news on monetary and financial developments

Transcription

Third Quarter 2006
Vol. 20, No. 3, (July - September 2006)
ISSN 01270664 PP 4090/4/2007
SEACEN Newsletter
http://www.seacen.org
The Bank of Mongolia
The Bank of Korea
Nepal Rastra Bank
The Central Bank of China, Taipei
Central Bank off Myanmar
Mya
M
yanma
ya
anmar
an
ma
State Bank
Sta
ank
nk of Vietnam
Vietn
Vieetn
V
Bank
B
ank
a
k off T
Thailand
Central Bank of Sri Lanka
Bangko Sentral ng Pilipinas
tion
onal Bank
k of Cambodia
Cambodi
Bank Negara Malaysia
Ministry of Finance, Brunei Darussalam
Monetary Authority of Singapore
Bank
Ba
B
ank Indonesia
ank
IIndon
In
Ind
ndon
nesi
Bank of Papua New Guinea
Reserve Bank of Fiji
SEACEN Newsletter
3rd Quarter 2006, Vol. 20, No. 3
MESSAGE FROM THE EXECUTIVE DIRECTOR
The highlight of SEACEN news for this issue of the Newsletter
must be the accession of the State Bank of Vietnam (SBV) as the 16th
SEACEN member. Having been observer to the SEACEN Governors’
Conference since 1986, the SBV has been actively participating in SEACEN
training activities. On behalf of the SEACEN Centre, I wish to welcome
Governor Le Duc Thuy to the SEACEN Board of Governors, and Deputy
Governor Mr. Phung Khac Ke, to the SEACEN Executive Committee.
Turning to SEACEN activities, the spotlight is on the 2nd SEACEN/
ABAC/ABA/PECC Public-Private Dialogue on Implementation of Basel
II, which signifies our efforts to enhance better cooperation between central
banks and commercial banks on implementation of Basel II and developments
in regional banking and supervision. Likewise, the major findings of our research project on Housing and Mortgage
Markets are featured for the benefits of policy makers and market participants.
On a personal note in my first message, allow me to thank all liaison
officers from SEACEN member banks/monetary authorities for your valuable
contributions to our Newsletter. Without your kind assistance, the SEACEN
Newsletter will not have seen the light of day.
Dr. A. G. Karunasena
Executive Director
The SEACEN Centre
Mr. Wilson Kamit CBE
Mr. Dae Bong Kang
Governor, Bank of Papua New Guinea
The Bank of Korea
Mr. Amando M. Tetangco, Jr.
Mr. Ismail Alowi
Governor, Bangko Sentral ng Pilipinas
Mr. Heng Swee Keat
Mr. Chingunjav Amarsanaa
SEACEN BOARD OF GOVERNORS
(as of 30 September 2006)
Managing Director,
The Bank of Mongolia
Dato Paduka Haji Ali bin Apong
Mr. Ajith Nivard Cabraal
Permanent Secretary,
Governor, Central Bank of Sri Lanka
Mr. Fai-Nan Perng
Dr. Chea Chanto
Governor, The Central Bank of China, Taipei
Governor, National Bank of Cambodia
M.R. Pridiyathorn Devakula
Mr. Savenaca Narube
Governor, Bank of Thailand
Governor, Reserve Bank of Fiji
Mr. Le Duc Thuy
The SEACEN Newsletter is published
quarterly by the SEACEN Centre
Lorong Universiti A, 59100 Kuala Lumpur, Malaysia
Tel: 03-79585600 Fax: 03-79574616
Chief Editor: Mrs. Kanaengnid Tantigate-Quah
Editors:
Mrs. Wong Yoke Mei; Ms. Seow Yun Yee
Mr. Zamri Abu Bakar
Mr. Burhanuddin Abdullah
Governor, Bank Indonesia
Mr. Lee Seong-tae
State Bank of Vietnam
Central Bank of Myanmar
Mr. Shaligram Dahal
Nepal Rastra Bank
Mrs. Diury Tolopa
Bank of Papua New Guinea
Mr. Diwa C. Guinigundo
Mr. Leong Sing Cheong
LIAISON OFFICERS
Governor, The Bank of Korea
Dr. Zeti Akhtar Aziz
Daw Ommar Sein
Haji Mahadi Ibrahim
Mrs. C. K. Nanayakkara
Governor, Bank Negara Malaysia
Mr. O. Chuluunbat
Mr. Kim Vada
Mr. Yen-Dar Den
Governor, The Bank of Mongolia
National Bank of Cambodia
The Central Bank of China, Taipei
U Kyaw Kyaw Maung
Ms. Lorraine Seeto
Mrs. Chantavarn Sucharitakul
Governor, Central Bank of Myanmar
Reserve Bank of Fiji
Bank of Thailand
Mr. Bijaya Nath Bhattarai
Mr. Wibisono
Mr. Mai Hoang Phuong
Governor, Nepal Rastra Bank
Bank Indonesia
2
SEACEN Newsletter
CONTENTS
3rd Quarter 2006
SPECIAL FEATURES
SEACEN Welcomes State Bank of Vietnam
as 16th SEACEN Member
... 4
48th SEACEN BOD Meeting held
... 4
Vietnam
... 5
8th SEACEN Conference of Directors of Supervision/
19th Meeting of SEACEN Directors of Supervision; and
2nd Public-Private Dialogue for the Asia-Pacific Region,
7 – 10 August 2006
...
Recently published SEACEN Paper: Housing and
Mortgage Markets in the SEACEN Countries
6
... 8
SEACEN ACTIVITIES
SEACEN – CeMCoA / BOJ Workshop on International
and Inter-Sectoral Flow of Funds,
27 – 30 September 2006
...
45th SEACEN/Federal Reserve System Course on
Banking Supervision (Intermediate Level): Asset
Securitisation, 7 – 22 September 2006.
...
9
SEACEN Mounts Seminar on Strategic Planning for
Corporate Planners, 14 – 17 August 2006
...
FORTHCOMING EVENTS
Forthcoming SEACEN Activities
(November 2006 - January 2007)
... 21
Forthcoming Study Visit and
Training in SEACEN Member
Banks in 2006/07
... 23
14
3rd SEACEN Seminar on Basel II: Preparation for
Implementation in the Asia-Pacific Region,
19 – 22 July 2006
...
15
10
MOF Brunei Hosts First SEACEN-CeMCoA/BOJ
Course on MMPM, 25 June – 7 July 2006
...
Views of some Participants on the Course …
16
... 18
Courtesy Calls and Meetings of SEACEN’s ED
... 19
12
Visitors to the SEACEN Centre
... 19
13
SEACEN Welcomes Visiting Research Economist and
Senior Economist
...
First SEACEN Research Workshop on Adjustments of
the Financial and Corporate Sector to the Rises in
Exchange Rate Volatility..., 21 – 22 August 2006
... 11
SEACEN Advanced Seminar on Risk Management in
Central Banks, 20 – 24 August 2006
...
12 th SEACEN-FSI Regional Seminar for Banks
Supervisors and Regulators: The Role of Market
Discipline (Pillar 3)..., 24 – 26 July 2006
...
NEWS ON MONETARY
AND FINANCIAL
... 24
DEVELOPMENTS
MEMBER BANKS
NEWS
20
... 44
3
SEACEN Newsletter
3rd Quarter 2006. Vol. 20. No. 3
SEACEN WELCOMES STATE BANK OF
VIETNAM AS 16TH SEACEN MEMBER
F
ollowing the admission of
member in the SEACEN Executive
the National Bank of
Committee (EXCO) which is a
Cambodia as the 15 th
supervisory body of the SEACEN
SEACEN member on 1 April 2006,
Centre and is currently chaired by
the SEACEN Centre welcomes the
current BOG Chair, Dato Paduka Haji
State Bank of Vietnam (SBV) as the
Ali Apong.
16 th Member, with effect from 1
September 2006. The unanimous
Vietnam is a member of
decision to admit the SBV as a
the Association of South East
SEACEN member was made via
Asian Nations (ASEAN) and
Mr. Le Duc Thuy
Governor
circular letters and based on the
the SBV belongs to the South
recommendation of the SEACEN
East Asia Voting Group of the
body of the SEACEN Centre and is
IMF. The SBV has been an
currently chaired by Dato Paduka
observer of the annual SEACEN
Mr. Le Duc Thuy, Governor of
Haji Ali Apong, Permanent Secretary
Governors’ Conference since 1986,
the State Bank of Vietnam, will now
of the Ministry of Finance, Brunei
and has been actively participating
join the SEACEN Board of
Darussalam. In addition, Mr. Phung
in SEACEN training activities.
Governors (BOG) as a member. The
Khac Ke, Deputy Governor, has been
Highlights of Vietnam and the SBV
BOG is the supreme policy making
appointed to represent the SBV as a
are featured on page 5.
Executive Committee (EXCO).
48TH SEACEN BOD MEETING HELD
I
n
compliance
with
Malaysia;
and
SEACEN Centre was convened
Kuang,
to approve the Directors’ Report
Malaysian Law, the 48 th
Dato’
SEACEN
of
Deputy Governor, Bank Negara
and Accounts
Directors (BOD) Meeting was
Malaysia; and Dr. A.G. Karunasena,
Year 2005/06. The approved
held on Friday, 8 September
Executive Director of the SEACEN
accounts have been published
2006, at Bank Negara Malaysia.
Centre.
in
The
Meeting
Board
was
Ooi
by
attended
Sang
presided
the
Report
by the BOD Chairperson, Tan Sri
In
conjunction
with
the
to
SEACEN
2006
all
Dato’ Sri Dr. Zeti Akhtar Aziz,
48 BOD Meeting, the 24 Annual
banks
Governor
General
authorities.
4
of
Bank
Negara
th
th
Meeting
of
the
for
and
SEACEN
and
Operating
Annual
circulated
member
monetary
Vietnam established on May 6,
1951 under the Decree 15/SL.
Vietnam was unified with
the formation of the Socialist
Republic of Vietnam in July,
1976 and the National Bank in
the South was subsequently
merged into the SBV.
VIETNAM
THE LAND
Vienam lies on the eastern
seaboard of the Indochina Peninsula
with a total area of 330,991 square
kilometers. It borders China to the
North and Laos and Cambodia to the
West. To the East and South lies
the South China Sea. Mountain
and hills cover four-fifths of
Vietnam’s territory. The capital city
is Hanoi.
Confucianism, Ancestor Worship and
Christianity. More than 80 percent
of the population speaks Vietnamese
or Kinh/Viet as well as their own
native language.
Over the past fifty years,
the
banking
system
has
made significant contribution
to the success of the Revolution
in Vietnam, contributing to
consolidating independence and
sovereignty as well as to the
cause of nation liberalisation
and unification.
Ho Chi Minh City
The State Bank of Vietnam
THE TRANSITION TO A
MODERN ECONOMY
Thap Rua, Hanoi
THE PEOPLE AND
LANGUAGES
The population of Vietnam is
83.2 million. There are 54 ethnic
groups living in Vietnam. The Viet,
or Kinh, people account for 88
percent of Vietnam’s population.
Major spiritual influences in
Vietnam include Buddhism,
Vietnam implemented the
economic reform process or “Doi
moi” in 1986. The country has
scored remarkable achievements. As
one of Asia’s fastest growing
economies, Vietnam is opening up
through regional and international
economic integration initiatives, with
GDP growing at an average of 7.5%
over the last decade, reaching a high
of 8.4% in 2005. The country is on
the way ahead with a steady
transition from central planning to a
socialist market-based economic
system, supported by a stable
political regime and leadership
committed to socioeconomic
development
and
prudent
macroeconomic management.
Today,
the
SBV
has
gradually acquired recognition
in ensuring the stability of
domestic currency, enhancing
the complexity of liquidity
instruments and continuously
improving management as well
as advanced business technologies
to further increase competitiveness
of the banking system and
successfully assume its role
as financial intermediary of the
economy, thus actively contributing
to the overall achievements of the
country.
THE STATE BANK OF
VIETNAM (SBV)
Hue
was
The precursor of the SBV
the National Bank of
Ha Long Bay
5
8TH SEACEN CONFERENCE OF DIRECTORS OF
SUPERVISION/19TH MEETING OF SEACEN
DIRECTORS OF SUPERVISION; AND
2ND PUBLIC-PRIVATE DIALOGUE
FOR THE ASIA-PACIFIC REGION
Kuala Lumpur, Malaysia
7 – 10 August 2006
set the tone of the Conference with
her opening address on “The Key
Principles
of
an
Economic
Surveillance Programme”. In
outlining the key factors to consider
in ensuring a successful surveillance
programme, Dr Wentzler highlighted
useful principles for defining the
goals, determining the strategy to
meet the goals, selecting the
necessary tools, besides establishing
accountability and the validation
process to ensure the programme’s
success.
The other speakers were
Mr Kirk Odegard, (Basel Committee
on Banking Supervision) who spoke
Dr. Karunasena (front row, standing 6th from left) flanked by
Conference speakers, SEACEN officials and delegates.
on “Banking Governance and Cross
Border Cooperation” and Mr David
he SEACEN Centre once
function of any supervisory authority
Wright (US Federal Reserve Board
again this year played host
and it is a basic necessity for
of Governors) who gave the
to three very important events which
sustainable economic development,
presentation on “Basel II: Pillar II
were held back-to-back with one
the conference theme on “Banking
and Concentration of Credit”. This
another, namely, the 8th SEACEN
Supervision: Moving Forward to
year’s conference generated some
Conference
of
Enhance Financial Stability” was
very useful discussions even as the
Asia-Pacific
most timely. Dr Nancy Wentzler,
delegates used this forum to enhance
Economies, the 19 th Meeting of
Deputy Comptroller of the US Office
networking with their counterparts
SEACEN Directors of Supervision
of the Comptroller of the Currency
from other countries. A total of 34
T
Supervision
of
of
Directors
and the 2 Public-Private Dialogue
nd
for the Asia-Pacific Region. All three
events were successfully conducted
at the Sheraton Imperial Hotel, Kuala
Lumpur, Malaysia on 7 - 9 August
2006. The annual 8th Conference was
convened on 7 August for the
directors of supervision from the
central
banks
and
financial
supervisory authorities in the AsiaPacific region to exchange views
and share experiences on common
issues related to banking supervision.
Given that financial stability is a core
6
A cross-section of the lady delegates from Thailand,
Indonesia and the Philippines during the Opening Ceremony.
Group photo of delegates from regulatory/supervisory authorities,
Dialogue speakers, chairpersons and officials.
delegates from 18 countries attended
Currency (OCC) and the Office of
by Dato’ Zamani Abdul Ghani,
the Conference.
the Superintendent of Financial
Deputy Governor of Bank Negara
Institutions (OSFI, Canada). The
Malaysia. Altogether, 28 senior level
The annual 19 th Meeting of
directors also proposed that the
officers from the regulatory/
SEACEN Directors of Supervision,
SEACEN Centre conduct a flagship
supervisory authorities and private
a closed-door session, was held on
training programme on Financial
sector
the same day, 7 August, immediately
Stability and to include the topic
commercial banks, served as
following the Conference. This
of governance and accountabilities
speakers and chairpersons at the
meeting was attended by 17
of banking supervisors in its syllabus.
Dialogue. In addition to the 34
delegates
from
12
institutions
included
delegates from the 8th Conference,
SEACEN
countries and four representatives
The 2nd Public-Private Dialogue
39 participants from the multi-lateral
from The SEACEN Centre, including
for the Asia-Pacific Region which
development finance institutions
Dr A. G. Karunasena, Executive
was held on 8 and 9 August, was
(Asian
Director, who chaired the session.
once again jointly organised by The
commercial banks and private sector
While the directors reviewed training
SEACEN Centre in collaboration with
institutions of the APEC economies
activities on banking supervision
the APEC Business Advisory Council
joined the Dialogue.
already implemented in 2006/07, the
(ABAC), Asian Bankers’ Association
required training event on financial
(ABA) and the Pacific Economic
As part of the post-Dialogue
stability and bank supervision for the
Cooperation Council (PECC). The
programme on 10 August, The
Operating Year 2007/08 were also
theme of this Dialogue focused on
SEACEN Centre sponsored a guided
discussed. Among the directors’ key
“The Implementation of Basel II and
sight-seeing tour of the new
recommendations for the future
Developments in Regional Banking
administrative centre, Putra Jaya and
programme, was the continuation of
and Supervision”. The programme
hosted a buffet luncheon at the
collaboration in conducting annual
had eight sessions with the first four
signature hotel, The Palace of the
training events with the Centre’s
sessions covering the review and
Golden Horses. The delegates were
strategic partners including the
developments of key issues raised in
impressed with the warm hospitality
Islamic Development Bank, the
the first Dialogue in 2005, and the
of the Centre and the excellent
Toronto Leadership Centre, the
last four sessions focusing on the
logistic arrangements undertaken by
Financial Stability Institute of the
new developments, issues and
the SEACEN secretariat, making their
Bank for International Settlements,
challenges relating to Basel II and
stay in Kuala Lumpur a pleasant,
the US Federal Reserve System, the
banking and supervision matters.
memorable
US Office of the Comptroller of the
The keynote address was presented
experience.
Development
and
Bank),
rewarding
7
RECENTLY
PUBLISHED
SEACEN PAPER
KEY FINDINGS
By Bambang Kusmiarso
Home ownership is one of the
most important forms of household
wealth and likewise, mortgage
servicing is an important form of
household debt. Therefore, housing
prices tend to have strong
implications
on
household
behaviours, and consequently
macroeconomic and financial
stability. The research project on
Housing and Mortgage Markets in
the SEACEN Countries was
conducted in an attempt to gain
deeper understanding of these two
markets. The main objectives are to
examine factors influencing the
market prices of house and rents as
well as the mortgage markets in the
SEACEN countries. The study is
conducted as a collaborative project
between the SEACEN Centre and 9
SEACEN member banks, namely
Bank Indonesia, The Bank of Korea,
Bank Negara Malaysia, The Bank of
Mongolia, Bangko Sentral ng
Pilipinas, Monetary Authority of
8
Singapore, Central Bank of Sri
Lanka, The Central Bank of China,
Taipei and Bank of Thailand.
The study found that a rapid
growth of population and
urbanisation, benign economic
environment and the rapid economic
growth in the region have
transformed the urban landscape in
many cities in the region and created
huge growth in housing and
mortgage markets. In general,
commercial banks and state-run
firms still dominate primary
mortgage lending. In Korea, informal
sources such as chonsei deposits
play a considerable role in housing
finance. From a regional perspective,
however, the size of mortgage
markets in the region are relatively
small. The ratio of mortgage loans
with respect to GDP in almost all of
the countries under study are still low
compared to the USA, the
Netherlands, and the UK. From the
policy perspective, therefore, there
is a strong growth potential as
these economies continue to develop.
Many factors affect housing
price movements, including
household incomes, interest rates,
household formation or other
demographic variables, supply side
variables, credit availability, taxes,
subsidies and other public policies
directly related to housing. Based on
empirical evidence, housing prices in
Malaysia appear to be determined by
real income per capita, people
expectations on future income and
economic outlook, demographic
variable, real lending rates, and total
loans outstanding in the banking
system. Meanwhile, in Taiwan
housing price is determined by the
real GDP, M2 and stock prices. In
Thailand, there was evidence of a
strong causal link between monetary
policy and property prices. For
the spillover effect to the
macroeconomy, the evidence in
Malaysia showed that housing price
moved closely with the real output
of the economy, and the strength of
this correlation seemed to increase
ever since the Asian financial crisis.
Meanwhile, Taiwan found evidence
that housing price raised CPI
inflation, M2 and bank loans rates.
In addition, reports on relevant
studies suggested that housing
bubbles and excessive lending had
been the contributing factor for the
Asian financial crisis in 1997, mainly
due to over-investment in the
housing sector, which resulted in
considerable non-performing loans
(NPLs) in commercial banks.
The study also suggested that
capital markets could provide an
alternative source of long-term
funding for housing, for both
developers and investors. Developers
can tap into the capital market as a
source of funding while investors
can diversify their investment in
property fund. In this regard, the
recent rebound in global economies
has facilitated further growth in
domestic bond markets as well as
asset-backed securities in many
countries. The study highlighted the
potential of securitisation to be used
as a vehicle for mobilising long-term
savings, additional means to stimulate
domestic housing markets, and in
broadening the institutional investor
base, increase transparency and
deepen domestic bond markets.
Mr. Bambang Kusmiarso,
Senior Economist seconded from
Bank Indonesia conducted the
research study. Mr. Bambang has
since completed his tenure at the
Centre and has returned to Bank
Indonesia.
