samchain/econo-pairs-v1 huggingface dataset:
Of course one way firms can get larger is through mergers and acquisitions, for which PRA approval of the ‘change in control’ is required. A natural question to ask is how our secondary competition objective plays into these situations. The law is actually very clear on this point: when considering whether to approve the change in control, we are required to disregard the competitive impact and to limit ourselves to a consideration of the appropriateness of the new controller. Assessing the impact on competition falls instead to the CMA. Third, there is a tension for us arising from the efforts we make to encourage new and smaller players. My involvement in this line of work really began with the collapse of the largest, and apparently well-diversified, bank in the world right here in the UK. And I have been involved in and observed numerous other episodes of big banks getting into trouble. So I will never believe that there is something inherently safer about larger banks. But nor do I believe the opposite, and there are plenty of examples of smaller banks getting into 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  trouble, in some of which I’ve been heavily involved. So it is perfectly natural that with our safety and soundness objective in mind we should take a close interest in small firms as well as large, particularly when they are fast-growing, heavy users of central bank funding schemes, concentrated in higher-risk niches and/or untested in a downturn.

Hence, while banks’ exposures to the household sector have been on a strong growth trajectory and account for more than half of banks’ lending portfolio, the quality of the portfolio has remained sound, with a net impairment ratio sustained at a low 2%. The banking system’s exposures to other retail and small businesses have also grown in the last decade, in part due to the established credit track record captured in CCRIS, which have enabled small and medium sized enterprises (SMEs) and micro enterprises to benefit from improved access to financing. These developments in turn, have resulted in a more balanced and diversified credit portfolio of banking institutions. In addition to CCRIS, there exist other private sector-owned credit bureaus in Malaysia that specialise in niche areas of value-added information and that offer differentiated risk management products to financial institutions. With the wider use of information provided by these credit bureaus, a priority has been to put in place a structure and framework for the appropriate oversight of their activities. This is essential to provide the necessary safeguards and to protect the privacy of data subjects. It is also equally important to ensure the accuracy, completeness and timeliness of credit information that is used by financial institutions to form credit decisions. Inaccurate, incomplete and dated or delayed information can have damaging effects on individuals in terms of access to financing, while exposing banking institutions to the risk of losses.
Hence, the adverse developments in the current account can be the outcome of capital inflows. Before I move on, let me sum up the risks of global financial integration as I see them, for this is really where the challenge lies. As a policy maker in an EM economy, living in a globalised financial system characterised by a huge pool of surplus liquidity is like living next to the sea. On a day-to-day basis, the tide comes in, the tide goes out. You learn to live with it. Sometimes, the waves are high and you need to take appropriate precautions. The sea is bountiful and to some borrowers it may appear to offer the opportunity of a cool escape from the searing heat of higher domestic interest rates. Like the call of sirens to ancient mariners, it lures residents and regulators with its enchanting promise of easy liquidity and growing domestic equity and bond markets. However, this vast sea also holds many dangers. It is affected by fierce forces that can create violent and destructive waves. Even when it is calm, beneath that calm surface there are dangerous currents. To the unwary, who wade in too far, it can drag them to financial ruin, be they businesses, individuals, or governments. Beneath its surface are hidden rocks that can drive even successful economies to the bottom of the sea.

