are needed that lead to higher labour market participation and lower +unemployment",0 +752,the unemployment rate nevertheless remains high at 30 per cent but there are encouraging signs that it is not increasing,0 +753,"the rate of +unemployment will also continue to be high in the years ahead figure 4",0 +754,hence it is essential to provide immediate support to the unemployed and those marginally attached to the labour market by employing active labour market policies and targeted social transfers to counter the temporary income loss and to shorten jobtransitions,0 +755,"some of the unemployed have been able to find jobs but not in large numbers +thus far",0 +756,employment increased further in the second quarter of 2015 while the unemployment rate has continued to decline,0 +757,"in addition long term unemployment remains very high 44 million americans or about +37 percent of the unemployed have been out of work for six months or more",0 +758,in other words the implementation of less stringent employment protection legislation linked to adequate financial support in the event of job loss would likely reduce the overall unemployment rate,0 +759,divergence has widened also in terms of unemployment rates and income inequality indicators,0 +760,"now unemployment rates are even +lower than before the crisis",0 +761,by way of comparison the share of unemployment that was long term in nature never exceeded 25 percent or so in the severe 198182 recession,0 +762,"not only does high unemployment particularly long +term unemployment impose heavy costs on the unemployed and their families and on society but it also poses risks to the sustainability of the recovery itself through its effects on households incomes and confidence",0 +763,most households today simply do not have the time skill or the access to the relevant information in order to manage themselves their longterm savings,0 +764,unemployment is low indeed here in biberach you are close to full employment household debt is not excessive and real wages are rising markedly,0 +765,unemployment edged up somewhat in the latter half of 2001 but has remained low,0 +766,"in this situation it is possible +that unemployment will still be high as changes in employment often occur somewhat later +in the economic cycle than changes in other variables such as growth",0 +767,similarly a stronger labor market can provide a modest countervailing factor to income inequality trends by leading to higher wages at the bottom rungs of the wage scale,0 +768,recently some economists have argued that the amount of slack in the labor market may be smaller than suggested by the official unemployment rate of 63 percent,0 +769,the unemployment rate peaked at 10 in october 2009 after a cyclical low of just 44 in may 2007,0 +770,the persistence and heterogeneity of youth unemployment rates across the euro area countries even before the crisis as well as the diverse developments during the crisis indicate that there is need for specific policies to improve education and labour market functioning in some countries,0 +771,over this time period the unemployment rate has declined to 73 percent from 81 percent,0 +772,"the recession and the sharp rise in unemployment may also have led households to revise +their beliefs about the stability of the economy and with it the predictability of their own incomes",0 +773,"ive treated the decline in the unemployment rate +as representing a decline in labor market slack",0 +774,in part this owes to the slightly better starting point for the unemployment rate than earlier assumed,0 +775,"and the average duration of unemployment +has declined sharply",0 +776,inflation is in line with the committees 2 percent objective and the unemployment rate is at nearly a 50year low,0 +777,"and unemployment has continued to decline fairly steadily to just over 3 its lowest rate for more +than a quarter of a century",0 +778,this is actually a rather large wage increase given the fact that unemployment is relatively high but not so large that it is likely to lead to any serious inflation risks,0 +779,"the true story doubtless lies somewhere in between but probably more on the side of the +household survey that tracks unemployment",0 +780,"the unemployment rate has declined a little but it +remains at a very high level",0 +781,"the unemployment rate is currently at +a 10year low of 32 while inflation eased to 457",0 +782,"for example the oecd estimates that the 2012 labour market reform in spain has improved transitions out of +unemployment and into employment at all unemployment durations ",0 +783,the unemployment rate also continues to decline despite an increase in labour force participation and is now at its lowest level in eight years,0 +784,in the euro area on the past 4 years the unemployment rate has dropped from 13 to 98 last october and is at its lowest level in four years,0 +785,but the greater puzzle is the slow paceof increase in compensation per hour at prevailing unemployment rates,0 +786,"the labor market under deflation +the unemployment rate in japan is now 37 percent",0 +787,"employment is growing and the jobless rate has dropped to +a sevenyear low of 44",0 +788,unemployment is falling rapidly,0 +789,labour market dynamics remain strong with euro area unemployment at 79 in december its lowest level in more than ten years,0 +790,115 unemployment 232 of youth unemployment in the euro area even though these figures are now dropping it is not and will never be a choice of society,0 +791,"unemployment has fallen and is continuing to fall to levels that few believed possible only a +few years ago",0 +792,"the average unemployment rate was less than 534 percent a full percentage point less than in the +previous 15 years",0 +793,the crisis has shaken the foundations of our societies in particular through high unemployment everywhere,0 +794,the aggregate decline in unemployment following the app disproportionately impacts groups with a higher share of the unemployed such as those in the lowest income quintile24 the effect is economically important as in that quintile unemployment rates drop by more than 2 percentage points,0 +795," the average unemployment rate is projected to increase this year and exceed 19 +up from 177 last year",0 +796,after peaking at 10 percent in october 2009 the unemployment rate has declined to 41 percent its lowest level since the 1960s outside of a brief period from 1999 to 2000,0 +797,"this is only the second time +since the great depression that the jobless rate has been so high and it is the first time since the 1930s that it has been so high for so long",0 +798,"youth unemployment in the euro area +youth unemployment is not a recent phenomenon",0 +799,"they too concluded that mismatches accounted for only a small amount of the increase in the unemployment rate +during the recession on the order of 34 to 112 percentage points",0 +800,"and employment +has been growing strongly taking the national unemployment rate down to an 18year low of just +under 7",0 +801,using statelevel data they show that if you further split shortterm unemployment into those unemployed one month or less and those unemployed between one and six months only the onetosix month rate has any predictive power for wage growth,0 +802,in december 2021 the unemployment rate stood already at 7,0 +803,"the unemployment rate according to the ilo definition stood at 94 +of the labour force in october down by 16 point yearonyear",0 +804,new labour market statistics also show that unemployment in the region has stabilised albeit at a very high level,0 +805,"although this decline is more than welcome i think the fact that almost a quarter of our youth is +unemployed remains unacceptable",0 +806,the unemployment rate fell to 65 percent in november 2021 from a peak of 176 percent in april 2020,0 +807,"unemployment remains painfully high and in my opinion +well above the long run structural rate of unemployment",0 +808,"shocks and institutions have piled employment adjustment +pressures especially on the young and youth unemployment has risen to record levels",0 +809,"despite the decline in the euro area average unemployment rate over the last few years +unemployment remains too high in several countries and regions of the euro area",0 +810,"notwithstanding sustained reductions in the aggregate unemployment rate and relatively rapid +employment growth wage increases in the euro area have so far remained moderate",0 +811,"moreover previous postworldwarii recessions do not seem to have +resulted in higher structural unemployment which many economists attribute to the relative +flexibility of the us labor market",0 +812,"we must not become +too sanguine that high unemployment will lead to low inflation",0 +813,if we assume that equilibrium unemployment in sweden is 6 per cent instead of 55 per cent we have the same ranking for the unemployment gap,0 +814,reducing unemployment is socially positive from a distributional point of view,0 +815,"and notwithstanding the legitimate debate about the north +south divide unemployment is at around its lowest rate in every individual region of the uk for some +20 years",0 +816,"normally during the first two quarters of the year the unemployment rate increases +on account of seasonal factors",0 +817,they include reducing the still high rates of unemployment for the longterm unemployed and the young,0 +818,"this fall in unemployment is considerably faster than the mpc +and other outside forecasters had predicted",0 +819,"germany +has amongst the lowest youth unemployment rates in the world currently standing at 77 per +cent compared with the eurozone average of 239 per cent",0 +820,a particular concern in this regard is the fact that the risk of becoming unemployed or experiencing income losses is not evenly shared across society,0 +821,between 2007 and 2013 it increased by about 9 percentage points in the euro area twice as much as the overall unemployment rate,0 +822,the academic literature is quite divided on whether a minimum wage will increase unemployment especially as the answer to that question will depend decisively on the size of the wage and the rest of the framework such as the social safety net for unemployment or job protection,0 +823,although the unemployment rate has declined by about 2 ¾ percentage points since peaking at 10 percent in october of 2009 a significant portion of that decline reflects the substantial decline of the labor force participation rate over that period,0 +824,unemployment although still too high has declined by 4 percentage points to below 8 per cent,0 +825,"at present a higher +unemployment rate of 08 percentage points corresponds to around 40000 jobs",0 +826,"1 +the natural rate of unemployment may be increasing sharply",0 +827,this long period of growth has pushed the unemployment rate down near historic lows,0 +828,what forms of increased flexibility in the labor markets are really welfare improving and what forms of increased insecurity involuntary mobility reduced chances for family life may have longlasting negative welfare and may be also outright growth effects,0 +829,given steady but modest growth we have seen surprisingly large gains in employment and until this year a rapid reduction in the unemployment rate,0 +830,may it not lead to a renewed increase in unemployment,0 +831,and we have no contemporary experience to assess how wage outcomes will evolve at a national unemployment rate below 4 per cent,0 +832,this happens to be the cyclical low reached in 200607 although unemployment was at or below this level much of the time from the middle of 1998 to the middle of 2001,0 +833,if unemployment remainson average at this level inflation tends to remain constant,0 +834,"this means that the unemployment rate can decline for two reasons because +more people are finding work or because fewer people are looking for work",0 +835,"in some euro area countries this phenomenon is +driving youth unemployment to levels that threaten the very fabric of society",0 +836,the unemployment rate which was about the same as the national average prior to the recession rose to a peak of nearly 13 percent,0 +837,employment has increased by 12 million over this periodwhile unemployment has fallen almost month by month on the familiar claimant count measurefrom a peak of over 10 in 1993 to some 47 now,0 +838,"in addition the unemployment rate has declined to +37 percent",0 +839,"at present both unemployment and inflation diverge significantly from these longerterm goals with the march unemployment rate at 97 per cent and core pce inflation over the past year at +13 per cent",0 +840,"youth unemployment rates in a number of stressed +countries also remain unacceptably hi gh",0 +841,"moreover about 5 million workers have +been unemployed for six m onths or more",0 +842,despite this we do not expect much change in the current rate of unemployment which stands at around 5¾ per cent,0 +843,"can such a high unemployment rate be socially +acceptable or sustainable",0 +844,the recent data on employment and unemployment are worrying in that context with unemployment edging up over the summer after having previously fallen by over 50000 from its peak in early 2010,0 +845,"secondly although overall employment conditions are picking up youth unemployment is still running at a high level +and the improvement in employment conditions for weaker members of society including the +selfemployed still remains inadequate",0 +846,"and as would be expected that higher unemployment has been +associated with a marked moderation in wage growth",0 +847,the unemployment rate went down to an estimated 88 per cent in 2007 compared to 91 per cent in 2006,0 +848,in 2009 we had the biggest recession in the postwar era with a sharp increase in unemployment,0 +849,"but unemployment has been +rising for most of the past eighteen months",0 +850,the unemployment rate was 34 percent in january its lowest level since 1969,0 +851,for instance it is useful to look at the broad unemployment rate which includes discouraged work seekers or employees working parttime but who would want to work fulltime,0 +852,the same is true for the unemployment rate at 68 in 2020 a much lower figure than in our recent december forecast,0 +853,"the official unemployment rate +increased from 252 per cent in the first quarter of 2013 to 256 per cent in the second quarter of 2013",0 +854,"accordingly the pace of economic growth has been insufficient to +support significant improvement in the job market indeed the unemployment rate at +78 percent is well above what we judge to be its long run normal level",0 +855,"it is tr ue that even without the great recession demographic forces would have led to some +decline in the employment topopulation ratio since 2007",0 +856,of particular concern is the large number of people who have been unemployed for more than si x months,0 +857,and the rate of unemployment on the claimant count basis at 35 is very close to its 25 year low,0 +858,"accordingly the gap between unemployment rates that had opened up e arlier declined from +2011 onward",0 +859,the labor market tightened further with unemployment rate edging down to 28 the lowest level in more than 20 years,0 +860,the unemployment rate is trending down in almost all member states,0 +861,"despite these substantial gains we cannot yet in my judgment declare that the labor market +has reached full employment",0 +862,heightened income instability also affects young peoples savings opportunities and decisions,0 +863,"as a rule of +thumb the youth unemployment rate is between 2 and 3 times are high as the total +unemployment rate",0 +864,"at its depth 400000 +canadians lost their jobs and the unemployment rate spiked by almost 3 percentage points +to its highest level in more than a decade",0 +865,and the us unemployment rate has fallen to the lowest level since mid2008,0 +866,it is also encouraging that jobless rates have continued to decline for most major demographic groups including for african americans and hispanics,0 +867,what can explain the rise in unemployment,0 +868,one particularly difficult issue is the continued high rate of unemployment,0 +869,"a little arithmetic shows that this scenario involves 19 pointyears of +extra unemployment relative to the fullemployment benchmark between now and the end of 2004",0 +870,that is the labor market has performed noticeably better than expected according to the unemployment rate measure,0 +871,an unemployment figure of 83 is however much too high,0 +872,unemployment remains low and stable,0 +873,"the unemployment rate is thus foreseen to stay slightly above 7 +in both years",0 +874,of particular significance the primeage labor force participation rate despite improvement this year remains about 112 percentage points below its precrisis level suggesting room for further gains,0 +875,"the euro areas seasonally adjusted jobless rate came to 69 in 2006 +thus hitting its lowest level in more than a decade",0 +876,"the role of policies +as we have seen there are cyclical and structural reasons for the high rates of youth unemployment",0 +877,"fourth the 9 percent unemployment +rate may understate the amount of labor market slack",0 +878,"it may be that we are +seeing a period of equilibrium with higher em ployment lower unemployment and lower wage +shares than earlier",0 +879,"as a result net unemployment is set to decline slowly towards its structural level of +around 100000",0 +880,however this effect is relatively small compared to how disproportionately the unemployed are represented in the lowest quintile,0 +881,from a peak of 176 percent in april 2020 the unemployment rate is down to just 58 percent in march this year,0 +882,the result is that euro area unemployment has risen steadily for 40 years,0 +883,from 2008 through 2013 participation dropped sharply by 3 percentage points but has remained about flat on net since late 2013 in a context of strong job growth and declining unemployment,0 +884,"2 unemployment also typically remains higher throughout the decade following +the crisis",0 +885,the current high rates of youth unemployment are likely compromising the future productivity of this generation and its precisely this group which will have to support a larger number of dependants than previous generations did,0 +886,the civilian unemployment rate is 5 percent not much above the level generally viewed as consistent with full employment,0 +887,"ou r assessment is that unemployment will reach +approximately 65 per cent at the end of the forecast period see figure 19",0 +888,figures for the labour market have also trended favourably showing net job creation since the second half of last year which has prompted a 2 pp decline in the unemployment rate over the past 12 months to 237 of the labour force,0 +889,there is even concern that the unemployment rate will move back up significantly when discouraged workers reenter the labor force,0 +890,if the labour market in reality is not as tight as the unemployment number suggests then it is not surprising that wage growth has been weak,0 +891,unemployment has begun to fall albeit gradually in the euro area,0 +892,an additional one may be inequality within an economy given that unemployment hits more the young population and those less educated,0 +893,unemployment is certainly not a perfect guide to slack in the labour market,0 +894,it could be that the level of unemployment consistent with stable inflation has fallen,0 +895,"although the economy has made great progress we started seven years ago from an unemployment rate +of 10 percent which guaranteed a lengthy period of high unemployment",0 +896,unemployment can remain high over a long period,0 +897,unemployment peaked at 10 percent late in 2009 a level unseen for more than 25 years and didnt move below 8 percent for nearly three years,0 +898,"however the increase in the unemployment rate was even larger +during the recent recession than in the 1990s episode",0 +899,"at 81 percent the unemployment rate +is nearly unchanged since the beginning of the year and is well above normal levels",0 +900,how precise are estimates of the natural rate of unemployment,0 +901,"it would also matter why the unemployment rate is declining and whether that +improvement is likely to be sustained in the future",0 +902,the trend in labour force participation rate has picked up significantly among women and older cohorts over the same period,0 +903,the unemployment rate in the euro area last year was the lowest in 25 years,0 +904,"the unemployment rate for those without a high school diploma +is 12 percent",0 +905,longterm unemployment in the euro area doubled from the precrisis level to over 6 percent of the workforce,0 +906,"for example despite unemployment +declining by three percentage points from its peak in 2008 headline inflation has fall en by +five percentage points over the same period to a record low of 01",0 +907,in my view however the preponderance of available evidence and research suggests that these alternative structural explanations cannot account for the bulk of the rise in the unemployment rate during the recession,0 +908,the number of unemployed youth totaled 55 million,0 +909,"yet even amid these shocks the labor market continued to improve employment has continued to increase and the unemployment rate is currently close to +most estimates of the natural rate",0 +910,the long expansion with occasional temporary pauses has done a lot to foster lower unemployment,0 +911,"the large rise in the unemployment rate in sweden at the beginning of the 1990s was followed by a +reduction in the number of vacancies which can be interpreted as a movement along the curve",0 +912,furthermore the september unemployment rate of 48 percent is not that far from the 35 percent unemployment rate that was realized in february 2020,0 +913,higher levels of education are positively correlated with both greater labour market participation and lower unemployment,0 +914,the unemployment rate at 62 percent in july has declined nearly 4 percentage points from its late 2009 peak,0 +915,withhigher nominal wage increases real wage costs will move up again and unemployment will tendto return to its initial level,0 +916,the unemployment rate is 37 percent the lowest since 1969,0 +917,for some time now us unemployment has been below the rate that an earlier rule of thumbidentified as the equilibrium level but inflation has not accelerated,0 +918,unemployment was especially high for workers with lower earnings a group that tends to have little savings to draw upon,0 +919,"the unemployment rate at 5 +percent in the second half of 2005 was down about 1 14 percentage points from its recent peak in +early 2003 and at its lowest level in four years",0 +920,"unemployment among young people aged 1624 is mo re than twice as high as unemployment in +other groups",0 +921,unemployment has also begun to decrease significantly,0 +922,the composition of the category unemployed has also changed,0 +923,should we be sceptical of the unemployment rate as an indicator of labor market conditions,0 +924,very low inflation complicates the adjustment process within countries leading to higher unemployment,0 +925,"such a long period of unemployment above +8 percent has not happened in over 70 years",0 +926,structural unemployment has personal and social costs that go far beyond lack of income creating a corrosive effect on social cohesion,0 +927,"unemployment remains near 8 per cent compared with an earlier and perhaps +unsustainable trough of 44 per cent just before the crisis and is well above consensus +estimates of the structural or natural rate of unemployment",0 +928,"4 however at the same time this decline in the unemployment +rate overstates the degree of improvement",0 +929,in fact the unemployment rate has continued to decline over the past 12 months from 83 to its current level of 78,0 +930,"8 +high unemployment rates in the euro area and in particular high youth unemployment rates +amounting to 178 in 2005 clearly suggest the need to spur labour demand",0 +931,this means that the economy could converge towards an even lower level of unemployment without creating undue inflationary pressures,0 +932,"11 for example out ofwork lone parents with older children must now claim job seekers allowance a benefit +with job search conditions attached unlike previous income support",0 +933,youth unemployment fell to 206 in the third quarter and continues to decline more rapidly than the overall unemployment rate,0 +934,"for reference +according to our estimates the unemployment will not exceed 6062 in two coming years",0 +935,"and those unemployed for more than one year remain +above their long term average",0 +936,from a peak of 176 percent in april 2020 unemployment rate is down to just 58 percent in march this year,0 +937,"in sum the +uptick in the unemployment rate in august was a temporary phenomenon",0 +938,"the unemployment rate in canada can also be expected to come down to a more natural +level",0 +939,the job market has also improved considerably with the unemployment rate declining to 58 per cent in september the lowest level since june 2008,0 +940," +no one in society remains untouched by a situation of high unemployment",0 +941,the cumulative decline in real gdp since the start of the crisis amounts to 25 and unemployment in 2014q1 stands at 278 with the longterm unemployed accounting for over 70,0 +942,"we expect however that progress in structural reforms especially those that improve the functioning of labour markets will help lower unemployment and facilitate new employment +opportunities",0 +943,similarly inflation did not fall very much as the unemployment rate climbed to 10 percent during the great recession,0 +944,"to do that would have meant driving down wages by +creating a deeper recession even higher unemployment and lasting damage to the job +prospects of many young people",0 +945,"research shows that the longt erm unemployment level may be affected by major +changes in actual unemployment",0 +946,these factors have contributed to persistence of high rates of unemployment,0 +947,the prospectsfor substantial reductions in unemployment in the short term remain disappointing,0 +948,"in effect the shortrun +nonacceleratinginflation rate of unemployment nairu declined allowing abovetrend growth tolower the unemployment rate without putting upward pressure on inflation",0 +949,over the period from 1976 to 2015 the overall unemployment rate averaged around 65 percent but unemployment varied substantially across regions and across worker backgrounds,0 +950,the number of registered unemployed fell somewhat in april and now stands at 28 per c ent,0 +951,this is likely to result in an unemployment rate averaging over 11 per cent for the year,0 +952,the labor market is particularly robust with unemployment at its lowest level since april 2000,0 +953,more flexibility in wage setting almostcertainly entails a wider dispersion of wage rates that is more wage inequality and reform ofunemployment benefits would place tougher conditions on the unemployed,0 +954,but a recent study has shown that the labour market in the euro area is in worse shape than the official job figures suggest with workers unlikely to see real increases in pay because of the level of underemployment1 a measure of slack in the labour market indicates that about 15 to 18 of the euro area workforce are without jobs or would like to work more which is nearly double the official unemployment rate,0 +955,"research suggests that morehighlyeducated individuals are happier on average make better personal financial +decisions suffer fewer spells of unemployment and enjoy better health",0 +956,unemployment remains close to its lowest level for a quarter of a century a trend seen in northern ireland just as much as in the uk as a whole,0 +957,"moreover there would seem to be little indication in the wage +data to support the idea that wage rigidity is having a major influence on unemployment",0 +958,"this may be +partly linked to the fact that workers in the us have little unemployment protection and low unemployment benefits",0 +959,the unemployment rate for instance is based on a narrow definition,0 +960,the latter has resulted in a dramatic increase in unemployment although in the us and the uk the labour market has recovered with unemployment rates back to around 6 percent in the euro area unemployment remains only slightly below its peak levels at 115 percent in july 2014,0 +961,"initially unemployment increased less than we +expected given the substantial fall in gdp it peaked at 9 per cent in early 2010 but since then it has fallen no lower than 76 per cent see figure 2",0 +962,"both problems in +adjusting relative wages and unjustifiably high real wages would lead to a rise in +unemployment",0 +963,the unemployment rate had fallen to 5 percent down from a peak of 10 percent in 2009,0 +964,the improvement in the labour market has been impressive with the unemployment rate falling from its peak at 10  in october 2009 to 41  currently a level below most estimates of the natural unemployment rate,0 +965,in february the euro area unemployment rate fell to yet another record low of 68 slide 4 lefthand side,0 +966,meanwhile our unemployment rate has been low at around 1 percent,0 +967,but unemployment still remains the second highest after spain in the euro area,0 +968,as the gradual easing of quarantine measures that has started in may continues and the economy recovers unemployment will also decline in h2 2020 but will remain higher than last year,0 +969,this change meant that unemployment in the age group 1524 increased strongly even though this groups main activity was studying,0 +970,i expect that the unemployment rate will fall below 62 by the end of 2014,0 +971,the latest unemployment rate 69 in march 2010 is one of the lowest in the euro area where the average stands at 10,0 +972,"the unemployment rate has declined from 10 percent in october 2009 to +55 percent in march 2015 a level that is not far above many estimates of its natural rate",0 +973,"unemployment falls to 46 +next year and to 4 the year after which means that we count on a higher rate of wage increases thanbefore",0 +974,the sameapplies if unemployment were to remain high or become even higher,0 +975,"unemployment rate increased by a +modest 23 percentage point to peak at 55 in september 2009",0 +976,the rate of unemployment even though it has gone up recently is just slightly more than half what it was at its peak in the 1990s,0 +977,"this results in higher unemployment and lower +inflationary pressure",0 +978,a rising participation rate can signal that people who dropped out of the labour force earlier are returning,0 +979,"at a time when us unemployment is very high this is a particularly unacceptable +outcome",0 +980,this implies that in the shortrun nominal wage rise will not fully absorb the actualinflation and as such it is argued there is scope for reducing unemployment through inflationas people adjust their expectations of inflation the shortrun phillips curve shifts upward andthe unemployment rate returns towards its natural level,0 +981,"14 it is determined by the structure of the economy including the effectiveness of +institutions and markets in matching vacancies and unemployed workers and by policies such as the +levels of unemployment compensation and minimum wage rates",0 +982,around half a million people have been taken out of unemployment,0 +983,the increase in employment will enable the unemployment rate to continue shrinking at an even greater pace than in 2014 to stand at around 20 of the labour force in the fourth quarter of 2016,0 +984,unemployment rates are expected to rise in line with an easing of labor market conditions,0 +985,"youth unemployment will result into too +many shattered dreams it leads to loss of identities and lack of zeal for life in general",0 +986,"in addition there has been a substantial +rise in the share of the workingage population that is in employment as the unemployment +rate has trended down and the participation rate has trended up",0 +987,but jobless rates for these groups are still higher than those for whites,0 +988,"a 75 unemployment rate is three percentage +points lower than the level reached in the mid1990s",0 +989,there are still at least 20 million unemployed people in the euro area many of whom are young who need to be brought back into the labour market,0 +990,growth has reduced the unemployment rate from more than 11 percent in 2003 to about 75 percent at present,0 +991,"steepening of the slope reflects the higher responsiveness of wage +changes against the improvement in the unemployment rate",0 +992,"employment has +risen significantly by more than 12 million people sinc e the launch of the euro and the unemployment +rate has steadily declined to the lowest level since 1993 although it is still unacceptably high",0 +993,it is also clear from the labour market data with the unemployment rate peaking at around 5¾ per cent which was around the trough in the previous two cycles graph 1,0 +994,"today just nine +months later the unemployment rate is 76 percent a larger decline than most fomc +participants expected in september",0 +995,in particular over the past three years unemployment has averaged roughly 5 percent,0 +996,unemployment is on the rise,0 +997,6 the u6 measure captures unemployment underemployment ie,0 +998,"the data also show that not only are the largest increases in the +unemployment rate among groups with lower levels of education but that these groups also +have the highest unemployment rates",0 +999,itcompares with the truly grotesque scottish rate of unemployment of close to 14 in the mid1980s,0 +1000,the latter of around 33 percent since 2004 has also adversely affected industrial production through direct and indirect channels,1 +1001,the problem lies with its quality and productivity which is insufficient to support growth a large amount of construction not enough machinery and equipment nor research and development,1 +1002,manufacturing activities related to exports and imports are especially in need of appropriate harbors even for java region which contribute the largest part to the national economy,1 +1003,for example if the temporary shortages of materials and equipment constrain production more persistently than we currently foresee they could feed through more strongly along the pricing chain,1 +1004,"fragmentation of production is also enabled by +enhanced transport and information transfer as well as their lower costs ie",1 +1005,"in general the slope of the +phillips curve steepens when firms find it easier to raise their sales prices or pass their input +costs on to their sales prices given the level of the output g ap",1 +1006,investment opportunities also exist in sectors such as logistics networks shipping trade pharmaceutical manufacturing and mining and quarrying,1 +1007,"despite this past and current investments in ex port branches of industry primarily in the +automotive industry will lead to increased produc tion and exports from the second half of the +current year",1 +1008,"another example is that of a businessman who said that weaker +demand in a particular industry would entail higher prices in the producers attempt to +safeguard their profits",1 +1009,as businesses become more certain of the durability of the recovery i expect that they will become more willing to further expand productive capacity particularly with new business equipment and software,1 +1010,"global demand for itrelated goods has so far been on an upward trend due partly to the rapid growth in em ergingmarket economies such as the brics and +thus inventory adjustments should basically come to an end in or after the middle of 2007",1 +1011,this growth will be led by supplyside factors further growth in investments in exportoriented sectors but also by the recovery of external demand supported by the expected successful vaccination process worldwide,1 +1012,"the trend of a rising share of overseas production +among japanese firms can be basically understood as a part of firms growth strategy to +place production sites near markets that are experiencing rising demand against the backdrop of a global shift of growth centers toward emerging economies",1 +1013,"recovery is +beginning to spread to orders received by manufacturers and capital spending with the rise in world demand for itrelated products",1 +1014,as well low oil prices could spur companies to innovate and achieve greater efficiencies in their production cycles,1 +1015,"this is a difficult task everywhere but is particularly +difficult in emes because of large under utilized capacity coexisting with supply constraints",1 +1016,"this is explained in part by weaker thanexpected us growth particularly in +investment which is significant for our exports",1 +1017,competitive global markets and persisting technological advances bothspurred the business drive to become more efficient and induced the price declines for many types ofnew equipment that made capital spending more attractive,1 +1018,traders may hedge against risks related to the fluctuating cost of raw materials and finished goods,1 +1019,but with large unexploited longterm profit opportunitiesstemming from stillburgeoning innovations and falling prices of many capital goods the typicalcyclical retrenchment could be muted,1 +1020,"with the world economy now beginning to catch a cold from the slowdown in the us +economy the quality and competitiveness of our exports means that our companies are +better equipped than others to hold their own in the global marketplace",1 +1021,the export industry reports steady solid growth although reports from the contacts in the regional network varied somewhat in the august contact round,1 +1022,"likewise in +product markets a high degree of competition and low barriers to the entry of new firms in most +industries in the united states provide strong incentives for firms to find ways to cut costs and to +improve their products",1 +1023,in the year to june 1999 equipment investment grew by13 per cent and by 16 per cent in the year to june 2000,1 +1024,"a physical asset whether an office building or an automotive assembly plant has the capability of producing goods even if the reputation +of its managers falls under a cloud",1 +1025,furthermore exports of engineering goods which account for around onefourth of indias total exports experienced robust growth across product categories and newer markets,1 +1026,"the geog raphical proximity of different activities gave rise +to agglomeration economies that aided rapid productivity growth and also enabled innovation in traditional production processes through the introduc tion of new systems such as justintime jit +modes of inventory management",1 +1027,against the backdrop of low growth in the world economy and in the external demand combined with a decline in energy prices no significant increase in export growth is expected,1 +1028,"the second pillar is a new process for monitoring +competitiveness and in particular unit production costs",1 +1029,"real business +outlays on informationprocessing equipment dropped at an annual rate of almost 10 percent in thefirst quarter of this year after having posted increases that averaged close to 25 percent a year from1997 through 2000",1 +1030,at present both the industrial sector in general and ssi sector in particular are exposed to international competitive environment,1 +1031,all available indicators suggest that final demand in the fourth quarter was stronger than anticipated,1 +1032,with regard to final demand business fixed investment is on an increasing trend,1 +1033,our businesses will need to develop new markets as the traditional advantage of relatively open access to us markets becomes less valuable,1 +1034,"it effectively cuts costs during the downturn while allowing businesses to quickly expand production once demand picks up +again",1 +1035,parallel to this development firms are increasingly shifting to exports and reaching international markets by quitting local production processes and local markets,1 +1036,"to replace this +growth we need a rotation in demand toward exports and business investment",1 +1037,it is not only about exporting but also about investing in the technology and equipment that will deliver competitive advantages in the future,1 +1038,on the other hand improved competitiveness will provide a basis for expanding capacity in some sectors,1 +1039,"meanwhile t he +headline and core cpis rapidly increased in summer 2008 which was due mainly to the surge in commodity prices",1 +1040,our export sector has performed below potential over the years,1 +1041,for this to result in production that is desired and valued by the market we always need a management model that is effective and professional,1 +1042,"in market economies it is important that producers face the right price environment when they make long term decisions about +investing in technology and productive capacity",1 +1043,indian industry has clearly embraced a host of new methods of production in recent years,1 +1044,"what triggered the change was that firms in leading industries have expanded +production overseas and conducted operations on a global scale while paying close attention to the +difference in costs at home and abroad",1 +1045,"the destruction of +production plants for important intermediate goods for the electronics industry led to +substantial supply problems worldwide which resulted in production losses",1 +1046,"for one thing the rise in commodity prices can be +expected to lower productivity in the primary sector as highercost that is lessproductive activities +become more profitable",1 +1047,third it is china that supported the prices of us exports of products and services,1 +1048,"regarding the risks associated with domestic fact ors i believe that there is a high degree of +uncertainty with respect to the extent of the increase in business fixed investment and +domestic consumption in response to higher corporate profits and real income growth",1 +1049,their demand has dropped and so have their prices but they have not experienced the collapse associated with postponing expenditures on goods of industria l origin,1 +1050,that said business investment outside of the energy sector has been unusually soft for the past three quarters and this weakness will bear close watching,1 +1051,these initiatives are important for the industry to develop as it becomes more internationally integrated,1 +1052,"steady increases in the rate of gross domestic saving and investment consumption demand addition of new capacity as well as more intensive and efficient utilisationcapitalisation of existing capacity +are expected to provide support to growth during 200708",1 +1053,"in the uncertain business environment that has prevailed for some time many businesses have probably +been making do with their existing equipment stretching out their normal replacement cycles +especially for rapidly depreciating hightech equipment",1 +1054,the market outlook for exports improved in the latter part ofthe year,1 +1055,"deflation is in almost all cases a side effect of a collapse of +aggregate demanda drop in spending so severe that producers must cut prices on an ongoing basis +in order to find buyers",1 +1056,"thi s is vindi cated by the recent surge in growth +of exports of automotive compon ents a nd cd",1 +1057,"it accounts for 22 per cent of world +gdp and for 15 percent of world exports",1 +1058,the company can also buy input goods such as oil and sell for instance pulp at a forward rate so that the company knows for certain what its future costs and income will be,1 +1059,"economists have conjectured that this is caused by improved technologies that allow businesses to +monitor their demand more closely and manage their inventories better",1 +1060,first through natural hazards as the most frequent and extreme weather events affect the production process and the supply of goods with effects on price formation,1 +1061,the cutback in business spending on hightech equipment has led in turn to sharpcutbacks in output at the firms that produce such equipment,1 +1062,factors of production are being reallocated to sectors with a strong focus on exports,1 +1063,in advancing structural reforms firms regardless of whether they are in manufacturing or nonmanufacturing will pursue changes in operational processes ie scrap and build in various areas such as production and sales,1 +1064,also most of the faster capital deepening reflected spending by businesses on hightech equipment mainly computer hardware and software,1 +1065,this has enabled output to respondincreasingly faster to an upsurge in demand thereby decreasing the incidence of strains oncapital capacity and shortages so evident in earlier business expansions,1 +1066,corporate investment in particular decisive for supply capacities is clearly recovering up 47 in 2015 6 in 2016 and is expected to be up 4 in 2017 and 2018,1 +1067,the main sources of measurement errors were first the estimation of qualityadjusted prices for new technology as falls in prices tend to be underestimated in us national accounts and second product entry and exit which makes it difficult to estimate changes in prices over time,1 +1068,"turning next to the product markets competitiveness can only be hurt if goods and services are not +properly priced to reflect the demand for them and the use of resources in providing their supply",1 +1069,exports and investment in machinery and equipment likewise supported economic growth over the past year,1 +1070,first a decline in demand in one country reduces its demand for imports from other countries,1 +1071,"the factorintensive exportoriented growth +strategy based on comparative adv antage and fuelled by trade preference with sugar textiles and +tourism as the three main pillars of the economy has given way to a new strategy",1 +1072,more recently beginning 2014 we had to react to the risk of sliding into deflation which was due to a combination of factors the slowdown in global growth the collapse of commodity prices and the persistent weakness in domestic demand,1 +1073,the improved infrastructure will allow regional economies at various stages of development to participate in regional production networks in line with their evolving comparative advantage,1 +1074,"it is said +that many firms are considering increasing the share of their overseas production",1 +1075,"meanwhile small nonmanufacturing firms form expectations on sales +prices by taking into account an expected increase in production costs while cons idering +relevant market prices influenced mainly by large nonmanufacturing firms",1 +1076,"i have already +mentioned how globalization promotes higher produc tivity by allowing firms to arrange their +production processes in the most costeffective ways",1 +1077,meanwhile at this point nonmining business investment spending is still very subdued,1 +1078,"growth should return but it is likely that growth can only be +sustained at a satisfying pace once the drag on demand and supply from rebalancin g +lessens",1 +1079,"because large firms often play a role as price setters aggregatin g their sales price +outlooks especially those of processing industries whose products are close to final +goods will likely result in the true outlook for general price inflation such as cpi +inflation",1 +1080,"in 2005 our export se ctor will con tinue to prof it from a global trad e growth by +approximatel y 8",1 +1081,"also lower +rates of investment in some of these countries may reflect some shifting of production to china where +investment rates have been quite high in recent years",1 +1082,also domestic competition is one of the mostpowerful forces that gives rise to international competitiveness,1 +1083,"in addition business fixed investment in manufacturing has been increas ing +gradually and if the rate of increase exceeds that of physical disposal and depreciation costs this will likely further raise capital stock and supply capacity chart 5",1 +1084,the most immediate effects would be on capital investment as we have seenbusinesses recognize the new technological possibilities and capital spending accelerates to takeadvantage of the new profit opportunities,1 +1085,"first a downturn in the world economy may adversely affect activity and profitability in export +industries and perhaps even the oil sector",1 +1086,but the year after that in 2001 the global downturn adversely affected our export and made growth for 2001 dip to 19,1 +1087,"it +incorporates the low june quarter figure and reflects weakness in business investment and particularlya decline in net exports in the first half of 1999",1 +1088,"businesses had limited +and lagging knowledge of customers needs and of the location of inventories and materials flowing +through complex production systems",1 +1089,"much of our work in this regard has been focused on improving our published +statistics on industrial production",1 +1090,"such a lift in the terms of trade if expected to +last would typically trigger an investment boom as firms in the tradable sector +sought to take full advantage of the much improved product prices and higher +expected profits",1 +1091,i should also note that this recent pickup in productivity has coincided with a rebound in business investment and that this increase in capital spending has been evident in both the equipment and intellectual property categories it is not just an oil patch story,1 +1092,moreover in many cases declining commodity prices reflect additional supply which usually carries a different positive implication for global growth as opposed to weaker demand,1 +1093,"monthly +contraction of industrial production in may was mainly due to a slowdown in the production of +transportation equipment as a result of temporary closures of some auto plants for +production line retooling ",1 +1094,"such a decline will make firms reduce their production activity at a level consi stent with the +drop in sales",1 +1095,and these possibilities offer additional opportunities including those of developing innovative products and services working with new partners and optimizing the mix of global and domestic activities,1 +1096,"business investment is being supported by +high rates of profitability and capacity utilization",1 +1097,consumption and machineryequipment investments were the main drivers of annual growth,1 +1098,market imperfections such as a lack of competition and transaction costs make both prices and production factors slowmoving and mean that it takes time for actual production and consumption to adapt to changes in supply and demand in the economy,1 +1099,"according to forecasts by mckinsey global institute offshoring of services to countries with low +manufacturing costs in the years 2003 2008 is going to grow at a rate of 30 annually",1 +1100,"this adjustment will involve heightened tensions on production +capacities as part of the equipment stock will have to be discarded due to changing regulations or due to increases in its operating costs with higher taxes",1 +1101,"indias share in world exports of goods and services tripled between the early +1990s and 2006 to close to 15 with a notable acceleration in the last three years due to +dynamic exports of services of cour se including it and itenabled services",1 +1102,"this suggests that firms have succeeded in cultivating potential demand by +making efforts to develop new products through shifting their human resources and capital to +those businesses",1 +1103,however it also involves some risk because the international mobility of production has increased,1 +1104,the amount ofcapacity plowed into limited areas of technology led to extra heavy price discounting,1 +1105,"we also expected that as the process of adjusting inventories and excess capacity was completed in +most industries capital spending in the united states which had been sharply curtailed would beginto recover in the second half of 2001",1 +1106,fourthly china is now upgrading its industrial structure which requires the transfer of certain production activities to overseas and thus facilitating highquality growth in china,1 +1107,"almost overnight businesses went into full protection mode halting all +capital expenditures shedding inventory and slashing expenses",1 +1108,imports are also expanding the increases we are seeing in imports of machinery and equipment and of various intermediate products are early signals of rising business investment,1 +1109,these factors include higher demand for euro area exports rising corporate profitability and an increasing use of installed productive capacity,1 +1110,"as a result of these constraints +production in some industries has declined substantially which has had a severe impact on +exports and domestic shipments",1 +1111,"the growth in foreign demand was reflected positively in the performance of industry which +grew 275 for this period",1 +1112,the most immediate impact on our economy has been the lower foreign demandfor the key primary commodities we produce and a 20 per cent drop in their prices between themiddle of 1997 and the end of 1998,1 +1113,we have started and stopped it a couple of times due to competing priorities for us and industry,1 +1114,"more likely southeast asia and china will complement each other in an international division of labour for example with southeast asia providing the components and intermediate processing and factories in china doing the final +assembly for the chinese market",1 +1115,future growth if it is to last needs to draw more support from business fixed investment and exports,1 +1116,"overall industrial recovery set in during +200203 and this has been sustained since then on the back of healthy growth in domestic demand +along with that of exports supported by high world economic growth increasing capacity utilisation +augmentation of capacity and positive business and co nsumer confidence",1 +1117,"capacity utilisation rate did not expand significantly was due to the fact that many manufacturing +industries for domestic market were affected by the deceleration in domestic expenditure which led anumber of industries to operate at less than half of total capacity namely beverages automobiles andiron steel products",1 +1118,"another major factor behind +the decline in exports is the weakening of cost competitiveness",1 +1119,services are also a bright spot in the export picture,1 +1120,"businesses have continued to cut +capital spending and liquidate inventories but the likely slowdown in the pace of inventory liquidation in coming quarters represents another factor that may support a turnaround in activity",1 +1121,"a more rapid expansion of +production capacity and better facilities for managing fluctuations in stocks pave the way for higherdemand and smaller cyclical fluctuations in the future",1 +1122,lastly recording a similar trend the yearonyear decline in exports eased to 96 percent in july from 499 percent in april,1 +1123,to increase competitiveness is the main driver for higher potential growth,1 +1124,"meanwhile we are faced with all the usual uncertainties about the prospective strength of domestic +demand and about overall demand pressure uncertainties which are currently increased by possible +distortions of underlying trends associated with the millennium the y2k fog",1 +1125,he held the view that fluctuations in aggregate demand can create business cycle fluctuations,1 +1126,"a si gnificant portion of the us capacity for high +tech production focuses on leading edge products and on customized products for which close +proximity to customers is an advant age",1 +1127,it is prudent to make use of macao as the platform to channel suitable enterprises to set up manufacturing concerns in lusophone countries,1 +1128,"establishing efficient and wellfunctioning product and +services markets can boost productivity trends by enhancing the incentive to invest and innovate",1 +1129,"economists have conjectured that this is so because improved technologies allow businesses to +monitor their demand more closely and manage their inventories better",1 +1130,however as long as the pace of increase in exports and production continues to be gradual the recovery in business fixed investment is likely to remain moderate,1 +1131,"the explanation for this is that at the beginning of an upturn companies have the +capacity to increase their production using existing resources",1 +1132,"but it is also true that it users +in a wide variety of industries such as other manufacturing financial and distribution industries have +improved productivity by way of itrelated investment which has laid the foundation for the +prolonged expansion of investment",1 +1133,the demand for a number of our exports was quite adversely affected,1 +1134,the growth dynamics have been propelled by the existence and exploitation of natural resources and primary products,1 +1135,but our experts consider this to be a soft patch that is largely due to a slowdown in external demand weighing on exportoriented sectors,1 +1136,"investment programmes were limited to renewing obsolete equipment or to +meeting the desire to increase firms productivity in an intensely competitive international +environment",1 +1137,"now more than ever is the time for +them to reengineer their operations achieve sustained rises in productivity and move into new products and new markets",1 +1138,"but if one looks closely one will +find that a good portion of this are raw materials parts and components produced in one country and sold to another for further processing or assembly for sale to a third country within or outside asia",1 +1139,"talking to businesses about their plans for the +future helps inform our forecasts and has be en especially useful recently for building a +profile of conditions in different sectors such as expected investment in the mining sector +over the coming years",1 +1140,their firms are devoting more resources to marketing abroad particularly in asia and expect their export sales to be higher in the next 12 months than in the past 12 months,1 +1141,the mix of output in the fourth quarter may also provide animpetus for a slowdown in production going forward,1 +1142,asian demand which had accounted for a relatively large share of growing world demand for commodities weakened considerably,1 +1143,"taking the example of firms shifting of produc tion overseas in order to realize an expanded +equilibrium of profits and employment fi rms need to rebuild development and production +systems at home especially for goods and se rvices enabled by high technology and with +high brand value and explore the domestic market with a focus on capturing diversifying needs while further expanding their overseas operations to carry out production and sales +activities that can be shifted overseas",1 +1144,"competition is a necessary ingredient for growth but there are many areas where the industry can +work together",1 +1145,"when the cyclical upswing began towards the end of 1993 most of the growth came from the export +sector",1 +1146,"if the content of production +changes through a renewal in the direction of products and services that demand a higher value on +the global market the value of production rises",1 +1147,on the other hand in the second half of fiscal 1997 downward pressure onoverall prices resulted mainly from the stagnant domestic final demand,1 +1148,"but none +of the businesses there can afford not to search continuously for greater control of costs for higherproductivity for new products and markets and so on",1 +1149,"experience in the 1990s suggests however that firms have become more flexible both in the +utilisation of existing capital stocks and in the procurement of new technology machinery and plantwhen demand rises",1 +1150,first by providing the market that makes the development of new industries profitable,1 +1151,the growth has also had afavourable composition coming primarily from exports and investment,1 +1152,on the supply side however firms operating in noncompetitive industries have increased prices to a larger extent than the surge in input costs driven by the energy component,1 +1153,"the exception is importcompeting +manufacturing where profitability is stable and in the service industry where it is improving further",1 +1154,"as this sector accounted for more than onethird of total exports in 2008 it strongly dampened the negative impact of +other sectors",1 +1155,as shown in the next slide global value chain participation as measured by the share of foreign value added in world exports increased substantially during this period,1 +1156,the industry is now moving cautiously from pilot projects in many of these areas to the use of these new technologies in limited production settings,1 +1157,"so +has competition for market share as countries adjust to the new competitive requirements of global supply chains",1 +1158,this resurgence boosts prospects for the exports sector,1 +1159,so far fdis in the tradable sectors are one of the traditional venues that increase productivity that implies not only tapping additional external sources for growth financing amidst low domestic savings but also transfer of knowhow and technologies,1 +1160,"this differential is proving particularly harmful for manufacturing industry which has continued under +increasingly sharp pressure from foreign competition",1 +1161,"but on the +other side we may find it difficult to moderate the growth of domestic demand when the internationalenvironment improves",1 +1162,"the latest data suggest that non mining activity is growing a little +faster than gdp",1 +1163,these increases reflect the progress in inventoryadjustments and the continued increase in shipments of capital goods which is closely related to businessfixed investment,1 +1164,instead of losing the competition chinese manufacturing industry and chinese firms experienced fast growth,1 +1165,we need to reduce demand somewhat without having serious adverse effects on investment and supply,1 +1166,a depreciation increases the prices of foreign products relative to domestic products,1 +1167,businesses will continue to invest in new capital adopt new technologies and build on the productivity gains of the past several years,1 +1168,"in the +process countries try to access markets or resources and gradually reduce the cost of +production and transaction by expanding overseas manufacturing operations in countries +where certain ownershipspecific advantages can help them to compete globally",1 +1169,if prices fell to such a low level that firms struggled to cover their ongoing costs consolidation could accelerate resulting in morepronounced declines in production and weighing on the broader economy by hurting demand and confidence,1 +1170,"this results from the production of the same category of goods primary goods in addition to the fact that they service the same +international market",1 +1171,"this weakness in foreign activity has restrained the demand for our +exports with adverse consequences for us manufacturers",1 +1172,"advances in inform ation technologies specialized production +processes and reduced communication and transportation costs have all led to a whole new range of goods and services becoming tradable",1 +1173,"specifically while usindustry was adding about 4 ¼ per year to its stock of industrial capital ohio was adding capital to +its industry at a 5 clip",1 +1174,business owners andmanagers appear to believe strongly that they are operating in such a competitive environment whether domestic or international that they cannot pass cost increases on to their customers inhigher prices because they would lose those customers to competitors overseas or down the streetlow import prices resulting from growing international competition and the strong dollar reinforcethis perception,1 +1175," demandside pressures are expected to build up in future because of rising +business activity at a time when internat ional commodity prices are themselves +continuing on an increasing trend",1 +1176,one gear that is moving at a far slower pace is the price of nonenergy services,1 +1177,yet we have also seen a strong and thus far persistent contraction in business investment which may weigh on future productivity growth as such investment tends to raise the technology content of capital,1 +1178,this is a normal trend in a growing economy as most of the imports are machinery and intermediate goods such as industrial boilers and equipment petroleum products chemicals and motor vehicles that are expected to enhance productivity and ultimately increase production,1 +1179,the recent downbeat production plans and export expectations in industry are consistent with that view,1 +1180,the number of exporting firms has grown and exports now go to more destinations than in precrisis times,1 +1181,"partly this is explained by imitation of technologies or t he assembly of researchintensive +products in china rather than their full developm ent and manufacture",1 +1182,fourth pakistans engagement in world trade reached 42 billion reflecting the pakistani companies integration with the global standards of quality pr oductivity and efficiency,1 +1183,firms that shoulder exports and production are exposed to severe pressure of international competition,1 +1184,while supply chain management has enabled efficient management of production and inventories at the same time it may have also facilitated rapid recognition of the decline in final demand inducing sharp reductions in production,1 +1185,"however for +many years our production structures were integrated to metropolitan centres with very little intra +regional linkage",1 +1186,we confront some common challenges such as surging energy prices and supply chain bottlenecks,1 +1187,"elsewhere among the majorindustrial countries weaker demand from asia is expected to be offset by relatively strong domestic +demand so that overall output growth is not much affected indeed it is expected to pick up on the +continent",1 +1188,"while thoseindustries which produce basic materials are burdened with excess capacity and continue to restrain +investment those related to information technology such as electric machinery have increased +investment substantially",1 +1189,"therefore the output gap with respect to t he oldtype demand is in the state of excess +supply and firms have no choice but to reduce the prices of their products and services",1 +1190,this then allows those companies to compete more effectively for future export sales,1 +1191,"not with standing the weak turnaround in overall output forecast for this year performances +in some of our major sectors so far have been encouraging",1 +1192,"by +bis review82007 3 + acquiring companies abroad they also acquire advanced manufacturing technologies that +further help reduction in the cost of production",1 +1193,"the second feature is the downward trend in the terms of trade particularly noticeable from +the early 1950s to about the mid 1980s3 this was the period of resource price pessimism +the prebisch singer hypothesis and so on which held that primary products would tend to decline in price relative to manufactured products",1 +1194,thanks to the very substantial additions to facilities in the past few yearsphysical capacity in the manufacturing sector was not greatly strained,1 +1195,a large number of the us companies that have been long accustomed to relying on the processing assembly transportation and distribution of the chinese exports for creating value added will be severely impacted with some even face the danger of going bust,1 +1196,generally weak external demand has led to some externally induced cyclical slowdown,1 +1197,moving forward however this growth is on course to become slower in this way exports are set to grow at moderate paces,1 +1198,thecounterpart is a sharp decline in net external demand in the industrial countries which if itwere not to be offset by action to stimulate domestic demand in those countries could indeedlead to weakening global activity and price deflation,1 +1199,"the pace of dereservation of ssi items therefore needs to be accelerated so as to +ensure that size does not remain a constraint to higher production costefficiency and technological upgradation",1 +1200,"capacity utilization among +canadian goods producers is getting close to the point where production constraints start to emerge",1 +1201,"as a prime +exporter of equipment and machinery this country has particularly suffered from the lopsided +composition of the shortfalls in international trade",1 +1202," on the supply side output of the secondary sector fell sharply almost twice as +much as in 2010 12 compared with 61",1 +1203,one is the surging growth of the philippine economy which requires higher imports of capital goods like machineries and equipment and the other is the continued softness of the global economy particularly in 20152016,1 +1204,in order to achieve a sustainably stronger profile of export growth we cannot rely solely on the us market,1 +1205,"we continue to encourage our exports +sector to take advantage of this competitive gain by producing more to then be able +to export more to other countries",1 +1206,"the actual increase in demand is benefiting many producers of commodities and is helping to offset the effect of +weakening of export markets in industrial countries thus contributing to the resilience of +output in many emerging market economies",1 +1207,furthermore the us takes in more than 40 per cent of taiwans electronics exports,1 +1208,"these include acquiring developing and retaining the right people applying technology to enhance research operational work and the management of +value chains addressing environmental issues and recognizing and dealing with increased +global interdependencies",1 +1209,business investment in equipment and software grew exceptionally rapidly in thelatter half of the 1990s and the first half of 2000 but it moved down in the final quarter of last year anddeclined further in the first quarter of 2001,1 +1210,"meanwhile growth of activity in the non mining econo my was subdued through +that period but it picked up slightly from late last year",1 +1211,this means less demand for our exports,1 +1212,not only have export volumes been affected but producers in both industry andagriculture also are having to adjust to the lower product prices that have come with slower economicgrowth abroad and the increase in the competitiveness of foreign producers induced largely bydepreciations of their currencies,1 +1213,to achieve this the priority is to boost business investment in france it is currently forecast at 34 for 2016,1 +1214,"business spending on capital +equipment should be held down by slower sales and production and by caution in a very uncertain economic environment",1 +1215,production and sale of highly volatile goods such as agricultural produce require wellconsolidated production units that are resilient to such repeated price fluctuations,1 +1216,"as +best we can tell mining investment declined over the past year while net exports rose +strongly due to lower capital imports and the higher production of bulk commodities made +possible by the earlier investment",1 +1217,"growth in exports and demand for information technology it has led recovery in +production as well as profits which in turn induced increase in business investment",1 +1218,"this mainly mirrored a more favourable outlook for international activity it also +seemed likely that domestic demand would be stronger than had been expected earlier",1 +1219,price flexibility allows for the recovery of any loss in competitiveness and fosters a faster adjustment of relative prices which in the absence of exchange rate adjustment is crucial for the rapid reallocation of production resources to the most dynamic sectors and firms,1 +1220,"a second hypothesis is that increases in global c apacity have held down us inflation in recent years +by limiting the ability of us producers to raise prices in response to increases in the domestic costs of +production",1 +1221,"this in turn enhanced the incentives of businesses to +invest in productive plant and equipment",1 +1222,there is the risk that the trends of demand and output in the last part of the year willlead to unsatisfactory results for 1999,1 +1223,"since our competitors have higher +levels of inflation for example in china we believe that prospects are improving for our +exporters",1 +1224,thus the lowering of tariffs within the region and the large regional market will provide an environment for smes to grow and achieve the production scale and efficiency required to compete in the global marketplace,1 +1225,"since 1967 there is a policy of reserving selected products in the manufacturing sector for exclusive +production in the ssi sector",1 +1226,"there is no doubt that the importance of the sme sector to the supply side of the economy is +much more widely appreciated now than it used to be",1 +1227,meanwhile net exports and business fixed investment continue to increase,1 +1228,"despite falling over the past 15 months our terms of trade or the ratio of export prices to +import prices remain 20 percent higher t han the average for the 1990s",1 +1229,"more advanced supplychain management and flexiblemanufacturing technologies have enabled our firms in recent years to adjust production levels morerapidly to changes in sales but apparently these improvements have not yet solved the thornier +problem of anticipating demand",1 +1230,our economy has bounced back better than most from the covid19 disruptions and we are benefiting from a surge in the prices of our key exports,1 +1231,"measured over periods of twelve months the rate of increase in the +allgoods production price index rose from 81 per cent in april 2001 to 86 per cent in may june andjuly",1 +1232,"aseans prox imity to major markets such as china and +india reinforces its status as an important global value chain player and a preferred production base for many multinational corporations",1 +1233,at the same time growth in production and empl oyment is slowing down,1 +1234,this would encourage private companies to operate their businesses more efficiently by expanding their markets and production bases,1 +1235,"strong growth abroad was also viewed as supporting us exports and domestic +production",1 +1236,"working to offset somewhat this anticipated slowing of the growth of domestic demand our export +markets can be expected to be more buoyant because of the revival in growth in many of ourimportant trading partners",1 +1237,therefore it is an economic bellwetheryou will invest only when you are relatively certain that the demand for your goods and services will remain firm or increase,1 +1238,some of them have emerged from recessions and are now increasing their demand for production from the rest of the world,1 +1239,"that is happening now +with us equipment investment declining by 23 per cent in the most recent quarter and investment in +technology by 10 per cent",1 +1240,"our three fastest growing exports in terms of first semester annual growth +rates were coal transport equipment machinery and electricity",1 +1241,"over the past three years weve seen strong growth in capital spending in commodityproducing +industries as well as substantial gains in both capital spending and employment in sectors with low +exposure to international trade",1 +1242,some of what we now see helpingrein in inflation pressures is more likely to occur in an environment of stable prices and priceexpectations that thwarts producers from indiscriminately passing on higher costs puts a premium onproductivity enhancement and rewards more effectively investment in physical and human capital,1 +1243,"in spains case mo reover given the specialis ation of the productive +structure in industries where demand is more sensitive to relative prices and in which the pressure exerted by products from the em erging economies is very high companies may find themselves +having to make a sharper adjustment to make up for lost ground on international markets and on the domestic market",1 +1244,"that means +getting on with the job of investing innovating developing new markets and finding new +more efficient ways of organizing and executing production",1 +1245,"if there are limits and restrictions to the adjustment to the most profitablecombination of productive factors the levels of investment in the new technologies will accordingly +be affected negatively",1 +1246,we are currently asking ourselves the following question are some factors such as the fall in the price of raw materials temporary,1 +1247,such arrangements are extractive in nature and will have longer term implications for the development of a strong domestic industry,1 +1248,"at the same time there has also been an improvement in the growth rate of economic +activity in the non mining sectors even though non mining business investment has +remained subdued",1 +1249,"this could be a source of instability in demand and output in +the somewhat longer run",1 +1250,in the industrial field the market competition rules are not applicable to a very small number of industries such as defense industry but most industries can open up and bring in competition,1 +1251,"however it should be noted that growth in indu stries producing tradable goods is slower than in +sectors producing nontradables",1 +1252,qe will stimulate aggregate demand through all of its components,1 +1253,so far there has been no truth to the predictions that low commodity prices will have a positive impact on global growth thanks to the positive momentum enjoyed by raw materialimporting countries exceeding the negative impact on exporting countries,1 +1254,china is making a challenging transition from export to domestic demandled growth and the cost of reallocating resources from excess capacity sectors to more dynamic sectors could further impair growth in the near term,1 +1255,they include a loss of exporting capacity in certain sectors and competitiveness challenges in others,1 +1256,"4 bis review 502010 + average annual export growth rates in volume terms in the eu",1 +1257,"in my view the revival in demand and production while not as strong as desired suggests that +we may be much closer to establishing a virtuous circle that will support stronger growth",1 +1258,this in turn requires a lower level of uncertainty about future demand and businesses operating conditions and more foreign direct investment would be very helpful as well,1 +1259,with global value chains production is distributed and technology dispersed over several countries industries and products,1 +1260,business investment fell substantially with mining investment falling quickly and as best we can tell nonmining capital spending also weak,1 +1261,the associated advances in global logistics enabled even greater specialization in productionthe development of global supply chainsmaking the world even more dependent on trade to connect supply and demand,1 +1262,"the value of merchandi se exports contracted by 24 per cent in the first +quarter of 2012and the terms of trade have deteriorated for two consecu tive quarters",1 +1263,we can also expect to see brandnew export activity from newly created exporting firms,1 +1264,"but not only that investment is critical +for us to be able to achieve productivity growth rates of close to 1 percent in our non mining +sectors an essential element in our trend growth forecast",1 +1265,"reflecting these developments in demand production has started picking +up moderately",1 +1266,"an ability to reorganize production and distribution processes is essential to take advantage of newer +technologies",1 +1267,"in an economy that is expanding rapidly problems with bottlenecks may occur temporarily because +new production facilities are not always available just when they are needed to cope with increased +demand",1 +1268,at the same time a weak global economy can put pressure on sales volumes for the swiss export industry,1 +1269,"orders and shipments +for nondefense capital goods have weakened on net in recent months pointing to a decline +in real outlays for new business equipment",1 +1270,"smes will have to continuously strive to incorporate the latest technology into their production processes as +well as in their marketing and management functions to cut costs gain efficiency and consistency",1 +1271,as we all know the quality of the product can only be as good or as bad as the inputs,1 +1272,increased fragmentation of production across international bordersa natural outgrowth of the gains from specializationmeant more trade for any given value of final production thus adding to the major expansion in gross trade flows in the 1990s and 2000s,1 +1273,"with the increasing competition globalization and the uncertainty due to the global +downturn smes will have to continuously incorporate the latest technology into their +production processes as well as in their marketing and management functions to cut costs +gain efficiency and consistency",1 +1274,"expectations concerning the next six +months indicate accelerating growth for domestically oriented industry and continued solid growth for +the export industry",1 +1275,in recent years the structure of the finnish economy has undergone radical changes in the wake of difficulties encountered by the forest and electronics industries,1 +1276,firms whose production is more integrated into global value chains have performed better and with least disruption to their output,1 +1277,as firms saw increased demand for their products they would seek to expand output to meet that demand,1 +1278,"although some industries have suffered severe +losses and have sharply curtailed their capital expenditures other sectors have posted growth in earnings and have continued to invest",1 +1279,that is with exports and production continuing to increase business fixed investment is showing signs of picking up,1 +1280,notably regional trade is on the rise again on the back of an increase in machinery and equipment exports,1 +1281,"with the lack of investment in new products and the dependence on an increasingly outmoded +structure of production the entire nation s material standard had to be adjusted",1 +1282,all of you compete vigorously when it comes to business and that is good,1 +1283,and as exporting companies reached their capacity limits we expected to see business investment increase,1 +1284,japanese firms still maintain high technological competitiveness in the production of core modules and processing equipment,1 +1285,"this applies both +to companies competing on international markets and those supplying goods and services to the +domestic market",1 +1286,"industry responded to reforms by undertaking massive +restructuring of its operations by upgrading their technologies expanding to more efficient +scales of production resorting to mergers and acquisitions both within and outside the country and refocusing their activities to the core competence",1 +1287,this is due to the sluggishness of demand in the deficit countries rather than to any improved competitiveness in their export sectors or to expansions in domestic demand in the surplus countries,1 +1288,considering the pricesetting behavior of firms in a situation where competition with overseas firms is expected to increase i cannot help but be cautious with regard to the outlook for prices,1 +1289,strong investment growth has contributed to a buildup of overcapacity in us manufacturing,1 +1290,"and this should give +businesses a greater opportunity to exploit their new equipment and technology to the fullest",1 +1291,"old technologies are +often deployed with overreliance on traditional methods of production which results in low +productivity and competitiveness due to the la ck of economies of scale",1 +1292,i believe that these positive factors will be sufficient to offset weakness in other areas such as net exports and fixed business investment that will continue to be adversely impacted by the stillstrong dollar weak foreign growth and low energy and commodity prices,1 +1293,therefore although the sharp drop in julys industrial production was offset by a rapid recovery in august we expect production to fall below the secondquarter level in the third quarter,1 +1294,deregulation and technological advances have increased the industrys opportunities andscope to channel savings to various projects,1 +1295,this new phase came about because over the years china has gradually developed its own technology and accumulated surplus capital which could be usefully and profitably deployed in the overseas markets,1 +1296,in addition in some cases the glut of semiconductors in 1996 andthe accelerated drop in their prices suppressed export earnings growth exerting further pressureson highly leveraged businesses,1 +1297,"we continue to expect a modest global recovery so +that the considerable underutilisation of production capacities will not be eliminated in the +next few quarters",1 +1298,"with regard to final demand business fixed investment has been on a downward trend although the +pace of its decline is slowing",1 +1299,"what lie at the core of a market +economy are the activities of firms and individuals in discovering new valueadded demand and turning such into attractive goods and services and shouldering risks attached",1 +1300,on the business side a surge of imports of machinery and equipment in the second quarter points to strong business investment in the second half of the year,1 +1301,"prolonged industrial action similar to that experienced at the tcl plant could setback the +incipient growth trend in the nonenergy sector",1 +1302,instead prices shot up creating incentives to explore innovate with extractive technology and invest in new facilities,1 +1303,"production has expanded as firms across a variety of +industries have been rebuilding their stocks to bring them into a better balance with sales",1 +1304,"nevertheless it is +important to note that most other advanced competitors have also experienced export market share losses over the same period",1 +1305,"in this regard the +sluggishness in exports of capital goods and parts is strongly affected by the fact that +sentiment in the manufacturing sector has deteriorated worldwide amid the current phase of +global economic deceleration causing firms to take a cautious stance toward business fixed +investment ",1 +1306,despite the difficulties of the recent past the forest industry is still one of the pillars of finnish exports alongside the heavy engineering metal industry and high tech electronics,1 +1307,meanwhile fast growth has resulted in production and distribution bottlenecks which may yet restrain further expansion and have already pushed prices higher,1 +1308,thus depending on the extent of the inevitable slowdown in growthin this area of the world the growth of our exports will tend to be muted,1 +1309,the revision of the base year in the case of wpi also led to some increase in the weights towards fuel and power and manufactu red products away from primary articles,1 +1310,one safety valve that has helped to relieve the pressures on us capacity has been the inflowof goods and services from abroad,1 +1311,for example u s steel was established in 1901 ford in 1903 royal dutch shell in 1907 and gm in 1908 and they quickly grew to lead the economy,1 +1312,now lets look at the categories of nonenergy goods exports that we said should lead the recovery,1 +1313,these goods are much more traded than services and this put pressure on global supply chains,1 +1314,"the external sector is also exerting an expansionary influence through higher +demand for exports and higher export prices",1 +1315,"first the buoyant growth in industry and services has been somewhat marred by the setback to agricultur e which has suffered substantial deceleration and +volatility",1 +1316,but it is also possible that the underperformance reflects a more structural longerterm shift in the global economy with less growth in underlying supply factors,1 +1317,but they also find it difficult to increase their production and investment until such time as they become confident about their competitiveness,1 +1318,the main objective remains enhancing competitiveness in other words creating and boosting production capacities to produce highquality goods and services at lower costs compared to our competitors,1 +1319,"for example new zealands increasing reliance