samchain/econo-pairs-v1 huggingface dataset:
That brings me to my last subject – that of culture. 47. Such qualities as integrity and respect are essential to maintain the community’s trust in the financial system. And, to be honest, this is one area where the HKMA cannot impose its will 4/5  BIS central bankers' speeches  on banks. We can push banks to do many things – but cannot enforce morality. 48. I am always reminded of the words of Baroness Onora O’Neill – the British academic and philosopher. She said, I quote, that “overuse of regulation leads to the formula ‘legal equals right’”. In other words, if the industry focuses only on complying with HKMA rules and statutory laws, it will assume all other possible behaviour is legitimate and acceptable. In short, banks will look for loopholes. 49. Of course, that is not the case. It is banks’ responsibility to instil a culture of prudent risktaking, an ethical approach to business, and a focus on treating clients fairly. 50. This is partly a matter of example within the organization – by top level attention at board level, good corporate governance, and by not encouraging short-term risk-taking. 51. This is not simply about complying with HKMA directives, or obeying the law. It is about bankers being aware of their personal responsibilities as custodians of the public’s trust, and as citizens. We cannot do this for you.

The themes are broad. That reflects the diversity of our agenda. They focus on the interactions and intersections between policy areas. They emphasise new challenges and new directions, while recognising that familiar questions facing central banks remain no less important. Today’s conference is organised around them. The first theme covers “policy frameworks and interactions” The re-emergence of macroprudential instruments as part of the policy armoury raises fundamental questions about the interaction of monetary policy, macroprudential policy, and microprudential policy. It is essential to improve our understanding of the relationship between credit cycles and systemic risks. Since credit market developments both affect and reflect potential growth in the broader economy, they – and macroprudential measures to influence them – require careful study by financial and monetary policymakers alike. The advent of a new, enhanced policy toolkit raises vital questions about the effectiveness of individual policy tools; their joint operation; and how they interact domestically and across borders. The second theme covers “evaluating regulation, resolution, and market structures” The financial crisis precipitated a radical overhaul of the approach towards regulation, supervision and resolution. Regulatory policies have shifted from a near-exclusive focus on microprudential resilience to a more balanced emphasis on minimising systemic risk. In the whirlwind of essential change, there has been, however, relatively little assessment of the overall effect of reform on the financial system as a whole. Moreover, our understanding of the “system” must extend well beyond the banking sector to encompass the whole of market-based finance.
•  A McKinsey study estimates that Myanmar will need to invest $ billion in infrastructure up to 2030 to achieve an annual growth of 8%. •  Foreign capital, intermediated through a well-developed banking industry and wellfunctioning capital markets, is a necessary complement to meeting this infrastructure need. And it is not only financing that foreign participation brings, but critical expertise in structuring projects and managing risks. Most important, foreign financial institutions promote competition and innovation, providing the impetus for local institutions to upgrade their capabilities. This has been Singapore’s experience. •  We had protected our local banks from foreign competition in retail banking for many years. •  In 1999, MAS embarked on a programme to liberalise access to Singapore’s domestic banking market. •  The aim was to strengthen our local banks through competition and provide Singaporeans with quality banking services. The strategy worked. •  The local banks built up strong management teams and made significant infrastructural investments to expand their range of business activities and enhance operational effectiveness. •  They are now stronger and more dynamic, with much improved systems of management, risk controls, technology, and expertise. •  Liberalisation provided the spur for our local banks to raise their game and compete with some of the world’s largest banks while maintaining high prudential standards. Why liberalise at a measured pace This leads me to my second point.

