samchain/econo-pairs-v1 huggingface dataset:
BIS Review 7/2000  12  4.3.2. The importance of “proper” incentives  It is important to have incentives which reflect the real costs connected to various payment services if participants are to come up with their own solutions balancing risk against efficiency. A pertinent example may be the regulations concerning loans in the central bank. It is a basic responsibility of the banks to ensure that liquidity is sufficient to cover settlement. The main rule for settlement in Norges Bank is that there shall be adequate cover in the account. If, for one reason or another, a bank does not have sufficient cover, it must turn to the market for financing. If necessary, the settlement should in part or in its entirety be delayed so as to give the institution enough time to obtain sufficient liquidity. Too easy access to loans in the central bank in situations where financial stability is not at risk involves costs in that it weakens banks’ incentives to address elements of risk in the payment systems and presents the customer with prices which do not reflect the risk attached to various payment services. 4.3.3. The importance of competition  The stipulated regulatory framework affects competition, such as who is allowed to initiate new payment services. Competition is important, both for improving the use of known, reliable payment services and for the development of new services.

The question we ask is whether this levelling off is permanent or whether we may expect a further reduction in the use of cash. Let me briefly outline three factors I believe may be of some significance: First, it has become less expensive to use cash in the 1990s. Cash is not an interest-bearing instrument. As such, forfeited interest income is part of the “cost” of using cash. A declining interest rate in the 1990s has substantially reduced this cost, both for the public and banks. Second, the public has been spared the real costs of cash use, while other payment instruments have increasingly been assigned full-cost prices. And third, developments in new payment instruments for small payments - cash cards - have progressed slowly. This is probably in part because we already have a well-developed EFTPOS infrastructure in Norway, and perhaps in part related to what I mentioned above - that cash continues to be an efficient and inexpensive alternative. 7  EFTPOS= electronic funds transfer at the point of sale. 7  BIS Review 7/2000  Predicting further developments in the use of banknotes and coin, both internationally and in Norway, is a difficult task. Low inflation, low interest rates and greater access - for example, via the EFTPOS system’s cash-back arrangement - will promote the further use of cash, whereas new technological solutions will reduce it. Developments in relative prices will also be of importance.
What I just described fits in with the development in Sweden. When the bank crisis came, we had no deposit guarantee system but the government found it necessary instead to issue a general guarantee, sometimes referred to as a blanket guarantee protecting all depositors but also other counterparts to Swedish banks, with the exception of the shareholders. This guarantee was in fact much broader, and potentially more expensive, than a limited deposit guarantee. After the crisis, Sweden has introduced legislation on a system of explicit limited deposit protection. All current deposits up to a certain amount, approximately 35 000 US dollars, are covered. For this, the banks pay a yearly premium, currently 0.10 percent on average of the total amount of deposits. Other parts of the financial sector In my presentation I have focussed on the banks, but an efficient financial sector must also contain a broad range of institutions and markets. They can specialize in certain activities and instruments and improve competition and diversity. They may also reduce the risk concentration on the banking system which implies that the overall economy will be less gravely hit if there ever is a systemic banking crisis. Compare for example Thailand in 1997, where the banks played a dominant role and Russia in the same year where banks played a minor role. Both countries were hit by financial problems but the overall effects on the economy were much worse in Thailand. In Sweden many different types of institutions and markets perform specialized roles alongside with the banks.

