Debt
Zimbabwe’s bond notes are ‘exacerbating’ economic fragility, IMF says
Fund urges Zim authorities to restore credibility to currency regime as financial crisis shows no sign of abating
Vietnamese central bank cuts rates, despite IMF credit warning
Decision contradicts IMF advice to keep monetary policy on hold to contain rapid credit growth, but growth and inflation have disappointed
CEPR paper sketches ‘radical, realistic’ Greek reform plan
Stanford and Yale economists outline “unorthodox” policies that could put Greek debt on a sustainable footing – and might be acceptable to all negotiating parties
‘Multiple lending’ may cause contagion during stress – paper
Researchers say multiple lending may ease liquidity shocks in normal conditions, however
BoE ups capital buffers as consumer credit outstrips income
“Pockets of risk” including effects of Brexit negotiations and car finance warrant attention, BoE says, though it stresses overall stability threats are at “normal” levels
Book notes: Can We Avoid Another Financial Crisis?, by Steve Keen
Steve Keen challenges “mainstream” economic thinking in this concise book, hoping to shift the political debate on debt
BIS paper links debt service lag to impact on real economy
Authors find the lag between borrowing and peak debt service helps explain why debt booms reduce future output and increase the probability of a crisis
RBA minutes point to dangers from debt
Growth in household debt exceeds growth in incomes, creating risks to consumption; board members say situation warrants “careful monitoring”
Thai central bank warns on deteriorating debt serviceability
Bank of Thailand flags financial stability risks as weakening macroeconomic outlook impacts debts among SMEs and households
Aruba central bank keeping an eye on government deficit
Caribbean central bank says borrowing from the domestic market could put pressure on international reserves; says it will be monitoring the situation “closely”
Paper explores effects of capital controls on cost of international debt
Restrictions on capital inflows produce “substantial” corporate bond spreads but effects are mitigated for firms in EU or with English legal origins
RBNZ consults on DTI limits with full macro-pru review scheduled for 2018
Central bank evaluates benefits of limit and how it would interact with current macro-pru policies; consultation offers reassurance to households about welfare costs
Former PNG governor accuses institution of ‘fuelling corruption’
Morauta says central bank has become “inanimate puppet” in government game whereby it continues to fund the growing deficit
Balance sheet weakness and falling investment to blame for productivity slowdown – paper
IMF paper rejects structural hypothesis for slowdown in productivity growth following crisis; firms with balance sheet issues and those hit harder by credit tightening cut back on investment
Venezuela’s central bank devalues bolivar as crisis continues
Bolivar devalued 64% in latest currency auction in an attempt to stem effects of financial crisis; Goldman Sachs comes under fire from opposition leader
Growth in offshore funding is creating risks – RBNZ
Financial stability report notes growing reliance of banks on offshore funding sources could become a problem; housing market risks require new prudential tools
NPLs ‘must’ rise during downturns – MAS’s Menon
If NPLs failed to rise during “difficult times”, that would be a sign banks are not doing their job right, MAS chief says
IMF’s Werner: Latin America must keep debt under control
Western hemisphere chief says there are some concerning signs on debt, although the risk of a systemic crisis is low; region well placed to weather Fed shock
Tackling the ‘human agency’ problem
Central banks are readying their communication strategies to mitigate a populist backlash against their post-crisis policies
US household debt surpasses pre-crisis peak
Household debt exceeds 2008 level for first time, driven in part by auto loans and student debt
Croatia’s Vujčić on tackling NPLs and home-host supervision
Croatian National Bank governor Boris Vujčić explains why dealing firmly with NPLs via a ‘provisioning clock’ does not choke growth while detailing the benefits of ‘home-host’ dialogues, such as the Vienna Initiative
IMF urges new macro-pru tools for RBNZ to tackle housing market
Debt-to-income tools would complement existing macro-prudential toolkit and help rein in household credit, fund says; RBNZ in pursuit of such powers but decision must come from government
Zimbabwe central bank actions like ‘putting lipstick on a frog’
Economic crisis is reminiscent of meltdown preceding dollarisation in 2008, but authorities have fewer options this time
China’s NPL problem has ‘stabilised’ – PBoC’s Yi
Deputy governor says non-performing loans are “pretty much stabilised” and capital outflow pressures have declined