IMFS Distinguished Lectures
In 2010, the Institute for Monetary and Financial Stability initiated the IMFS Distinguished Lecture Series. It is designed to provide a platform for the dissemination of the significance of monetary and financial stability. The exchange of ideas and views of leading policy makers and outstanding academics on important topics related to monetary and financial stability is promoted by the format. The lectures are geared to a non-expert audience as well as to participants from policy and academic circles.
Die expansive Geldpolitik der Europäischen Zentralbank (EZB) hält Bundesbankpräsident Jens Weidmann zwar für nach wie vor angemessen. Bei seinem Vortrag zur Geldpolitik nach der Krise mahnte er jedoch, die EZB dürfe den Zeitpunkt für einen Ausstieg aus der quantitativen Lockerung nicht verpassen. „Wir sprechen geldpolitisch nicht über eine Vollbremsung, sondern darüber, das Gaspedal nicht noch ständig weiter durchzutreten“, sagte Weidmann vor rund 350 Gästen.
Mit dem breit angelegten Kaufprogramm im Zuge der Finanzkrise sei das Eurosystem zum größten Gläubiger der Mitgliedstaaten geworden. „Das hat die Grenze zwischen der Geldpolitik und der Finanzpolitik weiter verwischt“, warnte Weidmann. Der Kauf von Staatsanleihen müsse allerdings ein reines Notfallinstrument bleiben. Zudem gewinne die wirtschaftliche Erholung im Euroraum weiter an Fahrt. Weidmann verwies darauf, dass selbst nach einem Auslaufen der Nettokäufe der vom Eurosystem gehaltene Bestand an Staatsanleihen auf einem sehr hohen Niveau bleiben werde. Daher werde die Geldpolitik auch weiterhin „sehr akkommodierend bleiben“.
Die expansive Geldpolitik wirke sich auch auf die Risikobereitschaft von Finanzmarktakteuren und Banken aus, sagte Weidmann; doch dies geschehe nicht immer auf die beabsichtigte Art und Weise. Während die in Geldanlagen eher als konservativ geltenden Deutschen mittlerweile mehr auf ertragreichere, aber auch riskantere Anlageformen wie Aktien und Fondsanteile setzten, nehme auch die Scheu der Banken ab, übermäßige Risiken einzugehen.
Weidmann sprach sich jedoch dagegen aus, die Finanzstabilität als gleichrangiges Ziel einer Notenbank neben die Preisstabilität zu stellen. „Je mehr Ziele eine Notenbank verfolgt, desto eher könnte die Geldpolitik in einem Zielkonflikt gefangen sein“. Das Konzept der Finanzstabilität sei deutlich schwerer zu fassen und nicht mit einem Index messbar. Makroprudenzielle Instrumente wie antizyklische Kapitalpuffer für Banken oder Begrenzungen der Kredithöhe seien dazu deutlich besser geeignet. Diese makroprudenziellen Maßnahmen dienten als „Skalpell im Instrumentenkasten einer Notenbank“ im Vergleich zur Geldpolitik, die als Hammer wirke, sagte Weidmann. Darüber hinaus erforderten viele dieser Maßnahmen eine demokratische Legitimation. Die Entscheidung über den Einsatz müsse daher bei der Politik liegen und nicht bei der Bundesbank. Nichtsdestotrotz dürfe eine Notenbank die Finanzstabilität nicht aus den Blick verlieren: „Auch für eine rein am Ziel der Preisstabilität orientierte Geldpolitik kann es ratsam sein, Entwicklungen an den Finanzmärkten zu berücksichtigen“, schloss Weidmann. Dauerhafte makroökonomische Stabilität sei nicht denkbar ohne Finanzstabilität.
