Global Financial Safety Net: Regional Reserve Pools and Currency Swap Networks of Central Banks

Global Financial Safety Net: Regional Reserve Pools and Currency Swap Networks of Central Banks

 

You can read this post from two perspectives

  • Geo Strategic (International Financial and Economic Architecture)
  • Financial and Economic stability / Macro-prudential Policy

 

Recent Financial Crisis has exposed the fact that global financial liquidity can be in shortage.  Since US Dollar is the global currency and is used in more that 40 percent of all financial transactions globally.

Asian Countries faced dollar shortage during 1997-1998 asian financial crisis.  Recent Global Financial crisis caused dollar shortage in advanced countries.  US Central Bank Federal Reserve responded by setting up currency swap lines with central banks of other countries.  These swap lines were made permanent in 2013.

After Asian financial crisis in 1997, many countries in developing world started accumulating FX reserves.  There was also a swap agreement (known as Chiang Mai Initiative) which was set up between ASEAN countries in south east Asia.

Nations also go to IMF to get conditional financing which they do not like to do.  New Trend is toward regional pooling of financial resources.  Latest example is BRICS CRA.

Even advanced economies such as EU have established European Stability Mechanism (ESM).

Chiang Mai Initiative has been revamped as Chiang Mai Initiative Multilateralism (CMIM).

 

Financial and Economic Stability / Macro Prudential Policy

A. Reserve Pools

  • Chiang Mai Initiative (CMI)
  • Chiang Mai Initiative Multi-Lateralism (CMIM)
  • BRICS Contingent Reserve Arrangement (CRA)
  • European Stability Mechanism (ESM)

B. Currency Swap Lines

  • Federal Reserve Central Bank US Dollar Swap Lines
  • PBOC China Central bank RMB Swap Lines

C. Global

  • IMF Financing

D. Self Insurance

  • Nation’s Foreign Exchange (FX) Reserves

 

From The decentralised global monetary system requires an efficient safety net

The global financial safety net as a set of protection mechanisms

The current decentralised system also lacks a central authority that is actively integrated and, above all, contractually bound into the maintenance of the monetary system by providing temporary liquidity, such as the IMF in the Bretton Woods system. Instead, various protection mechanisms have evolved because the current system has not led to greater external stability of national economies and the global economy. The problem of volatile capital flows became particularly clear once again in the course of the financial crisis of 2008 and 2009. For emerging market economies, the warning of a sudden reversal of capital flows has been omnipresent ever since the Asian crisis. However, the last crisis has demonstrated that even for industrialised countries their developed financial markets are a significant contagion mechanism for crisis developments. The following are regarded as key elements of the global financial safety net:11

International reserves. These include official foreign exchange and gold reserves as well as claims on inter-national financial institutions such as the IMF that can be rapidly converted into foreign currency under the countries’ own responsibility. •

Bilateral swap arrangements between central banks.  In a currency swap two central banks agree to exchange currency amounts, e.g. US dollars for euros. They agree on a fixed date in the future on which they will reverse the transaction applying the same exchange rate. During the term central banks can make foreign currency loans to private banks. •

IMF programmes and regional financing arrangements (e.g. European Stability Mechanism, Chiang Mai Initiative Multilateralisation Agreement, BRICs CRA, Arab Monetary Fund, Latin American Reserve Fund). They make financial resources available to the members to tackle balance of payments difficulties, manage crises and prevent regional contagion effects. Depending on their design, they may impose conditions and requirements for economic policy measures on the recipient countries. Some regional programmes require a combination with IMF funds.

The most important element of the protection mechanisms: international reserves

International reserves are by far the largest element of the global safety net.12 The lack of predictability and robustness of other elements has led to an over-accumulation of reserves. After the Asian crisis, upper middle income countries in particular built up reserves. While China holds a major portion of the reserves in this group of countries, all other countries also boosted their reserves significantly. As a result of central bank interventions in the foreign exchange market, reserves have decreased since the year 2013.

The renaissance of bilateral swap arrangements

Bilateral swap arrangements were used by the US Treasury as early as in 1936 to supply developing countries with bridging loans. During the Bretton Woods period, the Fed introduced a network of swap lines known as reciprocal currency arrangements to prevent a sudden and substantial withdrawal of gold by official foreign institutions.13 A swap protected foreign central banks from the exchange rate risk when they had obtained excess and unwanted dollar positions. It allowed them to dispense with the temporary conversion of dollars into gold. Between 1973 and 1980, the swap lines were used instead of US currency reserves to finance interventions by the Fed in the foreign exchange market. Gains and losses were shared with the other central bank when the Fed drew on a line. However, the G10 central banks could try to use the swap arrangements to influence the US foreign currency market interventions, so the Fed stopped using them in the mid-1980s. All existing swap lines except those with Canada and Mexico were ended in 1998. After the terror attacks of September 11, 2001, the Fed established swap lines with the European Central Bank and the Bank of England for 30 days and expanded the existing line with the Bank of Canada. Currency swaps were used here for the first time to restore liquidity in financial markets. During the global financial crisis, the Fed then financed the lender-of-last-resort actions of other central banks in industrialised and emerging market economies, with the latter assuming the credit risk. The international reserves of many central banks at the start of the crisis were smaller than the amounts they borrowed under the swap lines. In 2013 the swap arrangements between the six most important central banks were converted into standing arrangements. All these swap arrangements have one thing in common: they signal the central banks’ willingness to cooperate with each other, whether it be in defence of the parities under the Bretton Woods system, to avert speculative attacks on the Fed, or with the aim of providing dollar liquidity during the financial crisis. China has also set up a far-reaching system of swap arrangements, mainly with the aim of pushing ahead with the internationalisation of the renminbi. But from the perspective of these central banks, the agreements with the Bank of England, the Monetary Authority of Singapore, the Reserve Bank of Australia and the ECB also serve the goal of being able to provide renminbi liquidity in their area of responsibility when needed Swaps represent a powerful and flexible tool of central banks that issue reserve currencies to regulate international capital flows. Central banks are the only institutions capable of changing their balance sheets quickly enough to keep pace with the volatility of international capital flows. Swaps are unsuitable, however, for longer-lasting crises, sovereign debt crises and to finance balance of payments imbalances. That is why they would be the most suitable tool for emerging market economies, as they are more likely to face abrupt changes in capital flows. Nevertheless, so far only the most important central banks that issue reserve currencies have been able to access unlimited swaps. Granting them is determined by the mandate of the central banks and they represent contractual, not institutional agreements. Accordingly, the central banks are able to choose their contractual partners, and there is no central independent authority to supervise swap arrangements. The swap arrangements for central banks in industrial countries that do not issue a reserve currency can therefore be expected to be reinstated in the event of a global shock, while they are less likely to be employed in case of a regional shock. Their use is even less predictable for systemic emerging market economies.

 

Growth of Global Financial Safety Net

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Features of Instruments in the Global Financial Safety net

 

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Use of GFSN in various shock Scenarios

  • Balance of Payment shock
  • Banking Sector FX Liquidity shock
  • Sovereign Debt shock

 

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US Dollar Swap Lines

These six central banks have permanent US Dollar swap lines since 2013.

  • USA (Fed Reserve),
  • Canada (BoC),
  • Japan (BoJ),
  • Switzerland (SNB),
  • EU (ECB),
  • UK(BOE)

 

During the global financial crisis, the Federal Reserve extended swap arrangements to 14 other central banks. The ECB drew very heavily, followed by the BoJ. At one point during the crisis in 2009, outstanding swaps amounted to more than $580 billion and represented about one-quarter of the Fed’s balance sheet. The novel element of this effort was the extension of swaps to four countries outside the usual set of advanced-country central banks: Mexico, Brazil, South Korea and Singapore.16 Mexico previously had a standing swap facility with the Federal Reserve by virtue of geographic proximity and the North American Free Trade Agreement, but the new arrangement expanded the amount that Mexico’s central bank could draw and the Fed’s swaps with Brazil, South Korea and Singapore broke new ground. The swaps in general were credited with preventing a more serious seizing up of interbank lending and financial markets during 2008 to 2009 (Helleiner 2014, 38–45; Prasad 2014, 202–11; IMF 2013a; 2014a, Box 2). The Federal Reserve board of governors considered the “boundary” question at length, torn between opening itself up to additional demands for coverage from emerging markets and creating stigma against those left outside the safety net. Fed officials used economic size and connections to international financial markets as the main criteria for selecting Brazil, Mexico, Singapore and South Korea. Chile, Peru, Indonesia, India, Iceland and likely others also requested swaps but were denied. The governors wanted to deflect requests by additional countries to the IMF, which coordinated its announcement of the SLF with the Fed’s announcement of the additional swaps at the end of October 2008. Governors and staff saw in this tiering a natural division of labour that coincided with the resources and analytical capacity of the Fed and IMF.17 The ECB extended swaps to Hungary, Poland, Sweden, Switzerland and Denmark, in addition to its arrangement with the United States. The BoJ extended swaps as well, notably to South Korea after the Federal Reserve announced its Korean swap. The PBoC began to conclude a set of swap agreements with Asian and non-Asian central banks that would eventually number more than 20 and amount to RMB 2.57 trillion. Only those swaps with the central banks of Hong Kong, Singapore and South Korea are known to have been activated (Zhang 2015, 5). Boosting the role of the renminbi in international trade was the express objective of these swaps, although their establishment also helped to secure market confidence during unsettled times. The proliferation of swaps resulted in a set of star-shaped networks of agreements among central banks that were linked by Fed liquidity (Allen and Moessner 2010). Although a number of the swaps in the network were activated, only those swaps of the Federal Reserve were heavily used during the crisis. The “fortunate four” emerging market countries among the Fed 14 were each covered for amounts up to $30 billion, but only temporarily. When the Fed later declined to renew the swaps,  these countries became as vulnerable to liquidity shortfalls as the others. So, when South Korea took the chair of the G20 in 2010, its government proposed that the central bank swaps be multilateralized on a more permanent basis. It argued this would be increasingly necessary to stabilize the global financial system and would be in the interest of swap providers and recipients alike. Specifically, during the preparations for the G20 summit, South Korean officials proposed that the advanced-country central banks provide swaps to the IMF, which would conduct due diligence and provide liquidity to qualifying central banks. In this way, the global community could mobilize enough resources to address even a massive liquidity crunch and central banks would avoid credit risk.

In late 2013, six key-currency central banks made their temporary swap arrangements permanent standing facilities. Each central bank entered into a bilateral arrangement with the five others, comprising a network of 30 such agreements.18 But they prefer to maintain a constructive ambiguity with respect to whether they would re-extend swap arrangements to the other central banks that were covered during the global financial crisis, including Brazil, Mexico,19 South Korea and Singapore (Papadia 2013).

 

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During the global financial crisis of 2008-2009, Federal Reserve extended USD swap lines to several central banks.  The financial institutions in these countries faced USD shortages as the normal channels of money markets froze during crisis.

 

US Dollar Swap amounts extended during 2008-2009 Global Financial Crisis

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China RMB Swap Lines

During the 2007-8 global financial crisis, the international monetary system experienced an acute US dollar shortage that severely curtailed global trade and pressured international banking business (McCauley and McGuire, 2009; McGuire and von Peter, 2009). The US authorities, in response to the elevated strain in the global market, have arranged dollar swap lines with major central banks to mitigate the global dollar squeeze (Aizenman and Pasricha, 2010; Aizenman, Jinjarak and Park, 2011). On Thursday, October 31, 2013, the network of central banks comprises the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank agreed to convert their bilateral liquidity swap arrangements to standing arrangements until further notice.1 The dollar squeeze critically illustrated the danger of operating a US-centric global financial system. Against this backdrop, China has actively implemented measures of promoting the cross-border use of the Chinese currency, the renminbi (RMB), to reduce its reliance on the US dollar. The aggressive policy move was considered a clear signal of China’s efforts to internationalize RMB (Chen and Cheung, 2011; Cheung, Ma and McCauley, 2011). In 2009, China launched the scheme of cross-border trade settlement in RMB to encourage the denomination and settlement of international trade in its own currencies. One practical issue of settling trade in RMB is the limited availability of the currency outside China. China at that time had strict regulations on circulating the RMB across its border. To facilitate its RMB trade settlement initiative, China signed its first bilateral RMB local currency swap agreement with the Bank of Korea in December 2008, and the second one with Hong Kong in January 2009. Since then, China has signed various swap agreements with economies around the world.2

 

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BRICS CRA

The 5th and 6th BRICS summits in 2013–2014 marked a watershed in the evolution of the BRICS group with the establishment of the first BRICS institutions. These included the BRICS New Development Bank, the CRA, the BRICS Business Council and the Think Tanks Council. Although this has weakened the ‘political talk shop’ perception of the group, critics have questioned whether these institutions will have a substantive effect. In particular, doubts have been cast upon the effectiveness of the CRA.

The CRA is modest in size in comparison to the IMF and other similar arrangements such as the Chiang Mai Initiative Multilateralization (CMIM). At this stage the BRICS countries have committed $100 billion to the CRA, with China committing $41 billion, Russia, Brazil and India $18 billion each and South Africa $5 billion. The CMIM reportedly has a reserve pool of $240 billion and the IMF resources of $780 billion. It has been noted that with BRICS’s foreign reserves standing at about $5 trillion, a commitment of 16% would take the CRA pool to $800 billion.

 

From GLOBAL AND REGIONAL FINANCIAL SAFETY NETS: LESSONS FROM EUROPE AND ASIA

ASEAN +3 CMIM

ASEAN + Japan Korea China

The embryo of an Asian regional safety net arrangement has existed since 1977, when the five founding members of the ASEAN signed the ASEAN Swap Arrangement (ASA)5. Following the Asian crisis and after aborted discussion on the creation of an Asian Monetary Fund, Japan launched the New Miyazawa Initiative in October 1998 amounting to about $35 billion, which was targeted at stabilising the foreign exchange markets of Indonesia, the Republic of Korea, Malaysia, the Philippines, and Thailand6. The initiative was particularly valuable in containing instability in Malaysia’s financial sector, since that country had refused an IMF Stand-By Arrangement. The Japanese manoeuvre was deemed somewhat mutinous, since the IMF was very critical of Malaysia’s approach. But it also cemented the idea that Asia could gather enough resources to sandbag itself during a crisis period so long as Asian countries were united and managed to roll out timely and credible support mechanisms. In Asian countries under IMF programmes, the conditionality associated with the loans included severe fiscal cuts, deep structural reforms, and substantial increases in interest rates to stabilise currency markets. The economic and social cost of the adjustment was so high and abrupt that it provoked social unrest in a number of countries. This would reverberate strongly in the months that followed and leave a lasting scar in relations between Asian countries and the IMF7. This experience fuelled both a willingness to self-insure through accelerated reserve accumulation and to strengthen regional arrangements to reduce the reliance on global financial safety nets. Building on this lesson, the CMI was formalised in May 2000 during the ASEAN+3 Finance Ministers Meeting8. It largely built on the original ASA and bilateral swap agreements involving the PRC, Japan, and the Republic of Korea but was grounded in a broader programme that also included developing Asia’s local currency bond market and introduced a regional economic review and policy dialogue to enhance the region’s surveillance mechanism (Kawai and Houser 2007). The initiative included the new ASEAN members, increasing the total number of parties to the arrangement from 5 to 10. Table A.1 in the appendix highlights the evolution of the CMI. The question of cooperation between the CMI and the IMF quickly became quite heated, with a number of countries arguing that strong ties to the Fund would defeat the initial purpose of the initiative (Korea Institute of Finance, 2012), but the ties were kept nonetheless both to mitigate moral hazard (Sussangkarn, 2011) and to ensure some consistency with conditionality attached to the IMF’s own programmes. After the formal creation of the CMI in 2000, the era of Great Moderation that followed to some degree doused further ambitions to strengthen regional arrangements. As a result, when the global financial crisis hit in 2008, the Asian regional financial safety net proved too modest to play a meaningful role.

