samchain/econo-pairs-v1 huggingface dataset:
35 The economic policy choices made by the authorities and Norges Bank as manager of the Government Pension Fund Global must have legitimacy and credibility. Without long-term thinking, the management of our wealth will not be a success story. So far, it would seem that we have managed to mix and drink an adequate dose of Felix Felicis, but we must not let down our guard. Thank you for your attention. 33  See for example the obituary “Gunter Sachs”, in The Telegraph, 9 May 2011: http://www.telegraph.co.uk/ news/obituaries/8503379/Gunter-Sachs.html  34  Sigurd Høst (1936): Norges historie: med viktigere avsnitt av Danmarks og Sveriges historie. For middelskoler og ungdomsskole [History of Norway], in Norwegian only, Gyldendal Norsk Forlag, Oslo. 35  J. K. Rowling (2006): Harry Potter and the half-blood prince, London : Bloomsbury. 10  BIS central bankers’ speeches

All this will make for an interesting November round where, as I indicated earlier, we will look carefully at all the data, making our decision firmly in the light of the inflation target we have been set. Maintaining financial stability Having discussed monetary policy, I now want to turn to the other key role of the Bank of England - that of maintaining stability in the overall financial system. This does not, of course, mean that we  BIS Review 87/2001  3  supervise individual banks, building societies and investment firms. Since 1997, that role has been carried out by the FSA. The Bank, by contrast, is responsible for providing analysis of potential threats to the system as whole. We are responsible for financial system infrastructure, in particular payments systems. And, in exceptional circumstances, we would be responsible for undertaking official support operations to prevent difficulties in one institution affecting other parts of the financial system. Of course, we cannot do these jobs in isolation. Co-ordinating our system wide perspective with the FSA's daily supervisory responsibilities and the Treasury's legislative role is essential to the smooth functioning of the arrangements. A Memorandum of Understanding, signed by the Bank, the FSA and the Treasury in October 1997, sets out our respective responsibilities, both in 'normal' times, and in a crisis. And we work hard to foster these relationships, helped by the fact that I am a member of the FSA Board and Howard Davies is a non-executive director of the Bank.
While high food and energy prices curb consumption on these products, they would also encourage investment and increase supply in the long-term. In short, the common view is that central banks have nothing to do but wait for the supplydriven shocks to work out their natural course. However, in the current environment where persistent and rapid increases in food and energy prices have been observed for a considerable period, the prevalence of this view has become questionable – especially in the light of current projections that foresee even higher prices in the near future. As a matter of fact, many countries under inflation targeting regime now project that inflation will converge to the target at the end of 2009 or in 2010, at the earliest. Going through a long period of high inflation is a serious risk for price stability. First, the general price level may shift upwards at a faster rate, as producers and workers in other sectors ask for higher prices and wages in response to the loss of their real purchasing power. The fall in real interest rates due to deterioration in inflation expectations is another risk, since lower real rates will lead to a faster pace of credit expansion. The common factor of these two risks is that persistent supply shocks may turn into demand shocks after a while. Thus, at some point, central banks have to decide to what extent they can tolerate the rise in inflation.

Let me explain why the subject is a very timely and relevant topic. War and peace: Rising government debts in developed countries since 1980s 5. During World War II, naturally most governments borrowed huge amounts of debts to finance the warfare. As a result, the public debts shot up and the ratio of public debt to GDP rose to very high levels. In the industrial nations (e.g. US, UK, France, Germany and Japan), the average government debt increased to a peak level of over 200% of GDP in 1946. Huge government borrowings had crowded out the private sector and in any case most industries not related to military supplies production did not have the opportunity to expand their business anyway. After the War, industrial nations began to pay down their public debts as they embarked on the journeys of reconstruction. BIS central bankers’ speeches  1  6. After two decades of hard work and economic growth, the ratios of government debt to GDP of the industrial nations came down to below 30% in the 1970s while private sector debts grew steadily to around 85% of GDP. The total debt, public and private combined, was amounting to 110% of GDP at that time. 7. A brief word about debt. When one borrows money, whether to fund investments or to finance consumption, it could bring about many beneficial effects. For example, student loans could assist many young people without the necessary means to take up education or training that would benefit their whole lives.
I personally think that acceptance of the euro in daily life and financial transactions will come faster in Turkey than in other countries, for three reasons: the large numbers of Turkish citizens living in Europe, the large volume of trade and tourism transactions with Europe, and the consistent stability of the deutsche mark for 20 years and more. The introduction of the euro has reduced transaction costs and removed the risks connected with more volatile currencies, increasing the incentives for European capital markets to rely more on direct financing. A deep, liquid, and efficient euro bond market will be welcomed by Turkish sovereign and private bond issuers. Moreover, the volume of transactions in the euro bond market is expected to be much larger than today. 1  BIS Review 109/2000  Increased acceptance of euros in Turkish trade and financial transactions, of course combined with an environment of low inflation, will make direct investments in Turkey more attractive to European firms. Turkey’s presently very small total of direct foreign investments from European investors would surely be encouraged to grow by the disappearance of foreign exchange risks. Under such circumstances, both Turkish and European banks could be expected to increase their merger and acquisition activities. For the short term, the most important goal is to promote the euro as an international currency. Success will crucially depend on the new currency’s acceptance by the people of the EMU countries and other countries as well.

