samchain/econo-pairs-v1 huggingface dataset:
Lars Nyberg: Cash and payments – what lies ahead? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a meeting arranged by Sparbanksakademin och Handelns tvecklingsrad, Stockholm, 5 February 2008. *  *  *  To most people the Riksbank is associated with money. This is not so surprising. We supply the country with banknotes and coins and on each note one can see the signature of the Governor of the Riksbank. But we are not just concerned about banknotes and coins, which are tools to manage payments. We are also concerned about payments in a much broader sense. This is because the Riksdag, the Swedish parliament, has decided that we shall promote a safe and efficient payment system, as one of our tasks. Quite simply, this means that we shall ensure the financial system in Sweden is constructed in such a way that people (and companies) can manage their payments in a safe manner – and, moreover, at a reasonable cost. When we speak of ”financial stability”, which we do frequently, it is essentially the means to make payments safe and efficient we are referring to. It is, of course, no coincidence that the Riksdag has given us this task: If people were unable to receive their salaries and if banks and companies were unable to make their payments this would rapidly have a major impact on society.

The most well-known e-payment company is PayPal, which is registered in Luxembourg, but which is active around the world. Almost exactly ten years ago Stefan Ingves, the current Governor of the Riksbank, held a speech on the theme “Electronic money from a central bank perspective”. He then said that “the situation today on the e-money front can, put briefly, be described as there being a lot  5  In 2006, 85 per cent of all giro transfers and other credit transfers were made electronically, the remainder were paper-based. In terms of value, 96 per cent of these transactions were made electronically. Sveriges Riksbank. 4  BIS Review 16/2008  happening at different places in the world, although a breakthrough on a broad front is still in the future”. This summary can probably said to still hold today. 6 But not all development is tied to e-money. Mobile phones are now also used to make payments. For example, we can pay our bus and underground journeys by sending a text message. A few seconds later we receive a text message back from the operator, confirming that a ticket has been purchased and that it can be shown to the driver or conductor. If one has a prepaid card the cost is drawn directly, otherwise it will be put on the telephone bill. There are shops that have begun to use smart cards.
There is little reason to suppose that the authorities are likely to be any better than the private sector at finding the way forward. Nor is it obvious that national authorities have the locus or leverage to insist on a particular model. Much the same reservations would apply to any European level intervention. That said, what the public sector can contribute, in this area as in financial markets more generally, is a removal of barriers to competition, requirements on the provision of information and the easing of constraints on the effective functioning of the market. If consolidation does indeed take place, the public authorities may also have a role in ensuring that heavily concentrated market infrastructure providers do not exploit their position. But at a European level we are at present still some way from this situation. And internationally we need to work together, within the WTO and the IMF, as well as within the various international regulatory and professional bodies, to promote the global free movement of  BIS Review 48/2001  3  capital, because in this context – as in the case of free trade – the potential benefits are not confined to national or even regional boundaries but increase within wider international participation. Mr Chairman, we have come a long way in improving the effectiveness of our financial systems, and there are powerful forces at work pushing us in the right direction – including, within Europe, the introduction of the euro. But we still have a very long way to go.

