Dr.DEBESH BHOWMIK

Dr.DEBESH BHOWMIK

Saturday 15 November 2014

25TH ASEAN SUMMIT AND CLIMATE CHANGE





ASEAN JOINT STATEMENT ON CLIMATE CHANGE 2014

WE
, the Heads of State/Government of Brunei Darussalam, the Kingdom of Cambodia, the
Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Republic of the
Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom
of Thailand and the Socialist Republic of Viet Nam, Member States of ASEAN, on the
occasion of the 25th ASEAN Summit;
REMEMBERING
our commitments made in the Nay Pyi Taw Declaration on Realisation of
the ASEAN Community by 2015 (2014);
ASEAN Action Plan on Joint Response to ClimateChange (2012);
the ASEAN Leaders’ Statement on Climate Change to the 17th
Session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) and the 7thSession of the COP serving as the Meeting of Parties to the Kyoto Protocol (2011); the ASEAN Leaders’ Statement on Joint Response to Climate Change (2010); the ASEAN Joint Statement on Climate Change to the 15th Session of the COP to the UNFCCC and the 5th Session of the COP serving as the Meeting of Parties to the Kyoto Protocol (2009); the ASEAN Declaration on the 13th
session of COP to the UNFCCC and the 3rd session of the CMP to the Kyoto Protocol (2007); and the ASEAN Declaration on Environmental Sustainability (2007);
NOTING the wide ranging and collaborative research and policy development work in recent
years by ASEAN Member States on sustainable development, land use and landscapes,
and on forest conservation and governance, as recognised, for example, at the Forests Asia
Summit 2014;
REITERATING
our commitment to the UNFCCC, and its principles and provisions, as a framework for international collaboration on climate change mitigation and adaptation;
REAFFIRMING
the UNFCCC’s core principle of common but differentiated responsibilities and
that developed country Parties should take the lead in combating climate change and
the adverse effects thereof in accordance with this principle, while agreeing that renewed
efforts by all Parties to the UNFCCC are required to ensure mitigation goals are met;
WELCOMING
the Warsaw Framework for Reducing Emissions from Deforestation and forest Degradation
(REDD+), and the financial support provided by the United States,Norway and t
he United Kingdom, as an important outcome of COP19 and a critical step in
better valuing and protecting global forest carbon stocks;
PRAISING
strengthened efforts to mobilize the long term financing commitments from
developed countries to support developing countries and least developed countries in
pursuing ambitious mitigation and adaptation efforts;
RECOGNIZING
the United Nations Climate Summit held in New York on 23 September 2014;
HIGHLIGHTING
the urgency with which renewed mitigation efforts are required given the
latest reports prepared for the International Panel on Climate Change’s (IPCC’s) Fifth
Assessment Report (AR5) predict that, without additional mitigation, global mean surface
FINAL

temperatures will increase in 2100 from 3.7°C to 4.8°C compared to pre industrial levels,
and that substantial reductions beyond 2020 will be required to limit temperature change to
2°C relative to pre industrial levels;
POINTING
to the clear evidence of climate change in our region over the past four decades,
which has major consequences for agriculture, energy supply and livelihoods;
REEMPHASISING
that climate change is already having significant impacts causing major
loss and damage throughout the ASEAN region, and disproportionately affecting developing
countries, with the experiences with Cyclone Nargis in Myanmar and Typhoon Haiyan in the
Philippines providing stark evidence of the destructive impacts and disaster prone nature of
the region that cannot be ignored;
RECOGNISING
the important role that forest conserva tion and sustainable management of
forests throughout ASEAN will play in helping to mitigate global climate change, reduce the
risks of extreme weather events and other climatedriven disasters, and provide sustainable
economic livelihood opportunities for local communities;
WELCOMING
decision 1/CP.17 of the Conference of the Parties to the UNFCCC in which
Parties decided to launch a process to develop a protocol, another legal instrument or an
agreed outcome with legal force under the Convention applicable to all Parties by 2015 to be implemented from 2020; and recognising that the 2015 global agreement must be balanced and comprehensive, including key areas of the Durban mandate such as mitigation,adaptation and means of implementation;
ACKNOWLEDGING
that universal participation is an essential ingredient for greater ambition in the 2015 agreement and in that regard, all Parties have a common obligation to
submit an intended nationally determined contribution as part of the 2015 global agreement,
while rec allingthe principle of common but differentiated responsibilities;
EXPRESSING
the view that technology transfer, capacity building and financial assistance
from developed countries to developing countries are vital to supporting
Nationally Appropriate Mitigation Actions (NAMAs) and Intended Nationally Determined Contributions and other activities on climate change effectively and efficiently in the long run;
VALUING
the importance of pursuing climate change mitigation and adaptation actions that
are consistent with broader sustainable development goals to the achievement of food
security and poverty alleviation throughout the ASEAN region;
RECOGNIZING
the progress made in the implementation of the ASEAN Multi Sectoral
Framework on Climate Change: Agricultur e and Forestry towards Food Security (AFCC), the ASEANGerman Program on Climate Change: Agriculture, Forestry and related sectors
(GAP CC) through newly proposed ‘Forestry and Climate Change (FORCC)’, and the
ASEAN Swiss Partnership Programme on Social Forestry and Climate Change (ASFCC)
endorsed by the 36th Meeting of ASEAN Ministers on Agriculture and Forestry (36th AMAF);
ACKNOWLEDGING
the role of regional forums, including ASEAN, in supporting countries tocollaborate on the local, regional and global challenges of climate change;
DO HEREBY DECLARE TO:
1.
CALL
upon all Parties to the UNFCCC, including ASEAN Member States, to
take note of the findings in the IPCC’s Fifth Assessment Report;
2.
URGE
Parties to take immediate action on ratifying the Doha Amendments to the
second commitment period of the Kyoto Protocol;

