World Banking Abstracts, vol. 35, no. 1, 2018, Page 1
A FINANCIAL INSTITUTIONS
A1 FINANCIAL SYSTEMS AND CENTRAL BANKS
Nepal’s banks eye stability boost
Banker, The (UK), vol. 168, no. 1103 (December 2017), pp. 58-63
Nepal suffered a 7.9 magnitude earthquake in 2015 and this was followed five months later by a blockade of its border with India
that prevented basic goods from entering the country for several months. Two years on, the country’s banking sector has recovered
well but there are a number of systemic issues that need to be addressed. For instance, the country is arguably overbanked, there
are fears of further cyberattacks and there remains considerable uncertainty regarding the future direction of policy. Bankers hope
that elections being held in December 2017 will improve matters and that the situation will be further helped by the
implementation of a new federal government system. In a separate article, the governor of Nepal Rastra Bank offers his opinions
on managing liquidity and interest rate volatility.
Monetary and macroprudential policies under rules and discretion
Laureys, L. and Meeks, R.
Bank of England Working Papers, no. 702 (December 2017), pp. 1-12
In addition to their traditional monetary policy objectives, central banks are increasingly being charged with new macroprudential
objectives intended to preserve financial stability. This paper considers the policy design problem facing central banks with this
dual mandate. Research suggests that time-consistent policy is likely to produce better outcomes than simple monetary and
macroprudential rules. Indeed, optimal results are achieved when interest rates are responsive to macroprudential policy in an
augmented monetary policy rule. (2 tables, references)
Liquidity risk, bank networks, and the value of joining the Federal Reserve System
Anderson, H. et al.
Journal of Money, Credit and Banking (USA), vol. 50, no. 1 (February 2018), pp. 173-201
Systemic liquidity risk resulting from seasonal loan demand was one of the main motivations for the creation of the Federal
Reserve System in the US yet after its first decade of operation, only eight per cent of state-chartered banks had joined. In these
early years, it was primarily the banks that were particularly susceptible to seasonal loan demand that joined the System. Research
conducted for this paper indicates that banks were able to obtain indirect access to the discount window via interbank transfers and
also that some banks joined the System with the intention of passing liquidity obtained via the discount window on to other banks.
Furthermore, it is noted that those banks that joined the Federal Reserve System subsequently increased the scale of their lending.
(6 tables, 3 figures, references)
Monetary policy and domestic financial markets
Central Bank of Iceland Monetary Bulletin, vol. 19, no. 4 (2017), pp. 23-30
The Central Bank of Iceland lowered its key interest rate by twenty five basis points to 4.25 per cent in October 2017. Other market
rates have fallen in response and the interest rate differential with abroad has narrowed further. Domestic bond markets have
benefited from capital inflows since April but the scale of these is not a cause for concern. Meanwhile, credit growth has
accelerated from a low level and there has been sustained growth in broad money. House prices were rising at a rapid pace in the
summer and while they continue their upward path, the rate of house price inflation has since moderated. Private sector financial
conditions are on an improving trend, as are the equity positions of households and businesses. (1 table, 20 figures)