samchain/econo-pairs-v1 huggingface dataset:
SPEECH DATE:  3 April 2020  SPEAKER:  Governor of the Riksbank Stefan Ingves  VENUE:  www.riksbank.se  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  The Riksbank’s measures to mitigate the effects of the corona crisis on the economy These last three weeks have been some of the most dramatic Sweden has experienced in modern times. On 10 March, we told the Parliamentary Committee on Finance that the assessments described in the Monetary Policy Report from February had become entirely irrelevant.1 We already knew then that the Swedish economy would be affected by the coronavirus. What we did not know, however, was the force and extent of the impact. Our message then was that the Riksbank was ready to act to mitigate the negative effects on the economy. Since then, we have spoken to both companies and banks, and we have implemented a number of measures. Today, I’d like to talk about what we have done and how the measures are contributing to the ongoing economic crisis management effort. “Everything has changed in two weeks” “Everything has changed in two weeks” This was one of the quotes from the companies we have interviewed on account of the corona pandemic2. The fact is that the situation is changing so rapidly that it is difficult to form an idea of exactly how bad things are in the economy.

The ideas and experiences shared could then be contextualised to the prevailing local conditions to enhance financial inclusion. This proposal was welcomed by the members and resulted in the first Financial Inclusion Advisers programme conducted in Lusaka, Zambia in April 2009. The success of this inaugural programme hosted led us to this second programme hosted here in Malaysia with the support of JICA. JICA has long been involved in capacity building in  BIS Review 4/2010  1  the African continent, and we look forward to collaborating in the future in this area of building more inclusive financial systems. The Malaysian experience on the financial inclusion agenda In Malaysia, the commitment to the financial inclusion agenda is reflected in the new Central Bank of Malaysia Act 2009 which incorporates financial inclusion as an objective of the Central Bank. With the enactment of the Act in November of 2009, the Central Bank has imbedded in the legislation the financial inclusion agenda to ensure that future generation of central bankers will continue to direct efforts to building an inclusive financial system. Additionally, the Central Bank in the process of formulating a new blue print for the financial sector for the next decade. This blueprint would also ensure the development of a more inclusive financial system. The results of the financial inclusion measures thus far have shown positive results.
As a matter of fact, since 1982 the total real return on shares (the inflation-adjusted price level including reinvested dividends) has risen in Sweden at an average annual rate of around 16%. That is around two and a half times more than the trend rate since 1918. After 1982 the total real return in the United States has also been appreciably above the trend rate since 1871 (Fig. 1).1  Total annual real return on shares USA 1871-1999, index: S&P 500 1870 = 100 Sweden 1918-1999, index: normalised to 1928 level of S&P 500 1000000 USA 100000  Sweden Trend 6%  10000 1982-1999 Sweden 16% USA 15%  1000  100 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Sources: Global Financial Data, Frennberg & Hansson, Affärsvärlden and Statistics Sweden  1  Note that the chosen initial year has consequences for the trend rate of return; the path shown in the figure should therefore be seen as an approximation. 1  BIS Review 137/1999  The price-earnings ratio for the Stockholm Exchange is currently around 30 according to Affärsvärlden. This means that the price of an average share portfolio is equivalent to around thirty times the annual earnings. The ratio in the United States is even higher, around 35 (Fig. 2).

2  All speeches are available online at www.bankofengland.co.uk/speeches  2  We’re here today to discuss with you what causes changes in the economy, how they affect people and businesses in Merseyside and across the country and the Bank of England’s role in supporting jobs and growth. The economy matters for everyone and people want to understand it better. Three quarters think there should be better education about the economy and half want a better understanding themselves but virtually no-one – just 1 in 10 – think public figures talk about economics in an accessible way. Today, we are trying to bridge that gap. We are helping to make discussions of the economy more accessible and are launching practical tools that can be used to help educate students, and indeed everyone, about the economy. This is all part of a wider effort to improve our communications. We are doing this to make the Bank more open and accountable. Quite simply, people need to understand our actions and their effects in order to hold us to account. Doing so will also make our policies more effective. Let me give you an example. Our mission was originally set out in 1694 in the Bank’s founding charter. That was to ‘promote the publick Good’ – although that sentiment was contained within a 700 word sentence, hardly clear and transparent communication. And in practice at the time what it meant was raising money to carry on a war against France.
It is the financial stability of the euro area as a whole which is at stake, and this creates difficulties for our monetary policy transmission. Taking into account the reality of the situation we have reactivated a number of non-standard measures. Many people nonetheless fear that the continuous flooding of the markets with new money will lead to inflation in the medium term. This fear is totally unfounded. First the Securities Market Programme (SMP), namely the purchase of Treasuries on the secondary market, is not at all a quantitative easing programme. We are rigorously withdrawing all the liquidity which is provided. As regards all our non-standard measures, the balance sheet of the ECB has expanded by 77% since the beginning of the crisis; that of the US Federal Reserve System by 226%. This gives a measure of our relative prudence in this very grave crisis. And we are fully credible to deliver price stability over the next 10 years, according to observers and market participants. In the spring, the ECB spoke out against the restructuring of Greek debt which was being discussed at that time. Now there is again discussion of a debt restructuring. Does your opposition still stand? In the spring, the Governing Council of the ECB unanimously made the following points. We cannot accept the securities of a state in default, even for a short period of time, as collateral for the refinancing of banks without an appropriate credit enhancement. Similarly, we said that a credit event should be avoided.

