European central banks work on digital currencies

FRANKFURT: The Swedish Central Bank and the Bank of England carry out researches on whether they should start issuing Central Bank Digital Cash (CBDC) and compete with bank credit as a means of payment.

International Movement for Monetary Reform-IMMR that operates in more than 30 countries gathered international experts, central banks, researchers and banks to discuss the projects and proposals for a sustainable money system as well as design of digital currencies on June 15.

Miguel Fernandez Ordonez- Former governor of Banco de España; Carl Andreas Claussen Senior Advisor, Central bank of Sweden and Martijn van der Linden Professor of New Finance at The Hague University of Applied Science discussed the topic.

Dr. Artuğ Çetin, who also attended the conference explained the studies of European Central Banks. “The system is producing Money and offering it as credit because today’s system is not working anymore. Today money volume is equal to credit volume. We’re only producing money by getting into debt. This is the main problem that creates financial crisis. This money system is overvaluing the prices of the assets. The overvalued assets create different crises: mortgage crisis, share crisis etc. Turkey is one of the potential countries that can change its money system and make its own money more valuable, especially in today’s situation as Turkey is in debt and its money lost value,” he said.

The Australian Prudential Regulation Authority has taken the brakes off the struggling mortgage industry by telling lenders they can change the way they assess customers’ ability to meet repayments.

Two months ago Apra flagged changes to so-called serviceability requirements by no longer expecting banks to ensure customers could still repay their loan if its interest rate increased to at least 7%.

But the regulator, which has spent the last two years cracking down on loose lending, said on Friday that banks can set their own minimum interest rate floor and make their calculations using a 2.5% buffer.

That means borrowers on a typical 4% mortgage rate can expect to be assessed at 6.25% rather than 7.25%, enabling them to immediately secure larger loans and possibly helping to reignite the moribund housing market.

Analysis by ratecity.com.au showed a family on an average household income of $109,688 would be able to borrow up to around $60,000 more if their loan was assessed at 6.25%.

The average single person would be able to borrow up to around $50,000 more under the same scenario.

The leading independent economist Stephen Koukoulas said Apra and the Reserve Bank were “trashing financial stability” with the move which comes despite clear signals from the banking royal commission of lax lending standards in the industry.