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Bank of England Cuts Bank Rate To 0.25% And Introduces A Package Of Measures Designed To Provide Additional Monetary Stimulus

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending 3 August 2016, the MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the target. This package comprises: a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion. The last three elements will be financed by the issuance of central bank reserves.

Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly. The fall in sterling is likely to push up on CPI inflation in the near term, hastening its return to the 2% target and probably causing it to rise above the target in the latter part of the MPC’s forecast period, before the exchange rate effect dissipates thereafter. In the real economy, although the weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment. Consistent with this, recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.

These developments present a trade-off for the MPC between delivering inflation at the target and stabilising activity around potential. The MPC’s remit requires it to explain how it has balanced that trade-off. Given the extent of the likely weakness in demand relative to supply, the MPC judges it appropriate to provide additional stimulus to the economy, thereby reducing the amount of spare capacity at the cost of a temporary period of above-target inflation. Not only will such action help to eliminate the degree of spare capacity over time, but because a persistent shortfall in aggregate demand would pull down on inflation in the medium term, it should also ensure that inflation does not fall back below the target beyond the forecast horizon. Thus, in tolerating a temporary period of above-target inflation, the Committee expects the eventual return of inflation to the target to be more sustainable.

The MPC’s choice of instruments is based on a consideration of their likely impact on the real economy and inflation. The MPC has examined closely the interaction between monetary policy and the financial sector, both with regard to ensuring the effective transmission of monetary policy to households and businesses, and with consideration for the financial stability consequences of its policy actions.

The cut in Bank Rate will lower borrowing costs for households and businesses. However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate. This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions. In addition, the TFS provides participants with a cost effective source of funding to support additional lending to the real economy, providing insurance against the risk that conditions tighten in bank funding markets.

The expansion of the Bank of England’s asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses. It is also likely to trigger portfolio rebalancing into riskier assets by current holders of government bonds, further enhancing the supply of credit to the broader economy.

Purchases of corporate bonds could provide somewhat more stimulus than the same amount of gilt purchases. In particular, given that corporate bonds are higher-yielding instruments than government bonds, investors selling corporate debt to the Bank could be more likely to invest the money received in other corporate assets than those selling gilts. In addition, by increasing demand in secondary markets, purchases by the Bank could reduce liquidity premia; and such purchases could stimulate issuance in sterling corporate bond markets.

As set out in the August Inflation Report, conditional on this package of measures, the MPC expects that by the three-year forecast horizon unemployment will have begun to fall back and that much of the economy’s spare capacity will have been re-absorbed, while inflation will be a little above the 2% target. In those projections the cumulative growth in output is still around 2½% less at the end of the forecast period than in the MPC’s May projections. Much of this reflects a downward revision to potential supply that monetary policy cannot offset. However, monetary policy can provide support as the economy adjusts. Had it not taken the action announced today, the MPC judges it likely that output would be lower, unemployment higher and slack greater throughout the forecast period, jeopardising a sustainable return of inflation to the target.

This package contains a number of mutually reinforcing elements, all of which have scope for further action. The MPC can act further along each of the dimensions of the package by lowering Bank Rate, by expanding the TFS to reinforce further the monetary transmission mechanism, and by expanding the scale or variety of asset purchases. If the incoming data prove broadly consistent with the August Inflation Report forecast, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year. The MPC currently judges this bound to be close to, but a little above, zero.

All members of the Committee agreed that policy stimulus was warranted at this time, and that Bank Rate should be reduced to 0.25% and be supported by a TFS. Eight members supported the introduction of a corporate bond scheme, and six members supported further purchases of UK government bonds.

These measures have been taken against a backdrop of other supportive actions taken by the Bank of England recently. The FPC has reduced the countercyclical capital buffer to support the provision of credit and has announced that it will exclude central bank reserves from the exposure measure in the current UK leverage ratio framework. This latter measure will enhance the effectiveness of the TFS and asset purchases by minimising the potential countervailing effects of regulatory requirements on monetary policy operations. The Bank has previously announced that it will continue to offer indexed long-term repo operations on a weekly basis until the end of September 2016 as a precautionary step to provide additional flexibility in the Bank’s provision of liquidity insurance. The PRA will also smooth the transition to Solvency II for insurers.

International Monetary Fund Predicts Brexit To Hit Growth Of The Eurozone

On July 6, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Euro Area.

The recovery has strengthened recently. Lower oil prices, a broadly neutral fiscal stance, and accommodative monetary policy are supporting domestic demand. However, inflation and inflation expectations remain very low, below the European Central Bank (ECB) medium-term price stability objective. Euro area GDP growth is expected to decelerate from 1.6 percent this year to 1.4 percent in 2017, mainly due to the negative impact of the U.K. referendum outcome. Helped by gradually rising energy prices, headline inflation is expected to increase from 0.2 percent this year to 1.1 percent next year.

At the same time, downside risks have grown. Externally, a further global slowdown could spill over and derail the domestic demand-led recovery. Domestically, the risks are largely political. Further spillovers from the U.K. post-referendum situation, the refugee surge, or a heightening of security concerns could contribute to greater uncertainty, hurting growth and hindering progress on policies and reforms. Other risks include banking and financial sector weaknesses in some countries. Moreover, prolonged low growth and inflation themselves make the euro area increasingly vulnerable to shocks. Policy buffers to counter these risks are low.

Medium-term prospects are mediocre, with crisis legacies of high unemployment, elevated public and private debt, and deep-rooted structural weaknesses weighing on the outlook and productivity growth. As a result, growth five-years ahead is expected to be about 1.5 percent, with headline inflation reaching only 1.7 percent.

Comprehensive and more balanced policies taken collectively are needed to respond to these risks, helping to boost growth, rebuild buffers, and strengthen integration. Structural reforms to improve productivity and reduce macroeconomic imbalances need to be incentivized. Given limited fiscal space at the national level, an expansion of centralized fiscal support is needed, but should be accompanied by a stronger governance framework to ensure that members comply with the fiscal and structural rules. These measures would complement the current stance of monetary policy, providing a more balanced policy mix.

Executive Board Assessment2
The euro area recovery continues, supported by still low oil prices, a neutral fiscal stance, and accommodative monetary policy. Directors cautioned, however, that inflation and inflation expectations remain stubbornly low, raising adjustment challenges for debtors, and that crisis legacies of high unemployment and debt, alongside structural weaknesses and low productivity, continue to weigh on the medium-term outlook. They stressed that risks are increasingly to the downside and that policy buffers are limited. External demand could weaken, while political risks have risen significantly, particularly related to uncertainty regarding the outcome of the referendum in the U.K. and its new economic relationship with the European Union. Directors encouraged a smooth and predictable transition to reduce uncertainty. In addition, an intensification of the refugee surge could prompt additional border controls and hinder free movement within the single market.

Against this challenging backdrop, Directors urged strong collective actions to boost growth and strengthen the union, and cautioned that the cyclical recovery should not lead to complacency. Policies should prioritize structural reforms, enhancing investment and fiscal governance, maintaining supportive monetary policies, completing the banking union, and repairing balance sheets. Directors warned that without decisive actions, the euro area will remain vulnerable to instability and repeated crises of confidence.

To raise potential growth and narrow imbalances, Directors stressed the importance of structural reforms such as reduced barriers to entry in retail and professional sectors, improved public administration, lower labor tax wedges, and reduced labor market duality. They encouraged use of outcome-based benchmarks to incentivize reforms and stronger enforcement of the Macroeconomic Imbalance Procedure.

Directors encouraged the authorities to pursue a more balanced policy mix through growth-friendly fiscal rebalancing, use of fiscal space where available, and an expansion of centralized investment schemes or funds for common projects. Countries without space should stick to consolidation plans and use interest savings to rebuild buffers. Directors noted that access to any new central fiscal support could be conditional on implementation of structural reforms and compliance with fiscal rules, which could be further encouraged by strengthening and simplifying the fiscal framework.

Directors concurred that monetary policy is appropriately accommodative, and that recent measures should help ease financial conditions. They viewed negative interest rates as having contributed to lower bank funding costs, higher asset values, and more bank lending. While most Directors considered that further rate cuts could entail diminishing returns by squeezing banks’ net interest margins, a few Directors argued for a more holistic assessment that reflected possible valuation gains and improved asset quality. Nevertheless, Directors agreed that if the inflation outlook deteriorates, further easing, primarily through expanded asset purchases, would be warranted.

Directors urged faster balance sheet repair as part of a broader strategy to foster consolidation in the banking sector. They encouraged strong action by the ECB to set targets for banks to reduce impaired assets. This should be complemented by strengthening and harmonizing insolvency and foreclosure frameworks, and promoting distressed debt markets. Where appropriate, asset management companies could be used to kick-start markets, and in systemic cases, State aid rules could be applied flexibly.

Directors considered common deposit insurance and a common fiscal backstop as essential to completing the banking union. Deposit insurance should be accompanied by measures to reduce banking sector risks, and any changes to the prudential treatment of banks’ sovereign assets should be consistent with global standards. Directors urged further progress on capital markets union to diversify financing sources and enhance private risk sharing.

Mark Carney – Enabling the FinTech Transformation: Revolution, Restoration, or Reformation?

We have today launched an accelerator to work in partnership with FinTech firms on the unique challenges that we face as a central bank. Firms can apply now to take part.

The accelerator will work with new technology firms to help us harness FinTech innovations for central banking. In return, it will offer firms the chance to demonstrate their solutions for real issues facing us as policymakers, together with the valuable ‘first client’ reference that comes with it. With time, the accelerator will build a network of firms working in this space for the benefit of us and them alike.

How the accelerator will work
We will select firms to take part in short proof of concept projects (POCs) via a transparent and competitive process, based on clearly defined selection criteria. These criteria will ensure each project has the potential to be truly innovative, relevant to the Bank’s mission and mindful of commercial considerations.

At the end of the proof of concept, we will consider producing an assessment of our experience and publishing the findings. For successfully completed POCs, the Bank will consider acting as a reference for the firms.

Our Fintech Accelerator has already carried out initial work in the areas of data anonymisation, cyber security and distributed ledger technology. Other areas of potential future interest for the accelerator include:

finding new ways to structure and analyse large datasets
machine learning, particularly in relation to anomaly detection and pattern recognition
protection of the Bank’s sensitive data
However, our interest is not limited to the topics above. We would also welcome expressions of interest from innovative firms in all areas of FinTech that can demonstrate how their work relates to the Bank’s mission.

FinTech Accelerator
In his Mansion House speech published on 17 June, the Governor of the Bank of England announced that the Bank is launching a FinTech Accelerator to work in partnership with FinTech firms on challenges that we, as a central bank, uniquely face. The Accelerator will work with new technology firms to help us harness FinTech innovations for central banking.

In return, it will offer firms the chance to demonstrate their solutions for real issues facing us as policymakers, together with the valuable ‘first client’ reference that comes with it. With time, the Accelerator will build a network of firms working in this space for the benefit of us and them alike.

What does the Accelerator do? – Aims of the work:
The FinTech Accelerator deploys innovative technologies on issues that matter to the Bank’s mission and operations. Working in partnership with FinTech firms we will seek to develop new approaches, build our understanding of these new technologies and in some way support development of the sector.

How will the Accelerator engage with firms?
The Accelerator will appoint FinTech firms to run short Proof of Concept (POC) projects in a number of priority areas. Each POC will have clearly defined requirements and success indicators.