•  In Singapore, liberalisation spurred the consolidation of Singapore banks from seven banking groups to three, a process which may otherwise have taken much longer. •  Foreign bank participation in the domestic banking system must therefore be strong enough to encourage the strengthening of the local banks but not so strong as to overwhelm them. •  It is a judicious balance that each country must find for itself. Third, selective and stringent admission. Singapore has always had a very open policy towards foreign banks in wholesale and offshore banking activities. But when we selectively liberalised foreign bank access to retail banking, MAS considered three sets of factors: •  First, the banks’ prudential strength, credit ratings, and quality of risk management. We only admitted strong, well-run banks. •  Second, we took into account the relationship we had with the home regulator, as we needed to be able to work with them on consolidated supervision of these banks and trust them to regulate the head office in a sound manner. •  Third, we evaluated the banks’ long-term business plans and how they could contribute to the Singapore economy. Liberalisation is not an end in and of itself. It must ultimately lead to a stronger, safer, and more competitive financial system that serves the needs of the economy and country.
The Survey is a very extensive study in which over 8,000 people were interviewed and asked – among other issues – about their financial knowledge; their holding and acquiring of saving, credit and insurance products; their work-related expectations; and their attitudes to consumption and saving. It is the most comprehensive, representative and internationally comparable information source available on Spanish citizens’ financial competences. 3/8  It is, therefore, a most useful survey. And it is novel regarding the additional information it provides on the social and economic context in which Spaniards take their financial decisions. In this connection, it measures competences which, without being strictly financial, can indeed affect peoples’ decisions, such as their degree of reading comprehension and their ability to understand specific graphics. The Survey thus provides us with a sound database for assessing our efforts to increase financial literacy. I encourage you, as specialists in this area, to exploit it by using both its aggregate findings and its microdata, which are available for research on the Banco de España’s Internet portal.1 With regard to the population’s financial knowledge, the Survey shows that an extensive group of Spaniards are not familiar with basic concepts such as inflation, interest rates or risk diversification. To answer correctly the question on inflation in the Survey requires understanding that an amount of money loses purchasing power when prices rise. 42% of interviewees are not able to answer this question correctly.

We expect that to weigh heavily on demand. We judge the appropriate degree of monetary tightening taking that into account. What I reject is the argument that in our response to Covid the Bank’s Monetary Policy Committee let demand get out of hand and thus stoked inflation. The facts simply do not support this. On the latest number, UK GDP in March was only 0.6% above its pre-Covid level, and it is substantially below the path it was expected to follow pre-Covid. What we do have is a very tight labour market. But that does not look like a story about rapid demand growth. The labour force has shrunk by around 1% since the onset of Covid. It looks much more like an impact from the supply of labour. The job of the Bank of England is to return inflation to target at a time when a very large headwind from external shocks, and an internal shock from a fall in the labour force, are reducing real incomes but risk leading to persistence in domestic wage and price setting, socalled second round effects. The Bank of England will, as always, take monetary policy decisions to ensure that the inflation target is met over the medium term. We have raised the official rate four times so far and have made clear that in order to bring inflation down to target we are prepared to do so again based on the assessment at each of our meetings.
The risk premium in the interbank market has generally driven up the 3-month LIBOR which serves as the reference rate for the pricing of  15  Georgios Chortareas, David Stasavage, and Gabriel Sterne, 2002, “Does it pay to be transparent? International Evidence from Central Bank Forecasts”, Review of the Federal Reserve Bank of St. Louis, July/August, 99-117. 16  Frederic S. Mishkin, 2004, “Can Central Bank Transparency Go Too Far?”, NBER Working Paper No. 10829, p. 25. 17  In fact, the Bank of England would have preferred to act covertly, but the market abuses directive prevented this (http://www.guardian.co.uk/business/2007/sep/21/14). BIS Review 141/2007  5  credit. At the same time, interest rates on risk-free securities such as Government notes have declined. The result is a significant increase in the TED spread (the difference between an uncollateralized interbank loan and the risk free rate of the same maturity). With the 3-month LIBOR rising, central banks faced an important monetary policy decision. In countries where the official target rate is a central bank rate, for instance, the euro zone, the 3-month LIBOR became increasingly disconnected from the official target rate (typically a repo rate of two weeks or less). As you can see from Graph 1a, the ECB held its official target rate (the two-week repo rate) constant and therefore tolerated an increase in the 3month LIBOR.

