samchain/econo-pairs-v1 huggingface dataset:
The persistence of difficulties in the term money market, despite the existence of sufficient aggregate euro liquidity, points to an important limitation for public policies (and expectations about such policies) in the current environment, namely that central banks cannot and should  1  I am very grateful to Ulrich Bindseil, Cornelia Holthausen, Isabel von Koppen-Mertes, Flemming Würtz and Alessandro Calza for their valuable input and contributions, and to Giacomo Caviglia and Pedro Teixeira for useful comments. BIS Review 143/2007  1  not be expected to solve the more fundamental problems of commercial banks and credit markets. Through their liquidity management policies, the ECB and other central banks can certainly ease some of the liquidity difficulties faced by banks, but they cannot certainly restore the efficient functioning of the term money market. The current difficulties in this market will subside only when banks regain confidence in each other and the uncertainty about their own liquidity needs diminishes. This is likely to occur only when enhanced transparency and more extensive disclosures are made available to market participants, investors and regulators by both banks and non-regulated entities, thereby dispelling the current state of perceived opaqueness and uncertainty. The market turmoil and available information Let me now address another key aspect of information during the recent turmoil. Policymakers normally work under conditions of partial and incomplete information.

So, to conclude on the moral hazard topic, I would say that, in order to draw meaningful conclusions, it is important to distinguish between the very different possible types of financial crisis management measures available to central banks. When assessing and choosing among these different measures, it is necessary to take into account the implications for both the central bank and for its counterparties, including the future incentives of the latter, in order to achieve, overall, the most efficient allocation of resources. BIS Review 143/2007  7  Separation of liquidity management and the monetary policy stance Finally, a frequent focus of our communication during the turmoil has been the importance of distinguishing between interventions related to liquidity management and changes in monetary policy stance. It is very important for the public to understand that the implementation of technical measures related to liquidity management during the current turmoil has been completely separated from any considerations on the monetary policy stance. Contrary to the occasional public perception, these operations have had no effect on the overall liquidity supply to the banking sector. Overall, the amount of liquidity provided within the various maintenance periods since the start of the turmoil has remained unchanged. Instead, the liquidity provision has been to some extent simply brought forward in time within each period, thereby simply representing a shift in the time path of liquidity supply within the reserve maintenance period.
7This is about the size of the entire Chinese economy. In Asia, many families will soon see a transfer of assets from an aging first generation of business founders to the next generation. About 35% of Asia’s wealth will be in the hands of millennials in the next five to seven years. 8 There are stark differences in outlook between the next generation and their parents. Born into a globalised world, the younger generation is more socially aware. While wealth preservation is important, they are also concerned about the impact their wealth will make on society and the environment. They are twice as likely to invest in companies targeting social or environmental goals. 9 Nonetheless, the financing gap to build the green economy of the future remains large. Not enough of global wealth is being channelled towards sustainable development at the scale and speed necessary to achieve the goals of the Paris Agreement. The gap is particularly large in Asia – which is where the outcome of the battle against climate change will be determined. Asia accounts for almost half of global greenhouse gas emissions. 10 It also bears the brunt of economic losses from natural disasters – and climate change will amplify the impact. To sustain economic development and eradicate poverty while mitigating carbon emissions, Asia needs $ trillion a year of investments in sustainable infrastructure through 2030. 11 Investors are beginning to mobilise capital to support Asia’s development.