SEACEN Newsletter
SEACEN – CEMCOA / BANK OF JAPAN WORKSHOP
ON INTERNATIONAL AND INTER-SECTORAL
FLOW OF FUNDS
Port Dickson, Malaysia, 27 – 30 September 2006
Hosted by The SEACEN Centre
Workshop session in progress with Mr. Takezawa delivering his keynote address.
he Asian financial crisis
illustrated the vulnerability of small open
economies, such as those in the
SEACEN region, to the direction and
magnitude of international capital and
financial flows. Consequently,
concerted efforts, including the
establishment of the SEACEN Expert
Group (SEG) on Capital Flows, have
been directed at monitoring and
managing capital flows. On the other
hand, it has been understood that
domestic flow of funds is closely
related to the international capital
flows and that monitoring both
international and inter-sectoral flow
of funds would be useful to prevent
financial crisis. In this respect, even
though most countries have been
compiling the flow of funds account,
it has been generally felt that the
quality of flow of funds statistics and
the usage for economic analysis and
policy-making could be enhanced. In
light this, the SEACEN – CeMCoA/
BOJ Workshop on International
T
and Inter-sectoral Flow of Funds,
was held at Avillion Port Dickson,
Malaysia from 27 – 30 September
2006. The Workshop, hosted by the
SEACEN Centre, was organised with
the financial support from the Center
for Monetary Cooperation in Asia
(CeMCoA), Bank of Japan. The
Workshop attracted 30 participants
who are upper-middle level and
technical officials involved in the
compilation and analysis of balance
of payments and international
investment statistics, as well as
domestic flow of funds from 16
central banks, monetary authorities
and official statistical agencies of
both SEACEN and non-SEACEN
countries in the Asia-Pacific region.
The objectives of the Workshop
were to share experiences and
knowledge on how to monitor and
manage international and intersectoral capital flows as well as to
enhance understanding of the
domestic flow of funds conceptual
framework and linkages with the
balance
of
payments
and
international investment position
statistics. The Workshop had also
provided participants the opportunity
to gain deeper understanding and
hands-on experience on the analysis
and usage of flow of funds
accounts, as well as balance of
payments
and
international
investment position statistics. The
faculty of eminent resource persons
for the Workshop comprised of
senior officers from the International
Monetary Fund (IMF), Bank of Japan
and Bank Negara Malaysia. They
included Mr José Carlos Moreno,
Senior Economist, Statistics
Department, IMF; Ms. Toshie Kori,
Economist, Balance of Payments,
Continue on page 20
Mr. Moreno (3rd from right) with participants at a group work session.
9
45TH SEACEN/FEDERAL RESERVE SYSTEM
COURSE ON BANKING SUPERVISION
(INTERMEDIATE LEVEL): ASSET SECURITISATION
Kuala Lumpur, Malaysia, 7 – 22 September 2006
Hosted by Bank Negara Malaysia
on Banking Supervision with special
focus on Asset Securitisation. This
event, held in Hotel Hilton Kuala
Lumpur on 17 – 22 September
2006,
was
attended
by
34
participants from 12 countries in
the Asia-Pacific region.
The
Federal Reserve System provided
technical expertise by sending two
instructors, namely, Mr Timothy De
Rosier of the Federal Reserve Bank
of San Francisco and Mr Danny
Elder of the Federal Reserve Bank
of Richmond, to handle the entire
five-day programme. In spite of the
differences in the financial system
development of the participating
Dr Karunasena (3 rd from right) with speakers, Mr Elder and Mr De Rosier, and
Course Officials from The SEACEN Centre and Bank Negara Malaysia.
countries represented at the class and
the highly technical contents of the
iven the growth in volume
a few. It is therefore critical that all
course, the resource persons
and scope of securiti-
supervisors understand the issues in
managed to sustain the interest of
sation, it is a matter of
valuation and securitisation processes
the participants by conducting a quiz
crucial importance to address the
since more and more banks are
and a question-and-answer session
many issues in a securitisation that
entering and will continue to enter
for the class. The participants also
can expose an institution’s capital to
the securitisation fray. Besides this,
enjoyed learning from one another
adverse risk. There has been a great
bank supervisors must understand
through the sharing of selected
deal of confusion raised in areas
the accounting and risk management
country experiences.
such as discrepancy in valuations of
of these products.
G
Bank Negara Malaysia, as the
retained securities and residual cash
flows, improper accounting, lack of
It was with these objectives in
host for this event, provided an
familiarity with legal documentation
view that The SEACEN Centre
efficient secretariat that took care of
required, and inadequate risk
partnered with the Federal Reserve
all the logistic arrangements.
management processes, just to name
System in organising the 45th Course
Participants were very appreciative
of the hospitality extended to them
by Bank Negara Malaysia in
sponsoring the guided sight-seeing
tour and the lake cruise in Putra
Jaya, all the luncheons and tea/
coffee refreshments during the
Course and the closing dinner at the
exclusive Malaysian Petroleum Club
in Petronas Twin Towers, Kuala
Lumpur. They would like to see such
kind of collaborative activities
Closing dinner at Malaysian Petroleum Club, Petronas Twin Towers: The host,
BNM Assistant Governor Gopala Krishnan Sundaram (7th from right) flanked by
speaker, Mr Danny Elder and Course officials and participants.
10
continue for the benefit of their
colleagues in the future.
FIRST SEACEN RESEARCH WORKSHOP ON
ADJUSTMENTS OF THE FINANCIAL AND
CORPORATE SECTOR TO THE RISES IN EXCHANGE
RATE VOLATILITY AND THEIR POLICY
IMPLICATIONS IN THE SEACEN COUNTRIES
Kuala Lumpur, Malaysia, 21-22 August 2006
(From left) Mr. Boldbaatar, Senior Economist at the SEACEN Centre and
Mr. Nget Sovannarith from National Bank of Cambodia during workshop session.
he first SEACEN research
workshop on Adjustments of the Financial
and Corporate Sector to the
Rises in Exchange Rate Volatility
and their Policy Implications in
the SEACEN Countries was
successfully held at Istana Hotel,
Kuala Lumpur from 21-22 August
2006.
T
The project which was
approved by the SEACEN Board of
Governors as part of its programme
for OY 2006/07 aimed to analyse the
recent adjustment of both financial
institutions and corporate firms in
response to the rises in exchange rate
volatility; and to explore some
insights into how the behaviour of
financial and corporate firms could
play a critical role in economic
growth and stability.
Conducted as a collaborative
research, the project kicked off with
the first research workshop. The
workshop was mainly organised to
discuss the project proposal,
coverage of the study, time table and
the country paper outline. The
Workshop also provided an
opportunity for country researchers
to share their country experiences on
exchange rate volatility and their
policy settings. The Workshop was
conducted by the two project
leaders, namely Mr. Dagva
Boldbaatar, Senior Economist from
The SEACEN Centre and Dr. Yothin
Jinjarak, Assistant Professor of
Economics from Nanyang Technological University, Singapore. During
the Workshop, Mr. Boldbaatar
presented the research proposal,
focusing on the scope and objectives
of the Project while Dr. Yothin make
a presentation on Conceptual Issues
of Exchange Rate Volatility and
Lessons on Adjustments to the
Volatility. The Workshop discussions
went off smoothly under the
competent chairing of the sessions
by Dr. Bambang S. Wahyudi,
Director for Research.
A total of 13 country researchers representing 10 SEACEN
member countries have been nominated to participate in the Research
Project. Attended by 9 country
researchers, the Workshop concluded with an agreement on the methodology, coverage, country paper
outlines and timetable for the project.
The second workshop is planned to
be held on 8-9 January 2007. During
the post-workshop programme,
participants were taken to a city tour
and a visit to new administrative
capital of Putrajaya.
Participants during Putrajaya tour.
11
SEACEN ADVANCED SEMINAR ON RISK
MANAGEMENT IN CENTRAL BANKS
Bangkok, Thailand, 20 – 24 August 2006
Hosted by Bank of Thailand
Mr Winsnes of BIS sharing his experiences with seminar participants.
lobal developments have
contributed
towards
greater awareness of the
need for risk management
in central banks. While central banks
have to deliver price stability and
financial stability, they have to
operate in the financial market and
in the economy, which constantly
expose central banks to various risks,
such as reputational, strategic, legal,
human resources and operational
risks. As such, central banks would
need to continually identify and
manage existing and emerging risks,
as well as develop innovative means
and organisational structures to
manage them. The SEACEN
Advanced Seminar on Risk
Management in Central Banks,
hosted by Bank of Thailand, was
held at the Shangri-La Hotel,
Bangkok from 20 – 24 August 2006.
G
The objectives of the Seminar
were to identify and analyse the
major risks faced by central banks
and how to manage them; as well
as to update participants on the latest
developments on central bank risk
management and internal audit
functions of central banks. It also
afforded participants the opportunity
to learn from the practices and
12
experiences of central banks in and
outside of the region on how to
manage central bank risks in general
and role of internal auditors in
mitigating some of the risks. The
Seminar was organised for senior
and upper-middle level officials who
are involved in risk management and
internal auditing in central banks.
Thirty-seven participants representing 14 countries in the AsiaPacific region were seconded to the
Seminar. The Seminar was open by
Ms Nopamart Manoleehakul,
Assistant Governor, Strategic
Capabilities Group, Bank of
Thailand, while the closing was
officiated by Mr Yodchai Choosri,
Assistant Governor, Operations
Group, Bank of Thailand. Ms
Wanna Piyasirinond,
Director, Human
Resources Development Office,
Bank of Thailand
hosted the Farewell
Dinner on the cruise.
The faculty of
eminent resource
persons for the
Seminar came from
Asian Development
Bank (ADB); Bank
of Thailand; Bank for International
Settlements (BIS); Bangkok Bank
Public Company Limited, Bangkok;
and RHB Bank Berhad, Malaysia.
The discussions at the Seminar
included Central Bank Governance
in Times of Change; Role of Internal
Auditors and Risk Managers in
Governance; Bank of Thailand’s
Operational Risk Management;
Experiences of Bank of Thailand in
Financial Risk Management and
Operations; New Regulations and
Standards and the Impact on the
Role of Internal Audit; Internal
Audit – How to Respond to New
Challenges; Framework for Internal
Control Systems in Commercial
Banks; Internal Audit Process in a
Commercial Bank; Strategic
Component of a Risk Management
Framework
in
Financial
Institutions; Role of a Bank’s
Internal Audit Function in Risk
Management and Basel II; and Basel
II Standards in Operational Risk
Management.
A group dynamic session cum
sightseeing tour was conducted, on
Sunday, prior to the Seminar proper
for encouraging better rapport
among the participants who came
from various countries and different
culture and social background. Ms
Lorraine Seeto, Chief Manager,
Corporate Planning & Assurance
Group, Reserve Bank of Fiji
represented the class in giving a
valedictory response at the Seminar
Closing Ceremony. The participants
expressed deep appreciation to the
excellent organisation and warm
hospitality of the Secretariat from
Bank of Thailand.
Participants putting their artistic touches on the umbrellas during the Group Dynamics session at Rose Garden Riverside.
SEACEN MOUNTS
SEMINAR ON STRATEGIC PLANNING FOR
CORPORATE PLANNERS
Langkawi, Malaysia, 14-17 August 2006
At the Opening Ceremony (Left to right) – Ms Heidi Koller,
Mr. Paul Moser-Boehm, Dr. Karunasena, Mr. Zakaria Ismail.
S
ince the 1960s, strategic
planning has been widely
practiced in business
applications for reinforcing
competitive advantages to win
market share, coping with rapidly
changing environments, both internal
and external, and facing the
challenges of future uncertainties
with forward-looking visions. From
the 1980s, strategic planning was
introduced to government agencies
and non-profit organisations with the
aim of improving the effectiveness
and efficiency in both operational
performance and administrative
governance. More recently, many
central banks have began to adopt
strategic planning to deal with
uncertainties and challenges resulting
from ever increasing financial
liberalisation and globalisation. The
“SEACEN-BIS Seminar on Central
Bank Governance: Strategic
Planning and Other Issues” was
conducted in January 2005 to
provide an opportunity for SEACEN
Deputy Governors of the member
banks to exchange ideas and
experiences on how
strategic planning is
undertaken by the
respective central
banks. The Seminar
was instrumental in
bringing attention
to the emerging
significance arising
from the evolution of
the strategic planning
process
in
the
SEACEN member banks. As a
follow-up to this initiative, the
Seminar on Strategic Planning for
Corporate Planners was mounted
specifically for corporate planning
practitioners in Langkawi, Malaysia,
on 14-17 August 2006.
The main objectives of the
Seminar were mainly to (i) enhance
the participants’ understanding of
strategic corporate planning and
management in central banks; (ii)
benchmark the strategic planning
programmes and functions against
those of their peers and pool
experiences, and (iii) promote
cooperation among corporate
planners of central banks in the
SEACEN region in ensuring
consistency and sustainability of their
strategic plans and programmes. The
Seminar was designed for middle to
senior level officials from central
banks/monetary authorities, who are
involved in corporate planning
functions of central banks. The
Seminar was well received as a total
of 24 participants from 11 institutions
of 11 countries were nominated for
the 3-day Seminar.
The two resource speakers
were drawn from the Bank for
International Settlements (BIS) and
Oesterreichische National Bank
(Austrian National Bank), namely Mr.
Paul Moser-Boehm and Ms Heidi
Koller, respectively. During the
Seminar, Mr. Moser-Boehm laid the
groundwork for the Seminar with his
presentation on the overview of
strategic planning for central banks.
He shared information on the work
of the Central Bank Governance
Forum at the BIS and also touched
on pertinent issues such as
differences between corporate and
central bank governance, definition
of strategic planning, reasons for
central banks engaging in strategic
Mingling at the tea reception (Left to right) – Ms Wong Puay Chen,
Mr. Zakaria Ismail, Ms Heidi Koller, Mr. Trisno Nugroho.
13
planning, design and time horizon for
strategic planning. Lastly, he mapped
out the linkages between strategic
planning and budgeting. Meanwhile,
Ms Heidi Koller delved with
specific aspects of strategic planning
on performance management
systems and the tools for
implementation. She presented
different models of performance
management and their indicators.
She stressed that it was important
to find the right measures and
indicators and that incentives are
vital in any system. She also
presented a case study of the
performance management system,
the Intellectual Capital Report (ICR),
used in OeNB.
The participants presented their
country papers on five aspects of
strategic planning, viz., (i) strategic
planning objectives; (ii) design
aspects of strategic planning, (iii)
communication aspects of strategic
direction; (iv) implementation aspects
of strategic direction, and (v)
managing and measuring performance. A case study was also
presented on Bank Indonesia’s
experience on the Balanced
Scorecard as part of the performance management system.
Participants were also divided into 2
groups where they discussed and
agreed upon essential elements for a
strategic plan.
The Seminar was generally well
received by the participants and
favourably evaluated. Participants
and speakers also enjoyed the postSeminar tour to see some of the
famous sights in Langkawi Island
such as the Tomb of Princess
Mahsuri and Eagle Square. They
were also treated to a sumptuous
lunch at the Bon Ton restaurant
which is situated in the midst of a
rice field.
14
12TH SEACEN-FSI REGIONAL SEMINAR FOR BANKS
SUPERVISORS AND REGULATORS: THE ROLE OF
MARKET DISCIPLINE (PILLAR 3) IN THE BASEL II
FRAMEWORK AND ISSUES IN INTERNATIONAL
AUDITING OF BANKS
Kota Kinabalu, Malaysia, 24-26 July 2006
Mr. Jason George from the FSI, stressing his point
during the classroom session.
total of 32
participants
representing 15
institutions of
14 countries in
the Asia-Pacific
region.
The
success of the
Seminar owed
largely to the
contributions
of the very
experienced
he 12 th SEACEN-FSI
resource speakers which were
Regional
Regional
drawn from international institutions
Seminar for Banks
such as the FSI; Deutsche
Supervisors and Regulators: The
Bundesbank, Germany; KPMG
Role of Market Discipline (Pillar 3)
Singapore; Hong Kong Monetary
in the Basel II Framework and
Authority; Citigroup, USA; Moody’s,
Issues in International Auditing
Singapore; Australian Prudential
of Banks, jointly organised by
Regulation Authority, Australia;
the SEACEN Centre and the
PricewaterhouseCoopers, Beijing;
Financial Stability Institute (FSI)
Federal Reserve Bank of San
of the Bank for International
Francisco, USA; and DBS Bank,
Settlements (BIS), was successfully
Singapore.
conducted in
Kota Kinabalu,
Sabah from 2426 July 2006.
The Seminar
which
was
inaugurated
by Dr. A.G.
Karunasena,
Executive
Director
of
the SEACEN
A pose from Dr. Karunasena (2nd from left) and Mr. Zakaria (5th from
Centre, drew a
left) with speakers during teabreak.
T
The
Seminar
which
was
regulators, has successfully achieved
3RD SEACEN SEMINAR ON BASEL II:
PREPARATION FOR IMPLEMENTATION IN
THE ASIA-PACIFIC REGION
its objectives in providing a perfect
Kota Kinabalu, Malaysia, 19-22 July 2006
designed for upper middle and senior
level
banks
platform
supervisors
for
speakers
and
and
participants in discussing issues
related to the role of market
discipline (Pillar 3) in the Basel II
Frameworks and also in discussing
the issues in international auditing of
banks. The 2 ½ day Seminar was
organised
with
a
good
mix
comprising presentations by the
resource
speakers
discussions.
evaluated
The
the
favourably,
and
floor
participants
Seminar
singling
out
very
the
organisation and efficiency of the
logistical
and
administrative
arrangements. The participants
generally gave the speakers a high
rating and found their presentations
to be very useful and relevant. Most
of the resource speakers were
excellent in sharing their expertise
and experiences with the participants.
The participants felt that the Seminar
was well organised with the
appropriate balance of regulatory and
industry inputs on the subject matter.
On
the
social
side,
the
was very well
received and
attracted
40
participants from
19 institutions
of 9 countries.
Participants to
the
Seminar
comprised upper
middle
and
senior level bank
supervisors and
Dr. Karunasena introducing speaker from
regulators of
Bank Indonesia, Mr. Imansyah.
central banks
he 3rd SEACEN Seminar
and supervisory agencies, as well as
on Basel II: Preparation
senior officers of commercial banks
for Implementation in the
who
are
responsible
for
Asia
Pacific
Region
was
implementing and supervising the
bank’s compliance with prudential
successfully hosted and organised by
the SEACEN Centre in Kota
regulations. Very knowledgeable and
Kinabalu, Sabah from 19-22 July
experienced resource persons were
invited to share their expertise with
2006. The Seminar was inaugurated
by the Executive Director of the
the participants, namely from Bank
SEACEN Centre, Dr. A.G.
Indonesia, Bank Negara Malaysia,
Bangko Sentral ng Pilipinas and Bank
Karunasena. With the main focus of
sharing of experiences on the
of Thailand. In addition to resource
implementation and practical
speakers’ presentation, there was also
a panel discussion on the “Challenges
application issues and challenges in
implementing Basel II, the Seminar
of Implementation of Basel II in:
T
participants and speakers had the
opportunity to do some shopping
and sightseeing of Kota Kinabalu.
They were also treated to a
sumptuous seafood dinner at the
Restaurant Nelayan where they had
an opportunity to enjoy the
traditional dances of Sabah. Such
social activities fostered good
rapport among the participants and
speakers as they freely mingled with
one another.
Participants during the icebreaking session.
15
Thailand, Indonesia, Malaysia and
Philippines” which was chaired by
Dr. A.G. Karunasena. The
participants also had a chance to
share some of their country
experiences in implementing Basel II.
The first session of the 2 ½ day
Seminar covered the General
Overview of Basel II, which
provided participants with the basic
background of the needs, objectives
and tools of Basel II. It also detailed
the Pillar 1 – New Capital
Requirement Calculation; Pillar 2 –
Reinforced Supervision and Pillar 3
– Fuller Disclosures and Market
Discipline. This session was then
followed by the presentations on
Cross-Border Implementation of
Basel II and Emerging Regulatory
Banking Supervisory Issues and a
Global Perspective of Home/Host
Challenges in the Implementation of
Basel II. Other sessions focused on
sharing of country experiences in
Indonesia, Malaysia, Philippines and
Thailand. The panel discussion
mainly focused on the challenges
faced by the countries in
implementing Basel II.
The
Seminar
which
incorporated presentations, lectures,
roundtable and panel discussion was
highly interactive as both central
bankers and commercial bankers
were very active in sharing their
views. The discussion was highly
interesting and well rounded as they
came from the supervisors/regulators
on the one side and the private
sector, on the other.
The participants to the Seminar
were generally impressed with the
warm hospitality of the team of
secretariat in seeing to every detail
of their needs. Both participants and
speakers have enjoyed their stay in
Kota Kinabalu including the one-day
post-seminar programme to the
Kinabalu National Park.
