samchain/econo-pairs-v1 huggingface dataset:
Heng Swee Keat: The future of Islamic financial services Welcome address by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the 6th Islamic Financial Services Board Summit, Singapore, 7 May 2009. *  *  *  President of the Islamic Development Bank, H.E. Dr. Ahmad Mohamed Ali Al-Madani IFSB Council Chairman and Governor of the Saudi Arabian Monetary Agency, H.E. Dr. Muhammad Al-Jasser, IFSB Governors, Secretary-General Prof Rifaat Ahmed Abdel Karim, Ambassadors, Honoured guests Welcome I extend a very warm welcome to all our guests, especially those from overseas. As an Islamic Financial Services Board (IFSB) member, MAS is honoured to host this 6th IFSB Summit. This is IFSB’s first Summit in East Asia, and the strong interest shown by participants here is a testament to the growing opportunities for Islamic Finance and economic cooperation in our region. I very much appreciate the support of fellow Governors and IFSB Board members. A special thanks to all our panel chairmen and speakers, and to Professor Rifaat and the IFSB secretariat for organising this so well. We meet at a most challenging time. The IMF and the World Bank have forecast the global economy to contract for the first time since World War Two. The economies of Asia, like the rest of the world, have slowed significantly. So have all forms of financial services, including Islamic Finance.

Philipp M Hildebrand: Ten theories on the economic relationship Switzerland Europe Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to the Arbeitgeberverband Basel, Basel, 8 September 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The relationship between Switzerland and the EU is close in so many ways that it appears almost stronger than that among many member states themselves. The debate on a possible integration into the EU as a logical consequence should be as broad-based as possible. Economically speaking, the issue has become more pressing since the introduction of the euro, as Switzerland is now surrounded by a single-currency area. Switzerland’s weaker economic growth is also frequently quoted as an argument in favour of integration, since the necessary domestic structural reforms would then be easier to realise. However, one tends to overlook the fact that the national authorities would continue to be responsible for implementing reforms and that, moreover, the absorption potential of autonomous monetary and fiscal policies would be forfeited. Even with an independent policy, Switzerland is in a position to outperform if it again focuses on its strengths of flexibility and openness. The independent monetary policy has helped to keep inflation in Switzerland at a low level for decades. This and the diversification properties of the Swiss franc make capital cheaper in Switzerland by approximately 1.5 percentage points (interest premium).
This, in a way, is a good thing, as it contributes to restoring their competitiveness, as witnessed by their strong export growth. However, the lower inflation is, the greater the risk that unexpected shocks could push the economy into deflationary territory. Since this could, in turn, have consequences for overall euro-area inflation, it is perfectly justified to ask what should be done to minimize that risk. The best protection and the first line of defense against the risk of a lost decade is structural reform. Structural reforms stimulate private consumption and make investment more profitable. In particular, they increase the return on capital and, as a consequence, the economy spontaneously moves towards an equilibrium with higher interest rates. In turn, higher equilibrium interest rates would make it easier for the European Central Bank to set its own policy rate at levels consistent with those needed by the economy. The chances that monetary policy becomes constrained by the lower bound of 0% interest rates are reduced. Higher equilibrium rates also benefit savers, a legitimate concern in many countries. Basically, savers have a claim on future output. They are best protected when growth is sustained and widespread, allowing them to earn high returns and diversify their risks. That said, deflation, like inflation, is ultimately a monetary phenomenon. And central banks must fight all risks to price stability with determination. Under the Eurosystem mandate, which is the cornerstone of all our actions, price stability is our priority objective.

In parallel to assessing future economic prospects, the European Central Bank’s governing council looks independently at the dynamics of money and credit aggregates. This has proved very useful in the past to detect long-term risks to price stability, in both directions. The message today is clear: both money and credit are growing very slowly in the euro area as a whole. The M3 money-supply aggregate grew by 2.1% in September. These trends do not signal deflation, but warrant monitoring and vigilance when facing an uncertain future. Obviously, intentions may not always suffice and must be backed, when necessary, by appropriate and timely actions. Recent decisions by the governing council regarding both policy rates and liquidity provision show that we are ready to make the necessary decisions. Many instruments remain available should further risks materialize. There should be no doubt that the Eurosystem will ensure that price stability, as currently defined, will be maintained in the euro area. 2  BIS central bankers’ speeches
The decision adopted by the monetary authority of Switzerland took into account the fact that the floor – implemented in September 2011, when the Swiss franc was substantially overvalued against the euro – had become increasingly difficult to keep in place given the quantitative easing initiated by the European Central Bank and the significant capital inflows into Switzerland. The CHF appreciation against the leu was inevitable, even if the domestic currency had a relatively stable evolution against the reference currency (euro). The literature refers to the Swiss franc as a safe haven currency. Owing to the small size of the local financial market, against the background of foreign capital inflows, the Swiss franc tends to strengthen significantly versus other currencies in times of turmoil on international markets. The measures the National Bank of Romania can take in order to influence the exchange rate of the domestic currency against the Swiss franc are limited. The CHF/RON exchange rate is set indirectly. The euro is Romania’s reference currency on the FX market, given the intensity of the country’s trade with euro area states, the EU membership and Romania’s intention to adopt the euro in the future. The EUR/RON exchange rate is the result of the foreign currency demand and supply generated by trade and financial flows, while the CHF/RON exchange rate is determined indirectly depending on the EUR/RON and EUR/CHF exchange rates.