Der Vortrag von Bundesbankpräsident Jens Weidmann im Video
Valdis Dombrovskis, Vice-President of the EU Commission, sees a further need for closer economic and fiscal policy coordination in the EU. While presenting the Commission’s winter economic forecast during an IMFS Distinguished Lecture Dombrovskis said the euro area had become “more resilient” since the beginning of the Greek crisis, which by now had “very little spillover effects to other euro area countries”. This was a big difference to 2010 and 2011, “when we were seeing some kinds of domino effects”. According to the assessment of the EU Commission, the global economy is “rebounding in 2017”, and “unemployment continuing to decrease but still very high”.
With the EU Commission preparing country reports within the framework of the European semester, Dombrovskis outlined a range of recommendations for Germany where the EU Commission expects the economy to grow by 1.6 percent this year and by 1.8 percent in 2018. “Germany has weathered the crisis quite well”, Dombrovskis said. However, regarding the German currrent account surplus, he suggested to stimulate public investment further and to eliminate efficiencies in the tax system such as corporate taxation and local trade tax. Besides, Dombrovskis called for measures to boost competition in the services sector, in particular business services and regulated professions. On the other hand, Dombrovskis criticized the German pension system and the gender gap, calling for “increasing incentives for later retirements” and “reducing high tax wedges for low wage earners”, making references to the relatively high proportion of women in in part-time and mini jobs.
In view of the Brexit decision of the UK government, Dombrovskis underlined the need for building a capital markets union. “This makes the case for strengthening the capital market more important”, he said. The EU should also address issues such as the insolvency of member states and the support of fintechs. The Greek program, however, Dombrovskis sees "on track” with the economy recovering. “If we now do this final push from outside we can conclude the second review”, Dombrovskis said. Regarding the cooperation with the International Monetary Fund (IMF), Dombrovskis was positive. “It think it’s solvable”, he said.
The presentation is available here (PDF).
Das jüngste Urteil des Bundesverfassungsgerichts zu den OMT-Maßnahmen der Europäischen Zentralbank (EZB) zeigt nach Einschätzung von Verfassungsrichter Prof. Peter Huber, wie die Karlsruher und die Luxemburger Richter einen Ausgleich der Positionen herbeiführen, ohne Konflikte eskalieren zu lassen. „Wir haben im Vorlagebeschluss eine Brücke gebaut, die hat Luxemburg zu 80 Prozent übernommen“, sagte der Verfassungsrichter bei einem Vortrag zur Finanzkrise in der Rechtsprechung des Bundesverfassungsgerichts und dem Spannungsfeld zwischen nationalem Verfassungsgericht und Europäischem Gerichtshof. Mehr habe man nicht erwarten können.
Eine Woche zuvor hatten die Karlsruher Richter das OMT-Programm der EZB grundsätzlich gebilligt, für die Teilnahme der Bundesbank aber eine Reihe von Auflagen formuliert, die Bundestag und Bundesregierung beachten müssen. Im Juni 2015 hatte der EuGH in einer Vorabentscheidung geurteilt, dass die EZB in dem umstrittenen Programm Staatsanleihen kaufen dürfe und der Notenbank damit einen weitgehenden Freibrief erteilt. Mit der Einbeziehung der Luxemburger Richter per Vorabentscheidung hatte das Bundesverfassungsgericht Neuland betreten. Man müsse miteinander über manche Fragen ins Gespräch kommen, erläuterte Huber die Vorgehensweise. Dabei sei noch nicht das letzte Wort gesprochen.
Der Stellenwert der Rechtsprechung und der Gerichte selbst würden sich in den europäischen Mitgliedstaaten erheblich voneinander unterscheiden, sagte Huber. Während in Deutschland ein geradezu „atavistischer Glaube an das Recht“ herrsche, sei das Verfassungsgericht in Frankreich eher ein Mittel zum Zweck. Derselbe Gesetzestext werde daher in den einzelnen Ländern unterschiedlich verstanden. „Das muss man wissen, um zu begreifen, warum unsere Rechtsprechung im Ausland so viel Erstaunen auslöst“, sagte Huber. Seit der Aufklärung habe sich der Rechtsstaat in Deutschland durchgesetzt und schon früh geholfen, Unrecht zu beseitigen.