The selection process will be competitive and transparent. We will make clear our priorities, so that relevant firms can register their interest. From there a short list will be developed, and senior Bank staff will select the firms to work with on a POC. The selected firms will have the opportunity to test and demonstrate their products in a live environment, working closely with Bank experts. At the close of the POC, the outcomes will be assessed against the initial criteria, and the Bank may publish a case study or act as a reference client.

Successful firms may have the opportunity to re-tender through an open process to become an on-going partner of the Bank.

What is in the current cohort?
Below are some examples of current projects.

BitSight: Uses publicly available bulk data to assess firms’ cyber resilience, including looking for evidence of malware on a firm’s systems, signs of known software vulnerabilities, or weak encryption, which can be used to form a view on the information security of a firm over time. For the Proof of Concept, we will be looking to engage with BitSight to evaluate the Bank’s own resilience and to assess the benefit of this service as one of the range of information security tools that we use.
Privitar: Provides tools to anonymise and desensitise data. As part of our Proof of Concept, we will first test this software on a manufactured dataset to examine the analytical value of the desensitised data. We will then look to assess the capability of the tool on data held internally to establish if this will allow us to provide wider access to data for researchers within the Bank.
PwC: We have invested in understanding the technology of blockchain and distributed ledger, working with PWC. The team built a multi-node scalable distributed ledger environment, which contained several smart contracts to illustrate the applications of the technology. This has enabled us to better comprehend the resiliency benefits and practical limitations of the technology. These are detailed further in the linked publication.
Areas of Interest
Other priority areas are listed below, but we also welcome expressions of interest from firms working in other areas of FinTech.

We are interested in new ways of structuring and analysing large data sets and data gained in regulatory reporting. Other technological developments of interest are around machine learning, particularly in relation to anomaly detection and pattern recognition.

We would welcome expressions of interest or proposals for the Bank to participate in, or act as a silent observer or partner with an existing pilot distributed ledger network. Pilots should test how the technology functions in ‘real world’ scenarios. Where relevant, we will also be interested to explore the potential regulatory implications from the use of the technology.

Governor of the Bank of England Speaks Following Brexit Vote To Leave EU

The people of the United Kingdom have voted to leave the European Union.

Inevitably, there will be a period of uncertainty and adjustment following this result.

There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold.

And it will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world.

Some market and economic volatility can be expected as this process unfolds.

But we are well prepared for this. The Treasury and the Bank of England have engaged in extensive contingency planning and the Chancellor and I have been in close contact, including through the night and this morning.

The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.

These adjustments will be supported by a resilient UK financial system – one that the Bank of England has consistently strengthened over the last seven years.

The capital requirements of our largest banks are now ten times higher than before the crisis.

The Bank of England has stress tested them against scenarios more severe than the country currently faces.

As a result of these actions, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets.

Why does this matter?

This substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to UK businesses and households, even during challenging times.

Moreover, as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities.

The Bank of England is also able to provide substantial liquidity in foreign currency, if required.

We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to supply other financial services to the real economy.

In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses.

Conclusion

A few months ago, the Bank judged that the risks around the referendum were the most significant, near-term domestic risks to financial stability.

To mitigate them, the Bank of England has put in place extensive contingency plans.

These begin with ensuring that the core of our financial system is well-capitalised, liquid and strong.

This resilience is backed up by the Bank of England’s liquidity facilities in sterling and foreign currencies.

All these resources will support orderly market functioning in the face of any short-term volatility.

The Bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the UK financial system can absorb any stresses and can concentrate on serving the real economy.

That economy will adjust to new trading relationships that will be put in place over time.

It is these public and private decisions that will determine the UK’s long-term economic prospects.

The best contribution of the Bank of England to this process is to continue to pursue relentlessly our responsibilities for monetary and financial stability.

These are unchanged.

We have taken all the necessary steps to prepare for today’s events.

In the future we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward.

AIG Launches a New Equity Crowdfunding Insurance Product to Protect Investors

NEW YORK- American International Group, Inc. (NYSE:AIG) has launched a new product for the fast-growing global crowdfunding investment industry. This is the first new insurance product developed specifically to protect investors on equity crowdfunding platforms against issuer fraud.

Crowdfunding platforms enable innovators to bring their ideas to life and also give retail investors the opportunity to provide capital for start-ups and growth stage companies around the world. Historically, only high net worth individuals and institutional investors such as venture capital funds and private equity firms were offered these opportunities.

“As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors,” said Lex Baugh, President of Liability and Financial Lines. “This new product will help provide that confidence and help to support this asset class as it matures.”

Crowdfunding Fidelity protects individual investors against the theft of issuer assets by issuer directors, officers, or general employees which cause a direct loss to the individual investor.

By subscribing to this innovative new product, crowdfunding platforms will enhance the value they can offer investors by offering protection against issuer fraud. Although there have been limited instances of fraud in this sector so far, this new product helps to build investor trust in this emerging sector by working closely with the platforms to ensure underlying issuer trustworthiness.

The coverage is currently available to platforms in the UK and Canada. As other countries finalize regulations for companies to raise capital, this policy can be customized to local needs of equity-based crowdfunding platforms.

Eureeca, an equity crowdfunding platform registered in the UK and based in Dubai, is the first platform to purchase the coverage and make this protection against issuer fraud available to investors. AIG engaged with Eureeca to gain a deeper understanding of the industry’s risk exposures, ensuring that the product was designed specifically to address these needs. Eureeca launched in 2013 and focuses on providing deals from the Middle East, Europe, and Southeast Asia.

“Crowdfunding Fidelity is a great example of how AIG learns together with the industries and clients it serves to better meet their strategic needs. We are looking forward to building similar relationships with other platforms across the world and to expanding our offering to this sector,” said Mr. Baugh.

Chris Thomas, Co-Chief Executive Officer and Founder of Eureeca said, “The new power of the crowd and the desire to democratize investing throughout the world can unleash great partnerships. The success of the ecosystem depends on collaboration between all stakeholders. AIG has demonstrated its commitment to being a valued insurer to this new industry by engaging the crowdfunding space at such an early stage.”

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American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today we provide a wide range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 100 countries and jurisdictions. Our diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

Eurozone Deal Unlocks €10.3 billion For Greece Bailout

The Eurogroup welcomes that a full staff-level agreement has been reached between Greece and the institutions. Also, the Eurogroup notes with satisfaction that the Greek authorities and the European institutions have reached an agreement on the contingency fiscal mechanism, which is in line with the Eurogroup statement adopted on 9 May in particular as regard the possible adoption of permanent structural measures, including revenue measures, to be agreed with the institutions. It therefore provides further reassurances that Greece will meet the primary surplus targets of the ESM programme (3.5% of GDP in the medium-term), without prejudice to the obligations of Greece under the SGP and the Fiscal Compact.

The Eurogroup also welcomes the adoption by the Greek parliament of most of the agreed prior actions for the first review, notably the adoption of legislation to deliver fiscal parametric measures amounting to 3% of GDP that should allow to meet the fiscal targets in 2018, to open up the market for the sale of loans and to establish the agreed Greek Privatisation and Investment Fund that should operate in full independence. The Eurogroup mandates the EWG to verify in the next few days the full implementation of the outstanding prior actions on the basis of an assessment by the institutions, in particular the corrections to the legislation on the opening up of the market for the sale of loans, and on the pension reform, as well as the completion of all prior actions related to the government pending actions in the field of privatization.

Following the full implementation of all prior actions and subject to the completion of national procedures, the ESM governing bodies are expected to endorse the supplemental MoU and approve the disbursement of the second tranche of the ESM programme. The second tranche under the ESM programme amounting to EUR 10.3 bn will be disbursed to Greece in several disbursements, starting with a first disbursement in June (EUR 7.5 bn) to cover debt servicing needs and to allow a clearance of an initial part of arrears as a means to support the real economy. The subsequent disbursements to be used for arrears clearance and further debt servicing needs will be made after the summer. The disbursements for arrears clearance will be subject to a positive reporting by the European Institutions on the clearance of net arrears. The additional disbursement for debt servicing needs will be subject to milestones related to privatization, including the new Privatization and Investment Fund, bank governance, revenue agency and energy sector to be assessed by the European institutions and verified by the EWG and the ESM Board of Directors.

In line with the 9 May Eurogroup statement, and in view of the forthcoming full implementation of all the prior actions by Greece and completion of the first review, the Eurogroup considered today the sustainability of Greek public debt.

The Eurogroup agrees to assess debt sustainability with reference to the following benchmark for gross financing needs (GFN): under the baseline scenario, GFN should remain below 15% of GDP during the post programme period for the medium term, and below 20% of GDP thereafter.

The Eurogroup recalls the medium-term primary surplus target of 3.5% of GDP as of 2018 and underlines the importance of a fiscal trajectory consistent with the fiscal commitments under the EU framework.

The Eurogroup recalls the following general guiding principles agreed on 9 May for possible additional debt measures: (i) facilitating market access in order to replace over time public financed debt with privately financed debt; (ii) smoothening the repayment profile; (iii) incentivising the country’s adjustment process even after the programme ends; and (iv) flexibility to accommodate uncertain GDP growth and interest rate developments in the future. On 9 May the Eurogroup also reconfirmed that nominal haircuts are excluded, and that all measures taken will be in line with existing EU law and the ESM and EFSF legal frameworks.

Guided by these principles and on the basis of technical work carried out by the EWG, the Eurogroup agreed today on a package of debt measures which will be phased in progressively, as necessary to meet the agreed benchmark on gross financing needs and will be subject to the pre-defined conditionality of the ESM programme.

For the short-term, the Eurogroup agrees on a first set of measures which will be implemented after the closure of the first review up to the end of the programme and which includes:

Smoothening the EFSF repayment profile under the current weighted average maturity
Use EFSF/ESM diversified funding strategy to reduce interest rate risk without incurring any additional costs for former programme countries
Waiver of the step-up interest rate margin related to the debt buy-back tranche of the 2nd Greek programme for the year 2017
The Eurogroup asks the EFSF and ESM management to take these measures forward within their mandate, on the basis of preparatory work by the EWG, and where needed to prepare formal decision making by the relevant EFSF and ESM decision-making bodies. The decision on the smoothening of the EFSF repayment profile and the reduction of interest rate risks should be taken as a matter of priority.

For the medium term, the Eurogroup expects to implement a possible second set of measures following the successful implementation of the ESM programme. These measures will be implemented if an update of the debt sustainability analysis produced by the institutions at the end of the programme shows they are needed to meet the agreed GFN benchmark, subject to a positive assessment from the institutions and the Eurogroup on programme implementation.