Based on the examinations and assessments it undertakes, the NBR ascertains to what extent the management framework, the strategies, processes and mechanisms implemented by a credit institution ensure the proper management of risks given the particular risk profile of the credit institution. Thus, the supervision carried out follows the risk-based approach rather than the compliance-based one. In exercising its supervisory task, the NBR issues recommendations, adopts measures and imposes sanctions on the credit institutions themselves or on their executive and governing bodies in order to ensure that the proper remedial measures are adopted and compliance with the regulations in force is restored. D.  Implementation of recommendations of the European Systemic Risk Board (ESRB) on lending in foreign currencies  At EU level, the first recommendations on lending in foreign currencies were issued by the ESRB in 2011 (with implementation deadline in December 2012). The recommendations were not aimed at banning foreign currency-denominated loans by way of administrative measures, but at setting forth measures that would ensure borrowers have the capacity to service their debt even in the context of adverse developments. With some of these recommendations already regulated, the NBR supplemented the national legislation with the required provisions. Following up on the action steps of the Romanian authorities, the ESRB concluded that the aforementioned recommendation had been fully implemented by Romania.
Our benchmarking work has, for the first time, given supervisors meaningful information on international benchmarks against which they can compare their domestic banks. Many supervisors are responsible for only a handful of IRB banks, and it can be difficult to generate reliable benchmarks from a small sample. But our studies have provided supervisors with a much clearer picture of how their banks stack up against their international peers, and supervisory action is already being taken against a number of the outlier banks that are on the low side.   Similarly, the Committee’s RCAP jurisdictional assessments are having an impact by reducing variability due to undesirable differences in national regulations. These may often seem to be small issues of technical detail, but they can have a material impact on capital outcomes. To the extent these differences are removed, they can add to the consistency of outcomes. The Committee is also looking at the issue of national discretions and Pillar 2, and it is investigating whether more can be done to reduce variability from these sources by elinimating discretion where possible, and strengthening supervisory guidance on model validation, review and approval.   Since transparency (or lack thereof) of bank modelling practices is at the heart of the problem, during 2014 the Committee plans to propose enhancements to Pillar 3. The aim is to provide banks’ external stakeholders with information to better understand banks’ risk profiles and risk-weighted asset differences.

It is rather a matter of a new challenge in the long series of challenges the Swedish economy has had to face ever since the dawn of the industrial era more than a century ago. 5  BIS Review 118/1999
The big moves in asset prices during 2009 – a 50% rise in equities, 150bp fall in LIBOR spreads, the 150 bps fall in targeted corporate bond spreads for example – will have been strongly supported by the Bank’s monetary policy operations. And by purchasing the gilts which asset managers and others would normally have bought, the impact of the quantitative easing programme will have been to increase the demand for more risky assets – like corporate bonds. So the corporate and gilt purchase programmes have been complementary. Conclusion In my talk this evening, I hope I have explained a bit more clearly the motivation for and the design of the APF corporate purchase schemes. The Bank has not sought to provide large scale funding directly using public money. Rather, the operations have been consistent with a central bank acting as “Market Maker of Last Resort”. The Bank has transacted in modest quantities designed to improve the liquidity of corporate credit markets, bring down the cost of credit and encourage private sector lending. That has been supported by the much larger programme of quantitative easing and the low level of Bank Rate. The evidence suggests that, in conjunction with a very large monetary stimulus, abroad as well as at home, the corporate purchases have been successful in helping to invigorate those corporate credit markets in which the Bank has intervened. References Benford J, Berry S, Nikolov K, and Young, C (2009), “Quantitative Easing”, Bank of England Quarterly Bulletin 2009 Q2, available at http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf.