Jean-Claude Trichet: Interview with Die Welt Interview with Mr Jean-Claude Trichet, President of the European Central Bank, conducted by Jan Dams and Martin Greive on 7 October 2011. *  *  *  WELT: Mr Trichet, at the time you took up office, did you think it conceivable that you would be dealing with such a serious crisis in the currency union? Jean-Claude Trichet: Even before the outbreak of the financial crisis, the ECB warned that it was highly likely that there would be major corrections in the financial markets. However, the fact that the crisis would call into question the whole economic and financial strategy of all developed economies was not quite so foreseeable. You have had to take harsh criticism of your crisis management from Germany. How disappointing is that for you? That reminds me of a Goethe quote: “Against criticism a man can neither protest nor defend himself; he must act in spite of it, and then it will gradually yield to him.” The ECB must accept the criticism. The only thing that matters is that we are faithful to our primary mandate and take our decisions fully independently. It is about precisely that that increasing doubts are being expressed. Under your leadership, the ECB has lost its independence because it has financed hard-up euro area countries by printing money. This criticism is completely inaccurate. We are fiercely independent of governments and pressure groups. All our decisions are made fully independently by the 23 members of the ECB’s Governing Council.
for instance 2021 stress tests conducted by the EBA (EBA publishes the results of its 2021 EU-wide stress test | European Banking Authority (europa.eu), consulted on 21 March 2022), and the Fed (Federal Reserve Board - Federal Reserve Board releases results of annual bank stress tests, which show that large banks continue to have strong capital levels and could continue lending to households and businesses during a severe recession, consulted on 21 March 2022). 10 Cf. IMF, Global Financial Stability Report, October 2021. 11 Cf. SNB, Financial Stability Report, 2021, chapter 2.2.  corrections in real estate prices represent a key source of risk from a financial stability perspective. In several countries, real estate price growth has increased since the start of the pandemic, and has been higher than can be explained by fundamental factors. For instance, the residential price-to-rent ratio, a simple measure of real estate valuation, lies above its long-term average in many countries. 12 This has been accompanied by higher mortgage lending and, in some countries, by an increase in lending risks. 13 Overall, these developments have made real estate and mortgage markets more vulnerable to shocks, such as a sudden increase in interest rates or a deterioration in economic prospects. There are several reasons behind this marked increase in real estate prices. They include tight housing supply, a probable increase in housing demand due to the pandemic itself, and the historically low interest rates that have prevailed in recent years.