Abolish the step-up interest rate margin related to the debt buy-back tranche of the 2nd Greek programme as of 2018
Use of 2014 SMP profits from the ESM segregated account and the restoration of the transfer of ANFA and SMP profits to Greece (as of budget year 2017) to the ESM segregated account as an ESM internal buffer to reduce future gross financing needs.
Liability management – early partial repayment of existing official loans to Greece by utilizing unused resources within the ESM programme to reduce interest rate costs and to extend maturities. Due account will be taken of exceptionally high burden of some Member States.
If necessary, some targeted EFSF re-profiling (e.g. extension of the weighted average maturities, re-profiling of the EFSF amortization as well as capping and deferral of interest payments) to the extent needed to keep GFN under the agreed benchmark in order to give comfort to the IMF and without incurring any additional costs for former programme countries or to the EFSF.
For the long-term, the Eurogroup is confident that the implementation of this agreement on the main features for debt measures, together with a successful implementation of the Greek ESM programme and the fulfilment of the primary surplus targets as mentioned above, will bring Greece’s public debt back on a sustainable path over the medium to long run and will facilitate a gradual return to market financing. At the same time, the Eurogroup agrees on a contingency mechanism on debt which would be activated after the ESM programme to ensure debt sustainability in the long run in case a more adverse scenario were to materialize. The Eurogroup would consider the activation of the mechanism provided additional debt measures are needed to meet the GFN benchmark defined above and would be subject to a decision by the Eurogroup confirming that Greece complies with the requirements under the SGP. Such mechanism could entail measures such as a further EFSF re-profiling and capping and deferral of interest payments. Also, the Eurogroup commits to long-term technical assistance to boost Greek growth.

The Eurogroup recognises that over the exceptionally long time horizon of assessing debt sustainability there can be no forecasts, only assumptions, given the sizable degree of uncertainty over macroeconomic developments.

Against the background of the forthcoming successful completion of the first review and the agreement on debt relief, the Eurogroup welcomes the intention of the IMF management to recommend to the Fund’s Executive Board to approve a financial arrangement before the end of 2016 that will support the implementation of the agreed fiscal and structural reforms. It is recognised that, consistent with IMF policies, approval of this arrangement will also be based on a new DSA and the assessment of possible debt relief measures mentioned above. The possible debt relief will be delivered at the end of the programme in mid-2018 and the scope will be determined by the Eurogroup on the basis of a revised DSA in cooperation with the European Institutions for purposes of taking into account the European policy framework, subject to full implementation of the programme.

The Eurogroup stands ready, in line with usual practice, to support the completion of future reviews provided that the policy package considered today, including the contingency mechanism, is implemented as planned. The Eurogroup confirms that programme implementation, as well as policy conditionality and targets, will be reviewed regularly based on input from the institutions.

Investment Plan for Europe: European Fund for Strategic Investments to be extended following successful first year

One year after the European Fund for Strategic Investments (EFSI) came into force, the Commission looks at what has worked well in the Investment Plan, what can be improved, and how to advance.

Eighteen months after President Jean-Claude Juncker launched the Investment Plan for Europe, and a year after the start of the European Fund for Strategic Investments (EFSI), the Commission takes stock of achievements to date. Today the Commission shares the lessons learned and makes clear proposals for an ambitious future of the EFSI.

European Commission President Juncker said: “The Investment Plan is working and defying the pessimists. The European Fund for Strategic Investments is creating jobs and triggering investments in the real economy every day. That is why we propose to extend it beyond 2018. Let’s be ambitious in getting Europe investing again.”

Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, added: “Together with the EIB we have achieved a lot in the past 12 months. We have supported innovative energy projects, healthcare centres, urban development and high-speed broadband. Close to 150,000 SMEs have access to new financing. We have created a hub which provides advisory services and technical support to project promoters. We have launched a new portal for promoters to showcase their projects worldwide to investors. But there is more to do: we must continue to deepen the single market – the EU’s unique selling point – and Member States must work on removing barriers to investment.”

Achievements to date
The European Fund for Strategic Investments (EFSI) is at the heart of this Commission’s Investment Plan. Managed by the EIB Group, it is firmly on track to deliver on mobilising at least EUR 315 billion in additional investments in the real economy by mid-2018. The EFSI provides a first loss guarantee, so that the EIB has been able to invest in more projects, sometimes riskier projects, and to invest sooner than without the EFSI.

Overall, the EFSI is already active in 26 Member States and is expected to trigger EUR 100 billion in investment with the approvals given so far. Small and medium-sized enterprises (SMEs) have benefited particularly from the EFSI so far. To encourage more EFSI activity in the Member States lagging behind so far, the EIB and the Commission will increase their local outreach.

We officially launched today another element of the Investment Plan, the European Investment Project Portal (EIPP), an online platform bringing together European project promoters and investors from the EU and beyond. The Portal will increase the visibility of projects to invest in across Europe. This is something that investors asked for, and the Commission delivered.

The European Investment Advisory Hub (EIAH) provides technical assistance and tailored advice to private and public project promoters. The Hub has already dealt with more than 160 requests. Whilst this is a promising start, the Commission and EIB are working on making the advisory services more local and closer to those companies that should benefit.

In February, the Commission issued guidance on how European Structural and Investment Funds (ESI Funds) can be combined with the EFSI to enable as much investment as possible. A first set of projects is already benefiting from this combination in practice which will be further simplified.

Finally, the Commission has already taken a number of steps to improve the business environment and financing conditions as part of the Investment Plan’s third pillar. Initiatives include lowering capital charges for insurance and reinsurance companies. Insurers told the Commission that some of the Solvency II rules were keeping them from investing in infrastructure, and now this obstacle has been removed.The Commission will evaluate whether it is appropriate to lower bank capital charges for infrastructure exposures in a similar way, taking into account discussions on capital treatment of bank exposures. To facilitate venture capital investment in Europe, the Commission will also propose some changes to the venture capital regulatory framework. Together with Eurostat, the Commission will provide further clarity and review, where appropriate, relevant guidance as regards accounting aspects of public-private partnerships. To offer further legal certainty to investors as regards the financing of infrastructure, the Commission has provided practical guidance on what constitutes State aid, in the form of a Communication on the Notion of State aid.

The Communication on Delivering the Single Market Agenda, also published today, outlines the many strands of work that have been or will be carried out at EU level to create a business-friendly environment to encourage innovation and invest in people. This work ranges from creating a Digital Single Market, making the market without borders for services a reality, simplifying VAT rules, to improving access to venture capital for start-ups and investing in skills. The Commission is also working with the European Investment Fund (EIF) to establish a Pan-European Venture Capital Fund-of-Funds that would combine public finance and private capital for additional stimulus and scale for new companies. Member States also need to continue their structural reforms to remove bottlenecks and red-tape which act as a barrier to investment.

The future of the EFSI
Building on these positive results, the Commission proposes the following way forward.

Reflecting on its success so far, a reinforced EFSI will continue beyond the initial three-year period to address remaining market gaps and failures and continue to mobilise private sector financing in investments crucial for Europe’s future job creation, growth and competitiveness, with strengthened “additionality”. The Commission will present legislative proposals in the autumn to extend the duration of the EFSI, bearing in mind the scarcity of budgetary resources.

One of the biggest success stories of the EFSI has been the strong interest and participation by intermediary banks across the EU to provide finance to SMEs, the so-called EFSI SME-window. This will be scaled up quickly, under the current framework, for the benefit of SMEs and mid-cap companies in all Member States. The Commission will work with the EFSI Steering Board to use all the existing possibilities under the EFSI Regulation to reinforce the SME window.

The Commission will explore the possibility of using an EFSI-type model for investments in developing third countries.

The combination of EFSI support and ESI Funds will be further simplified and legislative and other obstacles to such combinations removed.
The Advisory Hub will be enhanced to be able to work more locally and to enhance its work with National Promotional Banks.

Establishing Investment Platforms will be further encouraged, with strong engagement from the Commission, the EIB Group, National Promotional Banks and other relevant actors. This is particularly important for small projects to reach scale.

Energy efficiency is undoubtedly one of the most successful sectors under the EFSI. The EFSI will continue to contribute to the development of the market for sustainable/green projects, by encouraging the development of a green bond market in Europe and improved coordination of existing efforts.

The Commission will continue to deliver on its Single Market priorities. Together with Eurostat, the Commission will provide further clarity and review, where appropriate, relevant guidance as regards accounting aspects of public-private partnerships.

Member States should also establish clear priorities, prepare concrete investment projects with the help of the Advisory Hub – in particular on cross-border projects – and structure their projects in an optimal way to ensure a greater use of financial instruments. In the context of the European Semester process, Member States should implement the country-specific recommendations to address national barriers to investment

Background
The economic crisis brought about a sharp reduction of investment across Europe. That is why collective and coordinated efforts at European level are needed to reverse this downward trend and put Europe on the path of economic recovery. Adequate levels of resources are available and need to be mobilised across the EU in support of investment. There is no single, simple answer, no growth button that can be pushed, and no one-size-fits-all solution. The Commission’s economic approach is based on three pillars: structural reforms to put Europe on a new growth path; fiscal responsibility to restore the soundness of public finances and cement financial stability; and investment to kick-start growth and sustain it over time.

The Investment Plan for Europe is at the heart of this strategy. It focuses on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. After one year in force, the European Fund for Strategic Investments (EFSI) is already showing results.

EFSI financing – latest figures
So far, the European Investment Bank (EIB) has approved 64 projects for financing under the EFSI which represent a volume of financing of EUR 9.3 billion. The European Investment Fund (EIF) has approved 185 SME financing agreements, with total financing under the EFSI of EUR 3.5 billion. Some 141,800 SMEs and Midcaps are expected to benefit. Together, these operations are located in 26 Member States and they are expected to trigger total investment of over EUR 100 billion.

Eurozone Deal Facilitates €10.3bn For Greece Bailout

For the short-term, the Eurogroup agrees on a first set of measures which will be implemented after the closure of the first review up to the end of the programme and which includes:

Abolish the step-up interest rate margin related to the debt buy-back tranche of the 2nd Greek programme as of 2018
Use of 2014 SMP profits from the ESM segregated account and the restoration of the transfer of ANFA and SMP profits to Greece (as of budget year 2017) to the ESM segregated account as an ESM internal buffer to reduce future gross financing needs.
Liability management – early partial repayment of existing official loans to Greece by utilizing unused resources within the ESM programme to reduce interest rate costs and to extend maturities. Due account will be taken of exceptionally high burden of some Member States.
If necessary, some targeted EFSF reprofiling (e.g. extension of the weighted average maturities, re-profiling of the EFSF amortization as well as capping and deferral of interest payments) to the extent needed to keep GFN under the agreed benchmark in order to give comfort to the IMF and without incurring any additional costs for former programme countries or to the EFSF.
For the long-term, the Eurogroup is confident that the implementation of this agreement on the main features for debt measures, together with a successful implementation of the Greek ESM programme and the fulfilment of the primary surplus targets as mentioned above, will bring Greece’s public debt back on a sustainable path over the medium to long run and will facilitate a gradual return to market financing. At the same time, the Eurogroup agrees on a contingency mechanism on debt which would be activated after the ESM programme to ensure debt sustainability in the long run in case a more adverse scenario were to materialize. The Eurogroup would consider the activation of the mechanism provided additional debt measures are needed to meet the GFN benchmark defined above and would be subject to a decision by the Eurogroup confirming that Greece complies with the requirements under the SGP. Such mechanism could entail measures such as a further EFSF reprofiling and capping and deferral of interest payments. Also, the Eurogroup commits to long-term technical assistance to boost Greek growth.

Obama Administration Announces Steps to Strengthen Financial Transparency, and Combat Money Laundering, Corruption, and Tax Evasion

The Obama Administration announced several important steps to combat money laundering, corruption, and tax evasion, and called upon Congress to take additional action to address these critical issues.