on asia as a trading partner reflects export market flexibility and has helped growth but could not shield us from the slowdown in world demand or the +drying up of financing even if it has meant a smaller drop in demand for our exports",1 +1320,exports decreased significantly owing to a sharp downturn in overseas economies,1 +1321,the buildup in input price pressures across sectors driven in part by elevated global commodity prices remains a concern,1 +1322,"many business observers now believe +that these newer technologies are not only reducing the cost of transforming inputs into outputs but +also decreasing interaction costs the costs incurred in getting different people and companies towork together to exchange goods and services",1 +1323,onshoring of production and reinforcing of strategic value chains,1 +1324,"this phenomenon is known as dutch dise ase very high prices for one export sector can +crowdout competitiveness in other export sectors",1 +1325,firstly with the help of new technologies companies improve their existing processes and create new products services and distribution channels,1 +1326,the effective capacity of production facilities hasincreased substantially in recent years in response to strong final demands and the influence ofcost reductions possible with the newer technologies,1 +1327,weak global demand is limiting the growth of our exports and the associated uncertainty is holding back business investment in structures equipment and software,1 +1328,one such force is a shock to the cost structure of firms deriving for instance from fluctuations in import prices,1 +1329,"greater +exposure to internal as well external competition proved to be instrumental in building confidence among the indian companies to compete with foreign competitors in world market",1 +1330,we looked at 31 categories of canadas nonenergy exports and found that about half of them were underperforming relative to what youd expect given the state of foreign demand and the exchange rate,1 +1331," second competitiveness has improved slightly mainly as a result of decreases in +production costs",1 +1332,"partly due to strong demand fo r thai products abroad the average capacity +utilization rate for the first five months of this year was the highest since the 1997 crisis",1 +1333,could we expect more demand from these countries this year,1 +1334,"as i have remarked on other occasions strategies to improve production and +distribution processes to exploit the contribution of new technologies in full must be rapidly +put into practice",1 +1335,"this blunts +the growth bolstering effect of lower commodity prices",1 +1336,if the difficult exchange rate situation persists companies may consider relocating production capacity to other regions,1 +1337,"i find these trends particularly vexing at a time when +global demand growth most likely has slowed",1 +1338,but on the other they may increase firms leverage since companies would have to invest in these new production processes to replace their existing technologies,1 +1339,rather it should be promoted from the viewpoint of creating an internationally competitivemarket and making the market attractive to domestic and overseas participants,1 +1340,ideally production and demand each face and respond to without distortion or impediment underlying relative costs,1 +1341,skyrocketing commodity prices led to higher costs for producers which in turn got passed on as higher prices for consumers,1 +1342,"it is driven by firm strategies to exploit competitive advantages internationally use +favourable local inputs and infrastructure and locate in final markets",1 +1343,this is beginning to affect theprofits of materials manufacturers in japan and as a result some of these firms are planning to curtailproduction,1 +1344,new orders for equipment and software hesitated in the middle of 2000 and then fell sharply as firms reevaluated their capital investment programs,1 +1345,there may even be special circumstances that make production most effective under limited competition,1 +1346,"it was primarily a stronger growth in investments in stock and to some +extent exports that came as a surprise",1 +1347,this results in a lower trade intensity of demand,1 +1348,when the cutback in stocks gradually reaches an end companies can increase production again without waiting for demand to increase,1 +1349,business fixed investment paced by spending on producers durable equipment rose atmore than a 22 percent annual rate in the first quarter and by nearly a 13 percent annual rate inthe second quarter,1 +1350,"reflecting growing +production capacity constraints caused by active production activities business fixed +investment especially in the export manufacturing sector recorded high growth however +the level of investment remained below the scale of cash flow",1 +1351,"the strong growthhigh +productivitylow inflation record of the united states over the past nine years has much to do with +the systematic efforts of us businesses since the 1980s to restructure their operations and invest +heavily in machinery equipment and software that embody the latest technologies",1 +1352,"exporters should look at those areas in their production processes where +they can attain efficiency gains and improve prod uctivity",1 +1353,the industry grew at double digits last year as it has for the previous five years despite global economic uncertainties and market volatility,1 +1354,business activity is expected to have continued improving during the third quarter driven by the strength of final demand and favourable financial conditions,1 +1355,"one of our imm ediate objectives is enhancing the economic +capacities that improve the competitiveness of our products and benefit more from foreign +demand",1 +1356,4 for example business investment in new equipment has historically been highly correlated with the capacity utilization rate which remains relatively low,1 +1357,this is because the whole region will be more closely knitted not only in terms of physical connectivity but also in terms of shared production networks,1 +1358,"there is abundant empirical evidence suggesting that the passthrough of input costs is generally weak in the face of adverse supply shocks such as rising energy costs and strong in response to a favourable demand shock3 +so for firms to be able to raise their prices in the way they are doing it today they need to be operating in a market environment in which demand is strong and hence pricing power is high",1 +1359,"but the pace of growth eventually slowed when full or nearfull +exploitation of the newer technologies was achieved",1 +1360,"that creates market opportunities for other economies as well as competitive threats and is likely to result in further structural change as businesses adjust to changing patterns of demand +and supply",1 +1361,"firms have been +relocating their production sites overseas at a faster pace and global ma activity has been +actively taking place",1 +1362,given solid global growth demand for goods and services from norwegian export companies may remain at a high level,1 +1363,"in the fourth scenario though higher us savings rate reduces demand for chinese products china successfully moves part of its excess capacity including its manufacturing +capacity to other developing countries through its going global investment strategy",1 +1364,in the current environment of excess capacity and intense global competition most businesses simply do not have the ability to raise prices,1 +1365,"investment in +equipment has not only remained the most dynamic component of demand but it also moved on a +rising path in the first half of the year",1 +1366,"they are also attributable to japanese firms activities to transfer production +sites overseas",1 +1367,for instance we can expect some parts of the manufacturing process to move offshore to lowercost venues,1 +1368,"finished product +prices held up overall despite the continuing high level of competition",1 +1369,experience of investment behaviour in the past may be a further indication that the pickup of investment in machinery and equipment will be modest,1 +1370,in view of the fact that the business sector competes with manufacturers in other countries it is of course another disquieting finding,1 +1371,"moreover as they seek to reconstruct their supply chains +some firms could consequently speed up the process of shifting their production bases to overseas locations",1 +1372,to document this reliance your next slide shows that the share of parts and components in other asian economies exports to china the middle green bars is much greater than their share in exports to the rest of the world the right blue bars,1 +1373,these sectors are benefiting from higher world prices for their products,1 +1374,"companies that have spare capacity within their business should be able to use these +underutilised resources to increase output relatively cheaply",1 +1375,"as the main engine for generating +domestic production and export growth",1 +1376,"indeed +global imbalances were not just the result of cyclical factors such as business cycle fluctuations changes in oil and other commodity prices etc",1 +1377,"therefore there is less additional +demand to offset the competitiveness effects",1 +1378,"with energy and other commodities accounting for about 45 per cent of our total exports and some 13 per cent of all valueadded economic activity +these relative price movements have led to a substant ial improvement in our terms of trade",1 +1379,many disappeared to be replaced over time by new firms exporting new goods and services,1 +1380,"other more indirect channels may exist including the possibilities that trad e promotes productivity +growth and thus lower costs and that global demand conditions influence domestic pricing decisions",1 +1381,however some of these products have disappeared from the export list owing to poor enabling environment,1 +1382,"however further factors dampening investment activity are pressure on profit margins and the continued overcapacity in parts of +the manufacturing industry",1 +1383,"the declin e in prices may reflect +high product ivity growth in the produ ction of some goods an d large investments to increase +production capacity particularly in c hina",1 +1384,to give one example china in an effort to rebalance its growth model wants to invest abroad,1 +1385,growth in the global economy is projected to remain high resulting in both high demand and favourable prices for the norwegian export sector,1 +1386,"about half of chinas trade is socalled processing trade that is components and materials +are imported mostly from other asian countries processing or assembly is done in china and the +finished product is reexported",1 +1387,potential growth is normally defined as the aggregate growth that can be achieved when utilisation of all production factors is normal over time,1 +1388,"moreover because all computer producers are faci ng a stronger global market us producers can +charge more for their output at home as well",1 +1389,"this could imply that canadas exports which were already slightly weaker than anticipated in the second quarter could continue to be +affected by slower growth in global demand",1 +1390,what this did was to reduce production costs at the aggregate level and increase asias comparative advantage,1 +1391,the positive signals come from an unusually strong growth in productivity during the slowdown in activity which indicates that the us industry has managed to adapt its production structure in an impressive manner,1 +1392,"on +the other hand although gross fixed investment in july continued expanding at a significant +pace imports of capital goods during the third quarter fell",1 +1393,two key factors need to be mentioned in this regard namely the unfavourable climatic conditions which had a considerable impact on the agricultural sector and the challenging trading environment encountered by the mining sector,1 +1394,the industrial world may well muddle through for a while before it figures how to harness and monetize as well as measure new technologies,1 +1395,"at the same time demand is normally affected as +well and there is a risk of this getting out of step with the stronger growth",1 +1396,"at least some of the deceleration may reflect a sl owing pace of technological improvementthat is +lessrapid downward shifts in the supply curve of capi tal goods",1 +1397,when we spoke with executives in our most recent business outlook survey we heard that companies that are benefiting from stronger us demand are starting to feel capacity pressures and a growing share of exporters tell us that capacity constraints would limit their ability to meet a sudden increase in demand,1 +1398,"no one knows better than you that manufacturing needs to become ever more +productive to prosper in a world of steadily falling prices and relentless international +competition",1 +1399,thereafter however they are expected to increase firmly again on the back of firm expansion in global demand particularly for digitalrelated goods,1 +1400,production and imports of investment goods are growing,1 +1401,overseas investment provides an important gateway for domestic businesses to enter the global marketplace and in recent times india has taken some significant steps to make its presence felt in the global arena,1 +1402,this is driven by the increase in commodity prices as well as supply constraints arising from production failing to match the rapidly increasing demand,1 +1403,more importantly higher valueadded goods and services tend to require more credit for more advanced production equipment and technology,1 +1404,"in aggregate the world price of new zealands commodity exports rose almost 14 per cent in the year +to april 2001 and almost 23 per cent over the two years to april 2001",1 +1405,"there are various challenges facing smes which inter alia include nonavailability +of timely and adequate finance availability of raw material technological obsolescence lack + + +1 tfp has been defined as the portion of output not expl ained by the amount of inputs used in the production +process and essentially captures how efficiently and in tensely the inputs are utilized in production process",1 +1406,"these measu res created a favourable +environment for industry to upgrade its technology and build up capacity in order to cater to +growing domestic and external demand",1 +1407,prices of ict goods and services information communications and technology have fallen worldwide as unit costs have fallen and supply has expanded,1 +1408,productivity depends on investments by companies and can rise significantly when new technology is deployed,1 +1409,this is the result of a number of factors primarily the drop in investment in the resource sector but also the rise in the price of imported capital which negatively affects investment in all industries,1 +1410,"working in the other +direction it is likely that export volume growth will begin to strengthen as the capacity being installed in the resource sector is used",1 +1411,the underperfor mance of our exports is due in part to weakness in foreign demand,1 +1412,efficient resource allocation will be realized only when individual firms pursue their economic activities such as production and investment through market mechanisms,1 +1413,last year german businesses exported goods and services with a total value of almost 1600 billion around the world,1 +1414,"the competitive position of these enterprises is also constrained by their ability to introduce +more efficient production processes",1 +1415,"we were also taking account of the sharp drop in +investment that has taken place particularly for machinery and equipment",1 +1416,slower growth there and in particular falling demand for commodities has impacted on our growth levels,1 +1417,"the latter reduces growth in exporting industries +and increases competition for domestic firms",1 +1418,it found that many goodsproducing value chains are becoming less tradeintensive as they locate closer to their customers,1 +1419,that adjustment was characterized by sharp reductions in business investment and pronounced liquidations in business inventories and was compounded by the simultaneous economic difficulties of some of our major trading partners,1 +1420,"the initial setback to exports in the categories of it electrical and electronic products has been offset by +growth in nontraditional exports and diversification of trade to newer markets so much so +that asian exports grew by double digits in a number of countries",1 +1421,also the regional integration in industry has the capacity to generate growth of productivity to better compete with the imports and contribute to the growth of regional exports,1 +1422,"in this new +landscape foreign companies optimally deployed their production sites and distribution +channels to create value added making greater use of outsourcing for cost efficiency",1 +1423,chinas exports now account for 14 percent of the worlds total compared with only 4 percent 15 years ago,1 +1424,and we are hearing from our contacts in industry that it is also spurring private businesses to invest in new equipment to support that activity,1 +1425,"the constraints are related +to production capacity flexibility in balancing the mounting demand primarily stemming from an +unchanged and unfavourable investment climate and t he highcost economy",1 +1426,the first one relates to the incentives for business to innovate and invest in new technology,1 +1427,"one possible explanation is that in an economy +based heavily on the production of services firm s have been putting their teams to work on +marketing and sales to drum up business against a backdrop of weak overall demand",1 +1428,"in 2010 this map has changed wit h the global shift in manufacturing to asia with +china accounting for 9 out of the top 25 bilateral trade routes by value",1 +1429,therefore during this period of transition in business strategy the pace at which production is shifted overseas will generally accelerate compared to the past average,1 +1430,this forced them torelocate their production bases overseas while shifting their domestic production to new productsfor which they have a comparative advantage,1 +1431,"i have highlighted ten challenges that we need to address in +order to accelerate output growth with focus on the quality of growth",1 +1432," we are also monitoring developments in china to see if we would see a slowdown +or a return to strong growth that together with a recovery in the us could push +global commodity prices higher",1 +1433,another adjustment concerns activity in the non resource sector particularly exports,1 +1434,it requires appropriate solutions starting with easy access to modern inputs and then selling the produce in most remunerative markets,1 +1435,while production and availability have been increasing the growth rate shows relatively high volatility raising the prospect of price surges in the face of steadily increasing demand,1 +1436,"leverage is still high and weak demand for +advanced economy exports could persist for some time",1 +1437,"the growing consumer market and the expansion of production +networks in asia will continue to be a major driving force in promoting this increased intra +regional trade",1 +1438,some manufacturing segments in other parts of the world are also facing excess production capacity and profitability is low,1 +1439,we are benefitting from strong demand for our exports especially ee and commoditybased products,1 +1440,"firms in advanced economies proactively engaged in strategic global allocation of production +sites in order to ensure the most efficient means of production",1 +1441,excessively large fluctuations in outputcan entail high economic costs,1 +1442,"in recent years however japanese firms hav e become better adapted to the situation and a +new international division of the production process concentrated in asia has been established",1 +1443,"growth had come to be increasingly driven by dome stic demand as external competitiveness +deteriorated",1 +1444,"in tandem canadian business needs to improve its competitiveness source new suppliers and prepare to manage in a more volatile +environment",1 +1445,"thus at first the +exporting industry might not be doing too badly and export prices remain unaffected",1 +1446,"such information +is used in an extensive way in order to assess the economic situation and shortterm prospects +for output demand and prices",1 +1447,now these countries are in a downturn with a high level of spare capacity and with a need to improve competitiveness,1 +1448,however it does indicate problems with regard to the competitiveness of business enterprises,1 +1449,east asia plays an important role as the global supplier of itrelated goods,1 +1450,"the industry structure in hordaland is very similar to the rest +of the country",1 +1451,"east asian intraregional trade has grown rapidly +since the turnofthecentury with the formation of a vertically integrated division of labor +centering on parts and components",1 +1452,"the business +model developed in this environment at the ti me was based on longterm stable business +relationships and put emphasis on mass production and the sale of lowpriced highquality +products for the domestic market and advanced economies",1 +1453,this alternative rested on a persistentlystrong belief in a high potential growth rate with investment in new technology continuing to play animportant part,1 +1454,"however the pac e of +increase in overall bus iness inves tment is likely to remain modes t as long as uncertainty regarding a +recovery in exports and production remains",1 +1455,businesses all over the world were impacted in general due to demand slump,1 +1456,internally the price of nontradable goods should fall more to stimulate demand for them,1 +1457,our analyses suggest that firms will expand their production capacity once again in 2017,1 +1458,"it does seem likely however that the rapid advances in information technology will also have a major +impact on future production and distribution processes in sweden",1 +1459,"these could be for instance sudden increase s in companies production costs due to soaring +commodity prices andor energy prices",1 +1460,countries that compete with china as exporters of manufactures and recipients of direct foreign in vestment feel that they will be overwhelmed,1 +1461,this means that domestic equipment investment in 2013 will probably stagnate,1 +1462,"companies in these countries will +then easily be able to increase production",1 +1463,late in the year there was a welcome pickup in investment in machinery and equipment but there is still a long way to go to get back to the level of investment before the pandemic which itself was low by historical standards,1 +1464,"this is +evidenced by the remarkably strong performance of the export sector since 1973 as well as by the +favourable trend of our terms of trade which showed an average improvement of 08 per year",1 +1465,on the activity side a wide range of indicators show a broadening and strengthening of demand and production,1 +1466,it would appear however that some of this stronger growth reflects the effects of temporary factors such as the impact of the us cashforclunkers program on c anadian automotive production,1 +1467,however in the longer run exports are expected to tend to mark a fall rather than a clear increase given the decline in expected growth in emerging and commodityexporting economies protracted low commodity prices and the resulting excess in production capacity related to materials and energy,1 +1468,"with commodity prices having come off their highs +and manufacturers problems with supply chains well along toward resolution growth in the second half of the year seems likely to be more rapid than in the first half",1 +1469,"large firms are likely to face a greater degree of uncertainty in their outlooks regarding their sales prices thus the number of dont know +responses tends to increase over a longer projection period probably because of +the direct exposure to fierce global and domestic competition in final product +markets",1 +1470,"as a result of production capacity shortfalls of +exporting countries in the short run and these countries reluctance to increase their +production capacity prices sometimes display excessive increases in the event of a setback in supply",1 +1471,"developments were very uneven among the different +industries with the increase in productivity in it user industries being much less impressive despite +large investments in it products than that in the it producer sector",1 +1472,we do four things at internationally competitive prices tourism international business rum and green energy and the foreign exchange we earn and save from these is used to fuel the imports we need for production and consumption,1 +1473,after such a prolonged period of massive capital investment there was a very sharp falloff in capital spending by us businesses during 2001,1 +1474,"last business investment spending has been depressed by a weak and uncertain sales +outlook tight credit conditions and significant unused capacity",1 +1475,that growth potential could be greater than we thinkif businesses find new ways to engage with gvcs and develop new products and processes to make them more productive and competitive,1 +1476,supply bottlenecks will likely hinder the quick expansion of production in some industries in the next few months and raise some costsin some cases significantly,1 +1477,robust business investment in equipment and intangibles continued in the second quarter and indicators suggest another gain in the third quarter,1 +1478,enterprises which have a viable business model and which produce competitive goods and services must also be able to finance their activities,1 +1479,in this period the strong course of economic activity in china and india two countries that account for a significant share of global commodity demand reinforced the upward trend in commodity prices,1 +1480,due to the simultaneous impact of demand and supply factors as well as global uncertainty on investment it is difficult to assess their relative importance,1 +1481,"as we mentioned in our latest quarterly bulletin published in june the recorded decline in export +volumes contributed to a slowing down in domestic growth from 3 per cent in the fourth quarter of lastyear to 2 per cent in the first quarter of this year",1 +1482,such economies depend on foreign exchange for their growth so the growth strategy must focus on increasing the productivity of the merchandise exports and services in which the country has a demonstrated competitive advantage enhancing the product and moving up the value chain and investment in value added products,1 +1483,"before this recent quantum jump in +information availability businesses had limited and less timely knowledge of customers needs and of +the location of inventories and materials flowing through complex production systems",1 +1484,"in such circumstances high levels of capacity utilization were good predictors of +resource tightness which was likely to translate into pricing pressure",1 +1485,"a growin g number of firms are looking to cut costs by +importing more inputs",1 +1486,likewise the increasing interconnection among the gms countries can help expand production potential and economic opportunities by utilizing each others spare capacity,1 +1487,on the other hand we are still seeing weak growth in canadas net exports,1 +1488,all these initiatives have opened a whole new world of opportunities for industry and businesses,1 +1489,"optimisation of the installed productive capacity utilisation +optimisation of the installed productive capacity utilisation means taking advantage of the +investment made todate increasing production going in search of new markets and new clients",1 +1490,however it also implies that the wedge weve observed between exports and foreign demand persists to some degree,1 +1491,the increased regional demand for our products provides a challenge to firms and households to increase output and take advantage of the high international commodity price developments,1 +1492,"technological ad vances in the itproducing sector that is +multifactor productivity and associated investment s in more and better production equipment capital +deepening started things off",1 +1493,hence there are immense opportunities arising from increased prices and resultant increase in production,1 +1494,"at present firms are +working to repair or rebuild supply chains by for example seeking to secure alternative +suppliers including from overseas and reviewing product specifications",1 +1495,"exportoriented activity must +become relatively more profitable than production for the domestic market alone",1 +1496,but i think a more natural place to look is at international trade because companies that use trade to increase specialization also increase their productivity,1 +1497,"nonmanufacturing firms which have relatively little ac cess to the global market are also experiencing +a severe market environment",1 +1498,"as we have seen exporter s have strong incentives +to be productive so that they can take advantage of access to our markets and thus they will make the +investments needed for growth",1 +1499,outsourcing consists in renouncing manufacturing or services in a given company and obtaining such goods or services from another company that may be located in the same or another country,1 +1500,the industry must secure the former for its future expansion or else it will continue plateauing,1 +1501,"in addition emerging economies are +now regarded not only as production sites for manufacturers but also as locations for software development centers or call centers for nonmanufacturers",1 +1502,asbuying selling and comparing prices at a distance has become easier producers of all kindsof goods and services have found themselves in a more competitive environment with lessindependent pricing power than they used to have,1 +1503,"growth is strong in export +sectors without such limits but their share in total exports is still small",1 +1504,despite the recouping of losses in international competitiveness exports have yet to record the anticipated upward dynamics,1 +1505,these same global developments have also weighed on business investment by limiting firms expected sales thereby reducing their demand for capital goods partly as a result recent indicators of capital spending and business sentiment have been lackluster,1 +1506,"on the other hand a producer also has an +incentive to cut back on his or her production when the market price is lower than the equilibrium price",1 +1507,"these companies generally view domestic and foreign +suppliers as competitive in the same way that they view domestic suppliers as competing with each +other",1 +1508,and real investment in equipment and software while not rising at the torrid pace of 2000 appears to have bottomed out and may be increasing,1 +1509,however istats preliminary estimate indicates that gdp declined by 03 per cent in the fourth quarter of last year in part likely reflecting especially unfavourable developments in the most erratic components of final demand,1 +1510,during this period inflation in the tradables sector those industries exposed to international competition has been negative averaging minus 08 percent annually compared to positive 12 percent in the prior two decades,1 +1511,"industries producing traded goods and services tend to be disadvantaged relative to the non +traded parts of the economy",1 +1512,"acti vity abroad has slowed more recently and seems +to be settling on a sustainable path that still should result in rising demand for us exports",1 +1513,"however due to the structural factors in the agribussiness sector worldwide i do not expect +this scenario to change significantly",1 +1514,"common feature is that domestic companies in bric economies have been seeking to +enhance their access to supplies of raw materials and moving into new segments of strategic +commodities and move up the value chain",1 +1515,"those were the days +when production and cpi showed signs of acceleration and substantial uncertainty existed if the business cycle had peaked",1 +1516,this is not surprising at all if one understands the fact that hong kong which has created and accumulated enormous amount of capital and wealth in the past few decades enjoys unique advantages in making it a lot easier for companies wishing to tap into the rapidly growing chinese market not only in terms of production and supplies but also in terms of a huge and rapidly expanding consumer market,1 +1517,the most obvious example is the very strong growth in exports of our resources,1 +1518,scope for exports is significant only if the industry achieves scale value addition diversity and develops information technology and outsourced businesses from the west,1 +1519,second the positive intense and fast response by the export sector which grew by around 45 in real terms between 2008 and 2017,1 +1520,"national economies became tightly linked with demand in one +country driving production and inventory cycles across several countries",1 +1521,chinas growth story which began in 1980 has evolved from simply attracting inward direct investments and technology for manufacturing and processing trade to becoming a major source of export of capital and technology abroad,1 +1522,for example electronics count for only 26 per cent of our total exports while they count for 36 and 60 per cent of taiwans and singapores exports respectively,1 +1523,they note that two industries in particular mining and oil and gas extraction and manufacturing account for much of the slowdown in mfp growth in this decade,1 +1524,"at present a recovery in exports and production and the +weakness in business fixed investment and privat e consumption seem to be in a tug of war",1 +1525,most of these suppliersconsider their year 2000 capability to be a business survival issue as it is of critical importance totheir ability to remain competitive in an aggressive industry,1 +1526,however as a result of domestic demand and the strong nonuk multinational sector our assessment is that there would still be some positive growth in output over the coming years even under a nodeal scenario,1 +1527,"when stocks are wellfilled and sales decline companies cut back on production so that +it becomes even lower than demand",1 +1528,"further the growing interaction between industry and services has +increased the in fluence of the latter in determining international competitiveness",1 +1529,"most of these are +firms that are highly exposed to international tradeincluding manufacturing",1 +1530,at least for the foreseeable future it will still take time to bring many types ofnew facilities into the production process and productive capacity will still impose limits on meetinglarge unexpected increases in demand in a short period,1 +1531,production and trade are likely to have been adversely affected by the inclement weather in january but business surveys suggest that a similar rate of expansion will occur in the first quarter of this year,1 +1532,"i was very much alive to the +potential dangers of this crisis for our export driven sector and could not be oblivious to its +ripple effects on the rest of the economy",1 +1533,by the way some sectors are more affected than others for example those which compete with uk producers,1 +1534,us gdp growth is not generating as much trade as previously with persistent weaknesses in business investment including in it,1 +1535,it appears that capital that is plant andequipment can adapt and expand more expeditiously than in the past to meet demands,1 +1536,"if there are +economies of scale throughout the region of possible industry outputs then marginal cost +pricing will yield negative profits",1 +1537,"these are the real challenges facing the exports sector +worldwide",1 +1538,competition for production of services may conflict with exploitation of economies of scale,1 +1539,"at the same time there were signs that domestic demand in canadawhich had held up well through the first part of the year was softening and that the inventory +adjustment particularly in the electrical and electronic sectors still had some way to go",1 +1540,"bis review 1272009 1 + despite a drop in exports other sectors are faring well",1 +1541,"but if this argument were made it would be important to keep in +mind that the change in relative prices between tradeable and nontradeable goods is an important signal for investmentand resource allocation and it would not be sensible to have this relative price moving about too much it is not onlydomestic prices that matter for price signals to the domestic economy",1 +1542,new technologies invented elsewhere need to be adapted by firms into their own production processes to make them more efficient,1 +1543,"the global economy had reached the peak of a long strong upswing which had stretched capacity and seen a wide range of raw materials and energy prices reach very high +levels",1 +1544,when the reduction of stocks ultimately comes to an end firms may step up production again even though demand has not yet started to recover,1 +1545,"in +addition firms follow a deflation oriented pricing behavior and hence use the sales prices of +their rivals and the purchasing behavior of customers to set their prices even when the +supply demand balance improves",1 +1546,does the reduced sensitivity reflect structural changes such as globalization or a greater role for intangible capital in production that have reduced the importance of cyclical swings in domestic activity for firms marginal costs and pricing power,1 +1547,this leads to the second prerequisite for higher potential growth increasing competition in order to establish efficient and wellfunctioning product markets,1 +1548,and the third phase i s a very large increase in resources sector production and exports,1 +1549,"another area of softness has been business spending for new equipment which slowed toward the end +of last year and remained anemic in the first quarter of 2007",1 +1550,several sectors experienced contractions in output volumes in the second quarter of 2015,1 +1551,owing to this positive growth utilisation of production capacity picked up,1 +1552,exports of goods and services excluding receipts from shipping have underperformed exports of the eu17 by a similar margin,1 +1553,we found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000,1 +1554,business fixed investment fordevelopment of new products and new businesses also seems to be increasing gradually,1 +1555,"another possibility is that business investment has been held down in recent years because relative +prices of capital goods are no longer falling at the same pace at which they declined in the late 1990s",1 +1556,itcan be said with a high degree of certainty that prospects for the countrys exports this year willremain favourable,1 +1557,on this note the strong industry support has indeed been commendable and contributed to the progress of inceif,1 +1558,but firstquarter growth was driven largely by net exports and inventoriestwo volatile spending categories that are typically not dependable indicators of ongoing momentum,1 +1559,"another risk is that core firms and +factories abandon domestic production sites",1 +1560,arguably however this rise is related less to technology and thestructure of underlying marginal costs and more to uncertainties about how quickly the new practiceswill be exploited to expand opecs productive capacity,1 +1561,"these developments were bolstered by investments in it equipment +and software by firms outside of the itproducing sector improvements in the knowledge and skills +needed to use effectively the equipment and softwar e and innovations in business processes",1 +1562,this is partly because demand for traded merchandise tends to be a bit more cyclical than the services sector where much output is not traded across borders,1 +1563,companies might instead produce a better product for the same price which means a lower qualityadjusted price,1 +1564,the sustained increase in the number of exporting companies over the past five years is due mainly to the growing participation of smes,1 +1565,"an economy that increases produc tivity and competitiveness can be deprived of +the benefits it should enjoy in terms of increased market share because of currency +depreciation in competing countries",1 +1566,"3 the trend decline in the relative price of imported mach inery and equipment has also contributed to the rise in canadas +terms of trade but this is not a recent development",1 +1567,"a firm can build a plant for instance but to get rid of it the firm will have to resell it below cost because of +specific features that prospective buyers will not appreciate",1 +1568,higher commodity prices bring increased investment which entails direct and indirect benefits not only for the sectors in question but also for the service sectors that support them ,1 +1569,all in all it can be concluded that growth prospects in the world around us have improved,1 +1570,"in addition local firms have also been increasing their production by introducing technologies and sales knowhow from advanced +economies",1 +1571,recent indicators have shown possible signs of slower growth in the early part of 2014 growth of industrial production slowed retail sales and passenger vehicle sales moderated and fixed asset investment growth was a little lower in january and february though quite stable in yearended terms,1 +1572,"at present the revitalization plans cover 10 industries including the light industry automobiles steel textile equipment manufacturing shipping petrochemicals nonferrous metals it and logistics with the aim to curb and reverse the +trend of declining growth in these industries",1 +1573,as a major investor and integrator of production in the region withmanufacturing concerns in china and southeast asia hong kong companies could adjust productionto areas which have the greatest export competitiveness,1 +1574,while the path ahead for commodity prices is as always uncertain declining investment rates in emerging asia particularly china present the prospect of a prolonged decline in the growth rate of commodity demand,1 +1575,an industry that has a good reputation will be good for its players and that good reputation would be translated into good value propositions for all those who are involved,1 +1576,as i mentioned earlier investment has also been noticeably weak in recent years likely reflecting increased restraint on the part of businesses unsure of the outlook for demand and their profits,1 +1577,in my book this is not only bad for the needed cyclical recovery in aggregate demand,1 +1578,"this slow trade phenomenon can be explained in part by the cyclical factor that +investment in plant and equipment which has a greater tendency to induc e imports is lower +than in the past",1 +1579,the ppi covers price changes faced by the producers on primary intermediate and finished goods and services ready for the market,1 +1580,"in contrast the value of machinery and equipment relative to +gdp has fallen steadily since at least the late 1980s although this is largely explained by +the fall in the relative price of machinery and equipment",1 +1581,later this year many firms will want to hold larger inventories ofgoods as insurance against year2000related supply disruptions and these are likely to run offthose stocks in the first half of 2000,1 +1582,in other words the laggard firms arent absorbing the new technology and incorporating it into their production processes to increase their efficiency possibly due a lack of competitive pressures,1 +1583,against this background the world economy is experiencing a double hit by complex supply and demand shocks,1 +1584,it increases the scope for efficiency gains through specialisation since it allows economies to make better use of their comparative advantage in international production,1 +1585,unfortunately this example is not readily transferable to other export industries,1 +1586,"firms have been telling us that they are producing more with existing +capacity rather than investing in new productive capital",1 +1587,business investment has been weak in the past six months or so even beyond the energy sector and investment in capital equipment is reported to have declined in the last quarter of 2015 and first quarter of this year,1 +1588,also notable is the fact that production especially in manufacturing did not keep up with growth in final demand in the closing months of last year,1 +1589,net exports have been the m ain source of expansion,1 +1590,uncertainty affects production decisions when firms must made decisions in advance regarding the technology that they will use and the means of production they will employ,1 +1591,investment in machinery and equipment especially keeps production structures up to speed with technological advances making it a useful lever for lifting an economys output and ultimately its growth as well,1 +1592,"in terms of goods structure electronics accounts for over 20 of total exports +in all east asian economies",1 +1593,smes have been widely affected by sluggish demand and a slump in export markets,1 +1594,there is not a single critical price that will constrain production or investment,1 +1595,adjustments may come about through deteriorating competitiveness and profitability in internationally exposed industries,1 +1596,"companies in korea and many other asian countries have become formidable +worldclass producers in a number of manufacturing sectors using advanced technologies but ina number of cases they permitted leverage to rise to levels that could only be sustained withcontinued very rapid growth",1 +1597,that recognises that the weaker outlook in the us will depressglobal demand and dampen growth prospects in other countries,1 +1598,"business investment in equipment and software which rebounded strongly early in the +recovery continued to post solid gains through the fall",1 +1599,"some of it was due to the unprecedented rise in global crude and commodity prices but a significant portion of it was also due to sizzling growth in an economy that was structurally c apacity constrained across the entire spectrum +infrastructure agriculture industry and services",1 +1600,"as a result some smal l firms may find it difficult to pass their rising +production costs on to their sales prices according to their forecasts thereby squeezing their margins",1 +1601,there remain a great many opportunities for you to seize here especially if you put innovative technologies to use,1 +1602,"net exports real exports minus real +imports which had been increasing are starting to level off as inventories of some raw materials and +electronics parts became somewhat excessive in east asian economies",1 +1603,"hence any attempt at developing industry in +isolation would drain it of a vital requirement fo r growth and sustenance viz competitive advantage",1 +1604,business fixed investment rose roughly 212 percent per year on average from 2004 to 2016 compared with about 5 percent from 1996 to 20038 some bright spots do exist capital expenditure by leading it companiesgoogle amazon and the likehas soared since 2010 and investment in the energy sector has returned to life,1 +1605,"domestic f ixed + 27 + investment provides a return in the form of high er production capacity in the future",1 +1606,"the economic effects can be seen in a number of areas including strong growth in business investment company profits share +prices and imports",1 +1607,business investment in equipment fell for the fourth consecutive quarter,1 +1608,uneven global trade recovery led by a few asian countries and select sectors such as medical equipment and electronic products raises concerns regarding its sustainability,1 +1609,as a result we expect the recent increase in commodity prices to boost the level of business investment in canada by less than half of what our models generally predict based on historical relationships,1 +1610,in 201213 however exports of goods and services were flat and remained subdued in the following year,1 +1611,as prices have fallen the value of production has increased a lot less than its volume,1 +1612,auto sales and production were taking a hitrevisions to the data on orders and shipments of nondefense capital goods provided hard evidence ofa slowdown in business spending on hightech capital goods and more companies announceddisappointing sales and earnings,1 +1613,indeed chinese exportbusinesses can enhance their competitiveness via reducing cost and improving product mix,1 +1614,"but what are possibly being reflec ted here are shortcomings in the quality of factors +of production and in the characte ristics of the business sector",1 +1615,the country sells commodities to asia and has been witnessing increased exports to that region,1 +1616,for example last year regional output declined largely because of falling output in the commodity based economies which have been adversely impacted by declines in commodity prices,1 +1617,that it is growing more slowly and is more inward looking than in the past means that we have to look to regional and domestic demand for our growth to make in india primarily for india,1 +1618,precisely because they are small producers in a global market only those products and services that are competitive internationally will survive,1 +1619,however net exports have continued to rise and business fixed investment is increasingsteadily,1 +1620,on the cyclical side the crisis has cost the world economy as much as us10 trillion in lost output or almost 15 per cent of production,1 +1621,"the current high level of utilisat ion of industrial plant capacity +and a considerable need for replacement investment sugg est that investment is still clearly on the up",1 +1622,"more specifically since the rebound in good part reflects a recovery in the +electronics and tourism industries it underlines our dependence on the state of external +demand",1 +1623,"if businesses in a given country +fail to change their product and service profiles to achieve greater value added they will find +themselves pushed out of the market by companies fr om countries with low manufacturing costs",1 +1624,however weakerglobal demand has caused the physical quantity of exported goods to decline by about 05 per cent inthe first quarter of 2001 compared with the fourth quarter of 2000,1 +1625,"global value chains as a source of tfp growth in the future +in sum therefore this diagnosis highlights two key facts cesee economies have a lack of capital and a strong reliance on global production processes",1 +1626,in particular capital goods investment in 2006 grew by more than 10 and in recent quarters its rate of expansion has been around 13,1 +1627,the sector is expected to witness strong growth in the coming years with its commitment to rd and low cost of production,1 +1628,"we rely on our ability to sell our goods and services abroad for our economic success while +other countries are at the same time aggressively seeking to sell to us or to set up operations +locally",1 +1629,"partly against +the backgrou nd of weak ness in final demand in europe and china the pickup in the nies +and the asean econo mies has moderated particularly in exports and business fixed +invest ment in manufacturing in the corporate sector ",1 +1630,moreover the small market size and limited range of resources result in a narrower range of domestic and export production and tend to cause high costs because of a lack of competition,1 +1631,"a substantial share of the graphics and publishing industry is characterised +by natural protection against foreign competition",1 +1632,"much of the growth this past year +owed to rising resource exports althoug h growth outside the mining sector also picked up",1 +1633,"18 the production process would therefore become more capital +intensive and the relative productivity of new capital purchases would be lower",1 +1634,new technology generated optimism and laid the basis for strong investment growth,1 +1635,"thailand needs to modernise its industrial base and requires government initiatives to +introduce improvements in areas of management and production technology",1 +1636,"moreover the sudden dropoff in +business demand coupled with some slowing in the consumer sector apparently caught producers off +guard",1 +1637,"this leads to the second prerequisi te for higher medium to longterm growth +increasing competition towards establishing efficient and wellfunctioning product markets",1 +1638,hence even as evidence continued to emerge in the first half of 2009 of the dramatic fall in demand for goods and services share prices and spot commodity prices began to recover,1 +1639,the same goes for firms wishing to invest in new production equipment the rates have never been so low,1 +1640,the electronics industry which recorded positive sequential growth in april and may shows tentative signs of a patchy recovery,1 +1641,"usd 24 trillion of which 10 will represent offshoring of business +processes and ict to countries with low manufactur ing costs",1 +1642,all indications are that it became more subduedin the third quarter and there may even have been some decline in the level of total production,1 +1643,when we export either goods or services we are competing with other countries supplying the same products,1 +1644,that is expansionary and puts pressure on prices for non traded goods and services,1 +1645,this accounts for about one third of our lost competitiveness,1 +1646,"a rapidly expanding economy is liable to encounter bottleneck problems because new production +facilities are not always available just when demand is rising",1 +1647,singapore firms shifted a substantial volume of production offshore and increased ownership of production facilities in the afez,1 +1648,my appreciation also goes to the manufacturers association of nigeria man whose support is critical to the successful development and implementation of the 100 for 100 policy for production and production ppp,1 +1649,"the purpose is to encourage production not only for domestic +consumption but also for exports in tradi tional markets and products and in new ones",1 +1650,"investment in machinery and equipment me and in research and development rd +which have been slower to recover are expected to gain strength as foreign activity in +particular us demand accelerates",1 +1651,"as these developments show a sharp drop in exports since last autumn and the subsequent decrease in production have started to adversely affect +domestic private demand with a lag",1 +1652,"canadian exporte rs operate in a global marketplace with +aggressive competitors and a global economy cont inually in flux",1 +1653,first greater investment by firms in tangible equipment and structures as well as intangible investments such as software and product designs raise labor productivity,1 +1654,"looking forward investment in new equipment and software is expected to be supported by healthy corporate balance sheets relatively low costs of financing of new projects increased confidence in the durability of the recovery and the need of many businesses to replace aging equipment and +expand capacity as sales prospects brighten",1 +1655,"if the produc tivity is low and declining then the final +price tends to be higher even if the cost of acquiring the factors of production remains the same",1 +1656,this applies for instance to the ifo indicator as well as to production in industry,1 +1657,"in +addition international supply chains made possible by advances in communication and transportation reduce costs and increase the compet itiveness of us firms",1 +1658,"the high exposure of australia and new zealand to emerging asian demand for industrial +raw materials and protein has sent the relative prices of those products and hence our real +exchange rates to high levels",1 +1659,the slowdown has been associated with weak investment and a decline in output gains from technological innovation,1 +1660,generally competition in the market place pushes market participants to increase their productivity,1 +1661,reflecting the increase in demand both at home and abroad production is increasing at a moderate pace,1 +1662,but the growth momentum weakened in the final quarter of last year amid a new pandemic wave driven by the omicron variant the increase in energy prices and supply bottlenecks,1 +1663,as the destocking comes to an enddomestic and international demand should therefore be able to generate an accelerating growthof production this year and in 1988,1 +1664,"this has no doubt been an important factor behind the surge in businessinvestment in canada since 1996 which is so important if we are to take advantage of new technology +and enhance our ability to compete internationally",1 +1665,over the year nonmining business investment increased by 12½ per cent the largest rise in a decade and a further increase is expected,1 +1666,these are essential characteristics of efficient markets which are necessaryfor efficient use of property by users as a factor of production,1 +1667,capacity utilization in industryis a little below its level through much of 1994 and pressures in product markets have remainedtame,1 +1668,auto exports to this country in particular have posted a significant rise since february,1 +1669,"in addition there is a risk that before seeing an +increase in supply capacity a deflationary impact may emerge as competition inevitably induces firms +to exit from the market",1 +1670,"efforts to +restore world demand are impeded by the scale of the imbalances in trade which are +beginning to grow again",1 +1671,its export sectors are homogeneous and prone to cyclical fluctuations,1 +1672,resources sector exports have risen strongly as the greater capacity resulting from all the investment has been put to use,1 +1673,despite these positive fundamentals real business spending on equipment and software has risen only 32 percent over the past four quarters and contracted in the first quarter,1 +1674,"so in 1910 confindustria was designed to inspire and promote an alleanza tra i produttori which could strengthen existing enterprises and multiply their +number",1 +1675,"in many industries investments in information technologies have helped firms to cut backon the volume of inventories that they hold as a precaution against glitches in their supply chain or as +a hedge against unexpected increases in aggregate demand",1 +1676,a company may estimate value added in its operations by netting out purchases of inputs from other firms from total sales,1 +1677,indeed some companies have moved production back to advanced economies a process called reshoring,1 +1678,"it should be noted here that firms +are likely to find it relatively easy to pass their increased input cost s onto the sales prices in +the near future as compared with the past deflationary environment",1 +1679,that way front line businesses would have to exercise good judgment in interpreting and applying those standards,1 +1680,we had lost competitiveness visàvis other regional economies,1 +1681,"export activity which is supported by over seas economies and production at present are +continuing to increase so that the driving force of the virtuous circle remains intact",1 +1682,"this is the result of major increases in +productivity in traded goods ",1 +1683,our tradeoriented industries should benefit from the mild upturn in global and regional electronics,1 +1684,supply chain configuration happens when production networks shift away from china to asean countries,1 +1685,despite a general slowdown worldwide and skyrocketing oil prices we continue to generate growth,1 +1686,some of it is cyclical as it comes from international commodity prices other supply side factors but also from a strong domestic demand,1 +1687,"before the advent of what has become a veritable avalanche of information technology innovation +most twentiethcentury business decisionmaking had been hampered by dated and incompletebis review 941999 2information about customer preferences in markets and flows of materials through a company s +production systems",1 +1688,companies in regional economies must also enhance their ability to create highvalueadded goods and services from a global viewpoint,1 +1689,"for some time now the growth of aggregate demand has exceeded the expansion of production +potential",1 +1690,"part but only a +small part of this shortfall can be traced to the low rate of business investment and special +factors such as the decline in north sea oil production",1 +1691,"to take advantage of these attributes we will need continued heavy investment to improve produc tivity and sustained innovative efforts to +develop new markets",1 +1692,10 in other words and contrary to what is often claimed tooweak demand can slow down creative destruction whereas stronger demand can accelerate it,1 +1693,however in many countries pace of growth might moderate partly due to supply side constraints and maturing business cycles,1 +1694,this whole process of expanding twoway trade and technological advancement is playing out in myriad industries,1 +1695,exporting or importsubstituting sectors that are selling their produce at a dollar price not too different from the price they were getting towards the end of 2001 have possibly endured a large loss of profitability,1 +1696,"industries geared to export markets +expanded by 22 on average while industries selling to domestic markets contracted by 75 ",1 +1697,therefore production becomes too expensive and businesses stop investing because they assume that demand is falling,1 +1698,"exports will be conditioned by weak growth +prospects abroad and by unfavourable cost trends in the pricesensitive electronics and +tourism sectors",1 +1699,"this is the case in many recent initiatives especially +among our more seasoned companies to consolidate and rationalize their supply chains using theinternet",1 +1700,with low inventories severe supply bottlenecks in some key sectors such as shipping or semiconductors and shortages supplychains are struggling to serve this demand,1 +1701,"it suggests that total demand although stronger than +anticipated may not have been putting as much pressure on our economy s production capacity as we +had thought at the beginning of the year",1 +1702,japanese major exporting firms continued efforts to increase production and procurement on a global basis could contribute to restraining the pace of increase in exports,1 +1703,"the former led to a concurrent drop in demand particularly for +consumer durables while the latter resulted in the go ods trade volume reacting disproportionately to changes +in production",1 +1704,"to +meet this challenge and establish a new basis for economic growth firms need to become +more innovative and competitive in an effort to add value to their activities and explore new +sources of demand both at home and abroad",1 +1705,the deficiencies in the economy lead to low productivity poor quality products and noncompetitiveness in the global market place,1 +1706,in the fourth quarter investment spending for both equipment and structures fell and net exports and inventory investment were drags on growth,1 +1707,businesses have capitalised on the advances in transportation telecoms and computing that make it easier to trade globally and fragment production,1 +1708,"the pace ofbis review 762001 3demand growth in the us needed to slow down as of course it has dramatically to the point where +growth in the us in recent quarters has pretty well come to a halt",1 +1709,there are clear similarities with the expansion of real economies in thepast hundred years a stream of new more efficient and specialised production processes and newcommunication facilities are leading to a growing volume of trade,1 +1710,among kansass major industries oil and gas production and equipment manufacturing have been hurt by the worldwide slump in energy demand,1 +1711,our export recovery since 2009 has been impressive but remains incomplete as at least 30 billion worth of export capacity was lost in the process and competitiveness challenges continue,1 +1712,"international trade tends to be highly sensitive to the +business cycle and foreign demand for us produc ts fell sharply during the global slump",1 +1713,but over time the higher output generated by those investments combines with stabilizing demand to bring about a period of downward pressure on prices,1 +1714,moving forward collaboration beyond traditional sectors and into competitive industries such as retail communication and oil and gas should be advanced as it opens up and extends our outreach to form new alliances,1 +1715,as a result the increase in final demand wasreflected fully in production growth,1 +1716,"imports on the other hand fell by more than 40 percent indicating a sharp deterioration in the domestic demand and supply conditions and this is +reflected by the continued declines in manufacturing production capacity utilization private +consumption and investment",1 +1717,"the term rise in +productivity carries the connotation of producing existing products at lower costs",1 +1718,this reflects a combination of modest growth in consumption the beginnings of fiscal drag solid business investment in equipment and software and relatively strong export growth,1 +1719,trade and investment linkages with china have increased markedly in recent years and a slowdown could adversely affect these trends,1 +1720,chief among them are the strong increase in oil prices since around the middle of last year the reversal of the temporary vat reduction in germany and cost pressures arising from temporary shortages of materials and equipment,1 +1721,"and given the +successful efforts to pare costs firms are set to benefit from new investment in plant and equipment",1 +1722,"as international prices of commodities are expected to continue to remain high and as direct influence over these prices is limited efforts will have to be focussed on increasing efficiency +and productivity to reduce cost and to shift resources to areas of comparative advantage",1 +1723,"exporters +should look at those areas in their production proc esses where they can attain efficiency gains and +improve productivity",1 +1724,typically investments in foreign production capacity are still placed in neighbouring countries,1 +1725,while smes continue to contribute significantly to domestic economic growth intraregional trade in asean remains driven by large multinational companies with the sme sector mainly having a supporting role in the regional production network,1 +1726,productivity will improve if business fixed investment is made and obsolete facilities and factories are replaced by ones equipped with new technol ogies,1 +1727,"beginning in the last quarter of 2008 there were noticeable declines across t he entire spectrum of domestic exports as +consumer demand waned",1 +1728,indeed just three years ago bottlenecks in industrial production though lessextensive than in years past at high levels of measured capacity utilization were nonethelessputting significant upward pressures on prices at earlier stages of production,1 +1729,on the other hand net exports have recently increased significantly and business fixedinvestment has been rising steadily,1 +1730,growing international trade and investments are indications of increasing international division of work,1 +1731,if production increases because stocks are too small and need to be refilled there is a risk that the upturn will be shortlived,1 +1732,this has in many cases been a vehicle for the transfer of technology and in others acompetitive spur to domestic industry,1 +1733,after a weak start to the year there has been a surge in nonenergy exports in the past few months,1 +1734,the use of science and technology is also critical to produce innovations in production and management and a dynamic private sector which is internationally competitive,1 +1735,similarly malaysias exports have been recording double digit growth since the start of 2021 and the order books of our exporters remain healthy,1 +1736,core components are in fact proving to be increasingly sensitive to the prolonged slackness in domestic demand,1 +1737,much of this activity was concentrated in the us,1 +1738,thus far many industries in the gms have stepped up their efforts to move up the value chains of production as well as integrate into regional supply clusters to better utilize the abundant resources,1 +1739,"and this gets to be even trickier after a period of business restructuring rapid technological change +and strong business investment in plant and equipment",1 +1740,the deregulation of industry the liberalisation of trade and the entry of china into the global economy augmented productive capacity and kept a lid on prices,1 +1741,"the slower growth in import prices reflects to some extent rapid productivity +gains in the production of manufactures an important component of trade6 increased exports by low + +3 some material in this section reflects research described in ihrig kamin lindner and ma rquez forthcoming",1 +1742,with production running well below sales the lift to income and spending from the inevitable cessation of inventory liquidation could be significant,1 +1743,in fact the yeartoyear growth rate of production improved fromless than 1 percent in the first half of 1996 to 44 percent in the latter half of 1996 a level consistent withthe growth in demand,1 +1744,especially in a competitive environment the onus is on enterprises to step up their innovativeness and their ongoing quest to achieve better and better production processes,1 +1745,foreign direct investment and loans helped in the construction of production facilities and infrastructures in the newly opened regions of the world,1 +1746,"it can also be seen as a corporate strategy to promote the brand image and utilisation of raw materials available in +the host country",1 +1747,nevertheless i think that it is necessary to closely monitor whether firms will shift production sites back to japan for manufacturing products to be sold mainly in overseas markets,1 +1748,"in contrast to other industries +excess supply does not necessarily put immediate downward pressure on prices and profits",1 +1749,"exports to china are soaring not only those of traditional +products but also of capital goods suggesting an improvement in the competitiveness of some +mediumtohigh technology firms",1 +1750,oneconclusion seems clear prudent risk management by a critical mass of firms will not only help toensure a safe and sound financial system but also will reward individual institutions with longterm profitability,2 +1751,"higher financial buffers are not about protecting the banks just like other +firms they can and should fail",2 +1752,it is also apparent that some banks are still in the early stages of implementing their risk appetite framework and therefore still have a lot of work to do to ensure its consistent application throughout the entire organisation,2 +1753,in fact the pra has over the past 8 years facilitated the orderly and solvent exits of 15 banks and 45 insurers,2 +1754,this flexible use of buffers is a key improvement in banking regulation since the global financial crisis during periods of stress banks should make use of their capital in order to absorb losses and maintain the supply of credit,2 +1755,"i dont mean to imply that banks should not hold liquid resources of their +own in the first instance",2 +1756,the proponents of structural regulation think that the safety nets formal and informal present in deposit banking might encourage large deposit banks to take excessive risks and to be overly active in the securities markets,2 +1757,the motivation for this new credit system relates to the emergence of very sizeable cash pools that could not find safety in banks insured deposits and were in search of safer forms of placing that cash in the shortterm3 those three main instruments were used to create supposedly safer private shortterm assets,2 +1758,the role of banks is of the highest importance in terms of warning against foreign currency risk exposure if not for the sake of their clients than for the sake of their own balance sheet results,2 +1759,"for operational risk all banks are likely to move to standardized approa ch with one or two banks experimenting with the +advanced management approaches",2 +1760,"first the basel committee has expressly designed the new accord to provide tangible economic +incentives for banks to adopt increasingly sophisticated risk management practices",2 +1761,more generally we have not yet seen negative rates have a major impact on market makers themselves in particular via the topical channel of banks and their profitability,2 +1762,"such a mixed model for the structure of the banking +sector or financial sector in general would lend stability through diversity",2 +1763,"an individual bank has a large amount of discretion in the way it funds itself as it can bid +more aggressively for the type of funds it wants and compete them away from other banks",2 +1764,i assure you that the bnb is going to get commercial banks familiar at an early enough stage with the main elements of the methodology of the forthcoming asset quality review so that each bank could budget the relevant costs by analogy with the euro area where banks have borne the costs of their asset quality review,2 +1765,"today all the swedish banks have voluntarily +strengthened their capital bases by more than the basel regulations require",2 +1766,the reasons for this were the concern that some financial markets would find it difficult to function normally at lower interest rate levels and that it could have a negative impact on the profitability of the banks,2 +1767,"more and more banks are +taking a firmwide approach to risk management that considers a broader array of risks across a +wider range of product lines and regions",2 +1768,"we also have regular dialogues with top management of banks to discuss financial and business conditions risk management and issues relating to broader economic and financial +stability",2 +1769,we implemented the comprehensive credit risk management crm guidelines for banks under circular no,2 +1770,can the valuable and sizable deposit franchises be sold off to private capital providers so that they can operate as healthy entities rather than be in the intensive care unit under the reserve banks prompt corrective action pca,2 +1771,as currently formulated the law entails a risk of adverse selection and moral hazard at worst that is a bank could foist its most impaired loans on an insurance company and then withdraw from the partnership,2 +1772,it is of course for banks to decide whether such integration makes business sense,2 +1773,"we expect banks to devote the greatest care to taking this aspect into +account in their balance sheets",2 +1774,the evolving bank capital regulations have been more guided by the fact that financial institutions in the developed world ventured into risky innovations with the help of excessive leverage and an exante insufficient capital,2 +1775,"the banks react ion to the global financial crisis centred on a risk averse philosophy and we +responded to the deterioration in liquidity by tightening investment guidelines to reduce credit +risk by limiting counterparty exposures",2 +1776,and third we are requiring banks to improve their risk management for instance with regard to the internal models they use to calculate the risks associated with the assets they hold,2 +1777,"finally management has to play a critical role to get the balance between the business units +and risk management right if banks have to develop adequate resilience",2 +1778,"so for me the question is not so much where is t he risk as in what circumstances could risk flow +back to the banking system and do banks have enough capital and liquidity to absorb such flows +without stress +this is relevant not only to credit risk but also to transfers of complex market risks",2 +1779,"second the reduced volume of banks activities followed by higher significance of the credit +risk in the risks spectrum the banks face with reflected also on their profitability",2 +1780,we expect such monitoring and analysis results may help the community and other stakeholders understand macroprudential policies adopted by bank indonesia to maintain and sustain financial system stability,2 +1781,to be sure some of these measures like higher bank capital and liquidity requirements after effective against a wide range of shocks,2 +1782,third mas annual industrywide stress tests indicate that the banking system would remain resilient under very severe stress scenarios,2 +1783,in particular the official sector recognizes the potential impact that stress at a large bank could have on financial markets or the real economy,2 +1784,while most us banks today operate in a safe and sound manner we must always be vigilant of future problems,2 +1785,the need to adapt to and comply with the new requirements is imposing costs on the banks and causing some headaches among bank managers,2 +1786,financial institutions continued to accept risks well above their required risk margin given their resources,2 +1787,"as you +all know the banks in the developed countries have faced significant amount of penalties from the regulators for their failure to conduct adequate due diligence on their customers",2 +1788,those are simple examples of risks taken by banks and there are relatively straightforward ways to mitigate those risks,2 +1789,theremay be little market discipline on such banks and the deposit insurer or regulator must constrain therationally excessive risk appetite of the bank,2 +1790,indeed just as financial engineering and advances in riskmanagement are changing the operating methods and business cultures of financial institutions they arealso transforming both the operations and the corporate culture of bank supervisors,2 +1791,however to develop financial models requires a certain amount of data and knowhow which a single bank may not have,2 +1792,"at least this is what the capitalization plans of banks +indicate",2 +1793,"one of the major improvements in basel ii is the closer linkage between capital requirements and the +way banks manage their actual risk",2 +1794,"second and thanks to greater sensitivity to the risks assumed the new basel proposal allows for +readier convergence between economic capital the level of capital considered appropriate by bank +managers and shareholders and regulatory capital that required by the supervisor",2 +1795,and more risksensitive capital requirements would assist in ensuring that banks would have sufficient capital to absorb losses when they do occur,2 +1796,as i earlier suggested pillar iii disclosure will highlight any significant differences across banks in the expectation that counterparties will penalize inconsistent risk measures,2 +1797,"third higher levels of equity capital will increase banks resilience and thereby +reduce the likelihood of financial crises",2 +1798,consequently they provide banks with the motive and theopportunity to engage in regulatory arbitrage that seriously undermines the regulatory standardand frustrates the underlying safety and soundness objective,2 +1799,but the baslecapital rules typically reduce capital requirements against the retained bank exposure by morethan banks lower the risk associated with the underlying loan pool,2 +1800,the latest stress testing exercise supported the resilience of the banking sector to absorb and limit the amplification of plausible shocks emanating from the lingering pandemic and prolonged russiaukraine war,2 +1801,taking risk is unavoidable in banking indeedbankers must do so to survive,2 +1802,but it means that banks that engage in such arbitrage retain the higherrisk assets for which the regulatory capital charge calibrated to assets of average quality is on average too low,2 +1803,"we have been intensifying ongoing efforts to make the balance sheet and profit and loss accounts of banks more +reflective of their true financial health",2 +1804,"resilient underwriting standards +we have to nurture more than the resilience of the banking system",2 +1805,working with eba data the esrb found that systemically important banks in europe typically have lower risk weights and leverage ratios than other types of banks,2 +1806,"18 for example norges bank writes in an article about the c ountercyclical capital buffer the countercyclical +buffer will strengthen the resilience of the banking sector during an upturn",2 +1807,"chart 6 +lesson 1 the limitations of privatesector risk management +one weakness in the system was the failu re of banks and many other investors to +appreciate price and manage risk",2 +1808,"removing these assets from +private balance sheets should increase liquidity and promote price discovery in the markets +for these assets thereby reducing investor uncertainty about the current value and prospects +of financial institutions",2 +1809,"conclusion +in closing i emphasize the need for riskmanagement processes in community and regional banks to +advance sufficiently to meet the riskmanagement challenges of the banks current environment",2 +1810,"and the recently adopted measures specified yesterday along with the pressure we are exerting on +our banks to increase their solvency should raise confidence in our banks and dispel doubts +about their present and future situation",2 +1811,"despite every effort by the supervisors to ensure a healthy banking system they cannot guarantee the +safety and soundness of individual banks at all times",2 +1812,there is no simple answer to the question of the correct capital level for a bank,2 +1813,"but the +financial crisis has also revealed the importance of banks adopting riskmanagement +strategies appropriate to these strategic changes and of bank regulatory agencies adapting +their supervisory models to both these kinds of changes in financial institutions",2 +1814,"in this regard th e bank considers that regulation should be proportional to the systemic +importance of the financial institution",2 +1815,"in +such a scenario where both banks and non banks undertake similar activities if only bank +regulation is tightened there is a very distinct possibility of risks migrating from the more +tightly regulated sector to a more lightly regulated sector the way water fl ows from high +pressure points to low pressure points",2 +1816,in order to facilitate banks to translate these fundamental elements into effective practices the hkma has launched various initiatives over the years including selfassessment on bank culture and culture dialogues with individual banks,2 +1817,"capital requirements should be set in relation to the risk of bank exposures +regulatory capital requirements must reflect the underlying risk of exposures in order to avoid distorting banks riskreturn decisions",2 +1818,"the stanc e of the bank has been that deposit +acceptance will have to be a tightly regulated activity and banks are the right structure to +carry on that activity",2 +1819,a resilient financial system is essential to support the recovery address inevitable pressure on bank profitability and reduce overall vulnerability to market volatility,2 +1820,moreover the new bank resolution mechanism itself could promote the development of competition in the banking sector consolidation will allow relatively large banks to return to the market,2 +1821,the banks are in the business of taking risks and hence they need to have a risk management framework in place,2 +1822,"in regard to addressing concentration of risk in the ccps work presently being +undertaken by fsb and bcbs include proposals for capital requirement on banks for +contribution to default guarantee funds maintained by ccps based on the amount of initial margin posted with the clearing house and its own financial resources",2 +1823,as regulators we need to ensure that banks uphold sound riskmanagement practices,2 +1824,from a medium and longterm standpoint the banking sector has to maintain its capital conservation policies,2 +1825,"on this basis we use our topdown stress test +tools to rank the impact of prevalent macrofinancial risks in order to gauge the +resilience of the banking sector",2 +1826,many of these banks useadvanced economic and statistical models to evaluate their market and credit risks,2 +1827,in some cases banks that are among the largest institutions in their jurisdiction and therefore rely hugely on the benchmark to price their products have chosen to leave the panel,2 +1828,investors seem to be uncertain whether banks have proper asset valuations and are adequately provisioned,2 +1829,maturity transformation is an important intermediation function of banks which benefit from the spread between short and longterm interest rates,2 +1830,"considering that the profits +affect the soundness of financial institutions in a cumulative manner the impact can vary +depending on the duration of the policy",2 +1831,on top of these foundations every bank needs clear risktaking policies allowing it to reach its business objectives while ensuring that risktaking activities beyond the institutions risk appetite can be identified and addressed in a timely manner,2 +1832,"along these lines we have encouraged banks to adopt the most modern riskmanagement techniques and we have encouraged all financial in stitutions to ensure the robustness of their +systems",2 +1833,"this heightened uncertainty suggests that in maintaining their capital buffers + the dikes banks need to do a better job capturing the risks related to this business model",2 +1834,"in short riskfocused supervision simply means that in conducting bank +examinations and other supervisory activities we will seek to direct our attention and resources to theareas that we perceive pose the greatest risk to banks",2 +1835,for those hedge funds judged to be of lower credit quality banksgenerally require the posting of collateral or margin above current market values to protectagainst the potential future exposure of derivative contracts with these counterparties,2 +1836,we should also remember that supervisory and regulatory measures that establish different forms of constraint for example capital adequacy requirements for the banks can indirectly affect the price of credit,2 +1837,"uncertainty about the extent of banks mortgagerelated losses +and their potential liquidity needs to support offbalancesheet entities led banks to become +much less willing to lend to each other and to other financial institutions",2 +1838,but many financial institutions are issuing securities with tlaclike features and there have been recent examples in europe where these types of securities have played a role in resolving troubled banks,2 +1839,risk weight on banks exposures to nbfcs which had been increased earlier was brought down,2 +1840,how far is imposing risk weight on sovereign exposures of banks currently being discussed by standard setting bodies actually justified in jurisdictions where the large part of the banking sector itself is publicly owned and required by statute to hold government securities in their investment portfolio,2 +1841,reviewing our experience of the past two or three decades one is struck by the repeated tendency of financial systems to build up risk and leverage in good times then shed it rapidly when conditions change,2 +1842,for this reason a crucial element of a fullyfledged edis would consist of riskadjusted contributions to the fund based on bankspecific strengths and weaknesses benchmarked at the banking union level,2 +1843,examples are the term mismatches and leverage of individual financial intermediaries and the imperfect information about risk exposure and soundness of particular banks and assets,2 +1844,"i fully endorse the work done by the basel committee to review banks risk management practices as well as the guidance +on sound liquidity risk management and supervision which was recently published and +constitutes a benchmark for the practices of financial institutions",2 +1845,"some banks have changed their +profiles materially in the past couple of years and the prospect of capital surcharges may be +an incentive for others to do so as well",2 +1846,thus we should aim first to protect depository institutions and second