Indeed, instead of seeking support under CMI, the Bank of Korea and the Monetary Authority of Singapore sought a swap agreement with the US Federal Reserve for some $30 billion each. The Republic of Korea concluded bilateral agreements with Japan and the PRC that were not related to the CMI. Similarly, Indonesia established separate bilateral swap lines with Japan and the PRC to shore up its crisis buffer and did not resort to the CMI for credit support (Sussangkarn, 2011). The plan to consolidate the bilateral swap arrangements and form a single, more solid, and effective reserve pooling mechanism – which had initially been put forward by the finance ministers of the ASEAN+3 in May 2007 in Kyoto – was accelerated and evolved in several iterations before the final version was laid out more than two years later. In December 2009, the CMI was multilateralised and the ASEAN+3 representatives signed the Chiang Mai Initiative Multilateralisation (CMIM) Agreement, which effectively became binding on March 24, 2010 (BSP, 2012). These successive transformations have strengthened the initiative, but it remains largely untested. In addition, other aspects of any credible regional financial arrangement, such as surveillance capacity and coordination of some basic economic policies, remain relatively embryonic.

 

 

From GLOBAL AND REGIONAL FINANCIAL SAFETY NETS: LESSONS FROM EUROPE AND ASIA

 

EU ESM

The history of European financial safety nets cannot be dissociated from the history of European monetary integration. With this perspective in mind, it dates back to the late 1960s and has been an ongoing debate to this day. The history of European political integration at every turn is marked by failed projects or actual mechanisms of financial solidarity, ranging from loose exchange rate arrangements to the project of a full-fledged European Monetary Fund. The advent of the monetary union was precisely designed to reduce the need for financial safety nets within the euro area. But the architectural deficiencies of the euro area and the lack of internal transfers have required the establishment of alternative mutual insurance mechanisms since the onset of the euro crisis in 2010. In 2008, when the global financial crisis hit, Hungary had accumulated important external imbalances and large foreign exchange exposures. It had to seek financial assistance almost immediately and initiated contacts with the IMF. The total absence of coordination with European authorities came as an initial shock because it showed that despite decades of intense economic, political, and monetary integration, EU countries could still come to require international financial assistance. The experience pushed European institutions to unearth a forgotten provision of the Maastricht Treaty to provide financial assistance through the Balance of Payments Assistance Facility9. This created preliminary and at first ad-hoc coordination between the IMF and the European Commission, which was then rediscovering design and monitoring of macroeconomic adjustment programmes. Despite the rapid use of this facility and the emergence of a framework of cooperation with the IMF, contagion from the global financial crisis continued for months and prompted some Eastern European leaders to seek broader and more pre-emptive support10, which failed. However, beyond official sector participation, there was a relatively rapid realisation that cross-border banking and financial retrenchment could become a major source of financial disruption and effectively propagate the crisis further – including back to the core of Europe, as large European banks were heavily exposed to Eastern Europe through vast and dense networks of branches and subsidiaries. In response, in late February 2009, under the leadership of the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank decided to establish what was known as the Vienna Initiative. This was designed as a joint multilateral and private sector coordination and enforcement mechanism to reduce the risk of banking sector sudden stops. In particular, it compelled cross-border European banks to continue to provide appropriate liquidity to their branches and subsidiaries in Central and Eastern Europe. The formalisation of such an arrangement11 quite early in the crisis has certainly proven the case for coordination of financial institutions in emerging-market economies, especially when a relatively small number of institutions have a disproportionate impact on capital flows. But with the crisis spreading to the euro area, starting with Greece in the fall of 2010, new regional arrangements proved necessary. The lack of instruments forced European officials to first consider bilateral assistance from member states. The idea of involving the IMF was initially violently rejected 9 on intellectual and political grounds12 but proved inevitable. In a number of successive iterations, more solid regional arrangements were designed (Bijlsma and Vallée 2012). Table A.2 in the appendix shows the evolution of European regional financial safety nets.

 

List of Regional Financial Agreements (RFA)

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Key Terms:

  • RMB
  • Bilateral Currency Swaps
  • Reserve Pooling
  • CMI
  • CMIM
  • BRICS CRA
  • AMRO
  • IMF SDR Basket
  • Currency Internationalization
  • Global Liquidity
  • Funding Liquidity
  • Market Liquidity
  • BRICS NDB
  • CHINA AIIB
  • Regional Integration
  • Multilateralism
  • Multipolar
  • FX Swap Networks
  • Central Banks
  • Reserve Currency
  • Global Financial Safety Nets (GFSN)
  • Foreign Exchange Reserves
  • Regional Financial Agreements (RFA)
  • Regional Financial Networks (RFN)
  • Bilateral Currency Swap Agreement (BSA)
  • RMB (Renminbi also known as Yuan)
  • International Lender of Last Resort (ILOLR)
  • Regional Financial Safety Net (RFSN)
  • Multilateral Financial Safety Net (MFSN)
  • National Financial Safety Net (NFSN)

 

Key Sources of Research:

 

Self-Insurance, Reserve Pooling Arrangements, and Pre-emptive Financing

Sunil Sharma

 

Click to access sharma.pdf

 

 

Regional Reserve Pooling Arrangements

Suman S. Basu Ran Bi

Prakash Kannan

First Draft: 8 February, 2010 This Draft: 7 June, 2010

 

Click to access Prakash.pdf

 

 

Toward a functional Chiang Mai Initiative

15 May 2012

Author: Chalongphob Sussangkarn, TDRI

http://www.eastasiaforum.org/2012/05/15/toward-a-functional-chiang-mai-initiative/

 

 

The International Financial Architecture and the Role of Regional Funds

Barry Eichengreen

University of California, Berkeley

August 2010

 

Click to access intl_finan_arch_2010.pdf

 

 

Examining the case for Reserve Pooling in East Asia: Empirical Analysis

Ramkishen S. Rajan, Reza Siregar and Graham Bird

2003

 

Click to access 0323.pdf

 

 

Financial Architectures and Development: Resilience, Policy Space and Human Development in the Global South

by Ilene Grabel

2013

 

Click to access hdro_1307_grabel.pdf

 

 

International reserves and swap lines: substitutes or complements?

Joshua Aizenman,
Yothin Jinjarak, and Donghyun Park,

March 2010

 

Click to access ajp-ir-sw-0301.pdf

 

 

How can we fix the global financial safety net?

WEF

https://www.weforum.org/agenda/2015/10/how-can-we-fix-the-global-financial-safety-net/

 

 

Regional Monetary Cooperation: Lessons from the Euro Crisis for Developing Areas?

Sebastian Dullien

Barbara Fritz

Laurissa Mühlich

 

Click to access WEA-WER2-Dullien.pdf

 

 

The Global Dollar System

Stephen G Cecchetti

 

Click to access Polp61.pdf

 

 

The Future of the IMF and of Regional Cooperation in East Asia

Yung Chul Park, Charles Wyplosz

2008

 

Click to access 20081111-12_Y-C_Park-C_Wyplosz.pdf

 

 

China’s Bilateral Currency Swap Agreements: Recent Trends

Aravind Yelery

 

http://journals.sagepub.com/doi/pdf/10.1177/0009445515627210

 

 

The Spread of Chinese Swaps

CFR

 

https://www.cfr.org/international-finance/central-bank-currency-swaps-since-financial-crisis/p36419#!/

 

 

Chiang Mai Initiative Multilateralization

Click to access CMIM.pdf

 

 

The Chiang Mai Initiative

Click to access 3iie3381.pdf

 

 

Beyond the Chiang Mai Initiative: Prospects for Regional Financial and Monetary Integration in East Asia

 

Click to access Session-2_1-4.pdf

 

 

Currency internationalisation: an overview

 

Peter B Kenen

 

Click to access arpresearch200903.01.pdf

 

 

 

Why Was the CMI Possible?

Embedded Domestic Preferences and Internationally Nested Constraints in Regional Institution Building in East Asia

Saori N. Katada

 

Click to access 1f1966fe-1c48-4d32-a463-ea268ecb2903.pdf

 

 

Emergent International Liquidity Agreements: Central Bank Cooperation after the Global Financial Crisis

Daniel McDowell

 

Click to access mcdowell_eln.pdf

 

 

Regional Financial Cooperation in Asia

Daikichi Momma

 

Click to access Session_2_Momma.pdf

 

 

East Asian Economic Cooperation and Integration: Japan’s Perspective

Takatoshi Ito

 

Click to access 41RegionalCoop.pdf

 

 

What Motivates Regional Financial Cooperation in East Asia Today?

JENNIFER AMYX

 

http://www.eastwestcenter.org/system/tdf/private/api076.pdf?file=1&type=node&id=32049

 

 

Evaluating Asian Swap Arrangements

Joshua Aizenman, Yothin Jinjarak, and Donghyun Park

No. 297 July 2011

 

Click to access adbi-wp297.pdf

 

 

Regional Monetary Cooperation in East Asia Should the United States Be Concerned?

Wen Jin Yuan Melissa Murphy

 

Click to access 101129_Yuan_RegionalCoop_WEB.pdf

 

 

Chiang Mai Initiative as the Foundation of Financial Stability in East Asia

Click to access 17902.pdf

 

 

COMPLEX DECISION IN THE ESTABLISHMENT OF ASIAN REGIONAL FINANCIAL ARRANGEMENT

Iwan J Azis

 

Click to access p02.pdf

 

 

Chiang Mai Initiative Multilateralization

December 2013

 

Click to access ChiangMaiInitiative_0.pdf

 

 

 

RMBI or RMBR?
Is the Renminbi Destined to Become a Global or Regional Currency?

Barry Eichengreen

Domenico Lombardi

 

Click to access RMBI_or_RMBR_-_Eichengreen.pdf

 

 

 

Monetary and financial cooperation in Asia: taking stock of recent ongoings

Ramkishen S. Rajan

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.473.361&rep=rep1&type=pdf

 

 

FINANCIAL CRISES AND EAST ASIA’S FINANCIAL COOPERATION

 

By Park Young-joon

 

Click to access ParkYJ.pdf

 

 

MONETARY INTEGRATION IN EAST ASIA

Peter B. Kenen
Ellen E. Meade

 

Click to access Kenen.pdf

 

 

Regional cooperation for financial and exchange rates stability in East Asia

 

Kenichi Shimizu

Click to access WP_FG7_2013_01_Dezember_Kenichi_Shimizu.pdf

 

 

ASIAN FINANCIAL CO-OPERATION

Address by Mr GR Stevens

 

Click to access bu-1105-3.pdf

 

 

The Rise of China and Regional Integration in East Asia

 

https://www.researchgate.net/publication/290788291_The_Rise_of_China_and_Regional_Integration_in_East_Asia

 

 

REGIONAL FINANCIAL COOPERATION IN EAST ASIA: THE CHIANG MAI INITIATIVE AND BEYOND

 

Click to access Bulletin02-ch8.pdf

 

 

Financial RegionaliSm: a Review oF the iSSueS

Domenico lombaRDi

2010

 

Click to access 11_global_economy_lombardi.pdf

 

 

The layers of the global financial safety net: taking stock

2016

 

Click to access eb201605_article01.en.pdf

 

 

Regional Financial Arrangements for East Asia: A Different Agenda from Latin America

By Yung Chul Park

 

Click to access 00510.pdf

 

 

Elasticity and Discipline in the Global Swap Network

Perry Mehrling

Working Paper No. 27 November 12, 2015

 

Click to access WP27-Mehrling.pdf

 

 

 Swap Agreements & China’s RMB Currency Network

https://www.cogitasia.com/swap-agreements-chinas-rmb-currency-network/

 

 

Central Bank Currency Swaps and the International Monetary System

Christophe Destais

 

Click to access CentralBankCurrencySwap_ChristopheDestais.pdf

 

 

Renminbi internationalisation – The pace quickens

Click to access Renminbi-internationalisation-The-pace-quickens.pdf

 

 

What Will China’s RMB Bilateral Currency Swap Deals Lead To?

 

https://www.chinamoneynetwork.com/2013/11/08/what-will-chinas-rmb-bilateral-currency-swap-deals-lead-to

 

 

Emergent International Liquidity Agreements: Central Bank Cooperation after the Global Financial Crisis

Daniel McDowell

 

Click to access mcdowell_eln.pdf

 

 

Currency Swap of Central Bank: Influence on International Currency System

 

Click to access 20160316142214_202.pdf

 

 

Building Global and Regional Financial Safety Nets

February 2016

Yung Chul Park

 

Click to access 35E%20Yung%20Chul%20Park£∫Building%20Global%20and%20Regional%20Financial%20Safety%20Nets%20%20Final.pdf

 

 

RMBI or RMBR?

Is the Renminbi Destined to Become a Global or Regional Currency?

Barry Eichengreen

Domenico Lombardi

 

Click to access RMBI_or_RMBR_-_Eichengreen.pdf

 

 

China’s Bilateral Currency Swap Lines

Yin-Wong Cheung, Hung Hing Ying  LIN Zhitao

ZHAN Wenjie

2016

 

Click to access GRU%232016-013%20_YW.pdf

 

 

Internationalisation of the Chinese Currency: Towards a Multipolar International Monetary System?

Lucia Országhová

 

Click to access biatec_01_2016_orszaghova.pdf

 

 

Central bank: China currency swap deals surpass 3t yuan

http://english.gov.cn/state_council/ministries/2015/06/11/content_281475125318660.htm

 

 

The International Lender of Last Resort for Emerging Countries: A Bilateral Currency Swap?

Camila Villard Duran

Click to access WP_108%20-%20The%20International%20Lender%20of%20Last%20Resort%20for%20Emerging%20Countries%20-%20Camila%20Duran.pdf

 

Click to access Duran%20-%20The%20International%20Lender%20of%20Last%20Resort%20for%20Emerging%20Countries.pdf

 

 

Entry of yuan into SDR may give a boost to global liquidity

http://www.marketwatch.com/story/entry-of-yuan-into-sdr-may-give-a-boost-to-global-liquidity-2016-10-17

 

 

Redback Rising: China’s Bilateral Swap Agreements and RMB Internationalization

Steven Liao
Daniel E. McDowell

 

Click to access yuan_isq.pdf

 

 

International reserves and swap lines: substitutes or complements? 