The United States has long led the global efforts to combat money laundering, corruption, and offshore tax evasion, and pursue the bad actors – including tax cheats, kleptocrats, and other criminals – who abuse the financial system or shell companies and other legal entities. Today’s actions build upon the substantial progress the United States and its global partners have made to date in strengthening the global financial system and providing greater transparency, so that criminals and tax cheats cannot hide their activities using anonymous shell companies and other legal entities. These efforts are critical to preventing criminals from using the global financial system to launder proceeds from corruption or other illegal activities, finance criminal activity or even terrorism, evade international sanctions regimes, or evade taxes.

In recent weeks, the disclosure of the so-called “Panama Papers” – millions of leaked documents reportedly revealing the use of anonymous offshore shell companies – has brought the issues of illicit financial activity and tax evasion into the spotlight. The Panama Papers underscore the importance of the efforts the United States has taken domestically, and the efforts we have undertaken with our international partners, to address these shared challenges.

Today, the Administration is taking the following steps:

Announcing new Administrative actions to combat money laundering, terrorist financing, and tax evasion: The Administration is announcing new rules to increase transparency and disclosure requirements that will enhance law enforcement’s ability to detect, deter, and disrupt money laundering, terrorist finance, and tax evasion:

Final Treasury regulations on “Customer Due Diligence” that enhance transparency and protect the integrity of the financial system by requiring financial institutions to know and keep records on who actually owns the companies that use their services;

New proposed Treasury/IRS tax rules closing a loophole allowing foreigners to hide assets or financial activity behind anonymous entities established in the United States.

Putting forward new legislative proposals to strengthen our tools to fight corruption and money laundering: The Administration is releasing draft legislation that would:

Increase transparency into the “beneficial ownership” of companies formed in the United States by requiring that companies know and report their true owners;

Provide additional law enforcement tools to combat corruption and money laundering

Calling on Congress to act on long-overdue proposals that help crack down on tax evasion: In a letter from Secretary Lew, the Administration is also calling upon the Senate to finally approve tax treaties that have been pending for several years, and that would help crack down on offshore tax evasion. We stand ready to work with Congress to act on the Administration’s legislative proposal, that ensures the United States is in line with international standards on tax information sharing.

Enhancing Financial Transparency Through “Customer Due Diligence” Rules

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is making public a final rule requiring financial institutions to know and verify the identities of the natural persons (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts.

This rule also amends existing regulations under the Bank Secrecy Act (BSA) to enhance transparency and protect the integrity of the financial system by clarifying and strengthening the customer due diligence obligations of financial institutions. The CDD Final Rule advances the implementation of the BSA by helping to make available to law enforcement valuable information needed to disrupt illicit finance networks. This will in turn increase financial transparency and augment the ability of financial institutions and law enforcement to identify the assets and accounts of criminals and national security threats. This will also facilitate compliance with sanctions programs and other measures that cut off financial flows to these actors.

Closing a Loophole that Enables Foreigners to Hide Behind Anonymous Entities Formed in the United States

The Treasury Department and Internal Revenue Service (IRS) are issuing proposed regulations closing a loophole in U.S. laws that has allowed foreigners to hide assets or financial activity behind anonymous entities established in the United States. The rule will require foreign-owned entities that are “disregarded entities” for tax purposes, including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS. These entities represent a narrow class of foreign-owned U.S. entities that have previously had no obligation to report information to the IRS or to get a tax identification number, and thus can be used to shield the foreign owners of non-U.S. assets or non-U.S. bank accounts. The proposed rule will strengthen the IRS’s ability to prevent the use of these entities for tax avoidance purposes, and will build on the success of other efforts to curb the use of foreign entities and accounts to evade U.S. tax.

Calling Upon Congress to Provide Additional Tools to Combat Illicit Financial Activity and Tax Evasion

In addition to the administrative steps taken today, the Administration renews the call for Congress to act to strengthen our authorities and close the gaps in our laws that can be abused by bad actors and keep the United States at the forefront of international efforts to combat financial crimes.

New legislation to require reporting of the “beneficial ownership” of corporations, helping law enforcement prevent and investigate financial crimes: Treasury is sending to Congress draft legislation requiring legal entities to know and report information on beneficial ownership. Increasing law enforcement access to “beneficial ownership” information – information about the people who are really behind a corporation or other business entity – will help in preventing and investigating financial crimes.

The Administration is committed to working with Congress to pass meaningful legislation that would require companies to know and report adequate and accurate beneficial ownership information at the time of a company’s creation, so that the information can be made available to law enforcement. The legislation would authorize the Treasury Department to require that legal entities formed or qualified to do business within the United States file this information with the Treasury Department, and face penalties for failure to comply. The misuse of companies to hide beneficial ownership is a significant weakness in the transparency of entities formed in the United States that can only be resolved by Congressional action.

New legislation to strengthen our ability to fight transnational corruption: The Department of Justice is sending to Congress draft legislation to enhance and strengthen our efforts to combat transnational corruption. This legislation would enhance law enforcement’s ability to prevent bad actors from concealing and laundering illegal proceeds of transnational corruption. It would also allow U.S. prosecutors to more effectively pursue kleptocracy cases and prosecute money laundering as part of foreign corruption, and reinforce our role in the international community as a model for others in anti-corruption matters. The proposals would assist investigators and prosecutors in gathering evidence which can be used in prosecuting those who seek to hide and move illegal funds.

A call for long-overdue Senate action on tax treaties: Eight tax treaties with other countries have been awaiting Senate approval for several years – including amendments to our existing treaties with Switzerland and Luxembourg that would enable U.S. law enforcement in the United States to obtain information about financial accounts in those countries. The inability to obtain this information has impeded investigations and enforcement relating to offshore tax evasion – including evasion involving secret Swiss bank accounts. Today, in a letter from Secretary Lew, the Administration called on Congress to finally act upon the treaties so that they can be implemented without further delay.

“Reciprocal FATCA” legislation to strengthen our ability to work with other countries to fight tax evasion: Congress also must act to strengthen the United States’ hand in pressing other countries to improve transparency by ensuring that we live up to our end of the bargain. The President has proposed providing full “reciprocity” under the Foreign Account Tax Compliance Act (FATCA) in the last three budgets he has submitted to Congress. Secretary Lew’s letter reiterates that Congress should act on the Administration’s legislative proposal as soon as possible to ensure that the United States meets international standards.

Background: Prior and Ongoing Administration Efforts to Address Illicit Financial Activity and Tax Evasion

Leading the charge globally to enhance financial transparency. The United States has led efforts within the major economic powers of the G-20 and the Financial Action Task Force (FATF) to strengthen international standards on combatting money laundering and terrorist financing, and facilitate their implementation. More than 190 jurisdictions around the world have committed to the FATF Recommendations through the global network of FATF-Style Regional Bodies (FSRBs) and FATF memberships.

Enacting legislation that provides critical tools to prevent individuals from evading U.S. taxes using hidden offshore accounts. Since President Obama signed FATCA into law in 2010, the United States has negotiated agreements with more than 100 countries that help us enforce tax our laws. FATCA’s pioneering approach to automatic information sharing on tax matters is the template for the development of international standards that have been endorsed by the G-20 nations and are being deployed around the world.

Cracking down on U.S. tax cheats and entities that facilitate them. The United States has cracked down on tax evasion through criminal and civil enforcement actions, including successful enforcement actions against dozens of Swiss banks. Prompted by the threat of prosecution, thousands of U.S. individuals have come forward voluntarily to disclose offshore accounts and pay back taxes and penalties. The IRS has received more than 54,000 offshore “voluntary disclosures” since 2009.

Unparalleled efforts to fight corruption through law enforcement action. The United States was the first country to criminalize money laundering and the U.S.’s Foreign Corrupt Practices Act (FCPA) provided the model for the OECD’s Anti-Bribery Convention and other efforts globally. The Department of Justice has an unparalleled commitment to, and record of, fighting corruption through law enforcement action, as reflected through six anti-corruption programs:

public integrity prosecutions of U.S. public officials;

prosecutions of U.S. individuals that pay bribes to foreign officials;

prosecutions of U.S. taxpayers who seek to conceal foreign accounts, as well as bankers and advisors;

pursuit of those who misuse the U.S. financial system through money laundering and other corrupt schemes;

the pioneering Kleptocracy Initiative, which uses investigation and litigation to recover the proceeds of foreign official corruption and return the proceeds to the citizens of countries victimized by corruption, which has led to the restraint of more than $1.8 billion involving 12 countries; and,

assistance to foreign counterparts in fighting corruption, both through cooperation in foreign corruption cases and through overseas capacity building.

Treasury Secretary Lew Announces Front of New $20 to Feature Harriet Tubman, Lays Out Plans for New $20, $10 and $5

WASHINGTON – In a letter to the American people, Treasury Secretary Jacob J. Lew today announced plans for the new $20, $10 and $5 notes, with the portrait of Harriet Tubman to be featured on the front of the new $20.

Secretary Lew also announced plans for the reverse of the new $10 to feature an image of the historic march for suffrage that ended on the steps of the Treasury Department and honor the leaders of the suffrage movement—Lucretia Mott, Sojourner Truth, Susan B. Anthony, Elizabeth Cady Stanton, and Alice Paul. The front of the new $10 note will maintain the portrait of Alexander Hamilton.

Finally, he announced plans for the reverse of the new $5 to honor events at the Lincoln Memorial that helped to shape our history and our democracy and prominent individuals involved in those events, including Marian Anderson, Eleanor Roosevelt and Martin Luther King Jr.

The reverse of the new $20 will feature images of the White House and President Andrew Jackson.

In his letter, Secretary Lew noted that the Bureau of Engraving and Printing will work closely with the Federal Reserve to accelerate work on the new $20 and $5 notes, with the goal that all three new notes go into circulation as quickly as possible, consistent with security requirements.

An Open Letter from Secretary Lew:

When I announced last June that a newly redesigned $10 note would feature a woman, I hoped to encourage a national conversation about women in our democracy. The response has been powerful. You and your fellow citizens from across the country have made your voices heard through town hall discussions and roundtable conversations, and with more than a million responses via mail and email, and through handwritten notes, tweets, and social media posts. Thank you for sharing this thoughtful and impassioned feedback.

Over the course of the last 10 months, you put forth hundreds of names of people who have played a pivotal role in our nation’s history. Many of you proposed that our new currency highlight democracy in action and reflect the diversity of our great nation. Some of you suggested we skip the redesign of the $10 note, which is the next in line for a security upgrade, and move immediately to redesigning the $20 note. And others proposed unconventional ideas, such as creating a $25 bill.

I have been inspired by this conversation and today I am excited to announce that for the first time in more than a century, the front of our currency will feature the portrait of a woman—Harriet Tubman on the $20 note.

Since we began this process, we have heard overwhelming encouragement from Americans to look at notes beyond the $10. Based on this input, I have directed the Bureau of Engraving and Printing to accelerate plans for the redesign of the $20, $10, and $5 notes. We already have begun work on initial concepts for each note, which will continue this year. We anticipate that final concept designs for the new $20, $10, and $5 notes will all be unveiled in 2020 in conjunction with the 100th anniversary of the 19th Amendment, which granted women the right to vote.