The asset management industry is indeed a sector where there is robust activity that should not be destabilised. Moreover, the reintermediation of the deposits of institutional clients and companies cannot be justified on the basis of regulatory ratios (in view of the strict treatment of these deposits in the draft  BIS central bankers’ speeches  3  regulations/reforms). Furthermore, the broadening of the deposit base of banks should not happen at any price: we are monitoring developments in the remuneration of deposits very closely. •  Lastly, securing maturity transformation activities can be achieved by encouraging the use of stable sources of financing. I have just talked about deposit-taking, but I should also mention the role played by the issuance of covered bonds. Backed by a dedicated portfolio of underlying assets, these securities proved to be resilient during the crisis and have since played an important role in the funding of European banks. 2. On the assets side  The rebalancing of banks’ liabilities structure is not sufficient on its own. In a general way, banks would also benefit from systematically making sure that their maturity transformation activities are profitable, by ensuring that the return provided by assets is proportional to the risks incurred. I would like to stress here that the greatest vigilance is required when the loans extended do not generate sufficient margins.
[...] The fundamental impulse that sets and keeps […] (it) in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization […] (as a) process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” When confronted with this state of affairs – a state of affairs that is admittedly disquieting and unsettling – the worst possible reaction is to retreat into nostalgic denial, and to pretend that we are living in temporary blips of disequilibrium, in exceptional situations, that will at some unspecified point in time revert to a blissful state of economic, social, cultural, political and institutional equilibria. The only reasonable approach is to endeavour tirelessly and to the best of our technical ability to navigate a reality that is complex, characterised by change and prone to crises. If there is no going back, then going forward we can only go forward. Navigating this reality requires us to be constantly vigilant to the risks involved, a task that requires us to understand reality and to deal with it to best of our technical competences. Change brings with it challenges and opportunities, which challenges and opportunities easily morph into each other, and generate further challenges and opportunities. Page | 10  Of course, the financial system, like any other, cannot reduce risk to zero.

And if it were possible there would be no real reason to let the monetary policy decisions be made by a Board with six members. It would be enough to have a single wise decision-maker. In recent decades, however, the trend has been in the opposite direction. All over the world, it has become more and more common to let monetary policy decisions be made by a group of individuals – a committee or board – rather than by a central bank governor alone. Probably the most important explanation for this is that many central banks have become more independent in this period. This has made it seem more natural to delegate the right to make decisions to a group of people rather than to one individual. This development has meant that research on monetary policy decision-making in groups has accelerated. 1 One result that has emerged is that groups tend to make better decisions than individuals. 2 This may be because the members of the group have different backgrounds, knowledge and experience that they can bring to the monetary policy discussion. These differences mark the decisions that the group makes in different ways so that these decisions tend to be better than the decisions that an individual would have made alone – the whole becomes greater than the parts. This applies irrespective of how the decision is made – by voting, as at the Riksbank, or in some other way.
The Minister of Finance was decisive, and after a single “one-on-one” discussion with me, he gave the approval for the Central Bank to proceed with implementation of the intervention plan. The rest is history. The newly appointed directors and the managing agents, with the Central Bank in the background, were able to stabilize the bank within a short period of about 2 weeks. Thereafter, within a few months, the bank was able to infuse new capital and thereby qualify to exit from the close monitoring system of the Central Bank, in less than a year. This episode will be an important lesson for those who wish to study the way Governments and Central Banks should cooperate to bring stability, in the face of any instability in the banking sector. It also confirmed the validity of an important annotation in Exter’s Report. Let me quote once again from the first Chapter of his Report: “Many of its (Central Bank’s) powers may go unused for long periods, because they are designed for particular situations, some of which may never arise. Others are intended for use only in crises or to forestall a crisis, but prudence dictates that they be included now, so that they will be at hand in case of need. …”.

But in certain cases I believe that some tax claims can be of a higher value and more liquid than in others. In other countries, doubts about the situation in the public sector may be greater and the question arises as to whether or not tax claims are actually liquid or have the capacity to absorb losses in real time. Because if you want them to be accepted as liquid assets, they must be immediately available. And call me old-fashioned, but I think that hard cash is the best form of capital. Where does Spain sit on the spectrum that you have described? The European Commission will comment on that from the perspective of public aid in its evaluation. In our Comprehensive Assessment last year we were not very enthusiastic about it (DTAs) but in the end we accepted it on legal grounds. But the most important thing for me is to have a level playing field and, as such, any legal clarification that arises as a result of the European Commission’s assessment will be welcome. The Spanish government states that this was designed in collaboration with the EU institutions, given that we were under the financial assistance programme for banks, and it appears to be rather calm. That’s what I said, we have to look at how things were done, under what circumstances and what its real liquidity is; it will depend on government liquidity, tax revenue etc… And there are very different tax arrangements involved.
4 One strategy for maintaining financial stability can briefly be described as consisting of three different parts: a clear regulatory framework, an efficient day-to-day prudential supervision and oversight and a preparedness to act strongly and quickly in a crisis. Exactly what role is played by the central bank in this strategy is also something that varies from country to country. Many central banks contribute in different ways to the formulation of the regulatory framework for the financial system, for instance, by giving their views on proposed bills and by participating in committees where domestic and international legislation is formulated. With regard to the day-to-day prudential supervision and oversight, one solution that is applied in Sweden and other countries is that the supervision of the financial sector is delegated to a special, independent authority with the power to apply sanctions. In other countries the supervision work is done by the central bank itself. In the cases where supervision is delegated to an independent authority, the central bank usually has an oversight role that entails regularly monitoring and analysing developments in the financial sector and presenting its views of the risks in the financial system. Ever since the bank crisis at the beginning of the 1990s, this has been perceived as a very important task in Sweden; in fact, it could be argued that the bank crisis was allowed to arise partly because no authority previously had the specific task of monitoring the overall financial stability.

