This is the bad news. The good news, however, is that, first, many of the principles underlying pre-crisis monetary policy frameworks are still perfectly valid, so that, in a sense, we do not have to “reinvent the wheel”. Second, the adoption of macro-prudential policies aimed at taking care of the buildup of disequilibria in asset markets, or within specific segments of such markets, offers the possibility of effectively tackling the problems which led us to the current predicament. Thank you for your attention. References Altunbas, Y., Gambacorta, L., and Marqués-Ibáñez, D. (2010), “Does Monetary Policy Affect Bank Risk-Taking?”, ECB Working Paper n. 1166, March 2010. 8  BIS central bankers’ speeches  Borio, C., and White, W. (2003), “Wither Monetary and Financial Stability? The Implications of Evolving Policy Regimes”, presented at: Monetary Policy and Uncertainty: Adapting to a Changing Economy, a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 28 – 30, 2003. Claudio Borio and Haibin Zhu (2008), “Capital Regulation, Risk-Taking, and Monetary Policy: A Missing Link in the Transmission Mechanism?”, BIS Working Paper n. 2588, December 2008. Ciccarelli, M., Maddaloni, A., and Peydró, J.-L. (2009), “Trusting the Bankers: Another Look at the Credit Channel of Monetary Policy”, ECB, mimeo. Dubecq, S., Mojon, B., and Ragot, X. (2010), “Fuzzy Capital Requirements, Risk Shifting and the Risk Taking Channel of Monetary Policy”, Banque de France, mimeo. Friedman, M. (1968), “The Role of Monetary Policy”, American Economic Review, 58(1), 1–17.
For example, we have seen difficulties from banks in arranging promotion of risk culture and cascading the “tone from the top” to different levels of staff, simply because of the lack of F2F interactions. This has tremendously reduced the opportunities for staff to build rapport and foster a common culture, which is an important element in the culture promotion efforts. 5. Secondly, the pandemic disruptions have effectively put bank culture under stress test. Against the new mode of banking operation with significantly reduced F2F interactions, both amongst banking staff and between banks and their customers, there are signs of increasing hurdles in maintaining a sound bank culture. 6. On one hand, there are challenges in ensuring robust controls in a non-F2F environment. 1/4  BIS central bankers' speeches  Reduced physical oversights of staff activities by supervisors could greatly reduce the effectiveness of conventional control mechanisms and practices that worked well in the past, and thereby increased the risk of poor customer outcomes. 7. At the same time, the pandemic is driving changes in customer behavior. Customers have tried to avoid visiting bank branches in person as much as they can. If we look deeper at the statistics, the customer behavior of investment activities registered a significant change in the past two years. The proportion of online investment transactions out of all channels of retail banks has increased from 37% in the first half of 2019 to over 50% in the first half of this year.