The collateral frameworks of the Eurosystem, the Federal Reserve System and the Bank of England and the financial market turmoil

In response to the turmoil in global financial markets which began in the second half of 2007, central banks have changed the way in which they implement monetary policy. This has drawn particular attention to the type of collateral used for backing central banks’ temporary open market operations and the range of counterparties which can participate in these operations. This paper provides an overview of the features of the different operational and collateral frameworks of three central banks that have been significantly affected by the crisis: the Eurosystem, the Federal Reserve System and the Bank of England. The paper describes the factors that shaped the three frameworks prior to the turmoil. It then describes the actions the three central banks took in response to the turmoil and analyses to what extent these actions were dependent on the initial design of the operational and collateral framework. JEL Classification: E52, E58, G01, G20.Collateral Framework, Central Bank Repo Auctions, Collateral, Open Market Operations, Financial Market Turmoil 2007-2009.

Green finance: investors need transparency

Corporate financial statements must include accurate, consistent and auditable measures of climate impact, write Benedict Weller and Michelangelo Brun

Excess reserves and implementation of monetary policy of the ECB

This paper explains to what extent excess reserves are and should be relevant today in the implementation of monetary policy, focusing on the speci?c case of the operational framework of the Eurosystem. In particular, this paper studies the impact that changes to the operational framework for monetary policy implementation have on the level and volatility of excess reserves. A ‘transaction costs’ model that replicates the rather speci?c intra-reserve maintenance period pattern of excess reserves in the euro area is developed. Simulation results presented not only show that excess reserves may increase considerably under some changes to the operational framework, but also that their volatility and hence unpredictability could. JEL Classification: E52, E58excess reserves, liquidity management, monetary policy implementation

The collateral frameworks of the Eurosystem, the Federal Reserve System and the Bank of England and the financial market turmoil

OCCASIONAL PAPER SERIES; NO. 107 / DECEMBER 200

Time-resolved single-crystal X-ray crystallography

In this chapter the development of time-resolved crystallography is traced from its beginnings more than 30 years ago. The importance of being able to “watch” chemical processes as they occur rather than just being limited to three-dimensional pictures of the reactant and final product is emphasised, and time-resolved crystallography provides the opportunity to bring the dimension of time into the crystallographic experiment. The technique has evolved in time with developments in technology: synchrotron radiation, cryoscopic techniques, tuneable lasers, increased computing power and vastly improved X-ray detectors. The shorter the lifetime of the species being studied, the more complex is the experiment. The chapter focusses on the results of solid-state reactions that are activated by light, since this process does not require the addition of a reagent to the crystalline material and the single-crystalline nature of the solid may be preserved. Because of this photoactivation, time-resolved crystallography is often described as “photocrystallography”. The initial photocrystallographic studies were carried out on molecular complexes that either underwent irreversible photoactivated processes where the conversion took hours or days. Structural snapshots were taken during the process. Materials that achieved a metastable state under photoactivation and the excited (metastable) state had a long enough lifetime for the data from the crystal to be collected and the structure solved. For systems with shorter lifetimes, the first time-resolved results were obtained for macromolecular structures, where pulsed lasers were used to pump up the short lifetime excited state species and their structures were probed by using synchronised X-ray pulses from a high-intensity source. Developments in molecular crystallography soon followed, initially with monochromatic X-ray radiation, and pump-probe techniques were used to establish the structures of photoactivated molecules with lifetimes in the micro- to millisecond range. For molecules with even shorter lifetimes in the sub-microsecond range, Laue diffraction methods (rather than using monochromatic radiation) were employed to speed up the data collections and reduce crystal damage. Future developments in time-resolved crystallography are likely to involve the use of XFELs to complete “single-shot” time-resolved diffraction studies that are already proving successful in the macromolecular crystallographic field.</p