Anhand der sieben Entscheidungen zu Finanzfragen, die Huber seit 2011 als Berichterstatter begleitet hat, zeigte er, wie das Rechtssystem auf den Bundestag als Mitte der Demokratie ausgerichtet ist. So hat das Bundesverfassungsgericht 2011 im Urteil zur Griechenlandhilfe den Bundestag verpflichtet, den Vollzug zu kontrollieren oder ihm Kontrollrechte beim Rettungsfonds ESM erteilt. Diesen Entscheidungen zugrunde liegen laut Huber zwei wichtige Prinzipien: die Identitätskontrolle greife, wenn der sogenannte Ewigkeitsgrundsatz berührt werde, sich also einer Verfassungsänderung entziehen, und das europäische Recht an seine Grenzen stoße. Der zweite Kontrollvorbehalt, die Ultra-vires-Kontrolle, komme zum Tragen, wenn die Grenze des Rechtsprechungsauftrags überschritten würde, sagte Huber. „Eine willkürliche Anwendung des Rechts ist letzten Endes eine falsche Anwendung“. Mit diesem Vorbehalt habe das Bundesverfassungsgericht Nachahmer etwa in Belgien, Spanien und Polen gefunden. Der EuGH vermeide ernsthafte Konflikte mit den nationalen Verfassungsgerichten und löse die Fälle auf eine andere Weise. Dabei sei er „viel sensibler, als es das bloße ‚Wording‘ seiner Entscheidung nahelegt“, schloss Huber.
In his Distinguished Lecture on March 5, the General Manager of the Bank for International Settlements (BIS), Jaime Caruana, described global liquidity as the "ease of financing" in the global financial system. He pointed out in his speech that we were entering a new phase of global liquidity and urged the central banks to stay the course of normalization.
As central banks return prudently to more normal policy settings "it is crucial that they do everything they can to manage expectations, both about their plans and about the uncertainties," Caruana said. Expectations shifted and portfolios adjusted during this process, followed by a certain degree of volatility in financial markets he explained. Therefore, central banks should not allow themselves "to be distracted by the bumpiness associated with this adjustment," Caruana added. According to the head of the BIS they should not be overly concerned by occasional disinflationary pressures.
However, Caruana emphasized that monetary policy was "only part of the picture". Therefore, he appealed to adhere to the reforms of the financial system and the real economy. "Countries need to pursue structural reforms," he said. "Debts need to be paid down and resolved or restructured where appropriate."
As the financial cycle tends to have a longer duration than the conventional macroeconomic business cycle imbalances were often difficult to protect Caruana underlined. Thus, in its analysis of the financial cycle the BIS takes a closer look at GDP growth, the flows of funds, changes in asset prices and monetary policy.
The aim of BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. Therefore, the Basel-based BIS is often referred to as the central banks’ central bank.
Established on 17 May 1930, the BIS is the world's oldest international financial organisation. The BIS currently has 60 member central banks, all of which are entitled to be represented and vote in the General Meetings.
Jaime Caruana has held the position of General Manager of the BIS since 2009. As the Bank's chief executive officer, he carries out the policy determined by the Board of Directors. From 2000 to 2006, Mr Caruana was the Governor of the Bank of Spain and, in that capacity, served on the Governing Council of the ECB.
In the aftermath of the financial crisis, many people have lost confidence in the economic system. During this time, the links between bank risks and sovereign risks have become much stronger. In the IMFS Distinguished Lecture on Tuesday, 28 January, Andreas Dombret, member of the Executive Board of the Deutsche Bundesbank took a closer look on how the lines between the public and the financial sector have faded and could be redrawn again. Due to implicit guarantees a close relationship between the state and the bank has evolved. The links between bank risks and sovereign risks have become much stronger in recent years, the central banker, who is in charge of Financial Stability and Risk Controlling, warned in his speech "The State as a Banker?". "Blurring the lines between the state and banks risks deforming our market economy and our thinking about it", he said.