16
MOF BRUNEI HOSTS FIRST
SEACEN-CEMCOA / BOJ COURSE ON MMPM
Bandar Seri Begawan, Brunei Darussalam,
25 June – 7 July 2006
Group photograph at the Opening Ceremony officiated by
Dato Paduka Haji Ali Apong (seated, centre).
lobalisation and volatile
external environment have
made the tasks of conducting monetary policy
in particular and macroeconomic
management in general much more
complicated. Issues and challenges
faced by central banks today are
vastly different from those in the
past,
and the pace of change has
even quickened. A course such
as the 1st SEACEN-CeMCoA/BOJ
Intermediate Course on Macroeconomic and Monetary Policy
Management (MMPM) aims to
assist central banks to cope with
these challenges.
G
Mr. Takeo Nakamura
delivering keynote address.
Specifically, the Course aims to
broaden participants’ knowledge on
macroeconomic analysis and
management; to familiarise participants with the major tools and
instruments used in the conduct of
monetary policy; and to update
participants on the latest issues that
are pertinent to macroeconomic and
monetary policy analyses.
The Course, which was
financed by the Bank of Japan (BOJ)
and hosted by the Ministry of
Finance (MOF), Brunei Darussalam,
was conducted during 25 June – 7
July 2006 in Bandar Seri Begawan,
Brunei Darussalam. A total of 21
participants from central banks/
monetary authorities of 11 countries
attended the Course. The Course
was declared opened by Dato
Paduka Haji Ali Apong, Permanent
Secretary of the MOF. Mr. Takeo
Nalamura, Head of the Center for
Monetary Cooperation in Asia
(CeMCoA), represented the Bank of
Japan at the Opening Ceremony and
delivered a Keynote Address on
Macroeconomic Management and
Policy: Central Bank Perspectives.
The Closing Ceremony was
officiated by Dato Paduka Haji Ali
Apong and Dr. A.G. Karunasena,
SEACEN Executive Director. The
Brunei Currency and Monetary Board
of the MOF provided secretariat
support for the Course.
Special Features
A few features distinguish this
Course from the normal SEACEN
training events. Firstly, it represents
SEACEN first attempt to conduct a
course on a modular approach in line
with SEACEN new strategic
direction. The Course is designed
especially for middle-level and
technical staff of central banks who
already have basic knowledge on
macroeconomics and monetary
economics. It is divided into different
modules, where each module is selfcontained but is related to one
another in that the later modules build
on the earlier ones. It combines two
courses on “macroeconomic
management” and “monetary policy
and strategies” that used to be
conducted separately.
Secondly, the Course incorporates a case study on monetary
policy committee (MPC) process
focusing on how the MPC arrives
at the decision and how it
communicates to the public. The
Case Study was developed in
collaboration with senior officials of
the Monetary Policy Group of the
Bank of Thailand.
Course Contents and Delivery
The Course was composed of
two parts: macroeconomic analysis
Dr. Roong Mullikamas of Bank of Thailand
and policy; and
monetary policy
management. The
first part covers 3
modules, namely
national income
accounts
and
forecasting
(highlighted by
experiences
of
Philippines and
Thailand); inflation
measurements and
forecasting
Dato Paduka Haji Ali Apong (centre) presenting
certificate to course participant.
(illustrated by the
case
of
Bank
Indonesia); and sources and
Philippines and Inter-Pacific
implications of macroeconomic
Research Sdn. Bhd.
imbalances (with highlights on
empirical work by the IMF and the
Course Evaluations
BIS). Similarly, the second part
Based on the participants’
includes 3 modules, namely an
evaluations, the Course received
overview of monetary policy
ratings within the range of 4.5 to 4.8
objectives and operations (based on
(out of a maximum score of 5). On
experiences of advanced as well as
the substantive aspects, the ratings
emerging economies); monetary
were 4.7 (benefits from the Course),
policy tactics (illustrated by the
4.6 (meeting objectives and wellexperiences of Australia and
designed), 4.5 (effectiveness of
Indonesia); and monetary strategies
resource persons as a whole) and
contrasting the experiences of
4.5 (usefulness of hands-out). On the
Malaysia, Singapore, Taiwan and
secretariat support, participants gave
Thailand.
a rating of 4.7, with a few special
notes to commend the secretariat
The Course was delivered by a
team of the MOF. Highlights of
faculty of 17 resource persons
comments
from
individual
comprising experts from the BIS,
participants are presented on
IMF, and the central banks of
page 18.
Australia, Japan, Indonesia, Malaysia,
Philippines, Singapore, Taiwan and
Social Events
Thailand. Two speakers were also
The Course programme was
invited from the National Economic
interspersed with social events to
Development Authority of the
foster closer relationship and
networking among participants.
The highlight should be the 1-day
Kuala Balai Cultural Heritage
Experience, where participants were
treated to a tour of the traditional
long house, traditional sago
processing, and cultural show; the
half-day city tour that provided
glimpses of the social, religion and
economic development of Brunei,
and the Cultural Performance put
up by all participants to showcase
the cultures of their countries. All in
all, participants were immensely
grateful for the warm hospitality
and excellent arrangements of
sharing a light moment during the group work.
the Host.
17
VIEWS OF SOME PARTICIPANTS
ON THE COURSE …
“This is definitely my most favourite course. The well-designed syllabus excellently combined
comprehensiveness and focus. The top-notched resource speakers admirably showed enthusiasm in
teaching and interacting with us participants. I went away from the course with very much clarified
understanding of what monetary policy process involves, and how my job relates to the other parts
at the central bank. A surprising bonus is to discover that such an intensive learning event could be
so much fun, thanks to the group of active, sociable and helpful participants; as well as the social
activities notably the cultural performance and weekend excursion. All these plus the superb support
services of the Host – Ministry of Finance, Brunei Darussalam- made the two-weeks course my top
choice of all central bank trainings for effective and enjoyable learning experience.”
Siriporn Muksakunratana (Class President)
Bank of Thailand
“The only thing I can say right now
is that the Course really worked for
me. For somebody whose
involvement in monetary policy was
practically nil, I am now running the
main macro model for monetary
policy setting. Having to temporarily
take over a place of my colleague,
who plays a critical role in the
monetary policy process, it is very timely that I just came
from the Course and was exposed to the monetary policy
process not just here at BSP but in the neighboring countries
as well. I can truly say that my participation in the Course
really paid off immensely for Bangko Sentral ng Pilipinas!”
Jade Eric T. Redoblado (Class Vice-President)
“This course has been without doubt
the best course I’ve ever attended,
both from the point of view of
knowledge adding and establishing
networks amongst fellow central
bankers in the region. The level of
discourse between resource speakers
and participants, the lively Q&A
sessions and the infectious informal
interactions between participants were quite amazing. I not
only have learnt a lot from all sides in the economic
perspective (Real, Fiscal, Monetary Policy Formulation and
Operations) but the relationships made amongst participants
have transcended culture, religion and language. Not
forgetting the great job the Ministry of Finance, Brunei
Darussalam, have done in hosting us. Truly a brilliant
course!”
Mohamed Rizwan Habeeb Rahuman
18
“This course is very interesting and
important because the agenda is
complete. There is macroeconomic
and monetary policy and almost all
topics have both the theory and
workshops/exercises. And almost all
of the speakers are very professional
and competent in their respective
topics.”
NitaAriastuti Muelgini
Bank Indonesia
“The course had provided a very good
broad-based understanding of issues
related to macroeconomic policy
management. In addition to bringing
home with me a toolbox full of relevant
principles, the ‘hands-on’ workshops
had also been useful in providing a
good feel of how these concepts are
currently applied in practice. The sharing of cross-country
experiences was particularly insightful. Above all, I cherish
very much the opportunity I had in being able to interact
with participants from other countries, forming bonds and
deepening my appreciation of the various cultures.”
Edwin Heng Mok Han
“I have not only learned about
monetary policy management, but
also about the dynamics of the
environment that keeps changing all
the time. This course has 3 excellent
ingredients: the speakers, the
participants and the coordinator.”
Rotelak Preecha
Bank of Thailand
Mr. Malcolm D. Knight, General
Manager, Bank for International
Settlements
COURTESY CALLS AND
MEETINGS OF SEACEN ED
aving assumed office of SEACEN Executive
Director in July 2006, Dr. A.G. Karunasena
took the opportunity to pay courtesy calls on
members of the SEACEN Board of Governors and
Executive Committee during his official trips in connection
with SEACEN training events in the respective capitals,
as listed below:
H
5 July
Dato Paduka Haji Ali Apong
Permanent Secretary, Ministry of Finance,
Brunei Darussalam
(Bandar Seri Begawan, Brunei Darussalam)
11 July
Dato’ Ooi Sang Kuang, Deputy Governor,
(Kuala Lumpur, Malaysia)
1 August
Tan Sri Dato’ Sri Dr. Zeti Akhtar Aziz
Governor, Bank Negara Malaysia
(Kuala Lumpur, Malaysia)
24 August
M.R. Pridiyathorn Devakula, Governor,
Bank of Thailand
(Bangkok, Thailand)
On 13 July 2006, Dr. Karunasena met with Mr.
Leslie Lipschitz, Director, IMF Institute, at the Meeting
in Bank Negara Malaysia, to discuss ways to strengthen
collaboration with the IMF Institute.
Taking advantage of the IMF-World Bank Meeting
in Singapore, Dr. Karunasena also held a series of meetings
with several SEACEN collaborators to discuss areas to
further strengthen collaboration:
17 September
19 September Mr. Jaime Caruana, Director,
Monetary & Financial Systems Dept.,
IMF
Mr. Leslie Lipschitz, Director
IMF Institute, IMF
Mr. Sunil Sharma, Director
IMF-Singapore Regional Training
Institute (STI), IMF
20 September
Ms Frannie A. Leautier
Vice President, World Bank Institute
VISITORS TO THE SEACEN CENTRE
Dato’ Sa Wai, General Manager, International
Centre for Leadership in Finance (ICLIF), visited the
SEACEN Centre on 5 August to discuss areas of
collaboration in the SEACEN flagship course on Central
Bank Management and Policy.
Mr. Mutsuo Hatano, Deputy Governor, Deposit
Insurance Corporation of Japan, paid a courtesy call
on Dr. Karunasena on 11 September.
Mr. Eli Remolona, Head of Economics for
Asia and the Pacific, and Ms. Corrinne Ho,
Senior Economist, BIS Representative Office for
Asia and Pacific, visited the SEACEN Centre on 21
September 2006, to discuss areas of collaboration in
research.
Mr. Robert N. McCauley
Chief Representative
Office for Asia & Pacific, BIS Hong
Kong
Mr. Herwidayatmo, Executive Director
(SEA Group), World Bank
18 September
Ms Jennifer Johnson-Calari, Senior
Manager, Reserve Advisory &
Management Programme (RAMP),
World Bank
Mr. Eli Remolona (middle) and Ms. Corrinne Ho (left)
discussing with Dr. Karunasena (right).
19
Continued from page 9
International Department, Bank of
Japan; and Mr Nazrul Hisyam bin
Mohd Noh, Deputy Director, and Mr
Mohamad Fairuz bin Saadun,
Manager, both from the Investment
Operations and Financial Market
Department, Bank Negara Malaysia.
Mr Hideki Takezawa, Director,
Head of Balance of Payments,
International Department, Bank of
Japan, represented the Bank of Japan
at the Workshop Inauguration, and
also presented a Keynote Address on
Utilisation of Financial Statistics
for
Macroeconomic
Policy
Planning. The workshop sessions
conducted over three working days
addressed issues concerning the
compilation of balance of payments
and flow of funds statistics for
policy making with topics such as
Capital Flow Developments and
Related Policy Issues and Actions;
Compilation of the BOP and
International Investment Position
Statistics; Malaysian FX Market
Surveillance Process; Flow of Funds
Account: Concepts and Monitoring
Framework; Flow of Funds
Account: Example from IMF’s
Compilation Guide; Compilation of
Flow of Funds: International
Comparison among Asia-Pacific
Countries; and International
Comparison of Economic and
Financial Structures. Two sessions
for group work were included to
provide participants with hands-on
experience on the compilation of
flow of funds.
Mr Khalid Sarwar Qureshi
Assistant Director, Statistics Department, State Bank of Pakistan represented the class in giving a valedictory response at the close of the
Workshop. A post-Workshop
sight-seeing tour to historic
Malacca was arranged for the
participants.
20
SEACEN WELCOMES VISITING RESEARCH
ECONOMIST AND SENIOR ECONOMIST
he SEACEN Centre
welcomes two new
staff into its fold –
Mr. Piter Abdullah from Bank
Indonesia and Dr. Min Bahadur
Shrestha from Nepal Rastra
Bank.
T
MR. PITER ABDULLAH has
joined the Centre as a Visiting
Research Economist with effect from
1 April 2006 for a six-month period.
During his tenure, he will be
implementing the research project on
“Impact and Policy Responses to
Volatile Oil Prices in the SEACEN
Countries”.
Mr. Piter is concurrently
working as a Researcher at the
Centre for Central Banking Education
and Studies of Bank Indonesia where
he is involved in research projects
on issues such the role of BPR
(People’s Credit Bank) in the rural
economy; cost benefit analyses of
decentralisation; regional competitiveness and the Indonesian payment
system. Mr. Piter obtained his
Master Degree in Development
Economics from the International
University of Japan and Bachelor
Degree in Management Economics
from Gadjah Mada University,
Yogyakarta.
DR.
MIN
BAHADUR
SHRESTHA has been seconded as
a Senior Economist at the SEACEN
Centre from Nepal Rastra Bank,
effective from 1 August 2006 for
a three-year term. During his
tenure at the Centre, his major
responsibilities will include
implementing research projects and
providing support to training
activities. For OY 2006/07, he will
conduct a research project on
“Role of Non-bank Financial
Intermediation: Challenges for
Central Banks”, and will also serve
as resource speaker for the Seminar
of the same title.
Prior to his appointment as
Senior Economist at the SEACEN
Centre, he was Director of the
Research Department of Nepal
Rastra Bank, which he joined in
1988. He has worked in various
departments at Nepal Rastra Bank
and has accumulated extensive
teaching and research experience. He
has published research papers and
articles in numerous journals.
Dr. Shrestha obtained his Ph.D.
in Economics from the University
of Wollongong, Australia and
holds three Masters Degrees in
Business Administration, Political
Science and Public Administration
respectively.
SEACEN Newsletter
•
FORTHCOMING SEACEN ACTIVITIES
(November 2006 - January 2007)
•
28th Meeting of SEACEN Directors of Research
and Training
Venue:
Siem Reap, Cambodia
Date:
15 - 17 November 2006 (4 days)
Host:
National Bank of Cambodia
Co-ordinator: Mrs. Jami’ah Jaffar
This annual Meeting is held to review the progress of
research and training activities for OY 2006/07 and
discuss proposed programme of activities for OY 2007/
08. The Meeting will be preceded by seminars for
Directors of Research and Directors of Training. Topics
for the seminars will be identified in consultation with
the Directors of Research and Training.
•
Seminar on the Role of Banking Supervision in
Financial Stability
Venue:
Date:
Host:
SEACEN Centre
Co-ordinator: Mrs. Wong Yoke Mei
Objectives:
¾ To broadly define the role of banking supervision in
financial stability and the linkages between the two
¾ To discuss recent developments in banking and
banking supervision (eg: Basel II, credit risk transfer)
and identify how they have contributed to financial
stability
¾ To discuss the impact of banking sector problems
and crises and how preventive action can lessen the
consequences of financial instability.
Speakers will be drawn from the Financial Stability
Institute, Basel Committee, central banks and supervisory
authorities globally, and international financial institutions.
Target Group: Assistant Governors and senior directors
from central banks/monetary authorities in SEACEN
countries and in the Asia-Pacific region who have
responsibilities for banking and/or financial stability issues.
5th SEACEN-CPSS Advanced Course on Payment
and Settlement Systems for Emerging Economies
(Modular)
Venue:
Bangkok, Thailand
Date:
Host:
Bank of Thailand
Co-ordinator: Mrs. Kanaengnid Tantigate Quah
Objectives:
¾ To enhance knowledge of participants on the
operations and management of payment system at
an advanced level;
¾ To broaden the understanding of the role and impact
of payment system on monetary policy and financial
stability; and
¾ To exchange views and compare experiences on
policy and management of payment system in the
Asia-Pacific central banks.
Speakers will be drawn from the Committee
on Payment and Settlement Systems (CPSS) of the
BIS, European Central Banks, and central banks
in advanced economies as well as the SEACEN
region.
Target Group: Middle and senior level officials at the
level equivalent to Manager to Deputy Director, with 715 years experience dealing with payment and settlement
systems in central banks, monetary authorities, and official
agencies of countries that have a well-developed payment
system.
•
5 th Meeting of Directors of Payment and
Settlement Systems of Asia-Pacific Central
Banks
Venue:
Bangkok, Thailand
Date:
30 November - 2 December 2006
(3 days)
Host:
Bank of Thailand
This annual Meeting aims to provide a forum for
Directors of Payment and Settlement Systems (PSS)
Departments of central banks/monetary authorities in the
Asia-Pacific region to exchange views and experiences
on common issues of concern and interest. The theme
21
experience, at level equivalent to Manager to Deputy
Director. Preferably, they should have experience dealing
with at least two core functions of central bank.
•
of this meeting will be on Towards Less Cash Economy:
Strategics, Risks and Reality. There will be a closed-door
session to discuss the training programme for staff of
payment and settlement systems departments.
The 5th Meeting will be conducted in conjunction with
the 5th SEACEN-CPSS Advanced Course on Payment and
Settlement Systems. The Meeting will be preceded by a
seminar on payment system issues, which will be
identified in consultation with PSS Directors. Keynote
speakers for the Seminar will be experts from the CPSS
or other institutions.
•
1st SEACEN Advanced Leadership Course on
Central Bank Management and Policy (Flagship)
Venue:
Date:
7 - 19 January 2007 (13 days)
Host:
SEACEN Centre
Co-ordinator: Mr. Hsieh Jen-Chun
Objectives:
¾ To strengthen the participants’ leadership and
professional competency skills on central bank
management and policy;
¾ To familiarise the participants with a broad
perspective on the knowledge and expertise in core
central bank functions; and
¾ To present the participants with an insight into the
practice of monetary management and the
coordination of monetary and other macroeconomic
policies.
2nd SEACEN/World Bank Advanced Seminar on
Comparative Experiences in Confronting
Banking Sector Problems in the Asia-Pacific
Region
Venue:
Kathmandu, Nepal
Date:
23 - 26 January 2007 (4 days)
Host:
Nepal Rastra Bank
Co-ordinator: Mr. Liew Khim Boon
Objectives:
¾ To review the experiences of Asia-Pacific countries
in dealing with bank insolvency;
¾ To draw on best practices that may guide countries
to strengthen their legal, regulatory and institutional
framework to deal with bank insolvency; and
¾ To provide participants the opportunity to share
experiences and to build cross-border cooperation.
The faculty of resource persons will be drawn from the
World Bank, international financial institutions, central
banks and the academics in the Asia-Pacific region.
Target Group: Senior officers of central banks, with 715 years experience in the relevant fields of bank
supervision, bank restructuring, and resolution of problem
banks.
• 5th Meeting of SEACEN Executive Committee
Venue:
Bandar Seri Begawan, Brunei
Date:
January 2007 (3 days)
Host:
Ministry of Finance
This Course will be conducted in collaboration with
renowned international institutions and training providers.
The collaboration will encompass course design and
syllabus, course materials, instructional techniques, as well
as identification of a faculty of speakers and Programme
Director who is responsible for overseeing day-to-day
running of the Course and provides technical assistance
to participants during the Course.
The annual Meeting is held to discuss and approve
SEACEN operations, budget and activities for the
forthcoming year. The Meeting agenda will include a
review of the SEACEN activities for OY 2006/07 and
approval of the proposed activities and budget for OY
2007/08; deliberation and approval of matters concerning
management and supervision of the SEACEN Centre; and
recommendations to the SEACEN Board of Governors
on matters and policies of strategic importance to the
SEACEN Centre.
Target Group: Senior officials from central banks/
monetary authorities who have potential to be heads of
departments or members of the policy–making committees
in their institutions. They should have 7-15 years working
The Meeting will be preceded by a high-level seminar on
topic of current interest to the SEACEN EXCO. Topic
for the seminar will be identified in consultation with the
SEACEN EXCO members.
22
FORTHCOMING STUDY VISIT AND TRAINING IN
SEACEN MEMBER BANKS IN 2006/07
(Open to Eligible Participants from
Other SEACEN Member Banks)
Target Group:
Mid-level officials from central banks and monetary
authorities around the world (by invitation only)
•
International Seminar on Global Imbalances and
Their Impacts on Emerging Market Economies:
Issues and Challenges
Host:
Bank Indonesia
Venue:
Denpasar, Bali
Dates:
16-17 November 2006
Contact persons:
Mr. Hoon-Koo Kang, Economist
Email: [email protected]
Ms. Hye-Rin Han, Junior Economist
Objectives:
To provide understanding of the origins of global
imbalances, to re-examine views on the multiple solutions
and the risks to restore the imbalances, and to find a
cooperative solution that requires each region of the world,
especially the emerging economies to do its part.
