BIS Quarterly Review, September 2017

17 September 2017

The BIS Quarterly Review for September 2017: Strong outlook with low inflation spurs risk-taking

Remarks by Mr Claudio Borio, Head of the Monetary and Economic Department, and Mr Hyun Song Shin, Economic Adviser & Head of Research, at the media briefing on 15 September 2017.

International banking and financial market developments

Strong outlook with low inflation spurs risk-taking
Monetary policy came sharply back into focus in global financial markets. In late June, market participants interpreted speeches by the ECB President and the Bank of England Governor as possible signs of the beginning of a broader-based tightening in major advanced economies other than the United States. Long-run government bond yields jumped. However, they soon softened in response to weak inflation data and central bank statements that investors perceived as having a more dovish tone. Moreover, low realised inflation led markets to ... More...
Highlights of global financial flows
International bank claims continued to grow in the first quarter of 2017, led by 2.8% year-on-year growth of claims on the non-bank sector. Year-on-year growth in interbank claims turned positive for the first time since the first quarter of 2015. The stock of international debt securities grew by 4.1% year on year in the second quarter of 2017, led by increased net issuance from the non-bank sector. Growth in euro-denominated credit to the non-financial sector outside the euro area picked up, led by a 12.3% rise in bank loans in the year to ... More...

Statistical initiatives

Recent enhancements to the BIS statistics
The BIS regularly seeks to enhance its statistical offerings to support monetary and financial stability analysis, in close coordination with central banks and other national authorities and international organisations. The exposure of economies to foreign currency risk is one potential source of vulnerability that has received increased attention in recent years, and the relevant data gaps are being addressed in the second phase of the Data Gaps Initiative (DGI) endorsed by the G20 (BIS-FSB-IMF (2015), FSB-IMF (2017)). Concurrently with this issue of the Quarterly Review, the BIS is expanding the data it publishes on exchange rates, on the currency composition of cross-border positions and on ... More...

Special features

FX swaps and forwards: missing global debt?
What would balance sheets look like if the borrowing through FX swaps and forwards were recorded on-balance sheet, as the functionally equivalent repo debt is? We combine various data sources to estimate the size, distribution and use of this "missing" debt and to begin to assess its implications for financial stability. A key finding is that non-banks outside the United States owe large sums of dollars off-balance sheet through these instruments. The total is of a size similar to, and probably exceeding, the $10.7 trillion of on-balance sheet dollar debt. Even when this debt is used to ... More...
Central bank cryptocurrencies
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC - retail and wholesale - and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with ... More...
What are the effects of macroprudential policies on macroeconomic performance?
Macroprudential policies are designed to make financial crises less likely or less severe. At the same time, they might also curb output growth by affecting credit supply and investment. Using data for a panel of 64 advanced and emerging market economies, this special feature investigates empirically the effects of macroprudential policies on long-run economic performance. We find that countries that more frequently use macroprudential tools, other things being equal, experience stronger and less volatile GDP growth. These effects are influenced by each economy's openness and financial development. Finally, we find that ... More...
Green bond finance and certification
Financing of investments through green bonds has grown rapidly in recent years. But definitions of what makes a bond "green" vary. Various certification mechanisms have evolved to allow more granularity as well as continuity in assessment. Green bonds have been priced at issuance at a premium on average relative to conventional bonds, but their performance in the secondary market over time has been similar. A relatively large share of green bonds are in sectors subject to environmentally related credit risks. More consistent green bond standards across jurisdictions could help to ... More...

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