According to Mr. Dombret the lines between the state and the banks can only be successfully redrawn if the state provides a framework in which the private sector can operate. Therefore, Mr Dombret emphasized the need to establish the Single Resolution Mechanism as a central pillar of the European banking union, implementing the bail-in principle as a rule as it is currently foreseen by the finance ministers of the EU. By this means, if banks incur losses in the future, shareholders and creditors will be first in line to bear these losses; taxpayers come last.
Five years after the Lehman insolvency, according to Mr Dombret the "too big to fail" problem could still damage the global financial system. In his opinion, only if the threat of failure was credible, it might encourage banks to behave prudently. In order to achieve this, a consistent legal framework across is required. "We need well-designed and credible bail-in procedures", Mr Dombret said in his speech referring to practicable bail-in procedures and higher capital buffers as two sides of the same coin. "The state is not a good banker and should not try to become a banker", the central banker said. The state should only take on this role in the most exceptional cases, if at all.
While the United States are recovering after the financial crisis and unemployment is decreasing despite low growth, the Eurozone has returned to a recession. Inflation is low on both sides of the Atlantic and monetary policy rates are close to zero. What are the monetary policy options for central bankers in these times to improve the economic situation?
On Tuesday, 21 May, James Bullard, President and CEO of the Federal Reserve Bank of St. Louis, held the IMFS Distinguished Lecture on invitation of the Institute for Monetary and Financial Stability (IMFS) and the U.S. Consulate General Frankfurt on "Monetary Policy Options in a Low-Rate Environment". The central banker argued in favor of quantitative easing (QE), which implies the purchase of government debt by central banks.
Bullard presented the different monetary policy measures that central bankers could use in a low rate environment: 1) Do nothing, keep the interest rate close to zero for an extended period of time and wait. This could lead to a mildly deflationary situation, warned Bullard. 2) Implement "forward guidance" by announcing future monetary policy measures, for example, maintaining the near zero rate even if the economy is recovering. According to the Fed member, this would also be problematic. The announcement would have to be perfectly credible to stimulate consumption and investment in the private sector. Otherwise no real effects could be expected. On the contrary, the promise could even send a pessimistic signal to the private sector that might interpret the central bank’s move as a reaction to a possible long-lasting depression. 3) Charge or rather "grant" negative interest rates on banks’ reserves or 4) do a twist operation: Exchange government debt with a short duration for debt with a longer duration. Bullard explained that these last two options were not very effective.
In Bullard’s view, the best policy option was quantitative easing: "Quantitative easing is closest to standard monetary policy, involves clear action and has been effective." The US central bank should therefore continue their quantitative easing program. Bond purchases should be adjusted to the economic performance and inflation rate.
For the Eurozone, Bullard recommended a GDP-weighted quantitative easing program: The European Central Bank (ECB) should buy government bonds of all Euro countries according to their share of Eurozone-GDP. In this way, it could counteract deflationary tendencies and, at the same time, calm down critics who reproach the ECB for buying government bonds to support highly indebted countries.
Due to the turbulent times that the euro area monetary policy was facing at the time, the Distinguished Lecture with Jörg Asmussen, Member of the ECB Board, originally planned for June 25, had to be rescheduled. Dramatic events preceded the new date in September: on September 6, the ECB presented its new bond purchasing program "Outright Monetary Transactions" (OMT) in which Jörg Asmussen had played a significant role. The German Constitutional Court had scheduled their decision on emergency petitions for the permanent "Euro rescue package" ESM for the day after the speech, and EU Commissioner Michel Barnier intended to present his plans for a European bank supervision authority.
It was thus not surprising that in his speech on "Stability Guardians and Crisis Managers: Central Banking in Times of Crisis and Beyond" Asmussen focused on the current events. As apparent in the title of the speech, he explicitly claimed for the ECB to have the role of the crisis manager and preserver of financial stability.