Inflation targeting is thus much more demanding than a fixed exchange rate regime with regard to the central bank’s analytical work and its ability to communicate its policy. Whether this is something that should be regarded as a disadvantage or not is of course a question of judgement. For the Riksbank, the transition to inflation targeting heralded the start of a fairly comprehensive increase in competence in the field of economics. The number of PhD economists at the Riksbank has risen sharply in recent years and our research in areas related to monetary policy has expanded considerably. Financial stability Let me now move on to the other central component of an efficient payment system. This concerns the stability in the financial system; particularly in the financial institutions that supply payment services, i.e. primarily the banks. Financial stability is currently regarded, parallel to the price stability target, as the main task of a modern central bank. The financial system has essentially three main tasks: converting savings into financing, managing risk and providing efficient channels of payment. Let me give a basic example. A bank receives savings from households which it then lends to other households or to companies that need to invest. Banks are specialists at valuing, monitoring and managing credit risks in the households and companies to which they lend.
If you go into a food shop today, you will find Swedish blood pudding as well as Italian salami, Chinese noodles, American peanut butter and coffee from Brazil. The same applies to most other types of goods. Increased trade also benefits the developing countries, which has been shown in various studies. Jeffrey Sachs and Andrew Warner at Harvard University have found that welfare in developing countries with an open trade policy has increased by 4.7% per year between 1970 and 1990, compared with 0.7% per year for those with closed borders. This means that a country can create more than six times as much welfare each year, just by deregulating its trade. No development assistance project in the world comes anywhere near such figures. The price for shutting oneself off from world trade is very high. Another important trend in recent years has been the deregulation of the international capital markets and the new information technology enabling savings capital to move in a second between different parts of the world, at almost zero cost. Capital is not really different from any other type of good. Some people need capital, and are willing to pay to borrow it. Others have savings and can sell the opportunity to use these for a period of time. Deregulation has meant that savings can to an increasing extent be channelled to where they will be most useful.

However, the IMF has become considerably more open in recent years, and today material on almost all activities is available, not least on the IMF’s website (www.imf.org). A second example is the issue of capital account liberalisation. Besides working for opening up the capital account in many countries, we strive for the long-term goal of giving the IMF a clearer mandate to regulate issues relating to the international capital market. A third issue where we have been active is developing a body of rules for how private creditors are to contribute to the financing of countries’ finance requirements in crisis situations. The increased attention in the media about the IMF and the World Bank has arisen during a period when the functioning of these organisations and their mandate have been discussed intensively internally as well. The growth of private capital markets has resulted in many countries no longer requiring financing from the IMF. At the same time, the need to build institutions, regulation and coordination is increasing, not least in the financial sphere. Some radical groups have argued that the IMF should be abolished, or considerably reduced in size. Others believe that the organisation should take on more responsibilities, such as within areas concerning the labour market, the environment and money laundering. Sweden is among those who believe that the IMF can only be an efficient organisation if its mandate is kept relatively narrow. The IMF shall work with financial stability, and in particular macroeconomic issues.
5 The results of the different studies differ somewhat, but the overall assessment based on research in this field is that a change in the exchange rate in the short term leads to a change that is half as great in import prices. The research has also shown that the pass-through of exchange rate changes on consumer prices is much less than on import prices. 6 The most obvious explanation for this is that import prices do not constitute the entire consumer price index (CPI), only around one third of it. 7 The fact that the percentage is so low is partly due to several domestic factors (transports, various types of service, and so on) affecting the final price for imported goods charged to the consumer. 8 As the example of the cheese importer showed, there may also  1  This example does not claim to offer a correct description of the Swedish cheese market, but merely serves as an illustration of the effects of changes in the exchange rate on inflation. 2  See, for example, Apel, Friberg and Hallsten (2004). 3  What is known as pricing to market is a reflection of this: in the example we use it would mean that the French exporter determines different prices for different export markets, such as Sweden. This could lead to a reduced tendency to change the price in Sweden as a result of exchange rate fluctuations.