Joshua Aizenman
Yothin Jinjarak,  Donghyun Park

March 2010

 

Click to access ajp-ir-sw-0301.pdf

 

 

The Asian Monetary Fund Reborn? Implications of Chiang Mai Initiative Multilateralization

William W. Grimes

2011

 

Click to access Grimes.pdf

 

 

Avoiding the next liquidity crunch: how the G20 must support monetary cooperation to increase resilience to crisis

Camila Villard Duran

 

Click to access GEG%20Villard%20Duran%20October%202015.pdf

 

Stitching together the global financial safety net

Edd Denbee, Carsten Jung and Francesco Paternò

2016

 

Click to access fs_paper36.pdf

 

 

Why Are There Large Foreign Exchange Reserves?  The Case of South Korea

Franklin Allen

Joo Yun Hong

 

Click to access 01_KSSJ_11-02-03.pdf

 

 

Federal Reserve Policy in an International Context

Ben S. Bernanke

 

Click to access Bernanke.pdf

 

 

The dollar’s international role: An “exorbitant privilege”?

Ben S. Bernanke

Thursday, January 7, 2016

https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-dollars-international-role-an-exorbitant-privilege-2/

 

 

TRADE AND DEVELOPMENT REPORT, 2015

Making the international financial architecture work for development

 

Click to access tdr2015ch3_en.pdf

 

 

Global Economic Governance in Asia: Through the Looking Glass of the European Sovereign Debt Crisis

China in Global Financial Governance: Implications from Regional Leadership Challenge in East Asia

Takashi Terada

 

Click to access China-in-Global-Financial-Governance-Implications-from-Regional-Leadership-Challenge-in-East-Asia-by-Takashi-Terada.pdf

 

 

Central Bank Currency Swaps Key to International Monetary System

http://andrewsheng.net/Article_Central_bank_currency_swaps_key_to_IMS.html

 

 

The Federal Reserve’s Foreign Exchange Swap Lines

Michael J. Fleming and Nicholas J. Klagge

 

Click to access ci16-4.pdf

 

 

Central Bank Liquidity Swaps

https://www.newyorkfed.org/markets/liquidity_swap.html

 

 

Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs

Linda S. Goldberg, Craig Kennedy, and Jason Miu

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.422.11&rep=rep1&type=pdf

 

 

eXperience With foreign currency liquidity-providing centrAl bAnK sWAps

 

Click to access art1_mb201408_pp65-82en.pdf

 

 

Banking on China through Currency Swap Agreements

October 23, 2015

By Cindy Li

http://www.frbsf.org/banking/asia-program/pacific-exchange-blog/banking-on-china-renminbi-currency-swap-agreements/

 

 

TESTING THE GLOBAL CENTRAL BANK SWAP NETWORK

http://www.perrymehrling.com/2015/07/testing-the-global-central-bank-swap-network/

 

 

The impact of international swap lines on stock returns of banks in emerging markets

Alin Marius Andries1 Andreas M. Fischer2 Pınar Ye ̧sin

June 2015

 

Click to access sem_2015_07_09_Andries_Fischer_Yesin.n.pdf

 

 

Why Did the US Federal Reserve Unprecedentedly Offer Swap Lines to Emerging Market Economies during the Global Financial Crisis? Can We Expect Them Again in the Future?

Hyoung-kyu Chey

 

Click to access 11-18.pdf

 

 

International reserves and swap lines: substitutes or complements? 

Joshua Aizenman,
Yothin Jinjarak,  Donghyun Park

July 2010

 

Click to access 037b0b0312cfb51cee7dffd5c3399332a669.pdf

 

 

Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs

Linda S. Goldberg Craig Kennedy Jason Miu

 

Click to access 9a564d30e508dcd3799ceb7a99b5e2c2e273.pdf

 

 

Central Bank Liquidity Swaps

https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2011-economic-trends/et-20111219-central-bank-liquidity-swaps.aspx

 

 

Central bank currency swaps key to international monetary system

April 2014

Author: Andrew Sheng, Fung Global Institute

http://www.eastasiaforum.org/2014/04/01/central-bank-currency-swaps-key-to-international-monetary-system/

 

 

Evaluating Asian Swap Arrangements

Joshua Aizenman, Yothin Jinjarak, and Donghyun Park

No. 297 July 2011

 

Click to access adbi-wp297.pdf

 

 

Central Bank Liquidity Swaps Overview

Yubo Wang

February 15, 2010

 

Click to access Central_Bank_Liquidity_Swaps_201002.pdf

 

 

The implications of cross-border banking and foreign currency swap lines for the international monetary system

 

Már Guðmundsson:

Click to access MGpresentation.pdf

 

 

The Politics of Rescuing the World’s Financial System: The Federal Reserve as a Global Lender of Last Resort

J. Lawrence Broz

 

2014

Click to access broz2014.pdf

 

 

From Exorbitant Privilege to Existential Trilemma

 

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1067001821&serialid=FdgDLSRBS51YJLr69%2BcO6H1iGqGyLNuzqEDE5DwoUt8%3D

 

 

The dollar is now everyone’s problem

September 29, 2014

http://www.moneyandbanking.com/commentary/2014/9/29/the-dollar-is-now-everyones-problem

 

 

The Global Dollar System

Stephen G Cecchetti

 

Click to access Polp61.pdf

 

 

Central Bank Swaps and International Dollar Illiquidity

Andrew K. Rose Mark M. Spiegel∗

March 14, 2012

 

Click to access RSGJE.pdf

 

 

DOLLAR FUNDING AND THE LENDING BEHAVIOR OF GLOBAL BANKS

VICTORIA IVASHINA DAVID S. SCHARFSTEIN JEREMY C. STEIN

First draft: October 2012 This draft: March 2015

 

Click to access ISS%20revision%20march%202015%20FINAL_7529aa88-fe19-4fd1-8427-43b83c5d8589.pdf

 

 

THE INTERNATIONALIZATION OF THE RENMINBI AND THE RISE OF A MULTIPOLAR CURRENCY SYSTEM

By Miriam Campanella

 

Click to access WP201201_1.pdf

 

 

Dollar Illiquidity and Central Bank Swap Arrangements During the Global Financial Crisis

Andrew K. Rose Mark M. Spiegel

August 2011

 

Click to access wp11-18bk.pdf

 

 

Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs

Linda S. Goldberg, Craig Kennedy, Jason Miu

Click to access w15763.pdf

 

 

US Dollar Swap Arrangements between Central Banks

 

Click to access box-b.pdf

 

 

Currency Swaps with Foreign Central Banks

 

BY RENEE COURTOIS

 

Click to access policy_update.pdf

 

 

Central Banks Make Swaps Permanent as Crisis Backstop

Jeff Black

October 31, 2013

https://www.bloomberg.com/news/articles/2013-10-31/ecb-makes-crisis-cash-lines-at-central-banks-permanent

 

 

Swap Lines Underscore the Dollar’s Global Role

 

Click to access 12q1currencyswaps.pdf

 

 

Central bank co-operation and international liquidity in the financial crisis of 2008-9

by William A Allen and Richhild Moessner

Monetary and Economic Department

May 2010

 

Click to access work310.pdf

 

 

Financial instability, Reserves, and Central Bank Swap Lines in the Panic of 2008

Maurice Obstfeld Jay C. Shambaugh  Alan M. Taylor

 

Click to access ObstfeldShambaughTaylorAEAPP.pdf

 

 

The Federal Reserve as Global Lender of Last Resort, 2007-2010

 

J. Lawrence Broz

 

Click to access Broz_Fed.pdf

 

 

Lenders of Last Resort and Global Liquidity

Rethinking the system

 

Click to access outreach_obstfeld_dec09.pdf

 

 

The Fed’s FX swap facilities have been quiet… too quiet?

https://ftalphaville.ft.com/2016/07/13/2169137/the-feds-fx-swap-facilities-have-been-quiet-too-quiet/

 

 

Swap Lines Underscore the Dollar’s Global Role

 

Click to access 12q1currencyswaps.pdf

 

 

THE EVOLUTION OF THE FEDERAL RESERVE SWAP LINES SINCE 1962

Michael D. Bordo Owen F. Humpage Anna J. Schwartz

2014

 

Click to access w20755.pdf

 

 

How China Covered The World In “Liquidity Swap Lines”

http://www.zerohedge.com/news/2015-05-17/how-china-covered-world-liquidity-swap-lines

 

 

The Federal Reserve’s Foreign Exchange Swap Lines

Michael J. Fleming  Nicholas Klagge

April 1, 2010

https://papers.ssrn.com/sol3/papers2.cfm?abstract_id=1597320

 

 

The Federal Reserve as Global Lender of Last Resort, 2007-2010

 

J. Lawrence Broz

 

Click to access dp-30.pdf

 

 

The Fed’s Role in International Crises

Donald Kohn

Thursday, September 18, 2014

https://www.brookings.edu/on-the-record/the-feds-role-in-international-crises/

 

 

Options for meeting the demand for international liquidity during financial crises

 

Click to access r_qt1009g.pdf

 

 

The Chiang Mai Initiative Multilateralization: Origin, Development and Outlook

Chalongphob Sussangkarn

No. 230 July 2010

 

Click to access adbi-wp230.pdf

 

 

The Amended Chiang Mai Initiative Multilateralisation (CMIM) Comes Into Effect on July 17, 2014

 

Click to access rel140717a.pdf

 

 

Note on Chiang Mai Initiative Multilateralization (CMIM)* 

Chalongphob Sussangkarn

 

Click to access Chalongphabs_Note.pdf

 

 

SOURCES AND EVOLUTION OF THE CHIANG MAI INITIATIVE

 

Vyacheslav Amirov

Click to access 7.pdf

 

 

The Chiang Mai Initiative

PIIE

Click to access 3iie3381.pdf

 

 

Why Was the CMI Possible?

Embedded Domestic Preferences and Internationally Nested Constraints in Regional Institution Building in East Asia**

Saori N. Katada

 

Click to access 1f1966fe-1c48-4d32-a463-ea268ecb2903.pdf

 

 

From the Chiang Mai Initiative to an Asian Monetary Fund

Masahiro Kawai

No. 527 May 2015

 

Click to access adbi-wp527.pdf

 

 

Asian Monetary Fund: Getting Nearer

By Pradumna B. Rana

 

Click to access CO11079.pdf

 

 

Panel on Financial Affairs Meeting on 2 November 2009

 

Background Brief
on Hong Kong’s participation in Chiang Mai Initiative Multilateralization

 

Click to access fa1102cb1-144-e.pdf

 

 

The Chiang Mai Initiative Multilateralisation: Origin, Development and Outlook

 

 

 

Much Ado about Nothing? Chiang Mai Initiative Multilateralisation and East Asian Exchange Rate Cooperation

Wolf HASSDORF

 

Click to access 06Hassdorf.pdf

 

 

Financial Safety Nets in Asia: Genesis, Evolution, Adequacy, and Way Forward

Hal Hill and Jayant Menon

 

Click to access wp_econ_2012_17.pdf

 

 

Financial Community Building in East Asia

The Chiang Mai Initiative: Its Causes and Evaluation

 

EPIK 2010 Economics of Community Building

Yoon Jin Lee

 

Click to access YoonJinLee.pdf

 

 

FROM “TAOGUANG YANGHUI” TO “YOUSUO ZUOWEI”:

CHINA’S ENGAGEMENT IN FINANCIAL MINILATERALISM

HONGYING WANG

 

Click to access cigi_paper_no52.pdf

 

 

Foundation of Regional Integration: Common or Divergent Interests?

Yong Wook Lee

 

Click to access -_foundation_of_regional_integration__1_.pdf

 

 

CMIM and ESM: ASEAN+3 and Eurozone Crisis Management and Resolution Liquidity Provision in Comparative Perspective

Ramon PACHECO PARDO

 

Click to access CBFL-WP-RPP01.pdf

 

 

An Overview of Regional Financial Cooperation: Implication for BRICS Contingent Reserve Arrangement

Zhang Liqing,NianShuting

 

Click to access 20160316142109_641.pdf

 

 

CMIM-Asian Multilateralism and Cooperation

Keynote speech by Dr. Junhong Chang, AMRO Director, at the 6th Asia Research Forum
1 July 2016

http://www.amro-asia.org/keynote-speech-by-dr-junhong-chang-amro-director-at-the-6th-asia-research-forum-cmim-asian-multilateralism-and-cooperation/

 

 

Financial RegionaliSm: a Review oF the iSSueS

Domenico lombaRDi

 

Click to access 11_global_economy_lombardi.pdf

 

 

Practices of Financial Regionalism and the Negotiation of Community in East Asia

Mikko Huotari

 

Click to access op8_huotari_feb-2012_end.pdf

 

 

Financial Integration in Emerging Asian Economies

Gladys Siow

 

Click to access 032-ICEBI2012-A10048.pdf

 

 

Regional Monetary Cooperation: Lessons from the Euro Crisis for Developing Areas?

Sebastian Dullien

Barbara Fritz

Laurissa Mühlich

 

Click to access WEA-WER2-Dullien.pdf

 

 

The Need and Scope for Strengthening Co-operation Between Regional Financing Arrangements and the IMF

 

Ulrich Volz

 

Click to access DP_15.2012.pdf

 

 

Towards institutionalization: The BRICS Contingent Reserve Arrangement (CRA)

http://www.postwesternworld.com/2013/05/12/the-politics-of-the-brics-contingency-reserve-arrangement-cra/

 

 

The BRICS Contingent Reserve Arrangement and its Position

in the Emerging Global Financial Architecture

NIColETTE CATTANEo, MAyAMIko BIzIwICk & DAvID FRyER

 

https://www.saiia.org.za/policy-insights/752-policy-insights-10-the-brics-contingent-reserve-arrangement-and-its-position-in-the-emerging-global-financial-architecture/file

 

 

Financial Architectures and Development:

Resilience, Policy Space and Human Development in the Global South

by Ilene Grabel

 

Click to access hdro_1307_grabel.pdf

 

 

Financial Regionalism in East Asia

 

Click to access VOLZ.pdf

 

 

Enhancing the Effectiveness of CMIM and AMRO: Selected Immediate Challenges and Tasks

Reza Siregar and Akkharaphol Chabchitrchaidol

No. 403 January 2013

 

Click to access 2013.01.17.wp403.enhancing.effectiveness.cmim_.amro_.pdf

 

 

Regional and Global Liquidity Arrangements

Ulrich Volz / Aldo Caliari (Editors)

 

Click to access regional_funds_oct2010.pdf

 

 

A regional reserve fund for Latin America

Daniel Titelman, Cecilia Vera, Pablo Carvallo and Esteban Pérez Caldentey

 

Click to access RVI112Titelmanetal_en.pdf

 

 

Financial Crises as Catalysts for Regional Integration? The Chances and Obstacles for Monetary Integration in ASEAN+3 and MERCOSUR

Sebastian Krapohl  Daniel Rempe

 

Click to access KrapohlRempe.pdf

 

 

Financial Integration

 

Click to access Financial%20Integration.pdf

 

 

Framework of the ASEAN Plus Three Mechanisms Operating in the Sphere of Economic Cooperation

Prof. Dr. Vyacheslav V. Gavrilov

 

Click to access CALE20DP20No.207-110826.pdf

 

 

Regional Integration in Europe and East Asia: Experiences of Integration and Lessons from Functional Multilateralism

Uwe Wissenbach

 

Click to access 13-2-02_Uwe_Wissenbach.pdf

 

 

General Overview: “Financial Risk and Crisis Management after the Global Financial Crisis”

 

Click to access Jun2016No9.pdf

 

 

Remaking the architecture: the emerging powers, self-insuring and regional insulation 

GREGORY T. CHIN

 

Click to access chin1.pdf

 

 

The Origins and Transformation of East Asian Financial Regionalism

 

http://dspace.uni.lodz.pl:8080/xmlui/bitstream/handle/11089/18824/6-069_084-Klecha-Tylec.pdf?sequence=1&isAllowed=y

 

 

Regional Financial Arrangement: An Impetus for Regional Policy Cooperation

Reza Siregar and Keita Miyaki

 

Click to access MPRA_paper_51050.pdf

 

 

Role of Regional Institutions in East Asia

 

Click to access RPR_FY2011_No.10_Chapter_11.pdf

 

 

Asia’s new financial safety net: Is the Chiang Mai Initiative designed not to be used?