3.
AFFIRM
that increasing pre-2020 ambition must be primarily achieved through the
implementation of the 2nd commitment period of the Kyoto Protocol and the outcomes
of the Bali Action Plan in accord ance with principles and provisions of the Convention, with
developed country Parties taking the lead;
4.
CONTINUE
to investigate increased renewable energy and energy efficiency potential
throughout the ASEAN region in recognition that such efforts can be the fastest and
most efficient way of closing the “ambition gap”;
5.
CALL
upon all Parties to the UNFCCC, including ASEAN Member States, to work
effectively and in good faith to adopt a protocol, another legal instrument or an agreed
outcome with legal force under the Convention applicable to all by the end of 2015, and to
table their Intended Nationally Determined Contributions well in advance of COP-21 in Paris
in December 2015 or by first quarter 2015 by those Parties ready to do so;
6.
URGE
developed countries to continue to show leadership, recognising historical
responsibilities, including by coming forward early with ambitious Intended Nationally
Determined Contributions by March 2015;
7.
AFFIRM
that we will put forward our Intended Nationally Determined Contributions
well in advance of COP-21 in Paris, or by first quarter 2015 for those Parties ready to do so,
as mandated by the decisions reached at COP-19 in Warsaw. These Intended Nationally
Determined Contributions will reflect our diverse national circumstances and be made in
accordance with the principle of common but differentiated responsibilities and contribute to
a 2015 agreement that is under the Convention and applicable to all Parties;
8.
REQUEST
support for developing countries and least developed countries in the
context of paragraph 2(d) of decision 1/C.19 in the preparation of Intended Nationally
Determined Contributions, and to pursue low carbon development opportunities that can
enable new mitigation efforts, especially focusing on renewable energy development, energy efficiency,and clean fossil energy technologies and forestry, to be included in their Intended Nationally Determined Contributions;
9.
URGE
developed countries to provide assistance to ASEAN Member States to enhance protection of the remaining forests,biodiversity and ecosystem services that can contribute to ambitious forest conservation and sustainable forest management goals in ASEAN Member States’ Intended Nationally Determined Contributions;
10.
URGE
all Parties to the UNFCCC to recognise the extreme vulnerability of ASEAN
Member States to climate change, and therefore the importance of adaptation activities and
enhancing capacity in the 2015 agreement;
11.
SUPPORT
the notion that apart from mitigation, contributions could also include
adapt ation, in the context that all Parties would submit intended contributions which are
nationally determined;
12.
ENCOURAGE
Parties to the UNFCCC to develop adaptation strategies that are consistent with, and address the threats identified in, the IPCC AR5 Working Group II report
on Impacts, Vulnerability and Adaptation;
13.
UNDERTAKE
concerted efforts to systematically rehabilitate our region’s mangrove
forests, in recognition of their critically important roles in mitigation and adaptation,
particularly their provision of disaster risk reduction services by minimizing the impacts of
coastal storms and flooding;
14.
ENCOURAGE
developed countries to recognise the potential to support the ASEAN
region to continue transition to renewable energy sources and increasing energy efficiency, as part of efforts to embrace low carbon futures;
15.
ENCOURAGE
developed countries to increase commitments, in terms of capacity building, technical assistance, technological transfer and financing, for developing countries
and least developed countries to pursue ambitious mitigation and adaptation objectives in
Intended Nationally Determined Contributions;
16.
ENCOURAGE
developed countries to accelerate their contributions to theGreen Climate Fund, to mobilise it as a matter of priority, noting that the distribution process should be effective, predictable and easy to access;
17.
AFFIRM
that finalisation and operationalisation of the Loss and Damage Mechanism is of urgent priority, and welcome the application of insurance oriented financial mechanisms,
such as crop insurance, throughout the ASEAN region with the support of
developed countries;
18.
AGREE
that enhanced financing from developed countries is critical for least developed countries and developing countries to pursue green economy pathways that can
preserve forest carbon sinks and to adapt to the emerging risks of climate change;
19.
ENCOURAGE
developed countries to prioritise financial and technological support for developing countries and least developed countries to rapidly pursue decentralized renew
able energy supply options, which is critical to allow poor communities currently
lacking electricity to pursue a clean energy future;
20.
ENHANCE
the potential of REDD+ to contribute to green development by protecting the remaining global forest carbon stock s and biodiversity resources, enhancing forest
carbon stocks and thereby increasing carbon removal reversing land degradation,
providing green products by sustaining management of forests improving the livelihoods of the rural poor, and aiding adaptation and mitigation efforts;
21.
ENCOURAGE
ASEAN Member States to strengthen existing regional collaborations,including in REDD+ readiness activities in order to capitalise opportunities under REDD+
framework and future climate regime, recognizing differences innational circumstances and
arrangement of REDD+ and/or forest related programmes in individual ASEAN Member
States.
22.
ENCOURAGE
all Parties to the UNFCCC to ensure that sustainable REDD+financing mechanisms are developed and implemented in order to enhance the potential forREDD+ to contribute significantly to global mitigation objectives;
23.
URGE
all Parties to progress in results-based REDD+ financing, taking intoconsideration conditions relating to forest protection and the rights of indigenous peoples
and local communities, and the principle that local communities and governments should be
supported in promoting genuine efforts to halt deforestation;
24.
REITERATE

