samchain/econo-pairs-v1 huggingface dataset:
•  Greece is preparing for a historic election that may well decide its future in the Eurozone. •  Spain is experiencing severe strains in its banking system against a backdrop of a sharp reduction in GDP, high unemployment, and a deteriorating real estate sector. •  Italy and Spain are facing higher sovereign borrowing costs that threaten fiscal sustainability. To be fair, Eurozone governments have been taking extraordinary measures to help stabilise the situation, reduce fiscal deficits, and restore growth. But they have reached a turning point where bolder, decisive actions will be needed to reverse the tide. The next few weeks and months will be critical. Islamic finance: challenges to overcome Let me turn now to the subject of our conference. Islamic finance has shown remarkable resilience during the last five years – perhaps the most challenging economic environment in the post-war era. The industry has grown by an estimated 20% annually in the last five years to reach $ trillion in total assets in 2011. Islamic banks have grown both in number and in scope. BIS central bankers’ speeches  1  But the sustained growth of Islamic finance is in no way guaranteed. For Islamic finance to continue thriving, the industry has to overcome a few key challenges. But in every challenge, there is also opportunity. Let me highlight three of them this morning.

Singapore has grown over the past decade to become the largest REIT market in Asia outside of Japan. Building on this strength, players in Singapore have established the world’s largest Shariah-compliant REIT, which draws in conventional and Islamic investors around the world. Third, opportunities for interaction and collaboration. As Islamic finance gains prominence, conventional financial institutions increasingly want to be involved to tap these opportunities. Financial centres like Singapore serve as intersecting nodes where Islamic financial institutions collaborate with their conventional partners to jointly grow the industry. By applying the same regulatory framework to both conventional and Islamic financial institutions, Singapore aims to encourage financial institutions here to grow their suite of products and services for the Islamic finance industry. Conclusion Let me conclude. Islamic finance has come a long way. As it embarks on its next phase of growth, the industry must overcome the challenges posed by slower growth and global deleveraging, and build scale and reach critical mass. This requires financial institutions, regulators, and international standard setting agencies to work closely together. Forums like these are ideal platforms. I wish you fruitful discussions. Thank you. BIS central bankers’ speeches  3
Secondly, due to the trade offs I described earlier, the government has proposed that the FPC be subject to a constraint that it should not act to preserve stability at the cost of significantly impairing the capacity of the financial sector to contribute to medium-to-long term economic growth. What this means in practice is that when faced with an immediate or incipient threat to stability, we must try to find a solution that avoids damage to long-term growth. That discipline is welcomed by the Bank. This is obviously all novel stuff. It is therefore helpful that the government plans to ask Parliament for a power periodically to flesh out the statutory objective, via a Remit from the Chancellor of the Exchequer – an arrangement that has worked well in the monetary field in the UK. It will enable practical lessons to be incorporated into the regime over time. Why is the UK’s macroprudential body separate from microsupervision? Most central banks have traditionally regarded their contribution to financial stability as deriving from their markets and banking supervision functions. That is explicit in the Federal Reserve’s 1913 statute, with which I began these remarks. And given the UK’s heavily concentrated banking system, effective banking supervision is obviously an essential precondition for preserving stability. But in terms of how organisations work in the real world, the flaw in relying entirely on this is that it assumes that those operational areas of the central bank will invariably make time and space to address the financial system as a system.

