Newsmakers 14 June, 2000 |
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News this issue:
HAPPY BIRTHDAYS Helmut Schieber, member of the board of the Deutsche Bundesbank since 1992, is 62 on June 25. Colleen K Strand, first vice president of the Minneapolis Fed, is 57 on June 27. Leonard Ladislas Tsumba, Governor of the Reserve Bank of Zimbabwe, is 57 on June 27. FORTHCOMING MEETINGS Asia-Pacific central bank heads to hold meeting in Seoul June 21 The Bank of Korea (BOK) will convene the fifth Executives Meeting of East Asia and Pacific Central Banks (EMEAP) in Seoul July 7. Eleven heads and officials of central banks in the Asia-Pacific region will take part in the planned meeting to exchange views on regional and global economic trends. The delegates will also be briefed on activities of three working groups concerning payment systems, financial markets and bank supervision. The day after the EMEAP meeting, the BOK will also hold an international symposium on "change in the financial environment and the role of central banks" to commemorate its 50th anniversary. If you would like to annouce forthcoming meetings on Newsmakers, email BWELLER@CENTRALBANKING.CO.UK PAPERS ON FOREIGN RESERVES Thank you for your suggestions on articles on foreign reserves. "The Currency Composition of Foreign Exchange Reserves: Retrospect and Prospect," by Barry Eichengreen and Donald Mathieson http://emlab.berkeley.edu/users/eichengr/helsinki2.pdf "Liquidity as a safety net: A few comments on liquidity risk" By Sylvia Piterman, Head of Foreign Currency Department, Bank of Israel http://www.bankisrael.gov.il/deptdata/neumim/neum012e.htm If you have any more
suggestions, please email RPRINGLE@CENTRALBANKING.CO.UK CENTRAL BANKERS IN THE NEWS Indonesia's central bank chief detained Prosecutors in Indonesia have detained the country's central bank governor, Sjahril Sabirin, following a politically charged row over the Bank Bali scandal. Investigators from the attorney general's office questioned Mr Sabirin for nine hours before detaining him. He will be detained for twenty days. All eyes have now turned to Sabirin's temporary stand-in, the central bank's senior deputy governor Anwar Nasution. Many speculate that former University of Indonesia (UI) professor Anwar will likely succeed Mr Syahril. Before joining the central bank's board of executives in April 1998, the 58-year-old was known for his criticism of the government. His most memorable remark on the central bank, ironically, was that it was a ""nest of bandits''. Born in Sipirok, North Sumatra, Mr Anwar is a graduate of UI, the Harvard School of Government and Tufts University in Massachusetts. His curriculum vitae reveals a teaching stint at the University of Helsinki and brief experience at the Asian Development Bank, International Monetary Fund and World Bank. Knighthood for BOE governor June 17 Sir Eddie George, governor of the Bank of England, was knighted in the Queen's birthday honours list. George is only the third serving governor in the past 100 years to be knighted, after Sir Leslie O'Brien in 1967 and Sir Walter Cuncliffe in 1917. Willem Buiter, former MPC member who is now chief economist at the European Bank for Reconstruction and Development, was given a CBE for his service to economics. David Arhcer is new chief economist at RBNZ June 19 David Archer has been appointed as the new chief economist at the Reserve Bank of New Zealand, replacing Adrian Orr. Mr Archer will take up the role in early July. He is currently the Bank's assistant governor and is in charge of the financial markets department. Lamfalussy to head "wise men" June 15 Alexandre Lamfalussy, former head of the European Monetary Institute and BIS, is to chair a group of wise men charged with investigating how to achieve a single market in financial services and how to coordinate regulation across Europe. NEWS THIS WEEK Bank Indonesia not bankrupt after all Bank Indonesia's assets exceeded its liabilities in a balance sheet published on June 19, meaning the central bank does not need fresh capital as suggested in a state audit last December. The central bank had 476.3 trillion rupiah (S$95 billion) in assets as of December last year and 392.9 trillion rupiah in liabilities. Last week, the third largest bank in the Czech republic, IPB, has been placed under forced administration after worried customers withdrew more than six hundred million dollars in one week. The crisis of confidence followed reports that IPB's reserves were below the permitted level and that its biggest shareholder, Japan's Nomura group, was unwilling to inject more money. A finance ministry spokesman said IPB's assets were under the control of the central bank and a special police unit had occupied IPB's headquarters. Josef Tosovsky, the governor of the Czech National Bank, has announced that he is seeking a senior post with the European Bank for Reconstruction and Development. The news comes at a crucial time as the central bank is trying to fend off legislative curbs on its activities, proposed by the ruling Social Democrats and the Civic Democratic Party. The two parties have sought legal and constitutional amendments that would affect the nomination of the central bank's board members, cut the pay at virtually all levels within the bank, and impose internal controls on both operations and the setting of monetary policy. Brazil springs rates surprise June 22 Brazil gained its lowest nominal interest rates for over a decade after the central bank surprised markets by knocking one point off its main rate. The monetary committee of the central bank (Copom) said it cut its base Selic interbank rate to 17.5 pct from 18.5 pct due to improved prospects of low inflation. The central bank also adopted a downward bias on future rate moves MAS announces end to cross shareholding June 20 Singapore's central bank, the Monetary Authority of Singapore, has announced Draconian measures to force banks into divesting