to promote financial stability in a manner that takes account of both the unique form of financial intermediation reflected in the traditional insurance business and the activities by a few firms that are much more closely connected to shortterm financial markets and the rest of the financial system,2 +1847,importantly a bank could reduce its operationalrisk charge by adopting procedures systems and controls that reduce its risk or by shifting the risk to others through measures such as insurance,2 +1848,while this may have had a negative impact on return on equity in the shorttomedium run it has increased the resilience of the banking system and should ensure a more sustainable level of profitability net of risks in the longer term,2 +1849,"besides the increase in the number of risks banks are now beginning to focus on their interlinkages +with a view to achieve a more comprehensive ri sk management framework",2 +1850,the economic recovery brings opportunities to the management of credit risk by banks,2 +1851,"the detailed recommendations are comprehensive +and if adopted by the banks they would go a long way in minimizing the risks that the banks are more often than exposed to",2 +1852,the banks would therefore need to evolve innovative hrm practices to be able to attract and retain the right mix of people to ensure effective operationalisation and maintenance of sophisticated risk management infrastructure,2 +1853,a policy that instead pushes banks across the board to rapidly dispose of npls in the market would result in a massive transfer of wealth from banks to private speculative investors that base their choices upon very high risk premiums and related returns,2 +1854,"summary +basel i must be replaced for the large internationally active banks of the world because it no longer +produces an adequate indicator of the strength of such banks and moreover that indicator does not +vary as risk changes",2 +1855,"nondisruptive exit route for nonviable banks +the reserve banks experience with the ucb sector clearly underscore d the necessity for providing a +nondisruptive exit route for non viable banks",2 +1856,and the traditional banking business or that will require banks to have liabilities available that may be converted into equity in the event of resolution,2 +1857,"in order to contain the risks arising out of nonslr investment portfolio of banks and fis in particular +through the private placement route it was proposed by the rbi to issue further prudential guidelines to be observed by banks",2 +1858,third as their business models and behaviour differ from traditional banks specificities of nonbank financial institutions have to be considered carefully when designing tools to stress them,2 +1859,but rather than distributing risk widely these instruments concentrated risk on the balance sheets of a relatively small number of highly levered financial institutions,2 +1860,by the same token a european deposit insurance system seems feasible only if the policy areas that influence the health of banks are european responsibilities,2 +1861,this review will give us a better idea of the overall it risk landscape in the banking industry,2 +1862,for todays financial system we are able to meet ourobligations by the intelligence we gain from and the authorities we have over the modestnumber of large banks we directly supervise and the holding companies of these and other largebanks over which we have a direct umbrella supervisory role,2 +1863,in times like these supervisors need to be especially vigilant in monitoring financial institutions and ensuring that they do not take on excessive risks,2 +1864,within this framework our banks could generally have the leeway to take on more risk exposures if they so choose,2 +1865,internal models can no longer be used to assess operational risks it had become clear that they were too complex and led to excessive variability in riskweighted assets and insufficient levels of capital for some banks,2 +1866,"not only because they probably +make the savinginvestment process more efficient but also because they allow for a better distribution of credit and market risk which should if anything enhance the stability and robustness of financial systems",2 +1867,9 these other tools include the term deposit facility term rrps and asset sales each of which would have the effect of reducing the amount of reserves held by banks,2 +1868,amlcft compliance in banks is assiduously assessed by regulatorssupervisors to ensure that the safety and soundness of the institution and whole of the financial sector is not being compromised on account of noncompliance with these rules,2 +1869,one of the first countries that introduced stricter requirements is the uk where banks are required to apply a stress situation with a duration of three months,2 +1870,next year we will conduct a full supervisory review of banks practices for incorporating climate risks into their risk frameworks as we gradually roll out a dedicated supervisory review and evaluation process srep methodology that will eventually influence banks pillar 2 requirements,2 +1871,"to the extent that that was true and we +found some evidence that it was true in some banks we concluded that our banking supervision +might actually be increasing the risk of bank failure by reducing the incentive for bank directors andbank managers to make their own careful assessment of risk",2 +1872,"if we observe the progress made by banks at least since the beginning of 2004 it would be +a fair assessment to assert that the current growth in banking indicators is satisfactory table 2",2 +1873,"the current rules do not allow the banks to reduce their capital very much when they use +credit derivatives",2 +1874,these values reflect a banks public function as a financial intermediary and recognize the privileges that come with a banking charter4 in other firms however compliance rules can be undermined by the values of the organization resulting in an unhealthy dissonance,2 +1875,"in practice however the role +played by banks themselves is mainly to act as intermediaries selling and advising on mpf schemesthe various mpf services trustee administrator custodian and investment manager are generallyprovided by other companies which may be related to the bank",2 +1876,well there are some indications that marketbased systems might be more procyclical than bankbased systems5 the more pronounced asset price booms and busts in marketbased systems might be the explanation for that,2 +1877,"purchases of stocks held by commercial banks +the bank started to purchase stocks held by commercial banks from november 2002 to reduce the +risk that stock price fluctuations might impact negatively upon the business management of individual financial institutions potentially resulting in instability of the financial system as a whole",2 +1878,"the +performance of banks depends on the quality of staff their professional competence and +also the compliance culture in the bank",2 +1879,i would therefore call on banks to focus their risk management operations primarily on the issues of maturity transformation and interest rate risk,2 +1880,"with an implicit guarantee or explicit deposit insurance +scheme in place and the regulator deeply implicated with any bank failure markets assess theprobability of loss given default to be lower than otherwise making them more willing to take risks withbanks",2 +1881,"the rules would establish prudential standards for the largest bank holding companies and systemically important nonbank financial firms standards that become more stringent as +the systemic footprint of the firm increases ",2 +1882,transition planning still concerns risk management capabilities insofar as we expect banks to build on their current ones and apply them extensively,2 +1883,"second for many globally ac tive banks the amount of capital required will +also rise because the amount of riskweighted assets against which the capital ratios are calculated will increase",2 +1884,"this is an example of how capital requirements can be used as an incentive to banks to improve their +risk management practices",2 +1885,"the supervisory policies and procedures being contemplated will build on the increasingly +sophisticated management and control systems that are rapidly becoming part of banks best practice +riskmanagement mechanisms",2 +1886,they will also include the extra capital requirements that large banks that constitute a particular risk to the financial system will need to fulfil,2 +1887,"as banks expand their risk taking activities both on balance sheet and off balance sheet some banks have become much larger and more complex thereby rendering +themselves too big to fail",2 +1888," the prudential norms applicable to the foreign banks for capital adequacy income +recognition and asset classification etc are by and large the same as for the indian banks",2 +1889,the allsopp report noted the efforts of fxnet swift echo multinet and thegroup of 20 banks to offer various types of riskreducing services and these ongoing efforts arevery encouraging,2 +1890,"they aim to give banks time to adjust their business model to the +new circumstances",2 +1891,"most banks in thailand will start +with the standardized approach in the calculation of their regulatory capital because of the reasons i +talked about earlier",2 +1892,so reflecting my own recent journey in getting my head around this area i thought today i would have a look back at how the banks work on financial stability has evolved over the past 20 years and particularly since the financial crisis,2 +1893,basel iii has not only improved the quality of the capital that banks are required to hold but also increased the capital requirements,2 +1894,"it has been documented7 for example how market +based measures of banks risks as perceived by financial market participants tend to react positively to increases in interest rates so that a lower interest rate leads investors to perceive banks as less risky",2 +1895,if we are too strict banks have to overinsure at significant cost by holding an excess of lowyielding liquid assets rather than loans and markets will freeze too quickly in crises,2 +1896,at the bank we have stepped up our vigilance and taken prompt action to sustain investor confidence and longterm financial stability by tasking a special multidivisional cell comprising senior officers from various disciplines to monitor closely the evolution of the crisis,2 +1897,the bank believes that the integration should also reducethe regulatory burden on financial institutions,2 +1898,this brings me right back to the argument for what we are doing today namely to strengthen the loss absorbency risk management governance supervision and resolvability of the banks we do have,2 +1899,"the introduction of +collateral requirements for banks loans has lowered the risk assumed by norges bank",2 +1900,the close alignment between the inputs to the regulatory capital calculations and banks internal risk assessments will facilitate a more risksensitive approach to minimum capital,2 +1901,investors should have the facts they need to properly price assets and be assured that banks are sufficiently capitalised,2 +1902,"and as banks +had already shed parts of their external and other non core assets in the first wave less +room was left for banks to protect domestic credit",2 +1903,"the oftenrepeated pattern in financial +markets has been the periodic shift in risk attitudes initiated by the state of the economy among lenders and other asset holders",2 +1904,"further the intermediaries perform +certain niche functions which may not qualify to be part of t he core businesses of banks",2 +1905,initially banks are required to adopt the standardized approach for credit risk and the basic indicator standardized approach for operational risk from 1st january 2008,2 +1906,market participants were concerned that a state in financial difficulties might not have the resources to support the banks in its jurisdiction,2 +1907,the authorities here want to hear your observations on how to avoid creating undue burdens on foreign banks while at the same time retaining our ability to shape the riskmeasurement and management methods employed by banks in our own markets,2 +1908,clearly the integration of esg or even only climaterelated risks into banks risk management is still in its early stages,2 +1909,the results showed that banks riskweighted assets differ to an extent that goes well beyond what can be explained by business models and historical experiences,2 +1910,"in order to prevent this happening banks maintain buffers of their own funds capital which can be used to maintain the claims of +depositors",2 +1911,"since +1986 review teams have carried out focused visits to banks to evaluate the level of risk in aninstitution as well as the risk management systems in place to identify monitor and controlthese risks",2 +1912,"in addition supervisors should be in a position to provide constructive feedback to bank management on these internal assessments or +economic capital based on their knowledge of industry practices at a range of institutions",2 +1913,neither the generally applicable basel iii changes nor the gsib surcharges were specifically tied to the stability of a banks debt structure,2 +1914,in my view an important step for the future will be to put together ccp stress testing and the stress testing carried out by big global banks one way of doing this could be to define common stress scenarios and see how the entire system performs,2 +1915,"nowadays banks provide different forms of credit wi th many more risks than before and invest in +complex products which required very strong internal control mechanisms that previously did not exist",2 +1916,"this does not leave all that much time for those banks which might want to use the advanced +approaches in the new accord to measure credit or operational risk to get themselves ready",2 +1917,"this introduced a credit risk +measurement framework for banks which became a globa lly accepted standard",2 +1918,"it follows from our discussion that the supervisory authorities may gain by the increasing +transparency in financial markets which will allow consumers and other bank borrowers to be more aware of the risks inherent in foreign currency borrowing",2 +1919,since banks have the right to hold deposits they can record such obligations on their own balance sheet without having to procure money in advance,2 +1920,the npl coverage ratio remains high at 835 percent providing confidence in banks ability to absorb possible losses,2 +1921,even when traditional banks were permitted to affiliate with other kinds of financial firms laws such as the bank holding company act1and section 23a of the federal reserve act2were oriented mostly toward protecting the insured depository institution and the federal deposit insurance fund dif from possible depredation by those nonbank businesses,2 +1922,"once the state is exposed to the +underwriting risk and moral hazard of a deposit insurance scheme implicit or explicit it must monitor +the banks to reduce the probability of failure",2 +1923,"with a view to enabling better measurement of ke y elements in systemic risk analysis it is +the responsibility of financial institutions to continue to enhance the transparency and +granularity of their individual reporting",2 +1924,an important example is the basel iii regulatory reforms which require banks to hold more and higherquality capital and meet new liquidity and leverage requirements and have thus made the banking system more resilient,2 +1925,the overarching objective of these measures is to preserve and further strengthen the capital reserves and the high lossabsorbing capacity of banks against potential deterioration in their loan portfolios and to ensure that the stability of the system is maintained including in the event of less favourable than expected exogenous economic and financial developments,2 +1926,"this in turn will reduce +investor uncertainty about the current value and prospects of financial institutions enabling banks and other institutions to raise capital and increasing the willingness of counterparties +to engage",2 +1927,"but in fact the dimension of the package was already taking the new risk development in the cesee countries where +austrian banks have a high exposure into account and proved to be the result of prudent foresight",2 +1928,"challenges for banks +the foreseeable developments will alter or at least affect the future role of banks",2 +1929,the various financial institutions are also redefining what should be their core business,2 +1930,this requires supervisors to considernot only asset quality that is the risk in the portfolio but also the banks pricing process,2 +1931,a very important dimension to contend for the banks is risk of concentration in a particular segment,2 +1932,"the market +prices of banks are known to offer useful supplementary information to that collected by +supervisors when assessing bank health",2 +1933,these figures demonstrate how banks successfully adapt to the challenging external environment and the evolving financial landscape,2 +1934,"allowing such customization or ch errypicking where a bank is allowed to select a different approach +for each portfolio in order to minimize its aggregate capital requirement could materially weaken the +regulatory capital framework for us banks and alo ng with it the effectiveness of prompt corrective +action policies",2 +1935,it does not mean either that the failure of anonbank financial institution could not through its direct credit or settlements exposures toother financial institutions bank or nonbank have damaging knockon effects,2 +1936,capital requirements should i be higher for larger banks ii depend on the liquidity of the assets held by a bank and iii increase in proportion to a banks shortterm debt,2 +1937,"it is +thus most appropriate that we are gathered here today to discuss the future of banking now +that we should look beyond core banking",2 +1938,"one is the importance of the regulatory regime making banks hold a minimum stock of truly + highquality liquidity",2 +1939,in order to make the financial system more resilient to shocks each individual bank will need to hold a bigger capital buffer than before,2 +1940,it would make banks better able to diversify their risks achieve economies of scale and become more efficient,2 +1941,"over the last decade the financial community has adopted +a commonly used suite of financial soundness indicators for commercial banks with a lesser +known set of indicators for insurance companies",2 +1942,many large banks use these models to calculate their riskweighted assets which then serve as a basis for calculating capital requirements,2 +1943,"again the increasing focus on a banks control environment gives greater weight to the management disciplines of measuring +monitoring and controlling risk",2 +1944,"i conclude with an appeal to all of you to work upon your deposit insurance systems +to make them ideal by creating an environment comprising good bank regulation and supervision sound governance of safety net agencies strong legal framework and strong accounting and disclosure regimes",2 +1945,"bis review 1162007 3 + ladies and gentlemen +i believe that the tenth annual asba assembly will serve to strengthen the bonds of banking +supervisors within the respective regions and provide meaningful insights into approaches to current issues in banking supervision",2 +1946,"they also ensure that banks hold appropriate +capital against the risks they accept",2 +1947,"creating some distance between supervisors and +the banks they regulate and indeed from the political systems of the banks they regulate can help improve the capacity for challenge and ensure a broader more detached +perspective on problems",2 +1948,"the overall acceptable +levels of expected and unexpected loss willing to be incurred by banks should be a management decision driven based on rigorous and analytical assessment of available +information",2 +1949,we have stepped up our efforts to work with banks to improve their riskidentification practices,2 +1950,"third to reinforce the viability of the new institutions +resulting from the mergers of several savings banks with the resources and the management capacity of the savings banks best placed to lead each of the concentration processes",2 +1951,this has given the providers of capital the disclosures they need specifically how banks manage risks and make profits in a format that the banks can readily supply,2 +1952,"in supervising banks us regulators have recognized the need for an ongoing +more riskfocused approach particularly for large complex and internationally active banks",2 +1953,even where no explicit charge is levied somewhere or other the financial institution is making up that cost,2 +1954,in particular it is argued that the heightenedcomplexity of these large banks risktaking activities along with the expanding scope of regulatorycapital arbitrage may cause capital ratios as calculated under the existing rules to becomeincreasingly misleading,2 +1955,"8 bis review 572010 + sale can be ignited as each bank attempts to guard against further reductions in value but +no bank is on the other side of the market",2 +1956,the basel 3 agenda formally covers many more risks than the previous standards and requires banks to have higherquality capital,2 +1957,"so if further analysis supports the conclusion that redemption risks are real the optimal regulatory response would surely not be one that treats all asset managers as quasibanks that need to have capital and similar bank regulatory constraints2 +an emphasis on actual risks can lead to the conclusion that some nonbank financial entities or activities do not pose material threats to financial stability at all",2 +1958,"quantitative indicators and qualitative judgements about +governance and risk management will be included in the risk profile of banks and their overall +classification",2 +1959,well i think there will be some banks which will need to improve their capital situation,2 +1960,"the banks need to compile a reliable database for +all operational risks that have arisen in the past 5 years or so and assess losses recorded during the +period",2 +1961,what can ensure success in this challenging task of delivering meaningful financial inclusion is full commitment of the board and the senior management of the banks,2 +1962,thissuggests that the risk that the banking sector will experience significant problems in the event ofa fall in asset prices is relatively small today,2 +1963,in this environment banks and other investors engaged in a search for yield spurring financial innovation,2 +1964,in fact doing so would provide market participants with a benchmark against which to judge each individual banks result,2 +1965,these capital requirements help ensure that a bank holding company maintains adequate capital to support its groupwide activities does not become excessively leveraged and is able to serve as a source of stre ngth not weakness for its subsidiary insured banks,2 +1966,"in more normal economic times when market +participants are not fearing the worst and when banks do not have access to government +capital injections as a backstop the revelation that some major banks may have capital needs under a stress scenario might be unnecessarily destabilizing",2 +1967,the five institutions represented here publicly recognize that financial stability matters,2 +1968,another factor underlining this trend is banks need to control their risks,2 +1969,"if commercial banks know that we will +always bail them out then they may take too much risk the banks shareholders and management might seek to profit from the extra gains arising from risky lending whilst relying +on the authorities when the risks crystallise",2 +1970,"this phenomenon in bank operation of the +banking system and the coming strengt hening of the regulatory framework for collateralized securities +products linked to the banking system appear likely to take bank industry to a new dynamic that would +lead toward a more universal characteristics of bankin g practices",2 +1971,"adherence to these minimum standards has been a norm by the banking system and bpng +has not experienced any adverse effects regarding capital run by the regulated institutions",2 +1972,"however our assessment is that the banking sector is reasonably well equipped to cope +with the increase",2 +1973,it is therefore important for banks to adapt their business models to the new realities as shaped by the consecutive crises,2 +1974,"financial institutions have made significant progress in the management of these +risks and pakistani banks have considerably improved their processes for identification and +management of credit and market risk exposures",2 +1975,by allowing banks to test and experiment with a variety of operational risk methodologies and measures we think that the new basel accords approach to operational risk will be a true catalyst for innovation,2 +1976,"we also know that banks maintain capital above these regulatory minimums in order to capture their full risk profiles since minimu m capital requirements do not necessarily cover +all risks to which a given bank may be exposed",2 +1977,"as a result minimum regulatory equity capital might fall +for some banks but rise for others on the basis of their portfolio risk profiles",2 +1978,we will review this recommendation in december and unless we conclude that the banks capital projections remain clouded by exceptionally high uncertainty we should revert to our usual supervisory practice of assessing the planned distribution of dividends on a bankbybank basis taking into account the safety and resilience of the banking system as well as the preservation of its intermediation function at a time of deteriorating asset quality and increased capital consumption,2 +1979,the situation calls for a prudent lending policy both to limit banks future loss potential and to help prevent a further buildup of imbalances,2 +1980,"it focuses more precisely on the various types of risk being +run by individual banks the quantity of such risks and the quality of the system used to manage them",2 +1981,third along with risk management compliance function in banks is one of the key elements in their corporate governance structure,2 +1982,yet the accord provides for a capital cushion for banks which is meant to absorbmore losses than just those due to credit risks,2 +1983,broader bank product variety may also be instrumental in maintaining financial stability as it provides investment diversification for the public,2 +1984,"an oftenheard complaint is that markets and banks will overreact to changing capital ratios the bank +will be overpenalized or the bank will overrespond in its lending policies",2 +1985,as asset prices dropped greatly financial institutions needed to improve their capital ratio to satisfy either investors or regulatory requirements,2 +1986,something else that shouldnt be surprising is that this experience has revealed that periodic stress testing has turned out to be a less useful supervisory tool to evaluate the risks of smaller and less complex financial institutions,2 +1987,"bank capital +another idea is that a bank need not fund its extension of bank loans only with deposits in its liability structure",2 +1988,for instance in our supervisory dialogue with banks as part of the thematic review we have started to discuss real client cases to understand how thorough banks are being in their assessment of their clients sustainability trajectories,2 +1989,"moreover ban king supervisors around the world including the office of the +superintendent of financial institutions here in canada are well aware of the need to stay on top of +the banks riskmanagement practices in this area",2 +1990,the scrutinization of the balance sheets of individual banks revealed that the main obstacles varied for different banks,2 +1991,"since those concerns arose we have +been actively monitoring us banks direct and indirect exposures to europe and tracking the banks management of their exposures",2 +1992,in performing the intermediary functions depositors and shareholders depend on the decision and practice of the financial institutions to balance the risks and rewards in their operations with the changes in operating environment and risk management expectations,2 +1993,"only by applying the same +definitions worldwide can the soundness of individual banks be compared internationally",2 +1994,indeed the portfolio rebalancing effect is empowered by the negative dfr as banks with high amounts of excess liquidity holdings have a strong incentive to reduce these holdings and put their reserves to work,2 +1995,as usual we will therefore be very explicit on how these banks should improve,2 +1996,"aqr and stress test exercises are not about taking npls out of banks +balance sheets but about ensuring that with a proper valuation there are enough provisions +and capital to ensure the point intime solvency of the institution",2 +1997,the majority of npls are booked in the balance sheets of banks that are financially sound notwithstanding the impact of the long and deep recession,2 +1998,moreover most of these banks capital is of the highest quality and thus lossabsorbing,2 +1999,this calls for a stronger risk management culture within banks,2 +2000,i have ensured that the banks decisions in particular those regarding regulation and supervision of deposittaking institutions are not guided by prejudices,2 +2001,"theyare also essential in order for the bank to accurately identify the risks in the overall financial systemand the possibility of their materialization and thereby prevent disruptions in the financial systembis review 461999 8in conducting onsite examinations we will continue to place emphasis on the assessment of the +financial strength and risk management systems of institutions",2 +2002,"the banks will also be under greater +pressure to reduce costs through exploiting new delivery systems reengineering their processes and +better managing their risks",2 +2003,with the financial restructuring currently underway it will be possible to strengthen the foundations of important savings banks,2 +2004,chart 7 illustrates this calculation for multiples of a 1 increase in banks capital,2 +2005,"moreover it is desirable that banks maintain capital above the minimum regulatory +requirement to withstand future losses both in normal and stress situations",2 +2006,at the same time however many banks already comply with at least one of the areas of ce risk management the ecb wishes to see developed,2 +2007,"the cbb is also addressing the challenges fa ced by certain invest ments made by banking +institutions especially banks exposure to the real estate market with a view to encouraging +banks to maintain a more balanced portfolio",2 +2008,"part of the explanation for banks behaviour was that these structures were not necessarily +designed to be profit centres but rather to enhance capital efficiency for the bank",2 +2009,"how many banks have moved towards ama approach +model for operational risk",2 +2010,this undue emphasis in turn caused many banks toneglect other critical elements of effective credit risk management including indepth creditanalyses of counterparties effective exposure measurement and management techniques andthe use of stress testing,2 +2011,"there are doubts about the solidity of banks in +numerous countries",2 +2012,some people relate the first objective to the question of whether a capital marketsbased financial system is superior to a bankbased financial system,2 +2013,"during the current crisis supervisory expertise and information have repeatedly proved invaluable in helping us to address potenti al systemic risks involving specific financial +institutions and markets and to effectively fulfill our role as lender of last resort",2 +2014,rather the boardsof directors and senior management of banks and other financial institutions must be responsiblefor ensuring that the institutions they manage are able to provide high quality and continuousservices from the first day in january of the year 2000,2 +2015,"they will help increase the efficiency ofour banks operations by providing new instruments to help manage mitigate and repackage +risks",2 +2016,"that is our rules have induced bank transactions that have the effect of reducing regulatory capital +requirements more than they reduce a bank s risk position",2 +2017,"the efforts of sbp and banking industry have yielded results in bringi ng about a positive change in the +corporate governance practices of banks",2 +2018,the question is of course the conditions under which we would decide to use that instrument because it is clear that the negative rates at some point have also side effects that start to become more important namely on the profitability of banks,2 +2019,in a few months time the bank will be issuing an exposure draft on fair treatment of financial consumers which will set out heightened regulatory expectations for all players,2 +2020,equally important improvements in banks risk management will provide a morestable financial system by making firms more resili ent to shocks,2 +2021,"given that +these highly capitalized banks are less likely to impose losses on the deposit insurance +fund i think there is something deeper here than can be explained by a simple appeal to depositinsuranceinduced moral hazard",2 +2022,this means that stricter requirements may also reduce the banks readiness to take on any risks at all that is to lend,2 +2023,"supervisors would also have less leverage over a banks capital allocation for op risk and third parties +would have more difficulty comparing capital among banks than they would under a pillar i rule",2 +2024,"first is the issue related to know your customer kyc in banks second from a central bankers perspective whether the banks are according fair +treatment to their customers ftc third is the issue of risk management and its +proper understanding and fourth is the leveraging technology for greater financial +inclusion",2 +2025,"many banks also stresstest their +portfolios on a businessline basis to help inform their overall risk management",2 +2026,both the quantity and quality of capital that banks are required to hold are now much increased,2 +2027,"in view of the strains on bank deposits in the wake of last years bank failures and the difficulty that many banks are having in raising capital examiners will also be redoubling their +efforts at assessing liquidity and capital planning",2 +2028,"however taking note of the predominant position of banks in the i ndian financial system +and taking a realistic view can we expect the bank finance to comprehensively cater to all +types of investment needs",2 +2029,the first leg is modification of thecapital accord per se especially for the large complex banking organizations the most important ofwhich will be to change the riskweighting scheme on portfolio assets,2 +2030,"i do not expect any significant effect of the crisis on our financial system for the following +reasons + firstly our commercial banks are some of the highly rated banks in the world",2 +2031,certai nly not all of the risk transferred by banks has left the banking sector,2 +2032,the basel iii standards also seek to reduce excessive variability of banks riskweighted assets,2 +2033,"for instance it is true that a straightforward +restriction in banks leverage using a simple instrument the leverage ratio does not do justice to the different risk classes of assets and may in some circumstances have unintended effects or create false incentives as can any other regulation",2 +2034,"apra +as the bank supervisory agency has a mandate to use its powers to promote financial stability for the system not just to focus on the idiosyncratic risks faced by individual banks",2 +2035,regulations passed so far have rightly aimed to make banks internalise systemic risks and markets to better price them,2 +2036,this will set in motion a new virtuous circle that will signal investor confidence in greeces economic prospects while encouraging the return of deposits to banks a return to financial markets after the end of the current programme and eventually the full abolition of capital controls,2 +2037,"important factors driving +these adverse liquidity developments in the unsecured market were general uncertainty +about banks subprime exposures and the scope fo r related writedowns resulting in ever +increasing lack of mutual confidence within the banking community",2 +2038,the quality of banks capital essentially comprising tier one capital and the substantial increase in the required minimum capital for banks and financial institutions implemented in december 2009 significantly contributed to maintaining financial soundness indicators at a comfortable level,2 +2039,yet while banks risk perceptions have gone down since 2014 in line with general economic conditions and the overall pickup in the flow of bank credit risk tolerance remains restrained and has even tightened somewhat since 2015,2 +2040,the accord is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate properly the various risks that banks face,2 +2041,but it is crucial that banks in their own selfinterest review the proposalscarefully identify potential problem areas and alert supervisors of material concerns,2 +2042,3 in fact recent empirical evidence suggests that the comprehensive intrusion associated with the ecb stress test quality assurance process has a disciplinary effect on banks risk taking after the stress tests see kok et al,2 +2043,by classifying losses in this way banks are better placed to identify appropriate risk controls and to assess the impact of these,2 +2044,additionally some larger banks may be accumulating these securities in preparation for morestringent liquidity regulations,2 +2045,finally the agencies expect banking organizations to conduct regular reviews of their management compensation policies to ensure that they encourage prudent lending and discourage excessive risktaking,2 +2046,"i will then look back on the developments in financial +markets at home and abroad since the collapse of lehman brothers followed by policy responses by the bank of japan and lessons for the activities of international banks especially the importance of liquidity management",2 +2047,moreover if banks give up certain activities following the new regulation it may result in a loss of liquidity among other things in such an important sector as bond market,2 +2048,"it seems clear that building on bank practice we are in the process of developing an improvement in +both lending and supervisory policies that will not only foster better risk management but could alsoreduce the procyclical pattern of easing and tightening of bank lending and accordingly increasebank shareholder values",2 +2049,"on that view aaa tranches occupy a place in the capital +structure of a securitised shadow banking system equivalent to that of retail deposits in the +capital structure of mainstream banks and so should be guaranteed by governments or in a closer analogy to retaildeposit protection by industryfunded insurance schemes and with issuers subject to authorisation criteria",2 +2050,"the first line of defence therefore consists of banks having sound risk +management practices and holding appropriate levels of capital and liquidity",2 +2051,such risks will impact the business models of banks,2 +2052,"without such a requirement there is empirical evidence that +risky banks tend to shift their funding sources toward insured deposits and away from risksensitive securities",2 +2053,"yet there is no reason to believe that these banks will not be able to make the necessary adjustment by better assetliability management reducing intermediation costs and providing more value added services to emerge stronger resilient +and efficient banks",2 +2054,developed originally for assessing banking system resilience macroprudential stress tests have recently been extended to cover a wider range of nonbank financial institutions let me mention insurance companies conducted by eiopa ccps conducted by esma and asset managers,2 +2055,c      the bank has also launched the operational risk integrated online network or commonly known in the industry as the orion system to enhance the standard of operational risk management in the financial sector,2 +2056,"besides making banks more ac countable and responsive to betterinformed +investors these processes enable banks to strike the right balance between risks and rewards and to +improve the access to markets",2 +2057,inthe case of ltcm stress testing could have given banks at least some warning of the types ofexposures they could have faced last fall,2 +2058,it is high time our banks start adopting the international best practices in their operations and stopped seeking regulatory forbearance at the earliest sign of distress,2 +2059,to this end bank negara will finalise plans this year for mandatory climaterisk disclosures by financial institutions in consultation with the financial industry,2 +2060,"the new prudential rules will significantly increase banks capital and improve its quality limit +financial leverage contain liquidity risk and attenuate the procylicality of intermediation",2 +2061,this could contribute to enhancing the risk management capabilities of banks,2 +2062,based on a deep understanding of our past experience we must monitor the progress of new financial innovation and changes in the environment surrounding financial institutions,2 +2063,for example supervisors have developed analytical tools to carry out detailed comparative assessments of banks business models,2 +2064,in fact certain large financial institutions that conduct activities similar to banks but have no banking license what we call nonbanks remain insufficiently monitored and underregulated,2 +2065,if we retain basel i for these institutions we will be leaving in place a regulatory capital regime that could undermine the safety and soundness of our largest banking organizations by widening the gap between these banks regulatory capital requirements and their actual risk profiles,2 +2066,"if it were so banks may have the perverse incentive to increase their +exposure to risky assets so as to earn a higher return on capital",2 +2067,"it is obviously crucial from a financial stability +standpoint that contingent capital securities do not end up largely in the hands of other highly leveraged financial institutions where losses could cause further spillovers and thus generate financial instability",2 +2068,indeed in my remarks today i want to discuss the changing nature of risk management in banking and its implications for bankers and bank supervisors,2 +2069,we want banks to be able to engage in market making and provide liquidity to financial markets with less fasting and prayer about their compliance with the volcker rule,2 +2070,the airb approach would not eliminate losses banks are in the business of taking risk and where there are risks there will be losses,2 +2071,prudential balance between the risks and potential returns to shareholders and safety to our depositors funds should always guide banks in the conduct of banking business,2 +2072,i urge financial institutions and market participants to continue to improve these modelsand to use empirically based quantitative riskmanagement models as one of many techniques used tochoose and manage risk,2 +2073,"regarding financial institutions their next gener ation models of risk management will have to +incorporate the nonlinearities and discontinuities of modern financial markets",2 +2074,"but this is a qual ified yes because we believe that banks must +take two appropriate steps to address the potential concerns that i have just highlighted +a banks should offer their retail customers a high degree of protection with adequate +regard to their interests or experience in investing in securities or other structured products",2 +2075,in analyzing financial cycle it is necessary to go deeper into banks balance sheet and therewith to head towards data granularity as an important platform to better assess banks risk attitude as well as to appropriately link banks specifics and their market behavior,2 +2076,"although the year 2010 is expected to be a better one some banking +activityrelated issues such as loan quality its recovery the shareholders commitment to providing more support to the banking activity and the strengthening of risk management structures require your utmost attention",2 +2077,it is clear that the capital regime plays a key role in shaping the incentives and constraints that banks face when managing their portfolio of risk exposures,2 +2078,"in other words while retainingincentive for banks to be always solvent there is constructive ambiguity in extending liquidity by lender +of last resort",2 +2079,t his may push banks into higher risk lending,2 +2080,"incorporating climaterelated risks into ongoing supervision and stress testing +this is why we have already asked banks to conduct a selfassessment against the supervisory expectations outlined in our guide and draw up action plans for aligning their practices to them",2 +2081,that supervisors evaluate and review banks operations and policies and discuss their views and suggestions with bank managers has been part of our institutional framework,2 +2082,this work should be undertaken in concert with related work on the systemic importance of financial institutions,2 +2083,furthermore active capital markets require banks to act as intermediaries thus it could provide stable or even a countercyclical source of revenue for banks,2 +2084,"the third column in the table shows by how much the chances of a banking crisis would +need to fall given a rise in capital of 1 of bank assets so that the benefits of that would match the estimated cost",2 +2085,the new approach simplifies the prudential rules by means of a unique standardised method that links the capital requirement to the size of operations and to the past history of each banks oprisk losses,2 +2086,"this experience contrasted with earlier periods when financial risks were concentrated at banks +and other insured depositories",2 +2087,there are two further aspects of financial institutions risk profile which merit discussion,2 +2088,in that regard under the new approach to bankingsupervision the reserve bank of new zealand remains well informed about the activities andfinancial condition of all banks operating in new zealand and well placed to respond toincipient financial distress where appropriate,2 +2089,"indeed the globalization process enlarges the opportunity for banks to diversify their portfolios and risks associated with their financial +decisions",2 +2090,"migration to the +advanced approaches is important for larger banks because it involves adoption of more +sophisticated risk management systems",2 +2091,just as the crisis has impaired the quality of bank credit the legislative response on crisis management has engendered uncertainty about investing in bank liabilities,2 +2092,"therefore r egulators must constantly review the definition +of a financial institution with the potential to trigger systemic risk as their financial sectors develop and evolve",2 +2093,regarding npl resolution the bank of greece has proposed an asset management company amc that simultaneously addresses the top two challenges for greek banks the high level of npls and the high share of dtc in bank capital with the minimum cost for all stakeholders,2 +2094,"while such a risk free approach is defensible from a prudential angle banks could fund financial instruments without taking a risk on their own balance sheet thus improving efficiency in the gold +linked financial markets",2 +2095,all in the largest banks will have to hold at least seven times as much highquality capital as they did before the crisis,2 +2096,"supervisors will ensure that banks have systems for managing and monitoring capital adequacy that +are appropriate to their overall risk profile this action will be complemented by market scrutiny on thebasis of more extensive disclosure requirements for banks",2 +2097,i urge all of you here today as stewards of the financial institutions to do your part in transforming the financial landscape by relentlessly pursuing these desired outcomes,2 +2098,to sum up the successful management and supervision of banks under multiple regulatory instruments is a key challenge for bankers and supervisors and one i might add that needs to be combined with the challenge of rethinking a banks strategy and business model,2 +2099,while contagion from the recent events of bank resolution and liquidation remained contained these events have also highlighted the important challenges regarding the resolvability of weak banks,2 +2100,"these steps ultimately +resulted in an enhanced appreciation of the impor tance of effective systems of deposit +insurance in maintaining financial stability",2 +2101,it means our financial institutions are faced with grave risks and should begin their green transition right away,2 +2102,that guidance takes the form of recommendations to banks and defines a number of best practices that we have identified,2 +2103,"finally i will present some thoughts on what banks and supervisors can do to improve core financial institutions +resilience to stressed market conditions",2 +2104,in addition there are many national and economic policy measures which directly or indirectly affect the risk profiles and thus the solvency of banks,2 +2105,"third we believe the major financial institutions n eed to continue to improve their capacity to measure +their exposure to risk in a less benign market and economic environment",2 +2106,as another example as there is at least in theory a risk that bailin rules could trigger financial contagion if a significant proportion of banks liabilities are held by other banks or by systemically important nonbanks such as insurance companies7 we need to understand and if necessary limit such crossexposures,2 +2107,the banking sector may serve as a catalyser to render the effect of such policies sustainable and benefit maximally from them in the form of expanded activity improved asset quality and enhanced income stability,2 +2108,customers do appear to place considerable weight on the brand of the financial institutions with which they bank and the larger banks have considerable investment builtup in their brands both tangible and intangible,2 +2109,"it is also recognised that some banks are systemically important within their own +domestic markets even if they are not inter nationally active to the same extent as the +gsibs",2 +2110,furthermore investors may fear that banks cherrypick the best assets for themselves thus reducing the quality of portfolios offered on sale,2 +2111,as a result of these changes large us banks are substantially more resilient to stress than in the past,2 +2112,the correlation between banks risk profiles and capital requirements increased to 82 in 2017 from just 40 in 2014,2 +2113,clearly a sizeable part of the npl stock is no longer a risk to bank balance sheets,2 +2114,more recently we have expanded the categories of entities that can be appointed as bcs and also allowed banks to charge a commission for services rendered by bcs,2 +2115,it is a good initiative to introduce a supervisory diamond for mortgage banks as is already known from the existing supervisory diamond for banks,2 +2116,transparency andaccountability demand realistic valuation of assets public disclosure norms and prudentialreporting by banks to help depositors and investors form an informed opinion about the state ofthe financial system thereby enabling them to react in an orderly fashion to asset price changesmoreover public intervention policies in the form of explicit or implicit guarantees may have tobe such that they do not lead to moral hazard in the form of undue risktaking by banks andlaxity in observing market disciplines,2 +2117,"to give you another example unlike in their old standard business models banks are now +paying more attention to the adequacy of pricing risk exposures so as to at least cover expected losses",2 +2118,the loss of capital that would result on bank books and the fear of vigilance actions that such haircuts might trigger have made it almost impossible to get banks to embrace restructuring,2 +2119,for those banks we directly supervise we will in any case keep a close eye on the risks that result from different group structures and from relations between different entities of the same group,2 +2120,we have the guiding principle of the reforms to thank for this riskoriented governance and regulation are there to help banks to allocate capital resources as efficiently as possible,2 +2121,for instance systemically important banks have to hold more capital than other institutions primarily as a way of countering the moral hazard too big to fail caused by their size,2 +2122,"nonetheless a number of securities lenders +seemed to believe otherwise and in many cases their expectations were fulfilled as +custodian banks agreed dur ing the financial crisis to bear at least some of the losses from +cash collateral reinvestment programs",2 +2123,"first in a world of less leveraged banks a business model of originate and warehouse +because that is what it became by the middle of the past decade is unlikely to be viable",2 +2124,this year we want to see firm progress in how banks incorporate ce risks in their risk management,2 +2125,for instance it has been pointed out that the scale and scope of the largest banks may simply be an efficient response by banks to the bundles of services demanded by the big internationally active customers18 at least attempt should be made to remove any perverse incentives which can lead to excessive growth of the sector and its risks,2 +2126,the point here is that new regulations allow banks to use financial models to estimate required capital and fair values of assets and liabilities,2 +2127,financial institutions will also be required to develop recovery plans for surviving a range of stressed scenarios a key objective of which is to preserve the continuity of critical economic functions performed by systemic financial institutions,2 +2128,in particular there could be a danger that in times of stress depositors could easily shift funds out of private banks thereby possibly triggering or accelerating bank runs,2 +2129,given the changing economic circumstances and the need to act quickly we didnt publish these three economic paths in advance and ask banks to model their exposures to them,2 +2130,our reasons for this are that the swedish banking market has distinctive features that entail risks and that there is no international framework for managing banks in cr isis,2 +2131,"it is thus a prerequisite for financial institutions to improve risk +measurement methods so as to accurately grasp more complex risks and establish an appropriate +capital base in order to win amid intense competition",2 +2132,thus to promote a sound risk culture within banks we have to mitigate the too big to fail problem,2 +2133,therefore it is essential that in their behaviour banks continue to take into account the main risks including profitability risks and asset quality risks,2 +2134,moreover it would be counterproductive to require banks to hold such a large share of these assets that it would impair the liquidity in these markets,2 +2135,"4 at the beginning of each period each bank originates a risky asset +the return on which depends on i the bankers ability which can be high or low and ii the macro state which can be good or bad",2 +2136,with banks rebalancing portfolios to take these changes into consideration banks could be expected to more expeditiously and effectively channel the sda funds to the productive sectors,2 +2137,"as is now well known internationally many banks had previously +offloaded certain items from their balance sheet to specialised investment vehicles",2 +2138,"in the light of this the bank of england has recently helped initiate a programme to enhance +information on the valuation range of banks fairvalued assets working alongside the financial services authority fsa and the auditing profession",2 +2139,in long periods of low bank losses and rising asset prices and credit banks will normally hold a countercyclical capital buffer,2 +2140,we have allowed banks to have an exposure up to 15 percent of their capital to a counter party and 40 percent to a group,2 +2141,"for example stress scenarios s hould address the risk of a downturn leading borrowers risks to +correlate more closely undermining the diversific ation strategies rightfully adopted by banks to +manage risk in normal times",2 +2142,"even as we move into this era of systemic risk regulation however it is important to +recognize that changes in the financial services industry have affected every bank in america large and small",2 +2143,as a result banks are being required to make significant strategic adjustments,2 +2144,"the idea an extremely simple one +is that banks should set aside provisions for lo an losses when the risk is assumed",2 +2145,requiring banking organizations to issue subordinated debtfrequently would force them to issue risksensitive debt rather than insured deposits whenthe bank s risk has increased,2 +2146,"much emphasis has been placed on ensuring that the banking sector remains safe and +sound however there are nonbank institutions that could severely threaten such safety and soundness and consequently the same level of attentionemphasis should also be directed to those institutions",2 +2147,the capital buffers we have asked banks to build up in recent years are now there to absorb those losses,2 +2148,to the extent that banks also disclose robust measures of these risksmarket participants will be able to make the same kind of comparisons and exert greaterdiscipline on financial institutions,2 +2149,in addition supervisors also noted the lack of downside risk analysis orstress testing as a weakness in risk management practices at many banks,2 +2150,the nonbank sector includes firms with diverse business models and practices many of which differ greatly from those of banks,2 +2151,in banks as for capital market intermediaries regulators are adopting and refining the risk based regulatory approach,2 +2152,"this objective could be accomplished +in several ways including by directly purchasing troubled assets by setting up and +capitalizing special banks that would purchase a ssets from financial institutions in exchange +for cash and shares of capital in the special bank or by making available to banks insurance that would pay off under very adverse conditions",2 +2153,banks must maintain capital commensurate with the amount of risksthat they take and hold enough to weather financial storms which can at times be severe andof considerable duration,2 +2154,"the power to supervise bank fees will also +enable steps to be taken as necessary to reduce the costs of switching between +banks",2 +2155,"dear bank managers +let me now focus on a number of issues of concern to the banking industry and the bank of +albania which we believe should be addressed carefully during the next year",2 +2156,should banks well advised and at the broader international level decide to move further in the direction of increasingly adding distance to the difference between actual capitalisation and regulatory requirement interesting new aspects may come up,2 +2157,these measures mr managing director will work to your own banks benefit,2 +2158,to achieve this it is crucial to build an environment which strengthens depositors confidence and makes the greek financial system resilient to outside stress,2 +2159,through our review we will gain indepth knowledge of the internal models for credit and market risk used by european banks as well as of their standards and best practices,2 +2160,"in particular the new standards will require banking organizations to significantly increase the amount of highquality lossabsorbing capital that they hold significantly improve risk capture in trading +counterparty credit securitization and other activities that the prior regulatory capital +requirements did not adequately capture make it more expensive for banks to provide liquidity guarantees to shadow banks constrain the leverage that banking companies can take by introducing a credible nonriskbased backstop and increase the capacity of banks to absorb shocks that might temporarily impede their ability to access shortterm funding +markets",2 +2161,without a policy of that kind there will be a strong incentive for maturitytransformation to be undertaken off bank balance sheets but with an umbilical cord back to the banking system,2 +2162,"because of the crucial role of banks in the real economy we decided to provide liquidity in +unlimited volumes and with longer maturities to banks",2 +2163,globally banks have doubled the amount of tier 1 capital they hold and canadas banks have been at the forefront of this effort,2 +2164,"liquidity risk managemen t banks of course +have been managing expected liquidity demands since the beginning of banking itself4 +because of its central role in the business of banking liquidity risk requires rigorous and effective management",2 +2165,"these are +concepts that are integral to the risk managem ent systems developed by large banks",2 +2166,the spread of problems between banks can thus also arise as an indirect effect through expectations that other banks may suffer similar problems to the one first affects or via more wellfounded suspicions of the banks exposures to one another,2 +2167,this is the mark of a strong banking industry one which can tap growth opportunities while acting responsibly in managing the publics savings,2 +2168,"this is +the basis for exploring their possible impacts on banks behaviour and the business cycle",2 +2169,"besides certain banks also have significant +stakes in some of the nbfcs",2 +2170,"on one hand the commotion it is causing with banks doubling t heir efforts in improving their risk management +systems to meet the requirements of the advanced approaches is a very positive development as far +as the bsp is concerned",2 +2171,this implies that banks have to deal with new competitors and it is conceivable that we will encounter substantial changes in the composition of the sector over the next decade,2 +2172,and this can provide a platform for banks to take strategic measures enabling them to strengthen their competitive position in the new institutional framework,2 +2173,in addition of course almost all the banks operating innew zealand have the backing of financially strong overseas parent banks,2 +2174,"with the varying +and somewhat subjective nature of internal measures the matter of consistency among banks becomes +important both to banks and their supervisors",2 +2175,this is expected to enable banks themselves to be aware of building leverage and common exposures,2 +2176,"our banks have limited exposure to structured credit and related derivative products which +were the main cause of the large losses of crisisaffected international institutions",2 +2177,under the proposal financial companies subject to the concentration limit would include insured depository institutions bank holding companies savings and loan holding companies foreign banking organizations companies that control insured depository institutions and nonbank financial companies designated by the fsoc for federal reserve supervision,2 +2178,"while it may be the case +that banks in the end hold fewer credits on their balanc e sheets i believe that it would be wrong to say +that banks now play a less important role in credit ma rkets",2 +2179,the 120 significant institutions represent 8085 of total euro area bank assets the spanish banks that will be directly supervised by the ssm account for 14 of the total assets of these 120 significant institutions,2 +2180,for banks to be able to manage their transition risks adequately they need to have information on how their customers are performing relative to a parisaligned transition path,2 +2181,it helps to make the single market more single it contributes to safer and sounder banks by making them more resilient and it helps to foster financial stability by enabling banks to fail in an orderly manner,2 +2182,"as the activities and risk profiles of large banks and securities firms have become increasingly similar and as financial intermediation has run more through securities markets weve certainly learned in the past month or so that it is not only commercial banks +that can threaten financial stability",2 +2183,"information about this must come from the banks +themselves and the risk must also be managed by the banks",2 +2184,"looking at the risk taking behavior of major banks from the perspective of integrated risk managem ent both credit risk and the risks associated +with longterm stockholdings have increased",2 +2185,"in designing its permanent liquidity insurance operations the bank was very mindful of the +need to balance the benefits to systemic stability the incentives for banks to manage liquidity +risk prudently and the need to minimise the risk taken onto the banks balance sheet",2 +2186,"bis review 222007 3 + that their investments will be fully protected if the bank gets into trouble and consequently these debt +holders exert market discipline on the firm9 +second because of both regulatory requirements and the force of market discipline banks hold much +more capital than gses hold",2 +2187,"in addition as compared to conventional banks they have held a +comparatively larger share of their assets in reserve accounts for the liquidity management",2 +2188,"although many issues of security design would need to be addressed for these instruments to effectively discipline banks generate adequate investor demand and to be reliably collected on when bad states occur these mechanisms could +potentially reduce the badsignal problems associated both with discretionary changes in +minima and with capitalraising efforts by the banks themselves",2 +2189,but i believe it would also be worthwhile to evaluate other changes to our capital regime to encourage earlier action by banks when the economic environment deteriorates,2 +2190,the first change is a shift in the relative importance of banks and nonbanks in the financial system,2 +2191,they promote a more sophisticated understanding of risks by financial institutions and how these risks connect with transition scenarios,2 +2192,"just as itwould be impossible or uneconomic to require banks to operate without risk to provide total certainty +of solvency so liquidity regulation is needed as a form of insurance",2 +2193,and since its inception the bank has played a role in shaping the development of the financial sector in the uk and using its influence to promote financial stability,2 +2194,it is equally important for the banks to diversify risk in their loan portfolio,2 +2195,as financial institution supervisors and as leaders of financial institutions we all knew we needed to be better prepared for crisis events whatever their character source or timing,2 +2196,"in the markets eyes many banking organizations had become uninvestable thus +as part of the financial stability plan of the new administration a comprehensive and forwardlooking assessment of the capital needs of 19 bank holding companies with more than 100 billion in assets was set in motion",2 +2197,"however in recent decades many banks have taken advantage of financial innovation and of +developments in securitisation to progressively shift towards the socalled originate and distribute model",2 +2198,for examplebeginning in january 1998 qualifying large multinational banks will be able to use their internalvalueatrisk models to help set capital requirements for the market risk inherent in theirtrading activities,2 +2199,second supervision and examination of banks by their regulators can insure thatbanking organizations maintain effective internal controls and implement an effective riskmanagement process so that the safety and soundness of banks is protected and the risk totaxpayers minimized,2 +2200,"this will +increase the scope for banks and other institutions that are subject to riskbased capital requirements to act more as a stabilizing force in response to future financial market shocks",2 +2201,"first +to the existence of healthy financial systems with sufficient room for manoeuvre to absorb the impactof varying shocks",2 +2202,this practice of seeking comment on guidance leads to better more informed supervision and better engagement by banks,2 +2203,"this will inter alia require banks to fine +tune and refine their risk management systems",2 +2204,it was also noted that most banks are taking a lowrisk and conservative approach to adopting regtech solutions,2 +2205,"building on bank practice we are in the process of improving both lending and supervisory policies +that we trust will foster better risk management but these policies could also reduce the procyclicalpattern of easing and tightening of bank lending and accordingly increase bank shareholder values +and economic stability",2 +2206,"furthermore as banks havedeveloped innovative techniques for managing and mitigating risk credit risk now exists in more +complicated less conventional forms than is recognized by the 1988 accord thus rendering capital +ratios as presently calculated less useful to banking supervisors",2 +2207,the security of funds entrusted to the banks demands that they are managed in a sound and prudent way in order to preserve the confidence of depositors customers and investors thus maintaining financial stability,2 +2208,we disclosed our stress test methodology and the results for each of the nineteen largest bank holding companies,2 +2209,at the same time banks have reviewed the geographical location of their assets,2 +2210,mas will continue by moral suasion and prescriptionto encourage the banks to strengthen and institutionalise their managements especially those mergedbanks which emerge from the consolidation,2 +2211,"presumably the potential for deposit runs led banks to take fewer risks than they might have otherwise another instance of market discipline +calomiris and gorton 1991",2 +2212,thoseevents in turn have caused bank supervisors to rely more heavily on banks own internal riskmanagement practices and to focus supervisory efforts to ensure that those practices are sound,2 +2213,"2 to put the scale and importance of these firms in perspective the 8 us bank +holding compani es among these 16 firms hold nearly 60 percent of all assets in the us +banking system 3 +the federal reserve s oversight of large financial institutions is aimed at ensuring the safety +and soundness of individual financial institutions as well as the resi liency of the financial +system",2 +2214,can regulatory agencies modify or provide exemptions to these regulations so as to make life a bit easier and more profitable for community banks without adversely affecting bank safety and soundness or financial stability,2 +2215,"for instance one possibility +would be an obligation which would apply to all banks to accumulate additional capital +buffers in times of excessive credit growth",2 +2216,"the banks discount window facility and widercollateral omos adverse incentives and the terms of liquidity insurance +these expansions of the bank of englands fac ilities have required us to be much clearer +than perhaps ever before about the terms on which we insure against liquidity risk",2 +2217,having saidthis i am fully satisfied that even in a financial system which is largely foreign owned such asin the new zealand financial system there is very considerable scope to use market disciplinesto promote improved risk management by the subsidiaries and branches of foreign banksindeed it is possible that new zealands disclosure regime might well be adding to theincentives on overseas parent banks to more vigilantly supervise their new zealand operationsand to give greater attention to their own financial condition,2 +2218,previous studies indicate that there are two effects of tighter capital requirements for banks,2 +2219,and second only some banks will face significant increases in capital requirements,2 +2220,"i +agree much with what has been said about the need to improve bank regulation and supervision going forward especially to reduce procyclicality in the financial system",2 +2221,"in the past several years the bank of thailand put great emphasis on robust stress testing +and risk management on the part of banks with an aim to strengthening the banking sector while the economy was still good and the sector profitable",2 +2222,in particular banks show they know well their legal obligations and risks and have generally taken due measures commensurate to the risk level,2 +2223,the marketvolatility beginning in 1994 did however provide some tests for the risk management systems of thelarger banks with active trading desks,2 +2224,"it is noteworth y that the cyclical expansion in bank credit has +extended over an unprecedented 30 months without enc ountering any destabilising volatility but this +situation warrants enhanced vigilance",2 +2225,i am happy to say that most banks have put in place similar provisions in the last one year or so,2 +2226,and on the other because banks do not take advantage of the years of plenty to build up reserves or provisions,2 +2227,i believe strongly that increased competition hasraised the ante for financial institutions and supervisors alike in their need to develop improvedtools to assess risk and to evaluate the relationship between risk and return,2 +2228,"second by reinforcing the link between the capital base and the risks actually incurred basel ii encourages banks to improve their systems for managing these +risks as well as their due diligence procedures",2 +2229,"at the european level we recently +observed an increase in recourse to the eurosystems deposit facility an alarming +indication for mounting distrust among commercial banks",2 +2230,i measure how far we have come by the frequency with which banks ask about changes in supervisory actions,2 +2231,"the higher return in bullish capital market is also a contributing to a tighter competition faced by banks +in mobilizing deposit funds",2 +2232,because thecurrent standard largely ignores the relative risks of different assets it encourages banks to shedovercapitalized lowrisk assets and to retain highrisk assets for which capital requirements are tooweak in short the increasing sophistication of markets demands that to be effective regulatory capitalcharges need to be reasonably attuned to underlying economic risks,2 +2233,the indicators of financial result capitalisation and liquidity evidence the considerable improvement of credit quality and show the importance to continue the implementation of the measures undertaken by the bank of albania,2 +2234,the rules also provide for an exemption for cesce insurance operations which is an added incentive for banks to have this guarantee in medium and longterm transactions since in addition to eliminating default risk they do not then have to set aside country risk provisions,2 +2235,"while +best practices that have been adopted by global banks have even surpassed the expectations of +basel ii this is not the case for most domestic institutions",2 +2236,do you think that the introduction of international financial reporting standards 9 would help in forcing banks to be more forwardlooking in their provisioning of risk,2 +2237,a deal like this is the most accurate market evaluation of the condition of the banking sector and its attractiveness to strategic investors,2 +2238,"encourage banks to improve their management of risk +weve also attained the third goal to go beyond a rulesbased structure and instead encourage banks +themselves to improve their abilities to identify measure and manage their risks appropriately",2 +2239,banco de portugal was able to identify a tip of the problem as it conducted an inspection beyond the normal perimeter of supervision involving an audit to the nonfinancial companies that are the main customers of the banks this exercise is known as etricc2 horizontal review of credit portfolio impairment,2 +2240,most of the innovative steps taken by banks in the recent past have a bearing on the profitability of banks on their own operational improvements better housekeeping and the like,2 +2241,in particular it seems likely that market disciplines would be more effectivewhere a bank is domestically owned that is where no other bank stands behind it,2 +2242,since nonbank intermediation has increased banks have had to improve efficiency to ensure survival,2 +2243,"in a fi nancial system that +is open to international competition it encourages banks to continue on the path of consolidation on +the basis of plans decided upon independently by the market",2 +2244,the rise in importance of ccps is indicative of the generally increasing role played by nonbank financial institutions in recent years,2 +2245,"the +advantages of banks over mfis stem from their being regulated institutions fulfilling the +necessary preconditions of ownership financial disclosure and capital adequacy that help +ensure prudent management",2 +2246,"the general tenor seems to be that banks are specialised in an +economic activity that can to a growing extent be performed by nonspecialist players",2 +2247,undoubtedly these regulatory changes will exert a noticeable positive effect on the capacity of banks to withstand periods of stress and that will result in less frequent and milder crises which furthermore should entail lower costs for the public,2 +2248,i believe the key is first of all there is no gap between the risk profile of our banks and their risk management system as well as our riskbased supervision,2 +2249,"for banks a safer and more robust financial sy stem will be characterized by improved risk +management that incorporates the lessons fr om the recent turmoil",2 +2250,the framework of lenderoflastresort policies and the regime for facilitating an orderly resolution of a major nonbank financial institution are critical to our ability to contain financial crises,2 +2251,"it is easy to get the impression that all of the new requirements i have reviewed will lead to +drastically increased requirements regarding the banks capital",2 +2252,moreover the structure of euro area financial markets implies that business models that typically attract more holdings of excess liquidity such as investment banks clearing and depository institutions and custodians are predominately located in core euro area countries2 also the capacity or willingness of banks in financial centres to accept additional deposits or reserves at attractive rates might diminish over time as excess liquidity grows,2 +2253,so though pillar 3is not irrelevant for community banks it is unlikely to be as effective as it is for large complex banks,2 +2254,for that reason it is a good thing that banks now need to hold more and betterquality capital,2 +2255,"that could fool +regulators as well as the banks own risk management function",2 +2256,"many regional banks have already built up capital well exceeding the +amount of risks they have calculated",2 +2257,"under the proposed guidance we would expect banks to strengthen their management practices as +their concentration risks grow",2 +2258,"a riskbased approach also m eans that the supervisor focuses on collecting +information from banks about those activities or operations where there might be material risks",2 +2259,"banks intermediation and trust +let me start by using a simplification of the activities of banks to explain why it is worthwhile investing in regaining trust",2 +2260,"and that can in turn encourage banks to take greater risks both in maturity transformation and +lending enabling them to earn higher profits",2 +2261,"the icaap provides a prudent framework that would force banks to consider their own assessments of business lines and the prospects for these determine their risk profile and then +actively decide the appropriate level of capital to hold",2 +2262,the reforms put in place by the bsp along with banks commitment to manage operational risks have resulted in significant improvements in the quality of bank assets and loan portfolios as well as strong capitalization,2 +2263,"the prin ciples envisage that banks should have in place +systems that would help identify m easure monitor and make provisions for such risks",2 +2264,"thus the costbenefit analysis suggested that it would not be responsible to require most of our banks + entities that do not operate across national borders to adopt basel ii especially because thousands +of them would probably choose the standardized version that adds only modest creditrisk sensitivity to riskbased capital requirements",2 +2265,"to further enhance the risk management of banks in +hong kong the hkma has decided to introduce a risk weight floor of 15 for residential +mortgages approved by banks on or after 23 february 2013 under the irb approach",2 +2266,it is necessary for us to establish a clear expectation on the management of such risks by financial institutions,2 +2267,"until the fog around banks capital adequacy is reduced including +regulatory induced fog banks cost of capital may remain high",2 +2268,"the limited diversification of the risk weights applicable to assets makes it possible for banks to select +higher riskreturn combinations",2 +2269,"so banks have +become more worried about the creditworthiness of their counterparties",2 +2270,"while the efsf provides a financial backstop the importance of publishing credible bank stress test results cannot be +overemphasized",2 +2271,"strict enforcement of the guidelines has led to severe regulatory sanctions against noncompliant institutions which explains why the bank is unpopular and +given the acceleration of crossborder banking activities the bank of mauritius is currently strengthening its riskbased supervisory framework",2 +2272,"on the other end of the +bis review 232008 1 + spectrum we have full reliance on banks internal credit models",2 +2273,"i will touch on two issues in the following minutes first its relevance for banks and +other participants in the financial markets and second its implications for financial stability",2 +2274,"in carrying out our review of capital ad equacy requirements relating to securitisations we +will aim to ensure that banks are required to hold an appropriate level of capital to cover the risks they +incur without overlooking the extent to which the se curitisation may result in risk reduction for the +institution",2 +2275,during the financial crisis this spread rose and fell with changes in investors perception of bank credit risk,2 +2276,such a shift from affiliates to banksubsidiaries would increase the subsidy and the competitive advantage of the entire bankingorganization relative to its nonbank competitors,2 +2277,"two of the driving principles +behind basel ii are to improve regulatory capital requirements to make them more sensitive to the +risks of unexpected loss and to sharpen the focu s of engagements between supervisors and banks +on ensuring that banks have adequately accounted for the risks of unexpected loss in their capital management",2 +2278,"for instance basel ii allows the banks to determine their own risk +taking to a great extent as long as they have adequate risk management and capital reserves",2 +2279,and banks have substantially strengthened their capital positions in that time since 2012 the cet1 ratio for significant banks for instance has moved up from 9 to more than 13 today,2 +2280,"having said this it would be incorrect to assume that financial institutions in general and +banks in particular had no risk management earlier",2 +2281,it meant that required levels of capital were more closelyrelated to the reasons for which banks hold capital that is to cover the risks in their portfolio,2 +2282,13 a marketbased system is one where securities markets share center stage with banks in allocating capital in contrast to a bankbased system where banks play a leading role,2 +2283,maintaining confidence in the management and governance standards of banks is essential for financial stability given the intrinsic opacity of loan portfolios and the dominant role of nonequity investors senior and subordinated bond holders wholesale investors nonguaranteed large depositors in the funding of banks,2 +2284,"32 raising banks resilience +the good news is that today banks are much better capitalised than they were five years +ago",2 +2285,when banks risk up they create a temporary improvement in expected fundamentals at the cost of greater volatility,2 +2286, we should be mindful not to increase significantly the overall level of capital requirements on banks even as we finetune the detailed capital rules,2 +2287,"the idea is to allow banks to fulfill their +psl target by buying off psl assets from other institutions through a pslc",2 +2288,however consistent with basel ii recommendations we have begun implementing major methodological revisions to the calculation of minimum capital that universal banks commercial banks and their subsidiary banks and quasibanks should hold against actual credit risk exposures,2 +2289,this is an indicator that bank asset quality was preserved even after the expiry of government economic support that the rise in the interest rates did not reflect adversely on financial stability and that all the measures taken produced the desired effects,2 +2290,"reserve bank has adopted a bank +led model for financial inclusion which seeks to leverage on technology",2 +2291,in the banking sector the us has genuinely nationwide banks which allows them to better diversify risk,2 +2292,"risk management and the new capital accord +to be sure running risks is an integral part of banking",2 +2293,"furthermore since debt instruments are mostly rated investor +awareness and monitoring is greater which mitigates the moral hazard arising out of deposit insurance as in the case of banks",2 +2294,what is key is that all banks continue to comply with the necessary requirements such as the statutory liquid asset requirements,2 +2295,"until the turbulence emerged the originatetodistribute model had generally been +understood to be a very effective instrument of risk management the banks using the model had an additional mechanism to decide on the degree of risk exposure on their balance sheets while these risks were transferred within the financial system to those agents most +prepared to assume them",2 +2296,"these range from those requiring banks to hold somewhat higher capital and liquidity ratios to much stricter capital and liquidity +requirements but they also include more fundamental changes to the financial architecture +that would preclude banks from undertaking many types of business",2 +2297,such flexibility will allow banks to use and easily improve their existing riskmeasurement and management practices,2 +2298," though banks exposure to the risky assets has been severely restricted by reserve banks +regulatory actions should there be a reversal of capital flows asset prices may decline",2 +2299,the question is to what extent should banksshareholders put up capital to underpin not only each institution but also the banking system,2 +2300,"our bank stress tests of a year ago also drew privat e capital to the banking system which helped +offset credit losses and provided the basis for increased lending",2 +2301,"it will be crucial to ensure that stricter regulation and supervision of banks will not push bank +like activities and risks towards non or less regulated institutions the so called shadow +banking sector",2 +2302,in addition lenders to banks may be requiring greater compensation for risk thereby raising banks funding costs,2 +2303,"for example the amount of jgb holdings by major banks which had been +reduced at the time qqe was introduced has been stable recently and the same applies to +the amount held by regional financial institutions",2 +2304,as mentioned earlier bank managements will have to develop internal capital assessment processes in accordance with their risk profile and control environment,2 +2305,"this is an area that the bank of thailand takes leadership role to strengthen