samchain/econo-pairs-v1 huggingface dataset:
In my view, they should not take the current regulatory framework for granted and operate under the assumption that this framework, which was mainly designed before the technological « disruptions » we see currently spreading through the financial system, does not need to evolve. On the contrary, to continue delivering well on their financial stability mandate, through their three classical roles, namely as catalyst, supervisor and service provider, they should aim first at 1/4  BIS central bankers' speeches  promoting the necessary regulatory adjustments so that the ultimate goal of financial stability is well preserved. In other words, we should contribute to providing the market with a sound, adapted and updated regulatory framework, which is, in my opinion, needed to support innovation, and even to foster it. To deliver on such a contribution, an open-minded approach and an in-depth understanding  of innovation is required. To that end, we need to engage with innovators, observe the ecosystem, test and learn. I think it is fair to say that the global central bank and supervisory community is heading in that direction as testified by the recent launch of the BIS innovation Hub. In any case, at the ACPR and the Banque de France, it has been our motto for a while, according to our digitalization strategy. It is indeed in this spirit that we set up in 2016, within the supervisory authority (the ACPR), a dedicated Fintech-Innovation Hub to have a direct contact with innovators and anticipate the effects of innovation trends.

One detailed factor that has complicated monetary policy recently is the effects on measured retail price inflation of regulated and administered prices such as above-inflation rises in utility bills, university tuition fees, rail fares etc. Individually these may be perfectly sensible public policy choices and I do not want to be interpreted as criticising their motivation. But the effect on CPI inflation is important. These prices – which are about 16% of the CPI basket – will contribute around one percentage point to the CPI inflation rate in the next couple of years, largely regardless of what happens to domestic demand. Pushing inflation down to 2% would require very low price rises in the other 84%. The risk of overall deflation is much less likely as a result. At our February meeting we faced, as so often in the recent past, a difficult choice. Should we offer more monetary stimulus, or should we not? My own choice, on a balanced assessment of the risks, was that we could and should do more now to support a nascent recovery with a further monetary injection. I do not believe the assertions of those who claim that that QE is noticeably less powerful than previously – although I have noted that there are limits to what monetary policy can be expected to achieve on real growth and it is impossible to measure the impact of monetary policy with any degree of precision. As with changing interest rates, the precise effects will always depend on the state of the economy.
So the challenge of designing an international monetary system that could prevent the emergence of “too high to last” imbalances remains. The financial crisis has reminded us all of the importance of solving this problem. Sudoku for economists shows that it is essentially a political and not a technical problem: how can we ensure that the economic policy frameworks of countries are consistent with each other? At present there is no political mechanism for achieving that consistency. Finding such a mechanism is urgent. Having narrowed somewhat at the height of the crisis, the imbalances are now widening again. There is a risk that countries will, out of frustration, impose unilateral  BIS Review 4/2010  3  and ultimately self-defeating protectionist responses. Because the number of countries involved in the international trading system is now so large, and the countries so diverse, the idea of another Bretton Woods conference is wholly impractical. The IMF, despite the legitimacy bestowed by its membership of 186 countries, is too unwieldy without reform. The G7 omits some of the key players, such as China. Of more immediate promise is the G20 group of countries, which produces almost 90% of world GDP. Last year, under the UK Presidency, the G20 agreed to a new policy coordination framework which commits member countries to a process, using the expertise of the IMF, of assessing the consistency of their national policies. G20 Heads of Government will meet twice this year, in June and November, to discuss progress.