their non-financial businesses which may lead to the restructuring of billions of dollars in assets. Cross-shareholdings between banking and non-financial associates will be unwound, name-sharing and common ownership cease and separate management structures set up. Lee Hsien Loong, MAS chairman and deputy prime minister, said the separation was aimed at limiting the risks to the banks of contagion, enhancing market discipline, increasing transparency and ensuring that bank management focused on core business. Gerashchenko says no to weak rouble June 20 Russian central bank chief Viktor Gerashchenko fired back at the government Monday in the spat over exchange rate policy and said the bank would chart its own monetary course to make sure the rouble was not pushed lower. "We're independent enough to make decisions ourselves," Gerashchenko told reporters as he left an investment conference. He said recent calls by Prime Minister Mikhail Kasyanov for preventing the "unjustified strengthening" of the rouble had had little impact on the central bank. Sri Lanka devalues the rupee June 20 The Sri Lanka government has announced it will let the rupee fall in value against the US dollar in a bid to boost the country's exports. The effective devaluation comes in the wake of increased defence spending as the government seeks to bolster the armed forces in their war against Tamil Tiger rebels. "The central bank has now decided to allow the market further freedom to determine the exchange rate...the spread between its buying and selling rates for the US dollar will be widened to 5% (from the earlier 2%)," the Central Bank of Sri Lanka said in a statement. Central bank governor A.S. Jayawardena said that he expected the rupee to lose up to 4% of its value. North Korea finally growing June 21 According to a report by the Bank of Korea (the central bank of South Korea) the economy in the north grew last year by 6.2%, the first year of expansion since 1989. However the report, based on information from the South's intelligence agency and its unification ministry, highlighted the economic gulf between the two countries. Per capita GDP in the north is $714, a twelfth of that in the South. Seventy percent of the North's hard currency came from recent foreign aid aimed at famine relief. http://www.bok.or.kr/index_e.html Solomons faces financial ruin as crisis draws on June 21 A quick resolution of the political impasse in the Solomon Islands looks unlikely. According to the governor of the Solomon Islands' Central Bank the country is already on its knees. But there is to be no speedy resolution to the crisis. The Malaita Eagle Force (MEF), which took over the capital two weeks ago, has achieved its first objective, the prime minister Bartholomew Ulufa'alu has resigned. But the parliamentary meeting to choose his replacement has been set down for June 28. Last week, the Australian dollar hit a new two-month high, as overseas investors continue to reverse their negative perceptions of the currency. Yugoslavian central bank new measures to fight inflation June 20 Yugoslav National Bank [NBJ] governor Dusan Vlatkovic has proposed new measure to control inflation. "Due to the possibility of inflation and the pressure on the exchange rate, we will propose certain changes and additions to the monetary policy, with a clear emphasis on not making decisions on directing funds that we had last year," Vlatkovic said. He added that the central bank and the business banks should support the needs of export production, agriculture and the energy sector with their loan policy, as well as give loan support for the construction of apartments. Cuba banking system not threatened by speculation June 19 Francisco Soberon, minister president of the Cuban Central Bank, emphasized the security and protection evident in the eight banks and 12 financial companies that make up the Cuban banking system. Soberon noted that the Cuban banking system is one of the few not threatened by speculation, money laundering, and fraud in general. Settlement systems disclosures on BIS website June 19 The latest addition to the disclosures accessible via the BIS website is the contribution from SIS SegaInterSettle AG The Swiss Securities Services Corporation (dated January: 2000). In February 1997 the CPSS/BIS published the "Disclosure framework for securities settlement systems" that was elaborated together with IOSCO (http://www.bis.org/publ/cpss20.htm). Many securities settlement systems have in the meantime made information on their system's operation and its allocation of risks available to the general public (http://www.bis.org/publ/cpss20resp.htm). The information relating to SIS SegaInterSettle AG can be accessed from that page or directly at http://www.sisclear.com/10000/E10111.htm Central Bank of Cyprus orders bank closure June 19 The Central Bank of Cyprus has ordered the closure of the Nicosia branch of Beogradska Banka, a state owned Serbian bank closely linked with President Slobodan Milosevic, on grounds of insolvency. A central bank official said Beogradska's licence to operate an offshore banking unit has been revoked last month. Riksbank to drop cheap loans for directors June 21 The Sveriges Riksbank was forced to abandon its policy of giving its directors cheap loans after revelations of the practice prompted sharp criticism from politicians and newspapers. Four of the bank's six directors had been given loans at the discount rate plus one percentage point, a rate cheaper than offered by commercial banks. The discount rate is 2.25 per cent compared with a housing loan rate of just over 7 per cent available to most Swedes. Klein: Pension funds should be encouraged to invest abroad June 15 Pension funds should have the freedom to invest in foreign currency and foreign equities, said Bank of Israel Governor David Klein. The central bank has been advocating for several years structural changes in pension funds, which will require them to