the soundness and +efficiency of the financial institutions",2 +2306,"the new law provides for clearer rules on management of risk the banks may be faced with +while carrying out their activity in order to guarantee and strengthen the protection of depositors and investors and to maintain banking system stability",2 +2307,the basel iii accords adopted in 2010 have increased both the quantity and quality of banking sector own funds in addition they ensure better account is now taken of the diverse risks to which banks are exposed thanks to the introduction of a leverage ratio measured as a share of total unweighted assets and two new liquidity ratios for bank cash levels,2 +2308,"as long as the bank +extends loans to financial institutions as the lender of last resort it needs to have sufficient knowledge of financial institutions business performance and the quality of their assets",2 +2309,"evidently the full picture requires that dimension also after all it +is to the directors of banks that we look in the first instance for safe and sound operation of their firms official prudential regulation can best be seen as a backstop designed to restrain the behaviour of imprudence or recklessness",2 +2310,supervisory practice indicates the technical difficulty entailed in approving the models presented by banks and in particular in gauging their ability to properly measure the sensitivity of the various portfolios to risk,2 +2311,"from a financial stability perspective they have a +number of attractive features not least the fact that the credit risk stays with the originator which strengthens the incentives for prudent risk management generally they are also more transparently accounted for in banks published accounts than securitisation transactions",2 +2312,the taskforce proposed a set of recommendations for banks to develop highquality transparent disclosures that clearly communicate banks business models and the key risks that arise from them so that people who supply capital to the banks can follow how they make money how they think about managing risk and make judgments on the basis of that,2 +2313,"supervisors can do much in this way to promote sound risk management around the +globe and to provide banks with stronger incentives to manage and control their risks",2 +2314,because privileged regulatory treatment allows banks to buy almost unlimited amounts of government bonds which they are not required to back with capital a haircut is particularly risky for banks,2 +2315,in this context i will mention that there are other tools available to the supervisor of banks in order to reduce the risks in this market and we have used these tools,2 +2316,so while the changes in the market pose potential competitive threats to banks the changes also raise potential new opportunities for banks,2 +2317,"these positions still carry some risk in +that some us banks counterparties might conceivably fail to make good on their +obligations but such risk is mitigated by the fact that the counterparties to large us dealer banks for sovereign cds trades are dispersed primarily across large financial institutions",2 +2318,"the tendency is that the other institutions take markets shares from the banks for instance in +providing channels for saving",2 +2319,"the capital +adequacy ratio of the banks indicates that after shock car of all banks remain above 11",2 +2320,this realigns risks and rewards and will certainly have a fundamental and positive effect on the risk culture within banks,2 +2321,"the bucketing of assets and liabilities under these guidelines and the structural +liquidity statement prepared by the banks have provided useful insights to the supervisors +as regards the liquidity health of banks",2 +2322,"the interaction between the private and public sectors in the developm ent of riskmanagement +techniques has been particularly extensive in the fiel d of bank capital regulation especially for the +banking organizations that are the largest most complex and most internationally active",2 +2323,"furthermore banks have tended to rely more on physical rather than on personal collateral in their +lending decisions",2 +2324,"but even the best examiners are no more prescient than the managers of the banks they oversee and cannot be expected to head off every problem or +detect every risk",2 +2325,this explains the banks high liquidi ty ratios currently averaging 46,2 +2326,"the sharp drop in financial markets prices and the ensuing prudent behaviour of customers +has also impacted on the banks trading income",2 +2327,in this way banks contribute to building up risk in the financial system,2 +2328,in the medium term banks will need to continue to take steps to eliminate excess capacity and consolidation could be a sensible way of dealing with profitability,2 +2329,"another more indirect channel is formed by a feedback loop that amplifies asset price +increases and causes banks to increase their holdings of risky assets",2 +2330,norges bank will contribute with advice on the design of regulations in this area but the bank should not be formally responsible for regulations that include provisions on banks business practices and consumer protection,2 +2331,"this can +for example be achieved by introducing higher bank capital and liquidity requirements for such banks",2 +2332,"what is relevant is that this fear stems from +knowing that banks apply the incurred lossmodel",2 +2333,an important market failure stems from the fact that banks enjoy the benefits of a safety net,2 +2334,concerns about the vulnerability of riskweights to model risk call for an alternative simpler lens for measuring bank capital adequacy one that is not reliant on large numbers of models,2 +2335,"this second thread is linked both to the requirement in section +165 of the doddfrank act for enhanced riskbased capital standards for large bank holding companies and to the basel committees effort to develop a framework for the assessment of a capital surcharge based on the global systemic importance of the largest most interconnected banking organizations",2 +2336,these include expanded eligibility for our small bank holding company policy statement and an increased scope of banks eligible for longer examination cycles,2 +2337,"first all banks are required to hold significantly more capital with higher standards applied +to the largest most systemically important firms",2 +2338,"the +very first csfi survey in 1994 highlighted the impo rtant tension between financial risk and business +risk when it observed +that banks are being forced by the quest for new sources of business to become a different +sort of financial institution sometimes without noticing it and probably without the necessary +skills5 +as 1987 and 1998 remind us the best laid hedges and collateral can lose much of their reliability during times of stress",2 +2339,it has improved recognition of npas and provisioning in banks enormously and many of you have fully imbibed the spirit of the review,2 +2340,in several of the adverse scenarios considered by the snb the estimated loss potential for the big banks continues to be substantial relative to their capitalisation,2 +2341,"ideally any decision on the +collateral framework under a new steady state should be based on a thorough examination of the impact of collateral valuation and haircuts on the size and composition of banks +balance sheets and the ramifications for the stability of the financial sector as a whole",2 +2342,when there is a marketwide scramble for liquidity a bank must be prepared to manage funding challenges and unplanned asset expansions simultaneously,2 +2343,although banks may implement sophisticated risk management strategies this single ratio with a minimum lag indicates the extent to which banks are funding credit with borrowings from wholesale markets or what is now known as purchased funds,2 +2344,mention should be made that banks showed caution in managing chfdenominated assets and liabilities,2 +2345,"financial markets are fundamentally about risk taking credit risk liquidity risk and market +risk are basic components of even the safest and soundest banking systems",2 +2346,"bank supervisors in the united states +and many countries around the world are assessing the safety and soundness of banks based less on +the strength of the balance sheet today and more on the strength of controls that will safeguard a banks financial health tomorrow",2 +2347,"a more risk +sensitive capital framework should help ensure that banks hold appropriate capital behind highrisk +credits in the first place and thus reduce the tendency for accentuating the need for capital after +problems arise with such loans",2 +2348,basel iii with its more stringent requirements reduces the likelihood that losses will run a bank into trouble,2 +2349,"in particular it is +important to assess the extent to which parent banks may have contributed indirectly to financial stability risks via lending in foreign currency",2 +2350,in the last couple of years the legal entity identifier lei system has been implemented in a phased manner in all financial markets including derivative markets regulated by the reserve bank as well as for bank loans,2 +2351,the real threat of actually failing is in itself a strong incentive for banks to be more aware of risk in their actions,2 +2352,"we have been frontrunners when it comes +to financial conglomerates or bank assurance institutions that combine banking insurance and +securities activities",2 +2353,"a robust pillar ii approach would require significant and sustained supervisory pressure to ensure that banks continue to invest in improving +their operationalrisk assessments",2 +2354,"for +example the shift to a highly complex risk weighting system for ban k assets has resulted in +the average amount of capital banks assign to these assets halving over the past 20 years",2 +2355,the valueadded and the profit of financial institutions are ultimately generated from their activities of taking and controlling various risks such as credit risk interest rate risk and liquidity risk,2 +2356,the bank will keep monitoring with strong interest what type of financial institution will play a role of intermediation through what type of channel,2 +2357,in light of this objective we are developing an industrywide sme database from pooled bank data for banks to use for their planning and risk management,2 +2358,the resulting moral hazard and the use of insured deposits as a funding source for these institutions justified everything from capital requirements to limitations on banks getting into nonbanking businesses,2 +2359,"none of these actions is a guarantee against imprudent bank behaviour of course but we believe that +we have gone a considerable distance towards ensuring that banks face strong incentives to behave +prudently",2 +2360,"this suboptimal level of caution is immedi ately apparent in banks balance sheets banks +tend to hold very low levels of capital",2 +2361,"it is part of the supervisors job to take that wider systemic view +and sometimes to curb practices which even prudent banks might if left to themselves regard as safe +4 +a number of things flow from this core insight",2 +2362,here i am referring to the role and effects of distortions in the incentive structures embedded in the business models of banks and other financial market participants in the originateanddistribute chain which have had a bearing on the provision of information about the quality of assets and the distribution accumulation and containment of risks in the financial system,2 +2363,"the focus on financial stability is important because many of these +nbfcs borrow from banks and their failure will have a negative impact on the balance +sheets of banks and eventually on financial stability",2 +2364,"we are +also working on a framework to enhance efficiency and transparency of price discovery in +sale of stressed assets by banks to arcs",2 +2365,"in our case the bank of thailand bot +supervises the banking sector which is the core of the financial sector",2 +2366,"but at the end of the discovery process in theory we will g et the +best risk management tools if and this if is the decisive word here if banks with weak +risk management processes are allowed to fail having to leave the market",2 +2367,the key here was to strengthen banks own risk management culture and system,2 +2368,"another lesson that has been learned +from the financial turmoil is that proper li quidity management is of paramount importance to +satisfy the banks funding needs and heightens their resilience against idiosyncratic or systemic risks",2 +2369,"this also causes an increase in the level of risk in the financial system because the availability of safe investments is limited so banks must move up the risk spectrum towards risky borrowers when they increase their balance +sheets",2 +2370,"the +revenue structure of euro area banks was stable for a long time but it has recently begun to change and there is at least some evidence of banks tending to offer fee based products to +clients as substitutes for interest based products",2 +2371,effective risk management in a financial institution requires not only modellingbut models that can test the full range of financial transactions across all kinds of adverse marketdevelopments,2 +2372,today i will concentrate my remarks on two more practical and immediate goals of the banking union i to eliminate the sovereignbank loop and thereby reduce financial fragmentation and ii to repair banks balancesheets recover the impaired credit channel and consolidate the ongoing mild economic recovery,2 +2373,moreover the supervisor of banks and i encourage the banks to be more careful and not to take unnecessary risksbut this too must be to the right degree,2 +2374,furthermore a strong capital buffer enhances a banks creditworthiness and from the markets perspective reduces its counterparty risk,2 +2375,"the shift from a bankdominated financia l system to a combination of centralized and +decentralized markets has increased the importance of market liquidity for determining asset prices +and for managing portfolios",2 +2376,as an example consider the actions that the bank of italy recently undertook with the aim of increasing bank provisioning in order to improve investor confidence in italian banks,2 +2377,"this requirement was put as a conservative measure to avoid +securitisation being used to inflate profits even while banks exposures in various capacities +to the spv remain",2 +2378,"that is when tensions in financial markets ea se banks will automatically seek less credit +from the ecb",2 +2379,equally important are the standards that make banks more resilient from a liquidity perspective,2 +2380,the crisis has subsequently exposed the extent of this increased risktaking by banks,2 +2381,"moreover our recent ex ceptional and temporary measures should be +seen as a window of opportunity for banks to strengthen their balance sheets and for governments to step up their efforts in a less troubled financial environment",2 +2382,"third we saw the need to shield the deposit taking bank f rom excessive risk taking in trading activity and from +exposures to entities in the shadow banking system",2 +2383,we will closely monitor the condition of these banks and the broader financial system in the coming months including through additional covidrelated analysis,2 +2384,"as our institutions complete +2 bis review 522008 + the implementation of basel ii i firmly believe that we will see a commensurate improvement +in the quality of risk management among our banks particularly in the operational risk area",2 +2385,"through this release the bank works to grasp risks in the financial system +as a whole and to share a common understanding with a wide range of participants in the +system including financial institutions",2 +2386,"let us understand that capital is a co mpetitive charge on the resources available for +lending with a bank and hence stepping up countercyclical capital requirements and providing capital buffers comes with a cost for the banking system",2 +2387,"taking full advantage of t hese innovations has required banks and other +institutions to make important improvements in risk measurement and risk management",2 +2388,the bsps riskbased approach which requires banks to put up more buffers when taking on more risks regulations on risk management macroprudential measures alignment of regulations with international standards while observing peculiarities of the domestic economy all ensure that banks perform in a safe and sound manner and that the economy is guarded against shocks that may affect financial sector stability,2 +2389,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,2 +2390,"the differences in stress test r esults obtained by supervisors and banks own models can be +informative and we do not want inadvertently to destroy the healthy diversity or innovation of +the models and other risk management tools used in the banking industry",2 +2391,"ccar helps ensure that the largest banking organizations will have enough capital to continue operating through times of economic and financial stress2 to be clear as the federal banking agencies have stated previously these stress testing and capital planning requirements do not and should not apply to community banks3 +in addition to strengthening requirements for stress testing and capital planning the agencies have also strengthened capital requirements for the largest firms by approving more robust riskbased and leverage capital requirements",2 +2392,the second is the lack of an effective resolution regime for large bank holding companies and nonbank financial institutions,2 +2393,"it is indeed perplexing how these banks +have been managing their risks when they do not have an idea of which activitybusiness line +has a positive risk reward skew",2 +2394,moreover it is not surprising that greek banks provisioning policies have been radically changed since the asset quality review aqr methodology was implemented and total losses were recalculated according to anticipated loss drivers,2 +2395,"basel i was an important advance that resulted in higher capital levels a more +equitable international marketplace and most rele vant to my theme this evening closer links +between banks capital holdings and the risks they take",2 +2396,accordingly we required banks to resubmit their capital plans and took several actions to preserve capital in the interim,2 +2397,a third set of regulatory measures of relevance to systemic risks from large financial institutions concerns the potential failure of these institutions,2 +2398,these new fee structures have come about as a result of the banks quest to find new sources of income,2 +2399,"by providing a consistent +framework for the largest banks to use supervisors will more readily be able to identify portfolios and +banks whose capital is not commensurate with their risk levels",2 +2400,a major challenge for the banks would be to manage their banking correspondent model effectively,2 +2401,"our hope is that the +guidance we offer on these various topics is becomi ng more consistent with financial institutions own +riskmanagement practices",2 +2402,"1 +but the most vital principle is to avoid creating perverse incentives for banks to take excessive liquidity risk",2 +2403,it would be dangerous to financial stability if we gave so large acapital carrot to banks to use the internal ratings based approach that many of the worlds mostimportant financial institutions which account for the vast bulk of global and g10 domestic bankingactivity saw a significant reduction of their regulatory capital requirement,2 +2404,but the banks preferred approach is to identify areas where competition efficiency or safety could be enhanced and then encourage industry to address those issues,2 +2405,"the nature of banks business and the +risks they are running have changed dramatically and the existing accord no longer comes up to +scratch it no longer functions as a mechanism for ensuring that banks hold an amount of capital that is broadly commensurate with the risks they run",2 +2406,most banks have limits in place with regard to exposures held on their own books,2 +2407,additional factors that have boosted the demand for safe assets are the new liquidity regulation for banks and the increased need of safe and liquid assets to be posted in collateralised transactions,2 +2408,this latter phenomenon still poses a risk overburdening banks with ever increasing requests for more capital may be procyclical and counterproductive from the point of view of systemic stability in that it incentivizes finance to go further into the shadow,2 +2409,"with investors now much more discerning in their +risk assessments banks have had to compete harder in the deposit and other funding +bis central bankers speeches 3 + markets and this is changing the way they do business",2 +2410,one of the main characteristics of financial institutions is that the failure of one institution might pull others down with it and cause a systemic crisis if the failing institution has because of its size a significant influence on financial markets or its business partners or does business with a lot of partners,2 +2411,"by increasing the sophistication of the +operational risk assessment and management proces ses banks can save on capital charge for +operational risk",2 +2412,under basel i a banks capital requirement does not adequately reflect gradations in asset quality and does not change over time to reflect deterioration in asset quality,2 +2413,even if banks are successful at tackling their internalyear 2000 concerns they may still face risks from critical services that they receive fromvendors,2 +2414,"can the same capital cover all of them or do banks need capital +for each one",2 +2415,capital provides a cushion to ensure that banks are prepared to face financial stress and other unexpected circumstances,2 +2416,"this will +ultimately influence the capital charge for each asset and would thus help minimize the reckless risk +taking by banks on account of the heavy capital charge",2 +2417," +it is a pleasure for me to be able to share with savings banks professionals and spanish financial system specialists some reflections on what are known as institutional protection schemes ipss",2 +2418,they aggregate marketspecific indicators related to money bond equity and banking markets thereby offering a comprehensive overview of financial integration in the euro area,2 +2419,"the rationale for this integrated model is closely re lated to the belief that our financial system works +better without combining in a separate single entity supervisory authority over banks and nonbank financial institutions and responsibility for market regul ation",2 +2420,"mas has studied how credit derivatives should be captured under the existing capital adequacy +framework for banks",2 +2421,but the remedy is not in relaxing established prudential standards that help us manage excessive credit risk concentration and protect financial stability,2 +2422,the banks must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place,2 +2423,this is supported by a growing ecosystem of banks and nonbank financial participants asset managers and corporate treasuries who have chosen to base their fx activities here,2 +2424,the second is a lumpsum levysubsidy on the banking sector which can be used to manipulate the amount of capital that banks carry forward into the next period,2 +2425,we have recently concluded our audit and assessment of a sample of the banks end 2013 target returns which you discussed recently with the various institutions,2 +2426,"the 50 largest bank holding companies continue to work at improving their liquidity positions +in the wake of recent market turmoil",2 +2427,if internal model banks are able to use relevant data and risk management systems to better understand and measure the risks in their business capital requirements might vary from the standardised approach,2 +2428,clearly these institutions are engaged in substantial activities outside the traditional banking role,2 +2429,the exercise comprised both the asset quality review which harmonised the valuation standards and accounting practices and the stress test which measured the resilience of banks to adverse macrofinancial shocks,2 +2430,"and now taking a +very bold leap from football back to banking regulation it is appropriate to demand more capital for holding high risk assets than for holding nearly risk free assets",2 +2431,"since we are talking about the speed of the recovery of the banking system and the question +of time it is perhaps useful here to make the distinction between current capital requirements +and what one might call the stressed capital position of the banks",2 +2432,rbis financial stability reports fsr have regularly pointed out the impact of such large interest rate moves on capital and profitability of banks,2 +2433,let me jump straight to the key argument with respect to the sovereignbanknexus sbbs will not function without the aforementioned reforms of sovereign exposures in the regulatory rules for banks,2 +2434,because risk profiles can change from one day to the next or even from moment tomoment it is necessary for a bank to be sure that the hli can effectively manage its businessoperations and risks on an ongoing basis,2 +2435,investors in bank stock will be satisfied with a lower rate of return when the capital structure of banks is improved,2 +2436,"the recent financial crises have further +reemphasized the importance of risk management frameworks for banks",2 +2437,the knowledge we gain from our associations with so many banksalso accommodates the development of new regulatory paradigms,2 +2438,this was evident in the results of the recent euwide stress tests which show that banks have become more resilient to financial shocks over the past two years,2 +2439,the basel iii riskbased capital rules require banking organizations to hold relatively little capital against sft assets which are assumed to pose little microprudential risk,2 +2440,for all these reasons we supervisors and banks must focus our efforts on mitigating nonfinancial risk,2 +2441,"in addition regulatory capital minimums even when more risk sensitive remain minimums and the +proposed accord assumes that banks will hold a level of economic capital above those minimums",2 +2442,there have been significant changes in financial regulation pertaining to highquality liquid assets and liquidity coverage ratios and the legacy of the global financial crisis has likely led financial institutions to want to have higher liquidity even outside of regulation,2 +2443,deliberately or otherwise banks opt for less conservative modelling assumptions that lead to less onerous capital requirements,2 +2444,a loss that can impact the banks or other financial institutions that have invested in them,2 +2445,this is a tall order because it requires the senior management of banks to pay much closer attention to how their compliance and control systems should be structured so as to strike the right balance between derisking and financial inclusion,2 +2446,"capital markets +facilitate the banking business by increasing the available options for risk management eg",2 +2447,"we have learned that certain prerequisites must exist before bank owners and +managers will pay attention to risk",2 +2448,"ladies and gentlemen +risk management does indeed lie at the heart of basel ii and it is imperative that a risk management culture be inculcated in banks as a precursor for implementation of the new accord",2 +2449,"the risks associated with the environment in which these banks operate increased during the +past six months",2 +2450,"the income generating capacity of banks is lower not only because of the portfolio deterioration but also the massive +amount of the recently introduced bank levy",2 +2451,"nevertheless banks would be well advised to steel themselves against possible negative +developments",2 +2452,the initial innovation of stress testing gave us an urgently needed tool to measure how much additional capital banks with mounting losses needed to survive the financial crisis more than a decade ago,2 +2453,"the foundation +version has a high degree of builtin conservatism under which rigid supervisory rules would establish +many of the creditrisk parameters that would determine bank capital requirements",2 +2454,the dissatisfaction arising from the difficulties in achieving an appropriate estimation of asset risk weightings should not lead to conventional solvency ratios being discarded or to their role as essential indicators of the financial strength of banks being questioned,2 +2455,at a time when valuations seem stretched and cyclical pressures are building i would be reluctant to see our large banking institutions releasing the capital and liquidity buffers that they have built so effectively over the past few years especially since credit growth and profitability in the us banking system are robust,2 +2456,"they aim to limit financial institut ions excessive risk taking by +requiring an increase in their capital at the time of credit expansion",2 +2457,27  from this they conclude that large banks are riskier and create more systemic risk when they have lower capital and lessstable funding,2 +2458,"these +losses could erode the capital base of the banks at a time when the risk weighting of assets based on credit rating levels increases",2 +2459,the topdown output floor affects overall capital requirements depending on the overall portfolio composition of a bank,2 +2460,arecent growing body of research supports the view that during that period market forces were fairlyeffective in assuring that individual banks constrained risktaking to prudent endeavors,2 +2461,"the possibility for banks to use as collateral abss that they hav e originated themselves may have prevented a +complete shut down of primary markets",2 +2462,we have better regulation and higher capital and liquidity buffers in banks,2 +2463,the first priority is to support the bank lending channel by strengthening banks that is by cleaning up their balance sheets and reducing fragmentation in funding markets,2 +2464,"in addition all bank directors must sign off thesequarterly statements at the same time attesting to the fact that the internal controls of their banks are +appropriate to the nature of their banking business and that those controls are being properly applied",2 +2465,simultaneously with a view to smoothlycarrying out our onsite examination of risk management and to have a sufficient exchange ofopinions with the subject financial institution the bank requests the institutions concerned toevaluate their abilities using the checklist at each examination,2 +2466,"ii derivatives comprehensive guidelines +derivatives play a critical role in shaping the over all risk profile of banks",2 +2467,some observers have suggested that the systemic risks raised by gses are not qualitatively different from those posed by the largest bank holding companies which are also a sizable presence in financial markets and enjoy some government guarantees notably deposit insurance,2 +2468,"recent trends in the asset quality of the banking system have been somewhat +disquieting",2 +2469,"this should reduce the incentive for banks to leverage up in a boom as +well as making the financial system more robust in a bust",2 +2470,today i will describe how nonbank intermediation in the united states has changed what regulations are in place and what reforms are under way to address the risks to financial stability associated with the growth of the nonbank sector,2 +2471,in each case banking supervisors and market participants appear not to have appreciated at least until very late the degree to which these institutions were intertwined with large banks and other financial institutions in each case the concerns over the direct connections of these institutions were compounded by uncertainty regarding their positions the positions of other institutions and the potential fire sale dynamics that could occur under forced liquidation of their assets,2 +2472,the comprehensive assessment of banks balance sheets which comprised the asset quality review aqr and the stress test components exposed the areas in the banks and the financial system that need improvement helped banks to strengthen their balance sheets enhanced transparency and built public confidence in the banking sector,2 +2473,this implies the continuation of stress tests for the banking sector with various hypothetical negative scenarios,2 +2474,the additionaland more frequent information now available could be expected to assist banks in managingtheir interbank exposure positions and in assessing the extent and nature of the business theyconduct with each other,2 +2475,but a bank or savings bank which cannot survive in an effective regulatory and supervisory environment needs to urgently rethink its business model,2 +2476,firstly the kind of increases in capital requirements you will see are an improvement of the rules in regards to risk sensitivity which are very bank specific depending on their business model,2 +2477,"the final concern i will discuss is the worry that basel ii could lead to a substantial decline in minimum +regulatory capital requirements at adopting banks",2 +2478,the funeral list of banks has not been so long as to suggest that the bank of mauritius has been ineffective as a regulatory authority of banks,2 +2479,"for typical banks the capital ratio starts out from a level under 10 so that +a rise in capital of 10 of risk assets is more than a doubling in the amount of bank capital",2 +2480,the rules also increase the banks opportunities to cover any losses they may incur,2 +2481,the explanation of this principle makes clear that if the supervisory agency doubtsthe integrity and standing of a banks owner or manager it should have the authority to preventa specific ownership structure or the appointment of a certain bank manager,2 +2482,"another +possibility is to learn from the spanish system of requiring banks to set aside general provisions against their loan book in good times which can be a cushion against losses in the downturn",2 +2483,"to avoid a situation where banks hold inadequate equity capital banks are subject to capital +requirements",2 +2484,"the objective was not so much to lean against the wind of rising asset prices but as a +cautionary measure to contain the exposure of the banking sector to sensitive asset +classes where rapid credit expansion was observed",2 +2485,"banks financial institutions +and other market players too need to be literate about their risk and return framework",2 +2486,"from the programme for your convention i see that most of your working sessions have been +concerned with the steps that commercial banks can take to protect themselves against risk in a rapidlychanging financial environment and the role of banking supervisors",2 +2487,the lcr aims to ensure that banks maintain an adequate level of unencumbered highquality liquid assets that can be converted into cash to cover net outflows during the period of stress,2 +2488, improvements in the risk management culture of banks,2 +2489,"range of practices +given these emerging risks what are large financial institutions actually doing to identify monitor and manage them",2 +2490,i would therefore like to put the question to you are our banks safer than they used to be,2 +2491,stress tests have been imposed to enhance the viability of large systemic institutions even in very adverse economic and financial environments,2 +2492,and by making investors in banks ultimately responsible for losses as is the case for other industries introducing a market discipline on risk taking that will further reduce the likelihood of failure in the first place,2 +2493,in their theoretical model the monitoring of the underlying loan is inefficiently low if a bank fr ees up regulatory capital by buying a cds,2 +2494,"customers private and +institutional alike did not know anymore just what exactly they were buying supervisors found it increasingly difficult to assess which risks financial institutions where subject to and institutions had more difficulty with valuing their products",2 +2495,"although the terms and conditions of the ppif have not yet +been announced this facility should help put a floor under the prices of lowerquality assets and provide a means for banks to shed such assets from their balance sheets",2 +2496,if banks are to remain as the core of financial intermediation they must retain customers now increasingly susceptible to be poached away by nonbanks offering cheaper more convenient services,2 +2497,similarly the banking union will not directly limit the share of banks assets tied to sovereign debt,2 +2498,derivatives have become another tool for banks to manage risk exposures,2 +2499,in particular banks now have to satisfy higher quantitative and qualitative capital requirements which has improved their ability to absorb losses,2 +2500,"as you know we +have drawn up a set of more stringent banking regulations more ambitious capital requirements to absorb losses improving coverage and reducing the risk of excessive borrowing",2 +2501,the know your employee rule will not only improve the operational risk managements of banks  but also foster confidence in the banking system,2 +2502,"yet from a regulatory +and supervisory perspective there is as yet no international standard that requires a banking group to ensure a sensible distribution of equi ty and debt within the group",2 +2503,the new accord will allow banks to better align their capital with underlying risks but it will require banks to put in place elaborate systems databases and processes to assess the riskiness of their assets,2 +2504,the indian financial sector which mostly has been a bankbased one needs to develop a robust fixed income market to bring in market discipline to augment bank finance and indeed free up bank finance for uses that cannot access the market directly,2 +2505,we see the whole picture we can compare banks and their business activities and identify common problems,2 +2506,"and we need to continue to work with banks to improve their riskmanagement and credit +evaluation systems so that the banks are not vulnerable to unexpected movements in +interest rates or asset prices in the future",2 +2507,but by enhancing the accuracy of risk measurement we should be making capital adequacy ratios more comparable and reliable both over time and between banks,2 +2508,basel iii which has led to a near doubling of capital ratios since 2011 positioned banks to better absorb the macroeconomic shock,2 +2509,"in terms of credit risk management japanese financial institutions have been improving their screening skills based on t he experience of the bubble period during the +1980s and have made fair accomplishments",2 +2510,"the deployment of any tool +would send an important signal to financial institutions investors rating agencies and the general public about the centra l banks unease about rapid credit growth andor the risks +accumulating in the financial system",2 +2511,these banks are now required to maintain a capital surcharge ranging from 10 to 25 per cent for their systemic importance effective 1 january 2016,2 +2512,we are making quarterly green credit assessment of our banks and are planning to extend such assessment to cover more financial institutions beyond the banks,2 +2513,"the second element in reducing moral hazard is to maintain effective supervision to curb excessive +risktaking by banks",2 +2514,"i feel that in the absence of +details of the quality of operational risk managemen t systems in banks and thei r operational risk loss +experience it may not be correct for the banks to assume that adoption of the advanced approaches +would result in lesser capital than under the bia",2 +2515,independent of the ecbs actions banks need to perform proper risk management acknowledge the recognition of impairments and book an appropriate level of provisions,2 +2516,"equally important banks continue to build strong buffers against +systemic shocks and have kept their capitalization well above the regulatory threshold",2 +2517,"if the financial system is to function without excessive assumption of risk not only owners of liable capital should +potentially be exposed to losses but also large investors and other unsecured creditors",2 +2518,"lessons +swedish banks were never directly involved in these problems though they did feel certain +effects of the developments in us financial markets",2 +2519,this approach requires that the public have information about the riskexposures of banks and about their procedures for managing those risks,2 +2520,persisting with an inappropriate valuation metric may give an inaccurate picture of banks true solvency position,2 +2521,"in this +regard i recognize that baiphil has been and will continue to provide support in strengthening the human capital base of our banks",2 +2522,the bigger responsibility lies with the banks themselves to ensure robust governance and risk management which are integral to the functioning of a bank,2 +2523,"in other words the weaker the discipline +surrounding the granting of a loan the stronger banks diligence procedures needs to be",2 +2524,"to give just one example nonbank financial +institutions need not be licensed or supervised in order to take deposits in new zealand",2 +2525,"a last important theme addressed the sense that the committee may have adopted an overly +conservative approach to some aspects of the framework resulting in much higher capital +charges than banks feel are necessary",2 +2526,"thirdly basel ii gives banks and supervisors a vital tool pillar 2 with which to assess +the risk profile of institutions and in particular to take account of certain risks that are +sometimes difficult to quantify but whose impact can be great",2 +2527,our hope is that shared solutions can be arrived at capable of guaranteeing these banks continued presence on the market,2 +2528,no ifc can exist or compete if it is not also a risk management hub in delivering the various forms of financial intermediation including the money banking capital asset management and insurance markets,2 +2529,let me start by summarizing what i take to be the papers main messagesfirst the authors argue that policymakers should pay careful attention not just to measures of leverage in the banking and shadow banking sectors but also to the financial stability risks that might arise from the behavior of unlevered asset managers such as those running various types of bond funds,2 +2530, second basel iii raises the quality of capital that banks must hold,2 +2531,these criticisms underscore the difficulty in fashioning standardized requirements applicable to all banks that balance risk sensitivity with the need to avoid excessive complexity,2 +2532,"on the basis of +analyses calibrated according to the intermediarys exposure to the different types of risk we have asked banks to further raise their higher quality capital above the regulatory minima ",2 +2533,"what is important though is that +basel iii does not jettison basel ii on the contrary it builds on the essence of basel ii the +link between the risk pro files and capital requirements of individual banks",2 +2534,but we have an interest in the profitability of banks for two reasons,2 +2535,results from stress tests show however that there are sufficient buffers in the financial system to withstand such a scenario19 for example the six largest canadian banks which hold roughly 70 per cent of outstanding mortgages have increased the quantity and quality of their capital in recent years and are well diversified across regions and sectors,2 +2536,especially with regard to the brexit vote the fact that even greater turbulence did not occur in the markets was probably due just as much to the prudent conduct of banks and supervisors,2 +2537,three of the banks are also above 12 per cent,2 +2538,following the complete removal financial institutions must pursue a dynamic management strategy based on their own judgment,2 +2539,the boz also regulates the conduct of the banks to ensure that players in the sector have a level playfield in order to safeguard the interests of both investors and customers of the banks,2 +2540,the changes at money funds have also helped reduce banks reliance on unsecured shortterm wholesale funding since prime institutional funds were significant investors in those bank liabilities,2 +2541,as the global financial crisis has demonstrated proprietary trading carries potentially large risks for banks risks both to the value of their assets and to their liquidity,2 +2542,the best way to achieve this is through the adoption of sound practices by the industryit is primarily the responsibility of each banking organization to manage its risks,2 +2543,under the terms envisaged in the current law on the management supervision and solvency of credit institutions this cost will be borne by the banks in accordance with the legally established keys and procedures,2 +2544,this year new rules were introduced regarding how much capital the banks must hold in relation to the assets linked to risks which includes lending ,2 +2545,first in september 2019 we amended our use of negative rates with a tiering system to mitigate their adverse impacts on bank intermediation,2 +2546,"closing it would bring about a clockwise rotation in banks payoff schedule lowering the beta of banks equity returns and +reducing risktaking incentives",2 +2547,it is a pleasure for me today to share some thoughts with you on the dimension this concept acquires for the financial system as a whole and for savings banks,2 +2548,"relationship to banks and bank supervision +it is important to remember that many of the benefits banks provide modern +societies derive from their willingness to take risks and from their use of a relatively highdegree of financial leverage",2 +2549,similarly we require banks to provide for standard assets even where there are no signs of impairment,2 +2550,you are examining the internal risk models which banks use to calculate their capital,2 +2551,"as the underpinnings of basel ii are concerned with enhancing the responsiveness to risk by banking institutions there are enormous expectations that basel ii will stand up to the test of capturing the complexities +and the more uncertain direction of risk in the current environment",2 +2552,it is not so much that the top management of banks consciously swing for the fences but rather that wholesale credit may be systematically too cheap for banks and perhaps other intermediaries too unless the usual market disciplines of failure can apply,2 +2553,many of these banks use advanced economic and statisticalmodels to evaluate their market and credit risks,2 +2554,this will allow us to better streamline supervisory efforts across various sectors of finance such as banking insurance and capital markets,2 +2555,by having banks bear the costs of their own protection incentives are set for riskconscious activities,2 +2556,"as a further step to address the banks funding problems and financial fragmentation within +the euro area the eurosystem started intervening directly in securities markets in order to +correct severe mal functioni ng of certain segments",2 +2557,"to repeat the main conclusions of my report it points first and foremost to prima facie +evidence of a comprehensive failure of bank management and direction to maintain safe and sound banking practices",2 +2558,"it is essential that capital requirements be significantly increased and that +they rise in line with the degree of systemic importance of a bank",2 +2559,"the second method consis ts of providing new loan opportunities for the banks +in order to improve the functioning of the financial markets and reduce spreads",2 +2560,"we and other +players in the market including idb and other is lamic banks have worked hard with aaoifi on +developing new standards and applying the aaoifi st andards on financial institutions",2 +2561,pension funds do not rely primarily on borrowing to fund their investments and are not vulnerable to excessive leverage or significant liquidity and maturity mismatches which caused many banks both traditional and shadow banks to fail during the crisis8 hence they are in general not a source of systemic risk to the financial system,2 +2562,in addition the sales ofcollateral real estate enable banks to plan flexible management strategies and reinvestment ofthe cash inflow from the sales will improve banks profitability,2 +2563,increased capital and liquidity are important tools to promote financial stability but in the end a bank is only as trustworthy as the people who work within it,2 +2564,while banks still exist and i am sure they will continue to do so recent developments have shown that nonbanks are just as capable of providing bank services,2 +2565,indeed we were concerned that banking supervision could even be increasing the riskof bank failure or distress by potentially reducing the incentives for bank directors andmanagers to make their own considered judgements about what constitutes prudent behaviour,2 +2566,as a general matter enhanced capital and liquidity requirements have substantially improved the overall risk position of the banks that constitute many of the major clearing members,2 +2567,likewise when a bank that is in good shape takes over a weaker one this may not necessarily result in a strong institution but could actually lead to a larger less healthy bank,2 +2568,it is important for banks to always remember that the funds they deploy belong to depositors and this should reflect in proper risk management governance and internal control systems,2 +2569,we have received feedback that our rules can prevent banks from sharing csi with a wide variety of relevant parties who need to know this information in order to help the bank remediate identified supervisory issues,2 +2570,commercial banks have an incentive to hold a certain amount of liquid shortterm assets for the purpose of liquidity and duration risk management,2 +2571,microprudential regulations that improve banks risk assessment and ensure the application of common rules are crucial in this regard,2 +2572,continual improvements in riskmeasurement techniques therefore should be the norm for all banks that intend to play in theglobal financial marketplace,2 +2573,in this regard it is important that a truly systemic solution resembling an asset management company is implemented in order to complement the individual efforts of each bank to swiftly improve asset quality,2 +2574,genuine difficulties inmaking assessments are thus one explanation another is that in certain cases the banks seemto have hunted with the pack instead of making independent risk assessments,2 +2575,"iv higher capital requirements for noncleared trades the basel requirements +already prescribe a capital charge for credit risk exposure of banks arising out of +otc derivative transactions",2 +2576,however many banks are yet to settle upon on a bc model which is scalable and will help them achieve their targets under financial inclusion,2 +2577,"this is eminently logical and sensible since with more cautious bank lending and enhanced +risk management within the hli sector it should be very hard for the hlis to build up excessive +leverage and concentration in the major financial markets",2 +2578,"the business of our banks was not +particularly complex and could have been adequately supervised in the former style",2 +2579,"howe ver we also see that eventually basel +ii implementation will not only require the readiness of the banking industry to implement better risk management including improving the qualit y of the capital and information system +but also require bank indonesia readiness to improve the quality of regulation supervisors the information system and practices as well as followup on bank supervision",2 +2580,"instead of differentiating one bank type from +another the stylized framework distinguishes across financial risks with much less concern with how we categorize banks",2 +2581,"i +think we would all agree that there is no greater enemy to a stable financial marketplace than a lack of +confidence and surely nothing undermines confidence more than a lack of reliable informationdiscipline by the market is not always pleasant a lesson many companies have relearned recentlyyet better quality information or what we often call transparency can boost the confidence ofdepositors investors and creditors and it can contribute to stability by encouraging banks to adopt amore proactive approach to managing their risks",2 +2582,"by establishing a much more refined approach that +requires banks to hold capital commensurate with the actual risks of their exposures and +activities basel ii should lead institutions to make better decisions about assuming retaining and mitigating risks",2 +2583,"this is necessitated due to +the excessive exposures of banks to derivat ive products whose risks were not captured +comprehensively under basel i or basel ii framework",2 +2584,we are and shall remain neutral to innovation our job is merely to ensure that banks and savings banks are able to shoulder the risks of their specific business themselves,2 +2585,"the five largest global +custodians are banks and banks both large and small act as trusted custodians for the securitiesreal estate and other assets of customers",2 +2586,"a strong increase +of the spread in summer 2007 and in september 2008 reflects the reluctance of banks to lend to each other closely related to a general lack of transparency about the risks individual banks have been carrying on their books",2 +2587,"another way in which deposit insurance funds can be conserved is by adopting least +cost solutions for bank resolution",2 +2588,it would be preferable to relieve both supervisors and community banks from examining compliance with these kinds of requirements in order to concentrate resources on the real issues presently faced by these institutions such as cybersecurity and interest rate risks,2 +2589,that is a good thing because a tremendous amount has been done over the past seven years in order to make banks much stronger,2 +2590,the new basel iii framework requires banks to hold more capital of a better quality,2 +2591,a number of regulatory and policy measures could help to improve the institutional setting in which the banking sector operates and facilitate banks efforts to adjust their business models,2 +2592,in particular banks selling insurance capital market and pension products have to be sensitive to the fact that the essence of financial services is trust,2 +2593,however more rational pricing policies are currently hindered by the lack of consistency among banks on how they price risk and allocate capital,2 +2594,"it +will be even worse according to the banks advocating this level playing argument if their +national supervisor imposes capital or liquidity requirements that exceed the int ernational +standards",2 +2595,even if individual institutions are robust the overall behaviour of the financial sector can pose a systemic risk,2 +2596,"shadow banks like conventional banks undertake various intermediation activities +akin to banks but they are fundamentally distin ct from commercial banks in various respects",2 +2597,"i do not want to imply that other measures to make the financial sector more stable + including liquidity requirements and changes to the way asset values are assessed and reported are not important",2 +2598,this will better reflect the risks that already are inherent but perhaps not easily recognised in banks portfolios either in regulatory or internal metrics,2 +2599,pillar 3 contains proposals for greater disclosure by banks pertaining to three broad categories the sotermed scope of application of the accord a banks capital adequacy and its risk exposures and assessments,2 +2600,this information allows banks to allocate capital more efficiently than other intermediaries who lack such information,2 +2601,"the capital of the other 472 institutions not +belonging to a group for the most part mutual banks amounts to 137 per cent of +riskweighted assets",2 +2602,"supervisors can pay more attention to the banks credit strategy for the same three reasons i +cited earlier to promote sound practices to ensure that those sound practices are in place and tostrengthen our basis for comparisons across banks",2 +2603,thecooperative efforts of bank supervisors over the world should be designed to ensure preciselyagainst this sort of bank,2 +2604,be that as it may as we put the finishing touches to the basel iii reforms it is important that the overall capital requirements on banks not be increased significantly,2 +2605,in the banking sector the empirical evidence seemsoverwhelming that governmentowned banks are likely to be weakest in risk management,2 +2606,however it is also important to continue to ensure that banks are not primarily judged according to their origin and geographical presence here the horizontal functions of the ssm have an important role to ensure riskbased approaches to microsupervision,2 +2607,"certain jurisdictions have even embarked on the dissemination of +stress testing results of their commercial banks",2 +2608,similarly problems arising in one financial institution have led to the suspicion of similar problems in other institutions leading to conditions similar to bank runs,2 +2609,"besides in order +to inculcate sound risk management practices among the banks and dfis and to make the stress testing exercise more effective consistent and focused sbp has is sued guidelines on stress testing",2 +2610,"we are continuing to work on +developing a set of indicators to help identify the buildup of financial imbalances but in +practice there will need to be a degree of judgment in assessing whether a macroprudential overlay is warranted based on the banks financial stability objective",2 +2611,regulators and supervisors can contribute to an environment where banks are empowered to achieve these strategic objectives simplifying and clarifying the process of thirdparty selection due diligence and monitoring,2 +2612,"the boards proposal recognized that as financial intermediation has evolved +corporate customers frequently seek to obtain a variety of funding mechanisms from one sourceby prohibiting banks from providing routine credit enhancements in tandem with a section 20affiliate the existing firewalls hamper the ability of bank holding companies to operate asonestop financial services providers thereby reducing options for customers",2 +2613,so we want quite a few banks to adapt more quickly to the new environment,2 +2614,the asset quality review has already given us a deeper insight into the banks procedures thereby making it possible for us to check which differences between banks are justified and to ascertain where we need to probe critically,2 +2615,aligned to engagement the development of capability across the institution is also a major component of the banks erm model,2 +2616,over the last 12 months or so as we have been working with all stakeholders on our capital proposals we have reduced the ocr by more than the banks estimated costs of the higher capital requirements,2 +2617,one concern is the potential abuse of the safety net by commercial firms that own a bank,2 +2618,"indeed basel iii will have some potential transitional costs that arise as banks +on average need to increase their capital base in order to fulfil the new requirements",2 +2619,i would thus strongly urge the banks to focus and further improve their capital management processes with a forwardlooking scientific and prudent approach,2 +2620,rather it was due to improved performance at the individual bank level driven by bankspecific factors such as more efficient operations and improving asset quality,2 +2621,there is for instance the systemic risk buffer which can be applied to all banks or to specific groups of banks,2 +2622,owing to the good preparation effort the transition to the new supervisory regime was smooth without any turbulence for the banks and their customers,2 +2623,dibi has been introduced to reduce asymmetric information between banks and the real sector which we suspect as one of several causes of the suboptimal bank intermediation function,2 +2624,"taking lessons from the global crisis +the basel committee on banking supervision has stipulated that a banking institution should maintain adequate levels of high quality liquid assets which can be converted into cash at +very short notice and at small discount to enable it to survive a stress situation over a 30 day time horizon",2 +2625,even as we have worked to implement improvements we also have sought to tailor regulation and supervision to the size and risk profile of banks particularly community institutions,2 +2626,"4 +in addition banks are special in that they fund themselves with retail deposits which provide +monetary services the nature of banks liabilities are central to their business not just how their business is financed",2 +2627,"to sum up our efforts to improve banks risk management we are looking at all areas of risk +management both on an individual and collective basis to ensure that all institutions have +their riskmanagement practices at satisfactory levels",2 +2628,i therefore believe that the prudential measures that we have taken and good risk management by banks will help stop assetprice bubbles from forming,2 +2629,"the calculation of risk parameters consisting on long run averages and the inclusion of a downturn bias in certain estimates would provide +more stable parameters and requirements without abandoning the advantages of a risk sensitive scheme across different banks",2 +2630,have also decided to take account of the impact of the crisis by making intelligent use of the flexibilities that they have as supervisors in the implementation of the regulations we have reduced certain capital requirements and called on banks to reduce their precautionary reserves,2 +2631,"it is worth considering however whether the reputation of large banks woul d be enhanced by a belief +that regulatory capture and other manifestations of ineffective supervision could be minimized",2 +2632,with data on financial institutions managerial operational and riskmanagement systems the federal reserve has information about the overall condition of the banking institutions it supervises as well as insight into developments in the broader financial markets,2 +2633,in light of these developments we call upon banks to continue to carefully assess the outlook for borrower firms and to make prudent and timely provisions,2 +2634,this year our joint supervisory teams will complement the srep assessments with their observations from a climate risk stress test and a thematic review on how banks incorporate these risks into their daytoday business,2 +2635,"moreover regardless of perceived risks financial institutions pulled money from risky assets in advanced and emerging markets +alike in an effort to strengthen their balance sheets",2 +2636,stress testing is one of the tools developed in the aftermath of the financial crisis to test the resilience of the financial system,2 +2637,"entire types of financial institution such as standalone investment banks may cease to exist while certain categories of financial instru ments such as the more exotic derivatives +may never be traded again",2 +2638,emphasis on the risk behavior of both bank and nonbank financial institutions and the countercyclical approach of building buffers in good times is another needed change,2 +2639,"i should note that qis 3 did not fully recognise the riskmitigating effects of collateral and guarantees +so we expect that in some cases banks may experience even larger savings when the new accord comes into force",2 +2640,"the proposed changes in the capital adequacy rules will apply with effect from 2005 but developments in the capital market could very well +lead to the banks credit granting being adapted gradually to the new rules in advance of their +introduction",2 +2641,"there was widespread risk aversion +in financial markets and the reluctance of banks to lend to each other risked creating a vicious downwards spiral",2 +2642,"that result is critical to + supervisors who believe that the ama methodology will produce a lasting discipline for banks +encouraging them to think carefully about and minimize the risks associated with their business +activities",2 +2643,capital requirements aim to correct these distortions and strengthen the motivation of banks to avoid excessive risks,2 +2644,we designed a qualitative questionnaire to evaluate how banks integrate climate risks into their strategy and their risk management framework,2 +2645,and saving the best for the last mas will transform the way it collects data from financial institutions for supervisory purposes,2 +2646,the argument for additional regulation has centred on the risk exposures and speculative activities as banks broadened their horizon to include noncore banking activities such as insurance and capital market activities financed with depositors funds,2 +2647,"as a regulator the bank of mauritius will no doubt oversee the wo rkings of this market to ensure +that risks are properly controlled that banks have adequate capital to support the risks taken and that +there is adequate transparency regarding the size and nature of the derivates market as it unfolds in +the future",2 +2648,microprudential supervision can mitigate excessive risk taking by applying institutionspecific measures to the banks that invest the most in risky assets,2 +2649,this requires a look at the corporate governance in banks and board level ownership of the antifraud initiatives,2 +2650,most dealer banks now routinely employvalueatrisk var measures to manage the market risks of their trading portfolios andsignificant strides are being made in the quantitative measurement and management of creditrisk,2 +2651,"pillar two of basel 2 advocates +dialogue between banks and well trained regulators able to apply the relevant judgment on the +choices that have been exercised by each bank to quantify risks in their portfolio and hence to +determine the commensurate amount of capital to be maintained as a buffer against those risks",2 +2652,"we either need a system where banks of any type can quietly fail and hybrid capital is actually useful in protecting the deposit +insurer or more realistically we shall need a much narrower definition of capital",2 +2653,these developments helped stimulate important changes in banks business models,2 +2654,"the advantage from a financial stability +view is that the risks become more widely disp ersed between the various holders and that the +individual bank can build a wellbalanced portfolio",2 +2655,there are also active moves to establish new types of banks which did not exist traditionally,2 +2656,"for thousands of us banks the migration to a regulatory capital regime based on advanced risk +management techniques is unlikely to occur for many years however",2 +2657,"section 4 explores in greater detail some of the quantitative drivers of high +aggregate returns to banking while section 5 explores some of banks business activities",2 +2658,"through their participation these firms will be +sending a clear signal about their willingness to improve market discipline7 bis review 1261999these have not been easy times for banks",2 +2659,"the mcib has over the years emerged as an essential risk +management tool for banks in their lending activities",2 +2660,to comprehensively assess the financial sector vulnerabilities there is a need to assess the risks associated with a financial institutions relying on a range of financial soundness indicators that help assess credit liquidity market exchange rate operational and reputational risks etc,2 +2661,"and there is a certain paradox in a situation where globalized banks +with diversified activities and balanced busin ess models are perceived as riskier than more +specialized institutions",2 +2662,as regulators and supervisors we would also need to be vigilant about the emerging risks that the banks could face and proactively suggest measures to enable banks to mitigate them,2 +2663,"whats been achieved +to make banks safer reform started by strengthening the bank capital regime",2 +2664,this can involve concentration limits so banks do not exceed their exposure to gsecs beyond an internally agreed total proportion of assets or the excess slr should be commensurate in risk terms with the banks capital allocation for investments,2 +2665,but given that banks are in the business of risktaking compliance functions can and should also provide the means by which a bank can take reasonable business risks based on more informed judgements,2 +2666,i believe that this point is appreciatedaround the region from our contacts with fellow supervisors we know that in many bankingsystems there is a heightened awareness of the importance of sound risk management,2 +2667,"indeed there is +evidence that the pressure on banks to deliver high returns to their shareholders after the rapid expansion in their capital base postconsolidation contributed to some of the highly risky behaviour that led to the collapse of some of the banks",2 +2668,"as financial markets progress towards greater transparency the market disciplinary mechanism will +reward banks that manage their risks effectively and penalise those that do not",2 +2669,"however the first responsibility lies with financial institutions themselves that did not develop +enough scrutiny in risks analysis were too much focused on short terms profits did not integrate the cost of risks premium and liquidity and in some circumstances did not fully understand the likely financial consequences of their behaviour",2 +2670,with the processingpower of modern computers it is now possible for the risk and return characteristics of large andcomplex portfolios to be managed centrally and if not real time at least on an intraday basisvirtually all large bank holding companies are now operated and managed as integrated unitsthis trend towards centralised risk management raises some fundamental policy issues as to howbest to regulate and supervise such large and complex banking organisations,2 +2671,moreover the higher required capital ratios will increase banks cost of capital while banks earnings are currently compressed,2 +2672,"liquidity management is an important part of the overall risk management for which +conventional financial institutions may have recourse to derivatives instruments",2 +2673,in this specific case model risk is the risk that a banks internal models incorrectly estimate the banks capital requirements,2 +2674,"these ltros ensured that banks had sufficient liquidity over the medium te rm while at the +same time embedding phasing out as a design feature",2 +2675,migration to the advanced approaches is important for larger banks as it involves adoption of more sophisticated risk management systems,2 +2676,"in this proces s an important first step is considering market +developments that affect how we view risk in the banking sector",2 +2677,"with such a crisis management system lenders will have a stronger financial incentive to +monitor banks risktaking",2 +2678,all the operational aspects must now be rapidly finalized to permit accurate assessment of its financial capacity and to prevent uncertainty from amplifying the national component of risk premiums thereby perpetuating financial market fragmentation and the vicious circle between the conditions of sovereign borrowers and banks,2 +2679,"the aim of such buffers is to make banks build up capital when systemwide risk is +increasing following excessive credit growth",2 +2680,now more than ever banks need to be aware of what the competition is doing so that they can review and refine their own strategies,2 +2681,"to be clear supervisors have no intention of pressuring any of the banks +outside the core group to adopt basel ii",2 +2682,"the progress made in the reform of the prudential regulation of banks needs to be +accompanied by further reflection about the functioning of the financial system as a whole and the different ways of improving the managem ent of liquidity risks",2 +2683,"in other words the impact on banks must be evaluated +dynamically not by taking a snapshot of the banks activities and balance sheets today",2 +2684,these statistics do not include nonpublic enforcement actions including restrictions on the further growth of banks that do not have satisfactory risk management regimes,2 +2685,supervisors have been expecting banks to manage operational risk for some time and banks have been holding capital against it,2 +2686,"it is vital for banking supervisors to keep a close eye on institutions profitability which is why we will again be conducting a survey on lowinterestrate and stress scenarios this year4 +3",2 +2687,"accordingly counterparty risks expos ure to specific asset classes and the overall +duration of the reserves portfolio were reduced and the banks conservative investment guidelines were tightened further",2 +2688,"this +is done firstly by monitoring the financial risks that banks undertake",2 +2689,specifying prudential regulatory aims in the context of community and middlerange banks suggests a rationalization that could possibly eliminate certain requirements as they apply to some of these banks,2 +2690,while notionalvalues and amounts securitized say almost nothing about the level of underlying risk to individualbanks they speak strongly to the increased volume and complexity of large bank activities and of thesomewhat hidden risks they face,2 +2691,one way for regulators and private markets to be able to monitor financial institutions and to assess their systemic reach is to assess the risk of multiple defaults,2 +2692,we also heard today that some banks have successfully implemented regtech using external vendor technology for some of their solutions,2 +2693,"this has ensured that at any given +point of time all the banks have a specific percentage of their liabilities in the form of risk +free liquid instruments",2 +2694,one of the key mandates of bank negara malaysia is to develop the insurance industry into a strong dynamic and innovative component of the financial system,2 +2695,basel ii on the other hand provides a much more refined approach by requiring banks to hold capital commensurate with the actual risks of such transactions,2 +2696,furthermore although the soundness and solvency of banks tend to strengthen their capacity to grant credit it is true that the combined effect of all the measures will by their very nature tend to reduce the profitability of banking and banks ability to channel savings to business activities involving risk,2 +2697,the comprehensive assessment helped us to identify problems on the balance sheets of the significant banks,2 +2698,"i will be delivering three key messages + +optimism and large lending capacity are boosting the banks risk appetite",2 +2699,investors will have to understand our unique national setup and where it deviates from the banking union before assessing which danish banks they might want to invest in,2 +2700,"for banks i believe the most direct way to do this is to prevent an initial limited fall +in the value of assets triggering sharply higher concerns about their solvency",2 +2701,the three elements combined will ensure a comprehensive assessment identifying remaining risks on banks balance sheets,2 +2702,not only are banks required to hold a lot more capital as well as liquidity to meet unexpected contingencies there is constantly increasing demand by the supervisors to deal with conduct risks,2 +2703,"even in the united states we have very different approaches to supervising large complex banking organizations and smaller community +banks",2 +2704," introduction of cds the overarching argument for introduction of cds is that it +enables stripping and trading of credit risk and it eventually helps in diversifying the +credit risk inherent in banks balance sheets",2 +2705,"by more clearly defining risk exposures identifying the +causes of their losses and establishing controls to limit future losses bank managers have been +better able to integrate decisions about risktaking into their strategic and tactical decision making",2 +2706,the idea that a bank is only a real bank if it is itself involved in the entire value chain as much as possible is a thing of the past,2 +2707,"this was confirmed by the imf in september 2013 in the foreword to its financial sector assessment program fsap in which it gave a favourable judgment on italys supervisory system1 +the bank of italys supervisory action +banks specializing in traditional retail services as is the case in italy are more vulnerable than others to periods of recession especially if deep and prolonged",2 +2708,to this end i will entreat banks to review their credit standards and capital needs in relation to their risk profile and appetite to ensure strict compliance,2 +2709,"the foreign exchange net +general position arrangement for the banking sector and allowing the issuance of tl bonds by banks in a controlled manner can also be considered in this context",2 +2710,a drop in banks share prices led to a deposit run on the banks,2 +2711,we also scale our examination procedures to reflect the lower level of systemic risk presented by banks with more than 50 billion in assets that are not liscc companies,2 +2712,the essence of these standards is that they require banks to provision upfront for any future expected losses,2 +2713,the overall provisioning cover for the banking system as a percentage of total unsecured npls is above 100,2 +2714,"the allowance of banks to affiliate with commercial firms threatens the ability of banks to continue to serve as efficient and objective intermediaries of credit and has the potential to expose banks to the operational financial and +reputational risks of commercial affiliates",2 +2715,"in our role as bank regulator our concern is with respect to the potential ramifications of all +these developments on banks",2 +2716,it is also recognized as a fact that strengthening prudential regulation of banks even though it has been necessary is not alone sufficient to ensure that bubbles and crashes do not occur in the asset and credit markets,2 +2717,"the important +thing from our perspective is that risks should be managed by those best placed to manage them +typically the banks themselves",2 +2718,in some casessupervisors have taken steps to monitor bank hedge fund exposures and bank initiatives toenhance internal counterparty credit risk management systems,2 +2719,embodied in the proposal are some important risk management principles and soundpractices that supervisors would expect all of the very largest and most complex us banks to befollowing or aspiring to even those not electing to use one of the more advanced approaches,2 +2720,"i am conv inced that banks will tackle this process as +professionally as they are completing the current phase",2 +2721,a regulator that has zero tolerance of the nonmarket behavior of financial institutions will be watching over companies,2 +2722,"basel iii requires conventional banks to hold a stock of high quality liquid assets that can be +used to meet unexpected deposit outflows",2 +2723,"as i suggested earlier the culture of risk management is not well rooted in our banking +system",2 +2724,"the second point is in a sense a collective action problem because national supervisors looking at the crisis have asked their banks the banks under their supervision to withdraw +their activities within national boundaries",2 +2725,operational risk is a new area now in cluded in the regulation of banks,2 +2726,"basel iii should make the +financial system more stable and reduce the likelihood of future financial crises by requiring +large banks to hold more and betterquality capital and morerobust liquidity buffers",2 +2727,"v banksdfis may also take exposure in future contracts to the extent of 10 percent of +their equity on aggregate basis",2 +2728,first and well known to most in the business good supervision requires us to be close to banks,2 +2729,as i mentioned earlier while bank regulators clearly play an important role in influencing banking operations it is really up to the industry to decide what it can and should do to regain the trust and respect that banks once enjoyed,2 +2730,in particular i am confident that the legal improvements regarding the enforcement of bank credit contract will not only help the banks soundness but will also contribute to increasing the discipline and effectiveness in the use of funds by the albanian enterprises,2 +2731,of course our low for long poses challenges for financial institutions and can lead to specific risks for financial stability,2 +2732,"the above developments have meant that t he risk management challenge for banks has +been steadily growing more complex over the last two to three decades",2 +2733,the bank of israel believes that these measures to increase competition between existing entities are not sufficient and therefore we have created a less stringent supervisory environment for nonbank entities such as the separated credit card companies or companies that will provide largescale credit against the issue of bonds,2 +2734,if a banks capital decreases as a result of it incurring a large amount of losses due to a decline in stock prices or a failure of a firm it has lent to the total amount of risk the bank can take will decrease accordingly,2 +2735,we need banks and other institutions that take their job seriously and promote the appropriate forwardlooking investments by distributing funds efficiently,2 +2736,"banking supervisors have focused intensively in recent years on detailed aspects of sound risk +management practices in financial institutions first the accurate measurement and monitoring of risksecond controlling and pricing exposures and third the holding of adequate capital and reserves tomeet unexpected losses",2 +2737,"leaving banks completely free to choose risk weights +using internal models is not safe",2 +2738,"however tr ansferring risks does not mean that nobody will pay +the bill if conditions deteriorate and those who will pay the bill are usually also bank clients or the +banks may pay compensation to holders of securitized bonds in order to minimize reputational risks +thus securitization does not completely insulate banks and this simple maxim tends to be ignored +today",2 +2739,"to address the observed challenges the cbn has reviewed the ub model with a +view to steering the banks towards core banking businesses",2 +2740,"there are nevertheless considerable differences from one bank to another in particular as to +how their risk appetite has evolved",2 +2741,"sinc e effective public disclosure enhances market +discipline and allows market participants to assess a banks capital adequacy disclosure can be a +strong incentive for banks to conduct their bus iness in a safe sound and efficient manner",2 +2742,"the purpose of bank supervision is to ensure that supervised firms are resilient to all of these risks1 +banks are becoming increasingly attuned to the heightened financial risks from a changing climate",2 +2743,"on a different topic but still with banks we are also looking at the role securi tisation plays in the new +zealand financial system as part of our basel ii activity",2 +2744,eight banks out of a total of 21 reported that there would not be any increase in provisions,2 +2745,maintaining resilience to risk and shock is an integral part of bank management and also bank regulation and supervision,2 +2746,with regard to capital adequacy the introduction of capital stress testing for large banking organizations has been one of our signature innovations since the financial crisis,2 +2747,"in cases of sharply falling market valuat ions these adverse creditchannel effects may even +be exacerbated by the deteriorating health of banks and other financial institutions",2 +2748,"the largest institutions have moved away from the traditional banking strategy of holding +assets on the balance sheet to strategies that emphasize redistribution of assets and active +management of risks",2 +2749,even so by constructing a separate consolidated approach to capital for systemically designated insurance firms compliance costs for these firms should be considerably lower than if they had to conform to the bank holding company capital regime,2 +2750,"besides there is a new +capital requiremen t known as cva credit valuation adjustment risk capital charge for otc +derivatives to protect banks against the risk of decline in the credit quality of the counterparty",2 +2751,but the better they are the more difficult it is to do so hence the extreme importance of banks being provided with a robust governance model,2 +2752,such persons have a vested interest in monitoring thebehaviour of banks and in sending the appropriate market signals in the form of withdrawal or highercost of funds or lower share price to banks that are taking too much risk,2 +2753,while the banks have better resilience in terms of risk mitigation structures and ability to absorb the losses and expenses the customers may not be so privileged,2 +2754,"first within the new regulatory framework +it is important that financial institutions continue to strengthen their own risk assessments",2 +2755,"this will +be done through further enhancing the market and products which will facilitate banks own risk management promoting an effective in formation system and pushing for the +amendments of necessary laws to facilitate risk management",2 +2756,let me elaborate on one principle macroprudential stress tests of the banking sector and their extension to nonbanks,2 +2757,"banks limit their lending to other banks and potentially to the +broader economy and they hold on to precautionary balances of cash as selfinsurance",2 +2758,"through npl carveout and strengthening of risk management practices all of these banks +have maintained npl ratios of low single digits",2 +2759,"protecting the banks from the cycle +in effect the objective of the first approach is to create more resilient institutions",2 +2760,while bank investorsultimately bear the risks of the institution too frequently they are not in a good position tomake knowledgeable business decisions about a banks prospects,2 +2761,this is referred to as a procyclicality issue by which we usually mean the tendency of financial system to accentuate fluctuations in real and financial variables around their trend,2 +2762,"we are +watching deposit movement carefully but so far have seen little evidence of deposits moving out of the banking system or as some had feared moving from smaller banks to l arger +banks perceived as too big to fail",2 +2763,the amendment would rectify this imbalance by permitting all bank holding companies to act as agent in the sale of insurance,2 +2764,in particular systemically important banking organizations must now hold higher amounts of capital and liquidity that are better aligned with their risk profiles and the official sector is making progress in ensuring no financial firm will be toobigtofail,2 +2765,there is an obvious connectionbetween valueatrisk techniques used by large financial institutions to manage their exposureto risk and the liquidityatrisk approach proposed here,2 +2766,banks are required to hold more equity and more liquid assets which strengthens banks resilience,2 +2767,if banks can withstand a hypothetical adverse scenario they would likely be able to cope with the early recognition of expected credit losses under a real downturn as required by ifrs 9,2 +2768,accomplishing this will make markets that need a reference rate that embodies bank credit risk more robust and resilient and will strengthen the financial system,2 +2769,"this contrasts with the international trend where banks have increased +capitalization in several jurisdictions",2 +2770,the bank is not responsible for prudentially regulating and supervising the activities of individual financial institutions1 rather our perspective is the entire financial system,2 +2771,so why does low bank profitability matter for financial stability,2 +2772,this of course would mean relying on expert judgment on these issues in a context