The decision to put Harriet Tubman on the new $20 was driven by thousands of responses we received from Americans young and old. I have been particularly struck by the many comments and reactions from children for whom Harriet Tubman is not just a historical figure, but a role model for leadership and participation in our democracy. You shared your thoughts about her life and her works and how they changed our nation and represented our most cherished values. Looking back on her life, Tubman once said, “I would fight for liberty so long as my strength lasted.” And she did fight, for the freedom of slaves and for the right of women to vote. Her incredible story of courage and commitment to equality embodies the ideals of democracy that our nation celebrates, and we will continue to value her legacy by honoring her on our currency. The reverse of the new $20 will continue to feature the White House as well as an image of President Andrew Jackson.

As I said when we launched this exciting project: after more than 100 years, we cannot delay, so the next bill to be redesigned must include women, who for too long have been absent from our currency. The new $10 will honor the story and the heroes of the women’s suffrage movement against the backdrop of the Treasury building. Treasury’s relationship with the suffrage movement dates back to the March of 1913, when advocates came together on the steps of the Treasury building to demonstrate for a woman’s right to vote, seven years prior to the passage of the 19th Amendment. The new $10 design will depict that historic march and honor Lucretia Mott, Sojourner Truth, Susan B. Anthony, Elizabeth Cady Stanton, and Alice Paul for their contributions to the suffrage movement. The front of the new $10 will continue to feature Alexander Hamilton, our nation’s first Treasury Secretary and the architect of our economic system.

The reverse of the new $5 will depict the historic events that have occurred at the Lincoln Memorial. In 1939, at a time when Washington’s concert halls were still segregated, world-renowned Opera singer Marian Anderson helped advance civil rights when, with the support of First Lady Eleanor Roosevelt, she performed at the Lincoln Memorial in front of 75,000 people. And in 1963, Martin Luther King, Jr. delivered his historic “I Have a Dream” speech at the same monument in front of hundreds of thousands. Honoring these figures will bring to life events at the Lincoln Memorial that helped to shape our history and our democracy. The front of the new $5 will continue to feature President Lincoln.

Due to security needs, the redesigned $10 note is scheduled to go into circulation next. I have directed the Bureau of Engraving and Printing to work closely with the Federal Reserve to accelerate work on the new $20 and $5 notes. Our goal is to have all three new notes go into circulation as quickly as possible, while ensuring that we protect against counterfeiting through effective and sophisticated production.

This process has been much bigger than one square inch on one bill, and along the way, we heard about countless individuals who contributed to our democracy. Our website, modernmoney.treasury.gov, will highlight many of the names that we heard throughout this process, and help tell some of the many stories that inspired us. Of course, more work remains to tell the rich and textured history of our country. But with this decision, our currency will now tell more of our story and reflect the contributions of women as well as men to our great democracy.

Thank you,

Secretary Jacob J. Lew

Global Economic Outlook and Communiqué of the Thirty-Third Meeting of the IMFC

The global economy continues to expand modestly. Global growth, however, has been subdued for a long time, and the outlook has weakened somewhat since October. Although recent developments point to some improvements in sentiment, financial market volatility and risk aversion have risen, reflecting partly the reappraisal of potential growth. The significant slowdown in global trade growth also persists. Recoveries in many advanced economies are restrained by a combination of weak demand, low productivity growth, and remaining crisis legacies. Activity in emerging market and developing economies has cooled down, although it still accounts for the bulk of world growth. Globally, lower commodity prices have adversely affected exporters, while their short-term growth impact on energy importers has been less positive than expected.
Downside risks to the global economic outlook have increased since October, raising the possibility of a more generalized slowdown and a sudden pull-back of capital flows. At the same time, geopolitical tensions, refugee crises, and the shock of a potential U.K. exit from the European Union pose spillover risks. Against this backdrop, it is important to buttress confidence in our policies.

Policy response
We reinforce our commitment to strong, sustainable, inclusive, job-rich, and more balanced global growth. To achieve this, we will employ a more forceful and balanced policy mix. Implementation of mutually-reinforcing structural reforms and macroeconomic policies—using all policy tools, individually and collectively—is vital to stimulate actual and potential growth, enhance financial stability, and avert deflation risks. Clear and effective communication of policy stances will be key to limit excessive market volatility and negative spillovers.
Growth-friendly fiscal policy is needed in all countries. Fiscal strategies should aim to support the economy, providing for flexible use of fiscal policy to strengthen growth, job creation, and confidence, while enhancing resilience and ensuring that debt as a share of GDP is on a sustainable path. Tax policy and public spending needs to be as growth-friendly as possible, including by prioritizing expenditure in favor of high-quality investment.

Accommodative monetary policy should continue in advanced economies where output gaps are negative and inflation is below target, consistent with central banks’ mandates and mindful of financial stability risks. Monetary policy by itself cannot achieve balanced and sustainable growth, and hence must be accompanied by other supportive policies. In a number of emerging market economies, monetary policy will need to address the impact of weaker currencies on inflation. Exchange rate flexibility, where feasible, should be used to cushion the impact of external shocks, including terms-of-trade shocks.

Structural reforms need to be advanced, benefitting from synergies with other policies to support demand. Structural reforms should be appropriately prioritized and sequenced in each country. Commodity exporters and low-income developing countries should implement policies to promote economic diversification.

Timely, full, and consistent implementation of agreed financial reforms, including the Basel III and Total Loss-Absorbing Capacity (TLAC) standard, remains important to boost the resilience of the financial system. Efforts must continue to facilitate the repair of private sector balance sheets. Advanced economies must deal with remaining crisis legacy issues. Emerging market economies need to monitor foreign currency exposures and bolster their ability to withstand financial shocks. Further analysis and solutions are needed, as appropriate, with the aim to prevent de-risking from unduly impeding access to financial services, including correspondent banking relationships.

Global cooperation is needed on several fronts, including ensuring a well-functioning international monetary system; reinvigorating global trade integration; combating corruption and improving governance; addressing international tax issues including transparency; coping with challenges of non-economic origin, including those pertaining to refugees; and consistently implementing and completing the financial regulatory reform agenda—including policies to transform the shadow banking sector into a stable source of market-based finance. We reiterate our commitment to refrain from all forms of protectionism and competitive devaluations, and to allow exchange rates to respond to changing fundamentals.

IMF operations
The IMF has a key role to play in supporting a stronger policy response by the membership.
Policy advice and surveillance: We support efforts to deepen analysis of the impact of macro-critical structural reforms, including the new initiative to increase the efficiency of infrastructure investment, and on principles to guide prioritization. To improve the policy mix for strong, balanced, and sustainable growth, we support work to identify country-specific priorities for fiscal policy based on a careful assessment of fiscal positions, and to identify areas where fiscal policy can play a larger and more effective role, consistent with maintaining debt sustainability. We look forward to the review of members’ experiences and policies in dealing with capital flows, and welcome plans to bring together the work on capital flow management and macro-prudential policies to inform financial and macroeconomic risk management. We look forward to the analysis of the implications of negative policy rates. We welcome efforts to strengthen exchange rate analysis. We also welcome plans to examine a framework of options to reduce risks from rising corporate and household indebtedness and unresolved crisis legacies in banks.

International Monetary System (IMS): We welcome the recent stocktaking of the IMS and the global financial safety net (GFSN) to determine what areas need further consideration. We reiterate that strong policies and effective IMF surveillance remain the cornerstone of crisis prevention. We agree that a strong and coherent GFSN—with an adequately resourced IMF at its center—is important for the effective functioning of the IMS, safeguarding stability, and helping reap the benefits of further financial integration. We call on the IMF to continue to explore ways to further strengthen the GFSN, including through more effective cooperation with regional financing arrangements. The IMF will discuss the case for a general allocation of SDRs and the reporting of official reserves in SDR. We support the examination of the possible broader use of the SDR.

Revisiting the lending toolkit: We emphasize the IMF’s central role in supporting adjustment and fostering effective implementation of sound policies. In this context, and in light of the risks that have been identified, we call on the IMF to explore ways to strengthen its approach to helping members manage volatility and uncertainty—including through financial assistance, also on a precautionary basis. We recognize the particular challenges for commodity exporters and emphasize the IMF’s role in assisting them in their adjustments. We also look forward to work on non-financial instruments, such as a policy signaling instrument covering emerging market and advanced economies.

Support for low-income countries: We welcome the IMF’s continued work in support of the implementation of the 2030 Agenda for Sustainable Development, as well as continued efforts to support growth and boost resilience in fragile states. We look forward to discussions on how to enhance countries’ access to precautionary financial support and reviewing current practices in regard to blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT). We also look forward to the successful conclusion of the current efforts to mobilize additional loan resources for the PRGT and to broadening the group of contributors. We support efforts to integrate capacity development and policy advice more closely, in particular, plans to assist low-income countries in boosting their domestic resource mobilization efforts, alongside international tax issues. We welcome the ongoing review of the IMF and World Bank Debt Sustainability Framework for low-income countries.

Addressing other challenges facing members: We call on the IMF to continue to collaborate with the Financial Stability Board, the World Bank Group, and other relevant bodies to help solidify a view on the drivers, magnitude, and impact of de-risking by global financial institutions on developing and emerging market economies, and provide advice and capacity development, where warranted. We welcome the IMF’s growing engagement with small states. We welcome proposed work on other challenges facing the membership—within the IMF’s mandate and where they are macro-critical—including migration, income inequality, gender inequality, financial inclusion, corruption, climate change, and technological change, including by leveraging the expertise of other institutions. To support countries managing spillovers from non-economic sources, such as large refugee flows and global epidemics, the IMF should be prepared to contribute within its mandate, including to global initiatives. We look forward to a review of the Guidance Note on The Role of the Fund in Governance Issues. We encourage the IMF to continue helping countries to strengthen their institutions to tackle illicit financial flows. We welcome progress made in Argentina’s effort to end a decade-long dispute and regain access to international capital markets. We also welcome its efforts and those of other countries to normalize relations with the IMF.
IMF resources and governance

We strongly welcome the effectiveness of quota increases under the 14th General Review of Quotas and of the Seventh Amendment on the Reform of the IMF Executive Board. We call on the Executive Board to work expeditiously toward completion of the 15th General Review of Quotas, including a new quota formula, by the 2017 Annual Meetings, and look forward to a progress report for our next meeting. Any realignment under this Review is expected to result in increases in the quota shares of dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole. We are committed to protecting the voice and representation of the poorest members. We reaffirm our commitment to maintain a strong, quota-based, and adequately resourced IMF. We reiterate the importance of maintaining the high quality and improving the regional, gender, and educational diversity of the IMF’s staff, and of promoting gender diversity in the Executive Board.

We welcome the appointment for a second five-year term of Ms. Christine Lagarde as IMF Managing Director, and of Mr. David Lipton as IMF First Deputy Managing Director. We look forward to their continued excellent and unwavering leadership in the challenging period ahead.
Our next meeting will be held in Washington, D.C. on October 7–8, 2016.

Global Economy Faltering from Too Slow Growth for Too Long

Global growth continues, but at a sluggish pace that leaves the world economy more exposed to risks, says the IMF’s latest World Economic Outlook (WEO).

The WEO forecasts global growth at 3.2 percent in 2016 and 3.5 percent in 2017, a downward revision of 0.2 percent and 0.1 percent, respectively, compared with the January 2016 Update.

In a recent speech, IMF Managing Director Christine Lagarde warned that the recovery remains too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries.

“Lower growth means less room for error,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research. “Persistent slow growth has scarring effects that themselves reduce potential output and with it, demand and investment,” he added.