•
Target Group:
Central bankers, academics, analysts from various
financial institutions, banking community, research
institutions, and representatives from multilateral
institutions such as the IMF, World Bank and ADB (by
invitation only).
Contact Persons:
Mrs. Sri Liani Suselo, economist
Mr. Sudiro Pambudi, economist
Mr. Purwanto, assistant economist
The Regional Leadership Programme for
Securities Regulators
Host:
Co-organised by the Monetary Authority
of Singapore (MAS) and the Toronto
International Leadership Centre for
Financial Sector Supervision (Toronto
Centre)
Venue:
Singapore
Dates:
14 – 19 January 2007
Target Group:
Registration is open to regional securities supervisors/
regulators. Deadline for registration is 17 November 06.
Contact Person:
Ms Ngoh Eng Eng, Assistant Director
Tel.: 65-62299346
• 14th Central Banking Seminar
Host:
The Bank of Korea
Venue:
Seoul, Korea
Dates:
7-10 November 2006
Topic:
Globalisation and Its Implications for
Monetary Policy
Objectives:
To discuss the Globalisation and Its Implications for
Monetary Policy, as well as to promote friendly relations
among central banks
23
NEWS ON MONETARY AND FINANCIAL DEVELOPMENTS
MINISTRY OF
FINANCE,
BRUNEI
DARUSSALAM
BRUNEI CURRENCY AND
MONETARY BOARD ISSUES
COMMEMORATIVE COINS IN
CONJUNCTION WITH THE
60TH BIRTHDAY OF HIS
MAJESTY PADUKA SERI
BAGINDA SULTAN HAJI
HASSANAL BOLKIAH
MU’IZZADDIN WADDAULAH
IBNI AL-MARHUM SULTAN
HAJI OMAR ‘ALI
SAIFUDDIEN SA’ADUL
KHAIRI WADDIEN SULTAN
AND YANG DI-PERTUAN OF
BRUNEI DARUSSALAM
On 15 July 2006, Brunei
Darussalam celebrated the 60 th
Birthday of His Majesty the Sultan
and Yang Di-Pertuan of Brunei
Darussalam. In conjunction with the
auspicious occasion, Brunei
Currency and Monetary Board has
issued
three
types
of
commemorative coins in limited
mintage for all avid collectors. The
first type is the gold proof coin with
face value of B$200, second type is
the silver proof coin with face value
of B$20 and the third is the
cupronickel coin with face value of
B$2. The observe of these coins
features the colour portrait of His
Majesty in traditional ceremonial
24
costume and the reserve of the coins
features the portrait of His Majesty
and his personal crest in full colour.
These collectible coins are packed
in 3-in-1 special wooden boxes of
200 sets and also individually boxed
for 200 pieces of gold proof, 200
pieces of silver proof and 200 pieces
of cupronickel coins.
BRUNEI DARUSSALAM: 2005
ANNUAL FISCAL AND
MONETARY REVIEW
Executive Summary
In line with the Government’s
continuous efforts to diversify the
economy, the Ministry of Finance
has taken the initiative to develop the
domestic capital market by
embarking on the project to issue the
first government securities known as
Brunei Dollar Short-Term Sukuk AlIjarah. On the eve of Hari Raya
Aidilfitri, 3rd November 2005, His
Majesty the Sultan and Yang DiPertuan of Brunei Darussalam
announced that Brunei Darussalam
would be the first Islamic country
to issue short-term Sukuk Al-Ijarah
in accordance with Islamic principles
of Syara’. Sukuk Al-Ijarah is
generally an alternative to
conventional bonds that involves the
buying, selling and leasing of assets
(e.g., government buildings). The
structure of Sukuk does not involve
any element of interest (Riba), which
is prohibited in Islam, but instead the
payment of rent for leased
properties.
The issuance of the Sukuk-AlIjarah is also aimed at encouraging
other entities in the country, including major corporations, to issue
their own sukuk as an alternative
source of funding and thus encourage a higher level of sophistication
in modes of financing in the country.
Another objective of the project is
to provide opportunities for the
public to invest in domestic financial
products based on Islamic principles.
The higher prices of oil
throughout 2005 have led to another
bountiful year for Brunei
Darussalam. Both the fiscal and
external accounts were in huge
surpluses. Inflation, as reflected by
the Consumer Price Index (CPI),
continued to be benign, as in
previous years.
In Q3 2005/06 (Sept. ’05 –
Dec. ’05), Brunei Darussalam
experienced a fiscal surplus of
B$962.1 million. Total Government
Revenue increased by 27.4 percent
(y-o-y) to B$2,201.8 million in Q3
2005/06 from B$1728.5 million in
Q3 2004/05. In terms of revenue
composition, Tax Revenue showed
an increase of 45.5 percent (y-o-y)
to B$1,496.5 million which mainly
reflected the rise in Tax Revenue
collection from the Oil/Gas Sector
whereas Non-Tax Revenue only
increased slightly by 0.8 percent.
Total Government Expenditure
declined by 7.5 percent (y-o-y) as a
result of the decline in current
expenditure.
Currency in circulation,
expanded by 4.4 percent to B$600.7
million, while M1 experienced a
slight increase of 1.3 percent.
However, Quasi Money declined by
7.3 percent leading to overall
decrease in Broad Money by 4.1
percent from the previous year.
Interest rates are significantly lower
as compared to previous years.
In the Banking Sector, total
assets increased by 4.9 percent to
B$15,186.3 million. In May 2005,
MOF issued a directive to the Brunei
Association of Banks which is aimed
primarily to reduce banks’ exposure
to personal loan. However, nonperforming loans have continued to
increase to 12.2 percent by the end
of 2005.
NATIONAL
BANK OF
CAMBODIA
ECONOMIC
GROWTH
Real or constant 2000 price
GDP for the June quarter 2006 was
5,794 billion riels (USD 1,415
million), a decrease of 1.6 percent
compared to the March quarter 2006
estimate of 5,887 billion riels (USD
1,443 million) and up 12 percent
compared to 5,176 billion riels (USD
1,277 million) estimated for the June
quarter 2005. The GDP growth rate
for the four quarters ending June
2006, compared to the four quarters
ending June 2005, was 13.4 percent.
The decrease in the real GDP in the
period under consideration was due
to seasonal decreases in agriculture
sector production and in the services
sector (tourism industry) of 11.5
percent and 0.3 percent respectively,
which was partly offset by an
expansion in the industry sector of
7.2 percent.
RETAIL PRICES AND
INFLATIONS
The upswing in inflation that
began during the first quarter of
2004 and continued during 2005 on
account of higher global oil prices
and higher prices of some local
products has been contained to
some extent during 2006. The
Consumer Price Index (CPI,
2000=100) rose by 2.8 percent in the
second quarter of 2006 and at a faster
rate of 3.3 percent during the twomonth period to August 2006, which
was still below the average quarterly
inflation rate of 3.4 percent observed
in 2004. The high increase in the CPI
during July and August 2006
compared with the inflation
movements during the fist half of the
year, was largely due to accelerating
prices of services related to
transportation and communication. The
pass-through effects of higher
petroleum prices continued to be felt
at the domestic price level. Though
price increases were recorded in all
the eight subgroups of the overall CPI,
the index of the sub-group of
Transportation & Telecommunication
recorded the highest increase of 3.8
percent, followed by increase in the
index of subgroup Housing & Utilities
and Medical Care of 1.6 and 1.3
percent, respectively in July-August
period compared with June quarter
2006.
The inflation rate (measured by
the annual changes in the three-month
moving average CPI) was 4.7 percent
in August 2006, as against 6.6 percent
in December 2005.
EXCHANGE RATE
MOVEMENTS
The exchange rate policy
conducted by the National Bank
of Cambodia (NBC) since
the
introduction
of
the
market economy in the early 90s is
to stimulate price stability, support
environment
for
economic
sustainable growth, and to decrease
financial and business risks, by way
of keeping stable value of the
national currency, the riel.
25
During the September quarter,
on account of both domestic
(current account of the BOP) and
the external pressures, the nominal
exchange rate of the riel against the
US dollar, as measured by the
market purchase rate, continued to
slide gradually downward. The riel
depreciated by 70 riel or 1.7 percent
from its end-June level against the
US dollar to reach 4,188 riel per US
dollar at the end of September 2006.
INTEREST RATES
Interest rates here are defined
as simple average rates reported by
ten commercial banks (operating in
Cambodia) with highest level of
deposits. Average interest rates on
local currency (the riel) savings and
term deposits remained broadly
unchanged during the two-month
period of July and August. The
average interest rate on Cambodian
riel savings deposits increased by 1
percentage point to 1.9 percent per
annum in August compared to July
2006, while that on riel term deposits
ended at 3.6 percent per annum.
The average interest rate on
foreign currency (US dollar) savings
and term deposits, on the other hand,
increased slightly, rising from 0.9
and 2.9 percent per annum in June
to 1.0 and 3.0 percent per annum,
in August 2006, respectively.
Whereas foreign currency deposit
rates were up, the average foreign
currency lending rate remained
stable, ending the month of August
at 16.3 percent per annum.
MONETARY DEVELOPMENT
Monetary data are available only
up to August 2006. Broad money M2
is defined to include currency outside
banks, local currency demand
deposits, savings and time deposits,
and foreign currency deposits. In the
reporting period from June to August
2006, the total money supply as
measured by broad money M2
continued its increasing trend. M2
increased by 281.8 billion riel or 4.7
percent in August from a stock
position of 333.7 billion riel at the
end of June 2006. This represents a
growth at about the same pace as
compared to the previous quarter
growth of 5.8 percent. The increase
during this two-month period is
reflected in the increase of M2 in
both, July and August of 2.4 and 2.2
percent, respectively.
Narrow money has been
growing relatively slowly in the
course of the reviewed period. This
item is generally highly correlated
with movements of currency outside
banks, whereas demand deposits
remained small due to low returns
on such savings. Following an
increase of 4 percent in June quarter
2006, currency outside banks
expanded at a moderate pace, up by
just 1.3 percent during July and
August. The same period, however,
saw a decline in local currency
savings and time deposits of 20
billion riel or 18 percent, while the
foreign currency component of
broad money have been growing at
a solid pace. This latter item
added 282.3 billion riel or 6.4 percent
compared with a growth of 273.5
billion riel or 6.6 percent in the
quarter ended June 2006.
Both components of the
counterpart of money supply, the net
foreign assets and net domestic
assets of the banking sector recorded
increase. The vigorous growth in net
foreign assets of the banking system
was the main contributor to
monetary growth in the reporting
period as this item increased by
204.8 billion riel or 3.1 percent on
the level recorded in the quarter
ended June 2006. Around 93 percent
of this increase is accountable to the
rise in net foreign assets of the
Central Bank.
BANKING
SECTOR DEVELOPMENT
Overall, the Royal Government
of Cambodia realises that the pace
of Cambodia’s growth success will
depend very much on capital inflow,
domestic consumption, exports and
suitable fiscal policy. It will also
depend on the speed of banking
Elephants and their handlers putting on a show for tourists.
26
RESERVE BANK
OF FIJI
RECENT ECONOMIC
DEVELOPMENTS
Classical dancers of Cambodia.
reforms and the soundness and
viability of the financial system to
underpin the efficient transmission of
monetary policy and to encourage
the intermediation process. Over the
last decade, development in the
banking sector has been remarkable,
following the completion of banks
restructuring programme in 1999.
This was witnessed by banking and
financial stability, and increased
financial services promoted through
the institutional and legal reforms
under the 10-years financial sector
blueprint, a long-term financial
sector development plan adopted by
the government in 2001. Financial
deepening as measured by the ratio
of M2 to GDP has improved, rising
from a small level of about 8
percent in 1996 to more than
20 percent in August 2006. This
is an important indication of
growing confidence in the
banking sector.
The legal frameworks and
regulatory apparatus for central
banking, banking and microfinance
supervision, and banking business
have all been established. NBC’s
capacity in conducting both on-site
and off-site bank supervision has
been upgraded. Regulatory standards
have been gradually improved and
additional banking regulations have
also been issued to enhance the
banking system. The draft law also
envisages the establishment of the
Financial Intelligence Unit (FIU).
Recently, the legal framework for
leasing activities has been
established, helping to bridge
the gap of financial services in the
market and add a new source of
financing to those, especially the
SMEs, who do not have adequate
access to bank loans. Crucial
progress has also been achieved
with respect to the development of
a functioning payment system in
Cambodia through the adoption of
the Law on Negotiable Instruments
and Payments Transactions and its
implementing regulations.
Looking ahead, prudential
supervision will be further enhanced
to safeguard the soundness of the
banking system. In this context,
efforts will be made to tighten
enforcement
of
prudential
framework and to strengthen NBC’s
supervisory credibility.
The Fiji economy is forecast to
grow by 3.1 percent in 2006.
Domestic demand remains firm.
Partial indicators of consumption
such as domestic Value Added Tax
collections and imports of consumption goods grew on an annual
basis during the review period. In
addition, lending for consumption
purposes rose in July, while the results of the June Retail Sales Survey
indicate that retail sales are expected
to grow by around 4 percent this
year. Investment is also increasing
as suggested by rising imports of
investment goods on an annual basis
Evidence of strong domestic
economic activities can also be seen
in the increasing demand for energy.
For the first 8 months of the year,
electricity generated by the Fiji
Electricity Authority rose on an
annual basis. However, output in the
cane & sugar industries fell in the
first 3 months of the crushing
season. Gold output also fell by
around 60 percent on an annual
basis.
On the fiscal side, Cabinet has
approved $58.3 million be re-
27
deployed from the existing budget
to meet the extra-budgetary
requirements for the 2006 fiscal
year. In the Government’s Strategic
Policy Statement, it is anticipated that
the 2007 budget strategy will propose
a fiscal framework that ensures that
Government continues on the path
of fiscal consolidation in the medium
term 2007–2009. Government has
set a deficit target of 2.0 percent of
GDP for 2007, which it intends to
progressively reduce to 1.5 percent
of GDP in 2008 and to 1.0 percent
of GDP in 2009. The underlying
focus of the Government’s fiscal
policy over the medium term is to
reduce deficits and thereby constrain
the growth in levels of Government
debt, whilst supporting investment,
exports growth and essential
services. Government projects its
debt to increase slightly from
52.2 percent of GDP this year
to 52.8 percent of GDP in
2007, before falling to 50.3 percent
in 2008.
In July, total money supply
grew at a slower pace of
15.9
percent
and
private
sector credit growth slowed
slightly to 28.6 percent. Similarly,
commercial bank lending eased
further due to a slowdown in lending
to private individuals; wholesale &
retail and hotels & restaurants; real
estate and manufacturing sectors.
New lending by commercial
banks also fell. Lending for
consumption purposes slowed
down, but lending for investment
picked up further pace in July. The
growth in lending by Licensed Credit
Institutions (LCIs) also slowed
down.
28
prices for food, durable
household
goods,
clothing & footwear
and housing.
The
trimmed
mean
remained unchanged
at 1.6 percent. The
year-end
inflation
forecast
however,
remains unchanged at
3.5 percent.
The
Overseas
Exchange Transactions
data
show
that
cumulative to July this
year,
merchandise
exports fell by 11.2
percent due to lower
The ceremonial mixing of kava, made from the
receipts from sugar,
crushed root of the pepper plant, in Namuamua, Fiji.
ginger, fish, mineral
The slowdown in credit is
water, textiles, clothing & footwear
a reflection of higher interest
and other re-exports, which more
rates, which maintained an upward
than offset the higher inflows from
trend in July. Commercial banks’
gold, copra, timber, re-exports of
time deposit, savings deposit
mineral fuels and other exports.
and lending rates (for both
Merchandise imports rose by 11.6
outstanding holdings and new
percent during the same period, the
transactions) all showed an increase.
increase was evident across all
While the new time deposit rates
categories.
offered by LCIs fell by 10 basis
Employment conditions remain
points in July, the interest rates
positive. Cumulative to August,
charged on new loans increased
around 6,100 taxpayers were
substantially.
registered, an annual increase
The combined effects of strong
of around 16 percent.
The
global conditions and firm domestic
highest number of new taxpayers
demand are exerting some pressure
so far have been registered in
on domestic price movements.
the
community,
social
&
Inflationary pressures are further
personal services sector, followed
boosted by higher international crude
by the wholesale, retail trade,
oil prices.
restaurants & hotel; finance,
insurance, real estate & business
In August, inflation rose to
services; manufacturing, transport,
2.9 percent, compared with 1.8
storage & communications and
percent in July due to higher
construction sectors.
RESERVE BANK RELEASES
2005 INSURANCE
ANNUAL REPORT
The Minister for Finance
and National Planning, Hon.
Ratu Jone Yavala Kubuabola tabled
the 2005 Insurance Annual Report
of the Reserve Bank of Fiji in
increases in rates this year and
The
F$10
will
carry
the rise in the statutory deposits
Kaleidoscope™, a metallic foil
of commercial banks is still
overprinted such that an effect of
working itself out in the financial
movement is achieved when the note
market and the Bank is monitoring
is angled. The security threads will
these developments closely”.
appear to the unaided eye just as they
RESERVE UNVEILS NEW
SECURITY FEATURES
Parliament on 7 August 2006. The
FOR NEW DESIGN
Report includes a review of the
thread will carry the text “RBF” plus
the Bank logo and will appear as a
series of shiny dashes on the surface
CURRENCY NOTES
operations of the Fiji Insurance
do in the current note series. The
of the paper and these will become
Industry for the year ended 31
The Reserve Bank of Fiji will
a solid line when held against the
December 2005 and also highlights
be issuing a new series of
light. The thread will not now be
the developments in the international
currency notes early in 2007.
fluorescent when illuminated with an
insurance market.
The notes will have improved
ultraviolet light; instead the
security features, and these features
fluorescence will appear as a
were introduced to the press on
design elsewhere on the note, in
Friday 22 September at the Reserve
two colours. The Fijian effigy will
Bank building.
remain as the watermark. It will
Governor of the Reserve
Bank of Fiji, Mr. Savenaca
Narube said the Fiji insurance
industry maintained its growth
be accompanied by a bright
in 2005 with healthy operating
Many of the features which
numeral within the paper which
results underpinned by improved
have become familiar to the public
will indicate the denomination of
underwriting
investment
will remain the same or similar
the note.
performances. Mr. Narube stated
(raised printing; very small text
that the Bank continued to develop
visible only with a magnifier; anti-
The new F$100 denomination
its supervision practice to bring to
photocopier and scanner line
will carry a brand new security
bring it in line with international
patterns; closely registered images
feature called Optiks™ which is a
standards. The Bank also increased
etc.)
form.
very wide security tape will carry
its focus on risk identification and
Holograms carrying the same images
an image of typical Fijian emblems
assessment and conducted its on-site
as at present will remain on the F$20
and will appear as an aperture on the
reviews of insurance companies in
and F$50 denominations.
front of the note.
and
or
in
improved
2005.
RESERVE BANK BOARD
LEAVES INTEREST RATE
UNCHANGED
The Board of the Reserve
Bank of Fiji in its meeting on
1 September 2006 decided to
leave interest rate unchanged.
The Governor and Chairman of
the Board, Mr. Savenaca Narube
said that “The impact of the
Fijian traditional dance.
29
BANK
INDONESIA
ECONOMIC GROWTH
CONTINUES
The Indonesian economy
continued to grow in Q2/2006 at
5.22% (yoy), higher than that the
previous quarter at 4.7% (yoy). On
the demand side, the growth was
driven mainly by consumption,
particularly government consumption. In Q2/2006, consumption
increased 5.83% (yoy), higher than
the previous quarter of 3.88% (yoy).
Investment, however, declined by
0.98% (yoy) due to the slow
improvement in the country’s
investment climate and decline in
consumers’ real income following
the hike in domestic fuel prices.
Exports continued to expand
accompanied by increasing imports.
On the supply side, growth was
largely contributed by the transportation & communication sector and
construction sector. The mining and
agriculture sectors also expanded in
line with increasing demand of these
sectors in the global market.
Looking ahead, the economy is
expected to improve further in Q3/
2006. Against this background,
GDP growth for 2006 is expected
to be around 5-5.7% yoy, assuming
that global environment remains
favourable, monetary policy stance
is yet to be loosened, and higher
expected income is to be realised
along improvement in the labour
market, whereas investment is to
remain subdued.
30
Barong & Legong Dancers performing
traditional dance from Bali, Indonesia.