Hal Hill, Jayant Menon

25 July 2012

http://voxeu.org/article/chiang-mai-initiative-designed-not-be-used

 

 

Will the new BRICS institutions work?

 

https://www.weforum.org/agenda/2014/08/brics-new-development-bank-contingent-reserve-agreement/

 

 

BRICS NEW DEVELOPMENT BANK AND CONTINGENT RESERVE ARRANGEMENT

 

Click to access 150428BRICS_Bank.pdf

 

 

The Contingent Reserve Arrangement and the International Monetary System

Manmohan Agarwal

 

Click to access 2ead896b5e52456a098bbd2d0b25774b.pdf

 

 

The BRICS Bank and Reserve Arrangement: towards a new global financial framework?

2014

 

Click to access EPRS_ATA(2014)542178_REV1_EN.pdf

 

 

China’s Bilateral Currency Swap Lines

Lin Zhitao Zhan Wenjie Yin-Wong Cheung

CESIFO WORKING PAPER NO. 5736 CATEGORY 7:MONETARY POLICY AND INTERNATIONAL FINANCE JANUARY 2016

 

 

Elasticity and Discipline in the Global Swap Network

Perry Mehrling Barnard College and INET

November 6, 2015

Click to access Global-Swap-Network.pdf

 

 

A Proposal for a New Regional Financial Arrangement: The Reserve Liquidity Line

Young-Joon Park

2014

 

 

International Liquidity in a Multipolar World

Barry Eichengreen

 

 

 

International Liquidity Swaps: Is the Chiang Mai Initiative Pooling Reserves Efficiently ?

Emanuel Kohlscheen and Mark P. Tayl

Click to access liquidity_swaps.pdf

Click to access twerp_752.pdf

 

 

International Reserves and Swap Lines in Times of Financial Distress: Overview and Interpretations

Joshua Aizenman

No. 192 February 2010

Click to access adbi-wp192.pdf

 

 

Coordinating Regional and Multilateral Financial Institutions

C. Randall Henning

 

Click to access wp11-9.pdf

 

 

The Asian Monetary Fund Reborn? Implications of Chiang Mai Initiative Multilateralization

William W. Grimes

Click to access Grimes.pdf

 

 

REGIONAL LIQUIDITY MECHANISMS IN DEVELOPING COUNTRIES

Gustavo Rojas de Cerqueira César

Click to access PWR_v4_n3_Regional.pdf

 

 

Much Ado about Nothing? Chiang Mai Initiative Multilateralisation and East Asian Exchange Rate Cooperation

Wolf HASSDORF

Click to access 06Hassdorf.pdf

 

 

Global Liquidity: Public and Private

Jean-Pierre Landau

 

Click to access Jackson-Hole-Print.pdf

 

 

Safety for whom? The scattered global financial safety net and the role of regional financial arrangements

Mühlich, Laurissa; Fritz, Barbara

 

http://www.ssoar.info/ssoar/bitstream/handle/document/48298/ssoar-2016-muhlich_et_al-Safety_for_whom_The_scattered.pdf?sequence=1

 

 

The International Financial Architecture and the Role of Regional Funds

Barry Eichengreen

August 2010

 

Click to access intl_finan_arch_2010.pdf

 

 

The evolving multi-layered global financial safety net : role of Asia

 

 

 

The decentralised global monetary system requires an efficient safety net

Click to access Fokus-Nr.-147-November-2016-monetäres-System_EN.pdf

 

 

Asian Regional Financial Safety Nets? Don’t Hold Your Breath

Iwan J Azis

Click to access ppr017e.pdf

 

 

STITCHING TOGETHER THE GLOBAL FINANCIAL SAFETY NET

Minouche Shafik,

Deputy Governor, Bank of England

26th February 2016

 

Click to access 31E%20Minouche%20Shafik£∫Stitching%20Together%20The%20Global%20Financial%20Safety%20Net.pdf

 

 

The Global Financial Safety Net through the Prism of G20 Summits

Gong Cheng

European Stability Mechanism

Click to access MPRA_paper_68070.pdf

 

 

ADEQUACY OF THE GLOBAL FINANCIAL SAFETY NET

 

 The Evolving Multi-layered Global Financial Safety Net: Role of Asia

Pradumna B. Rana

 

Global Financial Safety Nets: Where Do We Go from Here?
Eduardo Levy-Yeyati and Eduardo Fernández-AriasFriday,
January 14, 2011
 Strengthening the Global Financial Safety Net

 

The Global Liquidity Safety Net

Institutional Cooperation on Precautionary Facilities and Central Bank Swaps

Click to access new_thinking_g20_no5_web.pdf

 

 

Inadequate Regional Financial Safety Nets Reflect Complacency

Iwan J. Azis

No. 411 March 2013

 

Click to access adbi-wp411.pdf

 

 

Stitching together the global financial safety net

by Edd Denbee, Carsten Jung and Francesco Paternò

 

Click to access QEF_322_16.pdf

 

 

GLOBAL AND REGIONAL FINANCIAL SAFETY NETS: LESSONS FROM EUROPE AND ASIA

CHANGYONG RHEE, LEA SUMULONG AND SHAHIN VALLÉE

 

Click to access WP_2013_02.pdf

 

 

Financial Safety Nets in Asia: Genesis, Evolution, Adequacy, and Way Forward

 

Hal Hill and Jayant Menon

No. 395 November 2012

Click to access adbi-wp395.pdf

 What we really know about the global financial safety net

 

Beatrice Scheubel, Livio Stracca

04 October 2016

Global Financial Safety Nets: Where Do We Go from Here?

Eduardo Fernandez-Arias

Eduardo Levy Levy-Yeyati

November 2010

Global Financial Safety Nets
How can countries cooperate to mitigate contagion and limit the spread of crises?November 7, 2011

 

What do we know about the global financial safety net? Rationale, data and possible evolution

 Global Financial Safety Net

Evolving Networks of Regional RTGS Payment and Settlement Systems

Evolving Networks of Regional RTGS Payment and Settlement Systems

 

Globalization has created incentives for nations to form regional economic unions to take advantage of scale and resource pooling.

There are a lot of efforts underway to develop and implement regional RTGS between central banks.  There are several models for integration.

  • Many States, Many Currencies – Hong Kong SAR
  • Many States, Single Currency – EU uses EURO and Central America uses USD, SADC uses South African RAND

RTGS systems designed to facilitate such economic integration.

  • RTGS – RTGS – Interlink model – Hong Kong, ASEAN 5
  • RTGS-RTGS – SSP Single Shared Platform model – EU

 

 

 

From  Payment System Interoperability and Oversight: The International Dimension

Several factors may prompt the international interlinking of PSIs. In most cases, linking national PSIs to achieve international interoperability of certain payment services comes from a country’s decisions to exploit the benefits of international economic and financial integration (i.e., greater international trade and investment activities, attraction of foreign investment capital, risk diversification, and deepening and broadening domestic financial and capital markets), since integration requires economic units to have convenient access to cross-border payment service facilities. A powerful driver to regional PSI interlinking is constituted by the political agreements among countries in a region on a broad, long-term economic and financial development cooperative program. Usually, in this case, the efforts to link payment system (as well as other financial market) infrastructures are supported actively by a core group of countries in organized regional development policy and planning forums.5 In some cases, interlinking may result from decisions by national financial authorities to address the demand from market participants (and/or their customers, including asset managers, other securities servicers, and other types of businesses) for cross-border access to international markets at lower end-to-end transaction costs.

Cross-border transactions can be made possible by establishing bilateral links between national PSIs.8 Perhaps the simplest form of PSI interlinking is achieved when two central banks agree on a scheme to support or facilitate cross-border transactions. This likely requires linking the large-value transfer systems of the countries involved by developing technical interfaces between them. Some other solutions are possible which link national payment systems through central bank bilateral accounts, whereby participating central banks hold settlement accounts either with one another or with a common commercial bank.

More advanced solutions for PSI interlinking are characterized by the adoption of a unified scheme and a common technical-operational facility to process the transactions defined under the scheme. The common (regional or global) technical-operational facility follows one of two basic architectures: the decentralized model, or the single or fully centralized model. Arrangements adopting a decentralized model for regional, cross-regional and/or global payments link existing national settlement systems (Figure 1). These normally feature different degrees of sophistication and complexity. Most decentralized regional payment systems are designed in a “hub-spoke” structure, in which there is a central administrative and technical-operational facility referred to as the “hub entity”, which links the participating systems.9 The interlinking mechanism is usually a standardized messaging and connectivity technology, which links account management and the various national operating systems together, while participants access the hub entity through the national settlement infrastructure of their jurisdiction.

In the centralized platform model, the national payment system infrastructures are replaced by a single international system (Figure 2). In this case, it is more appropriate to talk about international payment system integration. Participants access the system directly through the relevant telecommunications network or indirectly through any direct participant in the system. Centralized platforms are mostly identified with international integration projects, most notably regional, which have evolved into monetary unions with the use of a regional currency. They minimize or even eliminate the distinction between cross-border and domestic payments, and allow for processing both types of transactions in the same system seamlessly.

Various examples illustrate the different technical modalities of interlinking discussed above. One example of bilateral links between national payment systems is the linking of the Hong Kong Monetary Authority’s U.S. dollar real-time gross settlement (RTGS) system with the RTGS systems of other central banks in the region, specifically Bank Negara Malaysia’s RENTAS and Bank Indonesia’s BI-RTGS. These systems operate on a common operating platform. Their links, which are independent from each other, allow payment-versus-payment settlement between the national currencies of those countries and the U.S. dollar. Other illustrative examples are the East African Payments System (EAPS), which shows the case of national payment systems linked through the holding of bilateral accounts among central banks, and the Sistema de Pagos en Moneda Local involving the national RTGS systems of Argentina and Brazil, which is an example of the national payment systems linked through their respective central banks which hold settlement accounts with a common commercial bank. Currently, two SML systems are operational: one linking the RTGS systems of Argentina and Brazil, and other linking the RTGS systems of Brazil and Uruguay.

Other cases exemplify the decentralized and centralized models of international payment system integration. Schemes with a decentralized settlement system involving multiple parties have been developed in regions where there is a regional currency, as well as for settling cross-border payments denominated in a single foreign currency. The most well-known example of a unified scheme with a decentralized settlement system for a regional currency was the original TARGET in Europe, which linked the Euro RTGS systems of EU national central banks. Another example is the Sistema de Interconexión de Pagos in Central America and the Dominican Republic, which uses a decentralized architecture for settling cross-border payments in U.S. dollars.11

With regard to the centralized model of PSI interlinking (or integration), relevant examples are TARGET2 and EURO1 supporting euro denominated payments in the European Union,12 the STAR-UEMOA for the West African CFA Franc throughout the West African Economic and Monetary Union, and the RTGS system of the Eastern Caribbean Central Bank (ECCB) for the EC dollar in the Eastern Caribbean Currency Union. Over the past decade, centralized payment system infrastructures have also been developed regionally, where no regional currency existed, to facilitate settlement of domestic, regional, and cross-regional payments in more than one settlement currency (e.g., RAPID in the United Arab Emirates, and CHATS in Hong Kong). Finally, an example of a unified global system for settlements denominated in multiple currencies is CLS Bank International, which links the national RTGS systems of the participating jurisdictions/currencies, with a strong reliance on the legal agreement of the rulebook and the technical standards.

The Southern African Development Community (SADC) regional payment integration project in the Southern African region captures aspects of a centralized model. The project develops on the International Payments Framework (IPF) concept to construct a regional payment infrastructure composed of a regional automated clearing house (ACH) and settlement system.14 The current architecture consists of the SADC Integrated Regional Electronic Settlement System (SIRESS), an electronic central system that facilitates cross border trade in the SADC region. SIRESS, and excludes domestic inter-bank payments and settlements. It allows participating banks to settle regional transactions denominated in South African Rand (ZAR) within SADC countries, on an RTGS basis. The system is operated by the South African Reserve Bank (SARB) on behalf of the SADC Committee of Central Bank Governors, with SARB also acting as the ZAR settlement bank. It is a safe and efficient payment/settlement system which reduces the cost to banks since there is no correspondent bank (intermediary) involved.15 The project should eventually evolve into a single regional payment settlement infrastructure, in tandem with the planned monetary union.

The prototypal regional systems for retail payments were multilateral arrangements governed by service agreements and operational protocols of limited standardization between participating banks in different countries. For example, TIPANET, which was designed as a cross-border retail payment service for credit transfers between cooperative banks in Europe and Canada, provided participating members with somewhat lower cost and faster payment delivery than the usual correspondent banking arrangements of that time.16 The widespread growth of credit and debit card payment schemes since the late 1980s provided a second wave of regional and crossregional PSI linkages and integration.

Some regional cross-border arrangements have developed across direct (horizontal) linkages between national schemes. This is the case of the arrangement linking the Interac debit card system in Canada, the NYCE Payments Network and PULSE systems in the United States, and Union Pay in China for access by the schemes’ cardholders to the cross-border debit and ATM networks. Global card payment schemes such as VISA and MasterCard provide cross-border interoperability in transaction systems for credit and debit payments and ATM cash withdrawals for cardholders and (vertical) integration of these systems with proprietary clearing and settlement systems. As global card payment schemes, they deal with domestic, regional, and cross-regional payments.17

Regional and cross-regional interlinking of national and funds transfer systems in general is a fairly recent development. Some, such as EBA Clearings’ STEP2 in Europe and SICA-UMEOA in the West African Monetary and Economic Union, are single regional schemes and systems for both domestic and cross-border payments among member countries using the euro and the CFA franc, respectively. Others are generally constructed through (horizontal) bilateral linkages between national ACHs. These linkages allow the ACH members in one country to transmit customer payments, typically via credit transfers, to end-receivers holding accounts with ACH members in other countries. The network architecture for regionally or cross-regionally linked payment clearing infrastructure and for single regional ACHs can be either a hub-spoke arrangement with a central hub connection, a centralized network structure, or a distributed bilateral network structure, which contemplates the operation of large providers of payment clearing and processing services (Box 1). Another example, in Europe, is the Single Euro Payments Area (SEPA) scheme compliant clearing and settlement mechanisms (CSMs). Services offered by competing CSMs, based on the SEPA payment schemes, are governed by market forces and are outside the remit of the European Payments Council (EPC). The EU regulation provides that, within the EU, a PSP reachable for a national euro credit transfer or direct debit shall be reachable for euro credit transfers or direct debits initiated through a PSP located in any member state. Any PSP participating in any of the EPC SEPA Schemes (SEPA Credit Transfer, SEPA Direct Debit), under the relevant scheme adherence agreement with the EPC and the relevant EPC SEPA Scheme Rulebook, is permanently obligated to comply with reachability from its readiness date. Each PSP needs to determine how to achieve full reachability for the EPC SEPA Scheme(s) it has adhered to. There are several ways for PSPs to send and receive euro payment transactions to and from other PSPs across SEPA. PSPs can choose and use any solution or combination of solutions, directly or indirectly, as long as reachability and compliance with the EPC SEPA Schemes are effectively ensured.