where financial institutions do not have enough experience to understand future risks,2 +2773,still trust assets are highly liquid with 903 percent classified as investments in highly marketable securities and deposits in banks,2 +2774,"the +4 bis review 722009 + assumption underlying this development was that this constituted a mechanism that took risk +off the balance sheets of banks placing it with a diversified set of investors and thereby +serving to reduce banking system risks",2 +2775,"we as risk managers have the weighty responsib ility of ensuring that our institutions are +prepared to weather these financial storms",2 +2776,"this will ensure that banks cannot show strong capital ratios and at the same time recognise assets that +diminish the quality of capital",2 +2777,"to build the quality and competence of banking per sonnel in risk management bank indonesia has +introduced the requirement for risk management certification for all levels of bank management",2 +2778,"more and more we are seeing banks upgrading their risk management systems to be able to +adequately and appropriately identify possible risks such as credit and liquidity risk and how they will be managed",2 +2779,another important commitment is for banks to maintain strong capital positions,2 +2780,published regulations that have gone through the rulemaking process with solicitation of public comment and bona fide engagement with the issues raised are the best and clearest way for banks to understand the rules of the road and for the bank regulatory agencies to ensure banks satisfy safetyandsoundness objectives,2 +2781,moreover beyond merely formally attributing responsibilities we still see banks making little progress towards more actively managing the ce risks they face,2 +2782,"the primary responsibility for risk +management appropriately rests with the management of each institution and our supervisory efforts are not aiming to prevent individual banks from suffering losses which is +part of the banking business",2 +2783,according to eba data the average capital adequacy ratio of eu banks was 193 in december 2019 the highest level we have ever seen for years mostly the result of capital enhancement actions taken by eu banks,2 +2784,the first reform aims to bring the current framework in line with what is best practice in the world today it will allow banks to transfer instruments hitherto booked at market value to portfolios where that will no longer be the case,2 +2785,the fsb has set in train two courses of action to prevent an excessive concentration of banking risk off the balance sheets of banks first it monitors their size activities and risk characteristics and second it is working on the introduction of measures both for institutions particularly closedend money market funds and for activities particularly certain forms of alternative funding such as securitisation or the funds obtained through the repo market or securities lending,2 +2786,liquidity standards for large us banking firms are a key contributor to financial stability as they work in concert with capital standards stress testing and other enhanced prudential standards to help ensure that large banking firms manage liquidity in a manner that mitigates the risk of creditor and counterparty runs,2 +2787,"no longer will there be a one size fits all approach whereby banks of varying +shapes and sizes are shoehorned into one inflexible system of capital charges",2 +2788,"when banks disclose timely and accurate information about their capital structure and risk +exposures market participants can better evaluate their own risks in dealing with such institutions5 bis review 212000greater market discipline in turn gives banks more incentive to manage their risks effectively and to +remain adequately capitalized",2 +2789,further progress on the banking union could also provide a rationale for recognising that crossborder lending activities within the banking union would benefit from a unified crosscountry supervisory setup and could therefore be treated like withincountry lending under the framework for global systemically important banks,2 +2790,another important issue in the context of risk management is the internal models that banks use to calculate their riskweighted assets which in turn serve as a basis for determining capital requirements,2 +2791,the emphasis on risk management is most critical at our largest most sophisticated andmost internationally active banks,2 +2792,under the new approach the intensity of bank examinations is based on our assessment of the risk profile of individual community banks including how each identifies and manages consumer compliance risk,2 +2793,however this transformation of illiquid lending into liquid funds in accounts makes the banks dependent on the confidence of the funders in the banks ability to meet its obligations,2 +2794,there is evidence that financial innovation has led to a stronger and faster passthrough from changes in policy rates to banks interest rates in particular for banks which are very active in securitisation and derivatives markets,2 +2795,"the adjustment process by private investors has increased the risk that banks may +increasingly be called upon as backup providers of funding",2 +2796,strategic risk decisions must emanate from bank management and from there it should become everyones business within the bank,2 +2797,this approach makes for a safe and sound banking sector and should not change,2 +2798,i worry that our current supervisory methods establish expectations that are too detailed across too many areas of bank operations and too wide a swath of banks,2 +2799,"given the differential risk appetite across banks and their business philosophies it is +likely that banks would self select their own approach which in turn is likely to engender a stabilising +influence on the system as a whole",2 +2800,"thus it +improves on basel i which requires banks to hold the same level of capital for a given portfolio no +matter how the portfolios inherent risk may change over time",2 +2801,indeed many of you will be aware that our supervisors regularly assess the risk profile of your banks,2 +2802,and this is precisely where the difficulty lies because one thing is certain it will not be enough for german banks and savings banks to rely solely on precautionary measures,2 +2803,but for this to happen they require relevant information on the financial institutions performance and operations,2 +2804,"i therefore appeal to all the banks operating in zambia to critically assess +the level of their charges and to continue playing the supportive role to development that they +have in the past",2 +2805,over the longer term we must continue to sharpen our thinking around the interrelationships between bank risk and broader changes such as advancing technologies and growth in nonbank finance,2 +2806,the need to adapt to and comply with these new requirements is imposing costs on banks and causing headaches among bank managers,2 +2807,"in addition since banks enjoy highly +profitable domestic opportunities in traditional lending they were not attracted to taking exposures to the derivative instruments that became the amplifying vehicles of instability in the recent great financial crisis",2 +2808,"on our part we at the bangko sentral will continue with banking reforms that will encourage +improvement of capital positions and br oaden the avenues for better risk management",2 +2809,"also the +banco de españa has obliged banks to adopt preemptive measures in the form of a larger pool of provisions",2 +2810,the meetings keep us well informed about each of the banks and the banking industry as a whole but fall well short of the more intrusive bank examination process typical in other countries,2 +2811,"for years policymak ers have hesitated to expand the coverage of +cra because of the nexus the law created between a financial institutions obligation to its community and its access to deposit insurance and other banking system benefits",2 +2812,"in applying the +highest standards of risk management the activity of the bank of italy and that of banks pursue largely +similar objectives",2 +2813,these measures are designed to free up bank resources to expand their msme loan portfolio,2 +2814,while this is to be sure a priority atleast for internationally active banks around the world let me offer a more comprehensiveframework for thinking about enhancing the stability of the global banking system,2 +2815,"the bank strongly believes that such a measure plays a catalytic +role in allowing financial institutions to proceed with their voluntary efforts",2 +2816,"the first is the spanish system of dynamic provisions which requires banks to build a +general reserve that can be drawn on in downturns",2 +2817,"among the main areas of this work one of the most +important is aimed at enhancing banks risk management practices and especially those related to liquidity risk",2 +2818,"similarly in some countries where there are perhaps +thousands of licensed financial institutions and a very large population and generous deposit +insurance or a strong implicit government guarantee of bank deposits it may well be desirable for the3 bis review 1241999supervisor to check the bona fides of bank management",2 +2819,better regulated markets may mean that banks bear less risk but it does not mean they should not be strongly capitalised,2 +2820,moreover even the capital market depends on the profitability and competitiveness of the banking sector for its smooth operation and deepening because banks are involved as both service providers and users at various stages of the securities and derivative intermediation chain,2 +2821,for many financial products it will still make sense to reference a creditbased benchmark that measures banks shortterm wholesale funding costs,2 +2822,"less risky assets on banks balance sheets sbp has +always required ban ks to meet higher capital and liquidity standards exceeding international +norms in several areas",2 +2823,"still there are limits to the ability of supervisors and examiners to monitor banks effectively +and control their risks",2 +2824,"can the same capital cover all of them or do banks need capital for +each one",2 +2825,"to the extent banks develop disciplined internal approaches to evaluating capital adequacy +and capital plans and enhance disclosures supervisors will be able to place greater relianceon all three pillars and meet the challenges of a more complex financial marketplace",2 +2826,"assessing safety and soundness +technological change financial innovation the acquisition of new powers by +banking organizations the increasing geographic scope of banks and the globalization of financialmarkets all challenge our ability to examine and assess the safety and soundness of individualbanking firms",2 +2827,the nbfc sector largely depends on market and bank borrowings thereby creating a web of interlinkages with banks and financial markets,2 +2828,"in particular with the implementation of the global reforms +agenda relating to basel iii implementat ion of otc derivative reforms reducing reliance on +credit rating agencies amongst others the regulatory landscape of banks is set to change +forever both domestically and in the global arena",2 +2829,"to balance and anticipate the future increasing complexity in the banking world and to +address the demands made by stakeholders regarding enhancing bank indonesias +performance quality some improvements in bank oversight have been undertaken",2 +2830,"still many of these liquidity pressures are likely to remain in one form or another and banks will +almost certainly continue to explore nondeposit liabilities to fund asset expansion",2 +2831,the us banking industry has its obligations too to manage its risks andto tell its story to bank supervisors the sec and the general public,2 +2832,put simply where new npls arise in the future banks will have to provision fully for them over a set period subject to a complyorexplain mechanism,2 +2833,moreover banks may not take positions in credit derivatives and face other restrictions regarding the operation of derivative instruments,2 +2834,with some notable exceptions we currently more or less apply the same rules and procedures to all banks irrespective of their size and their relevance for financial stability,2 +2835,"meanwhile the ecb takes the actual responsibility for supervising the banking system being +in charge of licensing credit institutions ensuring compliance with capital leverage and +liquidity requirements and also supervising financial conglomerates on a consolidated basis",2 +2836,to theextent we can validate the integrity of a banks internal controls more efficiently we can place moreconfidence in them at an earlier stage and can also take greater comfort that management is getting anaccurate indication of the banks condition,2 +2837,given the universal nature of vbi the application and adoption of similar strategies by financial groups which comprise conventional financial institutions would be the next phase of this evolution as we move forward,2 +2838,initially thirdlevel assessments will focus on the calculation of riskweighted assets across banks and jurisdictions,2 +2839,"recent surveys have indicated that banks have only just begun to reverse the histor ically large tightening in standards and terms +that they implemented in the aftermath of the crisis",2 +2840,this allows banks to dispose of their bad assets via asset management companies,2 +2841,the bank of italy is scrutinizing the weaknesses in the structure and working of banks boards of directors the aim is to remove factors that can hinder banks capital strengthening and to foster better business management,2 +2842,even as we act to improve the traditional bankcentred model of business finance and to make it more resilient we need to create more scope for markets and nonbank intermediaries,2 +2843," higher trading assets an alternative means of replicating the effects of higher +leverage is to increase the proportion of assets held in banks trading books",2 +2844,"2 +a central component of the swiss approach is that systemically important banks should +markedly improve their capital base and liquidity positions both qualitatively and +quantitatively and reduce their risk exposure to other banks3 this will make systemically +important banks more stable in future and reduce the likelihood of them running into +difficulties",2 +2845,what we want is a system where we have banks with adequate capital adequate liquidity number one so the probability of a large bank failing is a lot lower today than it was back in 2006 and 2007,2 +2846,for the largest banks this naturally includes an increased focus on financial stability risks,2 +2847,in this way capital is theclosest relative to market discipline among bank regulations,2 +2848,"traditional stress testing models +focus exclusively on solvency risk and estimate the overall risk to the financial system by simply aggregating credit or other asset losses that would materialize at individual banks in +the event of a severe shock",2 +2849,"the shorter the data series +applied by banks in their risk models are the more the capital requirements fluctuate with +business cycles",2 +2850,"and third the new liquidity r equirements will ensure that the banking sector has enough high +quality liquid assets to withstand acute funding stress as well as guarantee that longerterm assets are funded by more stable medium or longerterm sources",2 +2851,"in this approach we would first and foremost need to encourage banks to assess the potential riskiness of particular operations +investments products and decisions to thei r reputations and ultimately to their enterprise +value",2 +2852," crucially the terms of such liquidity insurance should balance its benefits against the +costs of creating incentives for banks to take more liquidity risk than otherwise",2 +2853,"a third and closelyrelated example is that the banks have not held sufficient capital for the +counterparty risks that they are exposed to in their derivatives trading",2 +2854,our goal in the basel process is to develop a risksensitive framework that provides appropriate incentives to banking organizations to maintain strong capital positions and sound riskmanagement systems,2 +2855,"ultimately it is in the best interests of iceland and the failed banks creditors +to safeguard economic and financial stability as is made plain by the fact that one of the +creditors largest assets is their stake in the new banks",2 +2856,for the us global systemically important banks gsibs we have also imposed an additional capital surcharge designed to reduce the threat that a failure of any of these firms would pose to financial stability,2 +2857,additionally the strengthened legal infrastructure and the improved risk culture in the banking sector have alleviated the adverse effe cts of mayjune fluctuations,2 +2858,"hence our preference is to hav e a bank led system with non bank players as +partners and service providers so that regulatory resources are focused on banks",2 +2859,since securitized products are rarely used in the turkish banking sector the ongoing financial turmoil has not put a marked pressure on local banks through that channel,2 +2860,"finally another welcome development is the sustai ned improvement in the soundness of our banking +system",2 +2861,we hope that our recent review on governance and risk appetite will help banks to get to know both themselves and the industry standard better,2 +2862,"after the 30day grace period banks may continue to participate in the +guarantee program by paying reasonable fees",2 +2863,"that banks and supervisors must redouble their efforts to ensure that sound underwriting standards are in place and that there are adequate +systematic procedures for identifying firmwide risk concentrations",2 +2864,throughout history we have seen the damaging consequences from bank runs financial market meltdowns and other financial shocks that occur when the public can no longer count on financial institutions to do the right thing in private,2 +2865,"as we move toward gr eater 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 ca pital levels must consider the sources of these +fluctuations more than ever before",2 +2866,"we need to ask how well banks and financial market entities are performing that role and how to assess the public and private sector costs associated with assuring that they play this +role",2 +2867,the bank holding company organizational structure has onbalance provided an effective means of limiting the use of the sovereign credit subsidy by otherparts of the banking organization,2 +2868,"in addition to realism in considering the opportunities that the new law allows bank managers must be +prudent in managing and monitoring the performance of banks",2 +2869,also the financial institutions strategic transfer fist act allowing banks to dispose bad assets to asset management companies serves as preemptive measure to manage any increase in loan defaults,2 +2870,because depositinsurance and other parts of the safety net can never be fully and accurately priced it isnecessary for us to monitor and sometimes to act to control bank risks in order to protect thepotential call on taxpayer funds,2 +2871,what effects have valuation practices and leverage had on the cyclicality of the financial system,2 +2872,"that is not so say that everyone trusts their bank and there are some who +because of the actions of banks seen abroad tar all banks wi th the same brush",2 +2873,indeed the framework through its three pillars and various safeguards provides multiple perspectives on a banks risk taking ensuring that there is no over reliance on any one measure,2 +2874,and our banking supervisors are assessing banks climate risk disclosures and examining how those risks should be embedded in the supervisory process,2 +2875,"the federal deposit insurance act establishes such a process for +banks but not for the holding companies of which they are part or for important financial firms that do not own commercial banks",2 +2876,"certainly a banking union can play a major role in breaking the vicious circle we see in +europe between banks and their sovereigns",2 +2877,financial institutions such as banks usually carry out analogous transactions that could also lead to similar risk exposures,2 +2878,in any case we expect the banks to preserve adequate capital in relation to risks it is essential that they continue to adopt a prudent approach to loan loss provisions,2 +2879,this cuts both ways clients of the banks will need to have perfect information on the banks as well,2 +2880,i propose to i draw attention to the significance of this interest rate risk exposure of indian banks ii urge banks to pay greater attention and devote more resources to their treasury operations and iii lay out some options available to banks for managing the risk efficiently,2 +2881,but holdingcompanies also own nonsubsidized entities that have no direct access to the safety netaccordingly both bank holding companies and their nonbank subsidiaries have a higher cost ofcapital than banks,2 +2882,a more fundamental issue with a capitalcentric approach of bank regulation is that even the most well capitalised banks have been found to have been caught up in the crisis spiral due to massive and immediate demands on liquidity,2 +2883,therefore there is a need for banks to step up efforts to resolve their existing npas and tighten their cr edit risk management systems,2 +2884,adopting the basel ii principles and those of sox 404 will improve overall management and in particular risk management and banks control and will institute the highest international standards in israels banking system,2 +2885,supervisors are keeping a very close eye on the effects that changes in regulatory requirements are having on banks and savings banks,2 +2886,"in response to that the banks that +were the most active on the fx market created cls a new settlement system that operates based +on the payment versus payment principle4 the new supranational system has significantly reduced +the credit risk and liquidity risk of fx operations a nd thus increased banks activity on the fx market",2 +2887,the financial inclusion strategies and delivery models being developed by banks are pr imarily technology driven,2 +2888,as financial supervisors we therefore call on credit institutions explicitly to manage their it and cyber risks just as diligently as they would the traditional risks in banking business,2 +2889,our latest stress tests also show the importance of our work to strengthen resilience in the banking sector especially the benefits of continuing to build capital buffers,2 +2890,"the involvement of banks in the financial trading of commodities including derivatives has +declined and some have pulled out of the sector altogether",2 +2891,"seventh we would be closely monitori ng the progress made by the banks as per their +financial inclusion plans",2 +2892,inside the banking union investors will have to study one single rulebook and the ecbs implementation of this rulebook before assessing which of the many banks within the union to invest in,2 +2893,this time large banks in the developed countries have certainly also become risk averse,2 +2894,in 2003 banks were advised to announce a benchmark plr to transparently reflect actual cost of funds,2 +2895,a very important part of maintaining confidence in banks is that the value of their assets the loans they make to simplify has not fallen below their sustainable value in the accounts of the bank,2 +2896,this adjustment will likely reduce the amount of extra capital that banks would need relative to a world in which they kept their business models unchanged even as the new rules were phased in,2 +2897,itis banks shareholders and management that have the strongest interest to measure risk accurately atleast if they expect to be around to bear the consequences of their actions,2 +2898,"for example it seems to me that we have made +much more progress in strengthening individual institutions through higher bank capital and liquidity requirements than we have made in reducing risk in the otcd space",2 +2899,"these seventeen principles were issued so that the liquidity risk framework of our banks +could incorporate the global best practices",2 +2900,"bis review 322003 3 + it may seem somewhat obvious to say that the lower profitability of the banks over the last few years +has been largely due to the poor economic environment",2 +2901,"this set of measures promoted and encouraged banks to adopt appropriate risk control +systems and practices oriented towards pr udent performance and enhancing transparency +with both clients and markets",2 +2902,the bsp is gearing banks up to step to the regional plate by adopting higher capital requirements enhancing credit risk management rules and raising governance standards among others,2 +2903,philippine banks continue to be an efficient and responsible intermediator of funds,2 +2904,it is crucial for banking institutions to evaluate decisions on the level and composition of capital from a strategic and mediumterm perspective,2 +2905,"the crisis revealed that even sophisticated investors and banks supposed experts in assessing financial risks too often took the short +cut of outsourcing their riskassessments to credit rating agencies",2 +2906,the priority has now shifted from the solvency of banks which has improved substantially to the liquidity of the shadow banking sector particularly funds and asset management companies that are exposed to the risks of sudden panicdriven runs,2 +2907,given that this conference is about stress testing it is worth revisiting some lessons from the first generation of bank stress tests9 bank stress tests were developed at the height of the 200709 financial crisis to provide a more systematic way to assess the effects of complex and interrelated exposures within the financial system,2 +2908,attention at the highest management level is therefore vital to ensure the formulation of the most appropriate ict strategies for banks to remain competitive,2 +2909,"a series +of stress tests are being conducted periodically by the res erve bank on the impact of +interest rate shocks on the banking and trading books of banks",2 +2910," it is inevitable that the bank will become increasingly involved with cooperative +oversight arrangements for financial market infrastructure that operates on a global +basis",2 +2911,at the ecb we have found banks to be profitable this year,2 +2912,"basel ii is basically risk mitigation in banking operations and it allows +supervisors and regulators to encourage or require banks to build up capital buffers in good times",2 +2913,basel ii is designed to improve risk management and measurement to link required capital to risk to focus supervision more closely on these variables to make such relationships more transparent and to facilitate a level playing field for banks that compete across national borders,2 +2914,in particular the asset quality review offers significant data on the potential shortcomings of the way in which the financial information disclosed by banks reflects the risk they assume,2 +2915,"another eleven banks plan to use the standard model for market risk while the remainder +have insufficient market risks to be affected by the new guidelines or are branches covered by their homecountry supervisors",2 +2916,in the context of bank capital adequacy supervisors increasingly must be able to assesssophisticated internal credit risk measurement systems as well as gauge the impact of the continueddevelopment in securitization and credit derivative markets,2 +2917,"as part of the vision the banking sector is expected +to effectively play its actual role in intermediation and for the banks to be among global +players in the international financial markets",2 +2918,"to be clear i don t want to give the impression that banks +lending decisions are driven solely or even primarily by regulatory capital requirements",2 +2919,"on top of that spanish banks +have increased their capital buffer over minimum requirements by 53 billion around 5 of gdp in the last three years",2 +2920,"in our case it proved to be an effective combination +since banks exposure to such entities coul d be regulated through absolute exposure norms +or even tweaking the risk weights applicable to such exposures",2 +2921,nevertheless restoring the capital position of greek banks represented only the first step of a more comprehensive reform plan to restore confidence in greek banks,2 +2922,it is encouraging however that banks have continued to strengthen their ability to absorb losses,2 +2923,it is essential that banks should be careful in their risk assessment and that the interest rates charged and volumes of funds lent should reflect the risk assessed,2 +2924,"and yes it is quite likely that the new regulations will force the banks to adjust their business models which may lead to +certain price increases",2 +2925,"at the centre of the case for reform in this area is the need for the sbp to regulate and supervise bank ing groups on a consolidated basis and to +apply prudential norms to all aspects of the business of groups that include banks",2 +2926,first the sudden reemphasis on bankbased intermediation has led to an urgent need for banks to raise very large amounts of capital,2 +2927,"moreover while the new regulations on banks capital and +liquidity ratio s will bring stability to the financial system once they are fully operational in the +short term they may act as a brake on loan growth",2 +2928,because of the deficiencies of the basel ii capital rules banks were able to halve their equity ratios without any increase in their riskweighted regulatory capital requirements,2 +2929,"before their transformation into banks observance of the +legal structure of savings banks meant that their restructuring could only move forward very +gradually step by step and with great prudence",2 +2930,furthermore they differentiate the treatment of certain financial instruments such as covered bonds high quality securitization instruments sovereign debt instruments and derivatives used for hedging with a view to reducing the costs of issuing or holding such instruments thus enabling the continuing participation of banks in the relevant securities markets,2 +2931,as part of the development of our domestic financial infrastructure the malaysia deposit insurance corporation was establish to provide a comprehensive deposit insurance and insurance benefit system for the banking and insurance sector,2 +2932,"despite these differences however the aim was to remove concerns +about the soundness of financial institutions by relieving uncertainty about their asset holdings",2 +2933,"the improvement in the spreads and functioning of securities markets has not been accompanied by any looseni ng of very tight credit conditions for bank +credit indeed banks have continued to tighten terms and standards in recent months albeit +at a slowing rate",2 +2934,while the lcrs objective is to promote shortterm resilience of a banks liquidity risk profile by ensuring that it has sufficient highquality liquid assets to survive a significant stress scenario lasting for one month the nsfr is aimed at promoting resilience over a relatively longer time horizon one year by creating additional incentives for banks to fund their activities with more stable sources of funding on an ongoing basis,2 +2935,"last month we increased t he capital requirements for our banks and are +currently registering over 100 insurance companies and around 60 nonbank deposit takers",2 +2936,as safeguards of your deposits at banks and starting with the asset quality review of banks announced by the reserve bank in 2015 since ably conducted by our supervisory teams and as acknowledged objectively by experts of reputed multilateral agencies we are doing all we can to break this unholy nexus,2 +2937,"liquidity positions will need to continue to be actively managed +and banking organizations will need to implement risk management improvements to remedy +the deficiencies that have been noted by companies and supervisors over the past year",2 +2938,only if banks see a realistic threat of failure they will have an incentive to manage risks in a prudent manner,2 +2939,moreover as an institution responsible for the financial system stability we have been implementing advanced macroprudential stress tests of the banking sectors solvency and liquidity for a long time,2 +2940,"even during the present phase the increase in provisioning can be funded out of banks +ordinary earnings",2 +2941,"consequently the new accord is designed to accommodate future changes in the way banks +measure and manage their risks by giving banks a range of options for calculating capital charges and incentives for using best practices",2 +2942,the committee will review the treatment of this risk under the three pillars of basel ii to strengthen minimum capital risk management and transparency inside and outside banks,2 +2943,"it is hoped that when investors see a much more stable and safer banking system they would +be willing to supply capital at lower returns",2 +2944,the pace and sequencing of the reforms have taken into account local market conditions as well as the risk profiles of banks by applying the principle of proportionality,2 +2945,"indeed in time we would expect at least the larger banks to have a fairly welldeveloped process for assessing all the risks inherent in their business the quality of the +management of these risks and ultimately how much capital they need to hold in respect of these +risks",2 +2946,"it is clearly evident that the migration to a market based model from the +conventional bank based model where banks used to play a very critical role in +intermediation has not diminished the importance of banks in the financial system",2 +2947,"under the advanced approaches capi tal requirements for an exposure will vary +on the basis of a banks actual risk experienc e if a bank increases the credit risk of its +portfolio its regulatory capital requirements will also increase and vice versa",2 +2948,the second weakness is generic to simple systems which conflate different levels of inherent risk namely that they tend to create incentives for banks to increase the average level of riskiness of their assets,2 +2949,"iv role of banks management in building up resilience to risks and shocks +as the regulatory architecture has evolved over a little over the last couple of decades it has +been accompanied by an increasing emphasis on internal controls and methodologies for building up the banks resilience to risks and shocks",2 +2950,"another related concern is the emergence of nonbank internet financial firms that have +balance sheets closely resembling that of banks but do not have access to the lenderoflast resort",2 +2951,"in particular the integrity of realtime information on changing prices valuation of financial position and warning on breaches of internal control is most critical now for banks top +management in taking timely and prudent decision",2 +2952,this reduces the risks of spillovers from bank failures to sovereigns and provides a common framework conducive to further integration in the banking markets a process which has been lagging,2 +2953,in particular we now have further evidence that there is alarge and growing disparity between the risk management practices of what might be called thebest practice financial institutions and those of their competitors around the globe,2 +2954,"while it is true that large international banks in the other g10 countries th eoretically have a choice +among the various basel ii credit risk and operational risk approaches in pr actice it appears these +banks will be adopting the more risksensitive adv anced approaches",2 +2955,"strengthening the resilience of financial institutions +let me first start with basel iii which constitutes the cornerstone of regulatory reform for the +banking sector",2 +2956,in the snbs view a possible recalibration of capital requirements must reflect the size and concentration of our banking sector,2 +2957,in my view this resilience has been the result not just of the presence of sufficient capital in the system but also of improvements in banks risk management systems,2 +2958,regulators and supervisors must fully understand any new financial innovations instruments and market practices in order to have the expertise to develop models assumptions and views of financial institutions and certify the risk management of those supervised institutions,2 +2959,"for our financial stability review and in our work for the esrb we are already using one of +this models to assess the second round impact of banks cross exposures to complement +the top down stress tests that we regularly conduct on a sample of 90 eu banks",2 +2960,this would also mean that financial institutions will need to meet higher standards of how they manage risks and govern their operations,2 +2961,"the industry may argue that the indian banks are very well +capitalised and no additional capital may be necessary on account of the sifiness of the +banks",2 +2962,"this mispricing of risk relates to deficiencies in risk management techniques but also and perhaps more importantly to existi ng incentives in the banking system oriented +towards the short term profitability of banks",2 +2963,"the financial safety net must be reassessed if it is so favourable that banks and market participants +are not encouraged to exercise market discipline",2 +2964,it has also become evident after the crisis that common risk exposures by financial institutions or the interconnectedness among institutions or markets can also be a source of systemic risk,2 +2965,"the role of bank of uganda in risk management in financial institutions +as bank of uganda we +have on a continuous basis issued risk management guidelines to +the supervised financial institutions sfis",2 +2966,"the role played by a robust and rigorous system of internal controls in banks is essential to avoid excessive risktaking especially when a bank operates in highly complex and innovative business +segments",2 +2967,"2011 who estimated the costs and benefits +of higher bank capital",2 +2968,while the situation is balanced for most banks elements of fragility remain in some cases especially in relation to banks ability to generate income flows suited to managing risks funding innovative investments and remunerating capital,2 +2969,third regulators in the cee countries have limited tools to act proactively due to the fact that a majority of the banks are owned by institutions headquartered in the eu,2 +2970,"in my mind the safety and soundness of individual banks the stability of the overall banking system +limitations on moral hazard enhanced market discipline and reduced taxpayer liability all begin with +strong equity capital positions at individual depository institutions",2 +2971,"the benefits of higher capital and its calibration +as i have highlighted better capitalised banks may represent substantial benefits from a +social perspective in the long run while the transition costs depend largely on the amount of additional capital that banks have to accumulate and the available time for banks to adjust to the new framework",2 +2972,financial institutions have limited net exposures on commodity derivatives and banks acting as clearing members are generally safeguarded by robust creditrisk management frameworks,2 +2973,the bank financial strength dashboard will significantly improve the accessibility comparability and timeliness of information about banks financial positions,2 +2974,"supervisors like more and more banks have adopted +a view of operational risk management as a comprehensive practice comparable to the management of market or credit risk",2 +2975,if the objective is to prevent systemic risk the trigger would be the total losses of all financial institutions enrolled in the system,2 +2976,"the six major banks in the uk have just announced that they will undertake a riskbased initiative of this +type",2 +2977,"in the coming years and we can start very soon we look forward to working +with banks with banking associations such as the bba and with academics and researchers +to find ways to move basel in the direction of full credit risk models",2 +2978,"g2d however supervisors are helping to spread the idea that financial institutions should round +out their current range of risk management tools to include extensive use of stress testing",2 +2979,by making predictions and assessing whether observed outcomes are consistent with those predictions we can better understand the complex dynamics in financial institutions and develop better policy,2 +2980,in some cases these reviews may well result in requiring individual banks to hold morecapital than the minimum regulatory standard,2 +2981,"part of this sense of assurance comesfrom the enhanced prudential supervision of banking organizations required both to protect thegovernments interest as insurer and to replace the market discipline that bank management and +depositors themselves used to provide but feel they no longer need given the perceived guarantees +of the safety net and supervision",2 +2982,"of particular +importance is that banks simulate their risk exposure s to hlis and the liquidity situation in periods of +stress",2 +2983,"why risk management assumes greater significance in banks +2",2 +2984,the first pillar provides for quantitative capital requirements in relation to three risk categories credit market and operational risk banks can compute the requirements using either a standardised approach or their own internal models,2 +2985,among these efforts is a review of the creditrisk aspects of asset securitization at our major banking companies,2 +2986,indeed if cyclical pressures continue to build and financial vulnerabilities broaden it may become appropriate to ask the largest banking organizations to build a countercyclical buffer ccyb of capital to maintain an adequate degree of resilience against stress,2 +2987,the review of the capital adequacy rules for banks now being prepared is a good example of how the overall purposes or rules to maintain financial stability can be combined with good scope for individual banks to apply the regulations in a way that is effective for them,2 +2988,"bis review 622006 1 + in addition to strengthening the linkage between minim um regulatory capital as calculated in pillar 1 +and the way banks manage their actual capital ba sel ii should make the financial system safer by +encouraging continuing improvement in riskmeasu rement and riskmanagement practices at the +largest banks",2 +2989,the aim is to provide a framework where banks and trust entities could expand opportunities for financial risk management and investment divers ification through prudent use of derivatives,2 +2990,"an analysis of the resiliency of the us banking system would be far from complete without a +recognition of the new techniques in risk management that have been applied in banking during the past few years",2 +2991,"in the +case of ltcm the banks had made a proper credit assessment and scrutiny of their counterparties",2 +2992,"basel ii by tying regulatory capital calculations to bankgenerated input s offers greater transparency +about riskmeasurement and management practices t hat stand behind the in puts provided by banks +and exactly how they are calculated",2 +2993,"in relation to this the bank for international settlements in their studies have identified that the lack of diversified structure and market may lead to increased risk from concentration of +credit and maturity risks in the banking system as the lack of markets may lead to the +mispricing of risk excessive delay in correcting large exposures as well as increased vulnerabilities from capital inflows",2 +2994,while both banks and pds are allowed as market makers in the swap market all business entities including banks and pds are permitted to hedge their underlying exposures using these instruments,2 +2995,naturally allowing banks to rely on internal models in determining their capital requirements has led and will continue to lead to changes in our supervisory process,2 +2996,we have also conducted quarterly stress tests on the biggest banking institutions based on a common macroeconomic scenario,2 +2997,as supervisors we will continue to stress to the regions bankers that a financial institutions decision to assume certain types of risk is a decision for the board of directors and senior management,2 +2998,and one of the reactions to this has been a call a very loud call in some places for banks to go back to basics in conducting their business,2 +2999,"against this background the internal corporate governance and organisation +of liquidity risk management varied according to the individual banks structure and business model",2 +3000,in this way relying on market financing tools banks faced pressure from market participants who recognized valuation losses and the authorities had no choice but to inject capital into banks at an early stage using public funds,2 +3001,one possible reason is that if enough of them were to do so for enough banks it might well help to protect the value of their investment portfolios more generally,2 +3002,that is not to introduce large changes in the aggregate amount of capital currently held in the banking system while at the same time to provide tangible incentives for banks to adopt the most advanced and sophisticated approaches to capital adequacy,2 +3003,furthermore it will be important for banks to be willing to use their capital buffers to absorb losses and continue to support lending,2 +3004,in this sense thebank does not intend to apply the checklist uniformly to all financial institutions but will utilizeit giving full consideration to the situation of each bank,2 +3005,"second to achieve those capital benefits the more advanced approaches to credit and operational +risk require banks to meet strong process control requirements",2 +3006,"for example detailed supervisory information about banks changing risk appetite and +exposure to different economic sectors and markets as well as how these risks are being +managed can provide useful early warnings about the health of the economy and potential systemic problems down the road",2 +3007,on numerous occasions over the last year i have discussed the importance of differentiating prudential regulation and supervision based on the varying nature of the risks posed by different groups of banks1 this differentiation needs to be explicit both in the analytic foundations of our prudential system and in the application of that system to banking organizations,2 +3008,regulatory requirements for tpps and banks obviously differ but so does the spectrum of services that they provide and the level of risk that they encounter and need to protect against,2 +3009,the use of cloudbased regtech technology for example gives banks the flexibility to adapt to changes in regulation and risk management while maintaining superb quality in risk management and compliance activities,2 +3010,"in this regard we hope that banks would ensure they have a good risk management system with an icaap that covers all significant risks including those stipulated under pillar i as well +bis review 1312009 3 + as other risks",2 +3011,"in essence there exist tw o elements of protection for the individual bank +one being capital and the other liquidity",2 +3012,the other main concern for financial stability is that low or negative interest rates may have an adverse impact on the profitability of banks and institutional investors ultimately putting their financial soundness at risk,2 +3013,"the road travelled so far has thus seen the entrenchment of a banking system with a proven +capacity to manage risk and high levels of profitability efficiency and solvency",2 +3014,the qas apply to all types and sizes of banks regardless of the performance test under which they are being evaluated,2 +3015,the ama builds upon the longtime best practices of banks to develop techniques for identifying measuring and attributing capital for operational risk,2 +3016,regulators have long realised that capital is the backbone of a bank it absorbs losses and it can prevent bank failures,2 +3017,from a regulatory perspective banks must therefore be required to have capital toabsorb the possible losses that result from risktaking and still remain solvent,2 +3018,"second we do monitor the exposures of banks to risky sectors and seek to limit their +exposure to such sectors through prudential regulations",2 +3019,"ho wever analysis of the systemic footprints of +these other us bank holding companies suggests that even if surcharges were to apply their amounts would be quite modest at least based on the current characteristics of these bank holding companies",2 +3020,in placing their securities the banks must be especially careful to comply with the investor protection rules since subscribers may be called on to contribute to the resolution costs,2 +3021,these inspections supplement the documentary controlsand are designed to assess banks ability to engage in the collection and investment of savings ina correct manner in accordance with criteria of sound and prudent management and all the legalrequirements,2 +3022,ideally a bottomup approach should also support banks own risk management capacity by forcing them to consider how severe adverse circumstances may affect their solvency,2 +3023,"in india banks should not take stress testing exercise a mere compliance requirement but accord due importance to it to facilitate the development of risk mitigation or contingency plans across a +range of stressed conditions",2 +3024,"clearly changes in financial markets have prompted supervisors and +bankers to reevaluate past assumptions in this period of economic slowing and to initiate adjustmentsthat ensure banking promptly adapts to conditions that are less certain and less robust than theextraordinary performance of recent years",2 +3025,bank indonesia will institute this affirmative policy for the greater good of all banks differentiating the weight of liability according to the portfolio conditions of each bank,2 +3026,"from the +perspective of banks supervisors and let us not forget counterparties and stakeholders capital is a cushion to ensure safety and soundness and to provide a benchmark against which the financial condition of banks can be measured",2 +3027,furthermore granular information on banks counterparties location of assets is called for in the assessment of banks exposures to physical risks,2 +3028,"in my comments today i will first address the recent financial performance of us banks and of +community banks in particular",2 +3029,"the basel iii standards for increased bank capital and liquidity will provide a strong +anchor for enhancing the resilience of each individual institution to adverse shocks",2 +3030,a related problem is the weakness in banks creditassessment processes that allowed them to build up some very large exposures to hedge fundsand other financial institutions,2 +3031,in particular to better identify potential channels of financial contagion supervisors are working to improve their understanding of banks largest exposures to other banks nonbank financial institutions and corporate borrowers,2 +3032,"banks use securitization for example to remove their lower risk loans which +perhaps they otherwise would not originate from their banking books reducing the associatedcapital charges",2 +3033," regulations allow financial institutions to rely on due diligence conducted by another bank +when they welcome a new customer",2 +3034,however there are some inherent rigidities which fail to cover many of the risks that banks assume in their business operations,2 +3035,overall banks must ultimately respond to losses on risky assets by raising new capital,2 +3036,however the results of a bundesbank survey of banks have indicated that the risks inherent in real estate business are hardly procyclical,2 +3037,so if banks are to bear the true cost of the risks they take changes need to be made to the environment in which banks operate,2 +3038,first banking procyclicality behavior following financial cycle and increase in short term highcost fund in the banks third party fund,2 +3039,"4 although ordinary +small depositors by and large did not run we nevertheless experienced the equivalent of runs on the network of nonbank financial institutions that has come to be called the shadow +banking system",2 +3040,"the result of the stress test is t hat the banking institutions losses on loans and guarantees will rise by +almost 15 percentage points over t he 3 year period",2 +3041,"to improve the functioning of financial institutions the bank will use its onsite examinations and +offsite monitoring to provide an environment in which banks can build new business models and +function efficiently with a highly sophisticated and integrated risk management system",2 +3042,while the banking agencies have tailored the volcker rule and have proposed significant tailoring of incentive compensation rules community banks and supervisors would benefit from not having to focus on regulatory compliance for matters that are unlikely to pose problems at smaller banks,2 +3043,the first is that banks preserve their capital base and build up adequate provisions for risk,2 +3044,"more recently the focus of supervision of holding companies by the federal +reserve is being modified to parallel the changes in the management of banking companiesmost large institutions in recent years have moved toward consolidated risk management acrossall their bank and nonbank activities",2 +3045,this practice of seeking comment on significant guidance leads to better more informed supervision and better engagement by banks,2 +3046,"the proposed foundation approach intended mainly forregional banks and the advanced internal riskbased approach intended mainly for large complex +banking organizations would require banks to create and use internal risk classifications for their +banking book",2 +3047,"and of course any such +insurance scheme must be prefunded it is no good trying to collect levies from riskier banks after they have gone bust",2 +3048,"french banks must buttress the elements that have allowed them to withstand +cyclical contingencies for the past few years +in addition to diversifying their business lines and i am pleased to note that securities analysts are +now taking this factor into account when assessing different banking industries french banks have improved their capacity to withstand cyclical contingencies",2 +3049,"risks and counterparty relationships outstripped banks +ability to manage them",2 +3050,by adopting regtech we can enhance the overall risk management and compliance quality of banks,2 +3051,"lender of last resort for an increasing number of players +traditionally systemic risks have been primarily associated with large banks",2 +3052,specifically reform efforts are concentrated on developing standards that are more risk sensitive and that build upon the internal riskrating and riskmeasurement systems that have been developed by the relatively small group of the worlds most financially sophisticated and complex banks,2 +3053,"the rates are attractive for buyers as banks now +conform with the riskbased provisioning required by the bangko sentral",2 +3054,"while liquidity pressures in banking and financial markets have eased of late we do recognize that institutions must prepare themselves for the possibility that liqui dity problems could return either marketwide +or at an individual institution",2 +3055,60see remsperger h 2000 p 7 for a more detailed discussion about the interdependence of asset prices and credit riskbis review 812000 10hand in hand with exerting supervisory duties over the banking sector,2 +3056,"this would not in all circumstances be a less robust system than one +where individual banks have reasonably diversified portfolios which are all as a result vulnerable tocommon shocks or one where a smaller number of large banks are all directly interconnected witheach other",2 +3057,that is why german banking supervisors have formulated risk management principles for the institutions we oversee creating fixed terms of reference despite rapid developments,2 +3058,"of course we and the other banking +agencies will vigorously enforce prudential capital standards for all deposittaking institutions including +those owned by the exempt bhcs",2 +3059,the banks counterparties have a financial incentive to optimise their use of collateral in these operations by selecting the cheapest to deliver,2 +3060,"the first reason is that at the point +when actions have to be taken to deal with a bank in difficulty there will inevitably be a considerable amount of uncertainty about how b ad that banks problems are",2 +3061,"the approach will also continue to be riskbased in which the expectations in +governance and risk management are higher for the larger and more complex financial institutions and when these expectations are not met the bank will respond with supervisory actions",2 +3062,"we are conducting +assessments of selected banking institutions capital adequacy based on certain macroeconomic scenarios",2 +3063,and currently 21 of exposures retained by banks are covenantlite against 74 of those that they distribute,2 +3064,"most notably there is an ongoing debate on the design of an adequate capital ratio in order +to increase banks resilience and ability to absorb losses",2 +3065,the most important tool in our kit is ensuring banks hold sufficient capital equity to be able to absorb unanticipated events,2 +3066,"in +addition while utilizing the information of individual financial institutions obtained through +such processes the bank seeks to gain a holistic view on the soundness of the entire +financial system",2 +3067,"2 bis review 632002 + the surprises that have occurred at banks are due to the nature of risk exposure and the quality of risk +management practices including use of offbalancesheet vehicles",2 +3068," the standard should require banks to hold a buffer consisting of assets whose +liquidity and value is robust to massive disruptions in the financial markets",2 +3069,it is all the more important then for banks to gear their operations towards sustainable profitability,2 +3070,i believe that banks and other financialinstitutions could significantly improve their disclosures by providing more information to themarket about their risk management policies and practices and about the values of internalrisk measures,2 +3071,firstly separation will limit the risk of contagion from nonbanking businesses to the bank,2 +3072,"eesti panks analyses confirm that the current capitalisation is +sufficient to cover possible larger loan losses without banks having to include additional +capital",2 +3073,"all of these features are intended to strengthen the incentives for market scrutiny of banks and to further encourage the directors and managers of banks to ensure that their banks risks especially credit risk market risks +exposure concentration operational risk and liquidity are being prudently managed",2 +3074,"in line with +coase banks have chosen the size which maximises their private value",2 +3075,and we need to build on the pillar 3 disclosure requirements of the framework to strengthen banks transparency around exposures to structured credit products and securitised assets including banks involvement as sponsors,2 +3076,"management should make certain that the economic +substance of risk exposures is fully recognised and incorporated into the banks systems",2 +3077,as a bank dominated financial system it is important for us that the banks have the ability to undertake intermediation in a productive and efficient manner,2 +3078,"it also provides banks management +with a tool to improve their internal risk managements by identifying the stress points in their +operations",2 +3079,the safely net is composed of 1 a framework to recapitalizefinancial institutions with public funds 2 full protection of deposits and other financial institutionliabilities and 3 a scheme to establish bridge banks or temporarily nationalize troubled banks,2 +3080,"this entails +first enhanced capital requirements for banks thereby reducing their vulnerability to sudden assetprice movements and ensure they have the resources to support any offbalance sheet exposures",2 +3081,these exercises include the independent loan loss forecasting and stress testing exercises carried out earlier this year to help establish the capital needs of the banks under the prudential capital assessment review pcar,2 +3082,"48 riskmanagement profile +the emphasis on risk management is most critical at our largest most sophisticated banks and most +internationally active banks",2 +3083,"not only are the activities of banks +central to credit intermediation but in this country banks fund their activities in part with federally insured deposits",2 +3084,"it is interesting to note that among the factors that affect banks +restrictive intentions neither the one concerning the liquidity position of the banks +themselves nor the one concerning access to fi nancial markets seems significant any longer",2 +3085,however under the assumption of the banks good intentions we can say that all banks have been able to meet the minimum capital requirement and will also be able to meet the rp100 billion capital requirement by the end of 2010,2 +3086,"however it is critical for individual financial institutions +themselves independent of the discussions on such a regulatory framework to strive to strengthen their capital bases that are consistent with the risks they hold",2 +3087,we have been emphasizing upon our banks the value of strengthening risk management frameworks and methodologies along with requiring their boards to institute a strong corporate governance culture to manage the banks effectively,2 +3088,the longer they are nottaken the longer troubled banks will continue incurring losses engaging in riskypractices threatening the safe institutions generating contagion effects and notperforming the banks allimportant maturity transformation function,2 +3089,"in this context we have been +closely monitoring counterparty exposures arisi ng from transactions with monoline financial +guarantors and have been discussing with banks the measurement and management of these positions",2 +3090,all in all big banks are not necessarily safer from a systemic perspective,2 +3091,in general we shape our supervisory expectations for each portfolio by considering the increase in safety and soundness that we are likely to achieve through a specific practice or requirement in light of the regulatory costs for the banking organizations in the portfolio and the impact that the stress or failure of those institutions would likely have on credit intermediation the deposit insurance fund and financial stability,2 +3092,"third we believe the major financial institutions n eed to continue to improve their capacity to measure +their exposure to risk in a less benign market and economic environment than we have experienced in recent years",2 +3093,the plethora of new developments occurring simultaneously will put a number of banks business models under pressure,2 +3094,the focus of microprudential regulation is on the distortions to funding costs that may arise when depositors or capital markets do not require the funds they provide fully to price in the risks assumed by banks in using those funds whether because of federal deposit insurance or expectations of a government safety net,2 +3095,basically these reforms allow banks to transfer instruments previously marked to market to portfolios where that will no longer be the case,2 +3096,before returning to this issue though i want to speak more directly to why and how we should analyze the risks and benefits associated with specific forms of nonbank financial intermediation rather than make regulatory decisions based upon the fact that a particular form of intermediation bears some resemblance to the borrowing or lending activities traditionally associated with commercial banks,2 +3097,"going along with these +vulnerabilities are an increase in the risk of forei gn lenders becoming unwilling to continue to provide +funding and a concern about how that unwillingne ss might play out in the new zealand financial +markets and in the exposures of banks in ne w zealand",2 +3098,"banks know that customers counterparties creditors and investors consider +capital as well as the financial performance and risk exposures of banks when making their decisions",2 +3099,"im +convinced that if bank balance sheets do not take adequate account of sovereign risk this +will remain an achilles heel in the financial system",2 +3100,this was achieved through the publication of consistent and granular data on a bankbybank basis with banks judged to have either passed or failed the test,2 +3101,"indeed the common equity capital to riskweighted assets ratio of the bank holding companies participating in the comprehensive capital analysis and review has more than doubled from 55 percent in the first quarter of 2009 to 12 percent in the fourth quarter of 20172 +we now regularly conduct comprehensive stress tests of the largest banking firms to help ensure that their capital distribution plans are consistent with their ability to lend and withstand severe macroeconomic and financial stress like that observed during the financial crisis",2 +3102,first being an integrated supervisor gives us better insights into the full range of activities that a financial institution engages in and hence facilitates more holistic financial supervision,2 +3103,the incentives for the sale of bank shares will facilitate the reorganization of thebanking system and foster an increase in bank size especially if the sales bring in authentic freshcapital,2 +3104,but ultimately risk management is a culture that has to develop from within theinternal management systems of the banks,2 +3105,it can do so by assisting banks ability to fund and distribute risk,2 +3106,to survive and be effective banks must be willing and able to take riskrevenue shareholder equity and if necessary the bank insurance fund are there to deal withmistakes,2 +3107,"the same can be said of the +various guarantees under which banks globally are raising money at present",2 +3108,"moreover banks can partially +hedge their risk and diversify their exposures",2 +3109,"these products can give rise to default risks that are not captured well in methodologies required by +the current rule specifying a tenday holding per iod and a 99 percent confidence interval thereby +creating potential arbitrage opportunities between the banking book and the trading book",2 +3110,banks and other financial institutions often rely on insurance and other hedging strategies to reduce potential losses,2 +3111,there were clearly lessons to learn from that exercise most notably the importance of clarity of early communication by the bank to financial institutions about the standards to which they would be held,2 +3112,from 2019 when it is possible for all instruments to be deployed in full banks and savings banks will have to hold cet1 capital equal to at least 7 of riskweighted assets,2 +3113,moving forward bank negara malaysia is looking to address identified gaps in technology risk management practices within the financial sector,2 +3114,this evaluation combines the quantitative results from the doddfrank act stress tests with a qualitative assessment of whether the largest bank holding companies have vigorous forwardlooking capital planning processes that account for their unique risks,2 +3115,"it is easier for the banks to increase the buffers by reducing lending that is relatively risky rather than reducing other +lending",2 +3116,"managing risks +the health of financial institutions today is also a result of improvement in the riskmanagement +process that has been ongoing at banks for years",2 +3117,if the credit risks disappear from the banks where do they go,2 +3118,"so banks with an existing brand name still have some advantage but it is not something that can be +wholly taken for granted",2 +3119,"the impact of higher capital ratios and more provisions on the resilience of banks is +selfevident",2 +3120,so we should foster a stronger risk management perspective and techniques with regard to climaterelated risks it is about having an adequate mapping and classification of atrisk assets and including them in banks forwardlooking risk strategies with a longer time horizon than banks commonly use for assessing traditional risks,2 +3121,"in addition bot h heightened risk aversion and regulatory changes mean that banks will want +to hold significantly more high quality liquid assets than in the past chart 6 shows these +holdings had shrunk to less than 1 of bank assets pre crisis",2 +3122,transition planning is the second step and one that will help banks to effectively develop a mitigation strategy to soften longterm impacts,2 +3123,it will also allow combining accountingbased information on the banking and financial sectors at large with firms risk management views and their perception of the main risks further down the road,2 +3124,the upshot for banks is that in time this could have the potential of replacing many templatebased regulatory reports and lessening the reporting burden on banks,2 +3125,"obviously this bankcentred risk propagation still +holds in fact much of the existing safety net is aimed at preventing a chain reaction within the banking system",2 +3126,recently as i noted earlier banks are also using moresophisticated creditriskmanagement tools,2 +3127,"these measures were needed to specifically address the issues of rapidly escalating asset +prices and the possible impact on banks balance sheets in a bank dominated financial +sector",2 +3128,"apart from the fact that it was difficult to value the instruments themselves the complex links between the b anks and their special companies made it +difficult to see the actual exposures of t he banks",2 +3129,for example the increasing use and sophistication ofcredit risk models at the largest and most complex domestic and foreign banks has profoundimplications for supervisory activities as well as capital regulation,2 +3130,it is then important to assess the likelihood that the banks safeguarding actions could worsen market conditions and actually increase its losses,2 +3131,"in the boards judgment it is unlikely that increased coverage even by indexing today would add +measurably to the stability of the banking system",2 +3132,an introductory chapter on the history and purposes of bank regulation revealed a complicated set of issues concerning changes in the structure and activities of banks which among other things suggested that the rationales for regulating banks might vary depending on the size business model and affiliations of a bank,2 +3133,we intend that thisphilosophy of holding company supervision will not change as banks are granted extended powers,2 +3134,another crucial measure to cut the sovereignbanking nexus refers to the regulatory capital requirement regime for banks,2 +3135,"they enable banks to +shoulder greater losses by themselves and thus shift the risk back to the owner",2 +3136,this places additional pressure on the demand for liquid assets because banks refinance this shortage against eligible collateral which is in addition to the assets needed for the prudential liquid asset requirement,2 +3137,"third it is desirable to reduce the risk associated with stock price fluctuations in banks shareholdings +for financial system stability",2 +3138,"an increase in the business that banks do with highly leveraged investors like some hedge +funds leads to an increase in the attention that banks must pay to counterparty risk management",2 +3139,"in particular deteriorating market liquidity often forces banks to +lengthen the horizon over which they can execute their risk management strategies",2 +3140,the basel committee has rightly in my view set out to make sure that in future banks will not be able to operate with so little capital relative to their assets,2 +3141,the reforms resulted from a reassessment of the role of banks in the postcrisis world justified by the adverse systemic effects of their distress,2 +3142,"focusing on price stability limits the banks ability to pursue its other major +objective financial stability",2 +3143,it compensates the lack of capital relief for banks in a regulatory environment which treats government bonds as risk free,2 +3144,it seems to me that an awareness of these risks does not yet exist at all levels of management at banks,2 +3145,"this development reflects the reluctance of banks to lend to each other and is closely related to a general lack of transparency as i mentioned earlier + about the magnitude of exposures that individual banks carry on their books",2 +3146,"as lane notes +in both directions banks were the main proximate investor in other banks so wer e +instrumental in the cross border retrenchment as part of the general breakdown in interbank +markets during the crisis",2 +3147,in addition the bank is the regulator and supervisor of most financial institutions operating in ireland,2 +3148,"the third area relates to the need for banking institutions to enlarge their sphere of influence +going forward given the changing environmen t banks will increasingly be exposed to +external developments and the forces of market discipline",2 +3149,rather ill be making the case today that technology will make banks better whether it is delivered by an established bank or a new market entrant,2 +3150,it has been very difficult for examiners to get large banks to tighten their operations especially when the banks were generating tremendous profits,2 +3151,a mix of different kinds of banks can make a contribution to meeting these requirements as efficiently as possible,2 +3152,the investments that banks propose to their customers must be perfectly consistent with the investors propensity for risk and their financial sophistication,2 +3153,prudential supervision has now returned to the bank facilitating a more coordinated approach to financial crisis management horizon scanning and proactive contingency planning and improving the banks ability to evaluate solvency ahead of any lolr,2 +3154,"the fact that credit risks are spread to other institutions with significant equity +such as insurance companies may thus r educe the risks in the financial system",2 +3155,it was a nonbank and its failure both imposed direct losses on its many types of counterparties and disrupted many markets with negative effects on banks,2 +3156,"it reached the point where the performance of +these companies began to impact the soundness of major commercial banks themselves",2 +3157,it will be important to verify the overall consistency of the framework imposing stricter prudential requirements on those banks that operated with the particularly risky business models that were at the root of the crisis,2 +3158,"20 under such circumstances any runs on banks for what ever reason became to some extent selfjustifying +whatever the quality of assets held by banks",2 +3159,first banks canbe required to hold enough capital in relation to risks so that moral hazard incentives areminimized,2 +3160," liabilities with high run off rates under the lcr such as deposits held by other +financial institutions have been repriced to reflect the fact that they are not +particularly attractive forms of funding for a bank",2 +3161,are greek banks now safe in terms of their capital position,2 +3162,by banks to clean up their balance sheets review their business models and reduce risky portfolios,2 +3163,following the collapse of one of the integration projects 13 institutions commercial banks and savings banks needed to increase their capital,2 +3164,the sensitivity analysis will help us judge whether banks would have enough capital if economic and financial conditions were to worsen,2 +3165,"the markets reaction has demonstrated that +the royal decreelaw has been most effective in restoring confidence in the spanish banking system and has ushered in a new stage in the process of savings bank restructuring adding to the progress of recent years in cleaning up balance sheets and reducing the sectors capacity and fragmentation",2 +3166,"what lessons are there to learn from financial crisis especially as we recapitalize our banks +to make them stronger and therefore better endowed for effective financial intermediation",2 +3167,"we want banks to deploy capital and +liquidity but in a responsible way that avoids past mistakes and does not create new ones",2 +3168,"for the new +financial holding companies the consolidated capital issue is complicated by the affiliation of banks +with institutions that have their own financial regulator and capital regulation",2 +3169,"however changes in the world and especially the changes in the +complexities in financial systems have forced cent ral banks to be mindful of the need for moving into +strategic planning as a major management device",2 +3170,in other words a regulator may regulate banks though banks may involve themselves inother activities such as being an intermediary in capital markets,2 +3171,to provide examiners with guidancein reviewing the adequacy of risk management at individual banks during onsite examinationsthe bank completely revised the checklist in may 1996 and it was distributed to financialinstitutions under the banks supervision as well as to various other financial institutions in thebelief that it could serve as a reference as they undertake initiatives to check and strengthen theirrisk management systems,2 +3172,the participative approach adopted by the bank has permitted prompt handling of issues affecting the banking industry,2 +3173,the message to banks and savings banks then is that they ought to make provisions if they want to stay healthy in the long term that is and remains without a doubt the best medicine,2 +3174,"as the bills are +not funded by banks they feel that their obligation is limited merely to regulatory reporting of +such cases although some banks have been found to not be diligent even in reporting",2 +3175,"plans to ringfence certain risky banking business by creating independent trading units within +banks are another such approach they reduce in ternal crosssubsidising of risky trading +business thereby giving depositors better protection from the risks of such business",2 +3176,"the guidelines seek to define clearly the roles responsibilities and risks that banks retain or undertake +when they participate in a securitisation transaction",2 +3177,"it is likely that banks will look for more capital and liquidity efficient models +for instance by offering products with a more stable or feebased income stream",2 +3178,in my remarks i would like to look at the situation at swiss banks from a financial stability perspective taking the big banks first and then moving on to a discussion of domestically focused banks,2 +3179,while this increase in the cost of equity may initially be compensated by the substitution of equity with debt funding the scope for such substitution is limited by regulatory requirements and banks own motives to establish adequate capital buffers,2 +3180, hleg is based on the view that underwriting is closely connected with corporate banking and thus naturally belongs to the deposit bank,2 +3181,"it creates room for diversification of the range of financial services +that a bank can provide",2 +3182,the standards are an amalgamation of the best practices of many banks,2 +3183,rather i thought it would be helpful at this early stage to offer my views on capital regulation and the role that capital standards play in helping to advance the safety and soundness of banks and the stability of the financial system,2 +3184,"it is also likely to discourage banks from investing the resources necessary to +better measure operating risk",2 +3185,in the area of banking supervision this year the ecb has formally identified climaterelated risk as one of the key risks facing the banking sector,2 +3186,we will also be issuing guidelines on riskbased approach to pricing to help ensure that exposures of banksfinancial institutions to risks associated with lendingfinancing activities are adequately compensated,2 +3187,"although +the direct credit exposure of financial institutions to hedge funds seems to have been relatively modest hedge funds activities such as sudden large scale liquidation and the +influence on market price dynamics and market liquidity have posed an indirect risk to core +financial institutions and the broader financial system",2 +3188," there is an uncertainty di scount attached to almost all banks due to opacity +of banks balance sheets creating some uncertainty as to the quality of the +assets",2 +3189,"not long ago bank indonesia issued regulations on risk management that apply to +all commercial banks as a minimum standard that banks will soon be required to meet",2 +3190," in order to better diversify the risk arising from the concentration in banks investments in +the international financial markets lower thresholds were set for banks large exposures",2 +3191,some curative steps by incumbent financial institutions are in the offing,2 +3192,"one big question therefore is how far we could get in dampening the credit cycle by +focusing on the provision of liquidity and so leverage by banks to other financial firms",2 +3193,"that is why as a +complement to the regulatory responses banks need to take immediate action straightaway regarding their internal risk management policies which play a crucial role both in terms of +liabilities and assets",2 +3194,choosing acredit strategy has become more challenging in light of changing competition not only becauselarger financial institutions have become more diversified and global but also because themarket distributes credit risk far differently than it did a decade ago,2 +3195,"by +looking closely at business models we want to increase our understanding of how banks actually make money and become better able to discern high risk strategies",2 +3196,this is possible because insurance has the ability to pool assess and assume risks that are outside the expertise and capacity of banks or businesses themselves to bear,2 +3197,"the second set is based on a vector autoregressive var model which assesses the impact of the overall economic 8 bis central bankers speeches + stress situation on the asset quality and capital adequacy of the banking system taking into +account the feedback effect of the macroeconomic performance of the economy on banks +stability",2 +3198,for another thing rising interest rates depress securities prices especially at banks that have not hedged securities holdings on their balance sheets and these tend to be smaller banks for the most part,2 +3199,"it will lay down minimum standards for banks to hold some resiliently liquid assets and about the +funding of illiquid assets",2 +3200,the ecb will define common practices and criteria it will monitor the actions and position of these banks and it will always be entitled if it considers it necessary to reclaim direct supervision over any of these banks,2 +3201,"there is growing dependence on purchased liquidity and also an increase in the illiquid component in banks balance sheets with greater +reliance on volatile liabilities like bulk deposits to fund asset growth",2 +3202,"the bank has adopted and promulgated a fee structure for its liquidityinsurance facilities that increases as banks borrowing increases andor is made against riskier less liquid +collateral",2 +3203,furthermore consistent with the basel framework for domestic systemically important banks dsibs apra has determined that due to their size interconnectedness substitutability and complexity the major banks should be required to hold more capital against their riskweighted assets than smaller financial intuitions,2 +3204,"the focus of the banks work is making su re that key systemic ri sks are identified and +establishing minimum standards to control that risk",2 +3205,"though most of our work and recommendations will focus on financial institutions under the +supervision of the bank of thailand we expect that the outcome of this process will provide a common framework for policymaking among the supervisory authorities in thailand and serve as a shared foundation for coordinating our efforts between the private and public sectors in transforming our financial infrastructures towards a deeper more efficient balanced and sound system",2 +3206,although to a lesser extent similar friction is occasionally exhibited even by regulated entities as can be seen in banks shunning of the fx retail 3 platform which would significantly improve the price for retail buyerssellers of forex,2 +3207,"seventh there is a progressive blurring of the boundaries between liquidity and solvency +stress faced by the banks in situations of generalised uncertainty in the markets and the loss +of confidence amongst financial entities",2 +3208,they promote transparency in the banking sector improve market discipline foster banks own risk management capacity and importantly inform prudential decisions of both a microprudential and macroprudential nature,2 +3209,"suddenly there was a great deal of uncertainty not only about the extent of losses and the +ability of banks to withstand those losses but about the extent of risk in the system where it +lay and how it might explode",2 +3210,"no +specific basel 2 approach is mandated to any bank irrespective of its size and complexity of its transactions",2 +3211,what i think is relevant from a financial stability perspective is that such entities create banklike risk without being subject to bank regulation,2 +3212,"the exercise is designed to ensure that banks are managed in a sound and prudent manner +and to dispel any market concerns over their financial soundness",2 +3213,further changes to banks business models will be brought about by structural measures,2 +3214,"it is designed to push banks to +continue to upgrade their risk management and capital assessment processes",2 +3215,"in the light of the experience it is fair to say that liquidity risk has been neglected in banks +overall risk management compared to all the att ention that over the past years has gone to +capital management",2 +3216,"due to the quality of public supervision and private risk management our banks had one of the +soundest capital bases in the world",2 +3217,"these vehicles like +banks themselves were funding longerterm assets with shortterm liabilities and like banks they were subject to a run when their lenders became concerned about the quality of +the assets",2 +3218,"to uncover hidden exposure and to +appropriately assess risk in the banking system rather than looking at individual institutions risk assessment should therefore make an attempt to judge the risk exposure of the system as a whole",2 +3219,"the structural +trends i have just identified have obviously prompted banks to reconsider their activities and theirdistribution channels",2 +3220,"additionally the underlying principle for introduci ng further criteria should be the preservation +of the banks financial soundness",2 +3221,a higher capital adequacy requirement for taking bigger risks will thus lead to the banks being forced to charge more for lending money to higher risk borrowers,2 +3222,"new zealand banks did not suffer a serious credit shock in the gfc +but we saw how quickly bank capital could be eroded in global financial institutions",2 +3223,even before the financial sector assessment programme started we at the bank of mauritius had already identified certain areas of vulnerability of our banking industry,2 +3224,"for the banks the greatest expense is in establishing the mechanisms necessary for a bank to evaluate and control their +risk exposures more formally",2 +3225,it is matter of great concern if bank lending funds an equity market boom or for that matter any asset price boom,2 +3226,of course nonbank lenders do not have acce ss to insured deposits,2 +3227,so today ill set out how leverage outside the banking sector can create risks to financial stability starting with that