MONETARY POLICY AND
INDICATORS
Inflation
The downtrend of inflation
continued in Q3/2006. In August
2006, CPI inflation increased 0.33%
(mtm) and 14.9% (yoy), lower than
that the previous quarter of 0.45%
(mtm) and 15.15% (yoy). Inflation
pressures came from seasonal
factors related to the beginning of
the new school year and hike in food
prices especially for rice. This
brought CPI inflation for the January-August 2006 period to 3.67%
(yoy). During the same period, core
inflation rose to 0.78% (mtm) or
9.68% (yoy), for which public
expectations were the major driving
factors, whereas imported inflation
and output gap were quite trivial.
Looking ahead, CPI and core
inflation will remain within the target
range. In Q3/2006, CPI inflation is
expected within the target range of
14-16% (yoy), and core inflation 810% (yoy). Throughout 2006, CPI
inflation and core inflation are
expected to reach 6-8% (yoy) and
5-7% (yoy), respectively.
Rupiah Exchange Rate
The rupiah charted further gains
against the USD. Rupiah appreciation
in August 2006 was supported by
improvements in macroeconomic
indicators, continued attractive yields
on rupiah investments, and lifting of
pressure from the tightening cycle
in US interest rate. These positive
developments proved attractive for
foreign capital flows in the domestic
financial market. However, at the end
of the month, the rupiah came under
downward pressure resulting from
the expectations of the cooling of the
US economy which is likely to
impact Asian exports to the US, in
addition to expectations of narrowing
interest rate differential. On average,
the rupiah exchange rate appreciated
0.41% from Rp9.131 per USD in
July 2006 to Rp 9094 per USD in
August 2006. As a result, the
average exchange rate for JanuaryAugust 2006 appreciated to Rp9183
per USD. At the same time, volatility
remained under control, easing from
1.36% in July to 0.36% in August
2006.
Looking ahead, the appreciating
trend is expected to continue for the
rest of 2006. Optimism on the
appreciating trend is supported by
favourable developments in both
external and domestic sides.
Considering this, the average rupiah
exchange rate during 2006 is
expected to reach Rp9183,
representing a 5.46% appreciation
from the previous year.
Monetary Policy Strategy
In August 2006, Bank Indonesia
decided to lower BI rate by 50 bps
from 12.25% to 11.75%. This
decision was taken following the two
25 bps cuts in May and June 2006.
The reduction in the BI Rate was
adopted in line with macroeconomic
stability, improvement in external
risks, findings from various surveys,
and favourable economic and
monetary outlook. The decision
remained in line with the inflation
target of 8%±1% for 2006 and
6%±1% for 2007.
Interest Rates
Reductions in the BI rate were
followed by cuts in guarantee rates
and bank deposit rates. During
August15-September 14, 2006, 1month rupiah deposit guarantee rate
fell 25 bps to 11.75%. This was
followed by a reduction in 1-month
time deposit counter rate to 10%
from 10.2%. At the same time, the
weighted average 1-month rupiah
deposit rate for July 2006 was
recorded at 11.1%. The fall in
deposit rates was in tandem with the
downward trending in time deposit
rates since February 2006.
by increased loan disbursements
whereas funds mobilisation declined.
In July 2006, bank lending expanded
by Rp1 trillion, with an annual
growth of 11.9% (yoy). At the same
time, mobilisation of bank deposits
slowed with an annual expansion of
14.3% (yoy), down from the
previous month’s growth of 15.6%
(yoy).
Liquidity continued to expand,
even though at a slower pace than
the previous month. Annual growth
in M1 was 16.8% (yoy), slightly less
than the 17% (yoy) of the preceding
month. M2 growth was 14.7%
(yoy), down from the previous
month’s level of 16.8 (yoy). With
growth at these levels, the M1
growth remained positive, while the
M2 growth became negative.
Capital Market
The 50 bps cut in BI rate to
11.75% set off a wave of bullish
trading in the Jakarta Stock
Exchange. The decision to cut BI
Rate was warmly welcomed by the
stock market as shown by steady
gains in the JSX index.
Improvements in expectations in the
wake of the interest rate decline were
reportedly key to the bullish market
activity. Other internal factor
included positive outlook on the
Indonesian economy following the
release of robust growth figures by
the Central Statistic Agency. On the
external side, the FOMC decision on
August 8 to pause interest rate hikes
prompted even more buying by
investors.
Condition of the Banking System
The reduction in BI rate in July
2006 was followed by an increase
in bank lending and decline in bank
deposits. By the end of July 2006,
loan disbursements were up by Rp
1.1 trillion at Rp 758.4 trillion
(expanding by 3.9% relative to
December 2005) whereas bank
deposits were down Rp 7.3 trillion
from the previous month at Rp
1.161 trillion. As a result, the loan
to deposit ratio (LDR) increased
slightly from 61.2% in June to
61.7%, indicating improvements in
banks’ intermediation. Higher LDR,
however, was accompanied by a
slight increase in non-performing
loans (NPLs) ratio to 8.9% (gross)
from the previous 8.7%.
Loan rates also eased in line
with movements in the base lending
rate. In August 2006, the base
lending rate eased slightly to 15.7%
from 15.8% in the previous month.
At the end of July, the weighted
average rate for working capital
credit eased slightly to 16.1%
from 16.2%, whereas consumption credit increased
from
17.8% to 17.9%.
Funds, Credit, and Money Supply
The cut in BI Rate was followed
Ramayana Dance from Indonesia.
31
THE BANK
OF KOREA
MACROECONOMIC
DEVELOPMENTS
The Korean economy has
shown sustained recovery since mid2005. The Bank of Korea announced
on September 1 that the preliminary
second quarter seasonally adjusted
GDP growth rate was 0.8 periodon-period and 5.3% year-on-year.
Looking at recent real
economic activities, exports have
continued to exhibit steady growth
and the private consumption
recovery has been maintained, while
construction investment shows
lackluster movements. The pace of
increase in prices has been
accelerating gradually due to the
business recovery and to high oil
prices. The CPI index rose 2.9%
year-on-year in August, after
increasing 2.3% in July.
MONETARY POLICY
The Bank of Korea had taken
an accommodative policy stance
since 2001, in order to help to
prevent recession. The resulting low
interest rate environment did give rise
to some side-effects, however,
including the short-termization of
domestic financial assets, excess
liquidity and mounting upward
pressures on asset prices.
32
Traditional Korean dance.
With the economy recovered
since mid-2005, The Bank of Korea
has reduced its accommodativeness
in order to deal with these sideeffects and to counter inflationary
pressures preemptively. The Bank
of Korea raised its policy rate,
the overnight call rate target,
from 4.25 per cent to 4.50 per
cent on August 10, 2006. It was the
fifth increase in the rate since
October 2005.
MONETARY CONDITIONS AND
FINANCIAL MARKETS
Year-on-year M2 growth is
estimated to have risen slightly from
7.2% in the second quarter to the
mid-7% level in the third quarter.
This was mainly attributable to
increased domestic credit mainly
through bank lending despite the
increased withdrawal of currency
through the overseas sector.
The yield on 10-year Treasury
bonds continued a gentle downward
trend during the third quarter, on
concerns about possible economic
slowdown, a fall in U.S. Treasury
bond yields, and foreign investors’
net purchase of Treasury bond
futures. It decreased from 5.20% at
the end of June to 4.96% at the end
of August. However, the yield on 3month CDs rose from 4.59% at the
end of June to 4.67% at the end of
August, affected by the hike in the
call rate target on August 10.
The KOSPI has shown a
relatively large increase, from
1249.2p at the end of June to 1,353p
at the end of August, due to rising
stock prices in major markets, to
expectations of improvement in the
information technology industries, to
decreasing global oil prices and to
foreign investors’ net purchases of
futures. Bank lending to the corporate
sector increased at a slightly slower
pace in July and in August than
June.
Bank lending to SMEs increased
by just 2.4 trillion won in August, a
similar amount to the 2.0 trillion won
recorded the previous month, and
marking a slowdown from the rapid
growth during the first half. Net
redemption of corporate bonds
issued through public subscription
continued for the fourth consecutive
month in August(-0.6 trillion won in
Jul. ----> -0.5 trillion won in Aug.),
owing to sluggish demand for longterm capital and to bank acquisitions
of private placement bonds.
Bank lending to the household
sector rose by 2.7 trillion won in
August - a somewhat greater
increase than the 2.5 trillion won
amount in July. Loans secured by
mortgage exhibited substantially
slowed growth (+2.3 trillion won in
Jul. ----> +1.3 trillion won in Aug.),
owing to a rise in lending rates and
to sluggishness in housing
transactions. However, loans taken
out by holders of overdraft accounts
showed a huge increase (-17.8 billion
won in Jul ----> +1.6 trillion won in
Aug.), due to seasonal expenditures
including those for vacations and for
student school payments.
FOREIGN EXCHANGE
MARKET
The won/dollar exchange rate
was stable in a range between 960
and 980 from February to March,
but declined sharply to 927.9
following the FOMC’s statement
implying a halt to its rate hikes and
Korean exporters’ huge dollar selling
in May. It rose with off-shore dollar
buying and outflows of foreign
stock investment funds at the end
of May, and has since then been
between 940 and 970. It stood at
961.5 won to the dollar at the end
of August.
THE BANK OF
MONGOLIA
MONEY INDICATORS
In the first 8 months of 2006,
money supply (M2) increased by
MNT 434.7 billion or 40.2 percent
from the same period of the previous
year, MNT 18.2 billion or 1.2
percent from the previous month,
and reached a level of MNT 1.5
trillion. In comparison with the same
period of the previous year, 88.5
percent of growth in money supply
came from change in quasi money
and remaining 11.5 percent from M1
aggregate. In particular, main growth
of money supply was increase in
savings.
Money supply consists of quasi
money (77.4%) and M1 (22.6%)
which in turn consists of currency
outside banks (13.5%) and current
accounts (9.2%). In the reporting
month, M1 increased by MNT 49.8
billion or 17.0 percent from the same
period of last year and by MNT 18.0
billion or 5.5 percent from the
previous month, respectively.
Majority or 70.0 percent of annual
growth in M1 came from change in
current accounts of individuals and
entities and 30.0 percent from
change in currency outside banks.
Quasi money increased by MNT
384.9 billion or 48.8 percent from
the same period of the previous year
and by MNT 26.8 billion or 2.3
percent from the previous month.
In terms of monthly changes, foreign
currency denominated deposits
increased by MNT 13.3 billion, while
togrog denominated deposits
decreased by the same amount.
Currency outside banks accounted
for 80.8 percent of currency in
circulation,
which
is
2.3
percentage points higher than
the
previous
month
and
5.6 percentage points less then the
same period of last year.
Cash in circulation increased by
3.1 percent from the previous month
and by 15.4 percent from the same
period of last year to MNT 252.9
billion. At the end of August 2006,
reserve money grew by MNT 6.1
billion or 1.7 percent from the
previous month, by MNT 40.3 billion
or 12.0 percent from the same
period of last year and reached MNT
374.9 billion. On the asset side, net
foreign assets comprised 60.8
percent of money supply and net
domestic assets 39.2 percent.
However, in the same time of last
year, these ratios were 43.4 percent
and 57.6 percent, respectively. This
indicates faster growth of foreign
assets. In general, banks and their
customers make decision on
allocation of their assets based on
market tendency and available
information, especially interest and
exchange rate.
Net domestic credit from
banking sector increased by MNT
139.4 billion or 19.2 percent and
reached MNT 865.5 billion. As a
result, the General government fiscal
balance recorded a surplus and net
credit to Government was reduced.
Moreover, credit to individuals
increased by MNT 162.2 billion or
57.3 percent, to private sector by
MNT 177.3 billion or 40.5 percent,
and to public sector by MNT 11.9
billion or 69.5 percent.
PRICES
According to the National
Statistical Office report, at the end
of August 2006, inflation measured
by CPI climbed up by 46.9 percent
from December 2000 (base period),
33
by 4.7 percent from the same period
of last year, 5.3 percent from the
beginning of the year, and fell 0.6
percent from the previous month. In
August 2005, the annual change in
CPI was 11.7 percent, whereas it
decreased to 4.7 in August of this
year.
LOANS,
INTEREST RATES
At the end of the reporting
month, loans to business entities and
individuals increased by MNT 351.7
billion or 46.7 percent from the same
period of last year, and by MNT
17.9 billion or 1.6 percent from the
previous month reaching MNT 1.1
trillion.
In the reporting month, banks
issued MNT 177.5 billion in loans,
of which 60.2 percent was togrog
denominated loans and 39.8 percent
was foreign currency denominated
loans. Banks issued MNT 1.2 trillion
loans since the beginning of the
year, of which togrog denominated
loans accounted for 59.8 percent
and 40.2 percent foreign currency
denominated loans.
Standard loans accounted for
91.2 percent of total loans, past due
in arrears 2.7 percent, and nonperforming loans 6.1 percent,
respectively.
According
to
classification of loans by type of
borrowers, loans to the private sector
made up 55.7 percent of total
loans, individuals 40.3 percent,
public sector 2.6, and other
sectors 1.4 percent, respectively.
Banks’ total non-performing
loans reached MNT 67.4 billion in
August 2006. The share of nonperforming loans in total outstanding
loans was 6.1 percent, which shows
reduction of 0.2 percentage points
from the previous month and 0.2
percentage points from the same
period of the previous year,
respectively.
34
Buddhist tsam mask dance, Mongolia.
Weighted average interest rate of
togrog loans was 28.1 percent,
which is 2.6 percentage points higher
than the previous month. The
weighted average interest rate of
foreign currency loans decreased
0.5 percentage points to 16.3
percent. Weighted average rate of
togrog loans decreased by 3.6
percentage points and weighted
average rate of forex loans by 1.7
percentage points compared to the
same period of last year. The Central
Bank bill interest rate reached 7.97
percent, which is 0.1 percentage
points higher than the previous
month and 0.8 percentage points
higher than the same period of last
year.
MONEY MARKET
In August 2006, banks
conducted transactions worth MNT
74.7 billion in the interbank market,
of which 70.6 percent was overnight
loans and 29.4 percent was repo
transactions. The annual weighted
average rate of these transactions
was 6.07 percent.
In the reporting month,
commercial banks have fully
satisfied the reserve requirements of
MNT 69.0 billion, and out of total
reserves of MNT 90.5 billion held
at the Bank of Mongolia, MNT 21.5
billion formed excess reserves.
FOREIGN TRADE, FOREIGN
RESERVES, AND EXCHANGE RATE
Exchange rate of togrog against
US dollar appreciated by MNT 1.0
or 0.1 percent from the previous
month, by MNT 37.0 or 3.1 percent
from the same period of last year,
and reached MNT 1168 at the end
of August 2006. The monthly
average exchange rate of togrog
against dollar was MNT 1168.35.
Moreover, Togrog depreciated by 1.0
percent against Euro, by 0.1 percent
against Renminbi compared to the
previous month.
Due to an effective management
of foreign reserves, official net
foreign reserves reached 455.0
million US dollars, which is enough
to cover 16.8 weeks of import. In
comparison with the same period of
the previous year, net foreign
reserves grew by 210.5 million US
dollars or 86.1 percent.
In comparison with the same
period of the previous year, exports
increased by 60.2 percent to 900.0
million US dollars and imports
increased by 32.0 percent to 940.5
million US dollars. External trade
turnover reached 1.8 billion dollars,
which is higher by 44.5 percent from
the same period of the previous year.
The trade deficit reached 40.6 million
dollars, which is a decrease of 110.0
million dollars.
NEPAL
RASTRA BANK
NRB UNVEILS MONETARY
POLICY FOR 2006/07
Nepal Rastra Bank, following
the enactment of NRB Act in 2002,
has announced the monetary policy
for FY 2006/07 on 23 July 2006.
This policy statement focuses on
broader macroeconomic objectives
of attaining price stability,
maintaining adequate level of
international reserves and ensuring
financial sector stability and thereby
facilitating high and sustainable
economic growth.
Policy Framework
The monetary policy framework
for 2006/07 has been prepared on
the basis of likely developments of
economic goals of monetary policy,
liquidity situation and experience
gained in the conduct of monetary
policy in the preceding years. The
monetary policy framework is also
forward looking as it is formulated
on the basis of economic outlook of
near future. Global economic
situation and the direction of
monetary policy stance of world
central banks are also taken into
consideration.
Policy Stance
A cautious but a tight monetary
policy stance has been adopted for
2006/07. Despite an adequate level
of liquidity, economic growth
remained low due to non-economic
factors. Interest rates are low due
to excess liquidity. However,
international short-term interest rates
are moving up. There is pressure on
inflation. Addressing
these
conflicting issues would be the focus
of monetary policy for 2006/07.
Economic Goals
The budget speech of 2006/07
has targeted economic growth at 5
percent. Without jeopardizing the
primary goal of monetary policy, i.e.
inflation, an adequate level of liquidity
aimed at facilitating the targeted
economic growth will be ensured.
initiated for banks failing to make
provisions for capital requirements:
a) distribution of dividend will be
banned,
b) branch expansion will not be
allowed,
c) a limit on deposit mobilization
will be imposed,
d) single obligor limit relating to
loans to an individual and a
company will be reduced,
e) any other actions will be
initiated.
Annual average CPI inflation is
projected at 6 percent for 2006/07.
Low food inflation due to the
prospect of good weather conditions
and low level of global inflation owing
to tight monetary policy stance by
the central banks around the world
are the underlying factors for
inflation projection at 6 percent.
These measures are expected to
encourage banks to go for merger
and acquisition in the event they fail
to mobilise the required capital.
Intermediate Targets
The
overall
monetary
management in 2006/07 will be in
keeping with the fixed exchange rate
regime and target of economic goals
as stated above. To guide the
monetary management, broad money
is projected to encourage financial
institutions to undertake debt
related mutual funds transactions.
According to the current provision,
a minimum paid up capital of Rs. 1
billion is required for the
establishment of a new national level
commercial bank. The existing
national level commercial banks are
required to increase their paid up
capital gradually to Rs 1 billion by
the end of mid-July 2009. For this
purpose, all commercial banks are
appropriating some amount from
their profit to the capital adjustment
fund. Accordingly, commercial banks
may maintain Rs 1 billion paid up
capital by the end of mid-July 2009
or, make adjustment in above stated
fund. Commercial banks are free to
decide on any of these options and
may go for combinations of these
two. The following measures will be
External Sector Reform
With a view to simplify the
settlement of petty transactions, a
limit of foreign exchange facilities to
be provided by commercial banks to
individuals and institutions has been
raised up from US$ 1500 to US$
2500. Commercial banks themselves
are allowed to provide foreign
exchange facilities up to US$ 5000
for individuals and US$ 10,000 for
a family (Nepalese citizens only)
migrating with valid visa to developed
countries like USA, Canada,
Australia, New Zeeland and UK. The
existing practice of gradually
increasing the number of items
importable against the payment of US
dollar from India will be continued.
The number of items allowed against
US dollar payment from India
currently stands at 91.
Capital adequacy ratio (CAR) is
fixed at 11 percent (including for the
computation of CAR for 2005/06)
till BASEL II is implemented.
The NRB will initiate and
implement policy measures relating
to entrepot trade. Nepalese traders
will be allowed to sell goods imported
through the import letter of credit
from exporters of any other
countries without entering the Nepal
35
border at prices higher than the
import prices to other countries.
NRB RELEASES
MACROECONOMIC
SITUATION OF 2005/06
Nepal Rastra Bank has released
the
annual
(August-July)
macroeconomic situation for the year
2005/06. The major highlights of the
report are as follows:
Real Sector
As per the preliminary estimates
of Central Bureau of Statistics
(CBS), Gross Domestic Product GDP (at 1994/95 prices) is estimated
to grow by 1.9 percent at
producers’ price in 2005/06. The
GDP had recorded a growth of 2.7
percent in 2004/05.
Monetary sector
Broad money (M2) expanded
significantly by 15.6 percent in 2005/
06 compared to a growth of 8.3
percent in 2004/05. The higher level
of remittance growth contributed to
such an increase of broad money.
Narrow money (M 1), witnessed a
higher growth of 13.9 percent in
2005/06. In the previous year, M1
had increased only by 6.6 percent.
Due to an encouraging inflow of
remittances, Net Foreign Asset
(NFA) increased by Rs 25.7 billion
(23.8 percent) in the review period
compared to Rs 5.7 billion (5.3
percent) in the previous year. The
domestic credit increased by 7.7
percent. This is lower than previous
year ’s growth of 13.8 percent.
Sluggish growth in private sector
credit and Nepal Bank Limited
(NBL)’s decision to write-off Rs 12
billion slowed down the growth of
domestic credit in the review period.
Banking sector’s claims on private
sector increased at a lower rate of
8.9 percent, compared to a growth
of 14.2 percent in the previous year.