The Maastricht Treaty impressively illustrates this changed approach with respect to the European area. This new political focus was also a reaction to the disillusionment with regard to the central banks’ ability to generate permanent growth effects. There was fairly widespread agreement that price stability should be the prime monetary policy objective. Second, it was of decisive importance that the currencies of the two leading countries, the US and Germany, achieved a high degree of price stability. Numerous countries gained credibility by pegging their exchange rates to the US dollar and the DM, thus seizing the opportunity to successfully import the stability policies of the Federal Reserve and the Deutsche Bundesbank. Third, the deregulation and globalisation of financial flows have increasingly disciplined the national authorities. These days, an excessively relaxed monetary policy is sanctioned much more severely and much more quickly than in the past by growing inflationary expectations, rising long-term interest rates and a persistent devaluation pressure. Correspondingly smaller are the incentives to run the higher risk of a long-term inflationary problem for reasons of short-term opportunism. On looking ahead, most of these factors promise to remain relevant. Such confidence, however, should not detract from the dangers and risks involved. Fiscal discipline is facing a difficult test phase in a number of countries. It is foreseeable that the combination of demographic trends and non-funded statutory pension claims will lead to intensive discussions on distribution in many places which, in turn, might easily trigger a rise in public indebtedness.
Other economists, such as Professor Torsten Persson at Stockholm University, estimate the trade gain at one fifth of this. An increased openness towards other countries has a positive effect on growth and on incomes. The European integration should therefore, in my opinion, not be limited to the borders of the EU, but be the first stage towards greater global openness. This openness would also contribute to increased competition, but would not replace a domestic competition policy. Both openness and a tightening up of the domestic conditions for competition would also lead to lower prices and increased welfare. Conclusion  During the 1990s there were a number of structural changes in the Swedish economy, which are together assumed to have increased potential growth. There were extensive reforms in the taxation, social insurance and pension systems. Deregulation, increased internationalisation, EU membership, a credible low inflation policy and stable public finances are other factors which should also have had positive effects. It was also proven during several years in the 1990s that a high growth rate was compatible with a low inflation rate. However, the strong growth in demand in recent years has gradually reduced the amount of available resources. The Riksbank concluded in its most recent Inflation Report, which was published on 19 March, that a significant part of the high inflation rate over the past year can be an indicator that resource utilisation was slightly higher than was compatible with the Riksbank's inflation target.

Conclusion I think I’ve covered a lot of ground in my remarks this morning. I look forward to continuing our dialogue in the coming year – and appreciate the opportunity to talk with you this morning. Thank you. BIS central bankers’ speeches  7
The most important concern in this regard is that, if the CCB generates capital constraints at some banks, these banks will need to decide which sector to keep lending to. It may seem reasonable that institutions will prefer to keep lending to the booming sector, while cutting back on lending to other sectors. The design of the CCB takes such undesired side-effects into account. In particular, the sectoral approach alleviates this problem to some extent. By increasing the cost of granting credit to a given sector (real estate lending) relative to others, it should discourage lending to the former as it is “penalised” in terms of higher capital requirements. And, thanks to its dynamic nature, the CCB can be flexibly adjusted, should it still have undesired consequences in other segments of the credit market. Conclusion To sum up, the global crisis has clearly stressed the need for a more comprehensive approach to financial stability. The potential cost of a systemic crisis is significant. Remaining idle is no alternative. We must insist on addressing systemic risk issues head-on. This is the intent of macroprudential instruments. In Switzerland, financial stability risk is currently building up, driven by persistently strong momentum in the mortgage and real estate markets. Against this background, the availability of a tool such as the CCB is a significant step forward. The CCB is a “soft”, incentive-oriented instrument based on the principle of prudence. It can and will be used in a balanced and flexible way to deal with specific cyclical risks to financial stability.

So how do we create a better and more sustainable structure for the financial markets both nationally and globally? I do not have the perfect answers to all of these questions. I doubt that anyone has. But I shall spend the next 20 minutes trying to answer them to the best of my ability. And I hope this will provide a good basis for the coming hearing. Monetary policy and the economic situation The downturn in the world economy has been very rapid and severe – in this way the worst in many decades. Sweden is an export-dependent economy and has been hit hard partly because of this. It will take time before the economy is back at the same level as prior to the crisis. But now we have come so far that the recovery has begun. One important component to which I shall also return is that the conditions on the financial markets have improved. Several indicators are also showing that confidence in the future among both companies and  BIS Review 138/2009  1  households has become much stronger, an important factor in the economic recovery (Figure 1). Figure 1.
Norway experienced a rapid automation of the payment market after banks altered their pricing and began to implement transaction fees that better reflected banks’ own costs. In Sweden, the introduction of transaction fees for cheques contributed to bank customers’ increased use of debit cards. As for cash, Swedish banks do not implement any fees for cash withdrawals while such fees do occur, for example, in other Nordic countries. Thus, differences in pricing can be expected to be an important factor in explaining the differences we observe in the use of cash. Given this, the Riksbank together with the four major banks initiated a study on the pricing of payment services in Sweden. Together these four banks account for more than 90 per cent of the Swedish retail payment market. Our aim was twofold: we wanted to estimate the costs that banks have in the  1  Sveriges Riksbank (2004), “Prices and costs in the Swedish payment system”, in Financial Stability Report 2004:2. 2  Cheques are no longer in use in Sweden. 1/3  production of these services, and we wanted to see whether the price mechanism is working well; whether prices provide users with information on what the different payment alternatives cost. Cost and price estimates The study was based on both fixed and variable cost and price data from 2002. Normally we would assume that users receive correct cost information when they face transaction fees that correspond to marginal costs in production.