small corner of the pensions market,2 +3228,"apart from increasing their lending to the banks they have also bought +various types of domestic financial assets",2 +3229,"and this prevalence also explains the minimal direct exposure of our financial institutions to other factors of risk associated with recent developments in the international +financial markets",2 +3230,a key institutional support to the new regulatory framework is the establishment of a mandatory deposit insurance system to protect credit union members and by extension to enhance stability of the financial sector,2 +3231,"having said that i would like to stress that financial institutions are ultimately responsible for ensuring that all relevant risks including liquidity risk are properly integrated into their overall +risk management",2 +3232,another area of intense interest is the expansion of financial activities beyond the traditional chartered banking institution construct,2 +3233,enhanced focus on risk management is all the more necessary as banks in india prepare themselves for the basel iii regime,2 +3234,"this forms a natural +part of our work in the financial stability field which also encompasses other countries where the swedish banks have a significant presence",2 +3235,"the guidelines issued by the financial stability board envisage two basic principles for bank +managers compensation that it must be tied to the risks taken and that it must not +jeopardize the preservation of the banks capital",2 +3236,"if banks had decided to call in non performing loans they would +have been forced to write off existing capital",2 +3237,this is because large and sustained booms on credit and asset prices once they occur are typically a reflection of the failure of financial institutions to manage risk,2 +3238,"making consistent positive carry may diminish the sense of urgency with which banks reduce +leverage or write down bad assets",2 +3239,"this aspect seems all the more important as global custodians tend to +become direct competitors to traditional financial market infrastructures",2 +3240,"to +the extent banks want to reduce their operationalrisk capital charge through the use of insurance +banks must analyze and demonstrate the relationship between specific losses and the ability to collect +from the insurer",2 +3241,at the same time the owners of bank equity will have a larger stake in a banks business and risktaking,2 +3242,"it shows that the role of credit risk seems to have diminished while the contribution of other factors increased after midmarch as liquidity concerns in money markets rose following the collapse of bear stearns which +induced banks to hoard more liquidity",2 +3243,"we are attempting to dismantle the barriers to competition in a careful way that will give the banks a +chance to adapt and avoid undue risks to the safety and soundness of the banking system",2 +3244,"we also hold periodic meetings with the top managements of banks to alert them to the banks vulnerabilities and +to sensitize them to our supervisory concerns",2 +3245,"the objectives of the proposed +changes are to enhance the rules risk sensitivity and to reflect changes in the composition of banks +trading books and changes in riskmanagement practices over the last ten years",2 +3246,when we look at financial stability concerns in nonbanks we are looking less at the riskbearing capacity of the individual institutions balance sheet and more at the potential for contagion and shock amplification through the system and amplification of the broader financial cycle,2 +3247,through those reviews we are identifying weaknesses in banks risk management practices including underwriting practices appraisal processes stress testing and market analysis,2 +3248,we discuss challenges faced by these banks on both bank associations platforms and the bank of russias platform and we are ready to finetune our regulation to create the best environment for sme operations,2 +3249,financial stability isnt about protecting incumbent banks or other existing firms from competition,2 +3250,second the domestic borrowing target imparts a procyclical bias to fiscal policy when budget revenues fall because of lower than forecast economic activity public spending must be cut to meet the target,3 +3251,i became concerned at the beginning of 2010 when back in february the budget deficits of several countries for 2009 were known and were higher than anyone expected,3 +3252,on the contrarythe surplus would gradually be reduced and in about 10 years the budget would begin to show adeficit,3 +3253,the constraining factor even then was the high fiscal deficit,3 +3254,"the gove rnment of india is pursuing the path of rulebased +fiscal consolidation from the year 200405 unde r the fiscal responsibility and budget management +act 2003 whereunder timespecific targets hav e been mandated",3 +3255,"to a considerable extent the fiscal legacy can be seen as one +manifestation of a broader legacy of lost output and hence weaker budgetary positions +through automatic stabilisers over a period of several years",3 +3256,moreover fiscal rules regarding budget deficits have the advantage of promoting an efficiency analysis of government plans,3 +3257,the credibility that italy has regained with its efforts and its awareness that there is no alternative to proceeding along the road of reform is producing savings on interest payments making it easier to contain the budget deficit,3 +3258,nor does it change the outlook for thefederal budget deficit apart from any modifications to the indexing formulas for entitlementsand income taxes,3 +3259,in fy201617 the third consecutive year of generating primary surpluses greater than 70 per cent of gdp jamaicas fiscal consolidation efforts produced a balanced budget,3 +3260,"the sustainability of +the budgetary situation in some countries is at stake",3 +3261,"recognising this the gove rnment made a commitme nt to strength en the fiscal consolidation process +with the ena ctment of the fisc al ma nagem ent resp onsibility act fmra in 2002 de signed to +reduce the budget deficit and outsta nding debt in the me dium te rm",3 +3262,"given the downward rigidity in revenue expenditu re and sluggishness in nontax receipts the scope +for deepening fiscal empowerment lies in improving tax revenue",3 +3263,in addition deficits fell very slowly in 1998 this reduction in fiscal imbalances beingthe result of strong economic growth and falling interest payments rather than of genuinefiscal consolidation measures,3 +3264,"as a general rule we recommend to all countries no t just italy that in the most encouraging part of +the cycle the windfall revenues should be used to ba lance the budget",3 +3265,the primary reason for these large budget deficits has been low tax collections,3 +3266,"to exceed thespending ceiling the first time it is exposed to serious strains would harm confidence in the budget +system that has been established",3 +3267,all this means that the budgetary policy measures to meet the budget deficit targets are less costly,3 +3268,"there is a re asonable case to make th at the us fiscal deficit a lthough a p roblem is a problem of +manag eable dimen sions for the medi um term p rovided we deliver mo dest ch ange s to th e paths of +expenditu res and revenu es",3 +3269,"finally budget deficit and debt stock of the +public are no longer sources of vulnerability",3 +3270,it is evident that such weaknesses in the administrative and political structure put an unnecessary burden on greeces fiscal position,3 +3271,both are necessary because they are mutually reinforcing fiscal sustainability creates the stability and confidence necessary for future growth and higher growth creates the revenues and debttogdp ratios necessary for fiscal sustainability,3 +3272,fiscal cushioning mechanisms however are by far the least significant only 10 to 15 of economic shocks are absorbed through public finances8 this last figure is similar in other federal systems,3 +3273,and of course at a laterdate it will be necessary to apply those provisions consistently if excessive budget deficits areincurred,3 +3274,"in such a scenario what are now seen as cyclical fiscal +deficits may in fact morph into structural fiscal deficits",3 +3275,as a result a large majority of countries failed to meet the budgetary balances targeted in the stability programmes for 2001,3 +3276,"in the +maastricht treaty the eu countries agreed that budget deficits and government debt relative to gdpare to be limited to 3 and 60 per cent respectively",3 +3277,the new zealand fiscal accounts continue in deficit but with a credible and improving track going forward,3 +3278,"3 public +final spending is scheduled according to the stated intentions of federal and state +governments to be subdued over the next couple of y ears",3 +3279,"further the reform of national fiscal +frameworks is being promoted so that budgetary policy rules and surveillance systems will be adopted that help curtail spending",3 +3280,"favorable terms of trade and a fiscal policy where government spending is tied to the central governments permanent income have helped avoid a major real appreciation and at the same time have permitted to accumulate public resources to guarantee that future +expansion of public spending will be less dependent of commodity price cycles",3 +3281,"at the heart of these efforts was the fiscal +responsibility and budget management frbm act which mandated a calibrated road map +towards fiscal sustainability",3 +3282,finally there are papers which try to prove that there is no deficit,3 +3283,however new vulnerabilities have emerged especially a broadbased deterioration in the fiscal positions in a number of noneuro area eu countries a number of which are currently under excessive deficit procedures,3 +3284,"ideally government budgets should move temporarily into a position of deficit when the +private economy suffers an adverse shock",3 +3285,one is the difficulty of resolving the troubled governments debt burden through austerity programs and everincreasing support funds,3 +3286,"these nationally implemented norms could help internalize the fiscal discipline +in each country and render the matter less of an issue of eu policing of the countries current fiscal actions",3 +3287,the first trigger was the mechanism of automatic stabilizers that resulted in rapidly declining fiscal receipts due to the synchronized recession,3 +3288,the government must plan the budgets for the coming years such that the path of the debttogdp ratio doesnt diverge and that it returns to a downward trend over time,3 +3289,"a loosening of the fiscal stance stemming from an unbalanced reform +strategy not only jeopardises fiscal consolidation but from a longerterm perspective also reduces the +potential for positive supply effects of fiscal reform on economic growth",3 +3290,10  see christiano l m eichenbaum and s rebelo 2011 when is the government spending multiplier large,3 +3291,the bank of israels first assessments regarding 2017 indicate that the automatic pilot for expenditures meaning the increase in expenditures required as a result of government commitments and expected demographic developments is nis 14 billion higher than the expenditure ceiling similar to the ministry of finances estimate that was published this week,3 +3292,"the third and final +stage of fiscal integration would only be achieved if agreement can be found both on +financing direct revenue raising capacity and common debt issuance and on the desirable +level of busi ness cycle synchronization",3 +3293,the conclusion therefore is that constantly tinkering with our common fiscal rules while leaving governance of structural policies entirely at the national level makes little sense,3 +3294,"looking ahead further progress in fiscal consolidation requires the implementation of difficult +structural fiscal reforms",3 +3295,in addition fiscal policy has been characterized by the collection of budget revenues beyond the governments projections and by the concentration of expenditures in mainly infrastructurerelated projects,3 +3296,"while a longterm plan is needed to reduce deficits and slow the growth of federal debt +the tax increases and spending cuts that would have occurred last month absent action by the congress and the president likely would have been a headwind strong enough to blow the united states back into recession",3 +3297,however due to the fund mechanism and the fiscal rule actual spending is decoupled from current petroleum revenues,3 +3298,while in others who were running bigger budget deficits assistance was sought from the imf which made quickdisbursing facilities available,3 +3299,"in contrast cooperation and creativity to deliver fiscal clarity in particular a plan for +resolving the nation s longer term budgetary issues without harming the recovery could +help make the new year a very good one for the american economy",3 +3300,"while the fiscal cost for some countries will be large in the shortrun the alternative of providing no fiscal stimulus or +financial sector support would be extremely costly in terms of the lost output imf 2009b",3 +3301,"8 bis review 282001 + + fiscal policy and automatic stabilization +on the fiscal side the automatic stabilizers are tax revenues and employment insurance payouts",3 +3302,"the gover nment budget deficit is +the difference between total revenues and total expe nditure",3 +3303,21 it measures the variation in the budget balance as a percentage of gdp for a 1 variation in gdp,3 +3304,the road towards a fiscal capacity will most likely be a long one,3 +3305,in fact the pact would bring about a return to the budgetarydiscipline adhered to before the deficits of many countries began to get out of hand in the 1970sand 1980s,3 +3306,diagram 1 shows the best general measure of theunderlying budget deficit,3 +3307,the consolidation of public finances reflected through the restoring of budget deficits downward trend is of great importance in terms of the decline of its financing cost,3 +3308,now we know that the fiscal framework as put in place before the start of the emu was not strong enough to prevent fiscal problems from emerging,3 +3309,then suddenly a mistrust overburdened regional financing the economy and especially fiscal cushioning powers,3 +3310,"i have reason to believe that this +assessment is driven largely if not entirely by recent trends in the fiscal budget which as +you very well know has registered substantial deficits in recent years and this is coupled with an accumulation of public debt",3 +3311,the fiscal authorities face an important tradeoff on the one hand closely linking fiscal policy to changes in the value of the gpfg will have a substantial impact on other government spending and revenues from one year to another,3 +3312,"in turn the deficit targets have been set at 53 for 2012 and at 3 for 2013 which entails a +most significant budgetary effort",3 +3313,"evaluating alternative fiscal policies at an unchanged level of output and specifically atpotential output also allows us to abstract from cyclical changes in the deficit and thereby to focus +exclusively on changes in the structural budget balance",3 +3314,"the objective of the legislation is to impose fiscal discipline on government spending and ensure a +transparent and accountable fiscal system",3 +3315,in many countries fiscal stimulus is turning to fiscal drag,3 +3316,"however the +public often have little awareness of these fiscal rules beyond the two threshold figures of +3 for the annual deficit and 60 for the debt level both in relation to gross domestic product",3 +3317,"thats in fact the problem in the us +where president obamas considerable efforts to provide fiscal stimulus to address the recession will need to be matched by a similarly bold program to reduce the fiscal deficit in the next few years",3 +3318,this doom loop undermines national eff orts to re establish fiscal sustainability,3 +3319,"with this high level of uncertainty in projecting budget totals and associated deficits +the congress needs to evaluate the consequences to longterm economic growth of errors in fiscalpolicy",3 +3320,"this debt +obliges the government to allocate part of its tax revenues each year to service the debt",3 +3321,and one way to rebalance liability and control is deeper fiscal integration,3 +3322,many countries are struggling with government finances,3 +3323,"it cut the structural fiscal deficit that is +excluding cyclical effects by even more 15 percentage points",3 +3324,"the aim of lowering deficit and debt quotas has to +leave the page and become a reality",3 +3325,"instead despite the good times between 1999 and +2008 fiscal policies were largely procyclical few countries maintained a budgetary position in structural balance and many ran deficits",3 +3326,in particular there has been speculation about significant changes to fiscal policy of late although the magnitude composition and timing of any fiscal changes are as yet unknown and will depend on the incoming administration and the new congress as well as the vicissitudes of the budgeting process,3 +3327,we undertook these actions in full line of sight of other fiscal initiatives aimed at providing cash flow and confidence in the economy,3 +3328,"not only quite sharp fiscal +adjustment measures but a huge commitment of public funds some 750 billion which is +huge in relation for example to the outstanding stock of debt in the countries affected",3 +3329,we have the stability and growth pact which sets out the fiscal surveillance rules and limits for government deficits and debt,3 +3330,but it also entailed a massive increase in the budget deficit and this inturn generated new problems,3 +3331,as a result for example thisyear there is some vagueness regarding the expected deviation from the budget deficit target andestimates of the actual deficit currently range from 25 to 35 percent of gdp,3 +3332,"recently some steps have also been announced to stabilize the government finances and +contain fiscal deficits within manageable levels",3 +3333,"i suspect that it is too much to ask the +commission to review the tax code in detail but a full picture of our budgetary dilemma will +require attention to the strengths and weaknesses of our current system of raising revenue",3 +3334,the us congress has approved a series of fiscal packages bringing the total fiscal spending to about 15 of gdp,3 +3335,as in someasian countries this balance of payments deficit has been experienced at a time when thegovernment itself is running a fiscal surplus,3 +3336,lets stay with italy which had promised to limit its budget deficit next year to 08,3 +3337,"moreover in order to boost domestic demand the government has announced additional tax sops subsequent to the +interim voteonaccount budget putting further pressure on fiscal position",3 +3338,more immediately the expansion in the public balance sheet combined with the financing burden of the fiscal stimulus packages have reduced fiscal resilience and constrained the scope for future fiscal action,3 +3339,"fiscal policy +even before the global crisis metastasized in september 2008 irelands fiscal position was +coming under pressure not just because of an accelerated expansion of spending in the previous few years but especially because of the sharp fall in tax revenues which began soon after the property prices started to turn down",3 +3340,"on the fiscal front the decline in the growth rate has l ed to an increase in fiscal deficits through for +example a decline in tax revenues",3 +3341,it was also improbable that fiscal risksharing would reach us levels not least owing to the relatively larger role for national budgets as fiscal stabilisers,3 +3342,with regard to fiscal policy stricter rules on deficits and debt were established including the sixpack the twopack and the fiscal compact,3 +3343,"there was basically one task on the agenda to eliminate the +very large budget deficit",3 +3344,"but the ecb in its latest report is still suggesting the extra fiscal revenues be +used to balance the budget and not to cut taxes",3 +3345,"dealing with the underlying problems +in addition to tackling the urgent issues stemming from the successive crises it has been +absolutely necessary for each country to implement all the efforts needed to restore them to a sound fiscal path",3 +3346,major improvements are also needed regarding the production and quality of fiscal statistics,3 +3347,"it underlies for instance the operation of builtin +fiscal stabilisers tax revenue automatically rises as income increases and falls as income declines +dampening expenditures in booms and encouraging them in recessions",3 +3348,"one of them is the delicate +state of government budgets which leaves many of these countries feeling they have little +choice but to pursue policies of fiscal contraction",3 +3349,"on the other hand cancelling +some or all of the scheduled tax increases and spending cuts would add to the widening +us federal budget deficit and raise the odds of the united states facing a similar financial +crisis to that which is occurring in europe",3 +3350,"however discretionary increases in public spending and tax reductions beyond the specific scope of the automatic stabilisers should be avoided since they may compromise the maintenance of medium and longterm budgetary stability and elim inate the fiscal policy leeway to respond to +sharper slowdowns",3 +3351,"balancing these objectives requires having in place very flexible +budget processes and tax and spending structures ",3 +3352,"for example fiscal rules may impose constraints on key budget aggregates such as total government expenditures +deficits or debt",3 +3353,"but regretta bly that com mitment +collapsed when it beca me appa rent that in lig ht of a less favorable e conomic e nvironm ent +maintainin g balance in the budget excluding social secu rity wo uld requi re lower spendin g or higher +taxes ",3 +3354," +the background +every year the question what is the desired budget deficit is raised even though all governments in +the last ten years adopted a policy which was supposed to reduce the deficit",3 +3355,on the whole this undercuts market discipline the intent of which is to secure not only compliance with fiscal rules but also sustainable budgets,3 +3356,"the almost balanced fiscal budget at the beginning of the crisis allowed scope for +implementing sizeable fiscal stimulus program mes",3 +3357,"i d o however not sup port pro posals which with reference to the +lisbon age nda sugg est that expenditure rel ated to gro wth pol icies sho uld be disreg arded whe n +calculatin g the deficit",3 +3358,"and in the united +states and many other economies the demograph ic changes now working their way through the +economy entail very large future deficits and co nsequently very limited fiscal room for maneuver",3 +3359,"there is a fiscal rule for government spending that stipulates +that all income above certain longterm price has to be saved",3 +3360,they were used to fund investment and not consumption and werecertainly not funding budget deficits,3 +3361,"it is therefore necessary to fully recognize that an +improvement in the fiscal balance cannot be achieved without efforts to both reduce +expenditures and increase revenues in real terms chart 13",3 +3362,the fiscal rule permits the government to spend the expected real return on the gpfg then estimated at 4 percent,3 +3363,in total over five fiscal adjustment packages this amounted to cumulative exante consolidation measures of the order of almost 10 per cent of gdp,3 +3364,"t he austria n example sh ows that structural cuts in fiscal deficits +need not e ntail belo waverage ma croeconomi c growth ",3 +3365,"congressional budget office cbo projections have the federal debt reaching an unsustainable level of two to five times our total national income within the next 50 years which leads us to an inescapable conclusion us fiscal policy must focus on +reducing this debt buildup and its consequences",3 +3366,"current congressional procedures generally require the cbo to score proposed spending and tax programs for their budget effects over a specified longerterm horizon this approach although not without its problems has the +advantage of linking budget targets dire ctly to legislative decisions",3 +3367,to this end it approved a new raft of measures on 20 may entailing spending cuts of somewhat over 15 billion to be made between 2010 and 2011 around 15 of gdp on top of the previously approved spending cuts and tax rises,3 +3368,and the government has stepped up its own spending which is helpful in the present international environment,3 +3369,"these were driven by sharp declines in +tax revenues as well as expansionary fiscal policies",3 +3370,the large revisions to greeces budget deficit for 2009 revealed a very serious fiscal imbalance and triggered adverse financial market reactions,3 +3371,"the outsi zed role of the government in the economie s that pursu ed th e impo rt +substitution strategy together with rel atively narro w tax base s and inefficient t ax colle ction led to +chroni c fiscal deficits a nd pervasive e conomic in efficiency in the protected in dustries",3 +3372,as re gards fiscal reforms the eu agreed on and signed the fiscal compact in march 2012,3 +3373,"with regard to fiscal policies in the wake of the cyclical downturn observed between 2001 and 2004 some member states experienced signific ant deterioration in their fiscal positions +and were accordingly subject to the excessive deficit procedure laid down in the treaty and set out in greater detail in the stability and growth pact",3 +3374,"25 eu +member states have signed the fiscal compact which commits countries to enshrining +important fiscal rules in binding national legislation",3 +3375,"the fiscal policy has had an expansionary nature during 2009 reflected +mainly in increased budget spending mainly due to rapid growth of capital expenditures",3 +3376,"reducing public spending inefficiency would pave the way to +financing tax cuts",3 +3377,in particular the pact calls on member states to bring budget balances to their so called mediumterm budgetary objectives and maintain them at that level,3 +3378,"at the same time the rule made +fiscal policy more robust by decoupling spending from current petroleum revenues the fiscal rule provides for a gradual and sustainable phasing in of petroleum revenue spending",3 +3379,"this is having a predictable effect on fiscal positions revenues +are weak and budget deficits have remained large",3 +3380,"it would have been easier to come up with a solution if the problem had been contained to +fiscal deficits as was the case for greece at the beginning",3 +3381,the fiscal consolidation currently planned by some accession countries is welcome and likely to require sizeable expenditure cuts or tax increases,3 +3382,this lessens the temptation for the fiscal authority to use the printing press to fund its public spending thereby substituting a hidden tax of inflation in the future for taxes or spending cuts,3 +3383,"the achievement of such goals does not depend only on releasing substantial resources +through a reordering of fiscal spending priorities",3 +3384,"the fiscal stimulus packages +involving additional expenditures and tax cuts have put further stress on the fisc",3 +3385,"fourth there is a need for the government to revert to its rulebased precrisis fiscal +consolidation path without compromising on the quality of fiscal correction",3 +3386,"one way is to increase public expenditure or +lower taxes and fund this by increasing the money supply ",3 +3387,despite the additional efforts shown in the most recent budgetary information up to november 2015 the fulfilment of these targets is not without risks,3 +3388,and finally the plan is for a consolidation of the nations fiscal position with a reduced deficit in the year 2002 with a balanced position envisaged during the period of the eight malaysia plan,3 +3389,"that said the slowdown in spending is having a significant +impact on tax revenue reducing the budget balance very rapidly so that utmost prudence +must be exercised in fiscal and budgetary decisions",3 +3390,the first offset is the unusually high degree of fiscal drag which the congressional budget office cbo estimates at about 1¾ percent of potential gdp in 2013,3 +3391,"when the bill was pas sed it was a precondition that revenue from such taxation that had +been moved forward should be used to reduce the government debt",3 +3392,"a repeat of the +first act in that performance is unfolding before our eyes now in 2001 with a rising budget +deficit contributing to a rise in the balanceofpayments deficit",3 +3393,"it remains to be seen how the discretionary fiscal measures adopted in response to the crisis +can be wound down and reversed to support fiscal sustainability in the longer run",3 +3394,"i assumed in theanalytics of the policy mix that any noncyclical change in the deficit was due to a change in policy +some combination of increases in tax rates and cutbacks in government spending",3 +3395,q1 should the fiscal plan built into the irish programme have involved larger deficits,3 +3396,the united s tates ha s now run a current accou nt deficit for fifteen years ,3 +3397,it is not a fiscal transfer between countries and is subject to stringent conditions,3 +3398,for example it is always easier to raise taxes than to reduce spending and to cut capital expenditure rather than consolidate current expenditure both of which lowered the quality of fiscal consolidation,3 +3399,"the tax +revenue went down and the large fiscal stimulus packages that were then required to contain the real consequences of the crisis and to avoid major disruptions in the financing of the economy also resulted in swift increases in public debts across the board",3 +3400,the rules of the fiscal compact namely the debt reduction rule imply primary surpluses of 3 to 4 of gdp every year for decades in portugal and other economies,3 +3401,governments these days through their fiscal policy do not limit themselves to accounting for revenues expenditures and budget making,3 +3402,"interestingly the fiscal package that is +included in the irish adjustment programme with the imf is of a comparable magnitude to the +precrisis fiscal expansion",3 +3403,"unlike in the previous period today +the primary problem is not the fiscal deficit but rather a lack of confidence",3 +3404,"second in the current situation it must be ensured that fiscal consolidation is not +compromised and the comm itments under the fiscal pact are achieved",3 +3405,"running excess ive fiscal deficits at the expense of future +generations can be very costly in times of crisis",3 +3406,the potential for excessive budget deficits is strictly limited by the treaty of maastricht and thestability and growth pact,3 +3407,especially in todays circumstances marked by profound transformation an easing of the fiscal burden on productive factors together with selective spending cuts to reduce waste and measures to make government more efficient can be decisive to the ability of the system to undertake the necessary changes,3 +3408,this clearly gives the country considerably more roomto manoeuvre than if we were already running substantial fiscal deficits,3 +3409,"medium term i nfluences +as the governments of developed countries in the western hemisphere struggled to deal with +the consequences of the gfc their spending and borrowing ballooned causing fiscal deficits +to rise at pace",3 +3410,"this misled many people including prime ministers +and members of the government made it very difficult to compare the situation in israel withthe rest of the world and also hampered efforts to explain the need to reduce the deficit",3 +3411,"this expansion in government +spending has been very significant in the us but it has also occurred in other countries",3 +3412,"although the budget constraints for emes expand as they become more integrated into the +global savings markets through more developed domestic bond markets there is no +alternative to a credible fiscal consolidation strategy",3 +3413," third the commitment by the greek government to reduce the fiscal deficit from last +years 136 per cent of gdp to 8 per cent this year and below 3 per cent in 2013 and the 110billion euro support package agreed between the greek government and the european commission the ecb and the imf are unprecedented in terms of magnitudes",3 +3414,a nominal spending ceiling has beenintroduced and applies to a moving threeyear period this means that additional spending in one fieldhas to be financed via reassessments elsewhere so that the overall ceiling is not exceededexpenditures during the current fiscal year are also monitored more closely if items are expected toexceed the budgeted figure the competent ministry has to propose ways of preventing this,3 +3415,"as a consequence in addition to the problem of a possible fiscal dominance there is a freerider problem as it is possible for countries to reap all of the benefits while +bearing only some of the costs of an unsustainable fiscal expansion",3 +3416,"the increasing deficits in the fiscal budget and in the current account made th e restrictive system non +operative",3 +3417,in greece the fiscal deficit was reduced by 13 percentage points of gdp between 2009 and 2013 the largest fiscal consolidation recorded in history in such a short period,3 +3418,also these expenses were on average 50 higher than budget deficit showing a relatively high level of fiscal responsibility in this regard,3 +3419,"the united +states has to address its fiscal im balances and deal with the issue of the low level of savings in the +overall us economy which is a major issue",3 +3420,"countries and governments can live with deficits for a while +but sooner or later the bill has to be paid",3 +3421,the budget deficit was about 2 percent of gdp similar to its level in the previous year and lower than the ceiling,3 +3422,against this backdrop the revised and simplified fiscal rules should be based on a mediumterm debt trajectory and on a single operational target namely a ceiling on the growth rate of public expenditures net of discretionary revenue measures as proposed by the european fiscal board efb,3 +3423,"indeed one of the fi scal policy errors prior to and including 2000 +01 was to mistakenly interpret budgetary improvements in good times as evidence of structural improvements which were often used to motivate spending increases or tax cuts",3 +3424,"supported importantly by the strong economic growth of the 1990s these +4 bis review 1282010 + rules are seen by many observers as havi ng helped put the deficit on a declining path +indeed the federal government generated a few annual surpluses",3 +3425,government policy action to deal with the global crisis has been particularly noteworthy despite its impact on fiscal deficit,3 +3426,"and +the process of fiscal consolidation bringing the federal budget deficit down to a more +sustainable level is largely complete chart 7",3 +3427,i name a few the initialpoint argument a huge deficit that required a bold adjustment effort errors in the design of the programme that include the mix of adjustment measures a greater reliance on tax increases than public spending cuts the value of fiscal multipliers etc,3 +3428,if this is the scenario thatin fact unfolds and the budget moves into surplus within the next few years the increase innational saving will pay off handsomely in preparing our economy and our budget for thechallenges of the twentyfirst century,3 +3429,the original idea of helicopter money refers to the direct financing of public expenditure,3 +3430,some of the most important pieces of the fiscal jigsaw already exist the sixpack the twopack and the fiscal compact,3 +3431,"consequently a strict application of the budget is especially necessary to ensure that new +revenue is used in full to reduce the budget deficit",3 +3432,"the paradigm change in fiscal policy was quite successful until the end of the 1980s public spending +was cut back to a level of 46 of gdp a major tax reform was implemented and the public sector deficit was nearly cut back to balance",3 +3433,however fiscal policys contribution to growth is not only determined by revenue and expenditure levels but also by their composition,3 +3434,the only way to finance the burgeoning government expenses was to print money,3 +3435,"for the united states it is essential to +avoid the risk of a sharp fiscal tightening such as would be produced in 2013 by the +legislated aut omatic spending cuts and the expiry of earlier tax reductions ",3 +3436,appropriate fiscal policies and structural reforms implemented bynational governments are vital and considerable progress is required in these areas,3 +3437,the combination of lower tax revenues and higher outlays arising from the operation of automatic stabilizers and fiscal stimulus programmes took their toll on public finances with deficits in a number of countries rising close to or even exceeding double digit levels,3 +3438,"in one of his ft columns martin wolf spoke about the us +republican partys fiscal policy trilemma the belief that large budget deficits are ruinous a continued eagerness to cut taxes and an utter lack of interest in spending cuts on a large enough scale",3 +3439,"the expansionary fiscal stance had to be sustained in 200910 to support a faster economic recovery which +was reflected in further increase in budgeted net borrowing programme of the centre and +states taken together to rs538 trillion in 200910",3 +3440,"as i already mentioned both the tax legislation signed into law in january and the sharp +spending cuts associated with sequestration will likely significantly hinder gdp gr owth this +year",3 +3441,"due to a recent strengthening of the eu fiscal rules member states now face stronger +incentives to adopt sound budgetary policies",3 +3442,the government assistance granted at present will need to be funded at a later date either through lower spending or higher taxes,3 +3443,"with large and varying budget revenues the basis for determining central +government expenditure and taxes from one year to the next may easily be impaired",3 +3444,for example the refined fiscal rules require balanced budgets or even slight surpluses,3 +3445,"the underperformance was contributed to by political +uncertainty and drawdown from earlier accelerated spending encouraged by previous +government policies",3 +3446,"finally when the budget is presented to the knesset for approval the basis of growth for 2002 should +be reconsidered as this provides the basis for estimates of tax revenue",3 +3447,the fiscal package accompanying the draft budget does not envisage radical changes in the tax system,3 +3448,"the only real question is whether these adjustments will take place through a careful and +deliberative process that weighs priorities and gives people plenty of time to adjust to +changes in government programs or tax policies or whether the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis",3 +3449,"in some cases this burden was compounded by the adoption earlier in the crisis of discretionary fiscal stimulus measures and the parallel decline in +government revenues caused by the economic dow nturn",3 +3450,"to this end i am +encouraged that the president and the congress are going at it hammer and tong searching +to find the right balance between goosing up the economy short term and reining in the longterm fiscal imbalances that are imperiling our nations future",3 +3451,"in raising this concern i am by no means recommending delay or inaction in addressing the +nations longterm fiscal challengesquite the opposite",3 +3452,globally governments unveiled large fiscal stimulus packages in 2020 amounting to nearly 14 trillion 135 per cent of world gdp to contain the spread of the pandemic imf 2021 and consequently deficit and debt levels soared,3 +3453,there has been some very welcome although much delayed action on correcting both the cad and the fiscal deficit over the last six months,3 +3454,"11 for example according to the imf spendingbased deficit cuts particularly those than rely on cuts to +transfers have smaller contractionary effe cts than taxbased adjustments",3 +3455,these investments are sustainable because they are supported by a prudent fiscal position characterized by lower national government debttogdp ratio of around 42 percent and additional revenues to be generated from the recent tax reform train,3 +3456,this enshrines balanced budget rules in national constitutions or equivalent under the vigilance of independent fiscal councils,3 +3457,this system has made it easier to follow a planned fiscal policy and resist oneoff pressures for increasing government spendi ng,3 +3458,"the improvement seen in member st ates fiscal positions since the new pact +was adopted is attributable largely to the recent cyclical upswing while progress with structural consolidation in countries with budgetary imbalances has generally been +disappointing",3 +3459,while the macroeconomic adjustment of the economy in both cases shared common features rebalancing of the public finances using both tax increases and spending cuts the adjustment in the more recent case began sooner and was being accomplished more quickly,3 +3460,1 the lack of budget discipline cannot only be blamed on the countries that have now been hit hardest,3 +3461,"note that a precondition for receiving financing from the esm is to have fully ratified the fiscal +compact which creates a link between crisis prevention and resolution schemes",3 +3462,"in the view of the governing council this requir es a rigorous implementat ion of 2007 budgets the +avoidance of expenditure overruns and the allocati on of unexpected extra revenues to deficit and debt +reduction",3 +3463,"the remaining 75 +saving in the borrowing requirement was largely due to the considerable restraint with expenditure +allocations exercised by the national government and more efficient procedures for collecting income +and other taxes",3 +3464,"the new legislative package also reinforces the sgp to focus more on fiscal sustainability +and reducing government debt levels",3 +3465,"the decision again to postpone +action on the expenditure side increases the budget adjustments needed to achieve a +balanced budget in 2011",3 +3466,the main point here is that while the initial work of fiscal consolidation is certainly difficult it is necessary in order to enjoy the fiscal dividends later on,3 +3467,"the federal german government has resolved to pursue a strict course of consolidation making +savings of dm 30 billion in 2000 and is aiming for a deficit ratio of 05 in 2003",3 +3468,"the measures are in addition to those approved during the summer and those +introduced by the 2012 stability law which provided for a reduction in the budget deficit of 286 billion in 2012 544 billion in 2013 and 599 billion in 2014",3 +3469,"the changes in fiscal policy which have entailed +among other things a reform of budgetary procedures and the imposition of a ceiling on +public expenditure have had positive effects",3 +3470,"the second main policy challenge is to secure fiscal sustainability in the medium term +through the strengthening of tax revenues and the implementation of prudent fiscal policies +reflected in the stabilization of the rising debttogdp ratio and the reduction of the fiscal deficit to levels below 2 percent of gdp",3 +3471,"this is manifested for example in the budget +surpluses now being produced",3 +3472,the government can now spend nok 120 billion annually from the fund without reducing its real value,3 +3473,"any fiscal package should be welltargeted in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue at the same time it should go without saying that the congress must be vigilant in +ensuring that any allocated funds are used effectively and responsibly",3 +3474,"the government is also improving their capacity +on fiscal budgeting by adopting a better debt and cash management",3 +3475,"here the fiscal package agreed at the end of 2011 must be +supplemented with a new growth package",3 +3476," the gradual restructuring of public finance starting in 1982 and resulting in a deficit of +21 of gdp in 1997 compares favourably with those of most countries in the vicinity",3 +3477,the debt burden will begin to crowd out all the governments other budgetary expenditure,3 +3478,to resolve this dilemma governments are resorting to fiscal subsidies to avoid full passthrough,3 +3479,"countries with sizeable deficits and public debt s should use the current windfall in tax revenues +to consolidate",3 +3480,in concrete terms if a country records a budget deficit which is found to be excessive in the sense of the sgp it is certainly that countrys responsibility to correct it promptly,3 +3481,"without fiscal consolidation financial market participants will balk at providing the funds +needed to close the gap between government revenue and spending",3 +3482,"the government has its own limitations when chipping in as the fiscal responsibility +targets leave little scope for finding funds",3 +3483,if you prefer expenditure instead of deficits the fiscal monitor of the imf is quite clear about the size of the revision of expenditures in the euro area and the us between october 2019 and april 2021,3 +3484,"however oth er signs are less en couraging a low level of saving a wide fiscal deficit and a curre nt +accou nt defi cit that re peatedly hits reco rd levels",3 +3485,"looking ahead it is of the essence that government policies decisively address these +various fiscal financial and structural impediments to growth",3 +3486,on the other hand norway like m any other countries is facing substantial fiscal challenges,3 +3487,or will a viable fiscal plan combine various types of tax increases and spending cuts,3 +3488,"the core element of such a fiscal union which is limited to the absolute essentials consists in +strict and effective budgetary rules that set a binding ceiling on national borrowing",3 +3489,"first the stability and growth pact which +needs the addition of a focus on sustainability of the fiscal accounts and not just on a particular deficit or debt level",3 +3490,"the fi scal strategy should not be one where there is +aggressive spending over and above the revenue with the government borrowing against +future revenue or one that the government spends all it gets in a year each year over the life +span of the lng project",3 +3491,however the available estimates of the structural budget balance show that at the aggregate level there was a slight deterioration last year as a result of the tax cuts applied in certain countries before the cyclical weakening had become apparent,3 +3492,they must have a longterm viewbased on the fact that israels economy is an open oneof the trends of the budget aggregates the tax burden the government expendituregdp ratio the budget deficit and the government debt burden,3 +3493,"after decades of budgetary imprudence there has been a growing recognition of our +fiscal problems in recent years and an increased willingness of presidents and congresses to addressthem",3 +3494,so as state budget situations worsen because of the state automatic fiscal stabilizers the unfortunate but likely result is that states will lack the rainy day resources to run deficits and will need to make budget changes that neutralize their own automatic stabilizers,3 +3495,government finances are strained to the limit after a long sequence of fiscal packages,3 +3496,the foremost element of this policy is to expedite the implementation of a fiscal incentive package and the 2009 national budget,3 +3497,i have previously enumerated the measures that the government and the knesset will have to take in order to deal with the fiscal necessities reducing inefficient expenditures to start cancelling tax exemptions and apparently also raising tax rates,3 +3498,"this section therefore restricts the direct financing of +government deficits",3 +3499,"the discussion of the nationaldebt and its developoment as well as of its repercussions on the tax burden on the onehand and the need to release significant budget sources for servicing the past deficit rather +than solving the problems of the future on the other would shed additional light on the +proposals to further increase the deficit for these and other purposes",3 +3500,"first if all of the spending increases are confined to the priv ate +sector then the government budget deficit will shrink as it did in the late 1990s which would help narrow the potential +saving shortfall",3 +3501,"the current debate appears to be about how much +to cut taxes or how much to increase spending",3 +3502,especially italy which has larger accumulated debt has undertaken bold budgetary cuts,3 +3503,"fundamental improvements in the fiscal sector resu lting from higher revenue collections and prudent +spending have been instrumental in shaping this much better economic picture",3 +3504,the fiscal deficit in 1997 wassmall at below 1 of gdp and the monetization of such deficits is now prohibited,3 +3505,president trump has introduced tax cuts that will increase the budget deficit by us15 trillion over the next decade and approved a congressional bill that will increase public spending by us300 billion over the next two years according to the congressional budget office cbo,3 +3506,the budget for 2002 had once again to curb the deficit with an impact slightly less pronounced and of opposite sign to that of the year before,3 +3507,in the past the accomplishments of sharp fiscal adjustments have been eroded in the years that followed,3 +3508,the deficit dropped to itslowest level in more than two decades in fiscal 1997 and yesterday the congressional budgetoffice released projections that show the budget remaining essentially in balance over the nextfew years moving to annual surpluses equal to 1 percent of gdp by the middle of the nextdecade,3 +3509,"similar move ment wa s +exhibited by the gross fiscal deficit gfd as well",3 +3510,clearly if any of the risks to growth i mentioned earlier were to materialise or financing costs were to increase it would be more difficult to meet the government deficit commitments and this must continue to be the main aim of spanish budgetary policy,3 +3511,"in addition the +stability programmes do not make the necessary progress in addressing longterm fiscal challengesthese challenges include inter alia the budgetary adjustments needed in many countries to cope withpopulation ageing",3 +3512,the first was the tabling of the fiscal responsibilityand budget management legislation which aims at the mediumterm management of the fiscal deficit,3 +3513,indeed all elseequal had the surprise fallen on the other side downward instead of upward we would belooking at nontrivial budget deficits at least through the beginning of the coming decade,3 +3514,"that change in our political +environment accompanied by the faster pace of technologydriven growth has resulted in a sharpreduction in the unified budget deficit and more recently the emergence of a significant surplus",3 +3515,however as deficits surged and the greek government revealed a much larger deficit than previously thought the attention focused more on the state of public finance,3 +3516,this has mainly been achieved by establishing the sovereign wealth fund and a fiscal rule imposing a constraint on oil revenue spending,3 +3517,fiscal policy became less focused on shortrun stabilization and more focused on longerrun considerations such as promoting growth through reductions in marginal tax rates the reagan approach or through reductions in structural budget deficits the clinton approach,3 +3518,that framework was explicitly designed to ensure fiscal responsibility with two resulting benefits,3 +3519,"the government bases its withdrawals from the fu nd on an average real return of 4 per cent for +financing current expenditure",3 +3520,"the fiscal debate of the 1970s was dominated by the budget deficits of the period and the +need to reduce them",3 +3521,in return greece was expected to implement an aggressive frontloaded consolidation program to reduce its budget deficit from doubledigit rates to less than 3 percent of gdp between now and 2014 with onehalf of that reduction occurring this year alone,3 +3522,this is the prudent fiscal response to a reduction in revenue,3 +3523,changes to chinas budget law last year have helped to bring more government spending onbudget,3 +3524,this leaves the countries with fiscal space to raise spending germany among them,3 +3525,for all these challenges relate to longterm fiscal sustainability,3 +3526,"as regards fiscal surveillance ambitious benchmarks are needed when establishing an +excessive deficit",3 +3527,"meanwhile the general +government sector tailored its spending plans to the need to reduce the budget deficit +following the serious budgetary slippage evidenced at the close of 2011",3 +3528, in the fiscal domain deficit reduction has been remarkable,3 +3529,"de mooij r a 2011 the tax elasticity of corporate debt a synthesis of size and +variations imf working paper fiscal affairs department wp1195",3 +3530,exploiting fully the flexibility allowed under the fiscal rules to finance reforms to correct structural weaknesses should help to prevent crises rather than merely controlling and managing their consequences,3 +3531,"this independent economic authority +should have influenced the national budgets with a focus on the level and the direction of the +balances as well as the financing of deficits and the use of surpluses respectively",3 +3532,"furthermore the mexican congress has imposed a balancedbudget rule and the discipline to go with it so that even with the deviation from balance allowed under emergencies mexico ran a budget deficit of only 25 percent in 2011 compared with +87 percent in the us mexicos national debt totals 27 percent of gdp in the us the +debttogdp ratio computed on a comparable basis was 99 percent in 2011 and is projected to be 106 percent in 2012",3 +3533,"given the enormous rise in public deficits and the strain this will put on future budgets the fiscal exit strategy will have to kick in as s oon as the recovery has firmed up which means +no later than 2011",3 +3534,"nevertheless as the petroleum fund is becoming very large the fiscal rule implies that sizeable and increasing revenues will be spent every year thereby leading to +expansionary impulses from fiscal policy",3 +3535,when the crisis hit a highly expansionary fiscal policy was pursued disregarding the existing imbalances and the lack of fiscal space,3 +3536,"the fiscal framework +has also been strengthened by several new pieces of legislation including the reinforced stability and growth pact and the so called fiscal compact",3 +3537,it does not make sense to require countries to get their fiscal situation undercontrol by a certain date just to let them go unpunished on a public spending spree shortlyafterwards,3 +3538,the consolidation path of the fiscal policy is reflected in both revenue increase and spending decrease,3 +3539,hence the fiscal mix is not sustainable and must change,3 +3540,"the restoration of fiscal rules such as those +that require new tax cuts or expenditure programs to be funded with offsetting policy measures will +help reduce the risk of further deterioration",3 +3541,"figure 5 shows a scenario of gradual reduction of the tax burden over time resulting from a freeze on nominal expenditure against a background of +strict compliance with fiscal commitments",3 +3542,although capital expenditurewas initially a casualty of the strict control over government spending it is now set to accelerate giventhe fiscal room for maneuver that the government has created,3 +3543,"th e gove rnment howeve r continue s to apply fiscal pruden ce and despite a decline in the +growth of tax revenue wa s able to co ntain the ma in budget deficit to an esti mated 24 per cent of +gross domestic pro duct in fiscal 200 304",3 +3544,"but in the coming years many advanced countries will face +major challenges in achieving and maintaining sustainable fiscal positions",3 +3545,"an important element in ensuring that we leave behi nd a stronger economy than we inherited as did +virtually all previous generations in this country will be to move over time toward fiscal policies that are +sustainable efficient and equitable across generations",3 +3546,however leaders had the courage to confront these problems head on and they adopted a series of reforms including the establishment of a fiscal oversight board and a more transparent budgeting process,3 +3547,these instruments were used intermittently to neutralize the expansionary impact of large fiscal deficits which were partly monetised,3 +3548,therefore balancing federal budget alone without accounting for debt accumulation by the regions is insufficient,3 +3549,but not keeping public debt and deficit in check would be tantamount to accepting that an ever greater share of fiscal revenues is channelled towards servicing debt instead of financing collective action which comes down to accepting a loss of sovereignty,3 +3550,the congress has found it easier to not agree on a budget than to go about correcting fiscal imbalances that drive the nations growing indebtedness,3 +3551,the expansion in government spending has historically been one of our main growth industries and our budget deficit relative to gdp after adjusting for the impact of the economic cycle on spending and revenue was one of the largest in the oecd in 2011,3 +3552,"today fiscal responsibility in most of the emerging world is not a +feature from the left or the right it is just common sense",3 +3553,"minor details aside +the federal debt held by the public increases each y ear by the amount of that years unified deficit",3 +3554,constantly refining fiscal rules while leaving structural policies at the national level makes little sense,3 +3555,therefore while some broadening of the tax base is necessary it is desirable that the primary focus of fiscalconsolidation measures should be on reductions in public spending,3 +3556,"at the same time the fiscal policy should make all attempts to stick to its revenue and +expenditure targets",3 +3557,"both countries have speeded up their budgetary consolidation and are implementing +balanced budget rules to their constitutions",3 +3558,"during the 1990s the fiscal balance averaged a surplus of 15 of gd p the abovementioned +structural fiscal surplus rule stabilizes government spending over time by linking it explicitly to +permanent government revenue",3 +3559,"in order not to threaten the progress infiscal consolidation the reduction in the tax burden has to be accompanied by a structural reduction of +expenditure",3 +3560,however although the united states has its own budget at the community level which is also controlled at the federal level the individual states are financially independent,3 +3561,over time fiscal measures will have to be applied in a more targeted way,3 +3562,"broadly the banco de españas view does not differ greatly from that +of the government implicit in the macroeconomic table accompanying the budget",3 +3563,christiano l m eichenbaum and s rebelo 2011 when is the government spending multiplier large,3 +3564,"many states have in the light of these deliberations modified their +budgetrelated documents to enhance fiscal transparency",3 +3565,but in the light of theexperience with government finance in recent decades a warning should be issued against taxcuts without parallel cuts in spending,3 +3566,however it should be borne in mind that the government assistance granted now will have to be paid for later either through spending cuts or higher taxes,3 +3567,"even small +deviation s from spending and revenue proje ctions can have a m ajor imp act on the deficit",3 +3568,"in ireland the windfalls supported the implementation of a procyclical fiscal +policy as governments used revenue strength to justify tax reductions and higher public +spending",3 +3569,first of all there are countries which dont have the scope for fiscal expansion according to the rules which we have given ourselves,3 +3570,"additional measures were therefore urgently needed to consolidate the budget and even +more resolute action to address the structural problems of italys economy",3 +3571,"it is hoped that +the budget act will help to ensure that the many years of systematic budget overruns are +now a thing of the past",3 +3572,"the primary structural fiscal balance chart 8 +is estimated by adjusting budgetary components of revenues and spending to account for the +effect of the output gap and the trading gain gap as estimated by the bank of canada see +pichette et al",3 +3573,"these countries have now embarked on fiscal adjustment +programmes to varying degrees primarily through austerity measures",3 +3574,potential gdp based on congressional budget office estimates for each year published in the budget and economic outlook fisca l years 20022011,3 +3575,it is an unprecedented act of solidarity towards the countries most affected by the covid crisis and for the first time final expenditure up to an amount of eur 390 billion will be financed by a shared debt instrument that is more than twenty times more than the previous proposal for a budgetary instrument for convergence and competitiveness bicc,3 +3576,greeces fiscal consolidation is one of the largest ever achieved by any country at any time under an imf programme,3 +3577,"achieving the frbm target of zero revenue deficit by 200809 requires continued focus on containing +expenditures increase in tax revenues and reduct ion in tax exemptions",3 +3578,but redressing the emergent deficit in daytoday spending was actually going to require a much larger adjustment in government revenue and spending not least because of the degree to which boomtime tax revenue fell off,3 +3579,those relationships established long ago continue to dominate the national budget,3 +3580,the fiscal rules of the stability and growth pact are another even if the extent of their success is open to dispute,3 +3581,  why are countries fiscal accounts always imbalanced,3 +3582,"the government sector on the other hand faced a prospect of accumulating debt as tax +revenues f ell and spending demands increased",3 +3583,"for exampl e the most co mmonly hea rd pre scription is for the united states to reduce its +call on world saving s by re ducing its fiscal deficit",3 +3584,the impacts on the fiscal policy are more serious implying stricter conditions for external budget financing signaling the need to start or continue with fiscal consolidation in the emerging economies where it has already started,3 +3585,"for example as i +noted actual budget deficits depend on spending and taxation decisions but also on the state of the economy",3 +3586,the administration recently submitted a proposed budget that projects the federal deficit to reach about 18 trillion this fiscal year before declining to 13 trillion in 2010 and roughly 900 billion in 2011,3 +3587,"second as regards the exit from high government deficit and debt governments should +ensure that the withdrawal of fiscal measures starts no later than the economic recovery",3 +3588,"indeed fiscal adjustment should focus first on cutting down those expenditure +items that are not conducive to growth and increasing the return on other items of +expenditure and second on modernising tax administration in order to effectively tackle tax +evasion",3 +3589,"as i mentioned paygo rules even when effective were designed only to avoid making the +fiscal situation worse they did not attack large and growing structural deficits",3 +3590,oneproblem is that the federal government does remarkably little direct investment spending so thecurrent budget deficit or surplus would differ little from the overall deficit or surplus,3 +3591,"they are thus expect ed to react to increased budget deficits by increasing +their own savings",3 +3592,"quite +understandably there are concerns about the adverse macroeconomic consequences of the +twin deficit problem a large and persistent fiscal deficit along with a high cad",3 +3593,"it has recommended amplifying the scope of fiscal +responsibility legislation in order to include the essential elements of a budget law",3 +3594,"events in 2011 show the difficulties of reducing the budget deficit at times of +economic weakness",3 +3595,"in recent years the eu member states have adopted a series of new rules aimed at +addressing these weaknesses including the fiscal compact which tightens the +requirements for fiscal discipline ",3 +3596,"the unified budget +deficit projected forward a certain number of years is an important m easure that is already included in +the congressional budgeting process",3 +3597,"this risk is +presumably greater in a period in which budget deficits are high as they are today",3 +3598,"the budgetary provisions in the treaty which limit the level of government deficits and debts and the +stability and growth pact which introduced the goal of budgetary positions close to balance or in surplus as a mediumterm objective for member states have been key to achieving sounder public finances",3 +3599,belgium denmark luxembourg and the netherlands introduced national expenditure rules in 1992 in response to the maastricht treaty and its debt and deficit rules,3 +3600,on the other hand the congress andthe administration have many opportunities to affect the level and growth in potentialoutput including the size of the structural budget deficit relative to output the details of the tax codeand the composition of government spending,3 +3601,"it is +essential that in the budgetary plans currently being prepared for 2004 there be a correction of excessive deficits within the agreed timeframe in the countries concerned",3 +3602,"they are unable to finance further deficit spending and have to cut spending and increase +taxes now",3 +3603,"the tr eaty has an internal logic especially since it dealt +with the question of budgetary policy by way of an agreement between the member states concerning +stability and growth the stability and growth pact whic h inter alia limits deficits to 3 of the budget +sh",3 +3604,the fiscal rule is robust to fluctuations in government revenues and provides a stable framework for economic developments,3 +3605,federal fiscal deficits adjusted for the cyclical state of the economy increased by roughly 212 percentage points of gdp from the period before the elections to six years following the elections federal debt held by the public increased from about 25 percent of gdp to nearly 40 percent and the current account deficit widened4 following the 2000 elections similar fiscal changes resulted in an increase in the fiscal deficit of close to 3 percentage points of gdp over the first six years of the new administration on a cyclically adjusted basis,3 +3606,"1 +thus even after cyclical effects play out many countries will continue to have large +structural budget deficits",3 +3607,this warrants some rethinking of the adjustment programmes target setup so as to prevent the return effect of gdp developments on compliance with the budgetary targets through tax revenues and social spending and debt targets through tax revenues social spending and the denominator effect,3 +3608,"however +this cannot be envisaged until budget consolidation has been achieved or until there is willingness to finance lower tax rates by a further spending restraint or a broadening of the tax base",3 +3609,"the fiscal deficit reached p676 billion as of marchlower +and better than the programmed ceiling of p718 billion",3 +3610,"it should not be thought however that all of the additional capital mandated by pcar2010 +was obtained from the government",3 +3611,"major +reserve currency governments are responding to the calls for fiscal balance higher savings and more balanced investment spending at home",3 +3612,that is exactly why governments around the world have launched extraordinary fiscal measures to support those having a tough time,3 +3613,yet i recognize that growing budget surpluses may be politically infeasible to defend,3 +3614,but the planned reduction in the deficit set out in the budget plans is comparable with the fiscal consolidation we saw in the mid1990s when the public spending share of gdp was also cut significantly as the economy recovered as chart 6 shows,3 +3615,"however even after economic and financial conditions return to normal the federal budget will remain on an unsustainable path +with the budget gap becoming increasingly large over time unless the congress enacts +significant changes in fiscal programs",3 +3616,"it is particularly worth noting that + +the fiscal adjustment was unprecedented turning a primary deficit of 101 of gdp in 2009 into a primary surplus of 43 of gdp in 2018 according to the enhanced surveillance definition",3 +3617,"add to this the lower impulse coming from public investment associated with +the recently announced fiscal adjustment",3 +3618,"finally it may be useful to note that our mediumterm projections assume that government +expenditures will evolve in line with the official projections and that there will be no further +increases in indirect taxes or any administer ed price adjustments",3 +3619,"although us lawmakers passed a bill by january +1st 2013 to avert the automatic spending cuts and tax rises due to take place the situation +was not fully resolved",3 +3620,we need to be mindful of public debt higher budget deficits today mean higher taxes tomorrow,3 +3621,"that forms a distinct contrast to the united states which is in the enviable position of being +able to think about what it can do with its budget surpluses",3 +3622,"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 longterm sustainable budget consolidation",3 +3623,"when talking about unsustainable policies it is straightforward to point to significant fiscal +imbalances which have been accumulated in some countries",3 +3624,moreover this good starting point has for example avoided the need to react to the current losses of revenue by raising taxes which would have certainly magnified the intensity of the adjustment,3 +3625,"its main +component is anchoring the commitment to enact laws requiring budgets of member states +to be at least close to balance in structural terms",3 +3626,10 im assuming that the government has access to affine taxes so that potential budget imbalances can be solved through an appropriate choice of an intercept for the tax system as in werning 2007,3 +3627,"for these countries with a view to ensuring a sufficiently swift return to sound and sustainable fiscal positions it appears to be advisable to implement fiscal adjustment beyond what is required to correct excessive deficits and +converge towards the mediumterm budgetary objective typically a balanced budget",3 +3628,unlike in the past windfall revenues and underspending have been used at least in large part to cut deficits,3 +3629,fiscal policies were supposed to conform to the other form of governance where countries would decide on and execute their own budgets but within the strict constraints of the deficit and debt limits set in the treaty,3 +3630,"in fiscal policy management greater importance is being attached to the details +of fiscal expenditures from the viewpoint of evaluating the contribution of each portion to theimprovement of economic infrastructures rather than to their effects in generating additionaldemand",3 +3631,"as regards fiscal surveillance ambitious benchmarks are +needed when establishing an excessive deficit and in setting the adjustment path towards a +countrys mediumterm budgetary objective ",3 +3632,the current plan is to reduce the deficit steadily over five years a more gradual fiscal tightening than in some other countries,3 +3633,"without unravelling the progress already achieved it will be essential to focus consolidation +on the fiscal composition of the budget reducing those expenditures that make the least contribution to growth and reducing the tax burden on economic activity",3 +3634,"the latest most significant measure taken is the introduction of the fiscal responsibility and budget +management act frbm in 2004 which enjoins the government to eliminate its revenue deficit and +reduce its fiscal deficit to 3 per cent of gdp by 2009",3 +3635,"solutions will need +to be worked out whenever legacy assets threaten to overwhelm the fiscal capacity of member states",3 +3636,at the same time fiscal consolidation programs should aim at increasing the efficiency and effectiveness of spending eg,3 +3637,creditors will not lend to a government whose debt relative to national income is rising without limit so one way or the other fiscal adjustments sufficient to stabilize the federal budget must occur at some point,3 +3638,however the direct cost borne by the government is transparently shown in its budget accounts,3 +3639,"17 +for gallatin a reduction of the united states federal debt burden was the end toward which all other fiscal policy was designed +18 he argued forcefully that the federal government +should spend tax revenues on new public services goods or investment only when tax revenues were freed from having to service a large public debt stock",3 +3640,"both spain and +italy recently completed 2012 budgets that move their deficits closer to eu targets",3 +3641,"the programme has allowed the reduction in the fiscal deficit to +be a gradual one with the scheduled deficit for this year higher than anywhere else in the +eu",3 +3642,"it is therefore important that in the years after 2007 +the budget policy allows the budget deficit to return to its path we saw prior to the fighting which will +emphasize the governments commitment to longter m budget targets and will demonstrate that the +deviation in 2007 was an exception",3 +3643,in recent years fiscal policy has been effectively based on explicit policy rules such as spending limits covering the whole electoral term,3 +3644,"but their experience is another reminder if +one were needed that every country with sustained budget deficits and rising debt + including the united states needs to act in a timely manner to put in place a credible program for sustainable fiscal policies",3 +3645,increasing revenues on a permanent basis expands the possibilities for repaying debt tomorrow and at the same time creates the conditions for fiscal expansion today,3 +3646,"this will be easiest where the fiscal measures taken were temporary it would be a matter mainly of not +repeating the measures",3 +3647,"it +was considered that if a limit on fiscal deficit was firmly set it would become difficult to make +up a decline in competitiveness with fiscal spending and countries had no choice but to strengthen their economic power",3 +3648,"sanctions can play a role in dampening the relative convenience of profligate +fiscal policies but a system of early peerreview of national budgets could detect inconsistencies and emerging imbalances at an early stage",3 +3649,the magnitude of fiscal consolidation was bound to be substantial because the size of the initial imbalances was very large,3 +3650,"this process ultimately entails some +transfer of national sovereignty in the areas of budget and structural policies",3 +3651,"in the end they often simply +weaken a countrys structural budget position",3 +3652,"after several years of large government +budget deficits interest expenditure is laying claim to a considerable portion of tax revenues andthereby limiting the governments scope for carrying out its tasks",3 +3653,"the pact sets budgetary rules and +procedures to reinforce fiscal discipline at the national level",3 +3654,"7 fiscal policy has loosened in many countries including ours to support growth and +to finance more expansive capital investment projects",3 +3655,we say the first act because there is a not insignificant chance that next years budget deficit will be higher than this years meaning possible added pressure to further increase the balanceofpayments deficit,3 +3656,there was no choice but to embark on a process of painful fiscal consolidation that was one of the largest and least gradual in the eu,3 +3657,"against the background of the current economic good times it remains +essential to step up the pace of fiscal consolidation in 2007 and beyond allowing unexpected tax +revenue to be fully allocated to deficit and debt redu ction",3 +3658,"in many cases the true state of the world will be disclosed well a fter the government responsible for +higher expenditure has departed",3 +3659,"the paygo rule required that any tax reduction or mandatory spending increase be paid for with offsetting tax hikes or spending cuts so that projected deficits over the 5 and 10year horizons would +not be worsened",3 +3660,those who dont have any fiscal space shouldnt use it or pretend to have it,3 +3661,"rbis perspectives on fiscal policy +the rbis approach to fiscal reforms is that while we agree on the need to eliminate the +revenue deficit and agree on a nominal limit for fisca l deficit what is even more important is +the mode of financing the fiscal deficit and the use that the resources so raised are put to",3 +3662,the ensuing reform of the pact in 2005 thus ushered in a greater degree of tolerance and political influence was permitted in dealing with eu member states fiscal imbalances,3 +3663,moreover higher spending would be counterproductive in countries with no fiscal space,3 +3664,"turning to fiscal policy buoyant revenue which c ontinues systematically to grow above budget has +provided for an improvement in programmed objectives",3 +3665,"still the relatively small size of this gap post 2009 indicates that there is a strong +structural element in the fiscal deficit",3 +3666,if you have a reform that may involve some upfront costs that can be taken into account in calculating the fiscal space,3 +3667,the reform effort to close these gaps have been substantial with the six pack the two pack and the fiscal compact to use brusselstyle acronyms,3 +3668,"binding commitments by +member states to swiftly implement strong national budgetary frameworks are essential",3 +3669,"although we should deploy as best we can tools to increase private saving the most +effective way to accomplish this goal is by es tablishing a sustainable fiscal trajectory +anchored by a clear commitment to substantially reduce federal deficits over time",3 +3670,"this outlay however brought to an end the provision to the +same enterprise of further government subsidies which would otherwise have added to future deficits",3 +3671,"both countries announced +and adopted major fiscal consolidation and structural reform plans aimed at balancing their +budget by 2013",3 +3672,although the balance of payments is an expost accounting record from an economic perspective it expresses an important budget constraint deficits need to be financed,3 +3673,"honourable members of the committee +detailing the governing policies in financial terms the state budget should not be based simply and solely on the economic and financial reality of a country but be viewed as an instrument for improving it",3 +3674,"these consolidation efforts will be more effectiv e if they are part of a comprehensive reform +programme which includes setting out concrete measures needed to prepare for the longterm fiscal challenges",3 +3675,"by 2030 according to the cbo they will reach about 15 percent of gdp3 as i will +discuss these rising entitlement obligations will put enormous pressure on the federal budget in +coming years",3 +3676,but there is no clarity on the details and hence the size of the fiscal impact,3 +3677,in the period from 1995 to 2007 the budget deficit averaged 43 of gdp and was always above the maastricht threshold of 3 of gdp,3 +3678,debt has increased materially as a result of the pandemic and fiscal deficits remain sizeable slide 8 righthand side,3 +3679,"it seems likely that a significant widening of the deficit which would +make the needed fiscal actions even more difficult and painful would worsen rather than +improve the prospects for a comprehensive fiscal solution",3 +3680,in the wake of the financial crisis and the ensuing recession many countries around the world responded with a significant increase in government spending,3 +3681,"the sgp was a compromise of quantifying fiscal soundness without interfering with the +budgetary and fiscal policies of sovereign states",3 +3682,"when adopting the stability and growth pact in amsterdam in june 1997 the +participating states undertook immediately to take corrective budgetary action if there are signs ofany considerable departure from the objectives of the stability and convergence programmes andparticularly from the mediumterm budgetary target of a nearly balanced or insurplus budget or if anexcessive deficit is in prospect that is a farreaching undertaking",3 +3683,in addition to setting out annual budget deficit and debt ceilings it highlights the member states individual fiscal responsibility,3 +3684,the federal government faces a longrun disconnect between its overt commitments and the baseline path of federal tax collections,3 +3685,next generation eu is the largest fiscal package that has ever been financed from the eu budget,3 +3686,"secondly sound budgetary policy is not only about deficit reduction and cutting +expenditure",3 +3687,third the governments overall fiscal consolidat ion efforts have already shown good results,3 +3688,"the manner of implementing fiscal federalism will be vital to ensuring the action to contain +spending is sustainable and to increase the systems efficiency and effectiveness",3 +3689,"the lack of information on revenue and expenditure targets makes it difficult to evaluate +some critical aspects of the fiscal policy outlined in the efpd",3 +3690,"looking ahead the question remains whether the fiscal policy now being pursued is +consistent with sustainable fiscal balances given the overconfidence in the soundness and resiliency of the economy that is the banner message of the current administration",3 +3691,"of course it is for +congress to judge what combination of tax increases and spending cuts should be +undertaken to achieve this",3 +3692,"this lack of ambition as regards fiscal consolidation which is not consistent +with the provisions of the revised stability and growth pact and falls short of the political commitments made could potentially undermine the credibility of the new pact",3 +3693,10 noy i a nualsri 2011 fiscal storms public spending and revenues in the aftermath of natural disasters environment and development economics 1601 113128,3 +3694,in greece the fiscal consolidation is one of the largest ever achieved by any country under an imf programme between 2009 and 2013 the fiscal deficit was reduced by some 13 percentage points of gdp,3 +3695,and they showed flexibility and solidarity at eu level fiscal and state aid rules were temporarily suspended and new common fiscal instruments were introduced notably next generation eu ngeu,3 +3696,"revenue +on the revenue side this budget tightens the fiscal pressure both in terms of direct and +indirect taxation with a range of new measures",3 +3697,"had +countries undertaken the necessary fiscal consolidation in the good years and reached a position of fiscal balance the 3 deficit limit imposed by the treaty would have been sufficient to deal with the slowdown",3 +3698,"in their 2011 budgets countries need to specify the necessary fiscal adjustment measures in detail while standing ready to correct any slippages +from the fiscal objectives announced",3 +3699,"third the tfc +recommended a fiscal restructuring plan based on the enactment of fiscal responsibility +legislation inter alia including i elimination of revenue deficit rd by 200809 and ii +containment of gross fiscal deficit gfd to 30 per cent of gsdp",3 +3700,"in addition as part of this +fiscal consolidation process a new fiscal policy framework that included a budget surplus +target of 1 per cent over the business cycl e was introduced in the year 2000",3 +3701,"of course fiscal deficits also had to be reduced in the united states during the +1990s but the relative tightening has been much less than in canada",3 +3702,"reforma is needed +i would suggest that reforma is urgently needed in the conduct of fiscal affairs in our nations +capital",3 +3703,"this creates budgetary pressure and leads to a choice of +raising revenue to fund these costs cutting other government programs or cutting benefits",3 +3704,"understanding how much these are +temporary or enduring behaviours is complicated by the tax and spending changes announced in the recent budget",3 +3705,"thus there would be need to make the problematic forecasts of government cash +revenue and expenditure including float items",3 +3706,"though the latest budget plans imply a somewhat bigger fall in the public spending share of +gdp than in the mid1990s this is offset by a smaller rise in the tax burden",3 +3707,active fiscal policy actions have taken up the room left by the shrinkage of private spending,3 +3708,as long as the basic willingness to share fiscal sovereignty is lacking we could and should then agree that sovereignty will be relinquished if a member state does not comply with the jointly agreed objectives such as the deficit and debt limits,3 +3709,this is evidenced for example by the fact that the eu budget is small in relation to the member states budgets but the states have instead agreed on binding rules and surveillance which limits their fiscal policies,3 +3710,"second there is a need for fiscal consolidation to generate the fiscal space for macro +management",3 +3711,such payments would ultimately have been financed from lower spending or higher taxes,3 +3712,"after nearly three decades of spending the petroleum revenues more or less as they came +in the fiscal rule enabled the government to save for future generations",3 +3713,and another factor that springs to mind is the importance of fiscal prudence only if there is sufficient fiscal leeway will the automatic stabilisers be able to function in difficult spells for the economy or the government might even respond to an economic slump by means of targeted spending increases,3 +3714,"in the +eac we are formulating fiscal rules to curb fiscal deficits and public borr owing",3 +3715,gb7g20 the noninflationary financing of budget deficits through the tender of government debt,3 +3716,"a determined pursuit of fiscal consolidation is all the more necessary as the accession process and the completion of the transition phase are likely to place further +demands on the budgetary situation for example in relation to higher infrastructure investments or +future reforms of the accession countries health and social security systems",3 +3717,"two d ifferent hypot heses exist i n rega rd to the relatio n +betwe en trad e deficits a nd budget defi cits",3 +3718,"conversely in the absence of public support and +commitment from elected leaders fiscal rules may ultimately have little effect on budget outcomes",3 +3719,the fiscal rule specifies that only the expected real return of the fund on average over the cycle is to be spent over public budgets every year,3 +3720,"it set a rigid framework of discipline based on budget targets for its expenditure and the budget deficit and it makes sure that it adheres to +them",3 +3721,we are very proud and rightly so of the impressive advance made in reducing the government budget deficit in recent years but the actual budget situation is not as good as we think,3 +3722,"the deficit would havebeen large enough to push the total federal budget into the red and an accrualbased budget measure +could conceivably record noticeable deficits over the next few years rather than the surpluses now +indicated by the official projections for either the total unified budget or the onbudget accounts",3 +3723,"to put the budget on a sustainable trajectory policy actions either +reductions in spending increases in revenues or some combination of the two will have to +be taken to eventually close these primary budget gaps",3 +3724,"much of the focus is on the fiscal si de with many seeing the solution being one of fiscal +austerity all round ",3 +3725,"vulnerabilities +our most important vulnerabilities are the twin deficits the fiscal deficit and the current account deficit",3 +3726,the latter include the observanceof limits on the government