State of the climate in 2018

In 2018, the dominant greenhouse gases released into Earth’s atmosphere—carbon dioxide, methane, and nitrous oxide—continued their increase. The annual global average carbon dioxide concentration at Earth’s surface was 407.4 ± 0.1 ppm, the highest in the modern instrumental record and in ice core records dating back 800 000 years. Combined, greenhouse gases and several halogenated gases contribute just over 3 W m−2 to radiative forcing and represent a nearly 43% increase since 1990. Carbon dioxide is responsible for about 65% of this radiative forcing. With a weak La Niña in early 2018 transitioning to a weak El Niño by the year’s end, the global surface (land and ocean) temperature was the fourth highest on record, with only 2015 through 2017 being warmer. Several European countries reported record high annual temperatures. There were also more high, and fewer low, temperature extremes than in nearly all of the 68-year extremes record. Madagascar recorded a record daily temperature of 40.5°C in Morondava in March, while South Korea set its record high of 41.0°C in August in Hongcheon. Nawabshah, Pakistan, recorded its highest temperature of 50.2°C, which may be a new daily world record for April. Globally, the annual lower troposphere temperature was third to seventh highest, depending on the dataset analyzed. The lower stratospheric temperature was approximately fifth lowest. The 2018 Arctic land surface temperature was 1.2°C above the 1981–2010 average, tying for third highest in the 118-year record, following 2016 and 2017. June’s Arctic snow cover extent was almost half of what it was 35 years ago. Across Greenland, however, regional summer temperatures were generally below or near average. Additionally, a satellite survey of 47 glaciers in Greenland indicated a net increase in area for the first time since records began in 1999. Increasing permafrost temperatures were reported at most observation sites in the Arctic, with the overall increase of 0.1°–0.2°C between 2017 and 2018 being comparable to the highest rate of warming ever observed in the region. On 17 March, Arctic sea ice extent marked the second smallest annual maximum in the 38-year record, larger than only 2017. The minimum extent in 2018 was reached on 19 September and again on 23 September, tying 2008 and 2010 for the sixth lowest extent on record. The 23 September date tied 1997 as the latest sea ice minimum date on record. First-year ice now dominates the ice cover, comprising 77% of the March 2018 ice pack compared to 55% during the 1980s. Because thinner, younger ice is more vulnerable to melting out in summer, this shift in sea ice age has contributed to the decreasing trend in minimum ice extent. Regionally, Bering Sea ice extent was at record lows for almost the entire 2017/18 ice season. For the Antarctic continent as a whole, 2018 was warmer than average. On the highest points of the Antarctic Plateau, the automatic weather station Relay (74°S) broke or tied six monthly temperature records throughout the year, with August breaking its record by nearly 8°C. However, cool conditions in the western Bellingshausen Sea and Amundsen Sea sector contributed to a low melt season overall for 2017/18. High SSTs contributed to low summer sea ice extent in the Ross and Weddell Seas in 2018, underpinning the second lowest Antarctic summer minimum sea ice extent on record. Despite conducive conditions for its formation, the ozone hole at its maximum extent in September was near the 2000–18 mean, likely due to an ongoing slow decline in stratospheric chlorine monoxide concentration. Across the oceans, globally averaged SST decreased slightly since the record El Niño year of 2016 but was still far above the climatological mean. On average, SST is increasing at a rate of 0.10° ± 0.01°C decade−1 since 1950. The warming appeared largest in the tropical Indian Ocean and smallest in the North Pacific. The deeper ocean continues to warm year after year. For the seventh consecutive year, global annual mean sea level became the highest in the 26-year record, rising to 81 mm above the 1993 average. As anticipated in a warming climate, the hydrological cycle over the ocean is accelerating: dry regions are becoming drier and wet regions rainier. Closer to the equator, 95 named tropical storms were observed during 2018, well above the 1981–2010 average of 82. Eleven tropical cyclones reached Saffir–Simpson scale Category 5 intensity. North Atlantic Major Hurricane Michael’s landfall intensity of 140 kt was the fourth strongest for any continental U.S. hurricane landfall in the 168-year record. Michael caused more than 30 fatalities and $25 billion (U.S. dollars) in damages. In the western North Pacific, Super Typhoon Mangkhut led to 160 fatalities and$6 billion (U.S. dollars) in damages across the Philippines, Hong Kong, Macau, mainland China, Guam, and the Northern Mariana Islands. Tropical Storm Son-Tinh was responsible for 170 fatalities in Vietnam and Laos. Nearly all the islands of Micronesia experienced at least moderate impacts from various tropical cyclones. Across land, many areas around the globe received copious precipitation, notable at different time scales. Rodrigues and Réunion Island near southern Africa each reported their third wettest year on record. In Hawaii, 1262 mm precipitation at Waipā Gardens (Kauai) on 14–15 April set a new U.S. record for 24-h precipitation. In Brazil, the city of Belo Horizonte received nearly 75 mm of rain in just 20 minutes, nearly half its monthly average. Globally, fire activity during 2018 was the lowest since the start of the record in 1997, with a combined burned area of about 500 million hectares. This reinforced the long-term downward trend in fire emissions driven by changes in land use in frequently burning savannas. However, wildfires burned 3.5 million hectares across the United States, well above the 2000–10 average of 2.7 million hectares. Combined, U.S. wildfire damages for the 2017 and 2018 wildfire seasons exceeded $40 billion (U.S. dollars)

Digitalisation, COVID-19 and the future of banking

Imagine you are walking down High Street in the city centre and fancy a coffee. On impulse, you purchase a deluxe Matcha soy latte for £4.95 using your credit card. You are just about to take your first sip of the steaming elixir, when your phone buzzes. It’s your bank which notifying you that you have spent £123.50 on coffee in the last month! (That’s interesting, you knew you drank a lot of coffee but didn’t realise it was this much.) Furthermore, the message from the bank suggests that if you had saved all the money spent on coffee in the last year in an exchange traded fund offered by the bank, focusing of course on environmental and social governance compliant stocks, you could have earned an additional return of 20% on the savings. (Wow, you think!) The notification then offers a direct link to setting up an investment plan, which can be implemented within minutes with a few easy clicks. The user does not need to enter any additional information, as it is already pre-filled. Furthermore, the bank offers to set up a reminder whenever you purchase coffee again, so as to put you into a good habit in the future