 

Main Regions with Regional RTGS Systems

  • EU TARGET2
  • Hong Kong SAR
  • West Africa – WAMZ
  • East Africa – EAPS
  • South Africa (SADC) – SIRESS
  • ASEAN AEC – ASEAN 5 RTGS
  • Central America – USD based RTGS – SIP

 

crossbor3crossbor4

 

Europe TARGET2 

Since the establishment of the European Economic Community in 1958 there has been a progressive movement towards a more integrated European financial market. This movement has been marked by several events. In the field of payments, the most visible were the launch of the euro in 1999 and the cash changeover in the euro area countries in 2002.
The establishment of the large-value central bank payment system TARGET was less visible, but also of great importance. It formed an integral part of the introduction of the euro and facilitated the rapid integration of the euro area money market.
A unique feature of TARGET2 is the fact that its payment services in euro are available across a geographical area which is larger than the euro area. National central banks which have not yet adopted the euro also have the option to participate in TARGET2 to facilitate the settlement of transactions in euro. When new Member States join the euro area the participation in TARGET2 becomes mandatory. The use of TARGET2 is mandatory for the settlement of any euro operations involving the Eurosystem.
As of February 2016, 25 central banks of the EU and their respective user communities are participating in, or connected to, TARGET2:
The 20 euro area central banks (including the ECB) and
five central banks from non-euro area countries: Bulgaria, Croatia, Denmark, Poland and Romania.

 

 

 

Hong Kong RTGS System

System Links

Hong Kong’s financial infrastructure is designed to cater for cross-border as well as domestic economic activities. Links with payment systems and debt securities systems in other economies provide an easily accessible payment and settlement platform for cross-border economic transactions and financial intermediation.

Payment Links

Links with Guangdong (including Shenzhen) – Launched in phases since January 1998, these links cover cross-border RTGS payments in Hong Kong dollars and US dollars, and cheque clearing in Hong Kong dollars, US dollars and renminbi, with Guangdong Province including Shenzhen.1 The use of these links, which helps expedite payments and remittances between Hong Kong and Guangdong, has been rising gradually with the increasing economic integration between Hong Kong and the Mainland.

Cross-border payment arrangements with Mainland – Cross-border payment arrangements involving the Mainland’s Domestic Foreign Currency Payment System were established in March 2009 to facilitate foreign currency funding and liquidity management of Mainland banks and commercial payments. The cross-border payment arrangements currently cover four currencies – the Hong Kong dollar, US dollar, euro and British pound.

Link with Macau – The one-way joint clearing facility for Hong Kong dollar and US dollar cheques between Hong Kong and Macau was launched in August 2007 and June 2008 respectively, reducing the time required for clearing Hong Kong dollar and US dollar cheques drawn on banks in Hong Kong and presented in Macau from four or five days to two.

Link with Malaysia – A link between the Ringgit RTGS system in Malaysia (the RENTAS system) and the US dollar RTGS system in Hong Kong came into operation in November 2006. The link helps eliminate settlement risk by enabling PvP settlements of foreign exchange transactions in ringgit and US dollars during Malaysian and Hong Kong business hours. This is the first cross-border PvP link between two RTGS systems in the region.

Link with Indonesia – The PvP link between Hong Kong’s US dollar RTGS system and Indonesia’s Rupiah RTGS system was launched in January 2010. The link helps eliminate settlement risk by enabling PvP settlements of foreign exchange transactions in Rupiah and US dollars during Indonesian and Hong Kong business hours.

Link with the Continuous Linked Settlement (CLS) system – The CLS system, operated by CLS Bank International, is a global clearing and settlement system for cross-border foreign exchange transactions. It removes settlement risk in these transactions by settling them on a PvP basis. The Hong Kong dollar joined the CLS system in 2004.

Regional CHATS – This is an extension of the RTGS systems in Hong Kong in the regional context. Regional payments in Hong Kong dollars, US dollars, euros and renminbi can use the RTGS platform in Hong Kong to facilitate cross border/cross bank transfers in those currencies.

Link with Thailand

In 2014, Hong Kong started operating PvP link between HK’s US dollar RTGS system and Thailand’s BAHT RTGS system.

 

regionalrtgs

 

 

US FEDWIRE RTGS System

This is surprisingly subtle.

When, for instance, when bank A in the Richmond Federal Reserve district sends $1000 in reserves to bank B in the Minneapolis Federal Reserve district, reserves are taken out of bank A’s account at the Richmond Fed and placed into bank B’s account at the Minneapolis Fed.

Now, bank A’s reserves are a liability on the books of the Richmond Fed, while bank B’s reserves are a liability on the books of the Minneapolis Fed. Without any offsetting change, therefore, the process would result in the Richmond Fed discharging a liability and the Minneapolis Fed gaining a liability – and if this continued, regional Fed assets and liabilities could become highly mismatched.

The principle, then, is that there should be an offsetting swap of assets. It would be too complicated to swap actual assets every time there is a flow of reserves between banks in different districts. (There’s over $3 trillion in transactions every day on Fedwire, the Fed’s RTGS system – and if even a fraction of those are between different districts, the amounts are really enormous.) Instead, in the short run the regional Feds swap accounting entries in an “Interdistrict Settlement Account” (ISA). In the example above, the Minneapolis Fed’s ISA position would increase by $1000, while the Richmond Fed’s ISA position would decrease by $1000, to offset the transfer of liabilities.

So far, this is all very similar to the controversial TARGET2 system in the Euro area, in which large balances between national banks have recently been accumulating. The American system is different, however, because ISA entries are eventually settled via transfers of assets. Every April, the average ISA balance for each regional Fed over the past year is calculated, and this portion of the balance is settled via a transfer of assets in the System Open Market Account (the main pile of Fed assets, run by the New York Fed). Hence, if in April the Minneapolis Fed has an ISA balance of +$500, but over the past year it had an average balance of +$2000, its balance is decreased (by $2000) to -$1500, and it has an offsetting gain of $2000 in SOMA assets.

As this example shows, since it is average balances over the past year that are settled, not the current balances, ISA balances do not necessarily go to zero every April. Historically, they were fairly tiny anyway, but since QE brought dramatic increases in reserves, these balances have sometimes been large and irregular. In the long run, though, the system prevents any persistent imbalances from accumulating.

(Note: the process in April is a little bit more complicated than I describe, since some minor transfers of gold certificate holdings are also involved. Basically, gold certificates are transferred between regional Feds to maintain a constant ratio of gold certificates to federal reserve notes; the transfers of SOMA assets are adjusted to account for this. Wolman’s recent piece for the Richmond Fed is one of the few sources that describes the system in detail.)

 

Twelve Districts of Federal Reserves

Federal Reserve Banks

  • Boston
  • New York
  • Philadelphia
  • Cleaveland
  • Richmond
  • Atlanta
  • Chicago
  • St. Louis
  • Minneapolis
  • Kansas City
  • Dallas
  • St. Francisco

Structure of Federal Reserve

Inter district Settlement Account Balances

 

 

East African Community

EAC Payment and Settlement Systems Integration Project (EAC-PSSIP)

 

The East African Community Secretariat has received financing from the African Development Fund (ADF) toward the cost of the establishment of EAC Payment and Settlement Systems Integration Project (EAC- PSSIP) and intends to apply part of the agreed amount for this grant to payments under the contract for Audit Services for the EAC Payment and Settlement Systems Integration Project (EAC-PSSIP).

The EAC-PSSIP is an integral part of the EAC Financial Sector Development and Regionalisation Project’s (FSDRP) higher objective of broadening and deepening the financial sector and is aimed at complementing the integration of the regional financial market infrastructure to facilitate the undertaking of cross border funds transfer in support of the economies of the region as a whole. The project objective is to contribute to the modernization, harmonization and regional integration of payment and settlement systems.

The project specifically aims at: enhancing convergence and regional integration of payment and settlement systems; and strengthening a harmonized legislative and regulatory financial sector capacity in the Partner States. The Project is structured under the following components: Component 1: Integration of Financial Market Infrastructure; Component 2: Harmonization of Financial Laws and Regulations; and Component 3: Capacity Building.

The project commenced its operation in January, 2014 and it was officially launched in March, 2014.

Towards A Single Currency

The latest development is the 2013 Monetary Union protocol, which sets out the terms for the introduction of a single currency by 2024. The IMF has stated that greater integration is “expected to help sustain strong economic growth and improve economic efficiency. A larger regional market will lead to economies of scale, lower transaction costs, increased competition, and greater attractiveness as a destination for FDI.” The first step towards this goal has already been taken. In May 2014 the East African Payment System (EAPS) was launched. The new system will facilitate real-time cross-border payments between member states. Initially, the EAPS was operational between Kenya, Tanzania and Uganda, linking the Tanzania Interbank Settlement System, the Kenya Electronic Payment and Settlement System, and the Uganda National Interbank Settlement. Lucy Kinunda, director of national payment systems at the Tanzanian central bank, told the local press, “We see the enthusiasm among commercial banks and traders building up as it facilitates intra-regional trade by reducing costs and risks in money transfers across border.”

While there is much expectation for the single currency and the political and economic integration it will bring, the main challenge will be the process of macroeconomic convergence. There has been substantial variation in inflation and economic growth rates within the EAC. For Kenya, there will also be a challenge in meeting the macroeconomic criteria laid out in the Monetary Union Protocol. In the decade to the end of 2013, Kenya only achieved the inflation target of below 8% in 2010 and 2013. The country fares better on the ratio of public debt to GDP, maintaining a ratio below the target level of 50% every year between 2008 and 2013. The member states have almost a decade to meet the convergence criteria.

 

Member States

  • Burundi
  • Kenya
  • Rawanda
  • Tanzania
  • Uganda

 

 

 

SADC – Southern African Development Community – uses RAND as settlement Currency

The Southern African Development Community (SADC) aims to achieve economic development, peace and security, alleviate poverty, and enhance the standard and quality of life of the peoples of Southern Africa through regional integration. Current status In order to achieve the above objective, a comprehensive development and implementation framework – the Regional Indicative Strategic Development Plan (RISDP) – was formulated in 2001 guiding the regional integration over a period of fi fteen years (2005-2020). The RISDFP outlines key integration milestones in fi ve areas: free trade area, customs union, common market, monetary union and single currency. The free trade area was achieved in August 2008, meaning that for 85% of intra-regional trade there is zero duty. The second milestone, to establish a customs union, has been postponed, with a new target date of sometime in 2013. Although the ultimate goal of monetary union with a single currency is several years away, the SADC Payment System integration project is already in motion. This has strategic objectives to: harmonise legal and regulatory frameworks to facilitate regional clearing and settlement arrangements; implement an integrated regional cross-border payment settlement infrastructure; and establish a co-operative oversight arrangement based on the harmonised regulatory framework. The first phase of the cross-border payment settlement infrastructure (SIRESS) went live for the Common Monetary Area countries that use the South African rand (South Africa, Lesotho, Namibia and Swaziland) in July 2013. The new system allows the settlement of payment transactions in a central location using rand as the common settlement currency. Next steps – towards an Economic Union If successful, the new system will be rolled out to the rest of the SADC Member States as the region advances towards its eventual establishment as an economic union. In parallel, the immediate next step is the establishment of the SADC customs union, which presents a number of challenges; the major one is the establishment of a single Common External Tariff, which requires convergence of all individual tariff policies into a single and uniform tariff regime.

The first stage of the Sadc Integrated Regional Electronic Settlement System (SIRESS), being the first go-live involving countries in the Common Monetary Area (CMA) namely Lesotho, Namibia, South Africa and Swaziland, was initiated in July 2013. Phase Two involved Malawi, Tanzania and Zimbabwe going live in April 2014 followed by Mauritius and Zambia which went live in September 2014 under Phase Three. Since the launch of Siress, 43% of payments in the Sadc region are now executed through the system, which settles payments in South African rand. By April 2015 Siress had reached the ZAR1 trillion (US$85,1 billion) settlement mark. This phenomenal growth of Siress is emblematic of the growing importance and influence of regional payment systems in general, the rationale of which is the subject of this article.

 

Member States

  • Angola
  • Botswana
  • Congo
  • Lesotho
  • Madagascar
  • Malawi
  • Mauritius
  • Mozambique
  • Namibia
  • Seychelles
  • South Africa
  • Swaziland
  • Tanzania
  • Zambia
  • Zimbabwe

As of 2015, 9 out of the 15 countries have joined the RTGS system.

  • Lesotho
  • Malawi
  • Namibia
  • Mauritius
  • Soth Africa
  • Swaziland
  • Tanzania
  • Zambia
  • Zimbabwe

 

sadc_member_states_lowres

 

 

 

ECOWAS – West Africa Monetary Zone (WAMZ)

The Economic Community of West African States (ECOWAS)’ Monetary Cooperation Programme (EMCP) provided the blueprint for the economic integration of the countries of West Africa. Amongst other measures, the EMCP called for the creation of a single monetary zone in the sub-regions known as the West African Monetary Zone (WAMZ). The WAMZ was created in April 2000 with the goal to establish an economic and monetary union of the member countries. In 2001, WAMZ created the West African Monetary Institute (WAMI) to undertake preparatory activities for the establishment of the West African Central Bank (WACB), and the launching of a monetary union for the Zone. The WAMZ programme aims to increase trade among the ECOWAS/WAMZ member countries, reduce transaction costs for the users of payment systems, domesticate cross-border transactions within the WAMZ through the use of a single currency, develop safe, secure and effi cient payment systems that conform to global standards and build a payment system that will facilitate monetary policy management for the WACB.

Ahead of the establishment of the WACB, having a modernised, safe and stable financial infrastructure in place is a prerequisite to introduce a monetary union successfully. To this effect, a grant of about USD 30 million from African Development Bank Fund was approved for the WAMZ Payments System Development Project, which aims to improve the basic infrastructure of the fi nancial sector through upgrade of the payment systems of our countries – The Gambia, Guinea, Sierra Lone and Liberia. The system components of the project include Real-Time Gross Settlement (RTGS) system, Automated Clearing House (ACH) / Automated Cheque Processing (ACP) systems, Central Securities Depository (CSD) / Scripless Securities Settlement (SSS) systems, Core Banking Application (CBA) system and infrastructure upgrade (telecommunication and energy). The Gambia’s high-value payment system went live in July 2012 and Sierra Leone is currently going through the implementation. The target date of the project completion in all four countries is June 2014.

