EU to cut price of cross-border euro payments

By Central Banking Newsdesk | News | 15 February 2019

Amended law will also give customers information on currency conversion charges

The cost of payments made in euros by parties in non-eurozone European Union countries will fall from December next year, after a vote by lawmakers.

The EU parliament voted on February 14 to amend the EU’s cross-border payments regulation in order to lower the cost of transactions made in euros between parties in different EU countries.

The parliament’s vote accepted proposals made in March 2018 by the European Commission, the EU’s permanent civil service. The EC said the amended regulation would “reduce the cost of intra-EU payments within the entire EU and unify the single retail payments market”.

Currently, payments made in euros from a party in an EU country that is not a member of the eurozone to a eurozone member are priced between €15 and €24 ($17–27), the EC said. These rules apply even when the amount being paid is less than the amount charged, it noted.

By contrast, payments made in euros by parties in two different eurozone countries are charged as if they were made within the country where the bank involved was based. Some banks charge nothing for making payments, while others charge a few cents, the EC noted.

Under the amended regulation, the EC said it expected the fee charged on a euro-denominated transaction from non-eurozone Bulgaria to eurozone member Finland to fall “from between €15 and €24 to about €1”.

Besides the UK, which is due to leave the EU on March 29, there are eight countries that are members of the bloc but which do not belong to the eurozone. These are Bulgaria, Croatia, the Czech Republic, Denmark, Hungary, Poland, Romania and Sweden.

The changes will come into effect from December 15, 2019. The EC said countries could also choose to apply the amended regulation to cross-border payments using EU currencies other than the euro.

Lawmakers also voted to accept the commission’s proposal to make currency conversion charges fully transparent for transactions that cross EU borders. The new law will set standardised transparency requirements for card-based transactions and credit transfers.

Travellers from one EU country to another are currently asked if they want to make transactions in their own currency, or the local currency, the EC noted. But they are not informed what either option will cost. Under the amended regulation, consumers will now have to be informed of the cost of the transaction in both the home and the domestic currency.

Egypt sharply cuts rates on lower inflation

By Central Banking Newsdesk | News | 15 February 2019

Central bank reduces key overnight deposit rate by 100 basis points to 15.75%

Central Bank of Egypt. Photo: Muhammad Mansour

The monetary policy committee of the Central Bank of Egypt sharply cut interest rates on February 14 due to the improved inflation outlook in the Arab economy.

Rate-setters reduced the three main rates by 100 basis points. The overnight deposit rate is now at 15.75%, the lending rate at 16.75%, and the main operation rate at 16.25%. “Incoming data continued to confirm the moderation of underlying inflationary pressures,” says the policy statement.

Headline year-on-year inflation was recorded at 12% in December 2018, below the 13% target of the central bank. Additionally, GDP growth accelerated to 5.3% in 2018, from 4.2% in 2017.

The committee argues the latest policy decision is consistent with its mid-term inflation objectives. By the fourth quarter of 2020, the Central Bank of Egypt aims to reduce inflation to 9%, plus or minus three percentage points.

The improved economic outlook has allowed the central bank to resume the loosening cycle it started last year. In February 2018, the committee reduced rates by 100bp, and it cut them again by 100bp more in March.

The Egyptian economy has suffered almost a decade of financial and political instability that forced rate-setters to sharply increase the deposit rate from 8.25% in 2014 to 18.75% in July 2017. In the wake of the Arab Spring in 2010–11, former long-time president Hosni Mubarak was ousted and elections organised. The Islamist candidate Mohamed Morsi won the May-June 2012 presidential poll.

Under Morsi’s watch, public spending rose to 34.6% of GDP in 2013 from 30.8% in 2012. Due to increased political violence, tourism plummeted, and with it a key source of hard currency. The budget deficit was recorded at 13% of GDP in 2013. In this unstable environment, international capital fled the country and the Egyptian pound progressively depreciated. As a result, in Morsi’s first year in office, inflation rose to 9.8% from 7.2% in 2012.