Note for example, the obsession of the financial markets with when the Fed is going to increase its interest rate by a quarter percentage point! Frankly, I do not think any one of the QE central banks is thinking of putting down its fiddle just yet. But the anticipation is certainly creating instability and over-reaction in the global financial markets, with EM currencies experiencing a high level of volatility. It is also not inconceivable that having run out of profitable opportunities in other parts of the markets, portfolio funds are now making currencies the next game in town. Implications for Malaysian economy and financial system These global developments obviously have implications for Malaysia. First, the volatility in the global financial markets will continue to wash on to our shores and create a challenging environment for both policymakers and participants in our financial markets. Such volatility does have an economic cost. Second, the fact that for the first time all the major economies are showing positive growth will provide support to growth of the Malaysian economy. However, until global growth can become self-reinforcing, the weak nature of external demand will remain a challenge. The significant contribution of domestic demand to growth in the face of the adverse external environment over the past several years is a tribute to the resilience of our economy and financial system. It is an outcome of not only the policies that were implemented during these years but also in the years before.
Trichet: In the event of a decision by the governments leading to a selective default or a default, which, again, we are warning against loud and clear, the governments would have to take care that the Eurosystem is presented collateral that it could accept. FTD: When it comes to deciding whether a default has occurred, will the ECB rely, as it has until now, on the rating agencies, or might the decision not be dependent on what they say? Trichet: Again, it is not the working assumption of the Governing Council. FTD: Let’s talk about the crisis management of the euro area governments. The Heads of State and Government and the finance ministers give the appearance of being a chaotic bunch. They often create such a cacophony that it inflames the crisis rather than dampening it. What needs to change? Trichet: There is an absolute need to improve “verbal discipline”. The governments need to speak with one voice on such complex and sensitive issues as the crisis. It is, of course, complex to take into account the need for sound, shared management of the Economic pillar of the Economic and Monetary Union, whilst fully respecting the functioning of the 17 democracies of the euro area. But speaking with one voice in a period of crisis is of essence. And, after all, it is what was possible after Lehman Brothers at the end of 2008.

FTD: To cope with the crisis the European Central Bank used non-standard measures. The Securities Markets Programme, special treatment for government bonds of Greece, Ireland and Portugal, the liquidity provision for banks. How far does the ECB go with its special rules? Trichet: We can not accept to put in questions our role as the anchor of stability and confidence in the euro area and in Europe. If a country defaults, we can no longer accept as normal eligible collateral defaulted bonds issued by the government of that country. Because, in the eyes of the Governing Council, this would impair our ability to be an anchor of confidence and stability. FTD: What does the ECB say to the fact that, in the context of the second package for Greece, governments have nonetheless been talking about solutions such as a debt rollover or a partial debt buyback, which could lead to default? Trichet: The responsibility for this lies with the governments. The governments have been warned, in no uncertain terms and using all possible means. I have said so publicly. I have explained in detail to the Heads of State and Government and to the finance ministers, on several occasions, that, if a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral. The governments would then have to step in themselves to put things right. That would then be their duty. FTD: What does that mean in concrete terms?
Lack of instruments to control an inflationary situation: If there is a continuous surplus in the balance of payments, a currency board has to necessarily monetize the surplus at the cost of building inflationary pressures. But it does not have instruments to contain it and is reduced to the status of a passive spectator. In view of the above shortcomings of a currency board system, Exter recommended that Ceylon should establish a central bank with wide powers. Exter could not be faulted for making this recommendation, since this was the accepted wisdom at that time. The frustration of the newly independent nations regarding their colonial past, the desire to attain economic independence soon to match the political independence and the obvious inflexibility of currency board systems to supply liquidity in a growing trade and payment era would have contributed to the popular belief at that time that the Currency board should be replaced by a central bank. However, about two and a half decades later when Singapore had to make the same choice, “Dr Goh and the Cabinet chose the path of prudence for Singapore and sought to preserve the Currency Board System for its in-built financial discipline” (Prudence at the Helm, 1992, p 15). Many nations since then, after devastating experiences with undisciplined monetary management, chose for currency board systems to institutionalize monetary discipline by legal means. Ironically, this virtue of a currency board system had not been dealt with in the Exter Report, possibly it would not have been foreseen at that time.

He argued quite correctly that such complex and delicate relationships cannot be established full-blown by a piece of legislation. It must be the result of years of experience and the slow growth of political conventions. Exter Report testifies to the fact that the independence of the Central Bank should be attained and maintained by people in both the Central Bank and the Ministry of Finance and working with a “moral consciousness” regarding the well-being of the whole society rather than narrow self-interest objectives. Conclusions Six decades is a long period during which a society should necessarily undergo tremendous political, social and economic transformation. The onslaughts of new technology, globalization and advancements in fast communication systems have changed the ideals of the people of all societies throughout the globe. Hence, one may tempt to question whether the ideals expressed by Exter more than a half a century ago are still valid and relevant. Though the ideals of societies have changed, the core principles that are embodied in the philosophy of central banking have not changed over the time. In fact, they have become much more hardened today than 60 years ago. Nations throughout the world have gone for price stability as a necessary prerequisite for continuous prosperity. Hence, the hands of central bankers have been strengthened much more today in all parts of the world to facilitate central banks to function independently and make appropriate policies for monetary stability.
Specifically, we decided to lower the interest rate on the deposit facility by 10 basis points to –0.30% and to extend the APP. The monthly purchases of € billion under the APP are now intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term. We will also reinvest the principal payments on the securities purchased under the APP as they mature, for as long as necessary. To help you appreciate the import of the overall recalibration of our asset purchase programme, you should consider that the extension of our net purchases to at least March 4  BIS central bankers’ speeches  2017 and the decision to re-invest the principal payments on maturing securities for as long as necessary will add EUR 680 billion – some 6.5% of the euro area GDP – in liquidity to the system by 2019, relative to the situation that would have prevailed under previous policies. This will strengthen our forward guidance on interest rates and ensure that liquidity will remain very supportive in the long term. There was very broad support among members of the Council for recalibrating our instruments to put inflation trends back on the path towards 2% that we envisaged when we launched our purchase programme.

