samchain/econo-pairs-v1 huggingface dataset:
Page 1  The economic situation and monetary policy − speech by Huw Pill Given at ACCA Cymru Wales  Page 2  Published on 20 May 2022  Huw Pill talks about what we’re doing to bring inflation down. And he gives his view on the outlook for the UK’s economy. Speech Good morning everyone. It is a great pleasure to speak here in Cardiff this morning. Thanks are due to: Lloyd Powell, Head of the Association of Chartered Certified Accountants (ACCA) Cymru Wales, for the invitation to speak here today; to Steve Hicks and Ian Derrick – the Bank’s Agents in Wales – for organising a fantastic visit, of which this is one of the highlights; and of course to all of you for coming this morning at what I am sure are busy and challenging times. On Wednesday, we learnt that UK consumer price inflation currently stands at 9.0%. [1] The MPC forecasts that it will rise to double digits in the fourth quarter of this year. For a monetary policy maker charged with achieving an inflation target of 2%, this is obviously a very uncomfortable situation. But, of course, my discomfort as an MPC member in these circumstances is as nothing to the challenges facing those most directly exposed to the current cost of living crisis. These are difficult times for many people, especially for the less well off, who spend a higher proportion of their income on energy and food, where recent price rises have been most significant.

Among other things, financial education would help both individuals and firms establish sounder financial situations and reduce financial risks such as unnecessary exposure to exchange rate volatility. The Bank of Albania has been on the vanguard of financial education in Albania and will continue to spearhead such efforts. Albania needs also to develop further payment systems and improve access to finance for various segments of the society, such as small and medium-sized enterprises or the rural sector. The Bank of Albania has responsibly exercised its duties in the area of payment system development. In this regard, we: Established, in 2015, the National Payments System Committee, to coordinate the work of all relevant public and private sector agencies; Compiled the draft law “On payments services”, which approximates the respective EU directive and paves the way for developing new payment products; and, Improved the technological infrastructure for payments, reducing therefore their costs. However, our work may not be considered as completely finished. Lastly, Albania should pay attention to the development of new financial market segments, such as capital markets and pension and investment funds. In this context, alignment of the legal and regulatory framework is of primary importance with a view to preventing the potential emergence of systemic risks or the possibility of regulatory arbitrage. ***  Dear ladies and gentlemen, Our agenda for the work that lies ahead of us is as complex as ambitious.
It actually mandates that 8% of a bank’s liabilities must be bailed in before there can be any recourse to public money or industry financed resolution funds. However, the powers, and indeed the requirement to bail-in, are not enough in of themselves. Bail-in powers need something to work with once a resolution is triggered. For resolution to be effective, we need banks to hold sufficient debt structured in a form that can be safely and quickly bailed in – or, to give it its inelegant full name “Gone Concern Loss Absorbing Capacity” – G.L.A.C for short. There is now agreement on the broad objective for an international GLAC standard: it must allow for an orderly wind down of large, complex cross-border groups, whilst protecting its critical economic functions. Discussions have moved on to the key design features. What sort of standard? How much GLAC? What type of debt should count and where should it be located? On the quantity, I repeat, we are not seeking an amount of GLAC capable of resurrecting any failing bank including the global giants. Rather, we are looking for sufficient GLAC to recapitalise the entities carrying out critical economic functions to a level sufficient to regain and maintain market access. For the remaining entities, sufficient capacity to provide for an orderly run-off is what is required. On what kind of instruments should count as GLAC, the debt needs to be of a sufficient maturity to give confidence that the funding will not have been withdrawn before the bail-in can be executed.