According to Asmussen, monetary policy is reaching its limits in terms of effectiveness and legitimacy. National governments should not mistake the ECB’s new OMT program for a substitution for structural reforms and fiscal consolidation. Asmussen emphasized the strict rules of the program. He explained that it was in accordance with the European law, especially with the ban on monetary government financing. Asmussen was convinced that the OMT program represented significant progress compared to the previous Securities Market Program.
Asmussen further emphasized the ECB’s willingness to play an active role in the European banking regulation. As a precondition he called for the separation of independent monetary policy and banking regulation controlled by parliaments or the judiciary. He also argued that the ECB should be given all required tools to play this new role effectively and efficiently.
Following the Q&A session with the audience, Asmussen answered questions from the media. He was asked how he would react to the upcoming decision of the German Constitutional Court and a potential ESM ban. Asmussen replied: "If that happens, I will be going on vacation."
The speech by Governor Chongsoo Kim, President of the Bank of Korea, was given in the grand environment of the Casino of Goethe University. A reception marked the beginning of the evening during which invited guests had the opportunity to try numerous Korean specialities and enjoy classical music performed by three Korean musicians.
After introductory remarks by Vice President Prof. Rainer Klump (Goethe University), Prof. Luise Hölscher (Ministry of Finance, State of Hessen), Dr. Lutz Raettig (City of Frankfurt), and Won-Jung Han (Consulate General of the Republic of Korea), Governor Kim gave an entertaining and interesting speech on "Out of the Great Recession: An EME's Perspective".
Governor Kim expressed concern about the alarming growth prospects in industrial countries and recalled the lessons from the international economic crisis in the 1930s. He blamed the high public debt of some European countries for the sluggish economic growth. He also warned against drastic austerity measures that could only exacerbate the recession in countries such as Spain and Italy. Instead, governments should find the courage to implement structural reforms, for example in labor markets. Monetary policy can only provide support to the extent that, through relevant policies, it may give the reforms time to be implemented.
Governor Kim harshly criticized the loose monetary policies of both the European Central Bank and the Federal Reserve. He contradicted ECB President Mario Draghi, who had denied negative effects of the ECB’s loose monetary policy on emerging markets. He emphasized, however, that current monetary policy leads to strong divergences of capital flows into emerging markets and thus exchange rate instabilities. In addition, he argued that the cheap money supplied by central banks was at least partly to blame for higher prices in commodity markets. Governor Kim called on the central banks of industrial countries to consider the effects of their policies on emerging countries. He advocated setting up an institution dedicated to the international coordination of monetary policies.
The Börsen-Zeitung summarized the event the next day stating, "Kim contradicts Draghi", arguing that Governor Kim had given his European colleagues a piece of his mind.
In his presentation on "Lessons From the Eurozone's Crisis" the Chief Economics Commentator of The Financial Times, Martin Wolf, discussed five questions: 1. How did the eurozone get where it is? 2. What is the challenge of adjustment? 3. How has the eurozone tackled its crisis? 4 How might the eurozone fix its problems? 5. What are German interests? His ample statements led to the conclusion, that the Eurozone now has a choice of which way to go or whether to break up. One possibility would be further moves to a fiscal union, with banks underpinned by a common treasury and substantial fiscal transfers to weak regions, which would surely require a single political process. Another – dreadful – possibility would be a move to full economic flexibility, with debt restructuring and national financial meltdowns.
At the Hessische Landesvertretung in Berlin Anders Borg, Minister of Finance, Sweden, gave a speech on "Ensuring Fiscal and Financial Stability in Europe - Lessons From Sweden". The Minister explained what he regarded as the essential parts of Sweden's fiscal policy framework, and what other countries can learn from Swedish experience. In the early 1990s, Sweden was in a position that has much in common with the situation in countries like Spain and Portugal today. Having public deficits of 11%, rise of unemployment from 3% to 10% and the risk premium against Germany was several percentage points. The interest rate even reached 500% for a while. The Swedish fiscal policy framework was among the weakest in the EU. The market lacked confidence both in the Swedish economy and in the ability of the political system to turn things around. So Sweden has previous experience of the situation that many EU countries find themselves in today.