Since August, inflation has fallen back to target (for the first time in 5 years) and unemployment has fallen rapidly towards 7%, so what have we learned on the journey towards our threshold? With the wisdom of hindsight, there have been three main drivers of the recovery thus far: a marked reduction in extreme uncertainty, the repair of the core of the financial system and significant deleveraging by households. These have driven a recovery in consumer spending and housing investment, which together have accounted for almost all the GDP growth in the year to Q3. As my colleague Ian McCafferty outlined earlier this week, there are also early signs of a recovery in business investment. The less good news is that the recovery has not – as measured at least – been accompanied by meaningful productivity growth. Given the continued openness of the economy and the credibility of macro policy, it is hard to think of any reason why there should have been a persistent deterioration the UK’s  1  My MPC colleague Ben Broadbent discussed these issues extensively in September 2013 in a speech at the London Business School, “Conditional guidance as a response to supply uncertainty”. 4  BIS central bankers’ speeches  productivity performance. In fact there are several reasons to expect productivity growth to pick up as the recovery proceeds. For example, until recently, the fragility of the banking system limited the reallocation of capital and labour from less to more productive activities.
This progress is the result of policy improvements that have reduced the imbalances and fragilities that fed past boom-bust cycles; greater openness to international trade and deeper economic and financial integration; and, for commodity exporters, some good fortune in the form of strong prices. Nonetheless, while trend growth in the emerging market economies has substantially outpaced that in the mature economies, the emerging market economies generally continue to accelerate and decelerate in step with the mature economies. So much for decoupling. This continuing close correlation reflects the fact that stronger emerging market growth has been built upon deeper economic and financial integration with the mature economies...as well as with each other. Against that backdrop, spillovers from the mature economies clearly played a part in the recent slowdown across the emerging world. But something more appears to be going on as well. As a general matter, the emerging market economies appear to be operating closer to capacity than the mature economies. Emerging market economy labor markets generally look somewhat tight by historical standards, and while emerging market inflation is down, it is still an issue for a number of countries. This suggests that capacity constraints and structural issues have been playing a role in the recent sluggishness, and that somewhat slower growth may be part of the new normal for the emerging market economies as well. How much slower will in part depend on policy choices in the emerging market economies.

