Default and Negative interest rate policies: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
(Create page. Sources: linked pages, BIS webpage https://www.bis.org/publ/cgfs63.pdf)
 
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1. ''Contract.''
''Central banks - monetary policy - unconventional monetary policy''.


Failure to honour the terms of an agreement.
(NIRP).


For example, failure to honour the terms of a loan agreement, or an obligation under a futures contract.
In response to the Global Financial Crisis some central banks set negative policy interest rates.


"They found that, overall, this strategy was effective... long-term yields adjusted downwards in line with expectations of future short-term rates, thus providing the desired expansionary stimulus.


2. ''Borrowing and lending - documentation.''
Although side effects, such as the compression of bank interest margins, were detected, they have not posed a major problem for banking stability to date because of offsets from other sources of income and the eventual recovery of bank portfolio values, including [a reduction] in non-performing loans.  


In borrowing and lending, default clauses are the part of the documentation that protect the investor (lender).
That said, the potential longer-term effects of a prolonged period of negative rates on intermediaries cannot be fully assessed on the basis of current experience."


Accordingly default clauses are incorporated into loan agreements and bond indentures.


 
''Source: 'Unconventional monetary policy tools: a cross country analysis'. Committee on the Global Financial System. October 2019''
Examples of default by a borrower include failure to pay interest or principal on time, and breaching a covenant.
 
 
3. ''Other obligations - tax compliance.''
 
More broadly, any failure to fulfil an obligation.
 
For example, late delivery of a tax return under the applicable tax compliance regime.
 
 
4. ''Systems design - behavioural economics - decision making''.
 
'By default', or a 'default position', means a choice or determination that is made, when no other positive decision or initiative has been taken.
 
 
:<span style="color:#4B0082">'''''Taxation in Qatar'''''</span>
 
:"There are two separate tax regimes in operation in Qatar and an entity is under the remit of only one regime.
 
:By default an entity is under the State of Qatar regime.
 
:Alternatively, an entity is under the remit of the Qatar Financial Centre (QFC) regime if the entity is licensed with the QFC."
 
:''Qatar - the Treasurer's Wiki''
 
 
Another example of a default position is the cognitive ''status quo bias'' to favour pre-existing conditions or choices, whatever they are.




== See also ==
== See also ==
* [[Acceleration]]
* [[Central bank]]
* [[Bond]]
* [[Committee on the Global Financial System]]
* [[Bond indenture]]
* [[Effective lower bound]]
* [[Breach of covenant]]
* [[Forward guidance]]
* [[Covenant]]
* [[Global Financial Crisis]]
* [[Credit event]]
* [[Lending operations]]
* [[Cross default]]
* [[Margin compression]]
* [[Debt distress]]
* [[Default bias]]
* [[Default fund]]
* [[Default netting]]
* [[Default surcharge]]
* [[Defaulting lender]]
* [[Deletion]]
* [[Entity]]
* [[Event of default]]
* [[Exposure At Default]]
* [[Finance party default]]
* [[Financial covenant]]
* [[Forbearance]]
* [[Forward contract]]
* [[Futures contract]]
* [[Grace period]]
* [[Interest]]
* [[Lehman provisions]]
* [[Loss Given Default]]
* [[Loan agreement]]
* [[Materiality]]
* [[Merton distance-to-default]]
* [[Non-performing loan]]
* [[Non-performing loan]]
* [[Obligation]]
* [[Policy interest rate]]
* [[Principal]]
* [[Quantitative easing ]]
* [[Probability of Default]]
* [[Reserve requirements]]
* [[Qatar]]
* [[Sterling Monetary Framework]]
* [[Qatar Financial Centre]]
* [[Supply side policy]]
* [[Regime]]
* [[Unconventional monetary policy]]
* [[Risk]]
* [[Zero lower bound]]
* [[Speculation]]
* [[ZLB problem]]
* [[Tax compliance]]
* [[Tax return]]
* [[Variation margin]]
* [[Waiver]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
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[[Category:Identify_and_assess_risks]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Cash_management]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Latest revision as of 21:26, 8 June 2020

Central banks - monetary policy - unconventional monetary policy.

(NIRP).

In response to the Global Financial Crisis some central banks set negative policy interest rates.

"They found that, overall, this strategy was effective... long-term yields adjusted downwards in line with expectations of future short-term rates, thus providing the desired expansionary stimulus.

Although side effects, such as the compression of bank interest margins, were detected, they have not posed a major problem for banking stability to date because of offsets from other sources of income and the eventual recovery of bank portfolio values, including [a reduction] in non-performing loans.

That said, the potential longer-term effects of a prolonged period of negative rates on intermediaries cannot be fully assessed on the basis of current experience."


Source: 'Unconventional monetary policy tools: a cross country analysis'. Committee on the Global Financial System. October 2019


See also

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