Summary
It is clear that 2009 is not a year on which the world's central bankers will look back with undiluted pleasure. They can congratulate each other, however, on having survived this annus horribilis. At some point it will become necessary to stop the presses from printing more money before another bubble forms. The Bank of Israel in August became the first major central bank to raise interest rates since the global economic crisis intensified in the wake of the fall of Lehman Brothers in September 2008. To date, the financial system has not been noticeably reformed. The business of banking is slowly returning to usual. Incentives for performance remain focused on the short term. Financial engineers are designing new products, raking into account a slight toughening of regulations and a modest increase in capital requirements. Much work remains to be done to ensure safe banking and economic prosperity. In here, the 2009 Central Banker Report Cards is presented.
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Extract
Central Banker Report Cards 2009
It is clear that 2009 is not a year on which the world's central bankers will look back with undiluted pleasure. They can congratulate each other, however, on having survived this annus horribilis. Their actions may have assured that the world economy and financial system were saved - but at an enormous cost. Future generations will foot the bill for rescuing the financial world, unless the global economy recovers much more quickly and strongly than most economists expect. And those deserving central bankers who worked long hours to hold things together cannot afford to rest on their laurels. They must now consider the consequences of what they have done, or not done.
At some point it will become necessary to stop the presses from printing more money before another bubble forms. The Bank of Israel in August became the first major central bank to raise interest rates since the global economic crisis intensified in the wake of the fall of Lehman Brothers in September 2008.Apart from making this tricky transition, central bankers need to be actively involved in the debate over how to avoid future crises involving systemic risk.To date, the financial system has not been noticeably reformed. The business of banking is slowly returning to usual. Incentives for performance remain focused on the short term. Financial engineers are designing new products, taking into account a slight toughening of regulations and a modest increase in capital requirements.The financial system is in much better shape than it was a year ago, as central bankers around the world did whatever it took, or whatever they could, to limit the damage. Propping up financial institutions that are considered "too big to fail," however, is not a sufficient remedy for restoring confidence. Much work remains to be done to ensure safe banking and economic prosperity.- Contributors: Gordon Platt, Antonio Guerrero, Anita Hawser and Dan KeelerThe AmericasArgentinaMartin RedradoGrade: CWhile Martin Redrado continues to surfer from the Argentine administration's lack of credibil...See the full content of this document
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