And no doubt the world economy will also have a share in these benefits. 3  BIS Review 109/2000
The big questions now - for all of us, not just for the euro countries - are, first, and most immediately whether we can avoid new financial shocks; and, secondly, how we should manage the economic fall out from the financial shocks that have already occurred. Developments since the IMF/IBRD meetings in Washington have in my view been quite encouraging. The Japanese financial package is reassuring, and the strengthening of the Yen has brought welcome relief to much of the rest of Asia. United States Congressional approval of the IMF quota increase and of the New Arrangements to Borrow (NAB) has paved the way to a vitally necessary increase in IMF resources. Brazil - which has been widely seen as the next potential emerging market domino - is clearly committed to taking strong corrective domestic policy action, which would command broad international support. And while there evidently has been a sharp contraction of wholesale market lending, within the financial sector in particular, in the United States, and suggestions there of a possible wider credit crunch, no new problems on anything like the scale of LTCM have in fact been uncovered. We are certainly not yet out of the wood, but the financial situation looks rather better than might have been expected two or three weeks ago. If we can avoid a new financial shock - and I am hopeful that we will - we still have to manage the global economic slowdown already underway.

Implementation Has Been Satisfactory But More Needs to be Done Achieving international consensus on the key elements of bank regulatory reforms is laudable. But for the reforms to have their intended effect, implementation is crucial. •  The FSB has formed a Standing Committee on Standards Implementation to monitor the implementation of the financial reforms among its members  •  I chair this Committee and so have particular interest in the issue of implementation. The Basel III standards have generally been implemented in a timely manner. •  Basel III risk-based capital rules have been rolled out in all 24 FSB jurisdictions. •  Final liquidity rules have been issued in all but two jurisdictions. In bank resolution, progress is more mixed. •  On the positive side, regulators have set up crisis management groups and developed recovery plans for all G-SIBs  But significant work remains on operationalising these resolution plans. •  And not all FSB jurisdictions have bank resolution regimes that are in line with FSB’s Key Attributes of Effective Resolution Regimes. Implementing reforms in a timely manner is one thing; implementing them in a consistent manner across jurisdictions is another. Ensuring consistency and level playing fields, and minimising opportunities for regulatory arbitrage have become the focus of implementation monitoring. The Basel Committee conducts in-depth assessments of member implementation of the Basel III capital standards to check for consistency.
In order to ensure a level playing field, financial players must be regulated according to what they do and not what they are. Addressing the growing influence of borderless technology on the financial system will also require an international coordination effort. Such are the challenges that the public authorities will have to meet. *  *  *  To discuss these important issues, we are extremely fortunate to have an excellent panel today, including: •  Mrs Sarah Dalhgren, Partner at McKinsey, formerly Head of the Financial Institution Supervision at the Federal Reserve Bank of New York (FRBNY). Dear Sarah, your expertise in supervision, which you demonstrated through most of the financial crisis, will be extremely useful to assess the current situation of financial institutions in the context of financial innovation. •  We also have Mrs Sandie O’Connor, Manager Director and Chief Regulatory Affairs Officer at JPMorgan Chase & Co. Dear Sandie, you are deeply involved in your firm’s regulatory strategy and your views on how financial innovation should affect regulation from the industry’s point of view will be extremely valuable. •  I would also like to introduce Mr Alain Papiasse, Deputy Chief Operating Officer (COO) at BNP Paribas, representing the group in North America. Alain is a top market practitioner with extensive experience in both asset management and investment banking. So, dear Alain, I hope you will provide us with “insider” and complementary views on what the fintech industry can usefully bring to banks.

