Transcript International Insolvency Law Organisational matters

Dr Marek Porzycki
Chair for Economic Policy
Euro area quantitative easing – ECB
announcement of an expanded asset
purchase programme, 22 January 2015
http://www.ecb.europa.eu/press/pr/date/201
5/html/pr150122_1.en.html
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Decision of the Swiss National Bank to drop
minimum exchange rate, 15 January 2015
http://www.snb.ch/en/mmr/reference/pre_20
150115/source/pre_20150115.en.pdf
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coverage: bonds issued by euro area central
governments, agencies and European institutions
amount: 60 bn EUR monthly
duration: „until at least September 2016 and in any case
until the Governing Council sees a sustained adjustment
in the path of inflation that is consistent with its aim of
achieving inflation rates below, but close to, 2% over the
medium term”.
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„Aimed at fulfilling the ECB’s price stability
mandate, … to address the risks of a too prolonged
period of low inflation.”
„situation in which most indicators of actual and
expected inflation in the euro area had drifted
towards their historical lows”
potential second-round effects on wage and pricesetting ( result of expectations)
„forceful monetary policy response” needed
context: key ECB interest rates are already at their
lower bound ( „pushing on a string”)
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making access to finance cheaper for firms
and households  supporting investment
and consumption, and ultimately
contributing to a return of inflation rates
towards 2%
purchase of bonds against central bank
money, „which the institutions that sold the
securities can use to buy other assets and
extend credit to the real economy. In both
cases, this contributes to an easing of
financial conditions.”
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controversial issue resulting from:
complex structure of the Eurosystem
varying creditworthiness of EU governments  differences in
credit quality of bonds
coordination of purchases by the ECB ( control over money
supply)
decentralised implementation by the Eurosystem central
banks (NCBs)
loss-sharing between NCBs on bonds issued by EU
institutions (12% of purchases) and on direct purchases by
the ECB (8%)
no loss-sharing on the remaining 80% - purchases by NCBs
 NCBs alone will bear the credit risk of the respective
sovereign bond issuer
credit quality criteria applicable in principle
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Swiss franc (CHF) perceived as „safe haven” by
investors – upward pressure on exchange rate
harm to Swiss economy resulting from overvalued
currency – loss of competitiveness
from September 2011 SNB applied a cap on CHF
appreciation – a minimum exchange rate of 1,20
CHF per 1 EUR
maintaining the cap meant a commitment to buy
foreign currency in unlimited quantities, creating
money in CHF in exchange
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loss of control over the expansion of the
monetary base  risk of inflation in the long
term
a cap combined with appreciation pressure
from the market resulted in conditions similar
to ( „impossible trinity”) – SNB was unable
to maintain an independent monetary policy
uncontrolled expansion of SNB currency
reserves combined with inability to sell them
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abandonment of the exchange rate cap,
introduction of floating exchange rate
result: CHF has suddenly appreciated to below
0,90 CHF per EUR and subsequently traded at ca.
1 CHF to 1 EUR
sudden currency appreciation and abandonment
of the commitment to unlimited creation of CHF
had similar effect to a tightening of monetary
policy
in order to reduce adverse effects of currency
appreciation SNB deposit rate was moved further
into negative territory to -0,75%
short term results – loss of competitiveness
of Swiss exporters  drop in shares of Swiss
companies
 hit to the Swiss tourism industry
 long term results - ?
 indirect results
– worsening of the situation of borrowers in
CHF in Poland and other countries of the
region
- risk of adverse effects for Polish banking
sector resulting from lower recovery rates
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