3 These requirements were further tightened in 2014 and 2019, in response to increasing vulnerabilities in the mortgage and residential real estate markets. Furthermore, Switzerland has a flexible regulatory framework that allows for both a broad and a sectoral application of the CCyB. In 2013, the Federal Council decided to activate a sectoral CCyB (SCCyB), following a proposal by the SNB. We deemed it to be the most costeffective response, given that vulnerabilities at the time – and even now – were concentrated in the residential real estate and mortgage markets. 4 The SCCyB was increased in 2014, deactivated at the onset of the pandemic, and has just recently been reactivated to a higher level. The SCCyB increases capital requirements associated with domestic residential mortgage loans while leaving those for other exposures unchanged. The sectoral focus therefore helps to minimise potential side effects on other credit segments and at the same time ensures an increase in overall banking sector resilience, since mortgage claims are the largest asset on Swiss banks’ balance sheets. 5  Experience with macroprudential instruments so far All the instruments we have been discussing have become part of the macroprudential toolkit in many economies since the GFC. Now over ten years on, we can draw first conclusions about their effectiveness, which is a prerequisite for their correct implementation. Let me note, however, that the assessment is still ongoing.
Progress is also evident in our agenda towards becoming the centre for Islamic fund and wealth management. We emerged as the largest hub, with 35% market share and the most number of Islamic funds. The Malaysian Islamic capital market has also gained its pace as a reputable destination for investment, given its wide range of world class financial products. Backed by a robust Shariah screening methodology, more than 70% of total listed securities in the country are Shariah-compliant, thus providing a wide array of selection for investors. Islamic finance has also become part of the growth strategies of global financial players, indicating greater appreciation of its value propositions. A host of global banking players offering Islamic banking services from diversified regions including from Japan; Europe; and the Middle East have also established their presence in Malaysia. A number of our industry players that offer Islamic finance have also ventured abroad to various jurisdictions. Our MIFC Community, with nearly 40 professional ancillary service entities not only provide key services locally, but many serve global demand and have set benchmarks for 1/4  BIS central bankers' speeches  international best practices. These industry developments which I have highlighted have indeed enhanced the depth and breadth of the Islamic financial services industry. Nevertheless, against the onslaught of global challenges that have intensified uncertainties and complexities, there is heightened urgency for the industry to strategically chart its next phase and reinforce its core strengths.

Islamic finance with a growth rate of between 10 to 12% annually in the past decade is gaining prominence at many fronts, including its ability to meet the unique demands of the modern economy. The sukuk market in particular, has produced a dynamic stream of cutting edge products with an appeal that transcends beyond borders and beliefs. It has a wide geographical spread, with global sukuk outstanding domiciled in over 20 countries, and an investor base that spans from Europe to the Middle East and Asia, thus allowing greater diversification of exposures and risks. Malaysia, with a consistent global sukuk market share of more than 50%, over the last 10 years, has sustained its position as the market leader. In the last few years, we have witnessed increasing sovereign sukuk issuances by non-Muslim jurisdictions to meet the varying motivations of its issuers. In 2015, at least 13 jurisdictions have tapped the global sovereign sukuk market. Issuances by the United Kingdom and Hong Kong, are testimonies that the sukuk has come of age. As for Malaysia, its market share of sovereign sukuk stands at 40% and the recent issuance of a Sukuk Wakalah by the Government, with 30-year tenure is currently the longest tenured sovereign sukuk globally. The horizons and usability of sukuk have also expanded into the sphere of Socially Responsible Investment (SRI); following the issuance of the first SRI Sukuk in 2015 by a Malaysian GLC. This is an example of innovative impact investing that generates positive social outcomes.
Specifically, the experiment was designed to examine how caps on bonuses and “malus” (bonuses that are not paid out if, for example, performance falters in subsequent years) might affect individuals’ risk choices and efforts to seek out the best projects. The experiment showed evidence that, while both schemes tend to reduce risk-taking, they could be arbitraged relatively easily by introducing absolute or relative performance targets. There was also some evidence that a bonus cap might reduce incentives to search for good projects. The Bank of England is considering extending this experimental approach to a wider range of policy design questions and a wider range of financial market participants - risk-takers and risk-managers. In principle, this approach might provide some early indications of how new regulation might reshape risk incentives, including arbitrage incentives, which could help in recrafting regulation before it is introduced. Macroprudential Policy One of the greatest intellectual errors made in the run-up to the crisis was a classic “fallacy of composition”: it was assumed that the resilience of individual financial institutions was both a necessary and sufficient condition to ensure the resilience of the financial system as a whole. Events during the crisis, and  22  See BCBS (2016): http://www.bis.org/bcbs/publ/d362.pdf and BCBS (2013b): http://www.bis.org/publ/bcbs258.pdf 30  All speeches are available online at www.bankofengland.co.uk/speeches  30  subsequent theoretical and empirical work, has shown that the resilience of individual firms is neither necessary nor sufficient for the mitigation of systemic risk (Masera (2014), Crockett (1996)).