See also the Bank’s paper: “The role of macroprudential policy: A discussion paper”, November 2009. 8  BIS central bankers’ speeches  The benchmark instrument, in the sense that it will definitely exist, will be the countercyclical buffer (CCB) in the Basel 3 Capital Accord. In the UK, it will be the FPC that decides whether to switch off the semi-automatic application of the CCB when triggered by the ratio of credit to GDP and other indicators exceeding certain thresholds. (It is not altogether clear, by the way, who will have that responsibility in other countries; the function requires a system-wide perspective and a macroeconomic capability and so is not exclusively in the domain of microprudential regulators.) Beyond the one instrument agreed internationally so far, the UK government is also considering whether to give the FPC a variety of other instruments. These include varying liquidity requirements; and varying capital requirements against specific types of exposure (“risk weights”) and/or minimum haircuts for specific types of secured lending, whether financing hedge funds etc or Loan-To-Value ratios for property-related lending. The availability of such targeted instruments might be especially useful where the FPC wished to mitigate risks from overexuberance and collective imprudence in lending to a particular sector without necessarily affecting credit conditions more generally. Targeting a specific area of business might also sometimes help to resolve a collective action problem sustaining a bubble if enough lenders themselves thought risk was being underpriced.
Credit for house purchase posted a year-on-year fall of 2.7%, declining almost 1 pp more than in February. The yearon-year growth rate of consumer credit, which stood at 15% in February, fell as low as 2.5% in May. In June it grew by 2.3%, owing especially to drawdowns of credit facilities, since new lending continued to move on a downward path. However, in the coming months we will inevitably witness a deterioration in the credit quality of banks’ balance sheets, as a result of the sharp contraction in the income of non-financial corporations and households over recent months. Indeed, this deterioration is expected to intensify when the moratoria end or the grace period on guaranteed loans expires. The volume of NPLs in the private non-financial sector continued to fall at a year-on-year rate of 11% in June, although this was 8 pp less than the decline in February. The NPLs in banks’ business in Spain increased by 2% between March and June this year, with no major differences between firms and households. Although the increase in NPLs traditionally lags behind the onset of recessions, this increase is very contained considering the scale of the fall in GDP. Undoubtedly, the measures implemented, particularly guarantee schemes for firms and payment holidays for individuals, are significantly reducing the immediate rise in newly classified NPLs. Reclassifications of NPLs which in recent years significantly reduced the NPL ratio, have also fallen, owing to less activity in the impaired assets market.

As the fed funds chart shows, market expectations for monetary policy are very sensitive to changes in the economic setting – consider the shifts in the shape of the federal funds over time. Thank you for your attention. 4  BIS central bankers’ speeches  BIS central bankers’ speeches  5  6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  23  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches  BIS central bankers’ speeches  15  16  BIS central bankers’ speeches  BIS central bankers’ speeches  17  18  BIS central bankers’ speeches  BIS central bankers’ speeches  19  20  BIS central bankers’ speeches  BIS central bankers’ speeches  21
In commentary on other papers, Shleifer himself has argued against one of the fundamental drivers of the crisis being the liquidity exposures stemming from ABS and other securities being financed by short-term repos; what Gary Gorton and others have called the run on repo.8 But the spirit – if not the analytics – of his paper could extend to myopia about liquidity risk; it was neglected because agents forgot about it. Only recently the leader of a financial institution that emerged relatively unscathed from the crisis told me that they had been blind to the possibility of a really severe liquidity crunch; and that they had reacted by massively cutting their short-term funding in the worst days of the crisis. As a policymaker, for whom explanations can be complementary rather than seminar papers in competition, the myopia and run-on-repo se stories seem to me to join up rather well. What to do? As the Basel Supervisors Committee proceeds with the FRTB, I can imagine reluctance to opine on the liquidity of markets, but it was not beyond the wit of the official sector to observe that crucial parts of the ABS market were utterly dependent on levered money and so very unlikely to be liquid when the music stopped. This partly makes the case for reconnecting supervisors and markets specialists in central banks. This is all part of getting the level of capital in the banking industry closer to what is warranted. Adair has said a great deal about that this evening.

Thankfully, all this is now also being worked on internationally in the Financial Stability Board. A second and obvious policy inference that one could draw from Shleifer’s paper, and one I want to spend a little more time on this evening, is that it is absolutely vital that (regulatory) capital requirements for banks more or less truly capture their risks. Two thoughts on that, of rather different kinds. First, it was very obviously a false step when, in Basel 2, the international-standard setters tried to follow the techniques and calibrations of private sector risk managers rather than engaging with the externalities that warrant State intervention in this area in the first place. Second, more particularly and more concretely, this underlines the vital importance of the current Basel work to review fundamentally the capital requirements for banks’ trading books. In short, Basel has recognised that the amount of capital a bank should hold against a liquid trading position often has good reason to be smaller than needed for a hold-to-maturity portfolio, ie where the bank can shed its exposure. But it failed utterly to recognise that since such books are marked-to-market (or model) and since the boundary conditions for solvency derive partly from accounting measures of asset values, it is vital that banks hold capital against the risk of violent swings in liquidity premia. Yet that is exactly what torpedoed a fair fraction of the largest banks and dealers in the world through their (levered) holdings of leveraged loans and super senior tranches of CDOs.
On behalf of the MIFC Executive Committee, I would like to express my appreciation to the members of the panel of jury for the Royal Award for Islamic Finance which is led by Yang Amat Berbahagia Tun Musa Hitam, former Deputy Prime Minister of Malaysia and also to the members of the taskforce that was chaired by Tan Sri Zarinah Anwar, Chairman of the Securities Commission, who oversaw the establishment of this prestigious award. It is my sincere hope that this Royal Award will be an inspiration to the global development of Islamic finance. 2  BIS Review 141/2010