Underlying inflation is now estimated to be between 2 percent and 2½ percent, which is one percentage point higher than one year earlier. Chart 9: Norges Bank’s key policy rate projections Saving, investment and spending decisions are influenced by expectations concerning future interest rates. Communication on the future course of monetary policy, including the publication of key policy forecasts, therefore plays an important role. Even though the key policy rate has been kept unchanged, Norges Bank’s forecasts for the key policy rate ahead were revised down through 2013. The downward revision of the key policy rate forecasts primarily reflects lower growth forecasts for the Norwegian economy. There are also prospects that wage growth will be somewhat lower than envisaged earlier. Growth among our trading partners and interest rates abroad have been somewhat lower than projected one year earlier. At the same time, banks’ lending margins are somewhat higher than expected. Chart 10: Inflation and capacity utilisation The analyses in the latest Monetary Policy Report published in March suggested that the key policy rate should be held at today’s level in the period to summer 2015, followed by a  2  BIS central bankers’ speeches  gradual increase. With such a path for the key policy rate, there are prospects that inflation will be slightly below, but close to 2.5 percent throughout the projection period. Capacity utilisation may edge down over the next year and thereafter move up to close to a normal level.
As the Mainland continues to expand its international trade and investment, and becomes more economically integrated with the rest of the world, Chinese traders, investors and financial institutions will face growing foreign exchange risk if they continue to rely on the US dollar. Thus, it is a natural development for Mainland China to allow a wider use of RMB in its cross-border trade and investment. From Hong Kong’s perspective, this policy move presents unprecedented opportunities to us, as we can leverage on our strengths as an IFC and our unique position as a gateway between China and the world to provide a premier testing ground for offshore RMB activities. Offshore RMB business has been conducted in Hong Kong since 2004. While the scope of RMB business was limited to retail banking initially, it has been expanded substantially to cover bond issuance, trade settlement, wealth management and further to ODI settlement in January this year. These developments have built a solid foundation for developing Hong Kong into an offshore RMB center. Let me briefly summarise these developments in three dimensions. The first dimension is RMB financing. Hong Kong is the first place outside the Mainland that has developed an RMB bond market. So far, 34 RMB bonds have been launched in Hong Kong with a total issuance size of 80 billion yuan.

Since the introduction of the QDII scheme, about $ billion worth of investment quotas have been granted up to September 2010. It is likely that a significant portion of these moneys is managed out of Hong Kong. In fact, over 40 Mainland companies providing fund management, securities and futures, insurance, and other services have already established a presence in Hong Kong to manage the funds flowing out of the Mainland and engage in fund advisory businesses. We expect the process of financial liberalisation in Mainland China to be a gradual and controllable one, as it has always been. It is however important to note that this process has begun and Hong Kong is bound to be a key destination as well as the management hub for the expected gradual increase in portfolio flows from Mainland China. This is a trend that financial services providers should not ignore in their business planning process. The wider external use of the RMB Now, let me move on to the second important trend: the wider external use of the RMB. Since the global financial crisis, Mainland China has taken steps to promote a greater use of RMB outside the Mainland. The rationale behind this policy move is easily understandable. At present, much of the cross-border trade and investment between the Mainland and other jurisdictions are conducted in US dollars.
These will help affected professionals, including women and working mothers, to find jobs suitable for their skills. We believe that industry professionals such as yourselves will be able to make significant contributions towards this initiative, and we urge you to participate in any way that you can. BIS central bankers’ speeches  3  20. As leaders in your respective companies, we hope that you will be welcoming to those looking to rejoin the industry, and acknowledge the experience that these professionals bring to the table. 21. Thirdly, given the challenging environment in financial services, it is more important than ever for employees to take charge of their own learning, careers, and development. Each of you can do much to encourage and institute training initiatives in your company, and to allow more time for employees to pursue further education in their specialisations. We look to FWA to continue being that strong influence in encouraging professionals to pursue continual rejuvenation, both in terms of skills and mindsets. Celebrating successes 22. I am glad to say that many financial institutions are with us in the journey of developing talent in the sector. In fact, a number of them are institutional members of FWA, who not only are close partners with us in building a strong manpower pipeline, but are also especially supportive of nurturing female talents. 23. For instance, Barclays, our host today, is the first bank in the world to join the United Nations initiative, HeForShe, which promotes gender parity in corporations.