deficit and debt,3 +3727,"in this respect it should be stressed that cutting the budget deficit requires an +unprecedented structural effort",3 +3728,"in recent years fiscal policy has been effectively based on explicit policy rules such as spending limits +covering the whole electoral term",3 +3729,on the domestic front the delay in the passage of the 2019 budget and the election ban weakened government spending and public construction,3 +3730,our current system of national fiscal policies and national budgets with a set of rules like the stability and growth pact is not sufficient,3 +3731,"in several european economies as in the us entitlement spending by +government has outrun future revenues and it is no longer possible to borrow away the +problem",3 +3732,nevertheless their effort is poorly matched by the fiscal policy and by the often delayed structural reforms,3 +3733,all three are in breach of the agreed fiscal rule of spending no more than 3 of national income on new debt,3 +3734,"the e conomic policy framework +of the new govern ment empha sises the need to increase g overnm ent revenue in the fiscal +consolidation effort while maintainin g an ade quate publi c inve stment p rogramme to im prove the +quality of the infrast ructure in the cou ntry",3 +3735,and even where fiscal space is not available budgets can be designed in all countries in ways that are friendlier to growth,3 +3736,"fiscal +empowerment through revenue augmentation holds the key to address such fiscal risks",3 +3737,"the fiscal cost +of the crises brought every indivi dual in the economy to his senses",3 +3738,we have countries that have fiscal space and dont use it,3 +3739,this definition which is unique to israel and serves to make ourbudget deficit smaller has misled many people in the past and sent out a reassuringmessage about the size of our budget deficit,3 +3740,any attempt to trade off reforms against higher structural deficits would pave the way for budgetary arbitrariness undermining the credibility of the rules,3 +3741,a second question concerns the ultimate target of budget rules,3 +3742,"there you have the prevailing modus operandi of our fiscal authorities pass the bill rather +than the american dream to our children",3 +3743,"similar choices have been made for the 2008 budget which increases the deficit in relation +to that on a current legislation basis",3 +3744,"moreover in relative terms fiscal positions of emes have further strengthened while those of +aes have worsened in the aftermath of the gfc due to sizeable fiscal stimulus policies",3 +3745,"on the +expenditure side the measures consist mainly of spending limits the definition of the means +for complying with the limits is left to future provisions",3 +3746,as for fiscal policy it is important to strike the right balance between the consolidation of public finances and support for an efficient reallocation of resources to viable companies,3 +3747,"although justified by the extent of the crisis and +varied in extent across countries this fiscal stimulus caused a substantial deterioration of +public deficits and debttogdp ratios",3 +3748,"in the case of the united states the +situation is complicated by the november presidential election which has the effect of +postponing difficult decisions in particular how to deal with the impending fiscal cliff of +expiring tax cuts and increased spending cuts",3 +3749,"a growth consistent fiscal strategy entails making binding commitments now +that will deliver medium term fiscal savings rather than achieve immediate deficit reduction",3 +3750,"the government is implementing an ambitious fiscal consolidation plan combin ing some tax increases with sizable spending +cuts and more importantly adjustments to longterm expenditures in particular to the pension system all of which will have a strong positive impact on the longterm sustainability +of public finances",3 +3751,we were on a path of fiscal consolidation before the crisis but got off track because of the counter cyclical spending necessitated by the crisis,3 +3752,"strong fiscal adjustment +has l ed to primary bu dgetary surpl us and si gnificant reduction of the fiscal deficits",3 +3753,"the longerterm sustainability of budget positions also needs to be ensured in several countries with +regard to the consequences of planned fiscal reforms such as those of pension systems and thereduction of taxes",3 +3754,"and in the case of +the budget deficit well see a decline from over 11 last year to 6 next year",3 +3755,"the main problem is that fiscal consolidation has to be effected at a time of an economic +slowdown",3 +3756,"the direct contribution of federal government spending and tax changes +reflected in the swing in the federal budget from deficit to surplus has been a net drag on growth",3 +3757,the higher deficit is reflected in the further increase in public debttogdp ratio to 635 at the end of the second quarter,3 +3758,"20182 +2 financial stability implications of fiscal measures +when the pandemic hit in spring 2020 governments implemented bold and comprehensive fiscal measures",3 +3759,"even small deviation s +from expen diture and revenue p rojections can h ave a major im pact on the deficit",3 +3760,"32 revenue +the budget measures are expected to reduce tax revenue by 26 billion providing for 33 billion in tax reliefs and 07 billion in tax increases",3 +3761,they have executed a fiscal adjustment of historic proportions and embarked on the difficult road of structural reforms,3 +3762,"however even after economic and financial conditions have returned to normal the federal budget will remain on an unsustainable path with the budget gap becoming increasingly large over time unl ess the congress enacts significant changes +in fiscal programs",3 +3763,"unlike in other major advanced economies our fiscal stance is not based on a sing le +budget voted for by a single parliament but on the aggregation of eighteen national budgets and the eu budget",3 +3764,thus we cannot rule out the possibility that theforces behind last years tax surge will prove transitory and dissipate more rapidly than cbo hasassumed implying lower receipts and renewed deficits for the years ahead,3 +3765,"do ecb demands that governments do more to cut budget deficits not put the renewed +growth at risk",3 +3766,"the problem the source of the current tensions clearly reside with national fiscal developments notably localised in those countries that have not done enough to correct imbalances or to prepare for difficult +times when times were still good",3 +3767,"one usual approach relates to the intertemporal debt sustainability that calls for an aggregate budget constraint between fiscal surplus and +seigniorage revenue",3 +3768,this also applies to fiscal developments regardless ofwhether they are actual planned or promised,3 +3769,"there is clearly such a relationship though other spec ial factors have also been at play here including +the large fiscal deficit",3 +3770,"at the federal level the budget +deficit narrowed appreciably in fiscal 2005",3 +3771,note that the rules laid down in the fiscal compact concern the structural budget deficit not the cyclical component of the budget,3 +3772,"the twin deficits fiscal and +balance of payments have compounded our problems",3 +3773,"with these large budget deficits total federal debt outstanding is almost 14 trillion or about 94 percent of +gdp",3 +3774,i will come back to our current fiscal rule for petroleum revenue spending shortly,3 +3775,the us has created a significant budget surplus andgovernment debt is being reduced,3 +3776,the governments fiscal space allowed it to finance the huge covid19 response without incurring unmanageable debts,3 +3777,"in 1994 the govern ment l aunched a serie s of expenditure reductions whi ch by 1997 had reduced +program spending by alm ost 20 pe r cent",3 +3778,consequently the prepandemic fiscal consolidation was ceased and the fiscal deficit hit a record high of 77 of gdp,3 +3779,the guidelines for the use of petroleum revenues set limits on the structural budget deficit,3 +3780,fiscal policy on the other hand is governments management of its revenues and expenditures to achieve economic stability,3 +3781,"one of them is to meet +the commitments under the excessive deficit procedure",3 +3782,moreover the stability and growth pact allows for fiscal flexibility so long as additional reforms increase potential growth,3 +3783,third the fiscal restraint that has held back growth in recent years has ended with the federal budget deficit now at a level consistent with a stable to slowly declining federal debttogdp ratio,3 +3784,"the fiscal +consolidation that commenced in 2010 arrested the rise in the headline deficit relative to gdp +and then r educed it once the economy began to recover",3 +3785,in years with a high level of activity the actual budget deficit will be smaller than the structural deficit,3 +3786,"a country which like ireland in the last decade depends +on volatile sources of receipt would be required to aim at a better fiscal performance a +lower deficit or even a surplus",3 +3787,it generated benefits but also imposed costs in any case as a strategy it is inconsistent with the current emphasis on fiscal discipline and the efficient deployment of resources across the economy,3 +3788,"new regulations were established for fiscal +policy with an expenditure ceiling and surplus target",3 +3789,the fiscal stimulus is carried out by increasing spending and reducing taxes,3 +3790,they have an unprecedented power to finemember states with excessive budget deficits,3 +3791,"adjustment on the spending +side accompanied by structural reforms to pr omote longterm growth has typically been the +best strategy especially when combined with a credible longterm commitment to fiscal +consolidation",3 +3792,"he relentlessly demanded a high level of fiscal transparency and consistently challenged all +decisions by the government to spend in excess of its current revenues",3 +3793,thissuggests setting targets in terms of structural deficits or at least allowing built in fiscalstabilizers to continue to operate,3 +3794,"while the economic debate +was previously focused on the lack of savings wi th currentaccount deficits and government deficits +we now have a savings surplus",3 +3795,and as we have seen from our longstanding discussions it is certainly not politically simple regardless of the shape that such an instrument could take from the provision of supranational public goods like security defence or migration to a fullyfledged fiscal capacity,3 +3796,"while the spending cuts and the measures to increase revenues are intended to balance each other in +the coming year a distinctly greater role for the initiatives to increase revenue is envisaged for the years that follow",3 +3797,"in the future this could enhance the efficiency +of public spending overcoming the great budget rigidity produced by use of past spending as +the main yardstick",3 +3798,and it was 1997 before the cumulative effects of all those deficitreduction measures put federal fiscal policy back on a sustainable track,3 +3799,the fiscal compact which requires countries to run balanced budgets over the cycle and reduce their debt levels progressively towards 60 of gdp has to be written into national constitutions or equivalent and is overseen by national fiscal councils,3 +3800,a public float with a permanent common fiscal capacity which does not mean that an additional annual budget is needed to better cope with macroeconomic shocks,3 +3801,"for example world +economic outlook compiled by the imf 2010 stresses that fiscal contraction that relies on spending cuts +tends to have smaller contractionary effects than taxbased adjustments",3 +3802,"the +stability and growth pact was not able to constrain fiscal deficits and in 2010 widely divergent fiscal deficits were apparent which ultimately led to the sovereign debt crisis",3 +3803,these countries are implementing their programs which will restore the public finances to a sustainable path,3 +3804,"the consolidation of public budgets to a +sustainable position is thus one of the key challenges for some accession countries as well as for the +present eu members",3 +3805,"even if this lesson is not fully taken on board the need for continued fiscal prudence will ensure that +choices between alternative uses of public funds will have to be made more frequently and spending +cuts made in sensitive areas",3 +3806,"as for fiscal policy the baseline scenario considers that the structural balance will be reached towards the end of the current administration and that there will be tax changes budget reallocations and new financing sources for the reconstruction +according to the governments announcements",3 +3807,"a new fiscal framework +the deficiencies of the stability and growth pact have been well documented elsewhere",3 +3808,"following the failure of lehman brothers in autumn 2008 the fiscal health of advanced countries deteriorated further as a result of economic stimulus and support measur es on the fiscal front to combat the sharp +economic downturn",3 +3809,"2 bis review 222010 + as troubling as these deficits appear even more disconcerting is the longerterm outlook for +the federal debt caused by the accumulation of these deficits over time",3 +3810,"lower revenue would have pushed the government accounts into deficit and a +higher debt ratio at the outset of the global financial crisis",3 +3811," the extent of the frontloading of fiscal spending during the first half of 2011 will be +gradually scaled back so that around 2012 it will be back to its precrisis level4 +the ratio of the fiscal deficit to gdp will decline from 19 this year to 16 in 2011 as tax +revenues increase5",3 +3812,"no need it seemed for restraint in spending and so after years of relatively +disciplined government budgeting there was a relaxation of spending controls one i will say which was broadly welcomed across most of the political spectrum",3 +3813,one is of course the growing burden in the budget ofthe cost of servicing government debt,3 +3814,is it fair to ask for both to obey the same fiscal deficit rules,3 +3815,and secondly in israel the indexation component of government expenditure for the part of the debt that is indexed to the cpi is not shown while internationally this component is also included,3 +3816,"fiscal policy mu st be part of a comprehensive and growthoriented +strategy that focuses on improving the structure of public expenditures ",3 +3817,"likewise t he scope for fiscal expansion was severely limited +by concerns about mediumt erm fiscal sustainability",3 +3818,due to the high uncertainty for 2021 the deficit will be consequential but the tax rate will not be reduced without a parallel decrease in expenditures,3 +3819,"18 +of course in lieu of tax cuts or increases in transfers the government could increase spending on +current goods and services or even acquire existing real or financial assets",3 +3820,when the crisis hit followed by a global recession an expansionary fiscal policy was once again adopted and this time it was particularly intense despite the imbalances hitherto accumulated and the absence of fiscal space,3 +3821,"large expansions of fiscal expenditure +before the crisis and the implementation of unprecedented stimulus packages to cope with it threw their debt levels very high",3 +3822,"in any case the additional fiscal costs that governments have +shouldered will be carried forward in terms of higher debt for years to come",3 +3823,"however what could negatively effect fulfilment of fiscal criteria and slightly +postpone the process of integration is the treatment of the pension reform expenditures which is now +also in question in many associated as well as member countries",3 +3824,the crisis has lent weight to the view that a supportive macropolicy mix leads to improved reform implementation10 the imf finds that where countries have fiscal space temporary public spending can ease the transitional costs of some reforms,3 +3825,the logical course one would think is a complete and full debt forgiveness coupled with a constitutionally mandated balanced budget,3 +3826,on this basis we need to move quickly to establish a sustainable fiscal position and accelerate efforts at meaningful diversification,3 +3827,"a year ago the congressional budget office expected the unified surplus to continue to +mount if no new policy actions were taken and to cumulate to 56 trillion for fiscal years 2002 to 2011",3 +3828,"economists call this a fiscal externality others talk of freeriding or moral hazard countries with a +sound fiscal policy that had to impose painful cutbacks on their citizens are forced to carry the can for +less disciplined member states",3 +3829,in the us this form of risk sharing has shown to be more important than federal budget transfers,3 +3830,this achievement represents one of the largest fiscal adjustments ever undertaken and is twice that of the adjustment in other member states that were under euimf programmes,3 +3831,fiscal policy must be part of a comprehensive and growthoriented strategy focusing as a rule on restraining the volume and on improving the structure of public expenditures,3 +3832,the boost from increased spending is usually greater when this is financed by a deficit,3 +3833,the same applies to how any fiscal adjustments are to be allocated across countries,3 +3834,in a situation of high fiscal deficit and lack of fiscal assurances on its responsibility separation of the two functions could increase the risk of macro instability,3 +3835,"but growing fiscal pressure means that public +balance sheets will not be able to sustain the current or ev en higher level of spending that is +needed",3 +3836,"but exactly which programs will be cut and which taxes increased and when is +unclear and has been further muddled by the behavior of fiscal policy makers these past few +days",3 +3837,"spreading the use of revenues in this way is +in line with the fiscal rule as it has been formulated",3 +3838,"on the fiscal side government spendi ng can be increased on a sustainable basis if +government revenue increases on the back of a growing econo my",3 +3839,"others blamed that same pact for obliging them to adopt tough budgetary policies +rather than explaining that these policies were for the good of their countries and of future generations",3 +3840,"when we first ran large current +account deficits in the 1970s and through to 1984 government fiscal deficits accounted for much of +the excess spending that gave rise to the current account deficits and government borrowing abroad +financed those deficits",3 +3841,"in the past two years spending cuts and tax increases totaling about 35 trillion over the +next 10 years have been enacted",3 +3842,"the realization of all of the +automatic tax increases and spending cuts that make up the fiscal cliff absent offsetting +changes would pose a substantial threat to the recovery indeed by the reckoning of the +congressional budget office cbo and that of many outside observers a fiscal shock of +that size would send the economy toppling back into recession",3 +3843,the changes in budget policy with a longterm expenditure ceiling and a budget surplus target form a natural starting point,3 +3844,"with regard to greece it became clear from the middle of 2011 that its fiscal consolidation and economic reform program to which it +had internationally committed itself was far behind schedule",3 +3845,enshrining balanced budget rules in national legislation creates a new first line of defence against fiscal imbalances,3 +3846,therefore a number of countries had to curtail the operation of the automatic stabilisers and some had to run budget deficits above 3 of gdp which triggered the related excessive deficit procedures,3 +3847,"on the fiscal front reforms to date have translated into a significant strengthening of the +stability and growth pact",3 +3848,"however tax increa ses of sufficie nt dim ension to deal with our loo ming fiscal problem s arguably po se +signifi cant ri sks to econo mic gro wth and the revenue base",3 +3849,"3 +no doubt for some member states economic convergence has represented a long and painfulprocess that required a stronger dedication to improving and maintaining government budgetdiscipline",3 +3850,"the second justification for shared fiscal arrangements is that problems in one country are very +likely to spill over to others",3 +3851,this may also include steps to create a common fiscal capacity backed by credible rules for national budgets and under appropriate democratic scrutiny,3 +3852,"fiscal policy contains automatic stabilizers basically tax revenues that rise in booms and fall in +recessions hence stabilizing overall spending demands",3 +3853,the fiscal rule guides the annual transfers from the fund to the fiscal budget,3 +3854,"further fiscal results have shown that in certain countries not enough room for manoeuvre was +available to absorb the budgetary effects of the slowdown without drawing too close to the limits set in +the stability and growth pact",3 +3855,"fiscal policy has been expansionary and the decision to increase budget spending this year was +warranted",3 +3856,under current federal law and most projected outcomes of congressional budget negotiations some ongoing fiscal restraint seems probable at the federal level,3 +3857,well the state budget is structured in such a manner that it has a deficit meaning a need of funding but whether that funding is used for current or capital needs it is hard to say because it is one account of the government from which all those needs are covered,3 +3858,this can of cou rse be viewe d as one reason for the rel atively high fiscal deficit,3 +3859,in europe there is much discussion about the level of budget deficits,3 +3860,till cordes kinda t p muthoora and a weber 2015 expenditure rules effective tools for sound fiscal policy,3 +3861,"over the last few years the fiscal authorities have cut federal spending and raised taxes and our congressional budget office estimates that these fiscal headwinds will reduce real gdp +growth by about 15 percentage points this year from what it otherwise would have been",3 +3862,"major elements of the fiscal compact are the strengthening of the role of the balanced budget rule +and a further tightening of the excessive deficit procedure",3 +3863," +this is a conference on fiscal policy specifically on how to allocate any potential future surpluses +among debt reduction tax cuts and spending increases",3 +3864,"however in the latter two cases the esas powers are subject to the fiscal clause +which provides that the esas powers cannot im pinge on the national fiscal responsibilities",3 +3865,"the exceeding of the deficit targets last year has highlighted the difficulty of correcting fiscal +dynamics in adverse cyclical situations",3 +3866,"the 20 03 budget was a further step in fiscal responsibility by r educing the budget +deficit to belo w 20 percent of gdp",3 +3867,"with the +betterthanexpected tax revenues thanks to the solid economic recovery the budget deficit +for this fiscal year and the extent of pub lic debt will probably be lower than originally +expected",3 +3868,"fiscal policy must also +ensure that public spending is delinked from the volatility in resource revenues to avoid imparting cyclical volatility to the economy",3 +3869,"in 2005 for example some nis 33 b illion 15 percent of the total government budget +was to cover debt interest payments and this is the second largest item after defense spending",3 +3870,"the fiscal +guideline implies that the nonoil deficit will increase in the years ahead thereby providing a +substantial fiscal stimulus each year",3 +3871,"growing fiscal imbalances if not promptly corrected are a cause of concern for several +reasons",3 +3872,"looking at national fiscal situations most analysts would acknowledge the magnitude of the +efforts undertaken",3 +3873,temporary revenue windfalls were used to finance permanent expenditure increases and some countries failed to achieve structurally sound fiscal positions despite a long period of strong economic growth,3 +3874," by far the greatest part of additional government expenses is directed to current expenses +and only a small part less than one tenth to financing investments",3 +3875,countries budget deficits have risen substantially on account of the crisis,3 +3876,this shift in the federal governments fiscal position has fostered an increasein overall national saving as a share of gdp to 17¼ percent from the 14½ percent low reached in1993,3 +3877,that spending cuts are key to establishing a credible path of fiscal sustainability,3 +3878,"policy +action was taken on fisc al front by passing the fiscal responsibility and budget +management frbm act in 2003 firmly setting targets for fiscal correction",3 +3879,"the basic rule in a democratic society is that fiscal policy using taxpayers money +needs to be approved as part of a budget by a parliament composed of members elected by the people",3 +3880,"the preliminary indications of a decline in +real tax revenues if sustained could have implications for ugandas fiscal consolidation strategy",3 +3881,"on the fiscal side when times get tougher governments also have to revise their plans reassessing the level of tax revenue they can count on no longer putting +substantially more new money into the economy each year",3 +3882,"at the beginning of 2013 federal fiscal policy is scheduled under +current law to become sharply contractionary with abrupt increases in taxes and cuts in +spending",3 +3883,"in the face of this hardship the strategy of reducing deficits has come under increasing +criticism from commentators and politicians",3 +3884,"because the liabilities are nominal and nonindexed the government budget constraint provides a linkage between the publics +assessment of future real tax collections and government spending and the current price +level",3 +3885,turning to fiscal policy kenyas fiscal position is set to adjust gradually through a combination of lower expenditures and higher revenue collection,3 +3886,it prevents the funding of external deficits from coming to a screeching halt,3 +3887,"in this respect we assumed that the fiscal space created by the strongerthan +expected economic activity leading to bette rthanexpected performance in budget revenues +would be used mostly to reduce the government debt stock and hence fiscal adjustment in 2011 and onwards would be implemented through institutional and structural improvements",3 +3888,"from +200304 there has been a sharp correction both in th e revenue and fiscal deficits and the process of +correction is primarily due to buoyancy in revenue re ceipts states own tax revenue as well as transfer +and devolution of resources from centre",3 +3889,"the principal aim of +fiscal policy however must be to ensure that the national budget is financed as efficiently as possible",3 +3890,"of course the united states is not exempt from concerns about the potential longterm +effects of an unsustainable fiscal path",3 +3891,in the event of a country having an excessively large budget deficit itsgovernment must act,3 +3892,if on the other hand budgetary provisions are exceeded higher spending and widening of the fiscal deficit have as experience has shown inflationary consequences and possible spillovers that could undermine external viability the twin deficit argument,3 +3893,as a result the cutbacks and downsizing necessary to restorefiscal health have been more sweeping and more disruptive than if action has been taken muchearlier,3 +3894,therefore greater emphasis on stepping up public investment and containment of subsidies while adhering to the fiscal consolidation is likely to pay rich dividends,3 +3895,"member states commit to run structurally balanced budgets and introduce a respective fiscal +rule into their national primary legislation",3 +3896,"as tax revenue has meanwhile declined as demand has weakened +substantially this has led to large budget deficits and rapidly growing government debt",3 +3897,"spain where fiscal consolidation had progressed more than elsewhere will have to make +sure that it keeps its fiscal credibility in the years to come in strictly meeting the requirements +of the stability and growth pact",3 +3898,"in some member states as for example in the case of greece eu funds were not put to +proper use and in some cases ended up imposing a burden on future government finances",3 +3899,"it +also facilitates the generation of gove rnment revenue and improved government funding +position",3 +3900,these actions include tax breaks public investment and generous fiscal backstops such as public guarantees and credit lines,3 +3901,"this situation will +be compounded by the projected 20012002 government budget deficit",3 +3902,to call the correction of unsustainable imbalances like the balance of payments deficits of 2007 and 2008 of around 10 of gdp and the budget deficits which ranged from 9 to 11 between 2009 and 2012 austerity is not really a very good description of reality,3 +3903,"while difficult work still lies ahead countries in the eur o area have made meaningful progress toward +achieving longterm fiscal sustainability",3 +3904,rising government deficits which were absorbing increasing amounts ofdomestic savings were not helping either,3 +3905,"thus the government was able to enact modest but still quite effective countercyc lical fiscal policies in the midst of global +turmoil",3 +3906,at a time when the level of savings is very low the prospective deterioration in the us current account deficit of around us150 billion a year due to the spending bill signed into law last month will almost inevitably reduce the overall level of savings,3 +3907,"42 structure of financing and public debt +the way the budget deficit and public debt are financed is as important as their level",3 +3908,"in fiscal 2012 the nonenergy fiscal deficit increased to 315 billion compared with 284 billion in the previous fiscal year +suggesting that the magnitude of the fiscal stimulus was higher than envisaged",3 +3909,the ecb agrees with the idea that countries that have fiscal space should use it but many countries do not have this fiscal space,3 +3910,at that time deficits were often the result ofsubstantial fiscal deficits and had to be covered by government borrowing overseas in foreigncurrency,3 +3911,"in particular the congress and the administration will +soon have to address the so called fiscal cliff a combination of sharply higher taxes and +reduced spending that is set to happen at the beginning of the year",3 +3912,so fiscal policy in terms of the rate of growth of public spending has started to be visible after a long period of basically being held at zero or slightly negative,3 +3913,"in the long run however current +account deficits could well increase again globally if the fiscal expansion which has taken place in recent years is not reined in",3 +3914,"larger +fiscal deficits are the outcome of increased expenditure and reduced taxes in addition to a +normal deterioration associated with a recessive period",3 +3915,"these include the large tax cut passed earlier this year the effect on spending of the fiscal measures already passed in response to the events of september 11 and effect of further spending increases and +further tax cuts now under consideration",3 +3916,"while the fiscal correction front deals with th e present imbalances the governance front will +mainly be directed towards the future in order to reduce the likelihood of recurrence of deficit +problems",3 +3917,"given the magnitude of the fiscal shortfalls in many countries the way in which fiscal +discipline is restored will have profound implicati ons for some time to come",3 +3918,a combined total of us24 billion amounting to about 20 per cent of gdp is expected to be received by jamaica over the programmes twoyear period to provide budgetary suppor t and meet balance of payments needs,3 +3919,"it seems to be committed to bring further improvements in +the budget deficit potentially to introduce spending caps and to increase the size of +emergency reserves",3 +3920,"although somewhat +disappointing that erosion was small relative to the influence of the wise choice of the administration +and the congress to allow the bulk of the unified budget surpluses projected for the next several yearsto build and retire debt to the public",3 +3921,while spending decisions essentially remain a national prerogative liability has become partially mutualised,3 +3922,"the budget deficit is being reduced this year in very adverse economic and financial +circumstances",3 +3923,"bis review 1372009 3 + fiscal consolidation is a continuing commitment and our collective efforts to address our +fiscal position may soon come to fruition",3 +3924,part of this reform program is fiscal consolidat ion which is now generating benefits for the country,3 +3925,"for an economy with a continuing need to +finance budget deficits there is of course a natural supply of debt instruments unless like hong kong +it has surpluses to spend",3 +3926,"but we should not forget that the fiscal +crisis has become so severe because most countries did not manage to restructure and improve their budgets during the good times of rather high growth",3 +3927,"so +far the tax increases have allowed the financing of addition al spending and the reduction +of the deficit",3 +3928," finally aggressive nearterm government spending cuts or tax increases could slow +economic growth at least in the short to mediumterm although a credible plan for +mediumterm fiscal consolidation is sore ly required and would have many economic +benefits",3 +3929,"the +government committed to a fiscal consolidation process through the fiscal responsibility and budget management act in 2003",3 +3930,"this means that much of the fiscal imbalance is structural and it must be checked urgently with highly ambitious consolidation measures that manage to reverse +the trend of spending and build revenue back up",3 +3931,"as earlier indicated budgetary policy has contributed to domestic stability by means of fiscal +consolidation and the control of the budget deficit",3 +3932,"we should learn the lesson that allowing wide budget +4 bis review 562009 + deficits while the economy is expanding ends in failure",3 +3933,"it is made of sudden breakthroughs often in response to wars famines or fiscal crises followed by +setbacks and regressions to earli er and less developed states of affairs",3 +3934,sanctions can play a role in dampening the relative convenience of profligate fiscal policies but a system of early peerreview of national budgets could detect inconsistencies and emerging imbalances at an early stage,3 +3935,burgeoning receipts along with continuing restraint on federal spending produced thefirst unified budget surplus in thirty years allowing the treasury to begin to pay down the federaldebt held by the public,3 +3936,"the package of measures approved in may involves bringing forward to 2010 and 2011 a +sizeable portion of the drive to reduce the deficit",3 +3937,most countries are now prepared to accept budget deficits to defend their economies,3 +3938,the improving fiscal position of the government supported by the series of fiscal reforms and improved tax administration provides the government the resources to increase public investments,3 +3939,to further facilitate the completion of unfinished work the budget enables the roll over of all unspent provisi ons of previous years to the ensuing year,3 +3940,"fiscal policy +coupled with these improvements the degree of transparency in fiscal policy was strengthened with +the introduction of the threeyear mediumterm expenditure framework which marked a departurefrom the oneyear budget announcements",3 +3941,i consider that budgetary plans recentlyexpressed in countries updated stability programmes are not very ambitious as tax cuts are notaccompanied by appropriate expenditure restraints,3 +3942,it is widely understood that governments can finance expenditures through taxation debt or printing money,3 +3943,"fiscal policies should also strive to establish a well designed consolidation strategy in those countries struggling with increasing fiscal +imbalances",3 +3944,to get around this starting 1990s several countries voluntarily enacted fiscal responsibility laws,3 +3945,as for fiscal policy which will be discussed in more detail later this morning the need to stabilise public debt amid weak growth has led to net tax increases both in last years budget and in the current one while the pace of public spending growth has also been tightened,3 +3946,"a failure to address these fiscal challenges would expose the united states to serious +economic costs and risks",3 +3947,"moreover +countries with remaining fiscal imbalances reaffirmed their commitment to attaining safe budgetary +positions by 2003 or 2004",3 +3948,"in addition our burgeoning budget surpluses have clearly contributed to a fending off +if only temporarily of some of the pressures on our balance of payments",3 +3949,"and government budget deficits +the current account deficit is mirrored not only in the shortf +all in private savings but also in +the budget deficit",3 +3950,"it soon became evident that the extent of th e required fiscal consolidation would be much +more significant than initially thought the explosion of fiscal deficits and debt ratios that were +seen to be part of the initial solution to the crisis was now seen as a problem as both +solvency and sustainability issues came to the fore",3 +3951,"but it would be +important to set at eu level strict deficit and debt limits for national budgets",3 +3952,"one problem with this approach was that its primary focus and measure of +success was the current budget deficit",3 +3953,"such +consolidation will need to be accompanied by improvements in the effectiveness and efficiency of public spending as well as of the tax system and its administration ",3 +3954,"however the fiscal consolidation process was slower than expected and its sustainability +must be ensured through public expenditurecutting measures",3 +3955,"avoiding pro cyclical changes in fiscal policy +such as tax cuts or increasing public spending when resources are already stretched",3 +3956,"we know that the budget for 2002 is not positioned on the path needed to attain these goals the deficit will be greater than planned because the estimate of revenues is based on an +unrealistic growth assumption",3 +3957,"for reasons i discussed last january i believe that cutting taxes is a far preferable way to reduce +the surplus over time than to institute new expenditure programs",3 +3958,the fiscal compact strengthens this focus on prevention through a new first line of defence the introduction of balanced budget rules in the constitutions of member states,3 +3959,the commitment to curbing and gradually reducing the fiscal burden is reaffirmed,3 +3960,the united states has launched a programme of expenditure measures and tax cuts amounting to almost 800 billion which will have an overall impact on the deficit for the three years 200911 of about 5 per cent of annual gdp,3 +3961,as it stands our longerterm fiscal challenges are formidable and will demand courageous political and fiscal leadership,3 +3962,the point of this is not about observing these limits for the budgetary rules sake placing constraints on government authorities or pushing through austerity programmes,3 +3963,the recession has further eroded fiscal positions and fiscal rules have failed to tame unsustainable fiscal paths so that the ability of fiscal policies in the eu to deal with another blow of crises is quite limited,3 +3964,"further ms teresa terminassian suggested that impact of climate change to public +finance should be responded by fiscal measures to mitigate and to adapt its consequences",3 +3965,"for the public finances to be sustainable this proportion must stop growing and eventually stabilize at lower levels a goal which has been explicitly stated in federal budget plans7 +the resulting vulnerability has been reflected in two ways",3 +3966,only spain used this fully to reduce budget deficits,3 +3967,"the imf has shown that in all advanced +countries including the united states and the united kingdom these losses accounted for +around two thirds of the deterioration in fiscal positions observed during the crisis",3 +3968,inthe context of this pact eu governments have agreed to reduce their government budget deficits toclose to balance or even to create surpluses in the medium term,3 +3969,"the fiscal rule is based on +an annual real return of 4 per cent after costs",3 +3970,at the same time the german experience along with the experience in many other countries shows that the lack of fiscal rules may lead to ever increasing public debt,3 +3971,most countries including my home country france and also italy have no fiscal room for manoeuvre for more spending,3 +3972,"however this reduction in the tax +rates requires the appropriate adjustments to be made in order to meet the objectives of fiscalconsolidation for example with the expansion of tax bases or cuts on the expenditure side",3 +3973,"yet +it has to follow a deeper fiscal union as it would imply significantly increased risk sharing amongst countries",3 +3974,"our +notion of the acceptable norm for the fiscal deficit arises from the need not to crowd out the private sector it also derives from the capacity to finance the deficit either from taxpayers or from capital markets",3 +3975,today this kind of dominance is manifested through the inability or unwillingness of fiscal authorities to control longrun expendituregdp ratio,3 +3976,the main challenge in macroeconomic management today is reducing the high fiscal deficit and an improvement in the quality of fiscal adjustment,3 +3977,"we need to see further significant +progress on the reduction of excessive fiscal deficits",3 +3978,the debt collection improvement act of 1996 required that most federal payments except for tax refunds were to be made electronically by 1999,3 +3979,"at the same time the eu countries have agreed on a number of measures for stricter budget +discipline",3 +3980,in addition the fiscal 2016 budget package passed at the end of last year which extended a number of tax breaks and eased caps on spending means that fiscal policy should provide a moderate stimulus this year,3 +3981,our fiscal policy based on a rule that determines public expenditure seeing past the cyclical ups and downs has allowed for a significant spending program to be carried out without jeopardizing public finances,3 +3982,governments are no longer draining national savings to financehuge budget deficits,3 +3983,"put simply a +government cannot for long periods spend substant ially more than it receives in revenues",3 +3984,indeed one of the fiscal policy errors prior to and including 200001 was to mistakenly interpret budgetary improvements in good times as evidence of structural improvements which were often used to motivate spending increases or tax cuts,3 +3985,"the last 10 years fiscal policy has been geared towards a cyclically adjusted nonoil deficit +which corresponds to 4 per cent of the fund every year",3 +3986,it was also important that the heads of state or government have further agreed on a new fiscal compact with a view to achieving a more effective disciplining of fiscal policies,3 +3987, in the event the budget revenues are above the planned level and the difference stems from the improved fiscal management such revenues may be spent affecting neither the budget deficit nor the fiscal consolidation intensity,3 +3988,"toward the end of this year important decisions regarding the +extension of current federal tax and budget policies loom",3 +3989,"this past experience with fiscal adjustment may raise hopes that we will be able to +roll back the recent fiscal deficits",3 +3990,budgetary policy in 2015 which was based primarily on the interim budget reflected a decline in the cyclically adjusted deficit that is the budget net of the effects of the deviation of growth from the long term rate to 27 percent of gdp,3 +3991,continued fiscal support will remain crucial to sustain the ongoing recovery assuming fiscal spending is efficient and effective,3 +3992,"it has been a major factor in +rebalancing our federal budget",3 +3993,"according to the fiscal rule the fiscal deficit should be reduced to about 4 per cent of the +capital in the government pension fund global gpfg when the economy resumes a +normal level of activity",3 +3994,"under the fiscal rule the +government can only spend in the annual budget on average over an economic cycle the expected real return on the fund estimated at 4 per cent annually",3 +3995,"further the mof is publishing an annual report on +government debt the middle office in the budget division is publishing quarte rly reports on +the debt issued",3 +3996,"the question has often been raised concerns the sustainability of the fiscal deficit and its potential for +longterm risks to the economy",3 +3997, the most important difference between the two economies probably concerns the fiscal response to the pandemic crisis in 202021,3 +3998,"fiscal policy challenges +at about 9 percent of gross domestic product gdp the federal budget deficit has widened +appreciably since the onset of the recent recession in december 2007",3 +3999,"a more timely fiscal adjustment would require the adoption of +corrective measures already in 2010 absolute spending cuts in real terms or additional tax +increases",3 +4000,"limitations of monetary policy +let me now turn to a topic that i would like to highlight today that is the limits to what monetary policy can achieve",4 +4001,"the conduct of monetary policy +what does all this imply for the ecbs choice of mo netary policy strategy and the conduct of its single +monetary policy",4 +4002,"the price stability target and conduct of monetary policy +in what follows i explain issues regarding monetary policy",4 +4003,3 the deviation was measured on 23 june after the publication of monetary policy report 210 ,4 +4004,"the adoption of inflation targeting by a central bank does not mean that the central bank must apply +definite rules and is not left with any discretion",4 +4005,as for the conduct of monetary policy in the future i think we need to get back to some of the original ideas about inflation forecast targeting,4 +4006,if such changes imply that for any given policy interest rate the monetary conditions are somewhat tighter than they would have been in the preturmoil period that will of course have to be taken into account when setting the policy rate,4 +4007,"the reason why we have chosen to publish our interest rate forecast despite the uncertainty over the +future is largely because we believe this is the best way of explaining our thoughts on monetary policy",4 +4008,"to contribute to such a more fundamentaldiscussion on the principles of monetary policy formulation i will today consider four relatedissues +first i intend to comment on how i view the connection between price stability +and growth for different time perspectives ",4 +4009,his goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances such as when policy is constrained by the zero lower bound on nominal interest rates,4 +4010,"calibration of monetary policy responses +so the monetary policy framework centred on the exchange rate remains valid",4 +4011,"if +the actual policy rate is lower than the implied path then the monetary policy stance is +viewed as accommodative",4 +4012,"finally i will share with you some views +on the experience we have gained with the single monetary policy so far and on the challenges ahead",4 +4013,"given the fact that we are in an inflationtargeting framework the reserve bank therefore does not +have any intermediate targets or guidelines as was the case before the year 2000",4 +4014,i want to emphasize that monetary policy should be data dependent not date dependent,4 +4015,why is this the primary objective of monetary policy,4 +4016,yet they are not fully in control of longterm interest rates try as they might in striving to fulfil their monetary policy mandates,4 +4017,the importance of this background is that monetary policy needs to shadow the equilibrium rate in order to meet its stability mandate,4 +4018,"summing up the results show that in many cases us monetary conditions have a +statistically significant effect on emes policy rates",4 +4019,the reserve bank cannot escape from the difficult challenge of weighing the growthinflation trade off in determining its monetary policy stance,4 +4020,"however the bank also strongly asserts that we will also do our best making every possible +effort from t he perspective of monetary policy",4 +4021,"first i believe we have more to learn about the role +that monetary policy can play once the policy rate is driven to zero",4 +4022,"i t is of course also the case that the +experience i have gained marks my monetary policy stance and colours my view of what it is +reasonable to expect of monetary policy in practice",4 +4023,first i will set out a broad characterization of the view of monetary policy inthe porter report,4 +4024,as i alluded to in my introduction monetary policy does not just affect the economy through the current setting of the interest rate but also through the expected path that the policy rate will take over time,4 +4025,the academic literature on monetary policy suggests a variety of prescriptions for preventing a lower neutral rate of interest from eroding longerrun inflation expectations11 one feature that is common to many proposals is that the persistence of the shortfall in inflation from our objective should be one of the considerations in setting monetary policy,4 +4026,"the federal reserve s primary monetary policy +tool is its ability to influence the level of interest rates",4 +4027,as the modes of operation of monetary policy are changing at least temporarily research has much to offer to decisionmakers,4 +4028,"there have been two changes made in the +new pta but i suspect that to the general public the only difference between the new agreement andall of the earlier ones is that the new agreement has changed the definition of price stability from 0to 2 percent to 0 to 3 percent while making it clear that delivering that price stability remains thesingle objective of monetary policy and constitutes the best way in which the reserve bank cancontribute to new zealands economic development",4 +4029,"this type of flexible application of monetary policy assumes that there is considerable confidence in +the policy and that it does not decline",4 +4030,"the ecb will continue to check carefully all available information concerning risks to price stability +under both the economic and the monetary analysis of its twopillar strategy in order to avoid acting belatedly and to anchor inflation expectations",4 +4031,"6 bis central bankers speeches + line of argument suggests that the stability of inflation expected 5 or 10 years ahead provides +a good metric for judging the credibility of monetary policy",4 +4032,"likewise our twopillar monetary policy strategy is intended to guarantee that no piece of evidence +relevant to monetary policy decisionmaking is excluded from the governing councils information setthe prominent role assigned to money as the first pillar of our strategy ensures that monetary +developments receive the attention that they deserve given the monetary nature of inflation beyond +the shortterm horizon",4 +4033,"14 our new assumption for +the interest rate does not change the way we conduct monetary policy",4 +4034,it is important to recognise the role of the definition of price stability in the conduct of monetary policy,4 +4035,"monetary policy strategy +i would like to start by drawing attention to what guides us when we make monetary policy decisions +ie how we have formulated the monetary policy strategy",4 +4036,"the benefits of systematic monetary policy +let me now turn to the importance of conducting monetary policy in a systematic manner",4 +4037,i am therefore convinced that in order to enable monetary policy to fulfil its mandate and to ensure clear accountability its important that price stability remains the primary objective of monetary policy,4 +4038,"as the central bank in a democratic society the federal reserve has an obligation to +articulate what it is trying to achieve with monetary policy",4 +4039,at the same time the federal reserve repeated that it would hold its policy rate low for a longer period of time,4 +4040,"the need for time consistency +given its capabilities and bounds it is desirable for monetary policy to focus on price stability",4 +4041,"once the first doubts emerge as to whether monetary policy can +assert its independence the central bank runs the risk of losing control over inflation +expectations and thus over inflation itself",4 +4042,"we continue to examine whether we +can make public more of the inputs to monetary policy without compromising the policymaking process",4 +4043,first i will discuss the factors that motivated the federal reserve in november 2018 to announce it would undertake in 2019 the firstever public review of its monetary policy strategy tools and communication practices,4 +4044,"indeed monetary policy in stage three starts +with interest rates which are very low by historical standards",4 +4045,"i would like to take this opportunity to discuss what the pta +says the thinking behind the changes introduced in 2012 and how the reserve bank +interprets the pta particularly in relation to recent data on inflation outcomes and in +relation to monetary policy going forward",4 +4046,"he +he or she +he or she must drive forward the normalisation of monetary policy",4 +4047,but i hope that i have given you a flavor of how empirical research can help us to refine our understanding of how monetary policy works and how policy should be conducted,4 +4048,"in other words based +on its assessment of the available data it should lay out the likely di rection of the monetary policy path + +3 see for example blinder et al",4 +4049,he explains that he does not support the audit the fed movement because he believes it would lead to greater political interference in monetary policy decisions,4 +4050,"it should be underscored that in the event of such departures from the rule of action it is +important to be particularly explicit about what is guiding monetary policy",4 +4051,however when the policy rates get to zero the socalled zero lower bound this conventional approach to monetary policy is not available anymore,4 +4052,"what not to do +i have spent some time discussing how i would strengthen our monetary policy framework by +completing our move to flexible inflation targeting",4 +4053,even though policy makers never mechanically follow such a rule over a long horizon it can ex post provide a good description of monetarypolicy setting,4 +4054,as monetary policy obviouslycannot control price developments exactly the target is accompanied by a tolerance interval of1 percentage point,4 +4055,but it is also clear that a single monetary policy does not mean that interest rates have to be the same everywhere,4 +4056,"it is an old established +wisdom that what monetary policy can best deliver is price stability",4 +4057,"the latter approach instead means +that the central bank makes its own assessment of what might be a reasonable future development in +the policy rate at the same time as it makes the inflation forecast",4 +4058,"some concluding remarks +let me sum up and in doing so say something about the implications for monetary policy",4 +4059,"see board of governors of the +federal reserve system 2013 fomc longer run goals and monetary policy strategy pdf statement +january 29",4 +4060,"as a central banker i will +start with a brief look at monetary policy in particu lar our policy of inflation targeting",4 +4061,"t hen many monetary policy rules would +recommend that the fomc not ease policy further and in fact consider reducing the level of monetary policy accommodation",4 +4062,taken to an extreme this view probably means that the standard monetary policy strategy would need to change on a more fundamental level,4 +4063,a major reason for the focus on these issues is the recognition that the stance of monetary policy encompasses not just the current level of the shortterm policy rate but its expected future path as well,4 +4064,this year 2015 is widely expected to be the year the federal reserve initiates normalization of monetary policy,4 +4065,however i think further active research on the role of the natural rate for monetary policy and its measurement is certainly worthwhile,4 +4066,"therefore in practice a central bank would often find it difficult to guide +longerterm interest rates to a level commensurate wi th what it considers to be the optimal monetary +policy stance",4 +4067,the funds rate is just nowfor the first time in a decadeabove the feds inflation objective but the inflationadjusted real funds rate remains below the range of estimates for the longerrun neutral real rate often referred to as r computed from the projections submitted by board members and the reserve bank presidents,4 +4068,for instance who could have predicted just six months before that the fed united states federal reserve will do four 75 basis points bps policy rate increases,4 +4069,"however monetary policy is probably most effective when the central bank communicates its +monetary policy intentions directly rather than comm enting on others interest rate expectations",4 +4070,"v monetary policy r ules +i would now like to slightly change the topic and consider unconventional monetary policy +and monetary policy rules",4 +4071,"i should note that i will discuss the process of scaling back accommodation mostly from the perspective of our interest rate decisions which my fomc colleagues and i see as our primary tool for actively adjusting the stance of monetary policy when our actions are not constrained by the zero lower bound on shortterm interest rates1 +assessing the degree of monetary policy accommodation +in our monetary policy deliberations the fomc always faces two fundamental questions first how do we assess the current stance of monetary policy",4 +4072,"but by monetary policy frameworks i mean +the broader set of rules and procedures for taking decisions about interest rates",4 +4073,"economic projections and rules of +thumb for monetary policy federal reserve bank of st louis review vol 90 +julyaugust pp 30724",4 +4074,"but the type two appreciation +is something that monetary policy would want to respond to in the form of a lower policy interest rate +than would otherwise be the case ",4 +4075,the framework statement explains that in these circumstances the fomc will use a balanced approach to the two mandates when formulating monetary policy,4 +4076,"the reserve bank s projected path of interest rate rises contained in the december +monetary policy statement suggests that the ocr will need to rise by around 2 percentage +points over the next two years",4 +4077,"in fact monetary theory suggests that the stance can change even if the policy rate +remains unchanged",4 +4078,"in line with transparent monetary policy implementation the monetary policy committee has explained +how this uncertainty affects its decisions",4 +4079,"if progress toward the mandate +objectives is slower than desired then this is telling us that monetary policy needs to be kept at a more accommodative setting for a longer time period than a standard rule would suggest",4 +4080,one obvious change is in the way that monetary policy works,4 +4081,"part ii optimal policy is more directly policy +focused with chapter headings inflation stabilization and welfare gains from +commitment to a policy rule and finally optimal monetary policy rules",4 +4082,monetary policy would surely be unable to cope with the expectation of always being able to guarantee an inflation rate of just under 2 for alongside the justified desire to steer inflation back towards the 2 mark monetary policy must also keep in mind that there are risks associated with the protracted lowinterestrate policy and the nonstandard monetary policy measures,4 +4083,"if this situation remains as such in a predictable time horizon the monetary policy +may remain accommodative over the same period",4 +4084,in the standard textbook treatment a large monetary base implies a zero policy rate,4 +4085,"4 the first effect would lead fed policy to be slightly less accommodative while the latter effect would lead it to +be slightly more accommodative",4 +4086,some observers tend to reduce monetary policy to the level of the key policy rate,4 +4087,"a common result +in the research literature is that if we take into account the fact that there is uncertainty about +the impact of monetary policy then we should act more gradually over time",4 +4088,so we should examine the contents of the monetary policy toolkit in norway and ask not only when the tools should be used but also how far the limits of monetary policy should be stretched in such a situation,4 +4089,"right now the federal reserve has multiple forms of accommodative monetary policy in +place",4 +4090,"conclusion +when i look back at monetary policy since the current monetarypolicy regime with a floating +exchange rate and an inflation target was introduced at the beginning of 1993 i think that it +has on the whole functioned fairly well",4 +4091,the reserve bank was thereforeforced once again during the past year to pursue a more restrictive monetary policy that led to anincrease of approximately 3 percentage points in the level of interest rates,4 +4092,the us federal reserve is raising its policy rate,4 +4093,"13 increasingly the results of this research are being integrated +into our regular assessment of monetary developments which is one source of input for our policy decisions",4 +4094,"if monetary policy is central to these changes it must be the case that many +countries have made similar changes to monetary policy",4 +4095,the sheer existence of a lower bound for policy rates complicates monetary policy decision making as it creates asymmetry a central bank can always increase its policy rate to control inflation but the policy rate cut is limited by the zero bound even if inflation drops to very low levels,4 +4096,4 federal reserve bank of new york measuring the natural rate of interest,4 +4097,and the fourth constraint is our own disbelief in the power of monetary policy,4 +4098,"for its part the federal open +market committee the monetary policymaking arm of the federal reserve sharply and +proactively cut its target for shortterm interest rates from the fall of 2007 through 2008",4 +4099,"4 bis central bankers speeches + should the fomc make up for past inflation misses",4 +4100,accordingly we use as a working assumption that the monetary policy rate will be kept unchanged during the projection horizon,4 +4101,before i begin to discuss what evaluations of monetary policy should focus on let me go into a little more detail about what characterises flexible inflation targeting,4 +4102,"rather it is the expected future path of +that rate that determines the stance of monetary policy",4 +4103," mediumterm price stability is the only objective monetary policy can effectively and +credibly pursue with the single instrument it has at its disposal the shortterm policy rate",4 +4104,"the types of nonconventional operation +implemented by the ecb fully allow us to amend the monetary policy stance in particular through a change in the interest rates",4 +4105,let me now come to the second point the equilibrium interest rate and why it matters for monetary policy,4 +4106,first it can provide greater monetary policy accommodation when the policy rate reaches the zlb by providing assurance that the central bank will keep the policy rate at low levels for some time and for a longer period than the public initially expected,4 +4107,let me end with a few words on how the reserve bank has been seeing monetary policy,4 +4108,"c price stability and monetary policy +allow me to turn to another topic the relationship between price stability and monetary policy",4 +4109,the instrument of monetary policy is the interest rate,4 +4110,"after that i will focus on approaches to measuring the natural real rate of interest nri and its +usefulness for the practice of monetary policy",4 +4111,"the operating procedure of monetary policy also underwent +a change with the overnight interest rate emerging as the operating target of monetary policy",4 +4112,"the federal reserve surprised everyone with an interest rate cut in january in between two +ordinary monetary policy meetings",4 +4113,"let me now go on to how the interest rate assumption is to be used and interpreted in connection with +the monetary policy decisions",4 +4114,"developments in monetary aggregates and their impact on inflation +let me now turn to the important role played by the monetary analysis in the ecbs monetary policy strategy and interest rate decisions",4 +4115,"one explanation for this might be +that recent developments have provided reassurance that the zero interest bound does not +constitute a restriction on monetary policy",4 +4116,"if the trend has +slowed that could have important implications for th e conduct of monetary policy",4 +4117,"as for the inflation 2 bis central bankers speeches + target the bank had for the past three years set it at a range of 2 to 4 around a +3 midpoint but for the next three years this has been narrowed compared to the +past to a 2535 range",4 +4118,this topic is not only of academic interest  as was recently announced the federal reserve is embarking on a review of its longrun monetary policy framework1  i will argue that the global decline in the neutral rate of interest over the past quarter century poses significant challenges to maintaining wellanchored inflation expectations in a standard inflationtargeting regime,4 +4119,"the policy framework of inflation targeting +by the policy framework i mean the principles by which the policy committee decides how to set its +policy instrument typically a shortterm interest rate",4 +4120,to be sure this independence does not refer to the goals of monetary policy,4 +4121,second will monetary policy where the required conditions are met manage an orderly exit from its extraordinary measures,4 +4122,"let me say a more general word on the distributional neutrality of monetary policy +6",4 +4123,indeed the central tendency of federal reserve policymakers forecasts is for expansion of real gdp over the four quarters of 2002 of 312 to 334 percent somewhat above the rates anticipated in our february report,4 +4124,6 duisenberg willem f 2000 making monetary policy in a broad monetary union bis review 82000,4 +4125,while these various reasons might delay the transmission of our monetary policy to prices they will not prevent it,4 +4126,let me now spend just a few more minutes to speak about our current stance of monetary policy,4 +4127,also in an effort to further improve the transmission of monetary policy the bsp adopted in june this year the interest rate corridor irc framework for its conduct of monetary policy,4 +4128,let me next turn to the ecb monetary policy strategy review,4 +4129,"if they +do not there can not be the slightest doubt that monetary policy will need to be tighter than wouldotherwise be the case",4 +4130,"15 charlie bean global aspects of unconventional monetary policies speech delivered at the 2013 economic +policy symposium federal reserve bank of kansas city 2013",4 +4131,tonight i would like to focus on a particular aspect of current monetary policy that has been a source of much discussion and debate forward guidance that is the practice of providing information on the way monetary policy is likely to evolve in the future,4 +4132,"achieving the p rice stability goal and conduct of monetary policy +the second point concerns the timing of achieving the price stability goal and its relationship with the conduct of monetary policy",4 +4133,so if the policy interest rate is at its neutral level monetary policy will be neither expansionary nor contractionary,4 +4134,"this description of what monetary policy can and cannot achieve is currently an accepted view that is +well documented in the research fiel d of flexible inflation targeting1",4 +4135,"the central bank must take this upward movement of interest rates into +account when formulating monetary policy",4 +4136,this is why price stability is said to be a medium to longterm objective of monetarypolicy,4 +4137,with one decision the decision to implement qe it became clear that the ecb has the capacity both to decide to implement monetary policy at the zero lower bound indeed below the zero lower bound and to succeed in implementing that policy,4 +4138,"so i suppose that with interest rates and the exchange rate still moving up and down monetary +policy will never seem totally boring",4 +4139,"while i think there is now a consensus that the inflationtargeting approach to monetary policy makes +sense there is always room for disagreement about how it is applied in practice",4 +4140,needless to say interest rates will pick up as monetary policy gradually returns to normal,4 +4141,indeed we are currently engaged in a review of the monetary policy strategy which has been in place since the start of emu,4 +4142,"the importance of this concept is that it provides a +sort of anchor to a monetary economy implying that monetary policy needs to shadow the real +equilibrium rate in order to meet its price stability mandate",4 +4143,"but he has argued that such rules +can serve as useful benchmarks for the practical conduct of monetary policy",4 +4144,if we assume an immediate alignment then the upward effect on longterm rates would depend on what measure one sees as being representative of the monetary policy expectations,4 +4145,accordingly the federal reserve used its monetary policy tools to lower the targeted fed funds rate to zero,4 +4146,discretionary monetary policy and the zero lower bound on nominal interest rates pdf journal of monetary economics vol,4 +4147,the point is simply that we should not conclude that monetary policy has as yet lost all its potency,4 +4148,"this suggests +the need to take a forwardlooking approach in the conduct of monetary policy",4 +4149,"whethe r central banks should publish an expected optimal +path for their policy rate",4 +4150,thus the monetary policy decision is preceded by a long process,4 +4151,in evaluating the stance of monetary policy the fomc routinely consults monetary policy rules that connect prescriptions for the policy rate with variables associated with our mandated objectives,4 +4152,you wont be surprised to hear that as a central banker i share euckens views on the importance of monetary policy,4 +4153,we consider this type of analysis together with many other inputs when we set monetary policy,4 +4154,"inflation assessment +the ecb and the riksbank both have price stability as the monetary policy objective but they have +given this objective different operational definitions",4 +4155,while the new formulation of forward guidance reflects the characteristic forwardlooking orientation of the ecbs monetary policy framework we have added two safeguards to ensure that policy rate normalisation only begins once inflation is sustainably on course to reach our mediumterm aim,4 +4156,"and just last month the +board again increased the cash rate with the result that monetary policy is now judged to be slightly on the restrictive side",4 +4157,"the3 bis review 872000reserve bank can only influence shortterm interest rates through the application of monetary policy +operational procedures",4 +4158,"but i have not heard anyone suggest a more convincing or attractive policy +stance for monetary policy than that which we have pursued",4 +4159,rbis monetary policy clearly recognises that and its current antiinflationary monetary policy stance reflects that,4 +4160,"the assessment we made at the most recent monetary policy +meeting was that the policy rate ought to be cut to 05 per cent",4 +4161,in all these areas the practice of monetary policy has made enormous progress in the last few years in fruitful interaction with monetary policy research,4 +4162,i would like to make it clear from the start that i will not be talking about current monetary policy,4 +4163,"if so it +will prove testing not only for monetary policy but also for other policies",4 +4164,within those models in which a taylor rule represents monetary policy the typical exercise that can answer the normative issue is the following how would inflation over the medium term horizon react if we were to adjust our policy instruments one at a time or all of them contemporaneously,4 +4165,in the literature the stance of monetary policy is judged as loose or tight depending on the level of real policy rate,4 +4166,what does this imply for the way in which the reserve bank implements monetary policy,4 +4167,"but is it important for us to be able to disti nguish monetary policy expectations from the other +factors that affect the interest rate",4 +4168,"the price stability t arget and q uantitative and qualitative monetary easing +next i would like to talk about monetary policy",4 +4169,"in +other words should monetary polic y simply set interest rates on the basis of market expectations",4 +4170,"in order to avoid setting aside the objective of price stability the central +bank must be independent in interest rate setting as it may be tempting to seek new objectives and tasks when inflation has been anchored for a time",4 +4171,"the recent guidance by the federal reserve about the conditions under which it would +continue to hold interest rates at close to zero is a way of quantifying the flexibility in flexible +inflation targeting",4 +4172,"once we recognize such a change it is appropriate to cut the +policy interest rate more than the standard taylor rule suggests as with the current policy by the fed",4 +4173,secondly the reserve bank could tighten monetary policy by increasing interest rates,4 +4174,"as you know the ecb s quantitative definition of price stability is a +key element of its monetary policy strategy",4 +4175,the monetary policy debate since october 1979 lessons for theory and practice federal reserve bank of st louis review marchapril 872,4 +4176,"but even this distinction may be more apparent than real if the central bank following a taylor rule actually follows a +2 bis review 12003 + reasonably steady inflation policy",4 +4177,i am going to offer some interpretations of the outlook as a context forthe recent policy action by the federal reserve and explain how i view this action as part of aprudent and systematic strategy for monetary policy,4 +4178,"the federal reserves recent monetary policy decisions +the framework i have outlined here can be useful in understanding the rationale for the recent decisions of the federal reserve and our policy approach going forward",4 +4179,the natural rate of interest is an important point of reference for monetary policy,4 +4180,"but every now and then analysts and commentators ask whether the exchange rate centred +monetary policy has outlived its usefulness and whether a switch to interest rate targeting or inflation targeting would make bett er sense",4 +4181,"the snbs monetary policy uses an inflation forecast as +a central indicator and sets its operational goal in t he form of a target range for the threemonth libor",4 +4182,"the importance of inflation forecasts for interest rate decisions +let me move on to talk about the assumption for the repo rate that we use when making forecasts in +our inflation report",4 +4183,"the federal reserve however decided subsequently to continue with app and pursue +highly accommodative stance of monetary policy",4 +4184,pollard p 2004 monetary policymaking around the world powerpoint presentation federal reserve bank of st louis,4 +4185,in this framework the monetary authorities have the freedom to deploy the instruments of monetary policy to the best of their capacities but are limited in their discretion of policy goals,4 +4186,"because of +this inflation targeting is neither possible nor advisable for the reserve bank",4 +4187,"other things equal a higher re al equilibrium interest rate implies that monetary +policy interest rates also have to move to a higher level consistent with the new equilibrium",4 +4188,"in delivering this mandate the bank of ghana s operational framework for monetary policy +involves adjusting interest rates to achieve the target inflation in the policy horizon",4 +4189,"why should the distributional spillovers of monetary policy be +treated diff erently",4 +4190,"we need nothing short of a revolution to +make monetary policy more relevant",4 +4191,last year the monetary board mb cut the bsps policy interest rate by a total of 75 bps and the reserve requirement ratio by a total of 400 bps,4 +4192,"to understand the aim of monetary policy it is necessary to be aware that monetary policy normally +has an impact with a relatively long time lag",4 +4193,"there is evidence that periods when monetary policy is rulelike largely coincide with good economic performance13 +this should not be interpreted as using a rigid mechanical rule for monetary policy but a way to make it systematic and predictable",4 +4194,"in norway the key rate was last raised by 025 percentage point to 25 per cent at the monetary policy +meeting on 16 march this year",4 +4195,"the basic framework +the porter report in most respects adopted a standard 1960s view of monetary policy",4 +4196,"the pta says that in pursuing price stability monetary +policy should seek to avoid unnecessary instability in output interest rates and th e exchange rate ",4 +4197,can the federal reserve best meet its statutory objectives with its existing monetary policy strategy or should it consider strategies that aim to reverse past misses of the inflation objective,4 +4198,"in the same vein when the ecb decided in late 2005 to start increasing its policy rates +again it was mainly because our monetary analys is indicated upward risks to price stability",4 +4199,"10 although these considerations are im portant for the design of monetary policy a central bank can make use of +other policy tools if the policy rate does become cons trained by the zero lower bound bernanke 2002",4 +4200,"my view is that the elevated reserve balances would be inflationary only if they prevented the fomc from +effectively removing monetary accommodation by raising interest rates when the time comes to remove such accommodation and i am convinced that that will not be the case",4 +4201,"for this reason i +believe that it might be helpful to uphold the monetary policy as the primary objective of the +central bank",4 +4202,communication is a critical part of monetary policy since it can lead to more effective policy by influencing expectations,4 +4203,let me address then the criticism that the distributional consequences of unconventional monetary policy undermine central bank independence,4 +4204,"finally i will briefly touch upon another important +aspect of monetary policy namely how to make good collective decisions and the role of the +staff in the monetary policy decision process",4 +4205,"4 +secondly there are always distributional consequences to monetary policy decisions",4 +4206,the monetary policy decisions of the ecb have not respondedmechanistically in the past and will not do so in the future to deviations of staffs inflation projectionsfrom any numerical target,4 +4207,"in my time today i will discuss these policy challenges particularly those related to the +conduct of monetary policy",4 +4208," +45 in his theory on the natural interest rate wicksell suggested perhaps the +simplest of simple reactive monetary policy rules ever if the price rises the interest rate +should be raised and if the price falls the interest rate should be cut ",4 +4209,"the determination of monetary policy in an inflationtargeting +framework therefore remains an art and does not become an exact science",4 +4210,"what is relevant however fo r monetary policy is the +outlook for price stability over the medium term",4 +4211,"i +believe monetary policy is the principal determinant of longterm price stability",4 +4212,before getting into other intricacies of monetary policy it is useful to bring forth the importance of price stability as an overriding objective of monetary policy,4 +4213,we do so because we believe that monetary policy is about a continuous commitment to price stability over the medium term,4 +4214,"there is presently little disagreement among economists that the ultimate goal of monetary policy +should be price stability",4 +4215,"in the simplest version of his model bill assumed that the central bank could choose to specify its monetary policy actions in +terms of a particular level of a monetary aggregate or a particular value of a shortterm +nominal interest rate",4 +4216,"furthermore the monetary policy review mpr which is published twice a year gives a +more indepth guide to our thinking about monetary policy ",4 +4217,"according to this simplistic representation the central bank changes the +overnight policy interest rate by considerin g two conditions",4 +4218,at the same time i believe that the federal reserve systems monetary policy responsibilities are allocated appropriately by the federal open market committee with new york playing an important role to ensure that monetary policy is executed effectively even during periods of duress,4 +4219,"transparency in the conduct of monetary policy is important +in this respect",4 +4220,"bis central bankers speeches 5 + our inflation targeting regime should be flexible",4 +4221,the theoretical case for monetary policy independence focused on countering inflationary biases that were likely to exert themselves in the absence of an independent central bank,4 +4222,"why is it important and how +does it affect the quality of monetary policy choices and outcomes",4 +4223,"this view of the mission of monetary +policy is consistent with both the dual mandate for the federal reserve in the federal reserve act and +with flexible inflation targeting regimes in many countries",4 +4224,"of course it should also be remembered that the introduction of nega tive interest rates +means a fairly marginal increase of monetary policy scope when all is said and done it is +hardly possible to cut the rate into negative territory by several percentage points",4 +4225,"the use of interest rates +to set monetary policy appeared to be viewed by many academic authors as something of a slightly unfortunate and uninteresting practicality +8",4 +4226,i also think that the choices are about how to conduct monetary policy during the transitional phase not about the longterm monetary policy framework,4 +4227,"the present policy targets agreement +what does the present policy targets agreement imply about the way in which the reserve bank +will formulate monetary policy in the years ahead",4 +4228,ive been with monetary board for 11 years 35 percent is more or less the normal policy rate,4 +4229,the reserve bank is not an inflation targeting central bank,4 +4230,"bis review 541997 3 +the reserve bank believes however that the main objective of monetary policy +as defined by the de kock commission is as important and warranted today as it was in themid1980s",4 +4231,"but the implications of aging for monetary policy go beyond the horizon that is relevant for +the current setting of monetary policy",4 +4232,a natural question to ask then is whether monetary policy may have lost some of its potency once interest rates reached the zero lower bound,4 +4233,"however this is something we handle within the framework of how we conduct our monetary +policy by taking account of events in our decisionmaking base",4 +4234,"we intend that +the comprehensive assessment will contribute to planning monetary policy going forward",4 +4235,"as i have noted constrained discretion also describes +reasonably well the recent policy approach of the federal reserve though of course the fed does not have publicly announced inflation targets",4 +4236,fortunately as i discussed earlier the degree of accommodation provided by monetary policy depends not just on the current value of the policy rate but on public expectations of future settings of that rate,4 +4237,ive warned you that monetary policy is on the agenda so before i go any further i have to give the usual fed disclaimer that everything i say reflects my own views and not necessarily those of the federal open market committee or anyone else in the federal reserve system,4 +4238,"continuing the normalisation of monetary policy +within this context of an improved economic situation the snb last year continued the policy of +gradually normalising the interest rates that it has been pursuing since june 2004",4 +4239,"in this context it is important to note that the ecb pursues its price stability mandate on the +basis of a monetary policy strategy with a strong forwardlooking element",4 +4240,"if this were so our experience from the 1970s suggests that a continuation of the lowrate policy would generate a further unexpected increase in inflation by adjusting policy according to this trigger the +fed would begin exiting from what would now evidently be excessive policy accommodation",4 +4241,"as the distinguished former +fed chairman paul volcker recently remarked1 inflation targeting may sound like an oxymoron since +usually central banks strive to fight inflation rather than to breed it",4 +4242,i should now conclude by saying something about the implications for monetary policy,4 +4243,"federal reserve interest rate targeting rational expectations and +the term structure journal of monetary economics 352 pp",4 +4244,and the perspective should be forwardlooking because our monetary policy framework directs us to shape monetary policy with a firm mediumterm orientation,4 +4245,how can new data help to identify whether and to what extent the practice of monetary policy has changed,4 +4246,we publish regular reports and updates about our monetary policy,4 +4247,"and let me add that the ecb has always taken firm and timely actions to pursue +a monetary policy which best serves the ultimate objective of maintaining price stability",4 +4248,"recently there has been some discussion prompted by senior staff at the international +monetary fund imf that central banks might aim for high inflation say 4 per cent as a +way of giving them more scope to reduce official interest rates in future downturns",4 +4249,it is with this relationship that the changes i propose could affect the conduct of monetary policy,4 +4250,and the research undertaken to discover effective monetary policy measures will help us in conducting our future monetary policy,4 +4251,"i should start by +explaining how this topic fits into the conduct of monetary policy",4 +4252,"setting the in terest rate to achieve +a monetary policy obj ective often pr ice stability or l ow and stable inflation is usually the responsi bility +of the central bank",4 +4253,central bank independence is warranted precisely on those grounds1 an inflationary bias arises when the monetary authority lacks independence and in pursuit of shortterm objectives stimulates demand by repeatedly using monetary policy beyond what would be consistent with its inflation target,4 +4254,"let me therefore now be extra clear +there is one objective for monetary policy and that is to maintain price stability",4 +4255,"v future monetary policy +let me conclude my speech by briefly menti oning monetary policy for the near future",4 +4256,"to the extent that we don t and instead seek +compensation for the impact of those things on the cpi the bank will need to tighten monetary policy3 bis review 622000to a greater extent",4 +4257,second the taylor rule as typically used assumes that a 2 percent real shortterm interest rate is consistent with a neutral monetary policy,4 +4258,"however this phase of +norm alisation of monetary policy is not yet over",4 +4259,"the major lesson that we at the bank of canada draw from our experience with inflation control is +related to the advantages of establishing a credible anchor for monetary policy by focusing on the predictability of inflation",4 +4260,let me a say