Today we help promote financial literacy through a video competition in partnership with the Puerto Rican Bankers Association. Our banking supervisors work to strengthen the financial system so it can readily supply credit to families and businesses, while our research economists monitor and analyze local economic conditions. This analysis – along with similar analyses from other regions across our nation – feeds into the decisions the Federal Reserve makes on monetary policy. In support of this work, I and other senior officials have traveled to Puerto Rico a number of times in recent years and met with a wide range of stakeholders, including university officials, students, business leaders, entrepreneurs, bankers and government officials. What we learn during these engagements helps to shape our understanding of the Puerto Rican economy and our efforts to support it. I have seen numerous examples of expansion and growth. This gives me confidence that Puerto Rico has the capability to be an economic success story. Nevertheless, these local engagements have also confirmed to me that conditions are not what we want them to be – in particular, growth and expansion are not happening broadly enough. The task of putting the Island on a path of robust, sustainable and inclusive growth remains a work in progress. During my visit here in March 2011, a number of business and community leaders expressed their concern that the economy had loss competitiveness. These local leaders asked if we would look at what might be holding back growth on the Island.
In the EU countries that are not using the euro, the effects from monetary conditions in the euro area led to improving macroeconomic environment, loosening financing conditions, and high bank liquidity. That stimulated lending and, in turn, the increase in residential property prices. However, these developments also increased cyclical risks. The Bulgarian National Bank conducted research into Bulgaria’s financial cycle. Our findings showed that we are currently in an upward phase of cyclical risk accumulation. Hence, we activated and then raised the rate of the countercyclical capital buffer. We have so far taken two decisions. In 2018, we set the countercyclical capital buffer rate applicable to credit risk exposures in Bulgaria at 0.5%, with effect from October 1 2019. In early 2019 we raised the rate to 1.0%, with effect from April 1 2020. The rate is applied to the overall credit stock of banks and not to the volume of newly issued loans. We announced that we could increase the rate to a higher level earlier if credit growth significantly accelerates. Our decisions were taken despite the fact that the standard metric of how the credit-to-GDP ratio deviates from its long-term trend remained deep in negative territory. Furthermore, we strengthened the macroprudential powers of the Bulgarian National Bank. The key element here was the introduction into Bulgarian law of a framework of borrower-based measures – requirements such as loan-to-value (LTV) and loan-to-income (LTI) – in addition to the existing capital-based measures.