Criteria for central bank assets: lessons from pre-ECB Germany

The Deutsche Bundesbank was formed in July 1957, when the two-tier central bank system set up following World War II was consolidated. That previous system had been established by the Allies in imitation of the Federal Reserve System and consisted of independent regional banks (the Land Central Banks) and a governing body. Under the new system, the Land Central Banks became offices of the Bundesbank. As was true under the previous system, the Bundesbank was made independent of the federal cabinet by law and was particularly proscribed from lending to the public sector except for short terms. Acquisitions of public debt occurred exclusively in the open market.Deutsche Bundesbank ; Banks and banking, Central - Germany ; Monetary policy - Germany

Criteria for central bank assets: lessons from pre-ECB France

The Banque de France was founded in 1800 to discount bills and issue currency. Initially, it was a private institution run by its stockholders. The Banque was nationalized in 1936 and its governing council was staffed by officials with a mandate to represent various interests in society. The Banque's autonomy was largely restored in 1973, and the Banque became officially independent in 1994. Whereas the Banque had originally lent appreciable sums to the Treasury, such lending was scheduled to be eliminated beginning in 1993 as part of the move toward monetary union. At that time the monetary policy operations of the Banque were revised substantially. The Banque also operates as a commercial bank, including taking deposits and holding an investment portfolio, although such activities are secondary to its responsibilities as the central bank.Banks and banking, Central - France ; Banque de France ; Monetary policy - France

Profits and balance sheet developments at U.S. commercial banks in 1997

U.S. commercial banks had another excellent year in 1997. Their return on equity remained in the elevated range that it has occupied for five consecutive years, and their return on assets reached a new high. Banks maintained their profitability while also adding significantly to assets. The year's strong economic growth increased the demand for credit; banks more than met that demand, gaining market share. In addition, banks departed from the pattern of recent years by sharply increasing their holdings of securities. Compared with 1996, banks earned a somewhat lower average rate on their interest-earning assets and paid a bit more on their liabilities, but these developments were more than offset by higher fee income and increased efficiency. Loan losses remained low relative to loans.Banks and banking - Accounting ; Bank assets

Profits and balance sheet developments at U.S. commercial banks in 1998

The performance of the U.S. commercial banking industry remained strong in 1998, but slipped a bit from the remarkable results of recent years. Both the return on assets and the return on equity edged down last year, although they remained high by historical standards. While supported by growth in fee income, profitability was damped by a large decline in the rates banks earned on their interest-bearing assets relative to the rates they paid on their liabilities, and also by higher noninterest costs, especially merger and restructuring expenses. Profitability was uneven last year across bank sizes: Whereas the largest and the smallest banks posted lower earnings, the profits of medium-sized banks--which account for almost two-thirds of industry assets--improved once again in 1998. Nevertheless, though these figures attest to the profitability of most banks, the share of bank assets at unprofitable institutions increased 2 percentage points, to 2.6 percent, the highest since 1994.Banks and banking ; Bank profits ; Bank assets

Profits and balance sheet developments at U.S. commercial banks in 1996

U.S. commercial banks had another very good year in 1996. Profits posted strong growth, preserving the high levels of return on equity and return on assets that have prevailed over the past four years. Helping to boost profits were continued strong growth of interest-earning assets, a slight widening of the net interest margin, significant gains in noninterest income, and continued containment of noninterest expenses. Return on assets edged up despite a slight increase in provisioning for loan and lease losses relative to assets. Delinquency and charge-off rates stayed low for business loans but climbed throughout the year for consumer loans.Bank assets ; Banks and banking

Proposed revision to the Federal Reserve's discount window lending programs

The Board of Governors' Regulation A currently authorizes the Federal Reserve Banks to operate three main discount window programs: adjustment credit, extended credit, and seasonal credit. On May 17, 2002, the Board published for public comment a proposed amendment to Regulation A that would establish two new discount window programs called primary credit and secondary credit as replacements for adjustment and extended credit. Primary credit would be available for very short terms, ordinarily overnight, to depository institutions that are in generally sound financial condition. Secondary credit would be available, subject to Reserve Bank approval and monitoring, for depository institutions that did not qualify for primary credit. The interest rate on primary credit would usually be above short-term market interest rates, including the federal funds rate, as opposed to the current situation in which the discount rate (the interest rate for adjustment credit) is typically below money market interest rates. Because of the above-market rate, the restrictions currently employed to limit access to adjustment credit will be unnecessary for primary credit. The primary credit program would be broadly similar to mechanisms adopted by many other major central banks to provide credit at the margin at an above-market rate.Discount window ; Regulation A: Extensions of Credit by Federal Reserve Banks