a little more about the background for the policy rate decision,4 +4261,"under the new act the monetary +policy committee will be charged with legal responsibility in the realm of both monetary policy target and exchange rate management policy",4 +4262,the science of monetary policy has not progressed to the point where we can specify the optimal rule for setting monetary policy,4 +4263,measuring shortrun inflation for central bankers federal reserve bank of st louis review vol,4 +4264,this isperhaps the single most important discipline for monetary policy under an interest rate regime,4 +4265,"monetary policy is based on forecasts +let me go on to the next issue i intend to take up namely the conditions under which monetary policy is conducted",4 +4266,"we at the ecb +will conduct monetary policy independently so as to safeguard price stability",4 +4267,"in its conclusion the report says that it could be that monetary policy should have been tightened +more and earlier",4 +4268,"in the fourth place and i am now starting to sound as if it is not at all possible to conduct monetary +policy with a demand for clarity we do not know exactly the stimulation or tightening produced by aparticular interest rate",4 +4269,nevertheless as i noted in a speech last month forecasting is an important part of our monetary policy process since the rba board needs to form a view on how its policy decisions might impact the economy and inflation in the future,4 +4270,"and it +should be understood that it is independent from the current conduct of monetary policy",4 +4271,it is why the reserve bank has lifted interest rates even as the federal reserve was reducing them,4 +4272,"normalizing policy +the focus of our discussions now is when and how to normalize monetary policy",4 +4273,however a consideration of monetary policy requires much more than examination of the target level for the interest rates,4 +4274,"way f orward +as i discussed above the r eserve bank has developed several measures of inflation +expectations over the last seven years which are providing important inputs for monetary +policy formulation",4 +4275,"in +jeffrey c fuhrer ed goals guidelines and constraints facing monetary policymakers +federal reserve bank of boston conference series no",4 +4276,"moreover we publish our own interest rate forecasts in +connection with three of these meetings when a monetary policy report is published",4 +4277,normalizing monetary policy when the neutral interest rate is low speech delivered at the stanford institute for economic policy research stanford calif december 1,4 +4278,"technically what the reserve bank is doing could more accurately be described as inflationforecast +targeting",4 +4279,"principles that guide the monetary policy decisions in the new interest rate assumption +when our forecasts were based on an unchanged r epo rate monetary policy could be explained by +the simple rule of thumb that i described the re po rate would normally be changed if the forecast +showed inflation deviating from target",4 +4280,in monetary policy  a journey from theory to practice,4 +4281,in a nutshell empirical regularities lay the ground for a prescriptive monetary policy rule even though oversimplified against which central bank actions can be evaluated,4 +4282,these considerations lead me to believe that monetary policymakers should take great care in making significant adjustments in their view of the neutral policy rate,4 +4283,"i ll +discuss what we have learned about the efficacy and drawbacks of these less familiar forms +of monetary policy and i ll talk about the implications for the federal reserve s ongoing +efforts to promote a return to maximum employment in a context of price stability",4 +4284,"may i conclude with the comment that whilst inflation targeting is certainly no panacea the reserve +bank still regards it as the most appropriate framework for achieving relative price stability",4 +4285,"for the stance of monetary policy the answer to this question is simple at least +in theory",4 +4286,therefore models can make animportant contribution to the setting of monetary policy,4 +4287,"in the +case of an increase in competition monetary policy largely stays the course leaving the +policy interest rate essentially unchanged",4 +4288,and i will give you a diagnosis and draw an inference for monetary policy,4 +4289,some argue that the federal reserve has too much discretion in its implementation of monetary policy and consequently would have the fed stick to a formal rule in its conduct of monetary policy,4 +4290,moving forward the bsp will continue to finetune its monetary policy framework to make it more marketoriented while staying focused on inflation control,4 +4291,fomc statement federal reserve and other central banks announce reductions in policy interest rates press release october 8,4 +4292,"setting monetary policy +of course most people think of the federal reserve as being responsible for setting and executing monetary policy",4 +4293,"indeed the ecbs monetary policy strategy contributed to the timely and highly warranted adjustment of the ecbs monetary policy stance with the first interest rate increase in +december 2005 which was to ensure that risks to price stability over the medium term do +not materialize",4 +4294,"the monetary policy rules that i described earlier would suggest again dont ease further if +youre doing better on your mandates indeed theyd recommend that the level of policy +accommodation be reduced ",4 +4295," reconciling survey and market based expectations for the policy rate +federal reserve bank of new york liberty street economics blog april 8",4 +4296,"but such situations by their very nature do not +justify the adoption as a general rule of a pre announcement of the future monetary policy stance",4 +4297,"ill have +more to say about the role of monetary policy in a moment",4 +4298,"central banks had one primary monetary policy tool at their disposal adjustment of an official shortterm interest +rate and experience suggested that this was best directed at achieving price stability",4 +4299,"policy lessons +before i conclude let me say a few words about how monetary policy fits into the picture",4 +4300,let me start at the place that all remarks about us monetary policy should start which is with the federal reserves dual mandate of maximum employment and price stability,4 +4301,"however even if the potential growth rate is 4 bis central bankers speeches + 1 percent if the inflation rate is 0 percent the room to reduce the interest rate amounts to +only 1 percent as the level of the neutral interest rate is 1 percent",4 +4302,first we are the operational arm of the federal reserve responsible for the implementation of monetary policy,4 +4303,overall the federal reserve has a wide range of tools for tightening monetary policy when the economic outlook requires us to do so,4 +4304,to quote the words of otmar issing former ecb chief economist central bank independence is indispensable if monetary policy makers are to be expected to pursue the primary objective of a central bank to maintain price stability and to do everything in their power to achieve this,4 +4305,the third criterion is that the interest r ate path should reflect a robust monetary policy,4 +4306,second accepting the principle that an inertial monetary policy rule performs better as uncertainty about the level of the equilibrium real shortterm rate increases what does this imply for monetary policy under current circumstances,4 +4307,the relationship between monetary policyand price expectations is probably fairly unstable,4 +4308,sucha framework for monetary policy ensures that monetary policy is transparent in that the authoritieshave a definite and measurable aim in their conduct of monetary policy,4 +4309,by publishing our own forecast for the interest rate we have become more open and clear with regard to our view of future monetary policy,4 +4310,and let me make this very clear the triangle does not include monetary policy,4 +4311,on the one hand its nothing new by design monetary policy always has an impact on interest rates,4 +4312,the neutral rate of interestthe rate that prevails when monetary policy is neither restrictive nor accommodativehas been an area of study and a personal passion for the past two decades,4 +4313,"23 and price stability remains the primary objective of monetary policy +against this background monetary policy and its tools must remain focused on price stability +and should not be overburdened with other objectives",4 +4314,in this respect monetary analysis adds significantly to the robustness of the asse ssment underlying our monetary policy decisions,4 +4315,"also the extent to which the +longterm rates react to central bank actions depend on the credibility of monetary policy",4 +4316," backg round studie s for the ecb s evaluation +of its monetary policy strategy ecb pp",4 +4317,"elements of the monetary policy transmission process are probably +working somewhat differently than on other occasions",4 +4318,"the reserve bank also publishes a monetary policy review twice a year to increase the +understanding of its conduct of monetary policy",4 +4319,but youre absolutely right we as central bankers must always ask ourselves whether our monetary policy stance is appropriate for us to attain our objective,4 +4320,"according to the standard taylor rule +whose policy prescription depends on the current value of inflation these episodes should have led to a significant tightening of monetary policy",4 +4321,one of the hallmarks of inflationtargeting is the greater degree of transparency it requires regarding monetary policy,4 +4322,"we are focussed on the impact of very low interest rates staying with us for a protracted +time and when i say this i am offering no view whatsoever on the likely course of monetary +policy",4 +4323,i firmly believe that the federal reserve has already pressed the limits of monetary policy,4 +4324,in a monetary union the single monetary policy through its focus on stable prices acts as the indispensable anchor to a range of economic policy decisions established at national and regional level,4 +4325,the mere adoption of a fixed exchange rate indeed signals the intention to subordinate monetary policy to exchange rate policy adding to the credibility of antiinflationary monetary decisions,4 +4326,"the oecd consensus holds that price stability is the appropriate goal +for monetary policy over the medium term",4 +4327,"in this respect let +us not forget that a central bank has only one instrument at hand namely monetary policy",4 +4328,"6 bis review 1072010 + conclusion +i agree that the federal reserve needs to keep its policy rate accommodative",4 +4329,even though the influence of external factors over price variables is great the channels of monetary policy can still operate effectively when the general public has firm confidence in monetary policy,4 +4330,but before that let me say a few words about our monetary policy,4 +4331,at the same time external factors can impact the monetary policy transmission mechanism in the us and influence the effectiveness of our monetary policy in achieving our objectives,4 +4332,"thus if the ecb were to change this rate for monetary policy reasons the costs for the +remaining period of the threeyear vltros would also change accordingly",4 +4333,"i appreciate this opportunity to +come and expose our vision of the relationship between market interest rates and the +conduct of our monetary policy",4 +4334,"a interest rate policy the monetary committee +in most countries decisions on the interest rate are made by a monetary committee that operates in the central bank",4 +4335,"one is the target variable +in which case i believe we should consider changing to an index upon which policy rate changes do not have such a major direct impac t as on the cpi",4 +4336,"inflation in focus not the interest rate +let me conclude this section of my speech with a few words on a concept that has been used in the +discussions on monetary policy recently namely that the riksbank has begun a normalisation of the +repo rate",4 +4337,in norway signals about future policy rates have long been part of the ordinary conduct of monetary policy,4 +4338,they can i believe provide useful guidelines for assessing the stance and the likely path of monetary policy,4 +4339,"first of all i would like to present a theoretical outline of how monetary policy works and then indicate +some relevant and realistic monetary policy objectives",4 +4340,fourth ill offer several interpretations of the policy action in relation to what i believeare important aspects of the strategy of monetary policy,4 +4341,"this is probably why the fed has +announced the policy rate as a range",4 +4342,"bis central bankers speeches 5 + interest to a very low figure say ½ per cent",4 +4343," survey measures of expectations for the policy rate federal reserve bank +of new york liberty street economics blog december 5",4 +4344,at that point the federal reserve will have to tighten policy considerably if it wishes to regain contro l of inflation,4 +4345,but monetary policy doe s not stop wo rking when the cha nges in interest rate s stop,4 +4346,the use that the central bank should make of the equilibrium real interest rate is straightforward if one follows the textbook prescription the central bank takes the equilibrium interest rate as being driven by structural factors which are largely beyond its control and steers the policy rate relative to the level of the equilibrium rate,4 +4347,"in other words inflation targeting fits somewhere betweenthe extremes which feature in the rules versus discretion debate which raged in monetary +policy circles in earlier years",4 +4348,to avoid such a problem any policy rate cut has to be justified on the basis of the prevailing monetary policy framework,4 +4349,"the principle objective of monetary policy is price stability and +using the same policy tool to achieve other targets creates potential conflicts in the setting of the policy stance",4 +4350,in particular i will focus on what we consider to be the main risks around the interest rate projections in the february 2017 monetary policy statement mps,4 +4351,"for example a central bank can +have an impact on the economy simply by signalli ng that its own view about the future path +of the monetary policy rate is different from the current market view",4 +4352,"how monetary policy works +the bank of canada has only one tool at its disposal for carrying out monetary policyits direct influence on the overnight rate ",4 +4353,as monetary policy is governed by forecasts this can lead to fluctuations in the interestrate policy,4 +4354,since 2005 we have published a projection of the future path of our key policy rate,4 +4355,the reserve bank of new zealand has operated a flexible inflationtargeting framework for nearly 30 years1 over time the practice of inflation targeting has become more systematic and transparent,4 +4356,"such disturbances influence the orientation +of monetary policy",4 +4357,we generally think that monetary policy operates with a one or twoyear lag,4 +4358,in fact the concept of monetary policy hitting an absolute limit i think theres a lot of nuance to that,4 +4359,last year i took up matters to do with monetarypolicys construction and effects as well as the considerations behind the monetary policydecisions in recent years,4 +4360,1 for more information on how the fomc specifies its goals see statement on longerrun goals and monetary policy strategy board of governors of the federal reserve system amended january 30 2018,4 +4361,"the aim is to influence interest rate expectations and thereby contribute to +achieving the objectives of monetary policy",4 +4362,let me explain how flexible monetary policy avoids such a result,4 +4363,"reference was also made to the analyses in monetary +policy report 307 which indicate that the key policy rate should be raised further but to a +lesser extent than envisaged in june",4 +4364,"what is certain is t hat the policy rate will be lowered as soon as the +central bank deems this compatible with the inflation target",4 +4365,in my remarks today ill discuss how the monetary policy landscape has evolved and what that means for inflation targeting in 2020 2050 and beyond,4 +4366,however monetary policy doesnot react to deviations of monetary growth from the reference value in a mechanistic way,4 +4367,"and what implications might it have +for monetary policy",4 +4368,"i believe that the fed remains more responsive to deviations of output from its target than +most inflationtargeting central banks even allowing for the convergence that has been under way",4 +4369,i will begin by explaining what it is that we are trying to dothrough monetary policy then ill describe how weve been doing where we are now andwhere we might be headed,4 +4370,the overarching motivation underpinning their introduction as well as for all our nonstandard monetary policy measures has been to ensure the integrity of the monetary policy transmission mechanism and thereby deliver on our mandate of an inflation rate of below but close to 2,4 +4371,in my contribution today i will emphasise that the ecb conducts monetary policy as usual,4 +4372,"but it is domestic monetary policy the decisions that the monetary policy committee take each month together with the overarching framework that defines our target that determines the path uk inflation in the +mediumrun",4 +4373,"let me make +it clear that we do not have any specific future directions of monetary policy at this moment",4 +4374,"the monetary author ity however cannot permanently fool agents with +rational expectations because they are aware of the incentives of t he monetary authority to regress on +its decision about inflation",4 +4375,"ordinarily monetary policy works by influencing the current and expected near term levels of +short term interest rates",4 +4376,"monetary policy transparency means how well the publ ic is aware of the central banks monetary +policy intentions and the issues on which t he next interest rate decisions will depend",4 +4377,given this audience i would be remiss were i not to mention our review of our monetary policy strategy tools and communications which concluded recently with our adoption of a flexible average inflationtargeting regime,4 +4378,"5 monetary policy and the natura l rate of interest in practice +in light of the discussed theoretical considerations the natural rate of interest could in principle play an +important role in the conduct of monetary policy",4 +4379,"hansson b and lindberg h 1994 monetary conditions index a monetary policy +indicator economic review 19943 1319",4 +4380,"as monetary policy has an effect with some time lag interest rate decisions are based on forecasts of +price developments one to two years ahead",4 +4381,"therefore monetary growth needs to beanalysed very closely by the governing council and we believe that monetary developments +constitute an invaluable compass for monetary policy decisions aimed at price stability over the +medium term",4 +4382,"4 bis review 12010 + monetary policy future +the federal reserve will face a number of challenges in the conduct of monetary policy in +the period ahead",4 +4383,indeed such a simplistic approach to monetary policy making is unwise in3 bis review 1121999all circumstances,4 +4384,"in such a situation monetary policy faces a +binding zero lower bound for the interest rate",4 +4385,one major reason for this emphasis is the recognition that the stance of monetary policy encompasses not just the current level of the shortterm policy rate but its expected future path as well,4 +4386,"i hope that i have made it clear today that canadas monetary policy approach of a flexible exchange +rate anchored by an inflation target works",4 +4387,changing the monetary policy rate is useless if market rates cannot be guaranteed to follow suit,4 +4388,the mpcs recent decisions to keep the policy interest rate unchanged can be rationalized in this light,4 +4389,"our monetary policy strategy can be described in a simplified manner using the rule of thumb that +when an assessment indicates that inflation one to two years ahead will deviate from the target level the instrumental rate is adjusted",4 +4390,"i realised that it must be the second interpretation since i am +from rbi an institution which has been subjected to intense public scrutiny in last about one year or so for its monetary policy response to contain inflation and anchor inflation expectations",4 +4391,"as soon as we abandoned an exogenous assumption of future key policy rates we had to +take a stand on how to formulate monetary policy within our core model",4 +4392,"in our case we have instrument independence in +other words the central bank has wide discretion in how it goes about achieving its inflation targetbut we do not have goal independence we do not establish for ourselves the target for monetary +policy in the way for instance that the us federal reserve board or the european central bank are +empowered to do",4 +4393,today i wish to offer some further thoughts about the distributional consequences of monetary policies what has happened so far and the way forward for policymakers,4 +4394,"let us assume that the central bank +first notifies a particular interest rate path but that new information is received afterwards which leads +to a policy rate decision that differs from the pat h published earlier",4 +4395,mas manages the exchange rate as its monetary policy tool in the same way that other central banks conduct monetary policy by managing interest rates,4 +4396,5 board of governors of the federal reserve system statement on longerrun goals and monetary policy strategy  adopted effective january 24 2012 as reaffirmed effective january 31 2023,4 +4397,"bis central bankers speeches 11 + fourth as a related issue it should be noted that both the bank and other centr al banks +under flexible inflation targeting adopt an inflation forecast approach not an actual inflation +approach in conducting monetary policy",4 +4398,"bis review 901997another way of expressing this is to say that monetary policy needed a nominal +anchor",4 +4399,"three lessons for monetary policy in a +low inflation era federal reserve bank of boston conference series pp 93678",4 +4400,indeed monetary policy is and should be powerless in that respect,4 +4401,"this means that the exchange rate is an +important variable for monetary policy conduct",4 +4402,"central bank independence as a corner stone for an effective monetary policy +2",4 +4403,"but of course it al so is an important influence shaping shorterrun +economic developments as well as monetary policy decisions",4 +4404,"however baffi did not give up pursuing the fundamental goal moving italy towards institutional arrangements in the field of monetary policy that would guarantee monetary stability over the longer +run",4 +4405,at the same time monetary policy cannot be strictly rulebased it must be flexible and robust,4 +4406,"in this context we have held the monetary policy rate mpr at 35 percent annually and we +foresee that within our forecast horizon further increases will be necessary",4 +4407,first we released a statement of our longerrun goals and strategies essentially a declaration of our monetary policy principles,4 +4408,"12 see eggertsson g and m woodford 2003 the zero bound on interest rates and optimal monetary +policy ",4 +4409,at the conference on monetary policy strategy tools and communications practices federal reserve bank of chicago june 5 and board of governors of the federal reserve system 2019 panel 2 transmission of monetary policy to the economy beyond the headlines at the conference on monetary policy strategy tools and communications practices federal reserve bank of chicago june 5,4 +4410,the terminal interest rate that the us fed is targeting is anybodys guess but it cannot be the case that it will tighten monetary policy endlessly,4 +4411,at that point the federal reserve will have to tighten policy considerably if it wishes to regain control of inflation,4 +4412,let me elaborate on the nine principles presented by mishkin also in relation to the ecbs monetary policy framework,4 +4413,"it is perhaps worth recalling what i said on 27 june in releasing our latest +monetary policy statement +it is clear that deviations from desired monetary conditions can be very large +indeed without threatening either edge of our inflation target if those deviationsare of relatively short duration",4 +4414,in order that the snb is able to fulfil its mandate of ensuring price stability while taking due account of economic developments in the best possible way it must make full use of its room for manoeuvre in monetary policy,4 +4415,"it is unrealistic under +these circumstances to expect the reserve bank to deliver on an inflation target in the shortterm",4 +4416,finally i will end with a few words and one modest suggestion about the implications of the experience with inflation targeting for the practice of monetary policymaking at the federal reserve,4 +4417,it need hardly be said that that isnot the way to conduct monetary policy,4 +4418,however the decline in the real neutral rate means that any given setting of our policy rate will be less stimulative today than it was a decade or two ago,4 +4419,to my mind it does not imply that the ultimate objective of monetary policy should not be price stability,4 +4420,"good monetary policy is about promoting through price stability +a stable background for these decisions",4 +4421,"as always what i have to say today reflects my own views and not necessarily those of the federal open market committee fomc or the federal reserve system1 +to get right to the punch line i favor a more flexible approach that incorporates a broader set of factors into the monetary policy decisionmaking process",4 +4422,"monetary policy +let me now devote the last few minutes of my talk to discuss how the current monetary policy fits into the overall public policy directions",4 +4423,"against the qe policies there is an influential view that after the policy interest rate has been brought to the zero lower bound nothing else +needs to be done except for the central bank to say that it will keep interest rates low in the +future too",4 +4424,3 federal reserve bank of new york measuring the natural rate of interest,4 +4425,"although price stability is an end of monetary policy it is also a means by which policy can achieve its +other objectives",4 +4426,"in other words it is not so much current +shortterm interest rates which define the stance of monetary policy",4 +4427,"what you may not have heard was that t he agreement committed the bank to continuing its +research on how monetary policy might be improved for the decades ahead",4 +4428,"optimal monetary policy in a model with distinct core and headline inflation rates unpublished paper board of +governors of the federal reserve system",4 +4429,"in particular communicating a future subjective path for the policy rate might be interpreted as an unconditional commitment which in turn could reduce the necessary +flexibility of monetary policy",4 +4430,and as a consequence policymakers are asking themselves if this should change the way they implement monetary policy,4 +4431,to say the least conducting monetary policy at the zlb has been a difficult experience that we all want to avoid repeating unnecessarily,4 +4432,woodford m 2003 interest and prices foundations of a theory of monetary policy ,4 +4433,since then central banks have been gradually opening up for instance in the mid90s i would like to emphasize only since the mid90s the us federal reserve started to publicly announce its interest rate decisions in real time something that policymakers had previously deemed unnecessary,4 +4434,"some concluding remarks +let me end with two general remarks on the future and limitations of monetary policy",4 +4435,"why should +heterogeneity be a problem for the single monetary policy",4 +4436,"ii low and stable inflation expectations increase monetary policys +effectiveness +like other central banks the reserve bank pursues flexible inflation targeting",4 +4437,"we provide clear guidance about the +future path of the key policy rate",4 +4438,"i believe as part of its communications the federal reserve would do well to adopt an explicit +numerical inflation goal just as the bank of england and many other central banks do",4 +4439,this is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy via the interest rate channel,4 +4440,thus using the standard means of further easing monetary policy cutting the target interest rate was no longer possible,4 +4441,in the context of pursuing our price stability mandate the bsp will continue to finetune its implementation framework for monetary policy to make it even more marketoriented,4 +4442,i feel the fed is coming nearer to the end of our job as defined by those extraordinary circumstances and anticipation of the normalization of monetary policy interest rate policy is appropriate,4 +4443,most often the independence of the federal reserve is discussed in terms of independence in the setting of monetary policy,4 +4444,"ho wever the time lag and the extent of the +impact of the policy measures may vary depending on developments beyond the control of +the monetary policy",4 +4445,the federal open market committee of the us central bank the federal reserve system asks its members explicitly for their estimate of the longerterm development of interest rates,4 +4446,"my assessment at the latest monetary policy meeting was that it +will need to be raised by 025 percentage points at every meeting this year so that it reaches +275 per cent at the end of the year",4 +4447,a makeup strategy in the form of flexible average inflation targeting is clearly shaping the feds monetary policy reaction function in the years ahead,4 +4448,"finally perhaps the most important +lesson of all is that price stability should be a key ob jective of monetary policy",4 +4449,thank you for participating in the conference monetary policy implementation in the long run here at the federal reserve bank of minneapolis,4 +4450,"be clear regarding the monetary policy objective +we should be clear about the objective of monetary policy",4 +4451,"for monetary policy our +objective continues to be price stability over t he mediumterm",4 +4452,"recently former federal reserve governor laurence meye r 2005 has presented a three +step strateg y for the fut ure of japans monetary policy",4 +4453,"what does monetary policy do to long term interest rates at +the zero lower bound",4 +4454,first the presence of an array of interest rates can actually provide a way for the central bank to inject additional accommodation by lowering such rates even when the policy rate is at the zero lower bound and second the lower bound may not be actually at zero but in negative territory,4 +4455,the federal reserve is thus postponing the start of its normalisation of monetary policy compared with earlier indications,4 +4456,"this means that the monetary pol icy discussion can now be based on a relatively +realistic development of the interest rate throughout the forecast period",4 +4457,whereas monetary policy was previously veiled in secrecy we are now open about our view of the likely future interest rate path,4 +4458,"i am therefor e confident that despite transparency there will +remain some news to report about monetary policy",4 +4459,"i have told you which considerations +underlie the choice of a monetary policy for the ecb and i have outlined the differencesbetween monetary targeting and direct inflation targeting",4 +4460,"bernanke ben s 2010 monetary policy objectives and tools in a lowinflation +environment speech at the conference revisiting monetary policy in a lowinflation environment conference federal reserve bank of boston boston 15 october 2010 wwwfederalreservegov",4 +4461,"let me answer this by briefly summarising how we describe our monetary policy +strategy in the special document on monetary policy published in may 2006",4 +4462,today i will offer some observations on monetary policy rules and their place in decisionmaking by the federal open market committee fomc,4 +4463,of course time will tell about their usefulness in the daytoday operations of monetary policy,4 +4464,"bis central bankers speeches 5 + last october i reviewed the first two decades of experience with the inflation target",4 +4465," the exchange rate is not the objective of the single monetary policy but it is an important +indicator included in the second pillar of the ecb s monetary strategy",4 +4466,according to our inhouse assessment our monetary policy has contributed to a decline of about 100 bp in longterm interest rates,4 +4467,i think that the fomc could improve communication and transparency by preparing a more comprehensive monetary policy report on a regular basis perhaps quarterly,4 +4468,"my opinion is that they in principle +counteract one another and that there was thus justification for maintaining the interest rate path that we have had since the monetary policy decision in july",4 +4469,unfortunately the science of monetary policy has not reached the point where we can specify a precise or optimal rule for setting policy,4 +4470,if price stability is the appropriate objective of monetary policy how should it be quantified,4 +4471,"32 monetary policy and price stability +this brings me to the second lead question should the monetary policy target be changed",4 +4472,we are currently conducting a public review of our monetary policy strategy tools and communicationsthe first of its kind for the fed,4 +4473,"basis for assessment +so much for our monetary policy strategy which is what i believe we should be assessed against",4 +4474,hence once the policy rate has reached the zlb the introduction of forward guidance and the commitment to keep the shortterm interest rate at the lower bound for a prolonged period of time would transform the zlb from a constraint into a deliberate monetary policy strategy,4 +4475,"if that were so even if the +same central bank were making the monetary policy decisions in both areas the difference in the shock could be such as to demand broad and frequent official rate adjustments in one instance while more moderate and gradual intervention might be sufficient in the other",4 +4476,normalizing monetary policy when the neutral interest rate is low speech delivered at stanford institute for economic policy research stanford calif december 1,4 +4477,"in this situation the +federal reserve fed has been communic ating to the public a path toward raising the policy +interest rate but is taking a flexible and cautious stance that the exact timing will depend on +future economic indicators",4 +4478,john and i have spent countless hours discussing how the federal reserve arrives at decisions about monetary policy and how it should arrive at decisions,4 +4479,"some economists stress that a published interest rate forecast may create problems in the practical +implementation of monetary policy",4 +4480,"could the monetary pillar be decisive in the coming months when it comes +to interest rate setting",4 +4481,"therefore not only t he change in real rates but also the direction of +change following changes in the policy rates is important for the effectiveness of monetary policy",4 +4482,10 instead one should normally allow monetary policy to change gradually,4 +4483,"another option is for the baseline forecast to assume a policy rate path calculated from a monetary +policy rule that steers inflation to target within the forecast horizon",4 +4484,"maintaining credibility for the conduct of monetary policy +a second guiding principle for monetary policy conduct is that a central bank cannot ignore the promises implicit or explicit made in the past when designing present policy",4 +4485,finally while it is interest rates that keep the reserve bank in the news i hope that you know that we do a lot more than just set interest rates,4 +4486,"e conduct of monetary policy +finally i would l ike to talk about the conduct of monetary policy",4 +4487,and this can change the way society perceives the basic parameters of the monetary policy framework,4 +4488,"other arguments have also been put forward against publishing ones own forecast for the +development of the policy rate",4 +4489,in turn it is quite possible that such revisions would be consequential for the boards assessment of the appropriate stance of monetary policy,4 +4490,the simple answer is change especially the change in the operating environment of monetary policy,4 +4491,"thus monetary policy should aim at price stability +in the long run",4 +4492,1 see board of governors of the federal reserve system statement on longerrun goals and monetary policy strategy as amended effective august 27 2020,4 +4493,"bis review 922000 2the objective of monetary policy +norway has a tradition of having a fixed or stable exchange rate although we cannot say that we have +had a high degree of continuity in monetary policy",4 +4494,a monetary policy strategy such as the one adopted by the ecb can be seen to provide a robust framework for monetary policy decisionmaking which heeds these two general principles in a way in which they reinforce and complement each other,4 +4495,"inflation forecasting at the federal reserve +i would like to shift gears at this point to tell you a bit about how the federal reserve board +staff goes about forecasting inflation",4 +4496,"let me explai n +broadly speaking there are two approaches to non standard monetary policy",4 +4497,"improving the federal reserves monetary policy framework +the federal reserve has not explicitly adopted a flexible inflation targeting framework",4 +4498,it is quite simply a method that entails a certain degree of monetary policy expansion but by using means other than the policy rate,4 +4499,finally i will outline possibilities for further monetary policy action should the reserve bank board decide that it is warranted,4 +4500,during the past eight years i have spoken and written frequently about ways to improve the framework we use for making monetary policy decisions,4 +4501,as a result there is some degree of convergence with regard to their monetary policy conduct although there is still considerable diversity,4 +4502,this means we do not have a preset destination for the policy interest rate,4 +4503,before i explore issues like inflation in any greater depth i should give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee or others in the federal reserve system,4 +4504,about the monetary policy rate at the statistical cutoff of this report market expectations showed differences in the expected path for 2015,4 +4505,we are focused on the impact of very low interest rates staying with us for a protracted time and when i say this i am offering no view whatsoever on the likely course of monetary policy,4 +4506,"bis review 612008 3 + usual tools of monetary policy will be effective in abnormal conditions",4 +4507,"10 bis central bankers speeches + + +a key step in normalizing policy will be to start increasing the target for the federal funds rate +which is currently still in a range of 0 to 14 per cent",4 +4508,"second i believe the federal reserve should do a more comprehensive monetary policy +report four times a year",4 +4509,"second as i previously pointed out firmly anc hored inflation expectations are essential to +successful monetary policy at any time",4 +4510,let me add however that the success of our measures critically depends on a number of factors outside of the realm of monetary policy,4 +4511,for that reason i support continued increases in the fomcs policy rate and based on what i know today i support a significant increase at our next meeting on september 20 and 21 to get the policy rate to a setting that is clearly restricting demand,4 +4512,but it would also have significant implications for the conduct of monetary policy,4 +4513,"the important lesson +from such a viewpoint is that we need to clearly state the objective of monetary policy in other words +we need to substantiate the abstract concept of price stability",4 +4514,"taking these considerations into account it would be reasonable to conclude that the overall +stance of monetary policy is now back in the normal range though in the expansionary segment of that range",4 +4515,"the ecbs monetary policy is based on a clearly defined monetary policy strategy aimed at +fulfilling our primary mandate of price stability",4 +4516,the taylor rule also highlights the critical importanceof real interest rates in the conduct of monetary policy,4 +4517,"conclusion +so in conclusion in these interesting times + first the reserve bank is as committed to avoiding deflation as to avoiding inflation and +that means that we will always be leaning against the wind to the best of our ability tending +to tighten policy if inflation looks likely to rise in the future and tending to ease policy if inflation looks likely to fall below the bottom of our target",4 +4518,pursuing such a strategy principally provides a transparent decision rule for monetary policy,4 +4519,the committees policy normalization principles have made clear that the federal reserve will in the longer run hold no more securities than necessary to implement monetary policy efficiently and effectively,4 +4520,indeed if we hold a sceptical view of monetary policy coordination we should favour stronger cooperation in some other policy areas,4 +4521,"3 +i would today like to highlight a few areas of the swedish monetary policy framework about +which there are grounds to open up a discussion based on the experiences we have gathered over some twenty years of inflation targeting",4 +4522,and nowhere is this more true or more relevant than in the conduct of monetary policy,4 +4523,"as long as these relationships hold there are conv incing empirical reasons for paying close attention +to monetary developments in the policy making process",4 +4524,the monetary policy strategy3 bis review 491999 the ecb has as i mentioned earlier such a mandate,4 +4525,i have just explained the goal transmission and tools of monetary policy,4 +4526,"he contended that quite to the contrary his +measure shows just the opposite that the fed policy is appropriate the policy rate cannot remain low for too long that central bankers are right to be considering withdrawal of their unprecedented monetary stimulus and that critics who say otherwise are misinterpreting his rule",4 +4527,"monetary policy +let me now devote the last few minutes of my talk to update you about our monetary policy",4 +4528,"on the other hand if a fixed exchange rate policy is pursued the monetary policy must +be designed accordingly",4 +4529,6 see board of governors of the federal reserve system statement on longerrun goals and monetary policy strategy as amended effective august 27 2020,4 +4530,"for example the federal reserve indicated at its september +meeting that its policy rate could be expected to remain at exceptionally low levels until +mid2015 and provided additional certainty with respect to its reaction function by linking +future unconventional monetary policy to substantial improvements in the outlook for the us +labour market",4 +4531,and it also preserves the positive contribution of negative rates to the accommodative stance of monetary policy and the continued sustained convergence of inflation to our aim,4 +4532,"as i noted some years ago bean 2003 such leaning against the wind is in principle +compatible with flexible inflation targeting a central bank ought to be willing to undershoot its inflation target temporarily if it believes that it will thereby improve its chances of meeting the +target later on by avoiding a disruptiv e bust",4 +4533,"federal reserve monetary policy 1922 33 a reinterpretation +journal of political economy vol",4 +4534,"20 more precisely the three statutory objectives for monetary policy set forth in the federal reserve reform act +of 1977 are maximum employment stable prices and moderate longterm interest rates",4 +4535,although the new regulation will not result in significant changes in the conduct of monetary policy the interest rate outlook is to some extent affected by the lowering of the numerical inflation target,4 +4536,however the higher ranking monetary policy goal of price stability does not allow for any increase in interest rates in the foreseeable future,4 +4537,"4 bis central bankers speeches + let us quickly recall why the exc hange rate is mas chosen tool of monetary policy",4 +4538,"as stressed by snb staff members13 the snb + retained important ingredients of monetary targeting in its new monetary policy concept",4 +4539,5 richard h clarida vice chair of the board of governors of the federal reserve system the federal reserves review of its monetary policy strategy tools and communications practices speech delivered at the federal reserve bank of minneapolis april 9 2019,4 +4540,from a purely monetary policy point of view it is entirely consistent to aim at negative rates when the real interest rate has itself turned negative,4 +4541,"that is +why since then we have taken as a working assumption a monetary policy rule that adjusts the interest rate in order to meet the target",4 +4542,"the snb thus continues to take account of the +exchange rate situation in formulating its monetary policy",4 +4543,"the current view is that a monetary policy change +has its maximum effect six to eight quarters afterwards",4 +4544,therefore i would next like to share with you the thinking behind thecurrent stance of monetary policy,4 +4545,this is because monetary policy is only providing stimulus if the shortterm policy rate adjusted for inflation is below the equilibrium rate,4 +4546,"looking forward we seek your help in maintaining the momentum of the virtuous cycle of continuous improvement in monetary analysis which will support monetary policy decisions +from which we all benefit",4 +4547,the natural rate of interest is one of the key concepts for understanding monetary policy,4 +4548,"the conduct of monetary policy refers to the way a central bank goes about achieving its +objective",4 +4549,"transparency in monetary +policy cannot mean that the central bank conveys more confidence in the outlook for growth and +inflation than it can reasonably have and it can not provide more assurance about the likely future +course of policy than it actually has",4 +4550,"16 +a third potential source of policy insurance comes from making clear that were it necessary +on inflationary grounds at the twoyear horizon monetary policy could be eased further",4 +4551,"let me adopt a stylised incarnation of a flexible inflationtargeting regime a description +which nonetheless follows closely early expositions in the literature",4 +4552,how can monetary policy sustain price stability if the situation requires new actions to get back to price stability when the main instrument of traditional monetary policy the interest rate is already at its minimum,4 +4553,"thus the credibility of monetary policy also reduces the coefficient allowing us to project that beyond short term effects inflation will stay near the target over +the policy horizon",4 +4554,the second important point concerning the transmission of monetary policy is the fact that it is not the current value of the policy rate that matters,4 +4555,"therefore at a practical +level it cannot be applied to the conduct of monetary policy",4 +4556,to this effect the mpc has raised the monetary policy rate by a cumulative 500 basis points during the year to 21 percent in november 2014,4 +4557,"process of setting out monetary policy objectives +general objectives +traditionally central banks pursue the twin objectives of price stability and growth or employment",4 +4558,"as its policy stance reflects the monetary policy c ommittee mpc judges that the +equilibrium real interest rate has been and continues to be negative",4 +4559,"finally i would very strongly stress that it is of paramount importance for a central bank to +ensure that inflation expectations remain wellanchored",4 +4560,what monetary policy in the real world can do by setting a short nominal policy rate is only to temporarily make the short real interest rate deviate from the neutral real interest rate which in turn is beyond the control of monetary policy,4 +4561,"i believe that the introduction of the monetary conditions index in december 1996 +may have helped to change the mix of monetary conditions to some extent by eliminating theimpression which had grown up that we had an exchange rate target as well as an inflation target buteven this is by no means certain",4 +4562,indeed monetary policy in stage three started with verylow interest rates by historical standards,4 +4563,today i will focus on our main function the conduct of monetary policy,4 +4564,1 board of governors of the federal reserve system statement on longerrun goals and monetary policy strategy as adopted effective january 24 2012,4 +4565,"i want to reiterate once again that the +reserve bank had run a tight monetary policy not because it does not care for growth but +because it does care for growth",4 +4566,in particular my views on the appropriate funds rate setting are and continue to be informed by taylortype monetary policy rules that depict the past behavior of monetary policy in response to deviation from its desired inflation target and economic activity from its natural or efficient level,4 +4567,"it is simply something we need to recognise in +setting monetary policy which means not holding interest rates at very low levels when that is no longer needed",4 +4568,"today s monetary policy decisions +affect the price level only after a considerable period of time",4 +4569,"the rate for the continued +adjustment of monetary policy will depend as usual on the information received",4 +4570,"from what i have said until now it is evident that our monetary policy decisions are normally based +on the main rule that says that we should aim at keeping cpi inflation at two per cent 12 years in the +future",4 +4571,the fomcs monetary policy strategy is based on three basic principles,4 +4572,"that bias emerges as +a consequence of the long and variable lags associated with monetary policy decisions",4 +4573,the bank fully recognizes the fact that inflation targeting could be an important policy tool for the purpose once we enter the stage where manoeuvrability is restored to monetary policy and the transmission mechanism recovers its function,4 +4574,"new zealand +the monetary policy objective of the reserve bank of new zealand is to keep future cpi +inflation outcomes between 1 and 3 per cent on average over the medium term",4 +4575,"indeed monetary policy +becomes entirely endogenous",4 +4576,"experience over the inflation targeting era since 1993 suggests that the probability of the cpi outcome being within half a percentage point of the +central forecast is roughly two in five at either a one year or a two year horizon",4 +4577,"two and a half years after its introduction the minimum exchange rate remains a key +element in the snbs monetary policy and just last week at our monetary policy +assessment we decided that it should be maintained",4 +4578,"1 +the first topic is how our monetary policy decisionmaking process is organized",4 +4579,one of the aimsof publishing our monetary policy strategy is to make our policy decisions transparent,4 +4580,in the monetary policy meeting of last july the us federal reserve said that it was within closer reach of its mediumterm targets,4 +4581,consistent with this approach when asked about the role monetary aggregates play in my policy thinking at a recent treasury select committee hearing i sought to steer a course between recognising that monetary developments can and often do offer important insights into the outlook for the economy and monetary policy but at the same time noting that money is not a summary statistic that alone can or should determine monetary policy decisions,4 +4582,"4 +the norwegian economist finn kydland received the nobel prize for economics in 2004 for +having shown that on the whole monetary policy decisions are better if policymakers delegate interest rate setting to an independent central bank under a clear mandate",4 +4583,according to woodford central banks should not merely commit to keeping the interest rate at its lower bound until a given future date,4 +4584,"in dece mber 2000 the bank stated in its editorial in +the inflation report that market participants had a different view of the future interest rate",4 +4585,for monetary policy whose only instrument is the interest rate the tinbergen principle means that there may be also only one target price stability,4 +4586, and third i will address some of the specific que stions for our monetary policy,4 +4587,i will assume that the monetary policy instrument is a shortterm interest rate,4 +4588,i want to emphasize that monetary policy is data dependent and is not on a preset course,4 +4589,"it is important for monetary policy that expectations of the interest rate are in line with the +repo rate path",4 +4590,"the aims of monetary policy +to understand the monetary policy decisions it is of course essential that there is no uncertainty +regarding the objective of monetary policy",4 +4591," price level determinacy with an interest rate policy rule and +rational expectations journal of monetary economics vol",4 +4592,"why then change the underlying framework for policy especially when this change is not likely to +have much of an influence on the conduct of monetary policy",4 +4593,"we therefore welcome a discussion of ideas about the content and +direction of the monetary policy",4 +4594,"making use of the outputs of such a workshop the bank will continuestudying the meaning of price stability and inflation targeting in the context of the conduct of monetary +policybis review 872001 76",4 +4595,"moreover sic +is an important system t hrough which the snb implements its monetary policy",4 +4596,"new keynesian models generally agree that monetary policy can be effective even at zero +lower bound if policy can take the form of credible commitments to future interest rate paths",4 +4597,"in my remarks today i will discuss inflation and its role in the federal reserve s conduct of +monetary policy",4 +4598,"i will talk about the swedish experiences of conducting an inflationtargeting policy +and how our monetary policy strategy has developed along the way",4 +4599,the role of monetary policy should therefore be to steer policy and market rates to that equilibrium rate,4 +4600,what is the main objective of monetary policy and what scope is available to monetary policy for pursuing other goals,4 +4601,"well if you want to talk about the relationship between monetary policy and other policy areas +not only in an abstract but in a realistic way then you must have a clear idea of the applied monetary policy strategy",4 +4602,romania has already started the tightening of monetary policy by hiking the rate three times this year after further narrowing the corridor around the policy rate last year but going forward we believe a gradual approach is warranted,4 +4603,consistency and continuity are attractive in monetary policy aselsewhere and i shall certainly not be promoting a change,4 +4604,estimates of the neutral interest rate suggested that monetary policy was falling behind the curve,4 +4605,this means monetary policy works largely by affecting expectations of future policy interest rates this is true both at and away from the effective lower bound,4 +4606,if monetary policy is to be truly data dependent then our stance of policy must begin to change,4 +4607,"6 bis central bankers speeches + i also want to point out that the objective of monetary policy conduct is not to attain a neutral +rate whatever its level is",4 +4608,"it also confirms how important it is for price stability to be the primary +objective of monetary policy",4 +4609,"the interest rate forecast in the monetary policy report is lower +than the forecast published in december last year",4 +4610,"my firm opinion is that a large part of the monetary policy decisionmaking process and +discussion should centre on monetary policy alternatives and their advantages and disadvantages",4 +4611,"however i will keep this relatively brief the main part of my talk will focus on the +significance of the exchange rate in the monetary policy process",4 +4612,another fundamental aspect of the ecbs monetary policy is that it aims to pursue price stability over the mediumterm and not every quarter or every year,4 +4613,23 see kiley 2008 for a discussion of the relationship between us monetary policy and survey measures of longrun inflation expectations his results suggest that it took many years for the federal reserve to succeed in anchoring longrun expectations at a low level,4 +4614,i am talking about the role of proportionality in our monetary policy deliberations,4 +4615,in that same time frame the us monetary policy rate has been altered fully 45 times almost twice as often,4 +4616,"introduction +there is presently little disagreement among economists that the ultimate goal of monetary policy +should be price stability",4 +4617,another argument which supports our choice is that various internationally recognized experts have compared the current setup of monetary policy to an implicit inflation targeting framework,4 +4618,by this i do not mean of course that anything goes in monetary policy,4 +4619,our colleague mervyn king often says that monetary policy should be boring,4 +4620,now after two years of participating in the decisionmaking process i would like to share some observations that i believe might help you better understand the formulation of monetary policy,4 +4621,"6 bis central bankers speeches + lower interest rates abroad suggest a reduction in the key policy rate",4 +4622,"the monetary policy interest rate mpr fluctuates around this +neutral rate in order for the monetary impulse to be consistent with achieving the target",4 +4623,"should that choice be made it will require +the reserve bank to recalibrate its inflation goal at a higher level",4 +4624,"first the ban k fundamentally reconstructed the framework of monetary policy bearing in +mind the importance of clearly communicating to the markets and the public its aggressive monetary easing stance to achieve the price stability target of 2 percent",4 +4625,"optimal monetary policy +in a model with distinct core and headline inflation rates unpublished paper board of governors of the federal reserve system",4 +4626,"put another way if we are not +absolutely certain about the outcome of monetary policy it is better to proceed gradually",4 +4627," monetary policy money supply and the federal reserve s +operating procedures in paul meek ed central bank views on monetary targeting",4 +4628,"20 to be sure i would never advocate turning over monetary policy to a computer +but why shouldn t the fomc adopt such a rule as a guidepost to policy",4 +4629,"at the same time a central bank which allows itself too much discretion over the time horizon +when inflation should return to its target would de facto be claiming authority over redefining its monetary policy objective",4 +4630,"when he turns to optimal policy woodford starts chapter 6 by +asking what the goals of monetary policy should be",4 +4631,last week the federal reserve reached an important milestone in its ongoing review of its monetary policy strategy tools and communication practices with the unanimous approval and release of a new statement on longerrun goals and monetary policy strategy,4 +4632,"the natural rate benchmark the refore indicates the ideal +interest rate setting for a central bank aiming to maintain price stability in a monetary +economy",4 +4633,"however existing empirical analysis does not indicate that +this approach delivers an uniquely superior predictability of monetary policy outcomes",4 +4634,if and how monetary policy should adapt its toolbox can only be assessed after we have progressed on the path of normalisation,4 +4635,the advocacy for corner solutions a fixed peg without monetary policy independence or a freely floating exchange rate retaining discretionary conduct of monetary policy is distinctly on the decline,4 +4636,of course since i come from a central bank practicing inflation targeting i tend to agree with the latter line of thought as i believe that whatever its faults the strategy has enough intrinsic flexibility to enable it to address them,4 +4637,"there is little point in setting an objective for monetary policy which it cannot +attain",4 +4638,on the monetary side the inflation targeting framework the reserve bank has been following for a decade and a half will guide adjustments to interest rates,4 +4639,"conclusion +let me say in conclusion that the assessment of monetary policy is an important part of an +independent central banks endeavour to be open and clear and of the endeavour to attain and +maintain confidence in the inflation target",4 +4640,"i will also say a few words about the concept of wellbalanced monetary policy +and then conclude with some reflections on monetary policy decisionmaking",4 +4641,instead i wanted to talk about something more general namely the communication of monetary policy and specifically the role of forward guidance,4 +4642,this is clearly true if we define a change in monetary policy as a given absolute rise in interest rates say 50 basis points,4 +4643,"this assessment argued in favour of adjusting the interest rates +within the context of a monetary policy stance which is conducive to maintaining price stability overthe medium term",4 +4644,"however the treaty does not specify how the +ecb should pursue its primary objective of maintaining price stability in other words it is silent onwhat is called the monetary policy strategy",4 +4645,are they however sufficiently distinctive as to require any fundamentally different approach in the conduct of monetary policy,4 +4646,"i should like to +take the opportunity to reaffirm that the ecb does not pursue any exchange rate target in its +stabilityoriented monetary policy strategy",4 +4647,4 2014 barsky r justiniano aja melosi lthe natural rate of interest and its usefulness for monetary policy,4 +4648,are low or even negative rates a permanent feature of monetary policy,4 +4649,in this policy model the central banks inflation target is besides flexible also symmetrical and forwardlooking,4 +4650,with interest rates already very low and with pundits constantly reminding them that inflation is always and everywhere a monetary phenomenon they have to go beyond ordinary monetary policy or lose credibility and risk violating their domestic mandate,4 +4651, the third matter is the rule system for monetary policy,4 +4652,let me begin by presenting my general view of monetary policy,4 +4653,5 g eggertsson and m woodford 2003 the zero bound on shortterm interest rates and optimal monetary policy,4 +4654,"although these differences are small relative to the overall variation in the +trend over the past forty years they are assuredly large enough to be meaningful to a monetary policy +maker",4 +4655,"conduct of monetary policy +a",4 +4656,"for instance at the ecb we are convinced that a thorough analysis of monetary +developments our monetary pillar is important for the conduct of monetary policy and for the anchoring of inflation expectations",4 +4657,"in view of their close links with +inflationary developments and their good leading indicator properties for future inflation monetarydevelopments must also play a prominent role in the monetary policy strategy of the ecb in the future",4 +4658,"the policy decision process +in setting monetary policy a central bank like the federal reserve must deliberate +systematically about a wide variety of important issues",4 +4659,keeping in view the inflation risk the reserve bank embarked on a calibrated exit from the expansionary monetary policy,4 +4660,of course there are good reasons why monetary policy is not set by algorithm,4 +4661,"in may 2003 after more than four years of conducting monetary policy the ecb undertook a +thorough evaluation of its monetary policy stra tegy and while confirming its initial price +definition it clarified its position by stating that it will aim to maintain inflation rates close to +2 over the medium term ",4 +4662,finally the role of the exchange rate in monetary policy should not be overlooked,4 +4663,"these +include how decisionmaking about particular tools can be dovetailed with monetary policy decisionmaking and how policy changes should be implemented",4 +4664,third the federal reserve was particularly aggressive early on in its pursuit of monetary policy accommodation in order to keep inflation expectations wellanchored,4 +4665,"the us federal reserve cut its instrumental rate six times during the spring bringing it down to +375 per cent",4 +4666,"also as i mentioned qe has ruled out the scenario in which monetary policy ends when the +policy interest rate reaches zero",4 +4667,"in the case of monetary policy the nature of our response is the more or less automatic one described +earlier",4 +4668,"the policy framework of qqe with a negative interest rate maintains monetary easing in +terms of quantity and quality and boosts it strongly with a negative policy rate",4 +4669,"and i hope that you intend to take part in this discussion as the whole point of an open central bank is to facilitate such discussion and allow it to +improve monetary policy",4 +4670,"to give money an important role in its monetary poli cy analysis and strategy is however quite a natural +thing for a central bank geared towards price stability to do as inflation is ultimately always and +everywhere a monetary phenomenon to quote again milton friedman",4 +4671,"in a monetary union the central bank when setting interest rates has to take an areawide +perspective",4 +4672,the federal reserve in the us has raised its policy rate in recent times but even then only four times in quarter point increments so that the policy rate has only just reached 1 per cent,4 +4673,"i wish to make clear from the start that i will not make any new assessment today of the +appropriate direction for monetary policy in relation to the monetary policy update that was published at the end of april",4 +4674,"bis central bankers speeches 9 + i want to reiterate here that monetary policy in norway will continue to be oriented towards +low and stable inflation",4 +4675,"no treatment of monetary policy is complete without some remarks on the reverse side of monetary +policy exchange rate policy",4 +4676,"t he descriptive style of forward +guidance on the policy interest rate has become clearer and has evolved over time",4 +4677,"if we started to observe behaviour that indicates that this +assumption was not correct then monetary policy would act upon it",4 +4678,"although there is a great deal of uncertainty about the neutral rate and conditions may change a reasonable assumption is that it will remain lownot far from current levelsfor the foreseeable future4 +what does a low neutral rate mean for monetary policy and the anchoring of inflation expectations",4 +4679,"however as we look back on 200405 we see a spongier monetary policy than would be the case +normally",4 +4680,"one of the reasons that the bank of canadas monetary policy has been successful in anchoring inflation expectations is that we implement policy +symmetrically",4 +4681,"2 bis review 312008 + the second lesson is that price stability should be the primary objective of monetary policy",4 +4682,the us federal reserve signalled at the end of july that it still has plans to raise its policy rate this year,4 +4683,"core inflation is very useful to the central bank itself as a guide to the appropriate setting +of its monetary policy stance",4 +4684,the federal reserve renewed its policy framework just recently and decided to move to average inflation targeting,4 +4685,"the projections published in the +june monetary policy report suggest that the key rate should be held at todays level to around the end of the year and then gradually be raised to a more normal level",4 +4686,"i would like to +examine in the process of reviewing how to make full use of the monetary easing policy in the future +whether we can reorganize the policy framework of the bank and whether there will be any room for introducing such a tool as inflation targeting within that framework",4 +4687,"i have no doubt +that inflation is a monetary phenomenon over the long term and that we are right in attributing a +prominent role to monitoring monetary developments in our monetary policy strategy",4 +4688,"objectives of monetary policy +3",4 +4689,"the us +fed has increased the fed funds target rate to its curr ent level of 50 per cent from 10 per cent at the +start of the tightening cycle and the general expectation is that it might be close to its peak",4 +4690,president plosser shares some thoughts about the stance of monetary policy and the advantages of raising rates gradually and starting sooner rather than being forced to raise them abruptly later,4 +4691,"in fact the practice of monetary policy in an +inflationtargeting regime is not necessarily inconsistent with a dual mandate such as that given to the federal reserve indeed most if not all inflationtargeting central banks today practice flexible inflation targeting meaning that they take account of other economic goals besides price stability notably economic growth employment and financial stability when making policy decisions",4 +4692,knowledge of this equilibrium level is important for assessing the stance of monetary policy,4 +4693,"already the fomc has extended its forecast horizon to indicate +where the governors and reserve bank presidents would like to see inflation coming to rest +over time",4 +4694,"as you know the reserve bank +board meets eleven times each year to consider monetary policy",4 +4695,"the fourth principle concerning the crucial role of expectations in the determination of +inflation dynamics and in the transmission of monetary policy is also universally recognised +and constitutes one of the key advances in the analytical foundations of monetary policy",4 +4696,"any reflections on the +future of the monetary policy transmission mechanism have to start from there",4 +4697,that robust and commonly shared analytical background on what monetary policy could and could not achieve was essential in establishing the primacy of price stability and the legitimacy of independence in monetary policy making,4 +4698,"technically the neutral rate of interest is an +important concept in monetary policy and a potentially useful guide to monetary policy stance",4 +4699,our decision to lower the interest rate is guided by normal monetary policy considerations in other words business as usual,4 +4700,"to give money a prominent role in its monetary policy analysis is quite a natural thing for a central +bank geared towards price stability to do because inflation is ultimately a monetary phenomenon",4 +4701,so now is a good time to take stock of our understanding of the powerand limitationsof monetary policy,4 +4702,"i should mention that +the ecb is currently studying possible nonstandard monetary policy measures",4 +4703,so i would argue that monetary policy should focus on this goal and leave other goals to other policy areas and that includes redistribution policy,4 +4704,"some have suggested that central banks adopt a regime in which +the monetary policy rate is the interest rate on reserves rather than a market interest rate such as the federal funds rate",4 +4705,first to the extent that such a tool can provide accommodation ruling out its use would raise the risks of insufficient monetary policy accommodation when interest rates are pinned at the zero lower bound,4 +4706,"we cannot rule out the possibility of situations arising where it may be necessary to set our +sights further ahead than the time period normally used to guide monetary policy decisions",4 +4707,"we havent announced an explicit inflation rate target consistent with that dual mandate but the federal reserve governors and reserve bank presidents publish our +individual forecasts for inflation over the longer run conditional on our individual views of +appropriate monetary policy",4 +4708,the market rate will vary from the natural rate for all sorts of reasons other than monetary policy,4 +4709,"it should be clear from what i have said so far that the policy strategy in this area can never +be as tightly defined or modelled as it might be in the monetary policy sphere +5",4 +4710,"the way the question has been posed may implicitly reflect two presumptions namel y that first monetary policy does not rely +sufficiently on scientific principles and methods at present and second that there is some doubt or scepticism on whether monetary policy will acquire more elements of a science in the future which would be desirable",4 +4711,let me add that the direction of our monetary policy evolution is not necessarily limited to what i have described thus far,4 +4712,today it seems unreasonable for a central bank not to announce its decision on the interest rate,4 +4713,"this has been +an input in our decisions so were it not for the strengthened exchange rate our monetary +policy interest rate would probably be higher than it actually is",4 +4714,indeed low equilibrium real interest rates affect the monetary policy stance in two ways first any given policy rate is less stimulatory with lower equilibrium rates,4 +4715,as i said earlier the federal reserve has raised its policy rate very gradually four times over the past two years,4 +4716,"ultimately a higher potential will create the conditions for a rising equilibrium rate and will +pave the way for monetary policy normalisation",4 +4717,one may harbor doubts about the power of monetary policy for two reasons,4 +4718,"there are opinions that it is easier to be governor of a fixed rate that it requires less +managing of the monetary policy",4 +4719,most of the observers find the monetary policy goal price stability easier to interpret no matter how complex measuring price stability and understanding the impact of interest rate changes may be,4 +4720,the reserve bank responded to the phases of high inflation through available policy instruments table 2 and chart 3,4 +4721,wefind this an encouraging development and it is possible that at some point the fomc mightelect to put more weight on such monetary quantities in the conduct of policy,4 +4722,"6 sometimes the central bank will need to +change its policy rate simply in order to maintain unchanged monetary conditions as proxied in the literature by r minus r star",4 +4723,at one end of the spectrum the us federal reserve has just started its interest rate normalization process after seven years of keeping its policy rate near zero,4 +4724,"such a framework for monetary policy ensures that monetary policy is transparent in that the +authorities have a definite and measurable aim in their conduct of monetary policy",4 +4725,why is monetary policy operating procedure important,4 +4726,but today i will discuss from the operational standpoint about the journey toward normalization of our monetary policy,4 +4727,"as reserve bank watchers may 11 +bis review 111999recall this was close to the time when we reached the judgement in october 1995 that +inflationary pressures were abating and that some easing in monetary conditions might beappropriate",4 +4728,directional and qualitative communication about the gap between the current policy rate and the terminal rate can foster market dynamics that reinforce and underpin the desired monetary policy stance,4 +4729,1 board of governors of the federal reserve system federal open market committee reaffirms its statement on longerrun goals and monetary policy strategy january 25 2022,4 +4730,"occasionally monetary conditions would become a bit too easy to be +consistent with our inflation target and we would draw attention to the fact that conditions should be somewhat tighter",4 +4731,as i said earlier monetary policy aims to make monetary policy decisions that provide as good a target attainment as possible and the models are important in this context because they make it possible for us to evaluate different monetary policy alternatives in forecast terms,4 +4732,"the natural rate of +interest and its usefulness for monetary policy american economic review vol",4 +4733,the us federal reserve system is also currently evaluating its monetary policy strategy,4 +4734,"as monetary policy acts with a time lag it +should be based on forecasts",4 +4735,"then i will discuss monetary policy at the +us federal reserve and its first attempt to bring about a restoration of normal conditions",4 +4736,in the first part of this lecture i propose to give a general overview of the parameters of monetary policy,4 +4737,"in my presentation i will address the following questions why is monetary policy operating +procedure important",4 +4738,"the simple rule that says that monetary policy shall +only react if the target for inflation is not met during the forecast period is a good help when +conducting monetary policy",4 +4739,"our second very fundamental role is to conduct our monetary policy in a transparent way to +keep our policy interest rate close to its target in order to control inflation",4 +4740,"our conclusion is that there will not normally be any reason between the monetary policy +meetings to give an indication of how the interest ra te will be set",4 +4741,to crown it all we have gained a monetary policy discussion that is aimed more at longterm issues and not merely at whether or not the interest rate should be altered a stage,4 +4742,in this lecture i will try to provide a peek into the monetary policy room,4 +4743,to ensure that we avoid propagating secondround effects and upsetting inflation expectations the bsp tightened monetary policy by a total of 175 basis points,4 +4744,"this in turn would support the predictability and +credibility of our monetary policy",4 +4745,"by this i mean quite simply how we +communicate our monetary policy intentions",4 +4746,one way to enhance its communication would be to indicate the likely behavior of interest rates based on a few different taylorlike rules that have been consistent with the conduct of monetary policy,4 +4747,our march forecast indicates that the key policy rate should be increased gradually towards a more normal level but at a slower pace than expected last autumn,4 +4748,"these operations confirmed that monetary policy tools are not exhausted when the policy +interest rate reaches zero",4 +4749,"bis central bankers speeches 3 + greater uncertaint y about the effect of the policy rate",4 +4750,"in this case a monetary policy impulse +may affect longterm interest rates in a different way than in previous periods",4 +4751,"the +strategy meetings take a nearterm view of t he monetary policy and consider key projections and +parameters that can affect the st ance of the monetary policy",4 +4752,"as a central banker i naturally +turn to a comparison with monetary policy here both the policy action raising short term +8 bis central bankers speeches + interest rates and the event inflation are well defined",4 +4753,"wsj but it does help on the monetary policy side as a flexible exchange rate makes +your interest rate policy more potent",4 +4754,"i want to turn now to outline something of how we think about the exchange rate in setting monetary +policy",4 +4755,therefore from an expansionary monetary policy up until the end of 2021 the ecb has moved through the neutral range and continued moving into the restrictive monetary policy interest rate range currently at 25,4 +4756,8 richard h clarida vice chair of the board of governors of the federal reserve system the federal reserves review of its monetary policy strategy tools and communications practices speech delivered at the federal reserve bank of minneapolis april 9 2019,4 +4757," the fomc revised and augmented its communications around the approach it +intends to implement when it becomes appropriate to begin normalizing the stance +of monetary policy",4 +4758,"i believe that the fomcs decision +making in 2011 has introduced a lack of clarity about its monetary policy mission",4 +4759,see board of governors of the federal reserve system 2020 2020 statement on longerrun goals and monetary policy strategy policy statement august 27,4 +4760,so the question is is there something to be learnt from monetary policy,4 +4761,"of course monetary policy does not react mechani cally to monetary developments but rather +responds to the information in monetary aggregates that is relevant for maintaining price stability over the medium term",4 +4762,"the interest +rate path may be perceived as a straightjacket preventing the central bank from pursuing the policy it considers to be appropriate at any given time",4 +4763,"given this strong antiinflationary orientation of central bankers appropriate policy actions +may face a credibility challenge of a different nature than we are used to talking about can +conservative central bankers be counted on to commit to keeping interest rates low in the +event inflation rises above their longrun target",4 +4764,"but as a central banker i would like to add that to win the battle against inflation in any country requires enhancing the room for +manoeuvre for monetary policy and the effectiv eness of the monetary policy instruments",4 +4765,"by giving some weight to the consideration that the key rate 4 bis review 1132010 + should not deviate too far from simple rules monetary policy may become somewhat more +robust1 +key policy rate + +a monetary policy that only takes into account the consideration of bringing inflation rapidly +back to target criterion 1 would imply that the interest rate should rapidly have been reduced to below 1 per cent when we presented the latest monetary policy report",4 +4766,"frederic +mishkin from the board of governors of the federal reserve system will be joining us this afternoon to speak on advances in monetary policy",4 +4767,"3 the reserve bank has been analysing this cycle to help assess its monetary +policy",4 +4768,"a wellorganised decisionmaking process is another important factor in the conduct of monetary +policy",4 +4769,"i would have said that monetary policy is about the deliberate decisions by the central bank to +influence shortterm interest rates",4 +4770,my role today is to shed some light on what the eu entrance might imply for the monetary policy in general and for us as monetary policy makers in particular,4 +4771,"if i were to be granted one wish as a central banker it would +be to increase the neutral rate of interest toward a more historically normal level",4 +4772,as a result the monetary policy had considerable space for monetary expansion through the decrease of the interest rate in its conventional form,4 +4773,"the reserve bank has also initia ted inflation expectation surveys so that we can have some direct +indicators of changing inflation expectations of th e public",4 +4774,"this applies both to the +principles behind monetary policy and to how well we succeed in meeting our objective",4 +4775,"first i want to draw out what have we learned +about the objectives of monetary policy",4 +4776,"the objective of monetary policy +a large body of academic literature stemming from the insights of friedman and phelps +provides the theoretical basis for establishing price stability as the objective of monetary +policy",4 +4777,"but i believe that we must learn to live with the fact that it is impossible to quantify all of the factors we monetary policy decisionmakers consider should be taken into account in the monetary policy +decisions",4 +4778,"sources bloomberg reuters ecb calculations10 + +the conduct of our monetary policy +our monetary policy reaction function has always been firmly anchored to our objective to maintain inflation at levels below but close to 2 over the medium term",4 +4779,"at the same time the flexibility is part of our means of conducting monetary policy which has +gradually changed during the period with an inflation ta rget",4 +4780,but can we say this has much to do with monetary policy settings,4 +4781,it is also true that we have less experience with the monetary policy tools used at the zero bound,4 +4782,"we accordingly still belief that an inflationtargeting monetary policy +framework allows an independent central bank to co mmit credibly to its longterm goal of price +stability",4 +4783,in fact policymakers at the federal reserve and many other central banks do routinely consult various policy rules as they make judgments on the appropriate stance of monetary policy,4 +4784,an adjusted index such as this will be most relevant when assessing the orientation of monetary policy in retrospect,4 +4785,this is relevant because the fed has long considered the anchoring of inflation expectations an important condition for meeting our monetary policy goals,4 +4786,today i have focused on unconventional monetary policy although whether the policy is actually unconventional or not can only be determined on a relative basis and perhaps through the use of retrospective wisdom,4 +4787,"bearing these differences in mind let me explain our thinking +behind the conduct of monetary policy in order to facilitate better understanding of our policy +making",4 +4788,"thus the snb essentially continues to report on its monetary +policy operations in a transparent manner the only difference being that certain data will be published less frequently",4 +4789,i believe on the whole that it is better to consistently use the cpif as an operational target for monetary policy and disregard the direct effects of interest rate changes on the cpi when assessing whether monetary policy is wellbalanced,4 +4790,similarly the us federal reserve publishes socalled dot plots to indicate how its federal open market committee views the likely future path of interest rates,4 +4791,"monetary policy +next let me move on to reviewing the performance of monetary policy",4 +4792,let me close by saying a few words about monetary policy and the federal reserves dual mandate,4 +4793,in view of these possibilities the review of the ecbs monetary policy strategy has rightly confirmed its mediumterm orientation that is the inflation target is to be attained over the medium term and not necessarily at each point in time,4 +4794,in my remarks today i therefore plan to focus on the conduct of monetary policy when inflation is below target and explain why the ecb is maintaining an accommodative monetary policy stance,4 +4795,"i will not try to settle this debate today which is bound to continue in both academic and +policy quarters although not surprising for a central banker i personally believe that monetary policymakers deserve significant credi t to this end not least as inflation is +ultimately a monetary phenomenon and hence ultimately determined by monetary policy",4 +4796,while this allows us to assess the implications for inflation of an unchanged policy stance it has the drawback that it is unrealistic during periods of regular changes to the policy rate,4 +4797,on the two occasions so far when we have presented a new assessment the monetary policy decision to raise the interest rate to 025 percentage points has indeed been anticipated and hardly been questioned,4 +4798,it is my view that as we approach the next century the field will narrow further andthat inflation targeting will become the dominant monetary policy regime,4 +4799,"what can the federal reserve do to ensure that inflation expectations stay well +anchored",4 +4800,"there have also been significant developments in the +monetary policy framework during the period we have practised inflation targeting and i hope that i +have been able to give you some insight into how our monetary policy strategy has developed and +how it works",4 +4801,what does that mean to the monetary policy,4 +4802,the costs and benefits of deviating from the systematic component of monetary policy,4 +4803,i have explained my preference for using inflation forecasts rather than actual inflation in the policy rule monetary policy works with a lag and therefore policy decisions must be forward looking,4