After weeks of increased tensions between Islamist pro-Morsi demonstrators and supporters of former president Mubarak, Morsi was ousted by a military coup in July 2013. The coup’s leader was the minister of defence, Abdel Fattah el-Sisi, who has led the country ever since.

IMF support

Due to the protracted economic imbalances, the Egyptian government sought international support. In November 2016, the executive board of the International Monetary Fund approved a three-year extended fund facility of SDR8.597 billion, or $12 billion.

On February 5, 2019, the IMF’s executive board gave a positive assessment of the macroeconomic outlook for the Egyptian economy, and completed the fourth review of the programme, transferring $2 billion. The EFF has already made available $10 billion to Egyptian authorities.

The fund supports the government’s plans to lift fuel subsidies in 2019, although it is likely to increase inflation in the short term. “Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits,” said David Lipton, the IMF’s first deputy managing director. “The recent pick-up in headline inflation reflected temporary increases in food and energy prices, but a restrictive monetary policy stance has helped to reverse the increase and keep core inflation well anchored.”

The IMF thinks the subsidies’ elimination will help to reduce the budget deficit and create fiscal space to finance social policies in health, education and infrastructure. Such measures could contribute to sustainable long-term growth.

“Egypt has made substantial progress as evident in the success achieved in macroeconomic stabilisation,” said Christine Lagarde, managing director of the IMF, on January 25. “Its growth rate is now among the highest in the region, the budget deficit is on a declining trajectory, and inflation is on track to reach the Central Bank of Egypt’s target by the end of 2019.”

Volcker rule helped curb equity market risk – researchers

By Central Banking Newsdesk | Research | 15 February 2019

Banks had large trading exposures to equity market risk before the rule was introduced, they find

The Volcker Rule helped curb US banks’ large exposure to equity market risk, a paper published by the Federal Reserve finds.

In the paper, Antonio Falato, Diana Iercosan and Filip Zikes evaluate whether trading increases or decreases systemic risk in the US banking sector. They do this by estimating the sensitivity of weekly bank trading net profits to a variety of risk factors.

“We find that US banks had large trading exposures to equity market risk before the introduction of the Volcker Rule in 2014, and that they curtailed these exposures afterwards,” the authors say.

In a counterfactual scenario test, the researchers find that before the Volcker rule was introduced, a 5% drop in equity market returns would have led to a loss of about 3% of the banking sector’s Common Equity Tier 1 (CET1). A 65% stock market drop, in line with Fed stress tests, would have led to an estimated loss of 20% of CET1, they add.

“The approach developed in this paper offers a first step toward assessing risk for the modern banking corporation,” the authors say.

The answers to the 2018 Central Banking Christmas quiz

By Central Banking staff | News | 15 February 2019

We reveal the answers to the Christmas quiz, and the winner

In previous years, Central Banking has produced an in-house Christmas quiz, to test our team’s knowledge of key events and other industry esoterica. But in 2018 we threw it open for the first time to readers.

The first tentative signs of spring are now appearing in the London air so we thought it was probably time to reveal the answers to the quiz, and the winner.

Lauri Jantunen of the Bank of Finland was one of only three people who got 23 right out of a possible 30, the highest score we received – his name was chosen at random from the three to win an iPad and a copy of the Central Bank Directory.

Jantunen says he finds Central Banking’s daily email updates provide a unique overview of the field of central banking. “Without these updates, I would have hard time keeping up with the latest developments in my field of work.”

You can catch up on our review of 2018 here. The answers to all the quiz questions are as follows:

1: Cyber security has become a great concern for central banks. Central Banking was contacted by a hacker in 2018 who claimed to have breached which central bank?

A: Central Bank of Bahamas

2: How many proofs of concept did the Bank of England complete in its Fintech Accelerator between June 2016 and June 2017?

A: 10

3: Which of the following financial institutions is causing the Federal Reserve a bit of a headache?

A: The Narrow Bank

4: According to Central Banking’s 2018 Survey, what percentage of central banks said they were working on a project involving Big Data?