Will Portugal need more help and will it receive it? The country was set back by the political uncertainty in the summer. This uncertainty has now been overcome and the country can and should take up from where it stood in the spring of this year, when it was able to successfully issue a long-term bond. Market confidence could be won back through a full implementation of the programme. That is why it is essential to keep to the existing programme and all its objectives. The debate on a second package is heard in Cyprus too. Not least because the collapse of the economy was worse than forecast. When can we expect “Cyprus II”? This question never ceases to amaze me. The Cyprus programme has not even been operating for six months and it has a duration of three years. I fail to understand why the question of a supplementary programme is already being raised. Cyprus must now implement the programme. There has been one review so far and that was successfully completed. The issue now is to continue the programme – nothing more. Not much has been heard about Slovenia recently. Will that country seek a rescue package if the ECB’s asset quality review exposes all the trouble in the banking sector? 2  BIS central bankers’ speeches  Slovenia is now conducting a separate stress test for the country’s ten major banks. The results will be available in late November or early December.
This shift was not driven by any policy but as a consequence of technology providing more convenient ways for us to transact with each other. The shift as I recall has generated very little controversy or political attention. There has been a political response, but this has more about financial inclusion, about ensuring access to a bank account and to “One of the most important forms of currency in England in Henry's time were notched "tally sticks" used to record debts. Tally sticks were quite explicitly IOUs: both parties to a transaction would take a hazelwood twig, notch it to indicate the amount owed, and then split it in half. The creditor would keep one half, called "the stock" (hence the origin of the term "stock holder") and the debtor kept the other, called "the stub" (hence the origin of the term "ticket stub.") Tax assessors used such twigs to calculate amounts owed by local sheriffs. Often, though, rather than wait for the taxes to come due, Henry's exchequer would often sell the tallies at a discount, and they would circulate, as tokens of debt owed to the government, to anyone willing to trade for them. Modern banknotes actually work on a similar principle, except in reverse.” Graeber (2011) 3 The Payments of Wages Act 1960, as amended by the Truck Act. 2  3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  commercial bank money so that people were not left behind by the change.

And this year, we will consult on giving greater access to our balance sheet as well as our infrastructure to non-bank payment providers. There is also still considerable opportunity to improve the domestic retail payment systems. FPS is not available, unlike in some other countries, at the till. And while the card schemes offer instant transaction it can take a number of days for merchants to receive the value of the transaction. These add to costs which are eventually borne by consumers. Two years ago, the 3 main scheme companies in the UK were consolidated into one entity that now is developing a new single ‘instant payment’ interbank system - the ‘New Payments Architecture’. The aim is to provide a faster, more resilient, and more efficient interbank system that is open to bank and non-bank payment service providers, and one that will enable and encourage innovation and competition including instant payment at the point of sale. Innovation and competition can lead to better, cheaper, payments services in the economy. But, the payment systems on which we depend have to be reliable and robust, prudentially and operationally. Regulation, therefore needs to keep pace with the changes in the payments landscape and the proliferation of new actors. The same risks have to be subject to the same regulation. The current regulatory regime focusses on the banks and core payment systems that have traditionally performed most of the functions, the ‘chain of actions’, involved in making transactions.
However, if we scale it to the country’s GDP, it was in the range between 6.1 to 6.9% over the past five years. Thus, despite the headway we have made in advancing e-payments, the persistency of cash among the public and small and medium sized businesses remains high. This opens up the economy to risks as cash is still being used by criminals to launder illegal proceeds, as we 3/5  BIS central bankers' speeches  have seen from some high-profile cases over the past year or so. Similarly, this is the preferred mode to finance terrorist activities, which will involve transacting in cash. Therefore, it is timely for us to look at ways to strengthen the controls to mitigate financial crime; namely the cash threshold reporting requirement. When we compare Malaysia with other countries, our current threshold is too high and disconnected from the size of our economy, especially relative to our purchasing power. Hence, it needs to be updated. In this regard, we would like to announce that we will be lowering the daily cash threshold report to RM25,000 effective 1 January 2019. This will bring the cash threshold report in Malaysia to be more at par with other countries. We do not anticipate any impact in terms of economic activity but an increase in effectiveness in taming the black economy that is still heavily reliant on cash transactions.