Reserve money (RM), which had
registered a muted growth of 2.2
percent in 2004/05, accelerated to 14
percent in 2005/06. A significant
growth in the NFA of monetary
authority helped expand RM in the
review year.
Security Market
In the fiscal year 2005/06, Nepal
Security Board approved 33 financial
institutions to issue their ordinary
shares, right shares and debentures
worth Rs 2.1 billion and Taragaon
Regency Hotel to issue right share
amounting to Rs. 446.5 million.
Accordingly, 13 financial institutions
have been given approval to issue
right shares amounting to Rs. 795.0
million, 16 financial institutions to
issue ordinary share amounting to
Rs. 456.4 million and 4 financial
institutions to issue debentures
amounting to Rs. 850.0 million.
Market capitalisation, on a y-o-y
basis, increased by 57.7 percent to
Rs. 96.8 billion in mid-July 2006. The
market capitalisation to GDP ratio
increased by 5.1 percentage points
to 16.6 percent in mid-July 2006.
The total paid up value of listed
shares on a y-o-y basis increased by
19.0 percent to Rs. 19.9 billion in
mid-July 2006. Of the stock market
liquidity indicators, the turnover to
market capitalisation ratio increased
to 0.34 percent in mid-July 2006
from 0.32 percent a year ago.
Price Situation
In 2005/06, average annual
consumer inflation stood at 8.0
percent, compared to the level of 4.5
percent in 2004/05. On a y-o-y
basis, consumer price inflation
remained at 8.3 percent in mid-July
2006, compared to the level of 6.6
percent in mid-July 2005. The prices
of petroleum products went up by
35.7 percent that pushed up the
indices of household goods and
services as well as transportation fare
in 2005/06, generating an upward
pressure on inflation.
Fiscal Sector
In 2005/06, the total expenditure
of the government, on cash basis,
increased by 11.8 percent to Rs
101.0 billion. In 2004/05,
government expenditure had
increased by 11.4 percent. The
increase in total expenditure is
attributed to an increase in
security expenses and the capital
expenditure. In the review year,
total expenditure remained at 16.0
percent of the gross domestic
product. In the previous year,
the ratio was marginally higher
at 16.1 percent. In the review year,
the recurrent expenditure to GDP
ratio stood at 10.5 percent and the
ratio of capital expenditure to GDP
remained at 3.3 percent. In
the previous year, the ratios were
10.8 percent and 2.9 percent
respectively.
Against the double-digit growth
of 12.5 percent in the previous year,
the revenue receipts registered a
Nepali women carrying grass baskets on their backs.
36
modest growth of 3.1 percent in
2005/06. The reduction of customs
duty in half-yearly budget
announcement and the decrease in
dividends from the government
enterprises are responsible for the
low growth rate of government
revenue. In the review year, the
foreign cash grant increased to Rs
8.9 billion. In 2005/06, budget deficit
of the government excluding
local
authorities’
accounts
widened
by
32.9
percent
compared to a growth of 12.9
percent in the previous year.
to 63.6 percent in 2005/06 from
61.3 percent in the previous year
while the share of other countries
went down correspondingly to 36.4
percent from 38.7 percent. Trade
openness, calculated as the ratio of
the sum of imports and exports to
GDP, stood at 40.5 percent in 2005/
06 compared to 39.0 percent a year
earlier. Because of the higher rate of
growth of imports relative to
exports, trade deficit expanded by
25.5 percent in 2005/06 compared
to the growth of 10.2 percent in
2004/05.
External Sector
Exports went up by 4.2 percent
in 2005/06 compared to an increase
of 8.9 percent in 2004/05. As
percentage of GDP, exports
accounted for 10.5 percent in
comparison to 11.0 percent a year
earlier. Of the total exports, exports
to India rose by 5.4 percent in 2005/
06 in comparison to a significant
growth of 26.4 percent in 2004/05.
The additional 4 percent duty
imposed by India in March 2006
was the factor that adversely
affected exports to that country.
Exports to other countries rose by
1.8 percent in 2005/06 in contrast
to a significant decline of 14.5
percent a year earlier. Total imports
galloped by 17.1 percent in 2005/06
compared to an increase of 9.7
percent a year earlier. The share of
imports in GDP rose to 30.0 percent
in 2005/06 from 28.0 percent a year
earlier. Out of total imports, imports
from India soared by 23.3 percent
in 2005/06 in comparison to a
growth of 12.6 percent in 2004/05.
The significant rise in imports
from India was mainly ascribed
to the rise in the import of
petroleum products by 26.3 percent
in 2005/06.
The overall BOP registered a
surplus of Rs. 25.6 billion in 2005/
06 compared to a surplus of Rs. 5.7
billion a year earlier. The current
account registered a surplus of Rs.
13.8 billion in 2005/06 in comparison
to Rs. 11.5 billion a year earlier. This
was primarily attributed to the
surge in remittance inflows by
48.8 percent emanating from
the rise in the number of workers
going abroad.
As a result of the increase of
import from, and export to, India
relative to other countries, India’s
share in total trade went up slightly
In comparison to mid-July
2005, gross foreign exchange
reserves soared by 27.0 percent to
Rs. 165.0 billion in mid-July 2006
in contrast to a decline by 0.2
percent in the corresponding period
of the previous year. The driving
force for such increase in the gross
foreign
exchange
reserves
was mainly the consistent increase
in the workers’ remittances.
In 2005/06, the exchange rate
of the Nepali rupee vis-à-vis the
Indian rupee remained constant. In
comparison to mid-July 2005, the
rupee depreciated by 8.94 against the
British pound, 9.42 percent against
the Euro, 9.20 percent against the
Swiss franc and 1.56 percent against
the Japanese yen. Nepalese rupee
depreciated vis-à-vis the US dollar
by 5.06 percent in mid-July 2006 in
comparison to the level of mid-July
2005.
BANK OF
PAPUA NEW
GUINEA
ADOPTION OF NEW
IMF FINANCIAL
SURVEY METHODOLOGY
The Bank of Papua New Guinea
has adopted a new reporting system
for monetary and financial statistics to
conform with the IMF’s Monetary and
Financial Statistics Manual (MFSM)
2000. The extended coverage of the
financial sector now includes the other
depository financial corporations.
Previously, the monetary survey only
covers the Monetary Authority and the
commercial banks. The new financial
survey includes other depository
financial corporations such as finance
companies, merchant banks, Rural
Development Bank, Savings and Loans
Societies and micro-finance schemes.
While Bank of PNG has adopted this
new reporting system, some data from
these other depository corporations
are still being consolidated to
eventually produce a financial survey.
Consequently, broad money and
liquidity data have been revised back
to 2002 and PNG was among the first
group of countries to have these data
published in the IMF’s International
Financial Statistics Supplement in
September 2006.
MONETARY POLICY
Consistent with the July 2006
Monetary Policy Statement released by
the Governor, the Bank of PNG
maintained a neutral monetary policy
stance in the third quarter of 2006,
reflecting stable macroeconomic
conditions. The Bank’s official
signaling interest rate, the Kina Facility
Rate (KFR) was maintained at 6.0
37
percent in July, August and September
2006.
ECONOMIC AND
FINANCIAL DEVELOPMENTS
Interest Rates
The weighted average interest
rate for the 28-day Central Bank Bills
(CBB) increased to 3.87 percent at the
end of September from 3.49 percent at
the end of the June quarter, reflecting
increased volumes in the auctions with
the objective to align market interest
rates with the KFR. For the 63-day
CBBs, the rate increased to 3.93
percent from 3.77 percent over the same
period. Consistent with its Debt
Management Strategy of shifting
domestic debt from short to longer term
securities, and the large fiscal
surpluses arising from higher mineral
taxes, the Government retired all the
Treasury bills that matured during the
September quarter. The last Treasury
bill auction was in April 2006. The
weighted average interest rates on
large wholesale deposits increased
between the end of March and June
across all maturities.
The commercial banks’ Indicator
Lending Rate (ILR) spread was
maintained at 9.45 – 10.70 percent in
the September quarter. The margin
between the weighted average lending
and deposit rates declined to around
9.5 percent in August 2006, due to the
decline in the weighted average
lending rate combined with an
increase in the weighted average
deposit rate.
Inflation
Annual headline inflation was 2.3
percent in June 2006, compared to 1.8
percent in March 2006. The low
headline inflation outcome was
matched by low underlying inflation
rates during the quarter. Annual
trimmed mean inflation was 1.4 percent,
compared to 1.5 percent in the March
quarter. Annual exclusion-based
inflation was negative 0.6 percent,
compared to 0.1 percent in the March
quarter. The headline and underlying
38
inflation for 2006 and the medium term
are projected to be around 2.5 – 4.5
percent. The low underlying inflation
outcomes reflected the stability in the
exchange rate, prudent fiscal
management and improved confidence
in the economy.
Despite high international oil
prices, inflationary pressure seemed to
have had a little impact on domestic
inflation over the six months to June
2006. While being mindful of the lag
effects associated with the high oil
prices, the Bank expects low inflation
in 2006 based on the assumptions of
stable kina exchange rate, moderate
increase in foreign inflation in PNG’s
major trading partners and prudent
fiscal management by the Government.
The Exchange Rate
The Kina appreciated by 1.8
percent to US$0.3320 at the end of
September 2006 from US$0.3260 at the
end of June. Against the Australian
dollar, the Kina also appreciated by 1.2
percent to A$0.4439 from A$0.4386 over
the same period. The appreciation
against the US dollar was mainly due
to higher inflows for mineral taxes and
agricultural exports. For the remainder
of 2006, the kina is expected to remain
stable against the US dollar.
Lending
Commercial bank lending
extended to the private sector, official
entities and non-monetary financial
institutions increased by K92.7 million
between June and September 2006.
The increase in lending reflected
advances made mainly to the finance,
retail and other business sectors such
as hotels.
Lihir gold mine, New Ireland province.
Broad Money and Liquidity
Broad money increased by 37.6
percent over the year to August 2006,
compared to the corresponding period
in 2005. This was due to an increase
in the Central Bank’s foreign exchange
reserves, combined with an increase in
the private sector credit. Total liquid
assets of the commercial banks
increased by 18.0 percent to K3,141.6
million over the year to September
2006, mainly reflecting increased
holdings of short-term Government
securities.
Supervision of the Financial System
As at the end of September 2006,
the financial system consisted of 4
banks, 11 licensed financial
institutions (LFIs), 22 savings & loan
societies, 7 superannuation funds, 2
investment managers, 5 fund
administrators, 5 life insurance
companies and 2 life insurance brokers.
A total of 58 licensed financial
institutions.
Total assets of the financial
system, including authorised
superannuation funds (ASFs) and life
insurance companies, as at the end of
June 2006 was US$3 billion. The
commercial banks held 63.7 percent of
total assets of the system followed by
ASFs with 26.5 percent. Licensed
financial institutions and savings &
loan societies held 3.9 percent each,
while life insurance companies held 2
percent.
As at the end of June 2006
total deposits and loans of the
deposit-taking institutions were
US$1.7 billion and US$0.75 billion,
respectively. The market share of
total deposits represents 92.0
percent held by banks, 4.4 percent
by LFIs and 3.6 percent by savings
and loan societies.
The overall condition of the
financial system is satisfactory as
financial institutions continue to
maintain adequate capital, reasonable
earnings, improvement in asset quality
and sufficient liquid assets.
BANGKO
SENTRAL
NG PILIPINAS
I.
HIGHLIGHTS ON MONETARY AND FINANCIAL
DEVELPMENTS
The Tinikling. This is one of the best known Philippine dances in the world. Tinikling
imitates the unique movements of the Tikling birds as they walk between grass stems
and over tree branches or evade bamboo traps set by farmers. The dance is said to
have taken form in the Spanish era when natives worked in the haciendas of the
Spaniards and flourished during the Japanese and American colonial periods. They
danced the Tinikling in celebration after a hard day’s work or after a fruitful harvest.
INFLATION EASES
Headline inflation decelerated to
5.7 percent in September 2006 from
6.3 percent in August 2006, as all
commodity groups except clothing
registered lower inflation rates.
Inflationary pressures in September
were eased by lower prices of
gasoline and diesel, as well as food
items such as vegetables, seafoods,
chicken and pork.
BSP MAINTAINS KEY POLICY
RATES SINCE THE LAST
POLICY RATE INCREASE IN
OCTOBER 2005
In its latest policy meeting held
on 10 August 2006, the Monetary
Board decided to keep the BSP’s key
policy rates unchanged. The
Monetary Board indicated that the
evidence on output and inflation
supported a steady policy setting.
Latest BSP forecasts continued to
indicate a slowdown in inflation.
Demand-based pressures are likely
to remain limited, given the moderate
improvements in demand indicators
and weak credit activity.
GROWTH IN DOMESTIC
LIQUIDITY DECELERATES
Domestic liquidity or M3 growth
decelerated to 12.4 percent year-onyear in August from the 13.2 percent
growth registered in July, based on
preliminary data from the BSP’s
Depository Corporations Survey. On
a month-on-month basis, however,
M3 rose marginally by 0.6 percent
from negative 0.4 percent in July.
The slowdown in the growth of
domestic liquidity may be traced in
part to the decline in credits to the
public sector as a result of the
improved fiscal performance—even
as liquidity continued to grow,
driven by strong inflows from
overseas Filipino workers (OFW)
remittances. In particular, net
lending to the National Government
declined by 7.8 percent from a 3.0
percent growth in July. In addition,
growth in credits to the private
sector slowed down to 0.4 percent
from 0.5 percent in July. Inflows
from OFW remittances and foreign
investments helped the BSP and the
banks to build up their foreign assets
and reduce their foreign liabilities.
BANKING SYSTEM REMAINS
GENERALLY SOUND
BSP, loans and discounts,
investments and cash item accounts
of banks. Commercial banks
continued to hold the bulk of the
industry’s total resources with
almost 90 percent share. The asset
quality of the banking system
improved with the implementation of
the Special Purpose Vehicle Law. As
of end-July 2006, the nonperforming loan (NPL) ratio of
universal and commercial banks
further improved to 7.17 percent
from 7.22 percent at end-June 2006.
Commercial banks’ loans
outstanding grew at an annual rate
of 4.3 percent as of July 2006 to
reach P1.6 trillion. This is a reversal
from the 0.6 percent contraction
posted in June 2006. The following
sectors contributed to the overall
growth in commercial bank loans:
financial institutions, real estate and
business services sector; wholesale
and retail trade; and mining and
quarrying.
BOP YIELDS BIG SURPLUS
The banking system remained
fundamentally resilient. The total
resources of the banking system
rose by 1.7 percent from the endMay 2006 level to P4.64 trillion as
of end-June 2006. Compared with
the previous year, this was 3.2
percent higher due mainly to the
increase in banks’ deposits with the
On the external front, the
country’s overall balance of
payments position yielded a surplus
of US$2.14 billion for the first six
months of 2006, supported by strong
inflows of OFW remittances and
investments. These foreign exchange
inflows helped raise the country’s
39
gross international reserves (GIR) to
US$21.12 billion as of end-June
2006. The GIR rose further to a
record high of US$21.56 billion as
of end-September 2006 and provided
sufficient cover for 4.3 months of
imports of goods and payments of
services and income. At this level,
GIR was also equivalent to 3.9 times
the level of the country’s short-term
external debt based on original
maturity.
The strong foreign exchange
inflows from OFW remittances and
foreign investments, and the rising
confidence in the country’s
economic fundamentals and the
better-than-expected fiscal position
helped support the Philippine peso.
The peso continued to strengthen
against the dollar and averaged
P51.38/US$1 during the period 3
July to 27 September 2006 from
P52.21/US$1 in the second quarter.
II. ANNOUNCEMENTS
MAJOR POLICIES
ON
Recent BSP policy issuances
may be viewed at www.bsp.gov.ph.
These include:
BSP ISSUES
GUIDELINES FOR
BASEL II
The BSP issued on 4 August
2006 guidelines implementing major
revisions to the risk-based capital
adequacy framework which will take
effect on 1 July 2007, to align the
existing Basel I – compliant
framework with the new Basel II
standards. The present minimum
overall capital adequacy ratio (CAR)
of banks and quasi-banks has been
maintained at 10 percent. However,
consistent
with
Basel
II
recommendations, the guidelines
include major methodological
revisions to the calculation of
minimum capital that universal
banks, commercial banks and their
subsidiary banks and quasi-banks
40
should hold against actual credit risk
exposures. The Basel II implementing guidelines also include the
introduction of bank capital charge
for operational risk. The required
disclosures to the public of bank
capital structure and risk exposure
are also enhanced to promote greater
market discipline.
BSP ISSUES GUIDELINES ON
MANAGEMENT OF MARKET
AND LIQUIDITY RISKS
The BSP issued on 15
September 2006 two new guidelines
that set forth the expectations on
how financial institutions should
manage liquidity risks and market
risks, including interest rate risk. The
guidelines were formulated to ensure
that financial institutions have
sufficient knowledge and skills to
understand and effectively manage
market and liquidity risks. These
emphasise that the level of risk
exposure undertaken by financial
institutions and the proper
management of these risks are
primarily the responsibility of the
financial institutions. The adoption of
the guidelines communicate the
BSP’s implementation of the risk-
based approach to supervision,
which promotes the adoption of a
principle-based regulatory framework, rather than a prescription
approach to supervision.
BSP EXEMPTS GOVERNMENT
BANK LENDING TO
GOCCS FOR
PRIORITY PROGRAMMES
On 7 September 2006, the
Monetary Board, the policy-making
body of the BSP, decided to exempt
loans, other credit accommodations
and/or guarantees granted by
government banks to governmentowned or controlled corporations for
certain priority undertakings from
the ceilings (individual and
aggregate) on unsecured loans to
directors, officers, stockholders and
their related interests (DOSRI).
These include loans for: (1) relending
to other participating financial
institutions or end-users pursuant to
the National Government’s lending
programs; (2) rediscounting facilities
and guarantee programmes for loans
granted to the agricultural sector and
micro, small and medium
enterprises; and (3) priority
infrastructure projects.
'
The Igorot Dance.
Inhabiting the
mountainous Central
Cordilera region of
Northern Luzon are
six ethno-linguistic
tribes known as the
Ibaloy, Kankanay,
Ifugao, Kalinga,
Apayao, and Bontoc.
They prefer to be
called by their
respective tribal
names rather than the
collective term Igorot,
which is used by the
Spaniards and later
Christian lowlanders.
Indigenous tribes
preserve their
customs, lore and
tribal identity, their
dances reflecting their
unaffected way of life.
Igorot dances portray
primitive, religious
and secular rituals.
MONETARY AUTHORITY
OF SINGAPORE
CENTRAL BANK
OF SRI LANKA
SRI LANKAN ECONOMY
GREW AT A HEALTHY
RATE IN THE FIRST HALF
OF THE YEAR.
A traditional Lion Dance, Singapore.
Singapore hosted the IMF/WB
2006 Meetings in September. As this
marked the return of the Annual
Meetings to Asia since 1997, it
was an important occasion for
Asia to demonstrate the significant
developments and structural reforms
that have taken place since the Asian
Financial Crisis. As host, Singapore
took the opportunity to ensure that
a consistent message of a rising and
strengthening Asia was reiterated at
the various platforms during the
IMF/WB meetings. More specifically, we wanted to impress that
the Asian growth story is not
just about China and India, but also
an increasingly vibrant Southeast
Asia.
Our message to the global
financial audience was simple: Asia
is on the rise, Asia is getting more
integrated, Asia is globally connected.
Bringing the meeting to Asia
presented a good opportunity for the
international financial community to
gather again in Asia to review and
discuss the developments, opportunities, exchange ideas and explore
collaborations and the opportunities
they bring to Asia. The meetings in
Singapore allowed them to witness
first hand how the Asian economies
have turned around and why Asia
will continue to be the fastest
growing region in the world.
The meeting recorded the
highest ever attendance with 23,000
registered delegates, including
11,000 official delegates from outside
Singapore and almost 5,000 private
sector participants who flew in for
the meetings.
The Monetary Authority of
Singapore, on 18 August 2006,
announced the reappointment of
Senior Minister Goh Chok Tong as
Chairman for a further two years
with effect from 20 August 2006.
The Sri Lankan economy grew
at a healthy rate of 7.6 % in real
terms in the second quarter of 2006,
compared with 6.3 % growth during
the corresponding quarter of 2005.
Combined with the revised estimate
for economic growth of 8.3 % in
the first quarter, the economy
expanded by an impressive 8 % in
the first half of 2006, as against 5.3
% last year. The expansion was also
broad based, mostly due to the
higher growth in telecommunication,
financial services, fishing, trade and
factory industry, particularly for the
export markets, which recorded
higher external demand. Going
forward, after taking into
consideration the impact of increase
in fuel prices and the projected drop
in Yala paddy production in the
second half of the year, GDP growth
for the whole year is projected to
be around 7 %.