A: 56%

5: In May 2018, the Bank of Mexico had its interbank payment system hacked. Initially the central bank said no money had been taken, but later it had to admit what amount had disappeared?

A: $15.2 million

6: Since seeking to remove unconscious bias from its recruitment process, the Bank of Canada has seen the percentage of women hired in the economic and financial sector specialism rise from:

A: 25% in 2014 to 50% in 2017

7: Luis Caputo resigned as governor of the Central Bank of Argentina on 25 September. On what day was he appointed?

A: June 15

8: The governor of which central bank stood down after 20 years in charge, telling Central Banking: “I can still recall the days when I took charge of compiling the balance-of-payment statistics and the real effective exchange rate index. These seemingly dull and mundane number-crunching tasks can become powerful tools in understanding the finer points of economic and financial issues.”

A: Taiwan

9: The governor of which African central bank told Central Banking: “We are currently experiencing a fourth industrial revolution, where it becomes crucial for institutions like the central bank to adapt to the changes by equipping itself with new capabilities. For this reason, we need to work to break walls between departments and build the right dynamics.”

A: Tunisia

10: The governor of which Caribbean central bank told Central Banking: “We are not a politicised institution. We need to further entrench that idea by taking our obligations seriously by putting a lot weight behind promoting financial literacy – which is low – and treat that as part of our mandate to communicate as a central bank. Central bank governors also need to be much more media savvy.”

A: Jamaica

11: The president of which Federal Reserve Bank told Central Banking: “The chair goes up to Capitol Hill on a regular basis and gets all kinds of comments from senators and representatives, so even if the president isn’t weighing in on things, certainly the Republican party is weighing in on things.”

A: St Louis

12: Which central banks have the biggest gold reserves as a percentage of foreign reserves?

A: US, Germany, Italy

13: Who was the Prime Minister of the United Kingdom when the Bank of England got its nickname, the “Old Lady of Threadneedle Street”?

A: William Pitt

14: “I knew that I would be accepted in the future only if I suppressed my will and yielded completely – even though it was wrong at law and morally – to his authority.” These are words of which Federal Reserve chairman?

A: Arthur Burns

15: Which former central bank governor famously likened monetary policy to conducting an orchestra?

A: Mervyn King

16: Which country was the first to print their banknotes with a vertical design?

A: Sri Lanka

17: What is the average growth rate of banknotes in the UK?

A: 5%

18: When is the Bank of Canada’s next inflation-targeting review scheduled for?

A: 2021

19: Which regulator constructed a stress test in 2018 that involved a 300-basis point steepening in the yield curve?

A: Federal Reserve

20: Can you match the central bank to its street? (One point for each correct answer!)

Federal Reserve Bank of New York

Liberty Street

Norges Bank


Bank of Spain


Central Bank of the Republic of Guinea

Boulevard du Commerce

Monetary Authority of Singapore

Shenton Way

Central Bank of Taiwan

Roosevelt Road

Reserve Bank of Australia

Martin Place

Bank of Botswana

Khama Crescent

Central Bank of the Bahamas

Frederick Street

Central Bank of Belize

Gabourel Lane

Bank of Ghana

Thorpe Road

People: Stanley Fischer joins BlackRock in advisory role

By Central Banking Newsdesk | News | 15 February 2019

Veteran central banker moves back to private sector; Jamaica begins search for new governor; El Salvador governor assumes presidency of regional council

Stanley Fischer

United States: Veteran central banker and academic Stanley Fischer has joined BlackRock as a senior adviser, the asset manager revealed in an internal memo on February 13.

Fischer will work within the BlackRock Investment Institute, an arm of the company that publishes research. In the memo, chief executive Larry Frank and vice-chair Philipp Hildebrand said Fischer will be a “key contributor” to the department’s research and dialogue with stakeholders. He also will support BlackRock’s investment academy.

Fischer most recently was vice-chair of the Federal Reserve, where he contributed to the central bank’s undoing of crisis-era policies. His final remarks at the central bank provide a hint to the wisdom he might take to the private sector.