increase their investments in the local capital market. Klein, however, said these funds should not be limited to investing in the local bourse but also be allowed to invest abroad, as the domestic market is not big enough to absorb their investments. He was speaking at an institutional investor's conference in Tel Aviv. RBI recruitment policy under review June 18 India's finance ministry is looking into complaints related to recruitment and promotion policies of the Reserve Bank of India (RBI) that has lead to gross overstaffing and frustration amongst officers of the institution. Investec to sell gold to Chinese central bank June 14 Investment bank Investec Group said that it had signed an agreement with the People's Bank of China to supply it with a minimum of 15 tonnes of gold a year for an unlimited period. "The agreement is for an unlimited period of time, providing for the supply of approximately one ton of pure gold every three weeks," Investec said in a statement. Estonia's central bank hikes growth estimate June 18 Western Europe expects the highest rate of economic growth this year since 1990 due to higher exports and therefore Estonia's outlook is good in a short-term perspective, said Andres Saarniit, head of the economic policy department at the central bank. The central bank expects growth of 5.5% in 2000. Inflation should remain under 4 per cent this year, according to a central bank estimate. DUISENBERG THIS WEEK Wim Duisenberg, President of the European Central Bank, embarrassed the UK government by characterising British arguments against joining the euro as "psycho-political". In a later press conference the prime minister, Tony Blair, insisted that economic considerations were paramount in the government's position on the euro. The UK government has promised to hold a referendum on the single currency and campaign for a yes vote once five economic tests defined by the chancellor, Gordon Brown, have been met. Duisenberg also raised fears within the UK government by talking about a "window" for UK entry into the Europe. This seemed to suggest that the opportunity for entry might last only a limited time, raising the spectre of the UK never managing to join. Duisenberg was speaking on June 20 to the European Parliament's Committee on Economic and Monetary Affairs. See the Committee's website for details: http://www.europarl.eu.int/dg2/ECON/EMU/EN/default.htm At the committee, Duisenberg also said Denmark could become a member of the euro area 'tomorrow' because it fulfills all relevant convergence criteria. "Denmark as a member of the ERM (European exchange rate mechanism), and soon the only member of the ERM, is performing in a way by which it fulfills all the convergence criteria. It could become a member of the euro zone tomorrow, so to speak." Duisenberg also described Irish inflation as 'worrisome' and warned the Irish government that there is nothing the ECB can do to tackle the problem. CURRENCY CORNER Announcement of banknote tender The Central Bank of Armenia announces international tender for printing and supply of banknotes of a new type. All organizations that have experience in printing banknotes and have ISO-9001 or ISO-9002 standard certificate can participate in the tender. Tender submissions should be submitted to the Central Bank of Armenia no later than 6 p.m. July 14,2000 to the address below. Mr. G Tumanyan 6, Nalbandyan, 375010, YEREVAN Republic of Armenia Central Bank of Armenia Tel: (3742) 589734 Fax: (3742) 567423 E-mail: tumanyan@cba.am ANNUAL REPORTS Departing Rojo warns that Spain may overheat Luis Angel Rojo, governor of the Banco de Espaņa, whose term at the central bank ends in July, has warned that the ECB monetary policy may be too loose for Spain. Presenting the Bank's annual report he said that the ECB's "relatively permissive" monetary stance was "excessively loose" for Spain. The Spanish government recently raised its inflation forecast for 2000 to 4%. Earlier in the year a Bank of Finland report estimated that the Spanish economy would need interest rates of slightly above 4% in order to prevent overheating. http://www.bde.es PAPER OF THE WEEK Financial Stability and Macroeconomy By Frederic Mishkin, Graduate School of Business, Columbia University An interesting survey paper which discusses whether a central bank's twin goals of price and financial stability can ever conflict. He concludes that "policymakers and particularly monetary policymakers should not be single-minded in always focusing on price stability but also need to focus on financial stability in designing their policies." But he goes on to say that a focus on price stability is by no means incompatible with the price stability goal. "Price stability," he says, "can help promote financial stability because it leads to longer duration debt contracts and a sounder currency." New York Fed Research Department The latest volume of the Federal Reserve Bank of New York's policy-oriented flagship publication has just been published. Volume 6, Number 2 (July). Articles include: "The Timing and Funding of Fedwire Funds Transfers," by James McAndrews and Samira Rajan; "Capital Ratios as Predictors of Bank Failure," by Arturo Estrella, Sangkyun Park, and Stavros Peristiani. http://www.ny.frb.org/rmaghome/econ_pol/2000.htm BOOK OF THE WEEK The European Central Bank - A bank for the 21st Century By Francois Naudin http://www.kogan-page.co.uk Francois Naudin, a French financial journalist, takes a long, hard look at the ECB. He starts with an historical context and revisits some basic notions about money and the relation between value and money, before dealing in detail with the structure and role of the central bank, its ethos and its financial aims. He asks: what are the ECB's terms of engagement, how does it operate, how is it likely to react to economic forces and how it will influence economic development in the 21st century? |
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