countries with REDD+ implementation, including the incorporation of non-carbon benefits
into systems and activities, taking into account different phases of REDD+ implementation in developing countries;
25.
ENCOURAGE
developed countries to fully implement obligations regarding land use,land use change and forestry, noting that all future actions or negotiations concerning land use land use, change and forestry should take into account the full range of ecosystem services provided by forests and wetlands;
26.
ENCOURAGE
the establishment of a network of research centres in ASEAN Member States to share knowledge and lessons learnt on climate adaptable agriculturalproducts, which will enable us to combat the impacts of climate change on agricultural production patterns and promote regional food security;
27.
INCREASE
our cooperation to improve our collective capacity to deal with climate and weather management, including undertaking collaborative research to better under stand
how climate change will influence the weather systems of the ASEAN region and
technology development on climate outlooks and forecasting to better manage risks, building the capacity of decision makers from different sectors and different geographic
scales to link climate knowledge with humanitarian and development action, and developing regional-scale, high resolution climate models for the ASEAN region;
28.
STRENGTHEN
ASEAN rapid response capacity to be more efficient and effective in the event of natu
ral disasters through existing mechanisms under the ASEAN Agreement on
Disaster Management and Emergency Response (AADMER);
29.
STRESS
the importance of fast capitalization of the Adaptation Fund to continue funding priority projects since countries are alrea dy affected by climate change;
30.
SEEK
assistance in the form of technology transfer, for both the public and private sectors to support strengthened mitigation and adaptation efforts, which should be easily
transferrable, subject to low costs and exempt fro munreasonable patent fees;
31.
REQUEST
ongoing support from developed countries to ASEAN Member States to better understand, develop and implement Measurement, Reporting and Verification (MRV) process;
32.
CONTINUE
to promote ASEAN’s experiences in other regional forums to progress collaborative efforts on climate change;
33.
COMMIT
ourselves to pursuing a successful COP20 as a crucial step towards elaborating a 2015 agreement at COP21 for the post-2020 period.Adopted in Nay Pyi Taw, the Republic of the Union of Myanmar, this Twelfth Day of November
in the Year Two Thousand and Fourteen.



Tuesday 11 November 2014

GLOBAL HUNGER


Global monitoring of FAO hunger target

In 1996 the World Food Summit (WFS) set the target of ''eradicating hunger in all countries, with an immediate view to reducing the number of undernourished people to half their present level no later than 2015". In 2000, the Millennium Declaration (MD) promoted the target to ''halve, between 1990 and 2015, the proportion of people who suffer from hunger''.
FAO received the mandate of monitoring progress towards the objectives set by the WFS and the MDGs. For this reason, the FAO statistics division rigorously and continuously works on the methodology and the parameters needed for estimating the prevalence of undernourishment.