That might involve a recession in the deficit countries, or an acceptance by the surplus countries that, one way or another, trade imbalances must be reduced. Sudoku for economists shows that countries cannot pursue for long incompatible economic policy frameworks. The reason why continuing large deficits are not sustainable indefinitely is that for every current account deficit there is an equal net capital flow in the opposite direction. Even if those flows remain constant in size, they imply an ever increasing stock of international asset and liability positions. Today China alone has reserves of over two trillion dollars, and Japan another trillion dollars. Adding inexorably to the stock of international assets and liabilities is like adding one brick on top of another to form a tower. With skill, it can be done for a surprisingly long time. But eventually the moment comes when adding one more causes the tower to fall down. If countries do not work together to reduce the “too high to last” imbalances, a crisis of one sort or another in financial markets is only too likely. We saw that following the first oil crisis in the 1970s when the attempt to “recycle petrodollars”, as they were called, led to defaults by a number of emerging market economies and a crisis in western banks. And sudden shifts in capital flows have led to periods of remarkable volatility in exchange rates between the world’s major currencies, the dollar, yen and euro (and, before 1999, the deutschmark).
Christian Noyer: Conducting monetary policy in times of financial stress Speech by Mr Christian Noyer, Governor of the Bank of France, at the European Banking and Financial Forum, Prague, 1 April 2008. *  *  *  For more than two centuries, preserving the value of money and fostering the stability of payment systems and credit and financial markets have been the two main responsibilities of central banks around the world. Under normal circumstances, we tend to think of these tasks as relatively distinct. Furthermore, this practical dichotomy broadly reflects the academic state of the art: as Professor Goodhart recently stressed, the large consensus on the macroeconomic policy side of central banking that has emerged over the last two decades contrasts with the absence of consensus on the appropriate theoretical framework for analysing financial stability and the best ways of ensuring it or restoring it when it breaks down.1 However, in times of stress, some interactions inevitably emerge. For instance, the financial turmoil has a clear impact on the effectiveness of monetary policy transmission (see for example the unusually large spreads on the money markets since August 2007). Conversely, adequate monetary policy decisions and credible communication should contribute to the orderly unwinding of financial crises. Periods of turmoil, like the one we are now experiencing, are thus clearly challenging, since we have to rethink the way in which we can meet both of our responsibilities. I will first address the issue of the necessary separation of liquidity management and monetary policy decisions.

It goes without saying that it is not only a quantitative issue and that at the same time the efficiency of research and development in terms of industrialisation  12  See P. Hartmann, F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation for productivity and growth in Europe”, ECB Occasional Paper forthcoming. 13  Some authors have calculated that if the average size of capital markets in the EU was bigger - in the US for instance this size is around 450% of GDP instead of 220% in the EU (based on an overall indicator measuring total financing in the economy by aggregating bank credit to the private sector, stock market capitalisation and the outstanding amount of domestic debt securities issued by the private sector) - then annual GDP per capita growth in the EU could be positively influenced (see G. Favara (2006), “An empirical reassessment of the relationship between finance and growth”, mimeo). 14  See the European Commission’s Green Paper entitled “Entrepreneurship in Europe”, 21.01.2003. 6  BIS Review 82/2007  is crucial. In the longer term, GDP could be up by 4.2% in 2015 and 7.0% in 2020, equivalent to an additional growth rate of nearly 0.5% per year 15 . Finally, to make these measures most effective, they need to be accompanied by efforts to improve the labour force’s level of education and expertise.
The July Monetary Policy Report included such an outline that shows how one can approach this question.11 The reasoning concludes that one can regard recent monetary policy as a trade-off between target attainment in the coming years, that is the period for which the Riksbank normally makes forecasts, and target attainment in the long run, beyond the forecast horizon.12 The idea is that a monetary policy that solely focuses on target attainment a couple of years ahead could miss the fact that financial imbalances are building up that risk leading to very poor macroeconomic outcomes in the longer run. According to this outline, decision-makers need to balance target attainment in the short and medium term against target attainment in the long term. Thus, there are two questions one needs to take a stance on: How does indebtedness affect the risk that shocks will lead to a really severe depression? And to what extent can monetary policy affect indebtedness and thus the risk of this type of scenario? The latter question, in particular, is important in this type of trade-off. Unclear benefits but clear costs Monetary policy is the most effective tool we have for influencing general price developments. It has an impact through, for instance, credit growth in the economy. Monetary policy can therefore be used to dampen credit growth when it appears alarmingly high, even if this does not appear justified on the basis of the prospects for inflation.

