What is a macroprudential tool and what’s not?
Officials around the world agree that macroprudential policy is an important tool for safeguarding the stability of their financial systems. But there is less consensus on what does and doesn’t count as a macroprudential policy tool.
In an effort to provide some much needed clarity, then, the Financial Stability Board, Basel Committee and International Monetary Fund have today released a guide.
But their reading of what doesn’t count is contentious. Read more
Should the troika have ‘gambled for redemption’?
The FT’s Peter Spiegel reports today of a standoff between the ECB and the IMF over how swingeing the next round of Greek cuts should be.
Part of the reason for the delay is a standoff between two of the members of the troika – the IMF and ECB – over whether Greece can keep paying its debts without taking more stringent austerity measures. The ECB has taken a tougher line, while the IMF has urged more leniency.
Which is right? According to a paper to be presented at a St Louis Fed conference tomorrow, the ECB is when it comes to Greece. But the case is far less clear cut on whether the troika should push for such harsh cuts elsewhere. Read more
The week ahead in central banking
Our week ahead email will help you to track the most important events in the central banking world. To see all of our emails and alerts visit www.ft.com/nbe
The majority of the world’s central bank governors and finance ministers are in Washington, DC this weekend for the IMF/ World Bank Annual Meetings.
Will there be any more policy coordination following the G-20 communiqué released late Thursday? Read more
The week ahead in central banking
Our new week ahead email will help you to track the most important events in the central banking world. To see all of our email and alerts visit www.ft.com/nbe
Both of next week’s key events are on Monday. Read more
Lagarde: fiscal, not Fed, policy needed for jobs
Christine Lagarde. Image by Getty.
The Federal Reserve is too often seen as a panacea for the US’s economic ills. This no doubt owes much to its dual mandate to both maintain price stability and promote employment, despite there being little monetary policy can do to influence structural unemployment.
And so Christine Lagarde’s comments today that there has been a rise in structural unemployment in the US – and that, by implication, fiscal policy should shoulder more of the burden for creating jobs – is to be welcomed. Read more
IMF to EU: raise capital above Basel III levels
The European Union today became the first jurisdiction to unveil proposals on how it intends to beef up its banks’ capital and liquidity buffers.
In terms of capital, the measures put European banks in line with Basel III in requiring them to hold common equity tier 1 capital of 4.5 per cent and total tier 1 capital of 6 per cent, up from 2 per cent and 4 per cent under the current regulatory regime.
That means the continent’s banks must raise a whopping €460bn in capital by 2019. Either that or shrink their balance sheets and shed risky assets.
But hold the applause. According to the IMF, this might not be enough. Read more
The IMF managing directorship: a French monopoly
France’s tendency to hog the IMF managing directorship is well known. But (as this post by Chris Giles shows) the extent to which it has done so is staggering.
If Christine Lagarde was to complete her five-year term, then French nationals will have served as the Fund’s managing director for 41 years. By 2016, the Fund will be celebrating its 70th birthday, meaning that one out of a total of 187 members would have held the managing directorship for a whopping 59 per cent of the time. Read more
Christine Lagarde, France’s finance minister, launched her campaign to become the next managing director of the International Monetary Fund on Wednesday. Read more
Spring meetings: weird British parochialism
British politics is in a bit of a tizz this morning about whether David Cameron will block Gordon Brown, his predecessor as PM, as the next managing director of the International Monetary Fund. Mr Cameron had a good line about it on the radio this morning:
“It does seem to me that, if you have someone who didn’t think we had a debt problem in the UK, when we self-evidently do, they might not be the best person to work out whether other countries around the world have a debt and deficit problem”
The thing is, apart from British journalists, no one else was talking about Mr Brown as the next MD of the Fund at all. Read more
Spring meetings: Has the IMF gone soft?
Although the IMF is super-orthodox and Anglo Saxon, when it comes to advanced economy monetary policy, even with a French managing director and chief economist, there are some signs of a softer IMF this spring.
Capital controls
Most attention has focused on capital controls, on which the Fund has issued its first ever guidelines on their use. This is seen as the IMF giving ground to countries, such as China, seeking to build foreign exchange reserves for currency management rather than expose itself to volatile capital inflows. This is a misreading of the IMF’s intentions.
The Fund could not have been clearer that capital controls are only a valid part of the macroeconomic toolkit if a country’s currency is not undervalued, it has sufficient foreign exchange reserves and it is unable to use monetary or fiscal policy. Only one - foreign exchange reserves – of these three criteria apply to China.
In contrast, in the World Economic Outlook, the Fund complains repeatedly about China’s exchange rate Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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