Methodological framework

In 2011-12 the FAO methodology for estimating the prevalence of undernourishment went through a deep review, to identify the most appropriate model to describe the habitual dietary energy consumption in the population and improve the estimation of its parameters. In particular, it was introduced the skew-normal distribution.
Further refinements of the methodology were introduced in the SOFI 2014 edition. Available micro-data from surveys are now used to identify the most appropriate functional form for the habitual energy consumption. A new outlier detection method was introduced for micro-data, based on a "leave-out one cross-validation" approach. And a new estimation method was introduced to estimate variability in habitual energy consumption for countries where no survey data are available, based on the observed relation between the Coefficient of Variation, GDP per capita, the income Gini coefficient and food prices. Changes are described in detail here

Food Balance Sheets

Food Balance Sheets (FBS) provide essential information on the food system of a country. They look at: 
i) the domestic supply of food commodities
ii) the domestic food utilization
iii) the food supply available for human consumption.
The Dietary Energy Supply (DES) derived from the Food Balance Sheets is also used for estimating the prevalence of undernourishment at national, regional and global levels.  
Food Balance Sheets are prepared by FAO using official statistics provided by the countries. They are updated annually and are available for nearly all countries.

Processing food data from household surveys

Food consumption data from National Household Surveys are analyzed to compute a set of food security statistics at national and sub-national levels (including gender disaggregated data) and to derive coefficients on the distribution of food consumption within the population (coefficients of variation and skewness). The latter are then used to estimate the prevalence of undernourishment.

Capacity development  

Capacity development is provided on the analysis of food consumption data. The main objective is to strengthen the national capacity to produce and use food security statistics derived from National Household Surveys. Technical support is also offered for the design of proper food consumption and food security modules to be included in household surveys.

Automatized processing of food data: ADePT-FSM software

In collaboration with the World Bank, FAO has developed software – the ADePT FSM – that aims at improving the consistency and availability of food security statistics extracted from National Household Surveys (Household Budget Surveys, etc.) containing food consumption data. The derived food security statistics are crucial to assess and monitor food security at national and sub-national levels and inform food security programmes.

Food Security indicators

In line with the recommendations made at the Committee on World Food Security (CFS) Round Table on hunger measurement (September 2011), the FAO Statistics Division has compiled food security indicators aimed at capturing various aspects of food insecurity. The suite of indicators was first launched in the State of Food Insecurity in the World 2012, and it was analysed and further developed and analysed in the State of Food Insecurity in the World 2013 and the State of Food Insecurity in the World 2014 reports.

Monday 3 November 2014

AMARTYA KUMAR SEN



AMARTYA KUMAR SEN



Amartya Kumar Sen (Bengali: অমর্ত্য সেন; born 3 November 1933) is an Indian economist and philosopher who since 1972 has taught and worked in the United Kingdom and the United States. He has made contributions to welfare economics, social choice theory, economic and social justice, economic theories of famines, and indexes of the measure of well-being of citizens of developing countries. He was awarded the Nobel Memorial Prize in Economic Sciences in 1998 for his work in welfare economics. Sen was born in Santiniketan, West Bengal, India, to Ashutosh Sen and Amita Sen. Rabindranath Tagore gave Amartya Sen his name (Bengali অমর্ত্য ômorto, lit. "immortal"). Sen's family was from Wari and Manikganj, Dhaka, both in present-day Bangladesh. His father Ashutosh Sen was a professor of chemistry at Dhaka University who moved with his family to West Bengal in 1945 and worked at various government institutions. Sen's mother Amita Sen was the daughter of Kshiti Mohan Sen, a well-known scholar of ancient and medieval India and close associate of Rabindranath Tagore. He served as the Vice Chancellor of Visva-Bharati University for some years. Sen began his high-school education at St Gregory's School in Dhaka in 1940. From the autumn of 1941, Sen studied at Visva-Bharati University school. He later went to Presidency College, Kolkata, where earned a B.A. in Economics, with a minor in Mathematics. In 1953, he moved to Trinity College, Cambridge, where he earned a second B.A. degree in Economics in 1955. He was elected President of the Cambridge Majlis. While Sen was officially a Ph.D. student at Cambridge (though he had finished his research in 1955-6), he was offered the position of Professor and Head of the Economics Department of the newly created Jadavpur University in Calcutta. He served in that position, starting the new Economics Department, during 1956 to 1958. Sen had to choose a quite different subject for his Ph.D. thesis. He submitted his thesis on "The Choice of Techniques" in 1959, though the work had been completed much earlier, (except for some valuable advice from his adjunct supervisor in India, Professor A.K. Dasgupta, given to Sen while teaching and revising his work at Jadavpur) under the supervision of the "brilliant but vigorously intolerant" post-Keynesian, Joan Robinson. Between 1960 and 1961, Sen was a visiting Professor at Massachusetts Institute of Technology. He was also a visiting Professor at UC-Berkeley and Cornell. He taught as Professor of Economics between 1963 and 1971 at the Delhi School of Economics (where he completed his magnum opus Collective Choice and Social Welfare by 1969),. This is a period considered to be a Golden Period in the history of DSE. In 1972, he joined the London School of Economics as a Professor of Economics where he taught until 1977. From 1977 to 1986 he taught at the University of Oxford, where he was first a Professor of Economics and Fellow of Nuffield College, Oxford, and then the Drummond Professor of Political Economy and a Fellow of All Souls College, Oxford from 1980. In 1987, he joined Harvard as the Thomas W. Lamont University Professor of Economics. In 1998 he was appointed as Master of Trinity College, Cambridge. In January 2004, Sen returned to Harvard. He has served as president of the Econometric Society (1984), the International Economic Association (1986–1989), the Indian Economic Association (1989) and the American Economic Association (1994). He has also served as President of the Development Studies Association and the Human Development and Capabilities Association. In May 2007, he was appointed as chairman of Nalanda Mentor Group to examine the framework of international cooperation, and proposed structure of partnership, which would govern the establishment of Nalanda International University Project as an international centre of education seeking to revive the ancient center of higher learning which was present in India from the 5th century to 1197.
On 19 July 2012, Nobel laureate Amartya Sen was named the first chancellor of the proposed Nalanda University (NU). Teaching began there in August 2014.