This morning, I would like to take the opportunity to briefly address some of the issues and priorities that are currently directing the Bank’s work in this area. We have substantially completed a review of the existing corporate governance frameworks for the banking and insurance industries and expect to be able to consult with industry on our specific proposals to update and harmonise the frameworks later this year. As part of this review, the insurance industry can expect that what is currently described as “best practice” in the prudential framework on corporate governance will be elevated to principles or minimum expectations to be met by all institutions. We do not expect this to substantially alter current practice in the industry given that for some time now, the Bank already holds insurers to higher standards that reflect the maturity of the industry and the more sophisticated nature of the business over time. But we also set out in the review to take a fresh and critical look at some key elements of the governance framework to ensure that our requirements remain fit for purpose in the context of the changing financial landscape. Independence, board size and composition, and expectations of subsidiary boards are among some themes addressed in our proposals. We have drawn extensively on our supervisory observations and thematic reviews of governance practices over the course of the past two years in informing our review. In many areas, positive changes can be observed in the governance practices of insurers.
As a consequence, the need to reform the existing Accord is widely recognised and supervisors are working very hard to shape the new Accord in close consultation with the private sector. The Basel II Accord is aimed at bringing the capital requirements closer to the true economic risks in banks’ portfolios and at offering a wide range of options and approaches to respond to the increased complexity of financial instruments. Basel II is achieving all of this basically by relying more on banks’ internal models in the supervisory process. An important by-product is, therefore, that there is a lot of pressure on banks to improve their risk management systems. Improvements are already visible. It seems clear to me that more supervisory efforts, similar to those in the banking sector, may also be needed in the other sectors of financial institutions, for example in insurance. The ECB has drawn attention since the early stages of the Basel II process and the implementation of the framework in the EU to macro-prudential implications and to the possibility of increased procyclicality of certain provisions. When bank capital is largely based on risk and risk increases in a recession, macroeconomic consequences might arise through a procyclical reduced ability of banks to lend. These concerns have been appropriately addressed in the revised proposals submitted for consultation by the Basel Committee and the European Commission. Pro-cyclicality concerns are substantially mitigated and a good balance can be found between risk-sensitivity and macroeconomic stability.

Paul Fisher: The Financial Regulation Reform agenda – what has been achieved and how much is left to do? Speech by Mr Paul Fisher, Executive Director for Supervisory Risk Specialists and Regulatory Operations of the Bank of England and Deputy Head of the Prudential Regulation Authority (PRA), at Richmond, the American International University, London, 30 September 2015. *  *  *  It is now 8 years since the start of the great financial crisis, and 7 years since the collapse of Lehman Brothers and AIG in the United States, followed by the bailing out of HBoS and RBS in the UK. The consequences were not limited to the financial sector – the economic recession that followed in much of the developed world was both deep and prolonged. This naturally created an imperative for changes to the regulation of the financial system to prevent the same thing happening again in future. Since I became Deputy Head of the Prudential Regulation Authority (the PRA) in June 2014, I have been asked a number of times to comment on how far the regulatory reform agenda has advanced. How close are we to ending “too big to fail”? How much more regulatory change can one expect?
It assigned to the Central Bank the main objective of pursuing price stability. The Bank was granted instrument independence to pursue that main objective, its financial independence was enhanced and the Act included clear provisions on transparency and accountability. The Act also stated that the Bank should promote an efficient and safe financial system, including payments systems domestically and with foreign countries. In addition to price stability, the Bank was, in other words, given a clear mandate to concern itself with financial stability. An inflation targeting framework was adopted at practically the same time with a joint declaration of the Government and the Central Bank which set a target for inflation of a 2½% twelve-month rise in the CPI. The framework imposes strong demands on the professional capacity of the Central Bank. The Bank regularly publishes a macroeconomic forecast and inflation forecast, with an associated inflation report. The inflation forecast provides the foundation for the inflation targeting policy. In its quarterly Monetary Bulletin, the Bank publishes a detailed analysis of current economic and monetary developments and prospects. It also presents the rationale behind the decisions by the Board of Governors to change or not to change interest rates, as well as signalling the monetary policy intentions for the period ahead. In these endeavours, the Bank seeks to be as transparent as possible. When the inflation target was adopted, the economy was quite unbalanced. It had boomed during the second half of the 1990s.