In Switzerland, the supervision and regulation of banks has traditionally been the responsibility of a separate independent authority, the Swiss Federal Banking Commission (SFBC). 2 So, where does the attention to financial stability come from? Let me offer you two straightforward reasons, followed by one that is perhaps slightly more subtle. First, in an advanced sophisticated economy, monetary policy would be severely challenged without a stable financial system and in particular without a stable banking system. Central banks depend on a functioning network of banks to conduct monetary policy operations. In theory monetary policy could be conducted without banks. For instance, we could increase liquidity by dropping currency from the proverbial helicopter. 3 Surely, doubts are justified as to whether this would be as effective as conducting auction-based repo transactions with robust banks. Second, a stable financial system with solid banks is of great importance for the development and growth of the economy. In Switzerland, for instance, the financial sector contributes nearly 15% to GDP and is therefore the most important industry in the economy. 4 Moreover, according to a recent study, the financial sector in Switzerland has in recent years contributed as much as 50% to economic growth. 5 The financial sector also provides essential inputs and services to all other industries. Here, I am thinking primarily of the banks that provide credit and liquidity to private households and firms.
Islamic securities has also maintained its dominance in the Malaysian bond market, accounting for 58% of total bond market. And almost two thirds of the equity market comprises Shariah compliant securities. Growth has also been experienced in the takaful sector in which the funds asset has registered an increase by 8.2%. This recent decade has also seen the increase in number of Islamic financial institutions including full-fledged Islamic banks, development financial institutions that engage in Islamic banking, takaful, re-takaful and capital market intermediaries. Several of these players have strategic partnerships with foreign players. In April this year, as part of the liberalization initiatives announced, new mega Islamic banking licenses and up to two family takaful licenses will be issued this year. On the global front, Islamic financial assets are projected to grow to USD1.6 trillion by 2012 while the global sukuk outstanding valued to date at approximately USD152.8 billion. In the third series of this seminar in 2007, the vital role of a strong legal and Shariah framework in the sustainable development of Islamic finance was extensively discussed. It is key to providing certainty and predictability to financial transactions. The current international financial crisis has demonstrated the importance of recognizing that the rapid transformation of the functioning of the international financial system had to be accompanied by the need to ensure that regulatory and legal framework was aligned with these developments.

Institutional structure that is determined by the legal and administrative framework is the first pillar of competitiveness. The ability to execute financial transactions efficiently, with  2  BIS Review 117/2009  sufficient certainty and enforceability, and a clear process for resolving ambiguities and possible breaches of the contract will enhance competitiveness, both at the institutional level as well as for the financial system as a whole. In Malaysia, Islamic finance disputes are adjudicated in civil courts and not the Shariah courts where the jurisdiction is limited to matters relating to Muslim individuals. If the dispute concerns a point on the ascertainment of Shariah, the courts and arbitrators are required to refer to the Shariah Council at Bank Negara Malaysia to facilitate the ruling. The Shariah Council’s authority is the ultimate body responsible for Shariah in banking and financial matters that is within the purview of Bank Negara Malaysia. This referral system provides an enabling platform for preserving consistency and predictability in interpretation and application of Shariah principles for financial transaction in Malaysia. Concluding remarks Allow me to now conclude my remarks. The inherent strengths of Islamic finance amid the global financial crisis has heightened interest in Islamic finance across the world. The level of innovation, scale and complexity of Islamic financial transactions is also increasing at a tremendous pace. Going forward, it is envisaged that the legal services in Islamic finance will become even more significant in the continued advancement and efficiency of Islamic finance.
The question is how well the last 20–30 years of history reflect the risks we may face in the future. History warns us of low resilience in the financial sector Even before the last crisis, we in Sweden had already seen warnings of insufficient capital levels. The credit deregulation of the mid-1980s coincided with the highest leverage ratios in Swedish banking history. As some of us remember, lending increased almost explosively during the second half of the 1980s. The low solvency of the 1980s created strong financial leverage that facilitated the excessively rapid growth of credit. As most of us remember, this ended in disaster. The low level of solvency also made the banks far too vulnerable when growth slowed down. The crash at the start of the 1990s led to a banking crisis with three years of negative growth and steeply rising unemployment and public debt. As we all know, leverage can work both ways. Resilience is needed in uncertain times Only a few years ago, we came close to seeing history repeat itself. In late 2008 and early 2009, Sweden stood on the brink of a new banking crisis. The low level of confidence on the financial market and great uncertainty over developments in the Baltic countries made it difficult or impossible for Swedish banks to obtain funding on the market. The measures adopted by the Riksbank, the Ministry of Finance, Finansinspektionen and the Swedish National Debt Office were decisive for saving the situation.