Sen has received over 90 honorary degrees from universities around the world.
Books
  • Sen, Amartya (1960). Choice of techniques: an aspect of the theory of planned economic development. Oxford: Basil Blackford.
  • Sen, Amartya (1997). On economic inequality (expanded ed.). Oxford New York: Clarendon Press Oxford University Press.
  • Sen, Amartya (1982). Poverty and famines: an essay on entitlement and deprivation. Oxford New York: Clarendon Press Oxford University Press.
  • Sen, Amartya (1983). Choice, welfare, and measurement. Oxford: Basil Blackwell.
  • Reprinted as: Sen, Amartya (1999). Choice, welfare, and measurement. Cambridge, Massachusetts: Harvard University Press.
Reviewed in the Social Scientist: Sanyal, Amal (October 1983). ""Choice, welfare and measurement" by Amartya Sen". Social Scientist (Social Scientist - JSTOR) 11 (10): 49–56.
Sen, Amartya (1970). Collective choice and social welfare (1st ed.). San Francisco, California: Holden-Day.
  • Reprinted as: Sen, Amartya (1984). Collective choice and social welfare (2nd ed.). Amsterdam New York New York: North-Holland Sole distributors for the U.S.A. and Canada, Elsevier Science Publishing Co.
Sen, Amartya (1997). Resources, values, and development. Cambridge, Massachusetts: Harvard University Press.
  • Sen, Amartya (1985). Commodities and capabilities (1st ed.). Amsterdam New York New York, N.Y., U.S.A: North-Holland Sole distributors for the U.S.A. and Canada, Elsevier Science Publishing Co..
Reprinted as: Sen, Amartya (1999). Commodities and capabilities (2nd ed.). Delhi New York: Oxford University Press
Sen, Amartya (1987). On ethics and economics. Oxford, UK New York, NY, USA: Basil Blackwell.
  • Sen, Amartya; Drèze, Jean (1989). Hunger and public action. Oxford England New York: Clarendon Press Oxford University Press.
  • Sen, Amartya (1992). Inequality reexamined. New York Oxford New York: Russell Sage Foundation Clarendon Press Oxford University Press.
  • Also printed as: Sen, Amartya (November 2003). "Inequality reexamined". Oxford Scholarship Online (Oxford University Press).
Sen, Amartya; Nussbaum, Martha (1993). The quality of life. Oxford England New York: Clarendon Press Oxford University Press.
  • Sen, Amartya; Drèze, Jean (1998). India, economic development and social opportunity. Oxford England New York: Clarendon Press Oxford University Press.
  • Sen, Amartya; Suzumura, Kōtarō; Arrow, Kenneth J. (1996). Social choice re-examined: proceedings of the IEA conference held at Schloss Hernstein, Berndorf, near Vienna, Austria 2 (1st ed.). New York, N.Y: St. Martin's Press.
  • Sen, Amartya (1999). Development as freedom. New York: Oxford University Press. Sen, Amartya (2000). Freedom, rationality, and social choice: the Arrow lectures and other essays. Oxford: Oxford University Press.
  • Sen, Amartya (2002). Rationality and freedom. Cambridge, Massachusetts: Belknap Press.
  • Sen, Amartya; Suzumura, Kōtarō; Arrow, Kenneth J. (2002). Handbook of social choice and welfare. Amsterdam Boston: Elsevier.
  • Sen, Amartya (2005). The argumentative Indian: writings on Indian history, culture, and identity. New York: Farrar, Straus and Giroux.
  • Sen, Amartya (2006). Identity and violence: the illusion of destiny. Issues of our time. New York: W.W. Norton & Co.
  • Sen, Amartya (31 December 2007). Imperial illusions. Washington D.C.
  • Sen, Amartya (2010). The idea of justice. London: Penguin.
  • Sen, Amartya (2011). Peace and democratic society. Cambridge, England: Open Book Publishers.
  • Drèze, Jean (2013). An uncertain glory: the contradictions of modern India. London: Allen Lane.
Journal articles