The current diminished outlook calls for an immediate, proactive response, Obstfeld noted. To support global growth, he emphasized, there is a need for a more potent policy mix—a three-pronged policy approach based on structural, fiscal, and monetary policies.

“If national policymakers were to clearly recognize the risks they jointly face and act together to prepare for them, the positive effects on global confidence could be substantial,” Obstfeld added.

Moderate recovery in advanced economies
Growth in advanced economies is projected to remain modest at about 2 percent, according to the WEO. The recovery is hampered by weak demand, partly held down by unresolved crisis legacies, as well as unfavorable demographics and low productivity growth.
In the United States, expected growth this year is flat at 2.4 percent, with a modest uptick in 2017. Domestic demand will be supported by improving government finances and a stronger housing market that help offset the drag on net exports coming from a strong dollar and weaker manufacturing.
In the euro area, low investment, high unemployment, and weak balance sheets weigh on growth, which will remain modest at 1.5 percent this year and 1.6 percent next year.

In Japan, both growth and inflation are weaker than expected, reflecting in particular a sharp fall in private consumption. Growth is projected to remain at 0.5 percent in 2016 before turning slightly negative to -0.1 percent in 2017, as the scheduled increase in the consumption tax rate goes into effect.

Emerging and developing economies slowing further
While emerging markets and developing economies will still account for the lion’s share of world growth in 2016, prospects across countries remain uneven and generally weaker than over the past two decades.

The WEO projects their growth rate to increase only modestly—relative to 2015—to 4.1 percent this year and 4.6 percent next year.
This forecast reflects a variety of factors:
• Slowing growth in oil exporters, with oil price decline, and still weak outlook for non-oil commodity exporters, including in Latin America.
• The modest slowdown in China, where growth continues to shift away from manufacturing and investment to services and consumption.
• Deep recessions in Brazil and Russia, and weak growth in some Latin America and Middle East countries, particularly those hit hard by the oil price decline and intensifying conflicts and security risks.
• Diminished growth prospects in many African and low-income nations due to the unfavorable global environment.
On the positive side, India remains a bright spot—with strong growth and rising real incomes. The ASEAN-5 economies—Indonesia, Malaysia, Philippines, Thailand, and Vietnam—are also performing well. And Mexico, Central America, and the Caribbean are beneficiaries of the U.S. recovery and, in most cases, lower oil prices.

Risks are on the rise
In the current environment of weak growth, risks to the outlook are now more pronounced.
These include:
• A return of financial turmoil, impairing confidence. For instance, an additional bout of exchange rate depreciations in emerging market economies could further worsen corporate balance sheets, and a sharp decline in capital inflows could force a rapid compression of domestic demand.
• A protracted period of low oil prices could further destabilize the outlook for oil-exporting countries.
• A sharper slowdown in China than currently projected could have strong international spillovers through trade, commodity prices, and confidence, and lead to a more generalized slowdown in the global economy.
• Shocks of a noneconomic origin—related to geopolitical conflicts, political discord, terrorism, refugee flows, or global epidemics—loom over some countries and regions and, if left unchecked, could have significant spillovers on global economic activity.

On the upside, the recent decline in oil prices may boost demand in oil-importing countries more strongly than currently envisaged, including through consumers’ possible perception that prices will remain lower for longer.

Raising growth still a priority
More aggressive policy actions to lift demand and supply potential could foster stronger growth in both the short and longer term.
The WEO emphasizes a three-pronged approach of mutually reinforcing policy levers. These include (1) structural reforms, (2) fiscal support, with growth-friendly composition of revenue and spending, and fiscal stimulus where there is a need and where fiscal space allows, and (3) monetary policy measures.

There is strong need and scope for further structural reforms. Analytical work featured in the WEO finds that labor and product market reforms in advanced economies can give a strong boost to growth prospects over the medium to long term. Carefully prioritizing and sequencing reforms is essential to boost their short-term effects.

Product market reforms—which aim to boost competition among firms and make it easier to start a business or attract investment—should be implemented forcefully, as they boost output even under weak macroeconomic conditions and without weighing on public finances. Where possible, narrowing unemployment benefits and easing job protection should be accompanied by other policies to offset their short-term cost on vulnerable groups.
Reforms that are coupled with fiscal support will be the most valuable at this juncture, including reducing inefficient taxes on labor and increasing public spending on research and development and active labor market policies (reforms aimed at getting the unemployed back into work, such as job training programs).

In many advanced economies, accommodative monetary policy remains essential to support economic activity and lift inflation expectations. In many emerging market and developing economies, monetary policy must grapple with the impact of weaker currencies on inflation and private sector balance sheets. Exchange rate flexibility, where feasible, should be used to cushion the impact of terms of trade shocks.
Finally, further financial sector strengthening is essential, including to create a context in which monetary, fiscal, and structural policies can be most effective.

The WEO warns that policymakers also need to make contingency plans and design collective measures for a possible future in case downside risks materialize. Cooperation to enhance the global financial safety net and global regulatory regime is also central to a resilient international and financial system.

Microsoft and R3 Partnership to Accelerate Adoption of Distributed Ledger Technologies by Global Banks

NEW YORK and REDMOND, Wash. – Microsoft Corp. and the R3 Consortium today announced a strategic partnership that will accelerate the use of distributed ledger technologies, also known as blockchain, among R3 member banks and global financial markets. Distributed ledger technologies enable enterprises and business network participants to complete financial transactions with greater speed, security, cost-efficiency and transparency relative to solutions currently used. In addition, R3 named Microsoft Azure the preferred cloud services provider for its R3 Lab and Research Center serving more than 40 member banks.

Under the terms of the deal, Microsoft will provide cloud-based tools, services and infrastructure for R3 lab locations around the world, as well as dedicated technical architects, project managers, lab assistants and support services. R3’s global labs will drive faster experimentation, provide technical agility and accelerate learning as the financial services industry moves toward validated and certified distributed ledger technology implementations.

“With intelligent, cloud-based technology, R3 and member banks will experiment and learn faster, accelerating distributed ledger technology deployment,” said Peggy Johnson, executive vice president of global business development at Microsoft. “What’s more, our collaboration brings to light tremendous opportunities to rethink business processes and transform entire industries.”

“The partnership between Microsoft and R3 will scale the use of distributed ledger technology in a way that will change the entire financial services industry,” said David Rutter, CEO of R3. “The Azure platform and intelligent cloud services bring advanced capabilities to this budding financial ecosystem, and the commitment by Microsoft will accelerate the adoption of distributed ledger technology around the globe and take our R3 Lab and Research Center offering to a new level of capability.”

R3 and Consortium members will have access to Microsoft’s expanding ecosystem of BaaS partners including Ethereum and ConsenSys, Ripple, Eris Industries, Coinprism, Factom, BitPay, Manifold Technology, AlphaPoint, IOTA, BlockApps STRATO, Tendermint LibraTax, and many others that will aid in the development, testing and deployment of distributed ledger applications in cloud, hybrid and local environments.

About Microsoft
Microsoft (Nasdaq “MSFT” @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more.

About R3
R3 is a financial technology innovation company led by a team of financial industry veterans, technologists and new tech entrepreneurs, bringing together expertise from electronic financial markets, cryptography and digital currencies. R3 operates in New York, London and San Francisco and with its partners to define, design and deliver the next generation of financial technology.

IMF Managing Director Christine Lagarde Letter tells Greece Prime Minister Alexis Tsipras ‘Leak Is Nonsense’

Dear Prime Minister,
Thank you for your letter of April 2, in which you ask about the IMF’s position regarding the program negotiations with Greece.

My view of the ongoing negotiations is that we are still a good distance away from having a coherent program that I can present to our Executive Board. I have on many occasions stressed that we can only support a program that is credible and based on realistic assumptions, and that delivers on its objective of setting Greece on a path of robust growth while gradually restoring debt sustainability.

Otherwise it would fail to re-establish confidence, with the implication, among others, that Greece would soon again be forced to adopt yet more measures. Of course, any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense.

As you and I have discussed several times, including recently on the telephone, I have been consistent in pointing out that, if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief. In the interest of the Greek people, we need to bring these negotiations to a speedy conclusion.

I agree with you that successful negotiations are built on mutual trust, and this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side. On reflection, however, I have decided to allow our team to return to Athens to continue the discussions.

The team consists of experienced staff who have my full confidence and personal backing. For them to be able to do their work, as you have invited us, it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.

Finally, the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks. To further enhance the transparency of our dialogue, I have therefore decided to release the text of this letter on our website at www.imf.org. I also look forward to any personal conversation with you on how to take the discussions forward.

Sincerely yours,
Christine Lagarde

Citi Announces Intention to Sell Consumer Businesses in Brazil, Argentina and Colombia

New York – Citi has announced its intention to sell its Consumer Banking operations in Brazil, Argentina and Colombia. The businesses, which include retail banking and credit card operations, will be transferred from Citicorp into Citi Holdings and will report financial results as part of Citi Holdings, effective first quarter 2016. Citi will maintain a strong presence in Brazil, Argentina and Colombia in order to continue serving its many corporate and institutional clients in these markets.

Citi CEO Michael Corbat said, “While our Consumer businesses in Brazil, Argentina and Colombia are of high quality, we have decided to focus our efforts on opportunities with our institutional clients in these countries and throughout the wider region. Citi is committed to Latin America, where we have operated for over a century and built an unmatched network across 23 countries.

“We allocate our resources where they can generate the best possible returns for our shareholders. These actions will further simplify our Global Consumer Bank, allowing us to more effectively deploy resources to where we have the ability to achieve scale within our targeted segments and see the greatest opportunity for growth,” Mr. Corbat concluded.

The consumer businesses moving into Citi Holdings include roughly $6 billion in assets and did not have a material impact on Citigroup’s net income in 2015. The new Global Consumer Banking footprint will serve nearly 54 million clients in the United States, Mexico, Asia Pacific, Europe and the Middle East, while further simplifying operations and improving performance. Since 2012, the Global Consumer Bank has made significant progress simplifying markets, branches, and products while strengthening controls and improving customer experience.

Citi
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Wells Fargo Completes Acquisition of GE Capital’s North American Commercial Distribution Finance and Vendor Finance Businesses

Wells Fargo & Company (NYSE: WFC) announced today that it has completed the purchase of the North American portions of GE Capital’s Commercial Distribution Finance and Vendor Finance businesses as well as a portion of its Corporate Finance business, totaling $27.4 billion of assets, including approximately $24 billion of loans. The remaining international segment of the transaction is expected to close later this year. The total acquisition includes assets of approximately $31 billion as well as businesses employing approximately 2,800 team members.

“The completion of this transaction strengthens our capabilities and deepens our customer relationships in key commercial lending markets across the U.S. and Canada,” said Tim Sloan, Wells Fargo’s president and chief operating officer. “The businesses acquired from GE Capital are industry leaders with proven business models and capabilities. As a result of this acquisition, we are adding a set of complementary businesses, long-term customer relationships and exceptionally talented and experienced teams that position Wells Fargo as a market leader in these important product areas.”

As previously announced, the businesses acquired from GE Capital include:

Commercial Distribution Finance
GE Capital’s Commercial Distribution Finance (CDF) business is a market leader in providing customized inventory financing to fund the flow of finished durable goods from manufacturers to dealers. Through industry expertise and integrated technologies, CDF helps manufacturers and dealers across the U.S. and Canada improve cash flow, reduce risk and grow sales. CDF’s inventory finance products and deep customer relationships greatly complement and expand the existing asset-based lending product offerings in Wells Fargo’s Capital Finance division. Effective March 1, Commercial Distribution Finance will adopt the tradename Wells Fargo Commercial Distribution Finance.