“The watchwords of the central banker should be ‘Semper vigilans,’ because history and financial markets are masters of the art of surprise, and ‘never say never,’ because you will sometimes find yourself having to do things that you never thought you would,” he said in a speech in September 2017.

Before joining the Fed, the Zambian-born Israeli-American served as governor of the Bank of Israel from 2005–13. Fischer is recognised for playing a key role in the economy’s recovery after the 2008 financial crisis.

He may continue to work with the Bank of Israel in his new role, as the central bank is a long-term client of BlackRock. The asset manager provides asset management and analytical services to the central bank, and was recognised for its efforts in the 2018 Central Banking awards.

Prior to his policy-making roles, Fischer served as first deputy managing director of the International Monetary Fund and chief economist at the World Bank. He also held a vice-chair position at Citigroup from 2002–05, and was for a long time a professor at MIT, where he trained several economists who went on to be eminent central bankers.

Jamaica: The Bank of Jamaica has formally announced a search for a new governor to succeed Brian Wynter.

Wynter’s term is due to end in November this year, after being extended in 2017 for another two years. He was asked to stay on in order to advance specific reforms and play a role in reforming the Bank of Jamaica Act.

In a press release, minister of finance Nigel Clarke said: “[Wynter] has successfully achieved the goals agreed at that time. With these achievements and the expectation of timely parliamentary approval of the legislative amendments to modernise the Bank of Jamaica Act, it is time to shift to the next phase in the leadership and governance of the BoJ.”

In November, his tenure as chief of the central bank will have totalled 10 years.

The IMF’s David Marston, also formerly a BoJ official, will lead the committee tasked with finding Wynter’s replacement. The committee will then put forward a list of candidates to Clarke, who will recommend a final individual to the cabinet.

El Salvador: El Salvador central bank governor Oscar Cabrera will serve as president of the Central American Monetary Council, the central bank announced on February 7.

Cabrera will take over from Costa Rica governor Rodrigo Cubero and will hold the position for the calendar year.

The council is composed of the governors of the central banks in the region, including Guatemala, Honduras, Nicaragua and Dominican Republic, as well as Costa Rica and El Salvador. It serves as an institution promoting economic and financial stability, and takes steps to consolidate regional policies and agreements.

Weak EU banks more likely to prop up ‘zombie firms’, ECB paper says

By Central Banking Newsdesk | Research | 15 February 2019

EU needs insolvency reform to reduce proportion of uncompetitive firms, researchers argue

Productivity in the European Union is held back by weak banks propping up “zombie firms”, a working paper published by the European Central Bank finds.

In Breaking the shackles: zombie firms, weak banks and depressed restructuring in Europe, Dan Andrews and Filippos Petroulakis look at data from 11 European Union countries from 2001–14.

The authors link information on firms and banks from several large datasets, including the ECB’s survey on the access to finance for enterprises.

They present what they call a “multi-dimensional indicator of bank health”. This assesses banks’ strength based on their levels of equity, net income, non-performing loans, return on assets, maturity mismatch and asset riskiness. The authors also assess the numbers of non-financial companies that are “zombie firms”, defined as those that would typically fail in a competitive market.

The authors present four main empirical findings. Weak banks, they say, “are between 1.2 and 1.8 percentage points more likely of being connected with a zombie firm compared to healthy banks”. A country’s insolvency frameworks are very important in reducing the proportion of weak banks.

Industries where firms are more exposed to weak banks see much weaker productivity gains from capital reallocation, the authors say. The authors also find that more capital sunk in zombie firms is strongly associated with less available for healthy firms. This is likely due to “crowding out”, they argue.

African countries leveraging data for regtech

By Central Banking Newsdesk | Research | 15 February 2019

IMF paper shows countries are looking at how to use tech to streamline supervision processes

Sub-Saharan African countries are beginning to leverage regulatory data to improve their supervisory processes, according to a research paper published by the International Monetary Fund.

The paper, Fintech in Sub-Saharan African countries: a game changer?, notes the National Bank of Rwanda already uses an electronic data warehouse to automate and streamline reporting processes for the supervision of more than 600 financial institutions.