First, strengthening talent development for individuals to achieve their fullest potential. BIS central bankers’ speeches  1  •  MAS works in close partnership with the industry to provide training pathways and training opportunities for Singaporean finance professionals. The pursuit of continual learning related to financial sector competencies will help each and every one to attain mastery in their respective fields and achieve their fullest potential. •  MAS has a range of schemes to support the learning journey at all levels, from undergraduates and fresh graduates, to early/mid-career professionals, and to those in leadership positions. We have prepared a “SkillsFuture for the Financial Sector” infographic that you can find at your table which provides more information on these schemes. 9. For example, under the Finance Scholarship Programme (FSP), MAS supports early-mid career Singaporeans in developing specialist capabilities through post-graduate studies, in areas such as risk management, speciality insurance and quantitative finance. The recently launched Financial Sector SkillsFuture Study Award will also provide an additional channel of support to enable individuals to upgrade their skills through a wider range of specialist programmes. 10. Second, beyond competency-based training, cross-functional and international exposure is a key ingredient in building up leaders. We want to ensure that there are Singaporean professionals taking up leadership positions in the key financial institutions.
As things look now, there is considerable probability that global interest rates will remain low over a long period of time, and then monetary policy will have to find other ways of working to attain the inflation target than those we are used to, and many of the measures will have consequences for the balance sheet. We need to endeavour to attain a better analysis of how measures that have an effect through the balance sheet affect the economy and become as clear and systematic when we talk about these as we have tried to be with regard to steering interest rates. I intend to begin with a historical retrospective – focusing on the past 30 years – and to describe how monetary policy has developed over time. Then I will move on to the challenges that monetary policy has faced and that have led to the use of new tools. This takes me to the international discussions about the monetary policy toolbox, and, in conclusion, I would like to discuss what opportunities and limitations the Riksbank Inquiry’s proposed new act entails. The development of monetary policy – a retrospective Ever since central banks in the modern sense were created, their objective has been clear: to provide the economy with a payment system and with a means of payment and to ensure that the value of these funds remains stable over time.

James McAndrews: Mortgage contract design – implications for households, monetary policy, and financial stability Opening remarks by Mr James McAndrews, Executive Vice President and Director of Research of the Federal Reserve Bank of New York, at the “Mortgage Contract Design: Implications for Households, Monetary Policy, and Financial Stability” Conference, Federal Reserve Bank of New York, New York City, 21 May 2015. *  *  *  The views expressed in this speech are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of New York or of the Federal Reserve System. Accompanying charts can be found at the end of the speech. Good morning, and welcome to the Federal Reserve Bank of New York. Today is the second and final day of our conference on mortgage contract design. We are hosting this conference, in association with the NYU Stern Center for Real Estate Finance Research, because we view mortgage design as an important policy issue, with implications for monetary policy, household finance and risk management, as well as for the structure and stability of the financial system. Mortgage debt is, by far, the largest household financial liability. According to New York Fed data 1, mortgages and home equity lines of credit make up 73 percent of U.S. household debt, amounting to $ trillion in liabilities outstanding.
They are problems not limited in importance to foreign exchange traders and bankers but are vital factors in the flow of raw materials and finished goods, in the maintenance of high levels of production and consumption, in the establishment of a satisfactory standard of living for all the people of all the countries on this earth.” 3 These wisely spoken words are as relevant today as in 1944. When the IMF and the World Bank were established, it marked the beginning of a period of international economic and financial cooperation which over time embraced virtually all the countries of the world. The Bretton Woods Institutions have served their membership well. When needed, their policies have adapted promptly and timely to changes in the world economy and the global financial system. The IMF, with its crucial competence, has been a key forum for policy collaboration. Its surveillance and lending activities are unique. I strongly believe that global  3  Cited inter alia in Harold James: International Monetary Cooperation since Bretton Woods, The International Monetary Fund, Washington D.C., 1996. 2  BIS Review 22/2010  governance is best served by a statutory-based international economic order, with effective and legitimate multilateral institutions where all countries are represented. In the recent decade, the rapid expansion of many large emerging economies has greatly altered the global economic landscape. Most dramatic is the re-entry of China as a major economic power.

At the same time, the growing imbalances in the world economy became and continue to be a source of instability, in addition to spurring protectionist tendencies. It is perhaps time to honor some fundamental principles, such as the one noted in an IMF Pamphlet from 1992: “The philosophy of the Articles of Agreement is based on the superiority of free trade as the organizing principle of international economic interaction.” 4 Lessons from the crisis The joint, massive, and unprecedented policy responses that were put in place as the crisis unfolded surely deserve due credit. As Mr. Subramanian here at the Peterson Institute noted in the Financial Times in late December 2009: 5 “What is striking about the influence of economics is that similar policy responses in the fiscal and monetary areas, and non-responses in relation to competitive devaluations and protectionism, were crafted across the globe. They were evident in emerging-market economies and developing countries as much as in the industrial world; in red-blooded capitalist countries as well as in communist China and still-dirigiste India. If ever there was a Great Consensus, this was it.” A key lesson from the crisis is the need for multilateral cooperation and collective action. It relates to the framework for polices on prevention, resolution, reform and implementation. It also relates to the institutional set-up.
Good cop/bad cop Speech given by Sam Woods, Deputy Governor, Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority  Mansion House City Banquet, London 25 October 2018  I am grateful to Ivar van Hasselt and Joanna Keeble for their assistance in preparing this speech and to other colleagues for comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Lord Mayor, Ladies and Gentlemen, Andrew and I have worked together for a long time, and we’ve often found it useful to adopt a regulatory good cop/bad cop routine. In the context of Mansion House, the rules are simple: whoever gives the shortest speech is good cop! Now Andrew I timed you just now, and with a few edits I think I can sneak in under the line… But why am I talking about the police at all? Police metaphors are dangerous, but as it happens “good cop/bad cop” is a good analogy for two different aspects of our role as regulator:   First, bad cop: areas where we need actively to insert the public interest into privately or mutually-owned firms, because some of the costs of their failure would be externalised and they therefore have an incentive to run too much risk. Here there is inherently a degree of conflict between regulator and firm – it is the way our system is set up. Capital is the most obvious example of these battlegrounds, where reasonable people with different objectives quite naturally come to different answers.