The second salient feature is Asia's high rate of savings, exceeding 30% of gross national product (GNP) in most Asian economies, which have enabled the private and public sectors to fund capital accumulation from domestic sources. While the private sector focuses on investing in physical capital and adopting new technologies to raise productive efficiency, governments across Asia place commensurate emphasis on developing infrastructure, such as roads, ports and utilities, as well as on healthcare and education. The combination of efficient capital and productive labour in turn generates more higher-value-added activity, thereby accelerating economic growth. Third, the Asian economies have adopted an outward-oriented development path, rather than depended only on domestic demand, to expand industrial production. Just five decades ago, Asia was amongst the world's poorest regions. Asia recognised that its development process would be slow and marginal should low-income-driven domestic demand be relied upon to incrementally stimulate industrial activity. It accelerated the movement of resources from low-productivity traditional activity to high-productivity modern activity. Most of Asia, early among the developing economies, has been very open to international trade and foreign direct investment (FDI), resulting in Asia to be rapidly integrated with the global economy. The trade volume of Asia as a share of total world trade increased from 14% in 1970 to 22% in 1990, and subsequently to 28% in 2008. Furthermore, Asia has also been a major recipient of FDI, with FDI flows into Asia increasing from 7% of total global FDI to 20% in 2007.
It is along the lines required to give credibility to the process, although to ensure that the budgetary targets are realistic, all economic agents must be convinced that, in the event of deviations occurring, all necessary measures will be taken to achieve such objectives. Lastly, and more clearly than  BIS Review 124/2009  5  on any other occasion, I must reiterate what I have said in all my previous Budget-related appearances: given the high degree of decentralisation of the State in Spain, it is of paramount importance that the territorial tiers of government should also commit themselves to reducing the deficit through compliance with the provisions laid down in budgetary stability legislation. The attention I have given to budgetary policy, in step with the rationale behind this appearance, should not however obscure one particular fact. This is namely that, at present, the main instrument available to the national economic authorities to address the crisis, strengthen the chances of recovery and push through fiscal consolidation plans are supplyside and structural reform policies, geared primarily to improving employment-generation capacity, facilitating change in the weight of productive activities and increasing the economy's efficiency and productivity. The future of the Spanish economy will turn to a great extent on these policies, not just in the long run but more immediately, where the structural strengths and weaknesses of the different economies inside and outside the euro area will be highlighted.

Lastly, I must add ignorance as another essential cause of improper financial behavior. Even with a well-designed financial education program with meaningful messages and effective delivery channels, financial literacy cannot be achieved if consumers neglect the necessity and benefits of appropriate personal financial management. All in all, desirable financial behavior is sometimes well known, but less likely to be implemented by consumers themselves. It is similar to living a healthy lifestyle. We know that healthy food and exercise are good for us, but we don’t do it. Hence, a solution to the improvement in financial behavior remains a challenging puzzle for many of the policy makers and practitioners to find the right solutions for various groups of people. Ladies and Gentlemen, I truly believe that this seminar would allow an invaluable opportunity for us to learn how to solve these puzzles from honorable speakers who have come a long way to share with us their enriching experiences and lessons-learnt. The achievement of effective financial education and behavioral change would eventually drive the global community towards a more financial- literate and disciplined population who would help ensure sustainable growth and equality in our society. Lastly, I wish the seminar a great success. I also wish to express my sincere appreciation for all of your endless efforts in promoting financial inclusion and financial literacy. Thank you. 2  BIS central bankers’ speeches
He lambasted the Bank’s acting “hesitatingly, reluctantly and with misgiving”.2 Henry Gibbs, Governor of the Bank from 1875 to 1877, highlighted the Overend experience as “the Bank’s only real blunder”.3 Yet the Bank had also learned from this experience. It had discovered that its role could be neither commercial nor competitive. Instead its role was as guardian of the financial system as a whole, protecting banks from what is today called systemic risk. In Bagehot’s words, the Bank should act as last resort lender to solvent institutions against good collateral at a penalty rate. It has done so ever since. The Bank did not have to wait long to put its new-found role into practice. On Saturday 8 November 1890 the Bank Governor of the day, William Lidderdale, summoned his Directors. This itself aroused suspicion. Bank directors were never seen at work at the weekend. They typically departed for the country around Friday lunchtime. (Let me tell you, things have changed for Bank of England Directors since then.) What Lidderdale told his Directors was electric. There were serious liquidity problems at another big and famous bank, Baring Brothers and Company. But the Bank had not the faintest clue as to Barings’ true financial position. To rectify that, Lidderdale ordered an accountant’s report on Barings to be brought to him with immediate effect. And with that, he departed to London Zoo with his son. 1  Kynaston (1994) Vol. 1. p200. 2  Bagehot (1873). 3  Wood (1999).