MONETARY POLICY
REVIEW – SEPTEMBER 2006
Having reviewed the recent
economic developments and
prospects, the Monetary Board at its
meeting held on 14 September 2006
decided to maintain the policy
interest rates of the Central Bank at
their current levels and to continue
with the conduct of open market
operations to decelerate the monetary
expansion to the desired path.
41
THE CENTRAL
BANK OF
CHINA, TAIPEI
MONETARY POLICY
DECISIONS OF THE CBC
BOARD MEETING
Young Kandyan dancers, Sri Lanka.
Accordingly, the Central Bank’s
policy rates, viz. the Repurchase and
Reverse Repurchase rates, will
continue to be at 9.125 % and
10.625 %, respectively.
The expansion in economic
activity continues at a healthy rate,
supported by the positive
contribution from all major sectors.
The agriculture sector is expected to
record a positive growth. Major
sub-sectors of the manufacturing
sector have also recorded a healthy
growth during the first seven months
of 2006 and are expected to expand
further benefiting from the robust
global economic growth and with
the preferential market access under
the GSP+ scheme. The services
sector will continue to grow with
major contribution from telecommunications, ports and financial
services sub sectors.
External trade continues to
expand in 2006. Export earnings
increased by 6.1 % during the first
seven months of 2006. Reversing
the setback in the first quarter,
exports picked up strongly during
the second quarter of 2006
registering a 19.6 % growth, despite
the work to rule campaign launched
at the Sri Lanka Ports Authority.
42
Imports grew by 20.2 % during the
first seven months of 2006. Imports
of investament and intermediate
goods registered substantially higher
growths reflecting expansion of
domestic manufacturing and
processing industries as well as
construction industry.
The widened trade deficit was
financed through private remittances,
which registered a growth of 24 %,
and higher net inflows to the government during the first seven months.
Accordingly, the balance of payments (BOP) has recorded a surplus
of US dollars 199 million by endAugust 2006. Reflecting the BOP
surplus, the gross official reserves
have increased to US dollars 2,555
million by end-August 2006 from US
dollars 2,458 million at end 2005.
The tight monetary policy stance
adopted from end 2004 was further
firmed in 2006 to curtail the high
growth in money and credit aggregates and the rising inflationary
pressures. The Central Bank raised
its policy interest rates by 25 basis
points in June and a further 12.5
basis points in July and has been
conducting open market operations
Continue on page 43
I. Taking into account of recent
financial and economic development,
the Board decided to raise the
discount rate, the rate on
accommodations with collateral, and
the rate on accommodations without
collateral each by 12.5 basis point
to 2.625%, 3.00%, and 4.875%,
respectively, effective 29 September
2006. The decision reflects the
Board’s assessment of the following
factors:
1.
Underpinned by external
demand, the economy has
continued its solid expansion.
The year-on-year economic
growth rates for the first and
second quarters of this year
were 4.92% and 4.57%,
respectively. According to the
projections of the DirectorateGeneral of Budget, Accounting
and Statistics (DGBAS) of the
Executive Yuan, economic
growth rate for the year 2006
will speed up from the previous
year ’s 4.03% to 4.28%. In
regard to contributions to GDP
growth, external demand is
expected to contribute 3.18
percentage points to this year’s
economic growth due to the
rapid expansion of exports. On
the domestic demand side,
private consumption has
moderated as a result of credit
card defaults. Coupled with
sluggish investment, domestic
demand is expected to
contribute only 1.1 percentage
points to economic growth this
year.
2.
3.
Excess reserves, reserve
money, bank credit, and M2
have all stayed at reasonable
levels. In the first eight months
of this year, the level of excess
reserves was NT$ 6.1 billion on
average, while the year-on-year
growth rates for reserve money
and bank credit were 5.55% and
6.87%, respectively. During the
same period, the broad
monetary aggregate M2 grew by
6.38% on average, and is
expected to stay within CBC’s
3.5% to 7.5% target zone.
CPI inflation has remained
subdued, and is forecasted to be
below 1.8% in 2006. Due to
weak domestic demand and
high-base effect on fruit and
vegetable prices, CPI inflation
for the first eight months of this
year was tame at 1.10%. Core
inflation was merely 0.55%
during the same period. Annual
CPI inflation this year is
forecasted to be 1.80% by the
Continued from page 42
aggressively to siphon off the excess
liquidity from the system. In
response, the growth in reserve
money supply has decelerated to 17
% by August 2006. Growth in broad
money, which remained high around
18-20 % during January – June
2006, declined to 18 % by July
2006.
Inflation as measured by the
point-to-point change in the
Colombo Consumers’ Price Index
DGBAS, and 1.50% by The
CBC, reflecting mild price
developments.
BANK OF
THAILAND
II. Against the backdrop of
slackened domestic demand, mild
price inflation, and real interest rate
remaining below its neutral level, the
Board judged that the fine-tuning of
the policy rate will safeguard price
stability, foster efficient fund
allocation, and promote long-term
financial stability.
III. The CBC will pay close
attention to economic and financial
development, together with future
price developments, so as to take
timely and appropriate measures.
DIRECTION FOR BANKING
ENTERPRISES AMENDED
On 5 July 2006, The Central Bank
of China amended “Directions for
Banking Enterprises While Assisting
Customers to Declare Foreign
Exchange
Receipts
and
Disbursements or Transactions” in
line with the deregulation of foreign
exchange
settlements
and
development of futures transactions
denominated in foreign currencies
traded in the domestic market.
(CCPI), which was 14.7 % in July
2006 increased to 15.3 % in August
2006. The 12-month moving
average inflation increased from
10.4 % in July to 10.8 % in August
2006. The current high increase in
consumer prices was mainly a
reflection of the pass-through of the
increase in fuel prices. It is expected
that the tight monetary policy
measures thus far taken by the
Central Bank would help contain the
high growth in money supply and
thereby reduce inflationary
pressures in the economy.
Dr. Atchana Waiquamdee
giving statements.
The Monetary Policy Committee
(MPC) met twice on 19 July and 6
September 2006 to review and assess
economic developments and outlook.
The following issues were assessed
and taken into consideration in
arriving at the MPC decisions.
The Thai economy continued to
expand in the second quarter
and onto July 2006. Although
domestic
spending
slowed
somewhat, the overall growth of the
Thai economy should not be affected
due
to
favourable
export
performance.
Pressure on the oil price
remained a risk factor despite recent
decline in the oil price. The MPC
therefore decided to maintain the
policy rate at 5.00 per cent per
annum at both meetings.
43
MEMBER BANKS NEWS
RESERVE BANK
OF FIJI
APPOINTMENT OF ACTING
MANAGER CORPORATE
COMMUNICATIONS
Mrs. Disusu Delana
Acting Manager Corporate
Communications
Reserve Bank of Fiji.
The Reserve Bank of Fiji has
announced the appointment of Mrs.
Disusu Delana as Acting Manager
Corporate Communications with
effect from 11 September 2006 for
a six month period.
Mrs. Delana joined the Reserve
Bank of Fiji in May 2005 as an
Economist (Prices & Wages) in the
Economics Group. Her previous
work experience includes a stint at
Librarianship, Journalism and as an
Economic Planning Officer. Mrs.
Delana graduated with a Bachelor of
History, Politics and Economics from
the University of the South Pacific
in 2000.
Mrs. Caroline Waqabaca,
Manager Corporate Communications
is the Reserve Bank of Fiji’s first
recipient of the Japan-IMF
44
Scholarship for Asia Program and is
currently undertaking a Master of
Public Policy Program at the National
Graduate Institute for Policy Studies
in Japan from July 2006 to September
2007.
ADB VICE PRESIDENT
MR. C. LAWRENCE
GREENWOOD VISITS
RESERVE BANK
On 7 July, Mr. Greenwood, the
Asian Development Bank’s Vice
President Operations 2 visited
the Reserve Bank of Fiji. Mr.
Greenwood is responsible for
four departments that come
under Operations 2 namely East
Asia Department, Southeast Asia
Department, Pacific Department
and Central Operations Services
Office.
FINANCIAL SECTOR
ASSESSMENT PROGRAM
(FSAP)
The FSAP Mission’s second visit
was from 28 June – 17 July 2006.
The Reserve Bank of Fiji’s FSAP
Steering Committee chaired by Chief
Manager Financial Institutions, Mr.
Barry Whiteside and its members, Ms
Lorraine Seeto, Mrs. Annie Rogers,
Mr. Filimone Waqabaca and Mrs.
Shajehan Hussein with the Bank’s
Financial Institutions Group and
other industry stakeholders had
extensive discussions with the FSAP
Team.
IMF staff visit
Mr. Alain D’Hoore and Mr. Jacques
Miniane visited Fiji from 13-18 July
and had extensive discussions with
financial institutions, Government
ministries and other stakeholders.
Bank Indonesia Deputy Governor
Mr. Maulana Ibrahim visits RBF
Mr. Maulana Ibrahim, Bank
Indonesia’s Deputy Governor visited
the Reserve Bank on 14 July to
discuss cooperation between both
central banks including technical
assistance, capacity building and
areas of mutual interest. He was
accompanied by Mr. Bramudija
Hadinoto (Deputy Director of the
Directorate of Accounting and
Payment System), Mr. Aribowo
(Head of Payment System Oversight)
and Mrs. Farida Peranginangin
(Deputy Head of Payment System
Oversight).
Bank
Indonesia Technical
assistance on RTGS
Mr. Aribowo and Mrs. Farida
Peranginangin was at the Reserve
Bank of Fiji from 14-21 July to assist
with the implementation of the
RTGS project. They had extensive
discussions with the RTGS project
team and produced a report with
recommendations for the RBF to
consider. The RBF is grateful to
Bank Indonesia for its assistance and
we hope to foster closer relationships with the SEACEN membership
with such exchanges of expertise.
IMF TA on Domestic Markets
Mr. Peter Katz from the Reserve
Bank of New Zealand was on an IMF
Technical Mission to the Reserve
Bank on Development of the
Secondary Bond Market in Fiji from
31 July – 18 August. Mr. Katz met
with the commercial banks,
Government ministries and the
Bank’s Domestic Markets team. The
Bank is evaluating Mr. Katz’s
recommendations. The Bank is
appreciative of the assistance given
by the IMF and RBNZ.
Board Meeting in the West
The Board of Directors of the
MEMBER BANKS NEWS
Reserve Bank of Fiji held their Board
meeting in Nadi on 1 September.
The Board with Executive
Management also took the
opportunity to visit a wind mill
project, major hotel projects and also
meet the business community.
IMF TA on Corporate Governance
Mr. Tonny Lybek from the IMF was
with the RBF from 28 August – 2
September to assist with corporate
governance issues. Mr. Lybek gave
a seminar to Executive Management
on corporate governance framework
for central banks. A seminar was also
given to the Board of Directors. The
Bank is grateful for the expertise
advice given by Mr. Lybek.
Vodafone Hibiscus Festival 2006
Miss Lusia Delai, Analyst in the
Financial Institutions Group, won the
2006 Vodafone Hibiscus Festival
crown. This is an annual event that
raises money for charity. Miss Delai
is the 11th contestant to be sponsored
by the Reserve Bank of Fiji. Six of
the Bank’s entrants have won the title
in the festival’s history. We wish
Miss Lusia Delai best wishes during
her reign as Miss Vodafone Hibiscus
2006.
Miss Vodafone Hibiscus 2006.
BANK
INDONESIA
Press releases issued by Bank
Indonesia during the period July to
September 2006 can be obtained
from the Bank’s website at
www.bi.go.id. The selected
highlights are as follows:
BANK INDONESIA
PROMOTES RURAL
BANK FINANCING
FOR OVERSEAS WORKERS
One key step taken by Bank
Indonesia to empower rural banks
is the promotion of Rural Bank
Financing for Overseas Workers. On
29 August 2006, Bank Indonesia
launched the Rural Bank Financing
Scheme for Overseas Workers
which is designed to resolve major
constraints faced by rural banks in
financing productive sectors.
Under this scheme, rural banks
are to provide loans from their own
resources or in cooperation with
commercial banks with support from
insurance companies and credible
overseas worker recruitment
agencies. Bank Indonesia regards
this scheme as profitable, as it
involves small-scale financing, which
is exactly within the rural banks’
expertise. Through this financing
scheme, overseas workers are
expected to generate higher foreign
exchange
earnings
through
remittances.
Prior to the launching of this
scheme, many rural banks were
poorly informed about the processes
and procedures of sending workers
overseas. To promote this financing
scheme, Bank Indonesia in
coordination with the Ministry of
Manpower and Transmigration, has
disseminated information on various
issues relevant to the processes and
procedures in sending workers
overseas.
ISO 9001-2000 FOR BANK
INDONESIA CASH SERVICE
Bank Indonesia has officially
received
ISO
9001—2000
certification issued by Lloyd’s
Register for quality criteria in cash
services operated by the Directorate
of Currency Circulation. Prior to this
certification, the Quality Management
Audit System developed by Bank
Indonesia’s Directorate of Internal
Control had also received ISO 90012000 certification in January 2003,
followed by certification for Bank
Indonesia’s Central File Vault
Management in September 2003.
Among the criteria evaluated by
LIoyd’s Register were the service
turn over, promptness and suitability
of opening hours, accuracy in
sorting currency fit for circulation,
security and convenience of service
location including parking facilities,
courtesy of cashiers and quality of
currency.
CREDIT CARD CHIP
TECHNOLOGY LAUNCHED IN
FIVE MAJOR BANKS
On August 23, 2006, an
inaugural ceremony was held in
Jakarta to commence the first
launching of credit card chip
technology in five major banks,
45
MEMBER BANKS NEWS
THE BANK
OF KOREA
THE BANK OF KOREA AND
WORLD BANK TREASURY
FORUM ON FOREIGN
CURRENCY RESERVES
MANAGEMENT
Guard from the Sultan’s Palace, Jogjakarta, Indonesia.
namely, Bank BCA, Bank Buana
Indonesia, Bank BNI, BII and
Citibank. These five banks are now
ready to launch the chip technology
of Euro MasterCard Visa (EMV) in
the use of their credit cards. The
application of this chip technology
is in line with Bank Indonesia’s
Regulation No.7/60/DASP of
December 30, 2005 concerning
Customer Protection and Security of
Card-based Payment Instruments,
which requires banks to apply the
use of chips for new cards and
renewals starting September 1,
2006. With the first launch of this
chip technology in these five major
banks, it is expected by the end of
2009, this technology will be
completely applied in all credit
card issuers/operators throughout
Indonesia. This technology is to be
applied to debit cards, ATM and
prepaid cards as well.
INDONESIA AND MALAYSIA
AGREE TO IMPROVE
SHARIAH FINANCE
HUMAN RESOURCES
The rapid development in the
shariah finance and banking
46
industries in the last decade has
brought about greater need for
improvements in human resources
in the Islamic financial industry. In
response to this challenge, on July
24, 2006, in Jakarta, the Governor
of Bank Indonesia, Mr. Burhanuddin
Abdullah, in his capacity as
Chairman of the Board of Curators
of the Indonesian Banking
Development Institution (LPPI) and
the Governor of Bank Negara
Malaysia, Dr. Zeti Akhtar Azis, in her
capacity as Chairman of the Board
of Directors of the International
Center for Education in Islamic
Finance (INCEIF), have signed a
Memorandum of Understanding
(MOU) covering the agreement to
improve human resources capacity
in the field of Islamic financing
scheme in both countries.
Along this line, the Government
and Bank Indonesia in their capacity
as regulators will continue to develop
various financial instruments and
special arrangements in the area of
shariah banking. International cooperation in this area will also be
enhanced to creat a healthy and efficient Islamic financial system.
“The Forum on Foreign
Currency Reserves Management”
was successfully held at the Westin
Chosun Hotel in Seoul, on 14~15
September, 2006. The Reserve
Management Department of The
Bank of Korea and The World Bank
Treasury co-hosted the forum, on
the main theme of ‘The Way Ahead:
Foreign Currency Reserves
Management’.
The Forum brought together
senior decision-makers from central
banks and official institutions
throughout the world to discuss the
issues, opportunities and challenges
arising from the continued increases
in foreign exchange reserve assets
and national wealth.
The Forum got under way with
welcoming remarks by Deputy
Governor Yeung-Kyun Rhee of The
Bank of Korea, opening remarks by
Kenneth G. Lay of the World Bank
Treasury, and a keynote address
from Dr. Lawrence Summers,
former President of Harvard
University and former United States
Treasury Secretary. The invitationonly discussion sessions consisted of
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presentations and discussions by
forum participants.
In his welcoming remarks,
Deputy Governor Rhee pointed out
that consideration of new asset
classes should come with the
introduction of best practices into
the appropriate risk management
systems. He also stressed that
central banks need to closely
cooperate with international financial
institutions to ensure successful
diversification of their investment
universes.
The key-note address by Dr.
Summers, under the title of
“Opportunities in an Era of Large
and Growing Official Wealth”,
encouraged central banks from
developing countries to consider
more opportunities in the global
capital markets for achieving better
returns over long-term horizons.
The majority of participants
found the forum a ground breaking
one in enabling exploration of
innovative
and
somewhat
controversial approaches to
sovereign wealth management
and, in this way, help to move
this important debate forward.
This forum was also noteworthy
as the first working-level
international seminar conducted by
an individual department of The
Bank of Korea.
BANK NEGARA
MALAYSIA
operators on 22 and 23 August
to discuss issues surrounding
the transition of the insurance
and takaful industries towards
a risk-based regulatory and
operating
environment,
achieving a greater role for selfregulation in the area of market
conduct, and the development
Press releases issued by Bank
of a sustainable dual system for
Negara Malaysia during the period
conventional insurance and
July to September 2006 may be
takaful in Malaysia. The
obtained from the Bank’s website
dialogue represents part of the
(http://www.bnm.gov.my). Selected
Bank’s consultative process and
highlights are as follows:
provided a platform for the
exchange
•
of
views
and
On 2 August, the Bank
perspectives in these areas,
announced the appointment of
drawing
three Assistant Governors
experiences
namely Dato’ Mohd Nor bin
Malaysia’s own pioneering
Mashor, Mrs. Lillian Leong Bee
initiatives on several fronts,
Lian and Mr. Gopala Krishnan
particularly in the field of
Sundaram with immediate
Islamic finance.
from
as
global
well
as
effect. This brings the number
of Assistant Governors in the
•
As part of the initiatives under
the Fund for Shariah Scholars
Bank to six.
in Islamic Finance, the Bank
•
•
The Bank, as the Secretariat of
announced the establishment of
the National SME Development
the Shariah Scholarship Award
Council (NSDC), on 7 August,
and Shariah Research Grant on
released the inaugural SME
25 August. This initiative
Annual Report 2005. The report
reflects the Bank’s commitment
provides information on the
to enhance the pool of talents,
status and performance of
knowledge
SMEs as well as highlights the
capacity in the field of Shariah
major programmes undertaken
relating to Islamic banking,
by the Government to promote
takaful and the Islamic capital
the development of SMEs.
market.
The Bank held a dialogue with
the
insurers
and
takaful
•
and
research
On 14 September, the Bank
issued guidelines on the
Mask dance in Korea.
47
MEMBER BANKS NEWS
establishment of new entities
in the Malaysia International
Islamic
Financial
(MIFC).
The
Centre
CENTRAL BANK
OF MYANMAR
guidelines
specified the eligibility criteria
and scope of business for the
establishment of new entities in
the MIFC to conduct Islamic
NEWS IN BRIEF
financial business in international
currencies.
•
The Bank, on 18 September,
approved the applications from
Munich Re and MNRB Holdings
Berhad to establish the first
retakaful companies under the
Takaful Act 1984, to conduct
both general and family retakaful
businesses in the domestic
takaful industry. This is part of
the Bank’s initiatives to develop
the institutional infrastructure to
support the development of the
takaful industry as well as to
promote Malaysia as a centre
for international currency
The Myanmar Delegation
headed by Minister for Finance and
Revenue, Maj-Gen Hla Tun attended
the 61 st Annual Meetings of the
International Monetary Fund and the
World Bank and related meetings
held in Singapore from 16 to 20
September 2006. The members of
the Myanmar delegation consisted of
the Governor of the Central Bank of
Myanmar, U Kyaw Kyaw Maung;
Director General of the Foreign
Economic Relations Department,
Daw Myo Nwe; Director of the
Central Bank of Myanmar, Daw
Ommar Sein and Deputy Director of
the Ministry of Finance and
Revenue, U Min Htut.
retakaful business.
•
At its meeting on 26 September
2006, the Bank’s Monetary
Policy Committee decided to
leave the Overnight Policy Rate
unchanged at 3.50 percent. In
accordance with expectations,
inflation has continued to
decelerate. At this stage, the
moderation of global oil prices,
if sustained, combined with the
expected mild moderation in
global growth, would contain
inflationary pressures in the
near future.