Member States

  • Ghana
  • Nigeria
  • Gambia
  • Guinea
  • Sierra Leone
  • Liberia

 

 

 

COMESA – Common Market for East and Southern Africa

The COMESA launched the COMESA Customs Union in 2009 and the COMESA Regional Payment and Settlement System (REPSS) to facilitate crossborder payment and settlement between Central Banks in the COMESA region. The new system provides a single gateway for Central Banks within the region to effect payment and settlement of trades.

Member States

Burundi, Comoros, DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe

 

 

 

ECOWAS – WAEMU/UEMOA – West African Economic and Monetary Union

created as a single monetary zone is the West African Economic and Monetary Union (WAEMU) / Union Economique et Monétaire Ouest Africaine (UEMOA). The WAEMU was established to promote economic integration among member countries and a common market that share West African francs (CFA francs) as a common currency, monetary policies, and French as an official language. It is a trade zone agreement to encourage internal development, improve trade, establish uniform tariffs for goods, establish a regional stock exchange and a regional banking system.

The UEMOA/WAEMU has successfully implemented macro-economic convergence criteria and an effective surveillance mechanism; adopted a customs union and common external tariff; and combined indirect taxation regulations, in addition to initiating regional structural and sectoral policies. Uniquely amongst Africa’s regionalisation projects, UEMOA/WAEMU has a single central bank, Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), which governs all of the fi nancial institutions across the Union. As part of the project for modernisation of the payment and financial infrastructure, the BCEAO launched a regional Real Time Gross Settlement (RTGS) system in 2004 and the regional Automated Clearing House (ACH) system in 2008.

Member States

Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, Togo

 

 

 

Central America

SIP — A NEW INTEGRATED REGIONAL PAYMENT SYSTEM

  • Guatemala
  • Costa Rica
  • Honduras
  • El Salvador
  • Nicaragua
  • Dominican Republic

Uses US Dollar as settlement Currency.

mapasip

 

The SIP is a novel framework in the Americas, with several elements that dis- tinguish it from other cross-border arrangements: it involves participants in various countries, allows for payment flows in all directions among participants, uses an RTGS concept for its ‘hub’ and interlinks exclusively central bank RTGS systems, not ACHs, and uses a foreign currency for its settlement accounts.

There may certainly be some doubts as to whether the degree of existing commercial integration among the countries of Central America and the Dominican Republic will suffice to make SIP a commercially viable proposition.

But one can see the SIP as part of a wider initiative which seeks to develop the financial infrastructure with a view to furthering a regional financial market. The SIP will be an integral part of the local payment systems of CMCA member countries and, as such, will widen the coverage of available services to the benefit of participants of the national payment systems. Furthermore, the SIP could act as a direct stimulus for those banks that operate in only one of the member countries to offer affordable cross-border payment services to its clients and thus assist in the strengthening of regional financial integration.

 

 

Asia – South East Asia – ASEAN 5

Payment issues: Deputy Trade Minister Bayu Krisnamurthi (second right), accompanied by Artajasa president director Arya Damar (right), inspects a booth during the Integrated Payment System seminar in Jakarta on Wednesday. The seminar aimed at informing business players about the integrated payment system ahead of the ASEAN Economic Community in 2015. (Antara/Prasetyo Utomo)

Bank Indonesia (BI) is currently developing tools to create a more time-efficient and low-cost payment system ahead of the launch of the ASEAN Economic Community (AEC) in 2015, when there will be a free flow of goods, services and people among ASEAN member countries.

‘€œWe are working to develop a more integrated national payment system before having an integrated payment system within the ASEAN region,’€ BI payment system executive director Rosmaya Hadi said at a seminar held by electronic payment service provider PT Artajasa Pembayaran Elektronik on Wednesday.

With the new system, the Indonesian banking industry will have a new real-time gross settlement system (RTGS) in which bank customers can carry out multi currency transactions on a real-time basis, she said.

‘€œWith this system, a bank customer can carry out multicurrency transactions in only minutes through non-cash payments,’€ she said, adding that BI would launch the new system this year.

Rosmaya also said the Indonesian central bank and its counterparts in five ASEAN members, including Malaysia, the Philippines, Singapore and Thailand, had agreed to prepare for an integrated payment system.

‘€œCentral banks of the ASEAN 5 have formed task forces on trade settlements, retail payments, monthly remittances, capital market settlements and standardization to formulate a set of regulations and schemes with which we will have an ASEAN integrated payment system,’€ she said.

Under the regional integrated payment system, people in ASEAN will be able to make financial transactions through ATMs, credit cards or electronic money without sacrificing much time and money.

According to a report by the ASEAN Working Committee on Payment and Settlement Systems (WC-PSS), the integrated payment system will reduce bank charges (such as foreign exchange spread among ASEAN currencies and handling fees), and encourage regulated non-bank remittance service providers to adopt international/common standards in retail payment systems.

Of all the ASEAN member countries, only Indonesia, the Philippines and Thailand currently have full ATM interoperability, according to an Asian Development Bank Institute report published in 2013.

‘€œWhen the AEC commences, ASEAN member countries will have greater need for an integrated payment system as people from across the region will have to carry out transactions from and to their home countries,’€ said Deputy Trade Minister Bayu Krisnamurthi at a similar event.

The AEC, also known as the ASEAN single market, will commence at the end of 2015. Under the AEC, the ASEAN 5 and Brunei Darussalam will have free trade agreements, while Cambodia, Laos, Myanmar and Vietnam will fully participate in the community in 2018.

Artajasa president director Arya Damar said that Indonesia should also develop its banking sector to tap its large market by utilizing more cashless transactions, otherwise other ASEAN countries’€™ banks would do so.

Citing BI data, Artajasa said that with a total of 800,000 local branches, commercial banks in Indonesia could reach only 20 percent of the total working-age population of around 150 million people.

‘€œMeanwhile, with only 15,000 ATMs, Malaysian commercial banks can reach 66 percent of its total working-age population,’€ he said.

Thai commercial banks, with around 66,000 ATMs, can reach about 30 percent of Of Thailand’€™s total working-age population, he added. (koi)

 

SINGAPORE – The five largest members of ASEAN – Indonesia, Malaysia, Singapore, the Philippines and Thailand – have agreed to implement an integrated payment system to enable real time gross settlement (RTGS) systems to be in effect by next year.

“With this system, a bank customer can carry out multi-currency transactions in minutes through non-cash payments,” said Rosmaya Hadi with Bank Indonesia.

The ASEAN 5 Central Banks are currently working on establishing protocols for intra-trade settlement, retail payments, monthly remittances, capital market settlements and standardization to enable the system to be up and running by the time the ASEAN Economic Community (AEC) unification occurs next January.

“When the AEC commences, ASEAN member countries will have greater need for an integrated payment system as people from across the region will have to carry out transactions from and to their home countries,” according to Deputy Trade Minister Bayu Krisnamurthi.

Under the system, individual users across ASEAN will be able to make financial payments through ATMs, credit cards, or electronic money without spending a significant amount of time or money doing so. As ASEAN currently has no plan to establish a unified currency, this program is expected to increase multi-currency transactions.

ASEAN members are also developing their ATM networks; Indonesia, for example, has an ATM reach of 20 percent of its total working population of 150 million, compared with 66 per cent for Malaysia.

Indonesia, Malaysia and Thailand are currently the only ASEAN members to have full ATM integration according to the Asian Development Bank. This will soon change as the other ASEAN member nations work towards greater integration.

Member States

Indonesia, Thailand, Phillipines, Singapore, Malaysia and Brunei Darussalam in 2015

Cambodia, Laos, Myanmar and Vietnam to join in 2018

 

 

 

ASEAN +3 Cross Border Infrastructure

In Delhi in May 2013, the Finance Ministers and Central Bank Governors of the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China (PRC), Japan, and the Republic of Korea—collectively known as ASEAN+3—agreed to set up a Cross-Border Settlement Infrastructure Forum (CSIF) to discuss detailed work plans and related processes for the improvement of cross-border settlement in the region, which included the possibility of establishing a regional settlement intermediary (RSI). Members, observers, and the CSIF Secretariat are listed in Appendix 1.

Based on the intensive discussions among CSIF members, the first report, Basic Principles on Establishing a Regional Settlement Intermediary and Next Steps Forward, was published by the Asian Development Bank in May 2014 after being endorsed by the ASEAN+3 finance ministers and Central Bank governors at their 17th meeting held in May 2014 in Astana. The members agreed that the central securities depository (CSD)–real-time gross settlement (RTGS) linkages, which connect national CSD systems and RTGS systems in a flexible

way, would be an achievable model for cross-border settlement infrastructure in the short term and medium term. This model linking existing infrastructure enables local bonds to be settled in delivery versus payment (DVP) via central bank money, which ensures the safety of settlement and is compliant with international standards, as well as being cost- efficient. As such, the CSD–RTGS linkages are to be studied as the most feasible model for implementing the RSI in ASEAN+3.

The Joint Statement of the 17th ASEAN+3 Finance Ministers and Central Bank Governors Meeting reads as follows:

We welcomed the recommendations submitted by the Cross-Border Settlement Infrastructure Forum (CSIF) and the direction of developing the implementation roadmap of CSD-RTGS linkages as short-term and medium-term goals and integrated solution as a long-term goal for making it possible to deliver securities smoothly and safely versus payment across borders. We are of the view that this is a practical and efficient approach to advance regional settlement infrastructure that promotes cross-border securities transactions in the region.

The 4th and 5th CSIF meetings were held in Hong Kong, China (September 2014) and Manila (January 2015), respectively. Specific topics to develop an implementation plan for the CSD–RTGS linkages—such as a desktop study, possible road map—were discussed at these meetings. As an initial step, the Bank of Japan (BOJ) and the Hong Kong Monetary Authority (HKMA) agreed to conduct a desktop study.

 

 

Regional Integration in South Asia:  BIMSTEC, SAARC, SAPTA, SAFTA

 

January 1, 2016, marked the tenth anniversary of the South Asian Free Trade Area (Safta). The agreement, which was reached in January 2004 at the 12th Saarc Summit in Islamabad, Pakistan, came into force on January 1, 2006, and became operational after the agreement was ratified by seven nations (Afghanistan, the eighth member, ratified it in May 2011).

It created a free trade area for the people of eight South Asian nations and aimed at reducing custom duties of all traded goods to zero by 2016.  That year is here but the South Asian nations see trade among them making up a meagre five per cent of their total transactions.

The purpose of Safta was to promote common contract among the member-nations and provide them with equitable benefits. It also aimed at increasing the level of cooperation in economy and trade among the Saarc nations by lowering the tariff and barriers and give special preference to the least developed countries in the Saarc region.

Safta had a potential

At a time when regional trade blocs and free trade area have emerged as models of cooperative economic growth, the Safta had offered a great opportunity to take forward the process of South Asian integration.

But South Asia has too much problems

But South Asia is a unique regional entity in the entire world. It is a region which has remained a prisoner of the past and pressing geopolitical realities involving India, Pakistan and China.

Thanks to the relentless rivalry between India and Pakistan and the latter’s proximity to the Chinese who have included the strategy of containing India in its scheme of things in South Asia, the idea of integration of South Asia in other forms have remained elusive.
Other smaller countries like Nepal, Bengladesh, Maldives and Sri Lanka, too, have played the China card against India time and again, hurting the prospects of mutual confidence.

In such an atmosphere of suspicion, achieving what the Safta had envisioned a decade back has been next to impossible. Despite a free trade pact since 2006, trade among South Asian nations makes up five percent of their total trade. They share few transport and power connections between them.

We saw how Saarc fell apart at its 2014 summit

We saw how the Saarc was split during the 18th summit held in Kathmandu in 2014 end when India and Nepal accused Pakistan of creating an obstacle on the way of regional integration by refusing to sign three multilateral agreements, including road trade and sharing of electricity.

Indian Prime Minister Narendra Modi even went to the extent of warning at that time, saying the integration would happen through the Saarc or without it.

He found backing in the Nepali ranks. India then went ahead with ties (visa, energy, road) with other neighbours like Nepal and Bangladesh and also promised to cut its trade surplus with the South Asian nations. But in all, Modi expressed displeasure that the progress was too slow.

Despite the presence of instruments like Safta and Bimstec (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), South Asia has only languished. The state of affairs in connectivity, financial infrastructure including banking and mobility of people and goods have remained stuck in the complex cobweb of customs, visa and transit norms.

India, too, is responsible for the poor state of affairs

India, being the largest nation in South Asia, has been equally guilty by not attaching much significance to the forum in the past, as it did in nurturing relation with the West and Russia. There has been a sheer lack of continuity in the country’s successive governments’ priorities towards South Asia.

For most, a combative policy towards Pakistan and dominating approach towards the smaller neighbours have been the most-after stand. No wonder, opportunities like Safta were lost without a trace.

Can Narendra Modi govt turn the tables around?

However, the Narendra Modi regime has attached much importance to the issue of South Asian integration which is a silver lining. The way India’s PM invited all South Asian heads of states or representatives to his swearing-in ceremony or kicked off his foreign tours with visits to small states like Bhutan and Nepal or suddenly landed in Lahore to reach out to his Pakistani counterpart-all these suggest that his government aspires to see a better surroundings.

Yes, there have been a serious goof-up by India’s foreign-policy makers in Nepal in the wake of its ratifying a new constitution, which has left the Himalayan neighbour distraught, but yet going by PM Modi’s general intent of improving the state of South Asian cooperation, the decade-old Safta could still have a future.

As of now, the wait will be for the 19th Saarc summit in Islamabad later this year.