As such, it is important for the industry to be aware of the trade-offs that come with adoption of these technologies. In pushing the boundaries of innovation, the industry needs to understand the risks that they pose. One example is the rise of mobile banking, e-payments and virtual assets. In Malaysia, mobile banking transactions have multiplied greatly, from around 500 million transactions in 2016 to almost 1.3 trillion transactions in August this year. The ubiquity of mobile internet and increasing dependency on our smartphones is expected to increase the importance of this medium. This technology fosters financial inclusion and offers potential for greater customer engagement. One such potential is in meeting and strengthening know-your-customer requirements. By leveraging on technology, financial institutions will be able to conduct e-KYC with greater efficiency while making the customer experience more seamless. One such solution is being tested in the Bank’s FinTech sandbox. Another area of growth comes from virtual assets. Between the end of 2016 to date, market capitalisation of virtual assets have grown by an extraordinary rate of over 1000% from around USD 20 billion to around USD 200 billion. While the technologies behind virtual assets may present great potential to revolutionise the way we conduct finance, the risks associated with virtual assets is an area that deserves much scrutiny. Features that may allow anonymous or pseudonymous transactions and easier crossborder transfers of values carry money laundering and terrorism financing risks that need to be addressed.
Macroprudential for the whole economy  To put that action in context, let me start with a very high level sketch of what in my view we mean by financial stability. Financial stability in essence is ensuring that the financial system and the real economy are able to absorb the ups and downs of the financial cycle. And, by extension, that the financial cycle does not amplify the troughs of the business or economic cycle or more generally disrupt the economy. We care about the ups, the peaks of the financial cycle because higher peaks are likely to result in higher falls and so, require higher resilience. By financial cycle I mean essentially the build-up and contraction of credit or leverage in the economy and in the financial system. The rise and fall of asset prices – both financial and physical assets – does of course matter. But it matters much more when assets are financed by credit.4 The term ‘financial cycle’ implies some smooth predictable sine wave. Life, I am afraid, is not like that. Financial cycles do not follow nice patterns: they are only ‘cycles’ in the sense that we can observe periods of credit growth followed by periods of contraction. The growth of credit in an economy tends to build up and accelerate over time and then contract as optimism about the future income streams and asset values waxes and wanes. And there are mechanisms, such as collateral values, endogenous to the creation of credit that reinforce both the upswing and the downswing.

Jordà, Òscar, Moritz Schularick and Alan M. Taylor (2016), The great mortgaging: housing finance, crises and business cycles, Economic Policy, 31 (85), pp. 107-152. Kovacs, Agnes, May Rostom and Philip Bunn (2018), Consumption Response to Aggregate Shocks and the Role of Leverage, Discussion Papers 1820, Centre for Macroeconomics (CFM). Levina, Iren, Robert Sturrock, Alexandra Varadi and Gavin Wallis (2019), Modelling the distribution of mortgage debt, Staff Working Paper No. 808, Bank of England. Nakajima, Jouchi (2018), The role of household debt heterogeneity on consumption: Evidence from Japanese household data, BIS Working Paper No 14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14
Let us start with the very criticisms levelled today at the multilateral economic order, and at what has been called the "Washington Consensus". It was economically sound, but socially too weak. Globalisation has often been felt to have mainly benefited large corporations – and their tax evasion. Inequalities between countries – notably between the North and the  Page 5 of 10  South – have fortunately decreased; those within countries have increased. And your generation is demanding that we guarantee the protection of the planet. Behind these criticisms are often our very European values. This echoes the work of many researchers who highlight the diversity of capitalist models and seek to correct their excesses. vii I am thinking in particular of Marie-Laure Djelic, co-Dean of the Sciences Po School of Management, viii of Michel Aglietta who denounces the "excesses of financial capitalism" ix or of Dani Rodrik who highlights the dysfunctions of liberal capitalism. x At the beginning of the 1990s, Michel Albert theorised "Rhenish capitalism". xi Jean-Dominique Sénard is now calling for “responsible capitalism” in Europe. Europe, if it is bold enough, is in a good position to provide concrete answers to the expectations of the world's citizens. The new Commission, led by Ursula von der Leyen, has the means to achieve this ambition. In my view, the "European model" is articulated around four requirements: the fight against inequalities, the promotion of individual autonomy through education and knowledge building, the preservation of the climate, and the renewal of multilateralism.

Apart from the internal push, ASEAN exchange linkage under the vision of AEC is taking place this year to allow global investors to trade ASEAN blue chip stocks at lower costs through a single platform. This initiative will ultimately raise the visibility of ASEAN capital market and continue to attract more capital flow. To sum up, as economic integration and upgrade of efficiency and competitiveness is key to our development, Thailand’s financial system is geared to facilitate this process. To do so, financial liberalisation will play a key role, with contribution by ASEAN banks as well as foreign banks operating in this region. Ladies and gentlemen, I would like to reiterate that with solid economic strengths and a wide-ranging development in Thailand’s financial system, the Thai economy will continue to be resilient in the face of the dismal global outlook. The BOT is fully committed to sound monetary policy conduct and financial-sector development via the Financial Sector Master Plan as well as play a supporting role in Capital Market Development Master Plan. Let me end my remark by thanking the British business community for substantial contribution to our economy. Your contribution will not only strengthen our long history of economic partnership but also bring economic prosperity to both Britain and Thailand. I very much hope that the mutually beneficial ties between British and Thailand will blossom into the future. Thank you  BIS central bankers’ speeches  3
So, if those are the benefits, what about the potential risks of international banking? The risks from banking are well known – that the failure of an institution can lead to contagion and spillovers that may have direct and indirect impacts on financial stability. These risks may be amplified, accelerated, and transmitted through the increased degree of interconnectedness that international banking brings. This could be through greater exposure to cyclical global macroeconomic trends, or through a greater appetite and capacity for risk without appropriate controls. Successive crises have clearly demonstrated the effects of international banks, and capital markets, “freezing”. Contraction in credit supply is a powerful channel through which financial crises hit global and domestic economies. And the balance between international and domestic services can shift rapidly in a recession as international banks serve the home market. In 2008–09 for example, UK resident banks cut cross-border lending by 30% 5, significantly more than lending in the UK. The same patterns were seen internationally. Lehman of course had global effects, but numerous other entities had substantial cross border effects too. The crisis showed us all too clearly that international banking, interconnectedness, and unrestricted capital flows carry risk as well as rewards. All this underlines the importance of delivering effective oversight of international banks. Prudent international regulatory standards are a necessary part of this, but are not on their own sufficient.