Friday 24 October 2014

CAPITAL MARKETS UNION

 

Capital markets union – the “Why” and the “How”

Dinner speech by Yves Mersch, Member of the Executive Board of the ECB,
Joint EIB-IMF High Level Workshop,
Brussels, 22 October 2014

Dear Mr Tănăsescu [Mihai Tănăsescu, Board Member of the EIB],
Ladies and Gentlemen,
In four days’ time, the European Central Bank (ECB) will disclose the results of its comprehensive assessment of banks’ balance sheets – what we have called a financial health check. This will mark the end of a tremendous effort by both banks and supervisors. Around 6,000 experts have been working full-time over the past twelve months to review the balance sheets of 130 banks in the euro area and Lithuania. Together, these banks represent roughly 85% of total bank assets in the euro area.
One reason you are here tonight may be not only the dinner but also that you would like me to let you in on the secret of the numbers we will publish at noon on Sunday.
I am afraid I have to keep you on the edge of your seats for four more days. Before we can disclose the outcome, we have to give banks the opportunity to review their results and prepare for publication. That review period will start tomorrow.
What we already know is that the banks that will fall under our direct supervision have strengthened their balance sheets by almost €203bn since the summer of 2013. This includes €59.8bn of gross equity issuance, €31.6bn issuance of contingent convertible bonds (CoCos), €26bn of retained earnings, €18.3bn of asset sales, €17.6bn of one-off items and additional provisioning and about €50bn of other measures.
These numbers show that even before the results are announced, the comprehensive assessment is delivering on its objective of repairing and strengthening banks’ balance sheets as the ECB takes on its new supervisory responsibilities.
But tonight, I would like to look beyond Sunday to the bigger picture surrounding the comprehensive assessment. What some perceive as a burdensome exercise, analysing very technical aspects of bank balance sheets, is in reality a display of the ambition to create a more integrated financial market in Europe.
The comprehensive assessment is an important prerequisite and foundation for the Single Supervisory Mechanism (SSM), which will start operating on 4 November. Together, they constitute a sea change in Europe’s banking markets. For the first time, common legislation and rules will be applied by a single authority, strongly increasing transparency and banks’ comparability across countries.
But we must recognise that we have not reached the end of the journey. A single supervisor can more easily ensure comparability where there are single rules. Remember the discussion about the different national definitions of non-performing loans in the context of the asset quality review. This is a telling example that the singleness of Europe’s financial market is still challenged by piecemeal national rules and standards.
In addition to banking supervision, there is a second area where fragmentation of Europe’s financial market remains a stumbling block. Seven years after the first shock waves of the financial crisis and two years after the sovereign debt crisis in the euro area, economic recovery is still some way off: euro area real GDP remained unchanged between the first and second quarters of this year. Unemployment is still at 11.5%. Prices in September rose by only 0.3% – and measures of inflation expectations have gone down.
To restart growth, we must open financing channels, especially for small and medium-sized enterprises (SMEs). And this can best happen when financial markets are fully integrated.
In the light of these various concerns, the aspiration to complete the single financial market has returned to the top of the agenda – and quite rightly so. The latest focus for this discussion is the creation of a European capital markets union.

Why a capital markets union?

Expectations for the project of a capital markets union are high. But to date, there is no common understanding of what it means or what it should look like. For the financial industry, it means new business opportunities; for financial stability experts, it means better control of shadow banking; and for entrepreneurs, it means better access to funding sources.
As central banker, I would stress another major advantage of more integrated financial markets in the euro area: it would greatly facilitate the implementation of the ECB’s monetary policy.
We are clearly at the beginning of the discussion of a capital markets union. But l believe that a broad public discussion is exactly what we need to generate ideas and start the opinion-forming process. I therefore welcome the fact that Lord Hill has announced his intention to consult a broad range of stakeholders and conduct analyses before presenting more concrete proposals. I too do not have a ready-made blueprint in my bottom drawer.
It is time to spell out more clearly what we want and what we do not need, what we can achieve and what we should not attempt. This way we can prevent the capital markets union from becoming a ‘Jack of all trades, master of none’.
In my view, the various motivations for a capital markets union can be summarised under two main objectives:
On the one hand, we need to find ways to generate growth. In a way, the euro area economy is like a plane flying on only one engine: bank financing. To increase the speed and stability of the plane, it would be good to add a second engine: capital market financing. Hence, we must seek to deepen capital markets so that they can play a more important role in supporting the real economy. And we must name areas where removing frictions between national markets can bring new business.
On the other hand, we need to ensure financial stability in the longer term. An impressive amount of regulation has been introduced since the crisis began, tackling several fundamental problems in our regulatory set-up. Indeed, the crisis showed that our initial rules were in some areas too lax and too heterogeneous across countries to ensure the stability and singleness of Europe’s financial market. At the same time, we should avoid excesses: more regulation does not always mean more stability.
In many instances, the two objectives of growth and financial stability complement each other. I believe that greater integration of markets can be key to both. Fifteen years after the financial services action plan, it is time for another big step forward for Europe’s single financial market.

