Bis Report
The Chair
Mr Jean-Claude Trichet Chairman of the Global Economy Meeting President European Central Bank Postfach 16 03 19 60066 Frankfurt am Main Germany
1 September 2011
Draft CGFS report on Global Liquidity Dear Jean-Claude In my capacity as Chairman of the Committee on the Global Financial System (CGFS), I am circulating to the Global Economy Meeting a draft report on Global liquidity – concept, measurement and policy implications. The report, which follows up on a request by ECC Governors, was prepared by an Ad-hoc Group on Global Liquidity, chaired by Jean-Pierre Landau of the Banque de France. I would propose that Mr Landau present the report to the September Global Economy Meeting. The report will also be discussed at the 11 September CGFS meeting; any additional insights from the discussion will be highlighted at the Global Economy Meeting. The report was written against the backdrop of ongoing work at the G20. It proposes to approach policy responses to global liquidity in the context of two distinct liquidity concepts. One is private (or private sector) liquidity and is closely associated with liquidity surges and related build-ups of risk. Responses to private liquidity are linked with micro- and macroprudential policies as well as the financial reform agenda. The second concept is official (or public sector) liquidity and relates to situations of liquidity shortage or disruptions in the provision of liquidity in private markets. Policy considerations in this area are primarily related to discussions about precautionary foreign exchange reserves holdings, central bank swap lines, and other tools for the international distribution of official liquidity. The report argues that the financial reform agenda and evolving macroprudential policy frameworks are working toward reducing the vulnerabilities associated with global liquidity cycles, both through enhanced resilience and reduced procyclicality. Additional policy action may be needed at both the
Mr Jean-Claude Trichet Chairman of the Global Economy Meeting President European Central Bank Postfach 16 03 19 60066 Frankfurt am Main Germany
1 September 2011
Draft CGFS report on Global Liquidity Dear Jean-Claude In my capacity as Chairman of the Committee on the Global Financial System (CGFS), I am circulating to the Global Economy Meeting a draft report on Global liquidity – concept, measurement and policy implications. The report, which follows up on a request by ECC Governors, was prepared by an Ad-hoc Group on Global Liquidity, chaired by Jean-Pierre Landau of the Banque de France. I would propose that Mr Landau present the report to the September Global Economy Meeting. The report will also be discussed at the 11 September CGFS meeting; any additional insights from the discussion will be highlighted at the Global Economy Meeting. The report was written against the backdrop of ongoing work at the G20. It proposes to approach policy responses to global liquidity in the context of two distinct liquidity concepts. One is private (or private sector) liquidity and is closely associated with liquidity surges and related build-ups of risk. Responses to private liquidity are linked with micro- and macroprudential policies as well as the financial reform agenda. The second concept is official (or public sector) liquidity and relates to situations of liquidity shortage or disruptions in the provision of liquidity in private markets. Policy considerations in this area are primarily related to discussions about precautionary foreign exchange reserves holdings, central bank swap lines, and other tools for the international distribution of official liquidity. The report argues that the financial reform agenda and evolving macroprudential policy frameworks are working toward reducing the vulnerabilities associated with global liquidity cycles, both through enhanced resilience and reduced procyclicality. Additional policy action may be needed at both the