The document summarizes several central banking institutions: 1) The US Federal Reserve (Fed) was founded in 1913 and oversees monetary policy and acts as lender of last resort. It aims to control interest rates and inflation. 2) The European Central Bank (ECB) was founded in 1998 and manages the eurozone's monetary policy, with the primary aim of maintaining price stability. 3) The Office of the Superintendent of Financial Institutions (OSFI) is Canada's financial services regulator, supervising banks, insurers, private pensions and more since 1987. It ensures safety and soundness through rule-making and oversight.

1. US FED, OSFI
AND ECB
TEAM 6 – DUL, LUONG, RAMEEZ, RIANDE, AND SHAAR

2. OVERVIEW
OSFI
US Fed ECB
• Since1987
• Founded in • Founded in • Government
1913 1998 independent
• 7 Board of • Produce and • Reports to MOF
Governors distribute • Supervises/regul
ates banks and
and FOMC banknotes insurers
Committee • Consults • Does not issue
• 12 regional ECOFIN banknotes
Federal with • Financial
services
Reserve exchange
• Government
Banks rates advisory

3. US FED - FUNCTIONS
• Monetary Policy
• Regulation and lender of last resort
• Federal Funds Rate
• Short-and long-term interest rates, the dollar's value in
the foreign exchange market, stock prices, household
and business spending.

4. US FED AND THE LENDER OF
LAST RESORT
Lender of Last Resort – Quantitative Easing (QE)
• A government monetary policy OCCASINALLY used to increase the
money supply by buying government securities or other securities
from the market
Cost:
• $2.3tn the Fed had already put into QE since 2008
• QE3, entails buying $40 billion in mortgage-backed securities each
month

5. US FED AND THE
FEDERAL FUND RATE

6. NEGATIVE EFFECTS OF US FED
Unemployment Commodity prices
Gold Price
Moral Hazard

7. ADVANTAGES OF US FED
Quantitative Easing generates an increase in investment in stocks and
company bonds
DOW JONES S&P 500

8. NO DIRECT ROLE IN
BANKING SUPERVISION,
WHY?
• There are 3 main political and economic reasons why this 2
agents system was created
• Countries would not have accepted one single
establishment to become, the central bank, for all euro
area.
• The Euro system approach is build upon the different
experiences of all NCBs, therefore each member maintains
their institutional set up, infrastructure and operational
Capabilities and expertise;
• Moreover, NCB continue to perform some non-Euro system-
related tasks (Internal affairs).
• In order to maintain a credit institution as an access point
to central banking in each participating Member State

9. WHAT IS ECB?
• Lets remember now!
• ECB has legal personality and is fully independent of
other national and European institutions.
• The ECB manages the Economic and Monetary Union by
handling the European System of Central Banks (ESCB)
requirements.
• Its primary objective is to maintain price stability; by
defining their monetary policy of “the Union”
• Price stability by steadying the general level of prices in the
economy; thus the avoidance of prolonged inflation and
deflation will be achieved (Monetary Transparency)

10. ECB OBJECTIVES AND
RESULTS
• By maintaining price stability it will be possible to achieve the following
objectives regarding Community
• Enables firms and consumers to make better-informed decisions on
consumption and investment,
• Thus allocating resources more efficiently
• Their will be no investors’ risk premium, on stocks or bonds (Smaller
Interest rate)
• An "inflation risk premium" is used to compensate investors for the risks
associated with holding nominal assets over the longer term.
• Price stability makes it less likely that individuals and firms will divert
resources from productive uses; thus hedging against inflation
• In order to make more transparent the Tax and welfare systems
• Benefits of price stability regarding community
• High level of employment  Has this been achieved???
• Sustainable growth  Our goal was met?
• Non-inflationary growth  Did we made the right call???

11. EU UNEMPLOYMENT LEVEL
SEASONALLY ADJUSTED UNEMPLOYMENT RATES (%)TOTALS
Country Nov-11 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12
EA17 10.6 11.3 11.4 11.4 11.5 11.6 11.7 11.8
EU27 10 10.4 10.5 10.5 10.5 10.6 10.7 10.7
Belgium 7.2 7.5 7.5 7.4 7.4 7.4 7.4 7.4
Bulgaria 11.7 12.2 12.3 12.4 12.3 12.3 12.4 12.4
Czech
Republic 6.5 6.8 6.9 6.9 7 7.1 7.3 7.4
Denmark 7.9 8 7.9 7.7 7.4 7.4 7.7 7.9
Germany 5.6 5.5 5.5 5.5 5.5 5.4 5.4 5.4

12. EU SUSTAINABLE GROWTH

13. EU INFLATIONARY GROWTH

14. OSFI ACTIVITIES
Regulation and supervision of federally regulated financial
institutions
• Risk assessment and intervention
• Monitoring/supervising
• Intervene in a timely manner
• Rule making
• Inputs to federal legislation
• Contributions to accounting and auditing
• Approvals
• Required under the legislation applying to financial
institutions
• Supervisory purposes

15. OSFI ACTIVITIES
• Regulation and supervision of federally regulated private
pension plans
• International assistance
• Corporate services
• Funded through asset-based, premium-based or
membership-based assessment on financial services and
user-pay program
• It recovers all of its costs
• Recognizes businesses and allows institutions to
compete effectively and take reasonable risks

16. IMPORTANCE OF OSFI
• Ensures the safety and the soundness of the financial
system
• Set the minimum standards
• Point the deficiencies
• Set appropriate corrective measures
• Maintain a balance
• Competition VS stability
• International rules VS Local market reality
• Creates public confidence in the financial system

17. EFFECTS OF OSFI
• Treats all members equally
• Implementing similar regulations and policies
• Direct effects
• Indirect effects to businesses and consumers
• Businesses taking loans from banks
• Consumers for private pension plans
• Banks and insurers have a trusted reference
• OSFI related to governments
• Reports to MOF

18. Q&A

19. THANK
YOU