How to implement a capital markets union?

So what measures do we need to take to achieve these objectives? To my mind, a comprehensive capital markets union requires thinking along three dimensions.
The first is the opening of the market itself: in this regard, we have already achieved a great deal within the EU. The second is the introduction of common regulatory standards. And the third consists of the institutional structures that enforce these regulatory standards.
I will elaborate on the second dimension and also make some remarks on the third dimension.

Regulatory dimension

Let me first address the regulatory dimension. Financial markets are complex systems with many different players, products, infrastructures and currencies. As a consequence, financial markets are at the intersection of many different fields of legal rules, including contract law, corporate governance, capital requirements, insolvency, taxation and consumer protection.
To ensure that a single financial market delivers growth and stability, all of these fields need to be taken into account. Let me illustrate this for the financial market segment that is the focus of this high-level workshop. To revive the securitisation market and to ensure its stability, there are three regulatory fields where I believe that action is necessary: ABS regulation; insolvency law; and payment and settlement systems. Let me discuss each in turn.

ABS regulation

The first key challenge for the securitisation market is the lack of standardisation at the European level and the heavy capital charges for an asset class that have been set internationally. Take the ABS market, which we have been looking closely at for some time. We believe that it could be an important channel for increased lending to SMEs.
Because of their size, SMEs generally cannot issue bonds. In addition, the risk of non-payment and the low liquidity of loans to SMEs in difficult times are major hurdles for SMEs to get financing, even through the banking channel. In this regard, securitisation can help to connect SME financing needs with the funds of bank and non-bank investors. It can do so by assisting banks’ ability to fund and distribute risk. Here we believe that having a consistent approach to securitisation underpinning various pieces of legislation is key to attracting a broader investor base and to de-stigmatising European securitisations.
Let me say clearly: no one wants to have the complex, opaque products of the pre-crisis years. Repackaging the umpteenth tranche of a financial derivative should be a thing of the past. But the regulatory framework should be appropriate for the actual risk. And in this respect there are significant differences between current and previous securitisations and between the US and European experiences.
Since the start of the crisis, the default rates of European ABS were on average between 0.6% and 1.5%. In the US over the same period, they were on average 9.3% to 18.4%. European SME ABS are even further below these default rates, at about 0.1%. It makes little sense to calibrate the international rules solely on the basis of US experiences. It would be like calibrating the price of flood insurance for Madrid on the experience of New Orleans.
The current rules lump all ABS together and are much too conservative. They effectively question their existence.
Under the current regulatory conditions, simple, transparent ABS built on real assets face almost as many constraints as much more complex financial products. The ECB has therefore, in cooperation with the Bank of England, made a number of proposals for a better functioning European securitisation market. We have received positive responses from the Commission and the Member States.
The proposals are derived in part from the quality and transparency requirements that central banks place on ABS, which can be deposited as collateral in monetary policy operations. And as a central bank, our demands have always been very high.
Let me add, that in this regard, the ABS market is a good example of how a capital markets union can also benefit our monetary policy, besides generating growth and promoting financial stability.

Insolvency law

The second regulatory obstacle for a single market for securitised products is the heterogeneity of insolvency rules across the EU. This applies to both financial and non-financial companies. The Council Regulation on cross-border insolvency proceedings establishes a common framework of basic rules regarding the competent courts, the applicable law and the recognition of court decisions. But within this framework, national laws differ substantially in how far they protect the different stakeholders in insolvency.
For example, the rights of preferential creditors differ substantially in some cases. Different prescriptions on the filing and verification of claims can also cause frictions. Heterogeneity becomes all the more important in dealing with the insolvency of multi-national enterprise groups. All in all, the heterogeneity of insolvency rules complicates the creation of homogenous asset pools and therefore the securitisation process. The Commission proposal to review the Regulation on cross-border insolvency makes suggestions how to improve this situation in the right direction.

