ignazio visco : financial stability implications of the pandemic welcome address by mr ignazio visco, governor of the bank of italy, at the 2nd bank of italy and bocconi university – baffi carefin conference “ financial stability and regulation ”, rome, 22 october 2020. * * * it is a pleasure for me to open the second conference on “ financial stability and regulation ” organised by banca d ’ italia and the baffi centre for applied research on international markets, banking, finance and regulation. this event could not take place in march in rome as we had all wished. but it is taking place today with its original programme, albeit in a virtual format. i want to thank the organisers at bocconi and at the bank for their efforts, the contributors to the five sessions, and the keynote speakers. the papers that will be presented today and tomorrow will cover financial stability and regulatory issues that have been hotly debated over recent years. the keynote lectures will address forward - looking issues on the implications of fintech competition on payment systems, the determinants of the low price - to - book ratios observed in the banking sector, and the challenges to central banking and financial stability created by climate change. in these brief remarks i will focus on the financial stability implications of the outbreak of the current pandemic. this is of course a topic not explicitly covered in the sessions of this conference. last november, when the call for papers was closed, nobody could have anticipated the events that would then unfold. but this does not mean that the discussions that will take place during this event will have no relevance to current financial and policy developments. on the contrary, many of the topics that will be covered in this conference – like the pro - cyclicality of loan loss provisioning requirements, the challenges associated with the rapid adoption of new technologies in the banking sector, the effects of bank dividend pay - out policies, or the implications of rising corporate solvency risk on banks ’ balance sheets – have been and will continue to be at the heart of the debate on the policy response to the covid - 19 crisis in the coming months. the spread of the covid - 19 disease and the necessary lockdown and social distancing measures adopted to contain it have triggered a contraction of the global economy of unparalleled magnitude. the reaction to the uncertainty and risks surrounding the initial stages of the covid - 19 outbreak led to serious liquidity strains in

january 20, 2017 bank of japan monetary policy divergence and global financial stability : from the perspective of demand and supply of safe assets speech at a meeting hosted by the international bankers association of japan hiroshi nakaso deputy governor of the bank of japan i. introduction in february 2008, the financial times ran an article describing the bank of japan as " fortress japan. " the article noted that the bank was functioning as a fortress for japan, shielding the japanese financial system from the turmoil in the global financial markets triggered by problems in the u. s. subprime mortgage loan market. as you know, the bank ′ s objective of maintaining financial system stability is as important as that of maintaining price stability. in order to fulfill this responsibility, not only is it important to uphold a microprudential perspective, which aims to understand the risks faced by individual financial institutions and encourages management responses thereto, but it also is important to formulate and implement policies from a macroprudential perspective, which aims to analyze and evaluate risks to the financial system as a whole. following the recent global financial crisis, the financial landscape is radically changing, with u. s. and european banks shrinking their balance sheets and non - banks, such as investment funds, increasing their significance. at the same time, in the sphere of monetary policy, we are now experiencing monetary policy divergence, where interest rates have been kept low for long periods in both japan and europe but the united states is entering a rate increase cycle. in order to maintain financial system stability in such a changing global financial environment, it is necessary to ensure that there are no hidden vulnerabilities from both the microprudential and macroprudential perspectives. today, i would like to approach this issue through the looking glass of the demand and supply of safe assets. ii. three facts regarding global financial intermediation by banks before going into my main thesis, let me point out three facts regarding global financial intermediation by banks. first of all, there is a close connection between fluctuations in banks'cross - border claims and global economic activity. looking at banks'cross - border claims by destination, financial cycles have engulfed one region after another ( chart 1 ). in the early 1980s, there was the debt crisis centered on latin america. later in the decade, we saw the bubble economy in japan. in the late 1990s, we had the asian currency crisis, and the 2000s started with a credit bubble in the united states and europe