Banks subsequently extended the securitisation  1  I am very grateful to Pontus Aberg, Valia Rentzou and Isabel Von Koppen-Mertes for their valuable inputs and contributions, and to David Marqués for useful comments. 2  See ECB (2008), “Securitisation in the euro area”, Monthly Bulletin, February. BIS Review 68/2008  1  model to other forms of credit, such as consumer credit and student loans, that were historically regarded as highly illiquid. In Europe, the market for structured finance products has grown rapidly during the last 5-10 years, often at double-digit rates (See Chart 1). This development was maybe even more pronounced in the euro area compared with other regions due to several factors, including the introduction of the single currency, further financial market integration through the use of 3 credit derivatives and related financial instruments, and an innovative financial industry. Growth in structured finance products has also been fuelled by high demand from investors stemming from the search for yield and diversification opportunities. Securitisation has also been positively affected by the move towards a more market-based financial system. Increasing securitisation of lending-related assets, together with relentless financial innovation in credit markets, have led to the diffusion of a new business organisation – the “originate to distribute” model – among banks, particularly those of large size. There is certainly no need to explain to this audience how, under this new business model, the loans originated by banks are transformed into marketable asset-backed securities.
The form of government was unstable, the payment system was rather chaotic and there was a general shortage of credit facilities. People who wanted to try something new found themselves restricted. Many saw no alternative to emigrating and trying their luck in America. It seems that more than a million people left Sweden for the new country in the west before the process of industrialisation began in earnest here. Less than a hundred years later, at the end of the 19th century, the Swedish economy had undergone a dramatic transformation. Inflation was low and the payment system functioned properly. The country vibrated with energy in every sphere. An impressive number of new products were developed on the basis of Swedish inventions and many of them became world leaders. Swedish financial experts were involved early on in exploiting the innovations. More and more people found work, living standards rose and Sweden achieved one of the highest growth rates in the world. When it comes to the causes of Sweden’s rapid economic transformation, there are some differences of opinion. The industrialisation taking place elsewhere was probably a major factor. Another was the possibility of importing capital for large investments. Domestic reforms in key areas may also have helped create the conditions for growth. Price stability was presumably of some significance. Low, stable inflation reduces uncertainty about the future for those who have to plan for the long term.

For these highly leveraged households, reducing the level of leverage will take time. They need to work with their banks and commit to debt repayment plans. 30 Hence on the whole, MAS’ assessment is that it is premature to ease property cooling measures now. It is important that we secure the gains we have made in stabilising the market and restoring financial prudence. Comprehensive measures to safeguard interests of consumers of financial products 31 On the financial regulatory and supervisory front, I will focus on measures being taken to safeguard the interests of consumers of financial products. 32 Several measures were announced recently and some will be announced soon. Let me set the context for these measures – motivating factors, overall approach, and how the various pieces fit together. 33 Three trends are shaping market for financial products. •  Low interest rates globally have spurred investors to seek better returns. •  Growing affluence and financial awareness have generated greater demand for a broader range of retail investment products. •  There has been an increased sophistication and variety in financial products offered to retail public. 34 Against this backdrop, MAS is taking a multi-pronged approach to safeguard consumer interests. First, we are enhancing regulatory safeguards for retail investors in unconventional investment schemes. Second, we will facilitate retail access to simple, lower cost products. Third, MAS will help to empower consumers with enhanced disclosure and information access. Fourth, we are raising standards of financial advice to consumers.