 

Towards South Asia Economic Integration

Payment systems to facilitate South Asian integration

SAARC Payment Initiative

Asian Clearing Union

A review of the Asian Clearing Union

 

 

 

 

Key Sources of Research:

 

TARGET2

https://www.ecb.europa.eu/paym/t2/shared/pdf/professionals/SIBOS_13_Target2_HQ.pdf?ddee08326301ecfe43123f036ade4322

 

 

 

Regional Monetary Co-operation in the Developing World Taking Stock

Barbara Fritz / Laurissa Mühlich

2014

Click to access Paper-Stocktaking-Regional-Monetary-Cooperation-Fritz-Muehlich-22-07-14-end.pdf

 

 

 

 

Redefining the Landscape of Payment Systems

Summary of Proceedings of the World Bank Conference

2009

 

Click to access 705740ESW0P1100Cape0Town0April02009.pdf

 

 

 

PAYMENT SYSTEMS TO FACILITATE SOUTH ASIAN INTRA- REGIONAL TRADE

Ashima Goyal

September 2014

 

Click to access Development%20Paper_1403.pdf

 

 

 

 

Regional Integration and Economic Development in South Asia

 

Click to access regional-integration-economic-development-south-asia.pdf

 

 

 

Creating an Association of Southeast Asian Nations Payment System: Policy and Regulatory Issues

Tanai Khiaonarong

No. 422 May 2013

 

Click to access adbi-wp422.pdf

 

 

 

 

BASIC PRINCIPLES ON ESTABLISHING A REGIONAL SETTLEMENT INTERMEDIARY AND NEXT STEPS FORWARD

CROSS-BORDER SETTLEMENT INFRASTRUCTURE FORUM

ADB

 

Click to access establishing-regional-settlement.pdf

 

 

 

PAYMENT AND SECURITIES SETTLEMENT SYSTEMS IN THE MIDDLE EAST AND NORTH AFRICA

MASSIMO CIRASINO AND MARCO NICOLÌ

JUNE 2010

 

Click to access MENAFlagshipPaymentsandSettlementsSystems12_20_10.pdf

 

 

 

HKMA RTGS System Links

 

http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/infrastructure/system-links.shtml

 

 

 

Payments Systems and Intra African Trade

 

Click to access chap8.pdf

 

 

 

Africa Payments: Insights into African transaction flows

SWIFT

 

 

 

PAYMENT SYSTEMS DEVELOPMENT IN THE WEST AFRICAN MONETARY ZONE (WAMZ)

BY TEMITOPE W. OSHIKOYA

 

Click to access Temitope_WOshikoya.pdf

 

 

 

SADC Regional payments integration Project – Annexure 6

Brian Gei-Khoibeb

 

http://209.88.21.122/documents/899832/1426693/SADC+Regional+Payments+Integration+18+06+2014.pdf/d5228610-a512-4a06-8ef2-03bba1c2be58

 

 

 

CROSS-BORDER LOW VALUE PAYMENTS AND REGIONAL INTEGRATION: ENABLERS AND DISABLERS

DR. LEO LIPIS COLIN ADAMS

 

Click to access SWIFT-Institute-Working-Paper-No-2014-005-Cross-border-LVP-Regional-Integration-Lipis_v4-FINAL.pdf

 

 

 

 

 

SADC Payments Project

 

http://www.sadcbanking.org/paymentsproject.aspx

Click to access SADC_Payments_Project.pdf

 

 

 

The development of a regional payment system in Central America: A step towards further integration and economic development.

Gregor Heinrich and Enrique Garcıa Dubon

2011

 

Click to access MPRA_paper_47398.pdf

 

 

 

Implementing Cross-border Payment, Clearing and Settlement

Systems: Lessons from the Southern African Development Community

 

Albert Mutonga Matongela

 

http://www.iiste.org/Journals/index.php/RJFA/article/viewFile/7798/7942

 

 

 

Payment System Interoperability and Oversight: The International Dimension

 

Click to access ITUFGDFS_REPORT%20ON%20Payment%20System%20InteroperabilityandOversightThe%20InternationalDimension-11-2016.pdf

 

 

 

Payment systems to facilitate South Asian integration

2014

 

Click to access WP-2015-021.pdf

 

 

 

Towards South Asia Economic Union

2015

 

Click to access Towards%20South%20Asia%20Economic%20Union.pdf

 

 

 

RBI suspends euro transactions via Asian Clearing Union

 

http://economictimes.indiatimes.com/markets/forex/rbi-suspends-euro-transactions-via-asian-clearing-union/articleshow/53001118.cms

 

 

 

Financial Infrastructure in Hong Kong

2013

Click to access facb1-657-4-e.pdf

 

 

 

PEOPLE’S REPUBLIC OF CHINA––HONG KONG SPECIAL ADMINISTRATIVE REGION

OVERSIGHT AND SUPERVISION OF FINANCIAL MARKET INFRASTRUCTURES–TECHNICAL NOTE

 

IMF Country Report No. 14/208

July 2014

FINANCIAL SECTOR ASSESSMENT PROGRAM

 

Click to access cr14208.pdf

 

 

 

PAYMENT AND SETTLEMENT SYSTEMS

Bonk of Malaysia

 

Click to access cp04.pdf

 

 

 

Financial Sector Reforms and Prospects for Financial Integration in Maghreb Countries

Amor Tahari, Patricia Brenner, Erik De Vrijer, Marina Moretti, Abdelhak Senhadji, Gabriel Sensenbrenner, and Juan Solé

 

Click to access Financial%20sector%20reforms%20IMF.pdf

 

 

 

The Southern African Development Community Integrated Regional Settlement System (SIRESS): What? How? and Why?

 

Click to access July%202013%20Economic%20Revivew.pdf

 

 

 

The Payment and Settlement Systems in the Republic of China (Taiwan)

October 2010

 

Click to access 010269422971.pdf

 

 

 

PAYMENT SYSTEMS IN JAPAN

 

2010

Click to access paymentsystems.pdf

 

 

 

The Inefficiencies of Cross-Border Payments: How Current Forces Are Shaping the Future

Written by Yoon S. Park, PHD & DBA, George Washington University

VISA

 

Click to access crossborder.pdf

 

 

 

BI prepares for ASEAN integrated payment system

The Jakarta Post

Jakarta | Thu, January 30, 2014

http://www.thejakartapost.com/news/2014/01/30/bi-prepares-asean-integrated-payment-system.html

 

 

 

ASEAN Financial Integration towards ASEAN 2025:

Call for a well-coordinated supervisory and regulatory framework

Satoru (Tomo) Yamadera

 

Click to access 4.presentation_by_satoru_yamaders_adb_0.pdf

 

 

 

UK Payments Infrastructure: Exploring Opportunities

31 August 2014

 

Click to access kpmg-infrastructure-report-for-psr.pdf

 

 

 

Payment Systems in Latin America: Advances and Opportunities

By Nancy Russell, NLRussell Associates

 

Click to access la_advances.pdf

 

 

 

PROGRESS REPORT ON ESTABLISHING A REGIONAL SETTLEMENT INTERMEDIARY AND NEXT STEPS

Implementing Central Securities Depository–Real-Time Gross Settlement Linkages in ASEAN+3

CROSS-BORDER SETTLEMENT INFRASTRUCTURE FORUM

2015

 

Click to access progress-report-regional-settlement-intermediary.pdf

 

 

 

ASEAN+3 Information on Transaction Flows and Settlement Infrastructures

ASEAN+3 Bond Market Forum Sub-Forum 2 (ABMF SF2)

December 2013

 

Click to access asean3-information-transaction-flows-settlement-infrastructures.pdf

 

 

 

 

BASIC PRINCIPLES ON ESTABLISHING A REGIONAL SETTLEMENT INTERMEDIARY AND NEXT STEPS FORWARD

CROSS-BORDER SETTLEMENT INFRASTRUCTURE FORUM

2014

 

Click to access establishing-regional-settlement.pdf

 

 

 

 

ASIAN ECONOMIC INTEGRATION REPORT

WHAT DRIVES FOREIGN DIRECT INVESTMENT IN ASIA AND THE PACIFIC?

 

Geert Almekinders, Satoshi Fukuda, Alex Mourmouras, Jianping Zhou and Yong Sarah Zhou

February 2015

 

Click to access wp1534.pdf

 

 

 

 

Guidelines for the Successful Regional Integration of Financial Infrastructures

September, 2013

 

Click to access Guidelines_for_the_Successful_Regional_Integration_of_Financia_Infrastructures_DRAFT.pdf

 

 

 

ASEAN 5 Prepares for Integrated Payment System

Posted on January 31, 2014

http://www.aseanbriefing.com/news/2014/01/31/asean-5-prepares-integrated-payment-system.html

 

 

 

Establishing an integrated payment system (real-time gross settlement) in ASEAN

Kusumo Wardhono, Dwi Tjahja

 

Click to access Complete_dissertation.pdf

 

 

 

a Practical approach to International Monetary System Reform: Building Settlement Infrastructure for Regional Currencies

Changyong Rhee and Lea Sumulong

 

Click to access BRICS_ASIA_no3.pdf

 

 

 

 

Strengthening Financial Infrastructure

Peter J. Morgan and Mario Lamberte

No. 345 February 2012

 

Click to access 09869.pdf

 

 

 

 

Why Complementarity Matters for Stability— Hong Kong SAR and Singapore as Asian Financial Centers

V. Le Leslé, F. Ohnsorge, M. Kim, S. Seshadri

2014

 

Click to access wp14119.pdf

 

 

 

 

Navigating Rise of Global RMB

JP Morgan

https://www.jpmorgan.com/cm/BlobServer/Navigate_the_Rise_of_the_Global_RMB_.pdf?blobkey=id&blobwhere=1320642032360&blobheader=application/pdf&blobheadername1=Cache-Control&blobheadervalue1=private&blobcol=urldata&blobtable=MungoBlobs

 

 

 

Cross-border payment link established with Hong Kong

2014

http://www.nationmultimedia.com/news/business/aec/30239651

 

 

 

 

Hong Kong’s role in facilitating the use of Renminbi as a currency for settling international transactions

2010

 

Click to access Yip_HK_use_of_RMB_intl_transactions.pdf

 

 

 

 

TARGET2: a global hub for processing payments in euro

ECB

https://www.ecb.europa.eu/paym/intro/news/newsletter/html/mip_qr_1_article_5_target2_global_hub.en.html

 

 

 

THE EAST AFRICAN PAYMENT SYSTEM (EAPS)

 

Click to access Bosco_EAPS.pdf

 

 

 

 

Hong Kong and Thailand launch a new cross-border payment-versus-payment link

http://www.hkma.gov.hk/eng/key-information/press-releases/2014/20140728-3.shtml

Click to access r140729c.pdf

 

 

 

Settlement Systems of East Asian Economies

 

Click to access Settlement_systems.pdf

 

 

 

 

Payments in ASEAN post AEC

Vengadasalam Venkatachalam, Head of Product Management South East Asia

https://globalconnections.hsbc.com/australia/en/articles/payments-asean-post-aec

 

 

 

 

PSSR – Payments and Settlement Systems Report

Click to access psr160624.pdf

 

 

 

 

Payment, clearing and settlement systems in Hong Kong SAR

 

Click to access d105_hk.pdf

 

 

 

 

Interdependencies of payment and settlement systems: the Hong Kong experience

 

Click to access fa2_print.pdf

 

 

 

 

Payment Systems

http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/infrastructure/payment-systems.shtml

http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/infrastructure/financial-infrastructure-hong-kong.shtml

 

 

 

Creating an Integrated Payment System: The Evolution of Fedwire

Adam M. Gilbert, Dara Hunt, and Kenneth C. Winch

Click to access 9707gilb.pdf

 

 

 

Federal Reserve Interdistrict Settlement

 

Click to access wolman.pdf

 

 

 

TARGET2 and Central Bank Balance Sheets

Karl Whelan

1 University College Dublin New Draft

March 17, 2013

 

Click to access T2Paper-March2013.pdf

 

 

 

Ontology and Theory for a Redesign of European Monetary Union

Sheila Dow

 

Click to access 5935449525f59deca84c16c4dce251122592.pdf

 

 

 

TARGET2: Symptom, Not Cause, of Eurozone Woes

By Thomas A. Lubik and Karl Rhodes

Click to access eb_12-08.pdf

 

 

 

The Idiot’s Guide to the Federal Reserve Interdistrict Settlement Account

http://jpkoning.blogspot.com/2012/02/idiots-guide-to-federal-reserve.html

 

 

 

Mutual aSSiStance betWeen Federal reServe bankS

1913-1960 aS ProlegoMena to the target2 debate

Barry Eichengreen, Arnaud Mehl, Livia Chiţu and Gary Richardson

 

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1686.pdf?1ad840394e67a3aedb6e1b1fa9401431

 

 

 

Interpreting TARGET2 balances

by Stephen G Cecchetti, Robert N McCauley and Patrick M McGuire

Monetary and Economic Department December 2012

 

Click to access work393.pdf

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

There are three broad categories of global Trade.

  • Trade in Commodities
  • Trade in Manufactured Goods
  • Trade in Services

During the Financial Crisis, Trade in commodities declined due to increase in Prices.

Trade in Services were largely unaffected.

Trade in Manufactured goods declined sharply for variety of reasons not yet entirely clear.

 

Potential Causes for decline

  • Fall in Aggregate Demand of goods
  • Constrained Trade Finance
  • Increase in Trade Barriers
  • Impact of Global Value Chains

 

From GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD A DEVELOPMENT PERSPECTIVE

The global economic crisis of 2008–09 has revealed the interdependence of the world economy. The financial crisis originated in the United States, but the resulting economic downturn quickly spread to the rest of the world. Trade, along with finance, was one of the main vectors of transmission of the crisis. In 2009, there was a massive contraction in global trade—minus 13 percent. The contraction was largely a reflection of a drop in demand, especially for durable goods. The fact that the shock was transmitted very rapidly reflects the increasing reliance by businesses on so-called global value chains (GVCs)—the process of ever-finer specialization and geographic fragmentation of production, with the more labor-intensive parts of the production process transferred to developing countries. In a world where GVCs are the prevalent business model for multinational corporations, a reduction in demand for final products by global buyers implies that demand shocks are immediately transmitted “upstream” to subcontractors in developing countries.

 

From Resilient to the crisis? Global supply chains and trade flows

According to the most recent IMF estimates (IMF 2009), the ongoing recovery will drive a wedge between output and trade. Output is supposed to shrink by ‘only’ 1.1% at the end of 2009 (-3.4% in advanced economies), but world trade is forecast to still experience a drop of -11.9%. While other estimates put the latter figure at –9% (WTO, World Bank), it is indisputable that during 2009 official figures recording trade flows will fall much more than GDP.

Apart from its magnitude, the fall in trade in 2009 has also been quite homogeneous across all countries (more than 90% of OECD countries have exhibited simultaneously a decline in exports and imports exceeding 10%, as noted by Araujo and Olivera Martins 2009). This fall has also been very fast, with trade virtually grinding to a halt in the last month of 2008.1 These facts led Baldwin and Evenett (2009) to qualify the drop in trade during the crisis as “severe, sudden and synchronised”.

A number of transmission mechanisms have recently been proposed to account for these three attributes of the contraction of trade flows, many of which impinge upon the role that global supply chains might have played in exacerbating the drop in global demand.

The basic argument is that in a world characterised increasingly by vertical specialisation, goods are produced sequentially in stages across different countries – so-called international supply chains. The constituent parts and components of a final good crosses borders several times before the final product reaches the consumer; at each border crossing, the full value of the partially assembled good is recorded as trade. As a result, for a given reduction in world income, trade should decline “not only by the value of the finished product, but also by the value of all the intermediate trade flows that went into creating it”.

This implies that the extensive presence of supply chains does not automatically explain why world trade overshot the world GDP drop; other explanatory factors are needed. These may include:

  • The collapse in internal demand and production, affecting current and future level of (tradable) inventories worldwide;
  • Fiscal stimulus plans with a relatively stronger support of non-tradable sectors, like construction and infrastructures (Bénassy-Quéré et al. 2009);
  • The rise of ‘murky’ protectionism; and
  • The problems of trade finance with financial spreads still well-above ‘normal’ (i.e. pre-crisis) market rates (Auboin, 2009).

Do the above arguments mean that global supply chains are totally neutral as a transmission mechanism of the crisis from GDP to trade? Of course not. In all likelihood, however, the channels are much more complex than originally thought, and entail important compositional effects.

