t t mboweni : monetary policy and south african bond market developments address by mr t t mboweni, governor of the south african reserve bank, at the south african bond market conference organised by the debt issuers association, johannesburg, 5 october 2006. * * * honoured guests ladies and gentlemen 1. introduction thank you for giving me the opportunity to open this conference on the south african bond market. there are several reasons for developing debt markets. the most fundamental reason is to make financial markets more complete by generating market interest rates that reflect the opportunity cost of funds at each maturity. this is essential for efficient investment and financing decisions. if bond markets do not exist, firms may have to finance the acquisition of long - term assets by short - term debt, and investment policies may be biased in favour of short - term projects. furthermore, debt markets can help the operation of monetary policy as prices in the long - term bond market give valuable information about expectations of likely macroeconomic developments and about market reactions to monetary policy moves. in my opening remarks today i will touch briefly on monetary policy and bond market issues. 2. monetary policy developments as you are all no doubt aware, monetary policy does not determine bond market yields. nevertheless, monetary policy and the bond markets do impact on each other in important ways. expected monetary policy developments are reflected in bond yields and we, in turn, get a lot of information from the bond market about market expectations concerning future monetary policy, inflation and growth. more recently, the development of the inflation - linked bond market has provided us with further insights into longer - term inflation expectations in the market. not surprisingly, the change in the monetary policy stance in recent months has been felt in the local bond markets. the repo rate had been unchanged for 14 months, but in june of this year, the monetary policy committee decided to raise the repo rate by 50 basis points, and this was followed by a further increase of the same amount in august. although capital market rates reflect expectations, these expectations are not always correct. at the time of the first increase, these changes were not fully reflected in bond yields, but we have seen a significant adjustment since then. although our actions took many by surprise, for some time we had been sounding warnings that we perceived the risks to inflation to be on the upside. our warning remains the same today, as we still see significant upside risk to the inflation outlook. our major concern remains the growth of household consumer demand which grew at an

yannis stournaras : financial stability, macroprudential regulation and microprudential supervision welcome address by mr yannis stournaras, governor of the bank of greece, at the 1st annual workshop of escb research cluster 3 “ financial stability, macroprudential regulation and microprudential supervision ”, athens, 2 november 2017. * * * it is with great pleasure that i would like to welcome you to this first workshop of the escb research cluster looking at issues related to financial stability, macroprudential regulation and microprudential supervision. since 2008, the global financial crisis and the european sovereign debt crisis have had profound implications for how central banks think about financial stability and the toolkits which are employed in its defense. in the past, emphasis was placed on supervising individual institutions – so - called microprudential supervision. the most obvious example of such supervision is that of capital adequacy regulations which are harmonised across countries and have through the years become ever more complex. however, discussions about how much capital banks should hold and what counts as capital are still the subject of on - going research. moreover, other supervisory tools are being examined such as rules surrounding bank leverage and liquidity. perhaps, however, the most important challenge facing european banks is that of nonperforming loans. there are two broad areas where research is needed. first, how do we deal with the legacy npls, those that built up during the crisis? questions which arise include : what is the best way to reduce npls quickly? to what extent are there issues of strategic default? what institutional reforms are required in the wider economy to facilitate the smooth work - out of npes? what are the implications for financial conditions of npes and the smooth transmission of monetary policy? the second broad area is how we treat new npls going forward. here i consider it important to have some research input to issues such as appropriate provisioning policies and balancing the need for provisions whilst at the same time not interfering too much with banks ’ ability to do their job, namely, oiling the wheels of the real economy. in addition to microprudential supervision, we can now add macroprudential regulation. this type of regulation focuses on the stability of the financial system as a whole. tools are used to try to understand the build - up of systemic risk in order to provide early warnings and prevent systemic crises. interlinkages between financial institutions are mapped