Eligible firms also had to contribute materially to the UK economy and must not be banks (other policies, as noted, had been introduced to help banks). And individual counterparty limits were imposed. Although disentangling the precise impact of the scheme from the global improvement in financial markets is difficult, it does appears to have been successful. Purchases peaked at around £ in late April 2009, at that time amounting to around one third of the sterling CP market. But, as I have stressed, the objective of the scheme was not to purchase a large quantity for its own sake. It was much more important that market spreads for the average issuer started to fall soon after the scheme was launched. Market spreads for all A1 rated sterling paper fell below APF spreads in August 2009 (Chart 3). By February 2010 nearly all firms who had sold CP to the APF were able to re-issue at cheaper rates in the market and the Bank’s CP holdings have fallen back to under £ That decline in usage, together with greater ability to issue in the market, indicates the improvement in market conditions which the scheme was intended to help bring about. I should note that, at the current moment, the need for firms to issue CP is at something of a low point. Investment-grade firms do not seem to have a strong demand for short-term cash and are concentrating on issuing longer-term debt.
As the economic situation abroad normalises, and pressures on the Norwegian krone ease, cost inflation and high activity in Norway will result in higher consumer price inflation. The key policy rate will then gradually be raised and approach a normal level. But developments could take another course. A pronounced weakening of growth prospects or a krone that is too strong may over time lead to inflation that is too low. Such developments would be counteracted by monetary policy measures. We still have room for manoeuvre in interest rate setting – in both directions. More resilient banking sector The financial crisis provided us with some important insights. First, the crisis illustrated that low and stable inflation is not sufficient to secure financial stability. Second, the crisis revealed severe shortcomings in banking regulation. Banking and financial sector regulation is now being reformed in many countries. New liquidity buffer and capital adequacy requirements are due for implementation in line with the changes to the EEA rules. The regulatory reform will make the banking industry more resilient to periods of rising losses and financial market turbulence. Norwegian banks have become more solid in recent years, which is a positive development. Banks’ capital, in particular that of the largest banks, should be increased further in order to satisfy the new requirements due for implementation. Chart 9: Bank lending margins have increased Banks’ lending rates have remained fairly high over the past year, despite a fall in their borrowing costs.

At the same time, our increasing dependence on oil and gas increases the vulnerability of the Norwegian economy. We know that neither of these sources will spring eternal. The theme of my speech this evening is how to enhance the resilience of the Norwegian economy. Continued weak growth prospects, but less fear When the financial crisis washed over the Norwegian banking sector in autumn 2008, we were reminded of how dependent we are on the world around us. Nonetheless, the Norwegian economy weathered the crisis well. After about a year, the downturn in Norway was over. Chart 1: Emerging economies are driving oil demand One of the main reasons is that there is strong demand for Norwegian goods in countries where economic growth remains robust. The centre of gravity in the world economy is shifting. In the course of the next few decades, China will most likely be the largest economy in the world. Emerging economies – with China at the forefront – are the main driving force behind the increase in demand for crude oil and other commodities. As a result, prices for Norwegian export goods have remained high, even in the context of declining growth among our traditional trading partners. Chart 2: Strong improvement in terms of trade  1  From Johan Borgen’s novel “De mørke kilder” [The Dark Springs], first published in 1956, Gyldendal Norsk Forlag. BIS central bankers’ speeches  1  The emergence of newly industrialised economies has also led to lower import prices in Norway.
CPIF with uncertainty bands Annual percentage change 4  4  90% 75% 50% Outcome Forecast  3  3  2  2  1  1  0  0 05  06  07  08  09  10  11  12  13  14  Sources: Statistics Sweden and the Riksbank  Figure 6. Forecasting performance for GDP and CPI 1-RMSE/SD, number of quarters ahead in time 1  1 GDP CPI  0.8  0.8  0.6  0.6  0.4  0.4  0.2  0.2  0  0 1  2  3  4  5  6  7  8  9  10  11  12  Note. Prior to the vertical line, the forecasts partly contain outcomes. Sources: The Riksbank and own calculations  BIS central bankers’ speeches  13  Figure 7. Forecasting performance for GDP, CPI and unemployment 1-RMSE/SD, number of quarters ahead in time 1  1 GDP CPI Unemployment  0.8  0.8  0.6  0.6  0.4  0.4  0.2  0.2  0  0 1  2  3  4  5  6  7  8  9  10  11  12  Note. Prior to the vertical line, the forecasts partly contain outcomes. Sources: The Riksbank and own calculations  Figure 8.