For the sake of argument, let us take the following story based on the idea that a relatively large part of the overreaction of trade has been caused by the sudden drying up of liquidity in trade finance. Auboin (2009) notes that, in the second part of 2008, spreads on short-term trade credit facilities suddenly soared to between 300 to 600 basis points above LIBOR, compared to 10 to 20 basis points in normal times, leading to a virtual freeze of important trade deals throughout the globe, with supply chain operations being disrupted by lack of financing, especially for developing country suppliers.

Under this assumption we would have a scenario in which the liquidity channel has led trade to overshoot the fall in demand, with the effect being larger within supply chains, as the trade financing of these operations is typically managed by large international financial institutions, particularly hit by the crisis.3

In this scenario, we would still obtain a severe, sudden and synchronised drop in trade flows, with the effects correlated with (but not caused by) the behaviour of global supply chains.

Moreover, under the same scenario, we would also observe that, during the crisis,trade falls more along the intensive margin (i.e. value per trade) than the extensive margins (i.e. number of traders). The reason being that, if the overreaction of trade was caused relatively more by liquidity constraints than by a disruption of supply chains, the above effects would lead to a reduction in the volume of trade, but not necessarily to a similar reduction in the number of traders worldwide.

This is exactly what Bricongne et al. (2009) find in a paper analysing the behaviour of French exporters during the crisis. Relying on monthly data for individual French exporters observed until April 2009, the authors find that the drop in French exports is mainly due to the intensive margin of large exporters, with small and large firms evenly affected once sectoral and geographical specialisation are controlled for. Interestingly, they also find that firms (small and large) in sectors more dependent on external finance are the most affected by the crisis.

While any conclusion must wait for more data to become available, there are good reasons to believe that the rise of global supply chains has not necessarily been the main cause of the recent “severe, sudden and synchronised” fall in global trade flows. Based on the available evidence, one may even be tempted to conclude that, under certain circumstances, international networks of production may also display some degree of ‘resilience’ to adverse shocks like the current crisis: supply-chain-related trade flows may react later (rather than sooner) to an adverse shock. Their fall may be smaller and, eventually, their recovery may happen faster relative to overall trade flows.

The observed resilience of supply chains may arise from some intrinsic attribute of production chains, as argued above. Alternatively, it may be the outcome of the political economy. Fearing that a collapse of supply chains would set off a sudden process of de-globalisation and implosion of international trade, governments may intervene in favour of supply chains. For example, the massive bail-outs of large financial institutions have helped their best customers, among them the big players within supply chains. Finally, of course, this indirect support of supply chains may have also been an unintended consequence of financial bailouts implemented for very different reasons.

 

From UNCTAD Global Value Chains: Investment and Trade for Development

gvc

 

Key Terms

  • BLS ( Bureau of Labor Statistics)
  • UNCTAD ( United Nations Conference on Trade and Development)
  • NIPAs ( National Income and Product Accounts)
  • OECD ( Organization for Economic Cooperation and Development)
  • EBRD (European Bank for Reconstruction and Development)
  • WTO (world Trade Organization)
  • GATT (General Agreement on Trade and Tariffs)
  • ILO (International Labor Organization)
  • ADB (Asian Development Bank)
  • UNIDO ( United Nations Industrial Development Organization)
  • BEA ( Bureau of Economic Analysis)
  • Production Networks
  • Vertical Specialization
  • Production Fragmentation
  • Intermediate Goods
  • Network Linkages
  • Global Supply Chains
  • Global Value Chains (GVCs)
  • Production Sharing
  • Inter Industry Input Output Tables
  • Inter Country Input Output Tables
  • Global Networks
  • Multi National Companies ( MNCs)
  • Regional Economic Integration
  • Trade Globalization
  • Trade in Goods and Services
  • Trade in Value Added (TIVA)
  • World Input Output Database (WIOD)
  • OECD-WTO TIVA Database
  • UNCTAD-EORA GVC Database
  • Global Trade Analysis Project (GTAP) Database
  • Institute of Developing Economies (IDE-JETRO) Asian IO Tables
  • World Input Output Network (WION)
  • Global Multi Regional Input Output (GMRIO) Framework
  • EXIOBASE/EXIOPOL EXIOBASE is a global, detailed Multi-regional Environmentally Extended Supply and Use / Input Output (MR EE SUT/IOT) database.

 

 

Key Sources of Research:

 

The Global Trade Slowdown: Cyclical or Structural?

Cristina Constantinescu, Aaditya Mattoo, and Michele Ruta

2015

Click to access wp1506.pdf

 

 

The future of global trade: Where are we heading and should we be concerned?

Gaaitzen de Vries
Bart Los
Robert Stehrer
Marcel Timmer

2016

https://www.weforum.org/agenda/2016/11/the-future-of-global-trade-where-are-we-heading

 

 

Demand Spillovers and the Collapse of Trade in the Global Recession

Rudolfs Bems Robert C. Johnson

Kei-Mu Yi

2010

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.186.7680&rep=rep1&type=pdf

 

 

Vertical Linkages and the Collapse of Global Trade

Rudolfs Bems
Robert C. Johnson
Kei-Mu Yi

AMERICAN ECONOMIC REVIEW
VOL. 101, NO. 3, MAY 2011

Click to access 600661c5f17781a38ca3168026b8663b8ebb.pdf

 

 

The Role of Vertical Linkages in the Propagation of the Global Downturn of 2008

Rudolfs Bems Robert C. Johnson

Kei-Mu Yi

2010

 

Click to access 0e43be03f9da1c48a385b94fbcc4904a3fb0.pdf

 

 

The Great Trade Collapse

Rudolfs Bems, Robert C. Johnson and Kei-Mu Yi

Annual Review of Economics
Vol.5:1-549 (Volume publication date August 2013)

 

 

GLOBAL VALUE CHAINS DURING THE GREAT TRADE COLLAPSE

A BULLWHIP EFFECT?

by Carlo Altomonte, Filippo Di Mauro, Gianmarco Ottaviano, Armando Rungi and Vincent Vicard

2012

 

Click to access 169822.pdf

 

 

The bullwhip effect and the Great Trade Collapse

Veronika Zavacka

 

Click to access wp0148.pdf

 

 

Trade Finance and the Great Trade Collapse

By JaeBin Ahn, Mary Amiti, and David E. Weinstein

2011

 

Click to access Ahn-Amiti-WeinsteinAERPP.pdf

 

 

Economic Crisis and Global Supply Chains 

Agnès Bénassy-Quéré, Yvan Decreux, Lionel Fontagné & David Khoudour-Casteras

Click to access wp2009-15.pdf

 

 

 

The Financial Crisis and Global Supply Chains

 

Robert N. Mefford, University of San Francisco, USA

http://repository.usfca.edu/cgi/viewcontent.cgi?article=1010&context=fe

 

 

International Supply Chains and Trade Elasticity in Times of Global Crisis

Click to access ersd201008_e.pdf

 

 

GLOBAL SUPPLY CHAINS: TRADE AND ECONOMIC POLICIES FOR DEVELOPING COUNTRIES

Alessandro Nicita Victor Ognivtsev Miho Shirotori

 

Click to access itcdtab56_en.pdf

 

 

The Great Trade Collapse: Shock Amplifiers and Absorbers in Global Value Chains

Zhengqi Pan

June 2016

 

Click to access Zhengqi%20Pan_GPN2016_008.pdf

 

 

The Age of Global Value Chains: Maps and Policy Issues

 

Click to access JACB201530.pdf

 

 

Asia and Global Production Networks Implications for Trade, Incomes and Economic Vulnerability

 

Click to access asia-and-global-production-networks.pdf

 

 

Mapping globaL Value Chains

Koen De Backer and Sébastien Miroudot

2014

Click to access ecbwp1677.pdf

 

 

Mapping Global Value Chains:

Intermediate Goods Trade and Structural Change in the World Economy

Timothy J. Sturgeon

Olga Memedovic

2011

 

Click to access WP%2005%20Mapping%20Glocal%20Value%20Chains.pdf

 

 

 

World Investment Report 2013:

Global Value Chains: Investment and Trade for Development

2013

 

Click to access wir2013_en.pdf

 

 

Trade finance: developments and issues

Report submitted by a Study Group established by the Committee on the Global Financial System

The Group was chaired by John J Clark, Federal Reserve Bank of New York

January 2014

 

Click to access cgfs50.pdf

 

 

East Asian Value Chains and the Global Financial Crisis

Genet Zinabou

2010

Click to access FR4-14-8-2010-eng.pdf

 

 

The collapse of global trade, murky protectionism, Recommendations for the G20

and the crisis

 

Edited by: Richard Baldwin and Simon Evenett

2009

Click to access 2009-03-murky-protectionism.pdf

 

 

Production Sharing in East Asia: Who Does What for Whom and Why?

 

Francis Ng and Alexander Yeats

1999

 

Click to access multi-page.pdf

 

 

PRODUCTION SHARING IN EAST ASIA: CHINA’S POSITION, TRADE PATTERN AND TECHNOLOGY UPGRADING

Laike Yang

 

Click to access gdsmdp20152yang_en.pdf

 

 

GLOBAL VALUE CHAINS SURVEYING DRIVERS AND MEASURES

João Amador and Sónia Cabral

2014

 

Click to access ecbwp1739.en.pdf

 

 

A New Measurement for International Fragmentation of the Production Process: An International Input-Output Approach

Satoshi Inomata

October 2008

 

Click to access 175.pdf

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD

A DEVELOPMENT PERSPECTIVE

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz Editors

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.364.8729&rep=rep1&type=pdf#page=97

 

 

THE NATURE AND GROWTH OF VERTICAL SPECIALIZATION IN WORLD TRADE

David Hummels Jun Ishii Kei-Mu Yi

March 1999

 

Click to access sr72.pdf

 

 

TRADE INTEGRATION IN EAST ASIA:
THE ROLE OF CHINA AND PRODUCTION NETWORKS

MONA HADDAD

2007

Click to access wps4160.pdf

 

 

Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?

Prema-chandra Athukorala

No. 56 | August 2010

Click to access wp56-trade-patterns-east-asia.pdf

 

 

Trade Integration and Production Network in East Asia

Pornnapa Leelapornchai

August 2007

 

Click to access Pornnapa.pdf

 

 

Trade patterns and global value chains in East Asia:
From trade in goods to trade in tasks

 

Click to access stat_tradepat_globvalchains_e.pdf

 

 

Global production sharing and trade patterns in East Asia

Prema-chandra Athukorala

June 2013

Click to access TU_VIROT,%20Ali_Reading2_Global%20Production%20Sharing%20and%20Trade%20Patterns%20in%20East%20Asia.pdf

 

 

Global Production Networks in Electronics and Intra-Asian Trade

Byron Gangnes

Ari Van Assche

2010

 

Click to access WP_2010-4.pdf

 

 

The Role of China, Japan, and Korea in Machinery Production Networks

Ayako OBASHI†

Fukunari KIMURA

March 2016

 

Click to access ERIA-DP-2016-10.pdf

 

 

China’s evolving role in global production networks: the decoupling debate revisited

Prema-chandra Athukorala

John Ravenhill

 

Click to access 2016-12_athukorala_ravenhill_wp_june_2016.pdf

 

 

International Production Networks And Changing Trade Patterns In East Asia: The Case Of The Electronics Industry

Dieter Ernst & Paolo Guerrieri

May 1997

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UNDERSTANDING THE WORLD TRADE COLLAPSE

Calista Cheung and Stéphanie Guichard

2009

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=eco/wkp(2009)70

 

 

GLOBAL TRADE: WHAT’S BEHIND THE SLOWDOWN?

IMF World Economic Outlook Report October 2016

 

Click to access c2.pdf

 

 

A Theory of Domestic and International Trade Finance

JaeBin Ahn

2011

Click to access 0c96052274d4abea86000000.pdf

 

 

The Great Trade Collapse: Causes, Consequences and Prospects

 

Edited by Richard Baldwin

2009

 

Click to access great_trade_collapse.pdf

 

 

Understanding the Weakness in World Trade

2015

 

Click to access eb201503_article01.en.pdf

 

 

The mystery of the missing world trade growth after the global financial crisis

Hanna armelius, Carl-JoHan Belfrage and Hanna stenBaCka

2014

 

Click to access rap_pov_artikel_1_141121_eng.pdf

 

 

Resilient to the crisis? Global supply chains and trade flows

Carlo Altomonte, Gianmarco Ottaviano

27 November 2009

http://voxeu.org/article/resilient-crisis-global-supply-chains-and-trade-flows

 

 

The great trade collapse: What caused it and what does it mean?

Richard Baldwin

27 November 2009

 

 

The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun

Andrei A. Levchenko

Logan T. Lewis

Linda L. Tesar

2009

 

 

Off the Clif  and Back? Credit Conditions and International Trade during the Global Financial Crisis

Davin Chory

Kalina Manova

This version: December 2009

 

 

WHY THE WORLD SUDDENLY CARES ABOUT GLOBAL SUPPLY CHAINS

GARY GEREFFI AND JOONKOO LEE

2012

 

 

China’s Slowdown: The First Stage of the Bullwhip Effect

Yossi Sheffi

September 09, 2015

 

 

Financial Crisis and Supply-Chain Financing

Leora Klapper and Douglas Randall

 

 

The mystery of the missing world trade growth after the global financial crisis

Hanna Armelius, Carl-Johan Belfrage and Hanna Stenbacka

2014

 

 

Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession

Escaith, Hubert

OECD, DEFI, WTO

28. October 2009

 

 

SPIDERS AND SNAKES: OFFSHORING AND AGGLOMERATION IN THE GLOBAL ECONOMY

Richard Baldwin Anthony Venables

Working Paper 16611

2010

 

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD A DEVELOPMENT PERSPECTIVE

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz

2010

 

 

Accounting relations in bilateral value added trade

Robert Stehrer

2013

 

Click to access wiod14.pdf

 

 

NETWORKS OF VALUE ADDED TRADE

Working Papers 2015

João Amador | Sónia Cabral

 

 

Trade patterns and global value chains in East Asia: From trade in goods to trade in tasks

WTO Report

 

 

Counting borders in global value chains

Kirill Muradov:

May 2016

 

 

Using Average Propagation Lengths to Identify Production Chains in the Andalusian Economy

ERIK DIETZENBACHER*, ISIDORO ROMERO LUNA** AND NIELS S. BOSMA

2005

https://idus.us.es/xmlui/bitstream/handle/11441/17372/file_1.pdf?sequence=1

 

 

Trade in Value Added: An East Asian Perspective

Satoshi Inomata

No. 451 December 2013

 

Click to access adbi-wp451.pdf

 

 

TRADE INTERCONNECTEDNESS: THE WORLD WITH GLOBAL VALUE CHAINS

2013

 

 

The globalisation of inflation: the growing importance of global value chains

by Raphael Auer, Claudio Borio and Andrew Filardo

 

 

 

 

GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND OUTLOOK

Arnold Tukker a b & Erik Dietzenbacher

2013

Click to access UNSD%20-%20Tukker%20-%20Overview%20on%20International%20IO%20Tables%20-%202013.pdf