Financial intermediaries are often more focussed on short-term earnings than private investors, and more likely to move capital in the event of anxiety or problems. There is therefore a risk, although this should not be exaggerated, that increased institutional ownership will reinforce herd behaviour and lead to larger fluctuations in prices in the financial markets. Increased institutional ownership also means that the passive owners will have relatively substantial influence over the companies. In most cases, the mutual fund companies do not participate in the management of the various companies. This in turn means that corporate governance issues gain in significance. What ability and interest do the mutual fund companies have in influencing management to participate in the board work of the limited companies? In recent years, mutual fund companies and other institutional owners have shown slightly greater interest in the work on management of these companies. However, an interesting question of principle here is what mandate they have for this. The primary goal for a unit trust investor ought to be to achieve the highest possible yield at a given risk level. It is not necessarily in the interests of the mutual fund investor for the mutual fund company to conduct corporate governance. However, from the point of view of the economy as a whole it is important that there are owners who can actively govern the companies.
Unquestionably, digital natives make up a very large and, above all, growing number of the 1/5  BIS central bankers' speeches  population, and they are naturally an attractive customer segment for the sector. However, we must not forget that there are still sections of the population that continue to rely on traditional banking services. No “neobank” plans on competing to attract the least digitally savvy segment of the population. The report describes the potential strategies being tested to lure and retain these groups, such as shifting from human service to virtual interaction, where queries are answered using machine learning or artificial intelligence techniques (such as chatbots). These initiatives are interesting, but overcoming their limitations will require further efforts to support education, both in digital and financial literacy, since these new channels open the possibility of many more services being arranged with a single click. The techniques used also need to respect some of our society’s fundamental values, as reflected by the proposed regulation of the European Parliament and of the Council on the use of artificial intelligence algorithms. Moreover, given that these groups may be more vulnerable to fraud and the rising cyber threat, monitoring must be maximised. In this regard, the report points to deepfake technology, which could put consumers at risk of identity theft. Yet more conventional fraud techniques, such as phishing, can be equally dangerous for those who only envisage arranging a financial product by walking into a branch, shaking hands and signing a document.

Thomas Jordan: Prospects for the Swiss economy in 2009 Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the erfa-Gruppe, Weinfelden, 15 January 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Following a long, strong and broad-based growth phase, the world economy moved into a major recession in mid-2008. About a year after the beginning of the unprecedented financial market crisis, there was a radical turnaround in the global economic outlook. The European and Asian economies were not disconnected from the US, as had been hoped. The Swiss economy leans heavily on its export and financial sectors and faces a difficult year. A recession appears unavoidable in 2009. Consequently, the skilful deployment of monetary and fiscal policies as well as optimal conduct on the part of business practitioners in Switzerland are particularly important. Monetary policy can be changed quickly and its impact is relatively rapid through its influence on interest rates and the exchange rate. The SNB has reacted resolutely to the deterioration in the economic situation and has reduced interest rates to almost zero. If necessary, monetary policy can be rendered even more expansionary through a series of alternative instruments. In the case of fiscal policy, the focus is on effective automatic stabilisers – first and foremost, allowing the occurrence of temporary budget deficits, together with unemployment benefits and compensation for short-time working.
In other words, Sweden is now in the sixth year of favourable economic growth. The 3% average is much the same as during the upswing in the 1980s but clearly above the annual average of 2% achieved in the 20 years from 1970 to 1990. It may be more than we can expect to sustain in the long run. An important reason why it has still been possible to keep inflation down in recent years has been the existence of unutilised capacity. This in turn has to do with the deep recession from which the recovery started and the comparatively rapid expansion of capacity since then. Medium-term inflation expectations have gradually stabilised around the 2% inflation target. At times, however, including the recent period, transitory price movements have brought the annual average change in the CPI just outside the lower limit of the target’s tolerance interval. There have even been periods when trend inflation has been lower than expected. For the decision-making of monetary policy, as the Riksbank has pointed out earlier, transitory effects on inflation are normally a secondary consideration. We are working to clarify how the target formulation is applied in order to dispel any uncertainty about how we should appraise direct effects on consumer prices that come from movements in, for example, house mortgage interest costs and indirect taxes. Altered conditions for international developments Last autumn, in the September Inflation Report, the Riksbank pointed to a growing risk of a weaker international trend on account of the crisis in Asia.

I’d be surprised if those who question our technical judgement at any particular moment could offer more than that. In the circumstances, I do not ask that the technical charge brought against us should be dismissed. But I would encourage you to suspend judgement, or at least to limit our sentence to an extended period of probation. I’m ready now for the cross examination, before the jury begins its deliberations! 3  BIS Review 31/2000