“Data can be automatically pulled every 24 hours or even every 15 minutes in the case of mobile money and money-transfer operators,” authors Amadou Sy, Rodolfo Maino, Alexander Massara, Hector Perez-Saiz, and Preya Sharma explain.

Several other countries have also developed regtech and suptech solutions. For instance, the Central Bank of Nigeria, in co-operation with the Nigeria Inter-Bank Settlement System, is developing a “data stack”.

The ‘stack’ will include a data warehouse and dashboards, allowing for risk-based and timely financial supervision. This approach, the authors say, could “inform new strategies such as financial inclusion policies and regulatory intervention”.

IMF prepares to overhaul its financial surveillance

By Daniel Hinge | News | 15 February 2019

Fund agrees with IEO report that there is much room for improvement, but budget is an issue


The International Monetary Fund is preparing to embark on a major overhaul of the way it conducts financial surveillance, after a report by the fund’s Independent Evaluation Office (IEO) highlighted considerable room for improvement.

The area is clearly a critical part of the IMF’s work, and gained in prominence in the wake of the 2008 financial crisis. But the fund still struggles to ensure the quality of its financial work is on a par with its macroeconomics, and to make matters worse, its budget has been flat in real terms for a decade, despite the array of new demands on its resources.

The IEO report finds much to like about the IMF’s financial surveillance, saying efforts since 2008 have delivered a “substantial upgrade” of its work. An important initiative was a post-crisis redesign of the financial sector assessment programme (FSAP), which led to mandatory surveillance of financial stability conducted roughly every five years at 29 jurisdictions deemed systemically important.

The “mandatory” part is significant – a country that notably declined to undergo an FSAP before 2008 was the US.

Shortage of expertise

However, the IEO says financial surveillance has been “uneven”, while integration with the yearly macroeconomic Article IV consultations has been limited. The IMF could be more involved with multilateral surveillance, it adds. Furthermore, the fund struggles to train and retain enough financial economists, and their rarity makes them highly expensive.

“Financial economists are key to identifying an evolving crisis or problems in financial stability. That moves too fast for the 5–10 year periodicity of an FSAP,” Ruben Lamdany, IEO deputy director and the report’s lead author, tells Central Banking.

“So you need to bring them to an Article IV, but the fund does not have enough such economists, and within the current budget envelope it would be difficult to increase their numbers significantly in the next couple of years.”

The fund is slowly building up its financial expertise, and financial economics is being taken more seriously across the whole discipline, so Lamdany says the problem should ease in the future. But the process is taking time, and the IEO says resources could be better allocated in the meantime.

FSAPs have become more costly over the years but the fund has not diverted additional resources their way. There is now a greater focus on larger countries, which are more complex to assess, and teams are given more time to prepare, which adds to the already large labour costs. As such, the number undertaken each year has fallen.

The IEO suggests the fund could be more risk-based when choosing the countries to survey, which could allow it to intervene if it sees trouble brewing outside the systemic 29. At the same time, a core of countries – the IEO recommends the top five most systemic – could still be subjected to mandatory scrutiny on a five-year cycle.

Macrofinancial links

The report proposes FSAP teams could create a framework of key risk factors for each country, with attendant metrics for tracking them, which could then be used by Article IV teams to monitor important financial developments. The “fungible macroeconomists” that form the rank and file of Article IV missions are not necessarily comfortable with complex financial issues, but the frameworks would provide an easy-to-read roadmap.

In a similar vein, the IMF’s lead financial economist, Tobias Adrian, who has headed up the monetary and capital markets department since January 2017, has helped develop a metric called “growth at risk”.

GAR measures how much growth could be lost if financial trouble emerges, highlighting a clear intersection between the financial and the macroeconomic spheres. The measure is already a fixture of the IMF’s global financial stability reports, and teams are preparing to test it in the field.

The IEO urges the fund to press ahead with similar research: “While the IMF cannot be expected to be at the cutting edge on all issues, it should expand research on issues within its comparative advantage, particularly on models to analyse macrofinancial linkages and cross-border spillovers and tools to identify and assess vulnerabilities and risks.”