Payment and settlement systems

The third regulatory challenge for the securitisation market is the field of payment systems and securities settlement. Despite much progress over the past decade, securities settlement in the euro area remains fragmented, inefficient and not very customer-friendly. This is not just a problem for smaller businesses, for which adapting to different conditions in the Member States often entails high costs, but also for the integration and functioning of the single market as a whole. A striking comparison is often made with the US, an economic area of comparable size: settling a cross-border securities transaction in Europe has been estimated to cost at least ten times as much as in the US!
This issue can be solved by establishing European market infrastructures for the processing of securities transactions, as well as a coordinated and more harmonised monitoring of critical market infrastructures. In all these areas, in which the Eurosystem is competent, relevant initiatives were launched several years ago and have already made significant progress.
For example, Target2Securities is the Eurosystem’s response to the high fragmentation that characterises the infrastructure supporting capital markets in Europe. T2S will be a new IT platform performing the real-time settlement of securities transactions against central bank money across European borders. T2S will settle all securities, both debt securities and equities. The T2S platform is now fully developed. This year is reserved for testing and it is set to go live in June 2015. This will be a major event with a strong impact on the financial services industry in Europe.
All of this applies fully to ABS markets. Their settlement infrastructure will become more integrated and overcome obstacles that have so far hindered cross-border trade.
The standardisation of ABS, further harmonisation of insolvency laws and the integration of settlement systems are three illustrations from the securitisation market showing how the regulatory dimension of a capital markets union can achieve progress by accelerating existing initiatives and launching additional ones.
More generally, the regulatory dimension implies both a deepening and broadening of the single rulebook. Deepening means that prudential rules should converge further where undue carve outs remain. Broadening means that the single rulebook should be expanded to other areas that affect the single financial market.

Institutional dimension

Beyond the regulatory dimension of a capital markets union, there are a number of institutional questions related to consistency across market segments, multi-level governance, actors and geographical scope.
As regards consistency, we need to ask ourselves: how much integration do we need beyond the banking system? If banking supervision is becoming European, can payment systems continue to be monitored nationally? What about new technologies? Do we wait until they are established in the old national frameworks before we try to negotiate mutual acceptance, or harmonisation, or should we foster creativity and efficiency by offering from the outset a Europe-wide single framework?
As regards multi-level governance, we must identify the areas in which the EU can take the initiative and those in which the Member States can be active. Can we rely on directives with national leeway in their implementation or do we need to make use of Regulations that are directly applicable?
As regards actors, there is the question of where we should rely on decentralised application of common rules and where we need institutions at EU level to implement common rules? What functions could be performed, for example, by the European supervisory authorities, whose activities and tasks are currently being reviewed in Brussels?
As regards geographical scope, it is important that we strive to make the capital markets union a project of the EU28 to reinforce the single financial market as a whole. Nevertheless, it is clear that the euro area has a particular interest in increased financial integration to pave the road towards a genuine monetary and economic union.

Conclusions

Let me conclude. Some may argue that the capital markets union is old wine in new bottles. I disagree. What is old are the problems that we need to overcome. But for that we need new measures that we have not previously been able to implement – either because of a lack of political will or because of an insufficiently clear plan on how to implement them. Art. 114 of the  TFEU gives a clear mandate for this purpose.
The capital markets union is not so much about a couple of high-profile actions but more about a larger series of less visible initiatives. And that is why we need the capital markets union as connector and label. To operate with this term will help to raise awareness, to define overall objectives, to prioritise resources and to ensure consistency of the individual measures.
Ladies and gentlemen,
The overall situation of the European economy makes it abundantly clear that we cannot wait for a miracle to end a period of low growth. We are not out of the danger zone. The patient is still fragile and unfortunately relapses cannot be ruled out.
As I have explained, a capital markets union can provide very important impulses for both economic recovery and financial stability. I am aware that some of the proposals are ambitious and cannot be implemented overnight. But the fact that the incoming President of the European Commission has already taken up the idea makes me optimistic. The challenge in the coming months will be to create greater political awareness of the enormous importance of this highly technical area for Europe’s economy.
At the same time, I want to point out that a capital markets union cannot be our only area of action. Financial policy, fiscal policy and economic policy are all equally important to keep the recovery on track. Governance of the euro area can be thought of like the gearbox of a car. The cogs do not all need to be of equal size but they all need to be moving in the same direction. If only one cog starts going the wrong way, the whole car grinds to a halt. Non-respect of agreed rules by some is clearly establishing moral hazard risks for the actions of others.
Many things in the euro area need to come together to create an environment in which businesses and entrepreneurs can generate added value. Ernest Solvay, after whom the library in which the workshop will take place tomorrow is named, provides us with a good example. In the early 1860s, he had a brilliant idea for the industrial production of sodium carbonate. But it took the perseverance of several financiers and ten years before the process was ready to be used on an industrial scale. And Solvay relied on a patent to protect the intellectual property that ultimately formed the basis of his corporate success.
Over 150 years later, a capital markets union can help the Ernest Solvays of today. It can enable all Europe’s entrepreneurs to obtain the financing they need to turn their innovative ideas into successful businesses that will create jobs and promote sustained prosperity.
Thank you for your attention.

European Central Bank
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