I prefer to talk of “gradualism” rather than the “sandbox” approach, which is another frequently mentioned solution: when precisely should fintechs be placed inside or outside of a regulatory sandbox? Segregation may be less manageable than a process of proportionate adaptation. That said, both approaches may be combined. Moreover, fintech companies, which mainly operate on the Internet, are not bound by borders. This raises questions as to the efficacy of regulations which are still largely domestic or based on residency criteria. The cross-border nature of technological innovation in the area of banking and financial services is a strong incentive for the regulatory authorities to coordinate their policies at the international level. Constructing the possible trinity between innovation, stability and regulation for digital finance requires the regulator to improve vulnerability analysis, enhance the security of transactions, adapt regulations and relax supervision, while all the time remaining vigilant. More precisely, the need to adapt supervision to the specific features of fintech companies will require setting up dedicated teams to assist them in obtaining the necessary authorisations and to organise their supervision: this will be the case in France thanks to the creation of a Joint Unit by the ACPR (the French regulator for banks and payment institutions) and the AMF (the French market regulator). However, this is only the first stage. In the long run, it will be necessary to  2  BIS central bankers’ speeches  ensure that the same rules apply to the same activities, irrespective of the players performing them.
In these circumstances, tightening prudential measures early on might seem a very reasonable thing to do. It is important to underline that in heavily bank dominated financial system, banking regulations might serve also as an instrument to affect domestic demand more directly than under other circumstances. Indeed, Bank of Estonia increased capital adequacy ratio on more or less cyclical grounds in 1996 and tightened capital requirements further at the onset of Asian contagion, before the peak of the cycle. Having said that, one should not look over the possible caveats of this "macro-prudential" policy approach. One obvious shortcoming is that as financial markets do mature and financial instruments become more complex, tightening banking regulations will simply intensify financial disintermediation. In that case, major capital flows will be channeled to less regulated areas that will bring about new risks of potentially systemic nature. The second problem is that the determination of the exact stage of business cycle is simply impossible. The longer it takes, the more weight is given to the consideration whether the tightening would not emerge too late and contrary to the best intentions, would contribute to pro-cyclical behavior of banks. To be honest, we have recently thought what approach would be suitable for us to take at present and we have understood that the topic is debated also in several present EU member states. VII.

Secondly, Estonia has avoided volatile short-term capital flows due to strong fiscal stance. While these "soft" policy principles support crisis prevention by providing relatively stable and transparent environment, the resilience of the system depends ultimately on the actions of market participants themselves. The task of the authorities is to provide an adequate regulatory framework and to undertake maximum effort for the supervision of the implementation of these regulations. There is another interesting, albeit still debated issue – to what extent should the supervisors rely on banks' internal risk control models and ratings. Estonian banking supervisors have taken relatively forward-looking approach in that respect by increasingly relying on risk-based approach of supervision. At the same time, and having in mind rapidly developing economy and currency board arrangement, we believe that our banking system should have also robust liquidity buffers as well as sufficient capital to withstand the fluctuation of asset prices. Therefore, we have set relatively high reserve requirement half of what the banks can meet by the holdings of high-rated foreign assets. We will further adjust the system of reserve requirements in the future as monetary policy framework will converge towards the eurosystem principles. Finally, I would like to stress that as an essential element of the safety net, the Deposit Insurance Fund is functioning well and has proved its usefulness already two years ago. The immediate task for Estonian authorities is to introduce the investor protection scheme for the other parts of the financial system.
Last year was exceptional, with euro area GDP growing by about 3% in real terms between the first quarter of 2017 and the first quarter of 2018, with the combination of strong growth in domestic demand and a rebound in international trade. This year, international trade dynamics seem weaker. It may be attributable to a delayed impact of the appreciation of the euro since the beginning of 2017. Temporary factors and supply-side tensions related to very high levels of capacity utilisation in some euro area countries also contributed to a moderation in economic growth in early 2018. In a nutshell, both demand and supply-side factors are at work, and our baseline scenario is surrounded by more uncertainty. So we must be prudent and carefully monitor economic developments. Why? 1/4  BIS central bankers' speeches  The level of uncertainty has increased. Protectionism, for example, is having an effect on business sentiment, which might already be holding back investment. It is still too early to tell. In addition, Brexit will have financial implications for firms not only in the United Kingdom, but at this stage no one knows what the final Brexit conditions will be. Are these uncertainties the reason for your prudence in the way the asset purchase programme is being concluded? Our baseline scenario still holds, but we must monitor the risks. This is why we decided to express an anticipation about the evolution of our net asset purchases. By doing so we are keeping what we call optionality.