Higher inflation expectations boost demand and increase the extent of the pass-through of higher costs to consumers. As a result, companies have the opportunity to almost completely pass costs to prices and thereby maintain or even increase their profits, which in turn discourages them to take efforts in order to reduce costs and improve labour productivity. Monetary policy should prevent the inflationary spiral from getting out of control. Therefore, it should respond to transitory factors to the extent they transform into steady factors through higher inflation expectations. This is especially relevant when households’ inflation expectations and companies’ price expectations are at their peaks recorded over several years, as they are now. Third, monetary conditions are adjusting to key rate increases faster. Over the period after our July meeting, the yield curve of federal government bonds with maturities of up to three years has risen. Furthermore, yields on long-term government bonds remain almost unchanged since last March, when we started to raise the key rate. I would like to remind you once again that the stability of long-term interest rates is crucial for the stability of bank rates on investment loans and mortgages. Interest rates in the deposit market were growing in July—August. The demand for bank deposits started to edge up. As of the end of July, the outflow of funds from retail time deposits ended for the first time since the beginning of last year. Moreover, it even reversed to a slight inflow in August, according to recent data.
At the end of 2010, the institution presented total assets of EUR 1,900 bn. But, according to the bank, on an adjusted basis, which reflected netting of derivatives and certain other balance sheet items, total assets were EUR 1,200 bn. In addition, according to some analysts, the grossing-up of derivatives assets alone would create a rise in total assets comprised between 42% and of 129% for the largest US banks. The discrepancies in the offsetting of transactions have been outlined by the Financial Stability Board. As a result, the two leading accounting Boards have swiftly reacted in putting this topic on their convergence agenda. I welcome this joint project and wish that the two Boards, after the consultation period with their respective constituents, will be able to publish a common standard that will facilitate the implementation of a global leverage ratio. 2.3 More generally, the differences in accounting standards between IFRS and US GAAPs have been a matter of concern from the beginning of the crisis. Since April 2009, the G20 has continuously asked the two Boards to converge towards a single set of high quality global accounting standards and to complete their convergence project by 2011 with the aim of remedying the major weaknesses identified during the crisis. The standard setting Boards have made progress, but standards have still to be finalised and this is not an easy path.

In addition to encouraging trends in the global economy, the stabilisation of output growth in the euro area has contributed significantly to this. However, the most recent industry and consumer surveys also give positive indications with regard to economic activity in the euro area. Therefore, it is likely that economic activity will accelerate in the second half of 1999 and the year 2000. When assessing the risks for price stability, the ECB does also monitor the external value of the euro. The weakening of the effective exchange rate of the euro, which remained at around 8% between the start of the year and early September, lent itself to an increase in import prices denominated in euro. Taking into account all available information, the outlook for the preservation of price stability remains favourable. However, recently inflationary risks have increased slightly. In the coming months it will therefore be necessary to monitor developments in the monetary aggregates and credit aggregates. In addition, the short-term effects of the increase in oil prices and exchange rate developments on consumer prices need to be taken into account. The latter factors should not affect the outlook for price stability as long as wage increases remain moderate. The wage round for the year 2000 will, however, play an important role in future price developments. On the basis of this current assessment of the monetary, financial and economic situation, the Governing Council of the ECB left the central bank interest rates unchanged at yesterday’s meeting.
Given the importance of achieving control of interest rates, it will be important to be ready to vary the nature of our operations if either effect becomes problematic, for example by: running more frequent OMOs; varying the terms of those OMOs; or amending our standing facilities. We take some comfort from our discussions with banks that their demand for reserves within our framework should keep us on the relatively flat part of the demand for reserves curve, limiting overnight rate volatility. Nevertheless we will continue to deepen our understanding of the demand curve and its drivers through our own analysis, and through further engagement with the market. A second challenge is to ensure that the new system, when in place, works for all market participants. The range and number of participants may well increase over time, and market structures may need to evolve to support the effective transfer of reserves through the system. So we will prioritise work on OMO design to ensure that SMF participants of all types, sizes and sophistication have ready access to reserves. In doing so, we will need to take care not to impede developments in repo and other markets unduly. Conclusions The Bank’s balance sheet will not be returning to its pre-crisis form, even after QT. That reflects the role it needs to play in delivering the Bank’s monetary policy and financial stability objectives in a new environment.