Recent changes to the Federal Reserve's survey of terms of business lending

The Federal Reserve's quarterly Survey of Terms of Business Lending, which has been conducted for more than twenty years, collects information on interest rates and other characteristics of commercial bank business loans. The survey has been changed from time to time to recognize innovations in bank lending practices and to improve the measurement of the desired information. The most recent changes took effect with the May 1997 survey. The major improvement was the addition of an item measuring loan risk. In addition, the reporting panel, which had been limited to domestically chartered commercial banks was expanded to include a sample of U.S. branches and agencies of foreign banks, which now account for a significant proportion of business lending to U.S. firms. This article discusses the most recent changes made to the survey and presents some information now available from the new items being reported. It also summarizes information about the use of loan risk ratings from consultations conducted with a sample of the survey respondents during the process of planning the revisions to the survey.Commercial loans

A Framework for Identification of Lessons Learned from Offshore Operational Data Using Barriers and Success Paths

PresentationOne of the most pressing challenges facing the offshore industry today is the effective interpretation, decision making, and action identification using the large volumes of operational data that are being collected and stored. Offshore operators, drilling contractors, and third party suppliers have developed real time operations centers designed to support offshore operations. The Bureau of Safety and Environmental Enforcement (BSEE) has proposed requirements for the collection of offshore real time monitoring data, but how such data will be used to support regulatory decision making is not yet clear. Operating companies and original equipment manufacturers are designing and implementing new equipment with a very high degree of instrumentation and advanced diagnostics capabilities, leading to new sources of operational data that could be analyzed to further enhance reliability, reduce downtime, and increase safety. The potential benefits to be realized from the collection and interpretation of such volumes of operational data are substantial. Individual organizations are already using the data to provide remote decision support for offshore operations as well as off-line analysis to enhance equipment reliability and plan maintenance activities. At a higher level, the potential benefits of analysis and interpretation of large volumes of operational data across organizational boundaries and at the industry level have been recognized but not yet realized. There has been much discussion regarding the promise of “big data analytics” to address these industry-level issues, but practical solutions are not yet available to deliver on the promises. However, a number of promising initiatives are underway. For example, the Society of Petroleum Engineers (SPE) and BSEE have initiated collaborative efforts to assess the processes, tools, and value of sharing and learning from offshore safety related data. A critical component that must be developed for effective utilization of operational data at the industry level is a framework for interpreting operation experience that will protect data confidentiality while allowing consistent interpretation and identification of lessons learned. Such a framework could support consistent application to identify lessons learned across discipline and organizational boundaries and the development of a “common language” for communication and consensus for action amongst industry and regulatory organizations. DNV GL has developed a framework for interpreting operational data that is built on a combination of barriers and success paths. Using this approach, data from operational incidents can be interpreted in light of the effects on barrier health and the utilization of effective success paths for responding to degraded or failed barriers. The approach is built upon experience gained in interpretation of aviation incidents in the NASA Aviation Safety Reporting System (ASRS), identification of lessons learned from incidents and accidents in nuclear power plants, and assessment of lessons learned from major pipeline leak accidents. The approach is currently being used in a project with an offshore operator and a drilling contractor to support development of diagnostic algorithms and regulatory compliance assessment for new well control equipment and procedures for deepwater drilling. A unique feature of this application is the utilization of the barrier-success path framework to form the foundation of a common language for regulatory approval of the new equipment and procedures, as well as continuous regulatory compliance assessment during operations. The development process includes proactive interaction with regulatory personnel to identify pre-defined decision criteria and communication protocols for continuous compliance assessment during operation. This paper summarizes experience gained in application of the barrier-success path approach for identification of lessons learned from operational experience in the commercial aviation, nuclear and pipeline industries and current developments for design of diagnostics and compliance assessment for deepwater drilling. The paper also summarizes the potential benefits for broader application of the approach for interpretation of operational data to support communication, decision making, and consensus for action across the industry including offshore operators, industry groups, regulatory authorities, and external stakeholders