A big part of that reflects recent success in averting tail risks that were weighing on investor confidence. Europe’s common currency hasn’t fragmented, the U.S. didn’t go over its fiscal cliff, and China hasn’t had a hard landing. But in each of these cases, there is plenty of unfinished business, and important challenges remain. In the euro area, while there are grounds for cautious optimism, much remains to be done to restore confidence and growth. Fiscal adjustment is far from complete and is likely to continue to weigh on growth for some time to come. Financial conditions in the periphery have improved, but remain much less supportive than in the core. Plans to build a banking union and deepen economic, fiscal and political integration remain very much works in progress. And, as the elections in Italy have reminded us, there is an important political counterpart to the economic and financial challenges and risks confronting the region. In the U.S., we are only part way toward addressing our fiscal challenges. Recent measures are chipping away at the deficit, but the approach hardly corresponds to anybody’s ideal of efficiency. While there is little mystery about what ultimately needs to be done, we simply have not yet mustered the political will to make the compromises needed to get there. And, unfortunately, with deadlines coming – and one just having passed for decisions on mandatory spending cuts and spending and borrowing authorizations – we can’t be comfortable that this is going to go smoothly.
This is confirmed by Phillips curve estimates. As you can see from the right-hand side chart on slide 3, ECB in-house estimates using a variety of slack and inflation expectations measures suggest that core inflation today is well below what historical regularities would suggest. Of course, a number of factors – such as changes in the slope, weak productivity growth or second-round effects of past low inflation – might be at work here. But in the current context this is unlikely to be the whole story. For one, there is considerable uncertainty around the slope of the Phillips curve. As we heard this morning, some estimates show that the curve has flattened in recent years. ECB research, by contrast, found evidence that inflation has become more responsive to slack lately, but with notable heterogeneity across euro area Member States.7 Blanchard, Cerutti and Summers have not found much change at all during the crisis.8 Second, our Phillips curve estimates show that even once we control for past low inflation and weak productivity growth, there is still a considerable part that cannot be explained by the model. These analyses therefore do offer one useful conclusion: that slack may be larger and that structural unemployment may perhaps not have risen by as much as some estimates suggest. This also means that policymakers should be careful in attaching too much weight to notoriously unreliable and hard-to-estimate measures such as the NAIRU.

Speaking as chair of the Financial Stability Board’s working group on the resolution of crossborder firms, I can update you on the work already in train. Basically for the top roughly 25 banks and dealers, the authorities will work with them over the next 6-9 months to produce recovery and resolution plans. The effort will build on the existing supervisory colleges, but typically at a more senior level, and involving resolution authorities and central banks as well as line supervisors. After official level exchanges, there will be engagement with those firms, also at a senior level (say group CFO). The desired outputs will cover two things. First, recovery plans for “de-risking” a group where it can and should be maintained as a going concern. Second, a resolution plan when a firm needs to be wound down and put to rest, but with essential economic functions maintained somehow. The FSA has explained their contribution to the exercise. No one should think that this will be easy; or that anyone in the official sector is naïve about that. It will, in fact, be formidably difficult. The process is, for that very reason, designed to flush out the issues, so that they can be properly debated and reviewed.
An important area in which central banks will have obligations towards the ECB is that of statistics. This is because the formulation of monetary policy in the euro area rests on the timely availability of standardised economic, monetary and financial data from participating national central banks. In recognition of this future obligation, the Central Bank of Malta established a Technical Committee on Financial Statistics in 2000 to identify the changes required to the way statistics are classified and reported by the Central Bank and other financial sector reporting agents in order to comply with ECB and Eurostat requirements. This committee, which includes representatives of all the interested institutions, has already agreed on the necessary changes to the reporting forms through which credit and financial institutions submit data to the Central Bank and the Malta Financial Services Authority. Monetary and financial data are in fact already being reported to the ECB and Eurostat. In the meantime, significant progress has also been made with respect to the establishment of a common direct reporting database between the Central Bank and the National Statistics Office for the dissemination to the ECB and Eurostat of balance of payments data and data relating to Malta’s investment position. In the area of payments, a new settlement system has been established for the handling of large inter-bank payments in line with EU and other international standards.

Prospective members of the euro area are in fact also required to satisfy the other four Maastricht criteria, which relate to inflation, the interest rate, the fiscal deficit and the public debt. I propose to focus on the ERM II criterion for two reasons. First, the timing of EMU membership is conditioned by the two-year period embedded in the exchange rate criterion. In Malta’s case, if it is part of the next enlargement in May 2004 and even if it fulfils the other Maastricht criteria, the earliest that it will be technically able to participate in EMU is mid-2006. Earlier adherence to the other criteria, therefore, becomes almost irrelevant. Second, the obligation to participate in ERM II has implications in terms of the preparations which a national central bank has to make in view of its eventual entry into EMU. This is because it impinges directly on some of the central bank’s main functions – such as the formulation of monetary and exchange rate policy and the management of external reserves – something which is not true, for example, of the fiscal criteria. ERM II is thus of particular interest to central bankers. Against this background, I will now review some issues which eventual participation in ERM II, and later in EMU, raises for policy makers in Malta. No significant change in the parameters governing monetary and exchange rate policy EMU entails the adoption of the euro and the surrender of autonomy in the area of monetary policy to the European Central Bank (ECB).