Global reach

Though the IEO stresses the IMF should “respect” the lead role played by standard-setting bodies in developing global regulation, it also says the fund could be more involved – resources permitting. The IMF has expertise in judging the quality of reform implementation at the country level, and could also offer important insights into global transmission channels.

A more radical idea the IEO puts on the table is for the IMF, in conjunction with institutions such as the Bank for International Settlements, to develop a global liquidity stress test.

While many countries conduct domestic stress tests, there is currently no systematic approach to assessing the vulnerability of the global system as a whole, says Lamdany. He acknowledges there are big practical challenges to developing such a thing, but explains the IEO’s independence lets it raise ideas that others might find difficult to propose.

“Our goal was to seed the idea of setting an institutional framework for these tests to be conducted in a regular and systematic fashion – to get the discussion going because it would require time and a lot of institutional changes,” he says.


The IMF and its membership has broadly welcomed the IEO report, and fund directors have promised to take key aspects of it forward. But they have also challenged some of the conclusions.

In a statement, IMF managing director Christine Lagarde said she “welcomed” the IEO analysis overall. “The report recognises the substantial upgrade the fund has made in its financial surveillance work since the Global Financial Crisis and offers valuable and constructive insights on how to further improve its quality and impact. Accordingly, I broadly support the IEO’s recommendations to make IMF financial surveillance more effective.”

Lagarde pointed out that the fund was already undertaking a “comprehensive review” of its surveillance, which will give it opportunities to work on the IEO recommendations.

She backed the idea of improving macrofinancial analysis in Article IV programmes, and said she “broadly” supports the idea of deepening collaboration with international partners. She called the idea of a global stress test “interesting”, but said she thought it might not be feasible. She agreed with the need to consider ways of improving talent management.

More controversial is the budget. The IMF board voted to reallocate resources towards financial surveillance at a recent meeting, in line with the IEO’s recommendation. However, only a small minority of board members supported an overall increase in the budget, meaning the fund’s management will have to engage in a “a difficult process of re-prioritisation”, says Lamdany.

The question of how many countries should face a mandatory FSAP is also contentious. Lagarde said she “broadly” concurred with the proposal to review the number, but said it needed to be done with “evenhandedness” and in a transparent way, while being wary of accidentally sending negative signals by choosing to target particular countries.

Some IMF members are sceptical of the plan to cut mandatory FSAPs down as far as just five countries. They note FSAPs are useful not just for helping domestic authorities to improve, but also for supervisors to understand risks posed by counterparties overseas. Having a reasonably high number of mandatory assessments helps provide clarity across important jurisdictions.

Overall, Lamdany is optimistic that the IEO’s review will influence the way the fund operates, though it may take some time. “Our experience with past evaluations indicates that IEO recommendations are taken seriously and that with some lag have an important impact on the IMF,” he says.

PBoC issues 20 billion yuan of central bank bills in Hong Kong

By Alice Shen | News | 15 February 2019

Bills could help improve the yuan-denominated bond yield curve

Hong Kong

China’s central bank sold 20 million yuan ($3 billion) of bills using the Hong Kong Monetary Authority’s bond tendering platform on February 13, with rates significantly lower than those of its last offshore issuance, a sign of ample yuan liquidity.

The People’s Bank of China (PBoC) sold 10 billion yuan of three-month bills at 2.45% and 10 billion yuan of one-year bills at 2.8%, according to a statement on the central bank’s website. The rates were notably lower than the 3.79% and 4.2% for the central bank bills it issued in Hong Kong last October.

The lower coupon rates reflect comfortable liquidity in the offshore yuan market in Hong Kong – the result of a series of monetary easing policies implemented by the PBoC in the past few months, according to one economist. Meanwhile, renminbi-denominated debt instruments of shorter tenors, such as the PBoC bills, could help improve the yield curve in the offshore market, as Chinese government bonds have longer tenors.