Their experience is relevant, nonetheless, for the Euro area Member States as well, as the common market and free movement of capital is a two-ways street. Financial and business cycles in euro-area and non-euro area are not perfectly aligned. Growth is now much stronger in Eastern Europe, and the output gap has turned positive earlier than in the euro-area. Inflation has also reemerged in non-euro area. Some of it is cyclical, as it comes from international commodity prices, other supply side factors, but also from a strong domestic demand. Yet, some of it is structural, as any catching-up process is inflationary in nature. Higher wage growth pressure is normal, up to a point, in view of large wage differentials, migration flows, and labor market tightening. Despite the wage growth, CEE countries are becoming increasingly competitive, as productivity also grows. This is why the current account position of non-euro member states is better now than before the crisis. The monetary policy normalization cycle runs also at a different pace. Even within CEE countries, while the monetary stance remains largely accommodative, the situation is quite heterogeneous regarding inflationary expectations, policy objectives, and policy tools used. As regards Romania, we started the tightening of monetary policy by hiking the rate twice this year, after further narrowing the corridor around the policy rate last year, but a gradual approach is warranted by the need to avoid sharp currency appreciation in the regional context. In our case, the policy normalization has been supported by two favorable developments in the banking sector.
However, the situation remains challenging for large sections of the economy – even at the current exchange rate, the Swiss franc is still very strong. We expect it to weaken over time, and fall back to a level more in line with its economic fundamentals. As the data show, economic activity in Switzerland slowed significantly in Q3 2011. Exports, in particular, fell noticeably. In addition to the strong Swiss franc, the general global economic outlook has deteriorated and downside risks prevail. Given this difficult environment, we remain firmly committed to defending the minimum exchange rate of CHF 1.20 per euro. This commitment applies at any time, from the moment the market opens in Sydney on Monday to when it closes in New York on Friday. We will not tolerate any trading below the minimum rate in the relevant interbank market. To enforce this policy, we are prepared to buy foreign currency in unlimited quantities if necessary. Moreover, we stand ready to take further measures if the economic outlook and the risk of deflation so require. To explain the rationale behind the SNB’s current monetary policy in more detail, let me briefly outline our assessment of the global economic situation, as well as the risks for the Swiss economy. Subdued global economic outlook and substantial downside risks In our global baseline scenario, the outlook remains – overall – subdued. Economic growth will continue to be driven by emerging markets.

On the other hand, a long period of very low interest rates may lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability. We are well aware of these risks and are analyzing them very carefully. However, due to the exceptional monetary policy situation, interest rates cannot readily be increased to address such threats. In other words, at the current juncture, monetary policy cannot react to these imbalances with conventional monetary policy instruments. Therefore, the Swiss Government is due to decide soon upon the introduction of so-called macroprudential instruments that can be used – if necessary – to mitigate potential credit and housing market distortions. Conclusion The outlook for the global economy remains subdued. This, together with the persistently strong Swiss franc, is weighing on economic activity in Switzerland. Although some indicators have pointed to a slight stabilization recently, we project that the Swiss economy will grow only weakly over the next few quarters. The degree of uncertainty regarding the growth outlook remains unusually high, also by historical standards. Downside risks – in particular stemming from a further escalation of the European debt crisis – are substantial. If these were to materialize, economic activity in Switzerland would suffer a much more pronounced slowdown than just described. Despite this rather gloomy overall picture, we should not overlook the potential for a more optimistic development. For instance, if the European authorities were to credibly commit to a sustainable solution soon, existing uncertainties would be reduced substantially.
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