Table 1: Current estimate of the UK PMRR based on feedback to the Discussion Paper Estimate £ PMRR base  120 – 160  PMRR buffer  30 – 90  TOTAL PMRR  150 - 250  I should stress that there is no mechanical link between this figure and the quantity of gilts that the MPC will need to sell during QT: it does not for example mean that gilt sales must stop when reserves levels hit the PMRR. As I will come on to describe, the whole point of the balance sheet framework that we are proposing is that it will allow the size of the balance sheet to be determined independently from the quantity and composition of QE and QT. Adding back the current level of banknotes and other non-reserves liabilities to the PMRR, and assuming nothing else changes, suggests that a steady-state balance sheet after QT of £ (12-18% of GDP) would be needed to deliver the Bank’s monetary policy and financial stability policy objectives. That’s materially higher than pre-crisis levels. But it’s roughly half where we are today (Chart 10), and narrower than we’ve previously indicated, reflecting the more detailed information available from the Discussion Paper feedback.18 As one cross-check, the required reduction in reserves to get to the PMRR is proportionally similar to that estimated for the United States by the Federal Reserve19. 16  https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-201809.pdf and https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-201902.pdf 17 No attempt is made to estimate any potential future rate of return effect.
Another conclusion is that interest-rate policy is not enough to achieve financial stability. The policy rate is an ineffective instrument for influencing financial stability, and policy rates high enough to have a noticeable effect on credit growth and house prices will have a strong negative effect on inflation and resource utilisation, even in sectors that are not experiencing any speculative activity. The use of the policy rate to prevent an unsustainable boom in house prices and credit growth poses major problems for the timely identification of such an unsustainable development, as well as for the assessment of whether policy-rate adjustment would have any noticeable impact on the development, and of whether, in the longer run, the development of inflation and resource utilisation would be better (Bean et al. 2010, Kohn 2008, 2009). Other instruments like supervision and regulation, including appropriate bank resolution regimes, should be the first choice for financial stability. Preventing a financial crisis requires not only improvements in the supervision of financial institutions, but also a greater emphasis on the supervision of the financial system as a whole. As regards the regulatory framework, generally, to the extent that financial instability depends on specific distortions, good regulation should aim to attack these distortions as close to the source as possible. Macro-  3  See Svensson (2003) for a discussion of policy options before and in a liquidity trap. 4  See Assenmacher-Wesche and Gerlach (2009), Bean (2009), Bean et al. (2010), Bernanke (2010), Dokko et al. (2009), IMF (2009).

As Islamic finance progresses, it will encounter many new challenges. Many of these challenges will be unprecedented and will vary from one country to another. It is from this perspective that as a collective, we need to collaborate even more closely to resolve some of the problems and bring Islamic finance to become an inherent part of society. Whatever we do today, will determine the shape and direction of the industry. For many of you who will become future thought leaders in Islamic finance, take the many opportunities that will come before you, to sharpen and deepen your skills and knowledge. Collaborate, respect and embrace each other’s views on various matters, no matter how far apart you are in your opinions. Celebrate diversity of views. Avoid polemics that trivialise issues. Debate and discuss the more important matters that concerns the ummah. Think, dig deeper and be innovative in approaching problems and solutions. Look at substance rather than form. Let’s not be argumentative. Let’s not get trapped into matters of no significance. Let’s practice and live the norms and the values that led to the glory days of many civilisations. You are a privileged group. As members of a highly diverse and global group of scholars, you are well positioned to make a difference to the world through Islamic finance. Since its inception in 2006, 86 recipients from 20 countries have been awarded the Shariah Scholarship Award. Right now, we have 40 recipients from 12 countries.