Minister Borg pointed out the necessity, that Europe must make serious reforms to ensure fiscal and financial stability. This could be learned from Sweden by introducing a strong fiscal policy framework, ensure an effective budget procces, wherethe Ministry of Finance has a central role and by implementing necessary structural reforms.
A reception for all participants followed the lecture, a dinner with invited guests – and as a highlight the attendance of Staatssekretär Jörg Asmussen – marked the end of the event.
Masaaki Shirakawa, Governor of the Bank of Japan, focused his speech on the topic of "150 Years of Innovation and Challenges in Monetary Control." He pointed out four innovations, which have played an important role in monetary control and consequently in achieving economic stability: 1. The invention of central banks, 2. The invention of a "lender of last resort", 3. The invention of monetary policy, 4. The introduction of the concept of central bank independence. He pointed out that in the practical application of these innovations, constant adaptation to changes in the financial and economic environment is necessary. In terms of the existence of central banks, it is essential that central banks take policy actions in response to changes in the environment. International cooperation is necessary not only among central banks but also at various levels of government and in the private sector.
The lecture was embedded within the framework of "150 Jahre Freundschaft Deutschland – Japan", which was promoted by the Embassy of Japan in Germany. Welcome addresses to the Governor were given by Luise Hölscher, Staatssekretärin in the Hessian Ministery of Finances, Lutz Raettig, Stadtrat (City of Frankfurt), and Mr. Toyoei Shigeeda, Consul-General of Japan in Frankfurt.
A reception marked the end of the evening.
The global financial crisis has been the most severe financial and economic debacle since the Great Depression of the 1930s. Central banks, and governments played a key role in containing the impact of the crisis by preventing a global economic and financial meltdown. At the same time, the crisis – which, by the way, is not over yet – may have important implications for central banking. This is what Jürgen Stark, Member of the ECB's Executive Board, reflected in his lecture titled "Central Banking After the Financial Crisis".
Jürgen Stark emphasized that monetary policy should be focused on the goal of maintaining price stability over the medium term and central banks should be independent of governments. However, the crisis has revealed short-comings of the pre-crisis global monetary order. Insufficient medium-term orientation in the monetary policy frameworks led to too loose a monetary policy stance in many advanced economies and contributed in my view importantly to exacerbating pre-crisis financial excesses. Strengthening the medium-term orientation of monetary policy frameworks also requires a commensurate leaning-against-the-wind attitude in face of financial cycles, which can be achieved by giving money and credit aggregates a due place in the monetary policy strategy.
These insights need to be taken into account in the current considerations on the phasing out of non-standard measures. The risk of creating renewed financial imbalances and serious financial distortions by maintaining too loose a monetary stance for too long is considerable.
Finally, the fundamental achievement to establish credible price stability oriented monetary policy frameworks must not be put at risk. Central banks need to avoid the spreading of any doubt of their commitment to maintain price stability and their independence from political influence. In this respect, it is important to refrain from any kind of monetary financing. It is ultimately up to fiscal authorities to address the root causes of the current problems and take measures to credibly ensure fiscal sustainability.
In his presentation on "Lessons from the Financial Crisis in Iceland" the Governor of the Central Bank of Iceland treated the build-up of macroeconomic imbalances, the rise of the cross-border banks, the crisis and its management, and the policy responses. After having a look at the recession and the stabilisation and recovery he concluded with the lessons to be learned: It is essential to habe macroprudential regulation and supervision with central banks in the driving seats. Microprudential supervision should be moved closer to or back into central banks, especially in small open economies.
The Werner Report, which contains the first plan for the achievement of monetary union in Europe, was presented in October 1970. To celebrate this, and to reflect on the report and its relevance today, Prof. Dr. Hans Tietmeyer, former President of the Deutsche Bundesbank, gave a talk on "The Werner Report at 40".
Jean-Claude Trichet, President of the European Central Bank, who also accepted the invitation as a speaker at this event, attended the dinner following the lecture.