During the recent crisis the currencies in “high interest rate countries” such as Australia and New Zealand weakened substantially against “low interest rate countries” such as Japan and the United States, which once again led to a speedy settlement of carry positions. One contributory factor to the inflows of capital to the emerging markets in Asia and Latin America, as I mentioned earlier, is the relatively low interest rate levels in the “old” industrial nations in North America and Europe. The low interest rates in, for example, the United States, make it profitable to borrow dollars in order to invest in other currencies that provide a higher return at given exchange rates. Several of the countries that are now experiencing capital inflows are unwilling to allow their currencies to appreciate against the US dollar despite the fact that the inflows are creating appreciation pressures. This is understandable in the light of experiences from, for instance, the Asian crisis. Exchange rates can be come highly volatile if they are completely adapted to highly volatile capital flows. But at the same time, the unwillingness to allow the exchange rate to appreciate probably strengthens tendencies towards capital inflows, as it enables speculation in carry trade, as I described earlier. Let me now leave the “speculative” element of the foreign exchange market and talk about the more long-term development of the exchange rate.
The insurance sector has not been left out. The entry into force of the European regulatory reform Solvency 2, also on 1 January, marks a profound break. We all know that “Solva 2” may still be improved; but it is a significant step forward. In this respect, it is important that all institutions continue their efforts to improve governance and enhance the quality of estimates and data submitted to supervisors, in order to ensure an adequate monitoring of risks, in  2  BIS central bankers’ speeches  particular those linked to the persistence of very low interest rates. At the international level, other challenges lie ahead, notably the definition of systemic groups – it must be similar on both sides of the Atlantic, like you I am sensitive to this–, harmonised capital requirements and resolution strategies. However, the soundness of the financial system does not depend solely on prudential regulations. It also depends on the confidence that economic players and the public, households and businesses, have in their financial system. In this respect, the efforts of financial institutions to protect their clients are essential. In 2016, what is needed is a firm implementation of the Eckert law on dormant bank accounts and unclaimed life insurance policies, and greater freedom of choice of loan insurance on real estate loans. And, of course, more than ever, we need to step up the fight against money laundering and terrorist financing. New measures have already been taken, some are being strengthened.

François Villeroy de Galhau: Challenges for France’s economy and financial sector in 2016 New Year Address by Mr François Villeroy de Galhau, Governor of the Bank of France, Paris, 18 January 2016. *  *  *  Ladies and gentlemen, Thank you for coming here today to this magnificently restored Golden Gallery. This is the first time that I am giving this address as Governor of the Banque de France, but it is an auspicious tradition that brings us together. I would like to start by extending my warmest wishes to you, your colleagues and your institutions. 2016 has already been marked by volatility: weak financial markets and commodity prices, from China and the Middle East; political uncertainty in Europe, in Southern Europe, in Eastern Europe, North-Western Europe with the British referendum, and even in Central Europe with the refugee crisis. It is our duty to be vigilant, but we must also, on the one hand, distinguish real information from background noise and real challenges – and there are no shortages of them – from the sensational and sometimes excessive statements at this start of this year; on the other hand, in the face of current volatility, we must stick to our mediumterm objectives. This evening I will not discuss the Eurosystem’s monetary policy as we are in the “silent period” leading up to the Governing Council meeting this Thursday. Such longterm strategies also apply to the reforms in Europe and in France.