Yield curve

The major goal of the PBoC’s offshore central bank bills is to complete a renminbi-denominated bond yield curve, Zhou Hao, senior emerging markets economist at Commerzbank, tells Central Banking.

“China’s government bonds usually have longer terms to maturity, such as one year, three years, five years, seven years or longer,” says Zhou. “Issuing bills with a three-month tenor could help complete the yield curve.”

Meanwhile, bills sold by the Chinese central bank could help boost the shrinking market for Dim Sum bonds – debt securities issued outside of China but denominated in renminbi, rather than the local currency.

“Without bills from issuers with high credit ratings such as the PBoC, the already struggling Dim Sum bond market could shrink further and disappear,” Zhou adds.

Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), has said the central bank bills with shorter tenors would help satisfy demand for high-quality and liquid renminbi assets in offshore market.

“All along there has been strong demand for high-quality and liquid renminbi assets in the offshore market,” Chan said after the PBoC’s first bond issuance in Hong Kong last October. “Following the annual issuance of sovereign bonds by the Ministry of Finance [of China], PBoC bills may further satisfy demand in this aspect, especially the demand for debt instruments of a shorter tenor.”

The PBoC issued its first batch of central bank bills in Hong Kong using the HKMA’s bond tendering platform, the Central Moneymarket Unit, in October 2018. It sold 20 billion yuan in total, according to the PBoC.

Defending the yuan offshore

The central bank’s first bond issuance in Hong Kong occurred when the renminbi was depreciating against the US dollar and the exchange rate of USD/CNY was approaching 7, a crucial psychological threshold for investors.

According to Ma Jun, an adviser to the PBoC and head of research with the National Institute of Financial Research of Tsinghua University, the central bank could use its bills issued in Hong Kong to manage offshore yuan liquidity and stabilise exchange rates.

“China’s central bank bills issued in Hong Kong could help maintain renminbi exchange rates at reasonable levels,” Ma told China’s state news agency Xinhua after the first such issuance last October.

Central bank bills are one of several tools in the PBoC’s monetary policy toolbox, alongside repurchase operations and reserve requirements. The PBoC sold its first central bank bills in mainland China in 2004.

It conducted an operation in offshore markets for the first time with a 5 billion yuan bond sale in London in 2015, as a result of the seventh UK-China Economic and Financial Dialogue.

“With the offshore bills, the PBoC can reduce or increase the cost of borrowing in renminbi, thus sending signals to the market that the central bank is capable of defending the yuan and defeating the short,” said Commerzbank’s Zhou.

MAS establishes long-term corporate governance committee

By Central Banking Newsdesk | News | 14 February 2019

New body will replace short-term councils formed every few years

Monetary Authority of Singapore

The Monetary Authority of Singapore has established a corporate governance advisory committee to raise standards in the financial sector, it announced on February 12. 

The Corporate Governance Advisory Committee has been set up to “uphold Singapore’s reputation as a trusted international financial centre”, the MAS said in a statement.

The new body was set up after recommendations made by the Corporate Governance Council in 2018, which called for improving standards over the long term. The council was dissolved on the publication of its final recommendations in August.

Corporate governance in Singapore has traditionally been cross-governed by multiple authorities, including the central bank and a number of short-term councils formed every few years. 

According to Singaporean publication The Business Times, a committee member and academic Mak Yuen Teen, said, “it’s good to have a permanent committee looking at corporate governance on an ongoing basis, rather than having a new council formed every few years”.

The committee is being chaired by Bobby Chin, director of Singapore Telecommunications. In a statement, Chin said: “The effectiveness of the code of corporate governance will require sustained commitment in both substance and form by companies and stakeholders.” The members of the first committee were announced on February 12.

But not all are happy with the makeup of the committee. Stefanie Yuen Thio, a managing partner at TSMP Law Corporation, who served on the dissolved council, said she would like to see “greater representation” given to “international players”, according to The Business Times.

Jamie Allen, secretary-general of the Asian Corporate Governance Association, said it was “disappointing to see so few investors” on the committee, according to the newspaper.