Jiří Rusnok: Basel Consultative Group Meeting - welcome speech Welcome speech by Mr Jiří Rusnok, Governor of the Czech National Bank, at the Basel Consultative Group Meeting, Topic "Regulatory Treatment of Sovereign Exposures - Survey of Recommendations", Czech National Bank and Bank for International Settlements, Prague, 4 October 2016. * * * Dear Basel Consultative Group members, Dear experts from all around the world, Dear ladies and gentlemen, Let me warmly welcome you to the Czech National Bank (CNB). We are proud to host the expert meeting on the Basel regulatory reform and its design, using the perspective of emerging markets and developing countries. In the wake of the recent global financial crisis, the Basel Committee on Banking Supervision (BCBS) is making reform steps towards more healthy, stable, and resilient banks and financial systems. The latest Basel reform includes more and better bank capital, leverage and liquidity requirements, as well as macro-prudential measures, ranging from G-SIB surcharges to countercyclical capital buffers. The reform effort is successfully underway and new standards are gradually being implemented worldwide, covering advanced as well as emerging markets and developing countries. When designing further details of the regulatory reform, we have to pay special attention to differences in financial systems among countries and regions. Namely, financial systems in emerging markets and developing countries are often shallower and less liquid than in advanced economies. Therefore, emerging market countries can hardly take over all regulatory measures without modifications.

The Eurosystem is primarily targeting market participants with market-making obligations and is monitoring the securities lending activities closely so as to ensure the ongoing effectiveness of the arrangements. In September 2017, securities on average worth € billion were lent out by the Eurosystem, of which around € billion were lent out against cash as collateral. For further 9 / 10  BIS central bankers' speeches  details please see the section Securities lending. 8 See Corradin, S. and A. Maddaloni (2017), “The importance of being special: repo markets during the crisis”,  ECB Working Paper No 2065. The authors study the case of ECB SMP purchases of Italian sovereign bonds in the second half of 2011. The SMP portfolio was strictly buy-to-hold and purchased securities were not lent out. 9 See D’Amico, S., R. Fan and Y. Kitsul (2014), “The scarcity value of Treasury collateral: Repo market effects of  security-specific supply and demand factors”, Finance and Economics Discussion Series Paper No 2014-60; and Jordan, B.D. and S.D. Jordan (1997), “Special Repo Rates: An Empirical Analysis ”, The Journal of Finance, Vol. 52(5), pp. 2051-2072. 10 See Cœuré, B. (2017), “Bond scarcity and the ECB’s asset purchase programme”, speech at the Club de  Gestion Financière d’Associés en Finance, Paris, 3 April. 11 One should note here the difference between the development of repo funds rate and the average specialness  premia after our decision to also accept cash as collateral in securities lending. While the former stabilised, the latter continued to increase.