It came care of fixing the exchange rate – first to gold under the Gold Standard and latterly in the post war period to the dollar. With the demise of the dollar standard in the early 1970s, however, the exchange rate anchor had been tossed overboard. At the Bank of England, as elsewhere, the search was on for a new nominal anchor. Into this vacuum stepped Andrew Duncan Crockett. Crockett joined the Bank in 1966 as a graduate entrant, just before the break-up of the Bretton Woods dollar standard. He set to work on the biggest problem of the day, locating a new nominal anchor. In so doing, he began working alongside another young(ish) new Bank entrant, Charles Goodhart. The result was a joint paper published in the Bank’s Quarterly Bulletin in June 1970. It was titled “The Importance of Money”.11 Re-reading it now, it was a prophetic piece of work. In the UK, it laid some of the analytical foundations for what, during the late 1970s and 1980s, became monetarism. More than that, the paper placed commercial bank money and credit at the centre of the macro-economy. It could as well have been titled “The Importance of Credit” or indeed “The Importance of Banks”. After a successful spell at the IMF, Crockett returned to the Bank of England in 1989. In 1994, he then became General Manager of the Bank for International Settlements, the central banks’ central bank. In central bank circles, change was in the air.
As a first key step in developing these approaches, the Basel Committee gathered information about banks’ internal ratings systems. Our findings indicate that there is presently no single standard for the design and operation of such a system. Thus, I see the importance of establishing appropriate guidelines for the use of internal ratings systems. These guidelines should ensure that internal ratings appropriately reflect the credit risk in each category of exposure. Additionally, it is important that we develop robust disclosure guidelines for internal ratings information to ensure that capital requirements are comparable across banks and countries. Standardized approach A revised standardized approach is still very important to us at the Basel Committee, as some banks may not have the internal resources to implement an internal ratings-based approach, and some supervisors have indicated that implementation of this approach would create resource strains for them. Further, we want to ensure that those banks that look to the Accord as the common standard many of which are located in emerging market countries - can subscribe to the revised framework. In order to improve the risk sensitivity of the standardized approach without becoming overly complex, the Committee has proposed the use of external credit assessments, such as credit ratings. Many comments noted drawbacks to this approach, but those that have seriously considered the trade-off between simplicity and risk sensitivity generally have agreed with the Committee’s decision to make use of external credit assessments.

Will it come about through a sharp correction in the dollar and, if so, what will the consequences be for the world economy? The majority of forecasters agree that the large deficits in the US are not sustainable. It’s true that the weakened dollar is expected to be able to lead to a certain stabilisation of the current account, but since the US imports around 1.5 times more than it exports there would have to be a sharp reduction in imports or an even steeper rise in exports for the deficit to be able to narrow. At the same time, demand in the US has to a great extent been the engine for the world economy in recent years. Expansionary economic policy has contributed to this and also resulted in a very large saving deficit. The inflow of capital to the US has stemmed, among other things, from Asian central banks’ purchases of US government securities. China has recently accounted for about one-third of the US external borrowing requirement. In that way, both China and Japan have built up substantial dollar reserves. The logic behind this loss-making activity (if the dollar continues to fall in value) is that it enables Japan and China to maintain low values for their own currencies, thus facilitating continued exports to the US and other countries. For China the substantial exports translate into jobs and incomes in an economy where a very high percentage of the population still live in the conditions of a developing country.