Forecast for GDP according to the convergence programme GDP at fixed prices, index 1994=100 130  130 Outcome Convergence report 1995  120  120  110  110  100  100  90  90 94  95  96  97  98  99  00  Sources: Ministry of Finance and Statistics Sweden  BIS central bankers’ speeches  11  Figure 3. GDP with uncertainty bands Annual percentage change, seasonally-adjusted data 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  90% 75% 50% Outcome Forecast  -6 -8 05  06  -6 -8 07  08  09  10  11  12  13  14  Sources: Statistics Sweden and the Riksbank  Figure 4. CPI with uncertainty bands Annual percentage change 6  6  90% 75% 50% Outcome Forecast  5 4  5 4  3  3  2  2  1  1  0  0  -1  -1  -2  -2 05  06  07  08  09  10  11  12  13  14  Sources: Statistics Sweden and the Riksbank  12  BIS central bankers’ speeches  Figure 5.
This in turn reflects the automatic contribution made by the central government budget to curbing cyclical fluctuations because more money accrues to the state in good times than in bad. If the economy had not been in a period of strong expansion, and the economic situation had been more normal, a considerably larger transfer from the Pension Fund to the Treasury would have been necessary in order to balance the budget. This cyclically adjusted transfer is estimated at a good NOK 71 billion this year, and just under NOK 77 billion in 2008, and has increased gradually over time. It is this estimate that forms the basis of the plan drawn up by the Government and the Storting, referred to as the fiscal rule. The rule states that the government is to spend, as an annual average through the business cycle, the expected return on the petroleum fund, i.e. 4 per cent. Because of the high level of activity, the Government has proposed using somewhat less money from the petroleum fund than 4 per cent of the Fund’s value at the beginning of the year. The proposed tax programme for next year will have a fairly neutral impact on economic activity. Proposed direct and indirect tax rates will generate approximately the same government revenues as last year’s tax rates had they been continued. As a whole, however, the central government budget will have the effect of stimulating activity.

This autumn the krone appreciated during the period of market turbulence, but has weakened somewhat in the past two weeks, reflecting shifting themes in foreign exchange markets. However, it appears the krone will be a good 3 per cent stronger on average in the second half of this year compared with the first half, and about 1.5 per cent stronger this year than last year. Exchange rate developments have a dampening impact on inflation. Given our inflation-targeting regime, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. High oil prices have resulted in substantial growth in the petroleum fund’s capital, and there are prospects of further growth ahead. The Government uses the central government budget to influence economic developments. Government petroleum revenues are transferred in full to the Government Pension Fund – Global and invested in securities abroad. However, as part of the budget resolution, the Storting decides on an annual transfer from the Fund to cover the deficit in the government budget when petroleum revenues and capital income earned by the Fund are excluded. This annual transfer – direct petroleum revenue spending – has been sharply reduced in recent years, but is expected to increase somewhat next year. Developments reflect a marked increase in the government’s general tax revenues as a result of the current period of strong expansion.
So, in other words, not only will banks get lower capital requirements in respect of lower risk credits; but they’ll also get lower capital requirements if they can demonstrate that they manage risk well. It is for this reason that Basel II might perhaps be better thought of not as the second “Capital Accord” but rather the first “Risk Management Accord”. Because it focuses attention not only on the more accurate measurement of risk, but on the management of risk. Banks looking to reduce their capital charge will have two choices: either reduce the risk, for example by substituting better risk credits for lower risk credits, or by reducing positions; or simply manage the risk better. And this will apply not only to credit risk. Again, to take the example of operational risk, banks will have the option of investing in more advanced approaches which will translate into lower capital charges. You may have noticed that I just mentioned banks having options, having choices. This is another key feature of Basel II. No longer will there be a “one size fits all” approach whereby banks of varying shapes and sizes are shoehorned into one inflexible system of capital charges. Instead, banks will be able to choose what approach they take; for example, whether they adopt the standardised approach or IRB approach for credit risk, and which of the various approaches to operational risk they adopt.

The sandbox serves two purposes: First, it allows experiments to take place, even where it is not possible at the outset to anticipate every risk or meet every regulatory requirement. Second, it provides an environment where if an experiment fails, it fails safely and cheaply within controlled boundaries, without widespread adverse consequences. How will the sandbox work? MAS and the applicant will jointly define the boundaries within which the experiment will take place. MAS will then determine the specific legal and regulatory requirements which it is prepared to relax for the duration of the experiment within these boundaries. We have received several sandbox applications since June, from FIs and FinTech players. The proposals leverage a range of technologies including distributed ledgers, machine learning, and big data analytics. MAS is reviewing the applications and looks forward to having some of these proposals launched in the sandbox soon. Meanwhile, we will be issuing today our finalised regulatory sandbox guidelines, incorporating feedback from the industry and road-tested against the actual sandbox applications we have received. Strengthening Cyber Security A smart financial centre must be a safe financial centre. As more financial services are delivered over the Internet, there will be growing security and privacy concerns from cyber threats. Users will have confidence in new technologies and innovative services only to the extent they have confidence in cyber security. Strengthening cyber security is therefore an important part of Singapore’s FinTech agenda. MAS works closely with other government agencies and the industry to help ensure cyber-defences are robust.