Compared to our framework for things like capital, liquidity and accountability, the regulatory framework for operational resilience is thoroughly under-developed not only here in the UK but also internationally. This matters more than it used to for a number of reasons, but let me pick out two. First, the emergence of cyber-attacks is a clear and present danger to the financial system which our forebears simply did not have to worry about. And second, as more and more of us access banks and insurance companies digitally, with a major programme of bank branch closures in full swing, and in the age of social media where problems become very visible very quickly, operational failures hurt more than they used to. For the same reasons the Treasury Select Committee is rightly taking a strong interest in this topic. 1  £ as at year-end 2017 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  We therefore published during the summer – jointly between the PRA, FCA and Bank as supervisor of market infrastructure – a discussion paper proposing a new framework for thinking about these issues. The central idea is a simple one: how much operational disruption to key business services should firms, the PRA, the FCA, and the wider Bank of England be prepared to tolerate? We call this ‘impact tolerance’. The focus of our future policy will be on the continuity of the business services that a firm’s customers and the wider economy rely upon.
But, as disappointing as this might sound to some of you, in building a new financial system I think there are limits to what can be achieved through a “heads on sticks” strategy. For me at least, the financial crisis was in the main not a story of individual fallibility, greed or hubris. There are 400,000 people employed in banking in the UK. The vast majority of those, perhaps even 99%, were not driven by individual greed and were not professionally negligent. Nor, even in the go-go years, were they trousering skyscraper salaries. It is unfair, as well as inaccurate, to heap the blame on them. For me, the crisis was instead the story of a system with in-built incentives for self-harm: in its structure, its leverage, its governance, the level and form of its remuneration, its (lack of) competition. Avoiding those self-destructive tendencies means changing the incentives and culture of finance, root and branch. This requires a systematic approach, a structural approach, a financial reformation. A financial reformation I want to argue that we are in the early throes of such a financial reformation. And that this will help to deliver a more socially useful banking system. Let me mention some of the more important of these reform strands. These fall into five categories – the five “c”s: culture; capital; compensation; credit; and competition. It is easier to will the ends on these issues than it is to divine the means. How exactly do we change banking culture?

With returns sky-high, there was then a great sucking sound as both people and monies were drawn into banking, in particular the high-risk/high return, sharp-suited parts such as investment banking. A generation of scientists’ and mathematicians’ heads were turned towards finance. Funds flowed into the bank money machine, with balance sheets rising fivefold in less than 20 years, much of it to support short-term trading activities rather than long-term investment. Yet even while it was still inflating, this bubble was already having silent costs – costs to the economy and indeed costs to other parts of banking. Many of the best people and the best financial resources were drawn away from other sectors, including the retail banking sector. Industries outside of finance were starved of sunlight. The costs of this great sucking sound are only now being properly understood. Recent research by the Bank for International Settlements suggests that, once bank assets exceed annual GDP in size, they begin to act as a drag on growth.3  1  Philippon and Reshef (2009). 2  Haldane (2011). 3  Cecchetti and Kharroubi (2012). 2  BIS central bankers’ speeches  Why? Because human and financial resources are drained from elsewhere in the economy. The sectors hardest-hit by this financial vacuum-cleaner effect are R&D-intensive businesses (who might otherwise have attracted the scarce, skilled labour that flowed into finance) and businesses reliant on external funds (whose financial cake was instead being eaten by the banking system). These are the very businesses that today we are seeking to re-nurture.