Vendor Finance
GE Capital’s Vendor Finance business provides vendor and dealer financing programs for manufacturers and dealers of all sizes, and their customers, across the U.S. and Canada, from Fortune 500 companies looking to offer private label financing to independent operations looking to manage cash flow. The business drives vendor sales growth by supporting dealers with inventory financing and by providing leases and loans to commercial end-user customers. As a leading provider of technology-enabled white label captive program and channel financing solutions, GE Capital’s Vendor Finance business will significantly expand Wells Fargo’s current capabilities within its Equipment Finance business. Effective March 1, Vendor Finance will adopt the tradename Wells Fargo Vendor Financial Services.

Corporate Finance
GE Capital’s Corporate Finance business (also known as Direct Lending and Leasing) provides senior secured asset-based loans as well as equipment leases and loans to middle-market customers. Wells Fargo purchased a portion of the business, which is being integrated into its existing Capital Finance and Equipment Finance businesses.

About Wells Fargo Capital Finance
Wells Fargo Capital Finance is the trade name for certain asset-based lending services, senior secured lending services, accounts receivable and purchase order finance services, and channel finance services of Wells Fargo & Company and its subsidiaries, and provides traditional asset-based lending, specialized senior and junior secured financing, accounts receivable financing, purchase order financing and channel finance to companies across the United States and internationally. Dedicated teams within Wells Fargo Capital Finance provide financing solutions for companies in specific industries such as retail, software publishing and high-technology, commercial finance, staffing, government contracting and others. Wells Fargo Commercial Distribution Finance is the trade name for certain inventory financing (floor planning) services of Wells Fargo & Company and its subsidiaries. For more information, visit wellsfargocapitalfinance.com.

About Wells Fargo Equipment Finance
Wells Fargo Equipment Finance provides competitive fixed- and floating-rate loans and leases covering a full range of commercial equipment for businesses nationwide as well as floor planning and inventory financing, and vendor programs in selected industries in the United States and Canada. Wells Fargo Equipment Finance is a leading bank affiliated equipment leasing and finance business in the United States by asset portfolio and annual originations, with more than 130,000 customers, and 1,100 team members. Wells Fargo Equipment Finance is the trade name of the equipment finance businesses of Wells Fargo Bank, N.A. and its subsidiaries. Canadian business is transacted by Wells Fargo Equipment Finance Company.

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.

MasterCard Partners with CU Wallet to Deliver Customized Digital Wallet Service for Credit Unions

PURCHASE, N.Y. and WOODLAND HILLS, Calif. – With shoppers adopting digital wallets at a rapid pace, MasterCard and CU Wallet are partnering to deliver a customized digital service to credit unions. CU Wallet will speed the development and deployment of mobile wallets and payment solutions for community financial institutions by offering the MasterPass™ digital service. It will also provide a seamless and secure shopping experience to credit union members wherever they shop – in-store, in-app and online – on the device of their choice.

The 120 member credit unions of CU Wallet, who represent more than 10 million members, can now offer MasterCard’s digital wallet service, in their own credit union-branded mobile application. CU Wallet’s on-device application and back-end infrastructure will enable consumers to use MasterPass to simply and safely make purchases in store, online or in-app with any payment card across multiple communications technologies, including NFC, QR/barcodes and remote checkout – providing an easier way to pay and a more seamless, end-to-end consumer experience.

“There is inherent value in the relationship that people have with their chosen financial institution and we think that should remain at the center – even in a digital environment,” said Matt Barr, group head, Digital Payments, MasterCard. “By leveraging the MasterPass API we are able to compliment the CU Wallet offering to deliver a truly holistic customer experience across devices and payment channels. By integrating into the credit union’s digital banking services, this also opens the door for enhanced loyalty and reward services.”

“The MasterPass acceptance network will provide our member financial institutions with increased transactions supported by a secure, compelling and convenient digital shopping experience,” said Paul Fiore, CU Wallet’s Chief Executive Officer and Founder. “This partnership is a significant milestone in our company’s history and our team is thrilled to work together with MasterCard to deliver innovative customizable mobile wallet solutions for financial institutions.”

The joint digital solution from MasterCard and CU Wallet keeps the credit union brand at the forefront on the digital wallet and at checkout, while providing consumers an easy, intuitive and low friction shopping experience at thousands of leading merchants. It enables consumers to pay for the things they want with the security they demand, using any device. MasterPass securely stores payment and shipping information, which is readily accessible when a consumer checks out using the “Buy with MasterPass” button and logs into their account. It is currently available in 29 countries and is accepted at 250,000 merchants globally.

About MasterCard
MasterCard, www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

About CU Wallet
CU Wallet is a leading provider of secure, white label digital wallet solutions headquartered in Los Angeles, CA. We work with best-of-breed technology partners to deliver an innovative, seamless, end-to-end consumer experience. CU Wallet enables more than 100 regional and community financial institutions to deliver a robust, self-branded suite of digital shopping and payments services to their account holders. For more information about CU Wallet, visit: www.cuwallet.com.

IMF Executive Board Selects Christine Lagarde to Serve a Second Term as Managing Director

The Executive Board of the International Monetary Fund (IMF) today selected Christine Lagarde to serve as IMF Managing Director for a second five-year term starting on July 5, 2016. The Board’s decision was taken by consensus.

In line with the selection process it had established on January 20, the Board held several discussions, including with Ms. Lagarde, the sole candidate nominated for the position, before making its decision today. Following today’s meeting, the Dean of the Executive Board, Mr. Aleksei Mozhin, said:
“In taking this decision, the Board praised Ms. Lagarde’s strong and wise leadership during her first term. During turbulent times in the global economy, Ms. Lagarde strengthened the Fund’s ability to support its members with policy advice, capacity building, and financing. She has also played a critical role in revitalizing the Fund’s relations with its global membership, including its emerging market and developing members.

“Looking ahead, the Board also welcomed Ms. Lagarde’s emphasis on ensuring that the Fund remains agile in all its operations; well positioned to provide integrated advice across the full spectrum of issues that impact macroeconomic stability; and focused on meeting the needs of its entire membership. The Board looks forward to continuing to work closely with the Managing Director in carrying out the institution’s goal of helping to ensure global economic and financial stability.”

Background:
Ms. Lagarde was first appointed Managing Director on July 5, 2011 (see Press Release No. 11/259). The selection process was initiated by the Board on January 20, 2016 (see Press Release No. 16/19) when it adopted a merit-based and transparent process.

The Managing Director is the chief of the IMF’s operating staff and Chairman of the 24-member Executive Board. The Managing Director is assisted in carrying out her responsibilities by four Deputy Managing Directors and about 2,700 staff from 147 countries.

Factsheet on the Managing Director Selection Process
Before her appointment at the IMF in 2011, Ms. Lagarde, 60, a national of France,served as Minister of Finance and Minister for Foreign Trade of France and had an extensive and noteworthy career as an anti-trust and labor lawyer. She served as partner with the international law firm of Baker & McKenzie where she became Chairman of the Global Executive Committee in 1999, and subsequently Chairman of the Global Strategic Committee in 2004. She held the top post at the firm until June 2005 when she was named to her initial ministerial post in France. Ms. Lagarde has degrees from the Institute of Political Studies (IEP) and from the Law School of Paris X University, where she also lectured prior to joining Baker & McKenzie in 1981. When appointed in 2011, Ms. Lagarde became the first woman named to the top IMF post since the institution’s inception in 1944.

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement today:

“I am delighted to be given the opportunity to lead the IMF as Managing Director for a second term of five years, and I greatly appreciate the continued trust and support of the Fund’s Executive Board and our 188 member countries.

“Over the past five years, the IMF has adapted and strengthened its capacity to respond to its members’ needs and is well-prepared to help them meet the challenges of the future. The global economy is undergoing a number of important transitions and we are focused on helping our membership navigate these successfully—with our excellent staff delivering policy advice, capacity building and, where needed, financial support. The Fund remains committed to its fundamental goal of helping to ensure global economic and financial stability through international cooperation.

“I look forward to serving our membership and carrying out our critical mission in the period ahead.”

FT Debt Capital Markets Outlook—Securing Stability amid ‘The Great Distortion’ Financial Stability: Vulnerabilities, Challenges and Enhancements – Address by José Viñals

Good morning Ladies and Gentlemen,

I am delighted to be with you in London today. I want to thank the Financial Times for inviting me to speak at what promises to be an extremely interesting and engaging event. And thank you, FT Editor Patrick Jenkins, for your kind introduction.

The event title is: Securing Stability amid the ‘Great Distortion.’ And as we all know, financial markets have given us cause for concern since the start of the year. This has raised questions about the economic outlook—is the recovery still on track? And it has also raised questions about whether policies are sufficient to keep us on the right track. So today, I want to discuss how to meet the challenges we face head on; to move away from the “Great Distortion” to achieve the ‘Great Normalization’; and by so doing to avoid market dislocation. I will argue that to succeed policymakers, ultimately, need to upgrade policies, as we have been calling for a while now at the IMF. The cost of inaction is high, as markets are signaling their restlessness with the status quo.

The world is recovering…
At the outset, let us look at the macroeconomic picture, which is an important anchor for global financial market developments. The IMF’s latest macroeconomic projections, released in mid-January, suggest that recovery is on the way, but we expect it will remain modest and uneven. Growth projections have been revised slightly downwards for the world, as the pickup in global activity is projected to be more gradual. You might think: “again!” But taking a step back, growth in 2016 is projected to reach 3.4 percent, up from 3.1 percent in 2015. This is a recovery. It is weak and uneven in different part of the world, but it is a recovery. Much needs to be done to secure these hard-won gains.
…at the same time, global financial stability is not assured as policy makers face a triad of challenges

Despite some positive news, our message continues to be that global financial stability is not yet assured. Policymakers need to face, upfront, a triad of policy challenges arising from: increasing vulnerabilities in emerging markets, persistent legacies from the crisis in advanced economies (such as high leverage), and weak systemic market liquidity. These challenges remain, and are a reason why market volatility persists.
Let me address some of these challenges, before turning to the policies needed to achieve the ‘Great Normalization.’

Rising vulnerabilities in emerging markets, . . .
Emerging markets face three important shifts. First, the commodity supercycle has come to an end just as credit booms are peaking in these countries. For example, since June 2014 oil prices have fallen by 70 percent and commodity prices have fallen by almost 45 percent. Why does it matter? It matters because corporates in emerging markets had been building large debt throughout the period of high commodity prices and ample liquidity conditions. We estimate that corporate and bank balance sheets are saddled with up to $3.3 trillion in overborrowing.1 Therefore, emerging markets are increasingly vulnerable to financial stress, economic downturn, and capital outflows.

There are, of course, winners and losers from the fall in oil and commodity prices in emerging markets, depending on whether countries are net commodity exporters or importers. But from a financial stability perspective, about one-quarter of outstanding corporate debt in emerging markets is from companies engaged in the oil and mining sectors. In some of these economies, borrowers are quasi sovereign, and thus represent a contingent liability on the sovereign balance sheet. At the same time, commodity exporting countries have seen corporate revenues fall. This corporate-sovereign nexus can put pressure on credit worthiness, and we have seen ratings for major emerging market sovereigns and state-owned enterprises that have already been downgraded.