48
The Governor of the Central
Bank of Myanmar, U Kyaw Kyaw
Maung attended the SEA-LAC
Central Bank Governor’s Meeting
held in Kuala Lumpur on 15
September 2006. Daw Thet Thet
Hla, Principal Research Officer,
accompanied the Governor on that
occasion.
U Than Nyein, Deputy
Governor of the CBM attended the
Seminar on Development Finance
for Countries in Transition 2006 held
in Tokyo, Japan from 28 to 30
August 2006.
Thingyin (New Year) Water
Festival Dancers, Myanmar.
Daw Ommar Sein, Director of
the Central Bank of Myanmar
attended the Malaysia-Africa Highlevel Knowledge Exchange Seminar
organised by the World Bank and
Malaysia’s Ministry of Finance, held
in Kuala Lumpur, Malaysia on 21 to
22 September 2006.
Daw Khin Saw Oo, Deputy
Director of the Bank Regulation
Department attended the 9th Annual
Meeting of Asia and Pacific Group
on Money Laundering (APG) in
Manila, Philippines from 2 to 7 July
2006.
A delegation from the China
Development Bank (CDB) headed
by its Governor, Mr. Chen Yuan
and comprising 11 members
visited Myanmar from 1 to 4
August and discussed with
Central Bank of Myanmar (CBM)
on
“Possible
Cooperation
Opportunities between 2 Banks”.
During their stay in Myanmar,
the CDB delegates paid courtesy
calls on the Minister for Finance and
Revenue and the Governor of the
CBM. The follow up CDB Mission
comprising 7 members visited
Myanmar from 25 to 27 September.
The delegation discussed issues
MEMBER BANKS NEWS
of bilateral trade and Monetary
Policy, account settling in Myanmar
and bilateral cooperation with
officials
of the Ministry of
Finance and Revenue, the CBM, the
Myanma Foreign Trade Bank, the
Myanma
Investment
and
Commercial Bank and the Myanma
Economic Bank.
The FATF On-site Evaluation
Mission visited Myanmar from 27 to
29 September 2006. During the visit,
the Mission visited and discussed
with institutions and departments
involved with AML/CFT activities to
assess Myanmar ’s substantial
progress in implementing AML/CFT
regime.
TRAINING
AND SEMINARS
General Banking Course
(officer level) No. 8/2006 Association
was opened on 7 August 2006 at the
Conference Hall of the Myanmar
Banks Association. It was organised
by the Banks Supervisory
Committee and the Myanmar Banks
Association. Minister for Finance
and Revenue, H.E. Maj-Gen Hla Tun
delivered an address on the
occasion. 41 officials from the
CBM, State-owned banks and
domestic private banks attended the
10-week course.
During the third quarter of
2006, 9 officials from the CBM
attended various training courses,
seminars, and also participated in
workshops abroad conducted by
international as well as regional
institutions.
BANK OF
PAPUA NEW
GUINEA
needs of the country, including the
requirements and compilation of
national accounts, monetary and
financial statistics, fiscal data, price
information, balance of payments
and requirements for TA’s.
IMF TECHNICAL ASSISTANCE (TA)
A) Monetary
Statistics
ATTACHMENT WITH THE
CURRENCY DEPARTMENT
The Manager of the Currency
Department at the Reserve Bank of
Vanuatu, Mrs. Heva Alilee, was
attached to the Bank of PNG’s
Currency Department for 3 weeks
from 4 September 2006. During the
attachment, she studied the
operations and activities in the
Processing and Control Unit. The
main functions of the Currency
Department are the issuing of
currency, maintaining their quality
and withdrawing and destroying
soiled and mutilated currency.
IMF MULTI-SECTOR
STATISTICS MISSION
Following a request from PNG
authorities, a seven-member IMF
Multi-sector Statistics
Mission, comprising
members from the
IMF’s head office, the
Australian Bureau of
Statistics and the
Pacific
Financial
Technical Assistance
Centre visited PNG
from 6-13 September.
The Mission reviewed
the various statistical
Beaver
&
Financial
Several IMF TA Missions,
starting in April 2005 and recently
with the Multi-sector Statistics
Mission assisted the Bank’s
Economics Department in expanding
coverage of its monetary and
financial statistics. The Missions’
objectives were to: (i) review the
current collection and compilation
procedures of monetary statistics by
the Bank of PNG; (ii) assist Bank
staff implement the methodology in
the Monetary and Financial
Statistics Manual (MFSM) 2000;
(iii) assist in preparing the
Standardised Report Forms for
reporting monetary data of other
depository corporations (ODCs commercial
banks,
finance
companies, merchant banks, savings
and loans societies, microfinance
companies and micro banks); and
Falls, Southern Highlands Province.
49
MEMBER BANKS NEWS
(iv) assist in finalising the integrated monetary database
(IMD) that meets the data needs for the Bank, the IMF
and other users.
To this end, the main monetary aggregates were
reclassified and reconciled with those published in the
Bank’s Quarterly Economic Bulletin (QEB) to the
methodology of the MFSM 2000. Accordingly, the new
and revised statistics were published in the June 2006
QEB. With the assistance of the TA Missions, successful
coverage of all ODCs reporting to the BPNG has been
achieved. Further work is being undertaken by the Central
Bank to extend the coverage to include other financial
corporations (OFCs), such as the insurance companies
(life and general insurance), superannuation (or pension)
funds, stockbrokers, investment managers, and fund
administrators.
The new monetary statistical tables extend the
coverage of private sector credit and money supply to all
financial intermediaries. It is important that non-bank
financial institutions are properly monitored because their
assets are as big as the commercial banks’ and any failure
can cause a contagion effect on the rest of the financial
sector. With the expanded coverage, the Bank will closely
monitor the financial flows between the different financial
intermediaries, and the health of the entire financial sector.
B) Internal Audits
The Bank’s Internal Audit Department (IAD) has had
an IMF TA since 2005. As part of the TA, Mr. Mark
Adams was with the Department for three weeks,
commencing 7 th September 2006. The TA provided
assistance in strengthening the internal audit functions
and governance arrangements in the Bank
-
50
The main issues addressed by the TA were;
Review of progress in implementing risk based audit
practices
Further development of skills in auditing specialised
central banking operations.
Proving guidance on formal documentation of internal
auditing policies and procedures.
Strengthening Audit Committee functions, process
and reporting.
Huli Dancers, Southern Highlands Province.
The TA also assisted IAD staff undertake an audit
of the supervising and licensing activity within the Bank’s
Financial Systems and Supervision Department. It aims
to further enhance the knowledge of audit staff of the
operations on other areas of the Bank.
PRESENTATIONS BY THE BANK
The Bank of PNG Governor, Mr. L. Wilson Kamit
and senior staff made two presentations in August on the
roles and functions of the Central Bank and Monetary
Policy for 2006. On 21st August 2006, the presentation
was made at the National Parliament House to Government
Ministers of the Budget and Economic Committees. On
24th August, the Governor made the presentation to the
Port Moresby Chamber of Commerce & Industry.
BUSINESS REPORT WRITING COURSE
In recognition of the need to improve
communication skills of Bank staff, the Human
Resources
Department
and
PriceWater
HouseCoopers conducted a 2-day refresher course on
Business Writing, commencing on 31st May 2006. Fortysix Bank staff attended the course.
The aim of the course was to enable participants to
produce effective business correspondence with the
emphasis on writing standard letters, memorandums and
reports. It also emphasised the importance of good
communication and developing skills to write in a clear
and concise manner to achieve the best results.
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TRAINING IN THE
FINANCIAL SYSTEM
SUPERVISION DEPARTMENT
BANGKO SENTRAL
NG PILIPINAS
Over the 9 months to September 2006, the Financial
System Supervision Department (FSSD) conducted a
number of training initiatives as part of its capacity building
for staff. The following activities were undertaken during
the period:
Press releases issued by the Bangko Sentral ng
1.
The Bank hosted two joint PNG/Pacific Exchange
Programmes for 2 weeks each in March/April and
in July/August 2006 where a number of staff from
FSSD and the Reserve Banks of Fiji, Samoa,
Solomon Islands and Vanuatu took part in
conducting on-site examinations of several authorised
superannuation funds. The programme was facilitated
by a technical assistant from the Australian Prudential
Regulation Authority (APRA).
This programme commenced in November 2004 and
is co-funded by the Bank of PNG and the Australian
Government (AusAID). The objective of the
programme is to provide staff in PNG and the Pacific
region with the skills to plan and conduct on-site
examination of the institutions supervised by central
banks.
The Exchange Programme will continue for
another two weeks in November 2006
where on-site examinations will be conducted
on two additional authorised superannuation
Funds.
2.
In June 2006, two of the FSSD staff participated in
an internship programme with the APRA for 4
months. The objective of this programme is to
facilitate staff to apply more advanced supervisory
techniques and skills in supervision and also to expose
them to the values and working culture in a different
working environment.
Two more staff will be sent to APRA under the
same programme for 4 months from mid-October
2006.
Pilipinas (BSP) during the period July to September 2006
can also be viewed at the BSP website. Selected highlights
are as follows:
BSP HOSTS ANNUAL
CEMLA MEETING
On 13 September 2006, the BSP hosted the Annual
Meetings of the Centro de Estudios Monetarios Latino
Americanos (CEMLA). Held at the Philippine International
Convention Center, the CEMLA event consisted of four
meetings, namely: (1) the 42nd Meeting of IMF/IBRD
Governors of Latin America, Spain and the Philippines;
(2) 82nd Meeting of Central Bank Governors of Latin
America and Spain; (3) CEMLA Board of Governors; and,
(4) CEMLA Assembly. The Meeting was attended by 46
central bank governors and finance officials from Latin
America, Spain and the Philippines as well as officials of
multilateral and regional financial institutions. The CEMLA
meetings provided valuable insights on emerging critical
issues such as global imbalances, and the direction
of interest rates and oil prices that would affect developing
51
MEMBER BANKS NEWS
economies. There were three presentations during the
meeting on world economic and financial developments
from the perspectives of the Asian, European and Latin
CENTRAL BANK
OF SRI LANKA
American regions. BSP Governor Amando M. Tetangco
Jr. (1st row, 5th from right), chaired the first two meetings.
The next CEMLA Governors’ meetings will be held
in Uruguay in May 2007.
MANILA HOSTS
INTERNATIONAL MEETING ON
MONEY LAUNDERING
AJITH NIVARD CABRAAL
THE NEW GOVERNOR OF THE
CENTRAL BANK OF SRI LANKA
Mr. Ajith Nivard Cabraal has been appointed by His
Excellency the President as the Governor of the Central
Bank of Sri Lanka with effect from July 1, 2006. The
Governor is also the Chairman of the Monetary Board of
the Central Bank of Sri Lanka.
On 3-7 July 2006, the Philippines hosted the
9th Annual Meeting of the Asia-Pacific Group (APG)
on Money Laundering. The event was attended by
over 250 delegates from legal, financial and law
enforcement sectors in the region. The five-day
meeting provided a platform for high-level discussion,
cooperation and evaluation of the progress made
by APG members in implementing internationally
recognised standards designed to combat and deter
money laundering and the financing of terrorism. Present
were Mr. Emot Kennedy, Asia-Pacific Group Secretariat
(left) and Australian Federal Police Commissioner Mick
Keetly (center).
52
Mr. Ajith Nivard Cabraal
Governor
Prior to this appointment, Mr. Cabraal was the Adviser
to His Excellency the President on Economic Affairs and
Secretary, Ministry of Plan Implementation. Mr. Cabraal
also served as a Member of the Board of the Strategic
Enterprises Management Agency (SEMA), which is
responsible for the supervision of the twenty most
important public institutions of the country, including the
State Banks and Public Utilities (Electricity, Petroleum,
Water, Railways, Road Transport, Ports, Airports, etc.).
In addition, he was also a member of the Government
Team that participated at the Geneva Talks with the
MEMBER BANKS NEWS
Liberation Tigers of Tamil Eelam in
February 2006. Further, Mr. Cabraal
represented the Government in
relation to the Millennium Challenge
Fund negotiations with the US
Government. During the period His
Excellency President Mahinda
Rajapaksa served as the Prime
Minister, Mr. Cabraal was associated
in the development of the “Mahinda
Chintana” which currently serves as
the Policy Framework and Development Plan of the Government.
The yearly festival in Kandy, Sri Lanka.
A Chartered Accountant by
profession, Mr. Cabraal is also an
Eisenhower Fellow and a recognized
consultant in Corporate Governance.
He was the Founder Chairman of the
Corporate Governance Committee
which developed the Code of Best
Practice on Corporate Governance
in Sri Lanka. He also served as the
President of the Business Recovery
and Insolvency Practitioners Association of Sri Lanka. He is a Past
President of the Institute of Chartered Accountants of Sri Lanka, South
Asian Federation of Accountants and
the St. Peter’s College Old Boys
Union. Further, he has served on the
Boards of the Securities and Exchange Commission, National Institute of Business Management, Post
Graduate Institute of Management
and the University of Moratuwa.
Prior to his appointment as the
Secretary to the Ministry of Plan
Implementation, Mr. Cabraal had
established his own management
consultancy practice. During this
period, he also served as Chairman
and/or Director of several quoted and
unquoted public companies until
December 2005 at which time, he
resigned from all private sector
positions to take up public office.
Mr. Cabraal is the author of the
books, “Towards a Sri Lankan
Renaissance” which is a collection
of strategies for the future
development of the country and “Lak
Mawata Muthu Potak” (A String of
Pearls for Mother Lanka) - a
collection of over 60 short essays
that Mr. Cabraal has contributed to
popular national newspapers over
the period 2003 to 2004.
Mr. Cabraal becomes the twelfth
Governor of the Central Bank of Sri
Lanka, succeeding Desamanya Sunil
Mendis who resigned after serving
two years of his term of office on
June 30, 2006.
CBSL ESTABLISHES A
FINANCIAL INTELLIGENCE
UNIT (FIU) TO
COMBAT MONEY
LAUNDERING &
TERRORIST FINANCING
Money Laundering and Terrorist
Financing have been subjects of
discussion at all levels of
Governments in the International
Community. Recognising the vital
importance of and the need to take
action to combat these activities an
Intergovernmental body called the
Financial Action Task Force (FATF)
was recently established to set up
standards and thereafter develop and
promote policies to combat the noted
activities. The FATF has outlined 40
recommendations as counter
measures against Money Laundering
(ML) covering the criminal justice
system and law enforcement, the
financial system, and international
co-operation. The recommendations
have been endorsed and adopted by
most of the members of the
International Community.
In
addition, the FATF has also
formulated additional 9 proposals
specifically directed to combat
Terrorist Financing. (TF).
ML is a process whereby
proceeds of Crime are converted into
legitimate funds using complex
transactions effected through
financial institutions. By obscuring
the origin of the money, criminals
53
MEMBER BANKS NEWS
can use the funds without raising
any suspicion. Such activity may
distort resource allocation as
laundered funds are generally used
for non-profitable investments that
do not bring any tangible benefits to
a country.
It is also the practice of those
involved in laundering of funds to
bring in money for a short period
into a country and suddenly exit to
another territory. Such capital
inflows to a small country such as
Sri Lanka can result in a surge of
financial transactions, which may
threaten economic and financial
stability if the funds are abruptly
moved out of the country. Further,
Sri Lanka is faced with the grave
concern over terrorist financing and
there is an urgent necessity to
address these issues
Consequently, Sri Lanka has
adopted the FATF recommendations,
culminating in the promulgation of
the following three Acts:
1.
2.
3.
Convention on the Suppression
of Terrorist Financing Act No.
25 of 2005
Prevention
of
Money
Laundering (PMLA) Act No. 5
of 2006
Financial Transaction Reporting
(FTRA) Act No. 6 of 2006
The Financial Intelligence
Unit (FIU) is a key component
under the FTRA, to deter
criminals from using Sri Lanka and
its Financial Institutions for money
laundering and Terrorist Financing
activity and thus mitigating the risk
of the country being exposed to
54
volatile economic and financial
conditions.
The PMLA aims to prohibit and
provide necessary measures to
combat such activity and the FTRA
has institutionalised the FIU and
makes it mandatory for all Financial
Institutions
and
designated
institutions, professionals to adhere
to guidelines and stipulations and
report suspected transactions that
seem to suggest money laundering
activities.
The salient features of the FTRA
among others include the support of
investigation and prosecution of
offences under the law and the
prevention of money laundering and
terrorist financing activities.
Institutions, bodies and professionals
are also required to maintain records
of identification and transaction and
related documents of clients and to
report to the FIU any transactions
that may be related to money
laundering and terrorist financing
activities. Financial institutions are
required to report to FIU the cash
transactions and electronic fund
transfers above Rs:500,000 and also
any suspicious transactions (i.e. a
transaction, which the financial
institution has reasonable grounds to
suspect, is related to the commission
of an “illegal activity” or any other
criminal offence).
1st FIU Meeting
As part of the general
awareness programme, the FIU held
its first meeting on July 31st 2006
with the Compliance Officers of all
Licensed Commercial Banks and
Licensed Specialised Banks at the
Central Bank Auditorium. The
meeting was arranged by Upali De
Silva, the Secretary General of the
Bankers Association. The Keynote
speech was made by Mr. George
Neville Fernando, the CEO of the
FIU. In his speech, he referred to
the FIU model that has been
established for Sri Lanka and outlined
its core functions. He noted that as
banks are most susceptible to be
used by individuals for Money
Laundering and Terrorist Financing
activities, the need is for all Financial
Institutions to pay special care and
attention to Know Your Customer
(KYC)policies and guidelines and
policies both those issued in house
and those provided by the Central
Bank of Sri Lanka. He also briefly
touched on the implications for
banks that are engaged in International Trade with the passing of the
Patriot Act by the US Government .
In his speech, Dr. Rohan
Perera, Legal Advisor of the Foreign
Ministry, outlined the legislative
policy and approach pursued by Sri
Lanka in giving effect to its
international obligations in the field
of money laundering and terrorist
financing in particular, in the context
of Security Council Resolution 1373
dealing, inter-alia, with Financing of
Terrorism and the International
Convention on the Suppression of
Financing of Terrorism. He explained
that even prior to the passing of the
Anti-Money Laundering Legislation,
an interim legal regime was created
in terms of the United Nations Act
by framing regulations to counter
the abuse of national fiscal systems
for terrorist purposes.
MEMBER BANKS NEWS
BANK OF THAILAND
BANK OF THAILAND
SYMPOSIUM 2006
The Bank of Thailand organised the 2006
Symposium on “Positioning Thailand in the New
Asian Economy “between 9-10 August 2006 at
the Shangri-La Hotel, Bangkok. The aim was to share
with the public some key findings from recent researches
conducted by economists of the Bank of Thailand and
serve as a forum for the exchange of ideas between
prominent academics and practitioners both in public and
private sectors.
THE BANK OF THAILAND
SIGNS MOU WITH
THE CHINA BANKING REGULATORY
COMMISSION
The Bank of Thailand (BOT) has signed a
Memorandum of Understanding (MOU) on Information
Exchange for Effective Cross-border Banking Supervision
with the China Banking Regulatory Commission (CBRC),
the regulator of financial institutions in the People’s
Republic of China.
The research papers presented at the symposium
were widely discussed, particularly on the evolution of
the New Asian Economy, and the appropriate policy
response, to provide a firm foundation for sustainable
growth and international competitiveness of the Thai
economy.
The MOU provides a formal basis for banking
supervisory cooperation between the two authorities. It
allows for supervisory cooperation between BOT and
CBRC in areas of information sharing and communication
during the licensing process and ongoing supervision of
banks operating under their respective supervisory
responsibility.
The MOU was signed by Mr. Liu Mingkang,
the CBRC Chairman (left in picture), and M.R.
Pridiyathorn Devakula (right in picture), the BOT
Governor, on 18 September 2006 in Singapore.
22 July 2006 - M.R. Pridiyathorn Devakula,
Governor, the Bank of Thailand has signed a Memorandum
of Understanding (MOU) to jointly facilitate and promote
trade and investment with H.E. Phouphet
Khamphounvong, Governor, the Bank of the Lao PDR
at Vientiane Capital City, Lao PDR.
55
SEACEN Seminar on Strategic Planning for Corporate Planners, Langkawi, Malaysia, 14-17 August 2006:
Participants enjoying the pungent durian – some for the very first time!
8th SEACEN Conference of Directors of Supervision of Asia-Pacific Economies, Kuala Lumpur, Malaysia, 7 - 10 August 2006:
Participants at the post-Conference sight-seeing tour in Putrajaya.
Cultural show at the 1st SEACEN - CeMCoA/BOJ Intermediate Course on Macroeconomic and Monetary Policy,
Bandar Seri Begawan, Brunei Darussalam, 25 June - 7 July 2006.

news on monetary and financial developments

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