Peter Praet: Interview in Expresso Interview with Mr Peter Praet, Member of the Executive Board of the European Central Bank, in Expresso, conducted by Mr João Silvestre on 18 June 2018 and published on 23 June 2018. * * *  Is the asset purchase programme (APP) really going to conclude at the end of this year? What we did last week was to express an anticipation that net asset purchases would end at the end of the year. We didn’t say we were now deciding to stop the programme in December. We still have six months to go. We translated the increased confidence we expressed about developments in the economy and inflation into an anticipation about the APP. And, at the same time, we also enhanced the forward guidance on interest rates. But, in any event, to anticipate the end of the programme is to give a strong signal. What exactly do you mean by giving a strong signal? We undertook a careful review of the progress made towards a sustained adjustment in the path of inflation to levels below, but close to, 2%. It was a strong signal because, in spite of a recent moderation in euro area economic growth, we concluded that progress towards our aim has been substantial so far, and actually sufficiently substantial for us to be in a position to express this anticipation of an end to net asset purchases at the end of the year.
Our cooperative journey to the SDDS Plus began in 2013, when, after the achieved national consensus on the usefulness of the accession to this standard, we officially informed the IMF of the efforts that we will make in the medium-term period to meet the membership criteria. Then, in the next years, we worked on the production, promotion and publication of the required data.

In addition, the current repo rate of 3.75 per cent is comparatively low, not least when one considers that inflation is around 3 per cent. The next question is how much importance should be accorded to each of the various factors and which side of the balance carries most weight. As regards the excessively high inflation at present, we have tried to analyse whether there are grounds for supposing that it stems from the Swedish economy having been more “overheated” during the recent upswing than we counted on earlier. The preliminary conclusion I believe can be drawn is that the explanation does not lie there. Most things suggest that inflation ought to fall back next spring as the transitory factors that pushed prices up drop out of the change figures. An alternative approach to whether the high inflation is temporary or more permanent involves looking at the development of by far the most important component of costs, namely wages. In that wage agreements have been completed, it is possible to arrive at a comparatively firm picture of how wages are developing, at least during this year and next. With reasonable assumptions about productivity, most things suggest that unit labour costs should be in line with the inflation target. This presupposes that the registered increase in inflation expectations, above all among labour market organisations, does not show up in wage increases; if that were to happen it would be very unfortunate and face monetary policy with new challenges.
While at one end of the spectrum, the case is being made that there is no other alternative to the market to generate an efficient functioning financial system, at the other end of the spectrum the call is for a more interventionist regime. The solution lies in a balance between these, and the avoidance of an over reaction in addressing weaknesses and excesses that have been built over an extended period of time. Equally important is to recognise that for markets to function efficiently, institutional and market infrastructure need to be well developed. The incentive structure, the rules of the game, the transparency and the levels of financial literacy also needs to be in place. When these elements are still yet to be developed, as in many emerging economies, it increases the risk to financial stability. For advanced financial systems, however, when the institutional structures and rules became deficient and less relevant, it is necessary for them to be changed. In essence, the environment has become highly dynamic requiring regular regulatory reinvention. Let me turn to the approach adopted by Bank Negara Malaysia. The recent global developments will not fundamentally alter the main tenets of our approach to the regulation and supervision of financial institutions in Malaysia. It will continue to be a balance between rules-based and principles-based regulation. The principles-based approach is more likely to produce more efficient market outcomes, better risk-alignment and socially responsible behaviour.

Conclusion 30 I have probably spoken longer than I should. I think this only goes to show the many areas of supervision which the different panels will no doubt delve further into. May I wish everyone a most fruitful and interesting meeting. I do hope that all visitors in this meeting will also be able to set aside a little time to enjoy Singapore’s lively sights and sounds. 5/5  BIS central bankers' speeches