A second shift in emerging markets is a tightening of external financing conditions. Emerging markets have benefited in past years from abundant access to liquidity and strong foreign portfolio inflows. However, normalizing interest rates in the U.S and an appreciating US dollar have tightened access to external finance and increased the burden of dollar-denominated debt. In this context, emerging markets will need to adjust to lower capital inflows, and in some cases, a reversal. Moreover, domestic financial conditions are also tightening, as nonperforming loans (NPLs) are recognized and domestic banks try to contain risks from their corporate exposure.

A third shift is taking place in China. As the second largest economy in the world, China plays an important role in driving global growth and increasingly in global financial markets. Growth in China is holding up even as the economy undergoes an important rebalancing: after all, growth last year was 6.9 percent and is projected at 6.3 percent in 2016. We do not believe that China is facing a hard landing, and recent data continue to bear this view out.

But the country is facing major policy challenges as it transitions to a growth model driven increasingly by consumption and services, rather than public investment and exports. Financial and corporate sector vulnerabilities have been rising—total credit to nonfinancial corporates rose from 124 percent of GDP in 2011 to 163 percent of GDP in mid 2015. These will need to be addressed as the economy is transitioning toward a more market-based financial system that discourages the buildup of new imbalances. The internationalization of the renminbi and greater financial integration with global markets represents an important step forward not only for China but for the international monetary system. This transition may become bumpy at times, but a strong commitment to reform and effective implementation with clear communication are essential.
Many emerging markets can still count on strong policy frameworks and buffers to weather these headwinds. Increased exchange rate flexibility, higher foreign exchange reserves, improved reliance on FDI flows, and domestic currency denominated external financing have enhanced their resilience to external shocks. Yet, not all emerging markets have strong policy buffers and in some cases they are depleting quickly, as the shifts these countries are facing are complex and difficult. This has been reflected in their bumpy ride throughout 2015 and the start of 2016.

. . . legacy issues in advanced economies
One of the reasons why financial markets are increasingly sensitive to developments in emerging and global markets is that advanced economies are still struggling with important legacies from the crisis: a weak and uneven recovery, high levels of debt in the public and the private sectors, low interest rates, and persistently high unemployment. This has been reflected in recent market movements, including falling equity prices and widening credit spreads, particularly for bank financials.

The U.S. is a brighter spot among advanced economies with its higher growth rate. It has made progress in addressing households’ housing-related debt overhang, and moved promptly to restore capital in its banks. Besides, U.S. monetary policy normalization has begun with a successful liftoff in December: the Federal Open Market Committee (FOMC)’s 25 basis point increase in Federal fund rates took place without any major market jitters.
But pockets of financial vulnerabilities have also emerged in the U.S. during a period of prolonged and exceptional monetary ease. Spreads had become overly compressed. The high yield market boomed, with funds supplied increasingly through mutual funds by retail investors searching for yield. Credit risks have become highly concentrated in the high leverage energy sector.

In Europe, there has also been some progress: monetary policy has been eased to counter downward risks to price stability, and this has helped support growth. But Europe still has to tackle important sovereign and banking vulnerabilities, which will be crucial to enhancing the effectiveness of monetary policy. Such effectiveness is currently blunted by crisis legacies. The stock of banks’ NPLs remains high: despite some improvement, it is still over 5.5 percent of banking assets or almost 900 billion euros. High NPLs undermine banks’ ability to lend—even at a time when quantitative easing has clearly helped banks repair their balance sheets by reducing funding costs and by helping to support economic activity. Cleaning up NPLs therefore remains a top priority! Europe also needs to complete its financial architecture—I will come back to this in a little while—to consolidate financial stability; and ultimately it will have to settle political tensions.

In a world where one of the lead economies—the U.S.—is recovering at relatively healthy pace, and others—the EU and Japan—are still struggling, policy normalization has implied diverging monetary policies. This, in turn, creates movements in exchange rate markets, with the appreciation of the US dollar. While a normal development, it generates tensions that warrant careful monitoring and strong macroprudential policy frameworks to contain potential risks.

. . . and weak systemic market liquidity
Another powerful challenge confronting policymakers is weak systemic market liquidity. Generally an ethereal concept for many, I am sure that fleeting liquidity is something that you, market practitioners, are extremely familiar with. And I take particular pride in emphasizing that we, at the IMF, have been at the forefront for some time now in pointing out this challenge.

In a world where the risk premiums are expected to decompress, this can unfold in an orderly or disorderly way. In the latter case, it could cause a vicious circle of firesales, redemption, and more volatility. Moreover, adjusting to new equilibria in markets and the wider economy poses an even greater challenge, given what appears to be brittle market structures and market fragilities concentrated in credit intermediation channels. Those vulnerabilities could materialize quickly as financial conditions normalize.

Tensions in market liquidity could exacerbate pressure on credit markets. The high yield bond market provides a good example. U.S. high yield securities are being increasingly held by mutual funds: 15 percent of the total high yield market was owned by mutual funds in 2006; this share reached almost 30 percent in 2015. This could be a problem, if the mutual funds that hold those bonds suffer from substantial liquidity mismatches on their balance sheets. They promise daily liquidity to investors but hold assets that are increasingly illiquid, because high yield debt issuers have seen their leverage rise over the year, and are more likely to fall in distress.

Highly indebted and fragile corporates could also suffer from funding stress, if credit risks in the high yield bond market rise and liquidity wanes. This could result in higher corporate defaults, amplifying bank chargeoffs and leading to an increasing number of credit rating downgrades.
What does this mean for global financial stability?

I would argue that the turbulence in financial markets that we have seen in the opening weeks of this year partly reflects the difficulties in addressing these challenges and their implications. The choices for policy makers are clear. We can:
Stay on a weak baseline that you might call the ‘Great Distortion’ of mediocre growth, asynchronous monetary policies, heightened vulnerabilities in some advanced economies and emerging markets that keep risks titled to the downside, and elevated market liquidity risks.
Or, we can upgrade policies to achieve a ‘Great Normalization,’ marked by stronger and sustained growth, converging monetary policies, and reduced vulnerabilities as we leave behind the ‘Great Distortion.’

The stakes are high because the weak baseline leaves us exposed to significant downside risks, which if they all materialize could lead to ‘Global Market Disruption,’ and an unwelcome rise in volatility and tightening of financial conditions. If this is prolonged, it could result in weaker growth, stalled monetary policy normalization, disorderly deleveraging in emerging markets, and amplified market liquidity risks.

Completing the policy upgrade
In terms of where we stand on policy, I want to emphasize that there has been progress, and that the ‘Great Normalization,’ while still quite far, is not unreachable. But I also want to underscore that to avoid the materialization of downside risks, the policy upgrade that we have recommended for some time remains essential, and is now more urgent. In short, not achieving a policy upgrade and falling into the downside scenario of ‘Global Market Disruption’ will be costly: by our calculations, three percent of global output by 2017!4

Escaping the ‘Great Distortion’ will require resolute policy action in 2016. The policy upgrade we are referring to at the IMF goes well beyond monetary and financial reforms. It encompasses fiscal and structural policies, and our policy recommendations on those issues are covered in our Fiscal Monitor and World Economic Outlook publications.

Actions speak louder than words. Where are we so far? On the monetary policy front, a lot has been achieved, even though there remains uncertainty about the path of U.S. monetary policy normalization. Expectations of successful normalization in the U.S. have decreased, as reflected in the divergence between the Fed’s stated intentions and market expectations. For instance, markets are pricing in an 80 percent chance that rates will be below the FOMC median projection by the end of next year, and an almost 30 percent probability of rates remaining at low levels (1 percent or less).5

But monetary policy should not be “the only game in town”. Euro area banks need to strengthen their balance sheets further by comprehensively tackling NPLs and the corporate debt overhang; this will ultimately enhance the effectiveness of monetary policy. In addition, policymakers must complete the banking union, so as to move financial stability onto firmer grounds. An essential step remains establishing a common deposit guarantee scheme. Equally important, we need a greater focus on system-wide financial stability. Who is really in charge?

Coming back to emerging markets, navigating what promises to be uncharted waters in 2016 will not be easy, especially in those countries with reduced policy buffers. In this context, strengthening surveillance over balance sheet risks, building resilience of both corporates and banks, while maintaining healthy sovereign balance sheets will remain crucial. In China, in particular, clarity and communication on policies will be essential to the country’s smooth integration into the world economy. Similarly, deleveraging the Chinese corporate sector will require great care and will have to go hand in hand with the strengthening of banks. Last but not least, at the global level, market liquidity should be reinforced by putting in place adequate policies and oversight of asset management and financial market structures.

A long and testing to-do list, I am afraid, which policymakers will need to address also amid rising geopolitical risks. But the ‘Great Normalization’ can be within reach if this to-do list is urgently completed.
Thank you.

Ambac Assurance Settles RMBS Litigation Against JP Morgan for $995 Million

NEW YORK, Jan. 26, 2016 — Ambac Financial Group, Inc. (Nasdaq:AMBC) (“Ambac”), a holding company whose subsidiaries, including Ambac Assurance Corporation (“AAC”), provide financial guarantees and other financial services, today announced that AAC and the Segregated Account of AAC have settled their RMBS-related disputes and litigation against JP Morgan Chase & Co. and certain of its affiliates (collectively “JP Morgan”).

Pursuant to the settlement, JP Morgan will pay AAC $995 million in cash in return for releases of all of AAC’s claims against JP Morgan arising from certain RMBS transactions insured by AAC. AAC has also agreed to withdraw its objections to JP Morgan’s global RMBS settlement with RMBS trustees.

Commenting on today’s announcement, Nader Tavakoli, Ambac’s President and Chief Executive Officer, said, “We are delighted to bring our RMBS-related litigation against JP Morgan to a successful conclusion. Today’s announcement validates our resolve and reinforces our confidence in our remaining RMBS-related cases. This settlement will have a positive impact on our fourth quarter 2015 operating results, as well as our claims paying resources. I want to thank our very capable legal and RMBS teams for their hard work and dedication in achieving this settlement. Today’s announcement is but one example of our proactive efforts to address portfolio losses and enhance value for our stakeholders.”

The financial impact of the settlement and other related information will be described in Ambac’s fourth quarter 2015 earnings release and 2015 Form 10-K filed with the SEC.

About Ambac
Ambac Financial Group, Inc., (“Ambac”), headquartered in New York City, is a holding company whose subsidiaries, including its principal operating subsidiary, Ambac Assurance Corporation (“AAC”), Everspan Financial Guarantee Corp., and Ambac Assurance UK Limited, provide financial guarantees and other financial services to clients in both the public and private sectors globally. AAC, including the Segregated Account of AAC (in rehabilitation), is a guarantor of public finance and structured finance obligations. Ambac is also selectively exploring opportunities involving the acquisition and/or development of new businesses. Ambac‘s common stock trades on the NASDAQ Global Select Market under the symbol “AMBC”. The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions on the ability to transfer Ambac’s common stock. Subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), any person or group of persons shall become a holder of 5% or more of Ambac’s common stock. Ambac is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, we use our website to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates to the status of certain primary residential mortgage backed securities litigations. For more information, please go to www.ambac.com.

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