Birgir Ísleifur Gunnarsson: Interaction of monetary and financial stability in small open economies Welcoming address by Mr Birgir Ísleifur Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, at the SUERF Seminar, Reykjavík, 3 June 2004. *  *  *  Ladies and Gentleman On behalf of the Central Bank of Iceland, I warmly welcome you to this seminar on the Interaction of Monetary and Financial Stability in Small Open Economies. It is an honour for us to co-sponsor the seminar with SUERF. We are grateful to David Llewellyn, Eduard Hochreiter, Beatrix Krones and Micheal Bailey at SUERF for the excellent cooperation which we have enjoyed with them in its preparation. The topic of the seminar is an appropriate one which is attracting increasing attention, both within and outside central banks. I trust that the presentations and discussions over the next two days will leave us with a better understanding of this interaction and of the issues on which we wish to focus our attention in the period ahead. We will be assisted by very impressive speakers and participants. I wish to extend my gratitude to those who have agreed to give lectures and present papers and I look forward to inspiring and stimulating contributions by them. In this address, I will briefly describe our own recent experience in the areas of monetary and financial stability. The current Act on the Central Bank of Iceland was adopted in 2001.
We have previously managed to agree on interest rate messages with information on our future intentions when we have commented on the plausibility of the interest rate path given by market expectations. There are also some other problems that have been put forward as arguments against central banks publishing their own interest rate forecasts. One such argument is that it makes communication with the general public more difficult. If the central bank first announces a particular interest rate path and then new information is received, which leads to a policy rate decision that differs from the path published earlier, this could be perceived as a failure on the part of the central bank and it could damage the bank’s credibility. 11 Personally, I do not believe that this will be a major problem. On the contrary, one of the main points of publishing one’s own interest rate path is that it should improve communication with the general public. We have always carefully emphasised that there is considerable uncertainty in the assessments and explained that new information may come in later which could radically change the conditions for our monetary policy assessments. 12 To emphasise this even more strongly, it is important to illustrate the uncertainty in different ways, for instance by calculating the uncertainty interval around the interest rate path. This we intend to do.

carry trade) and instead incentivize them to focus on their core activities. 4  BIS central bankers’ speeches
First, how much comfort should we take from the recovery seen so far and what factors are likely to determine its future vigour? And second, to what extent are the Bank’s planned new responsibilities for macroprudential policy likely to address the “missing instrument” problem exposed so painfully by the financial crisis? I will conclude with some reflections on monetary policy. The recovery so far There has been a strong start to this recovery. After four consecutive quarters of growth, the pace of the recovery to date compares favourably with previous episodes: output is  BIS Review 161/2010  1  estimated to have grown by 2.8% over the past year, quicker than at the same stage of either the 1980s or 1990s recoveries. Some encouragement can also be taken from the composition of growth. Spending by households and businesses has begun to pickup; this despite strains on private sector balance sheets, muted disposable income growth and an impaired banking system. Over the past year, this increase in private sector spending has helped offset a weaker net trade performance, which has been particularly disappointing given the early and substantial depreciation of sterling. However, it is too soon to say we are out of the woods. Economic recovery has to be judged in terms of the level of output, not the rate at which it is growing. It is the level of households’ incomes that determines their well-being. And it is the level of economic activity which governs companies’ profitability and their viability.

I will return to the monetary policy implications of this growth outlook in a while. The missing instrument problem But before doing so, I want to report on the progress that has been made in strengthening the macroeconomic policy framework in the UK in response to some of the fault lines exposed by the financial crisis. Much analysis and soul searching has been conducted in the aftermath of the crisis, and the lessons and implications for different aspects of economic, financial and other areas of public policy are wide ranging. In terms of the lessons to be learnt for monetary policy, many commentators and policymakers – myself included – told a variant of what could be termed the missing instrument problem. 3 This analysis argues that the case for an inflation targeting framework remains sound: the focus on a clear numerical target for monetary policy has served our  3  4  Dale (2009). BIS Review 161/2010  economy well, and low and stable inflation remains a cornerstone of our long-term prosperity. However, it acknowledges that control of short-term interest rates – the main tool of monetary policy – is a relatively blunt instrument best deployed maintaining a broad balance between nominal demand and supply. In particular, movements in short-term interest rates are not well suited to managing risks from credit cycles and other imbalances within the financial sector.