samchain/econo-pairs-v1 huggingface dataset:
Norges Bank is among the top ten shareholders at around half of the companies we are invested in, and we have found that companies listen to what we have to 2/6  BIS central bankers' speeches  say. Responsible investment – a chain of tools Chart: Responsible investment – a chain of tools Responsible investment is the most important tool in our work on climate risk and climate-related investment opportunities. I will now look at some important parts of this work. We are already doing a great deal, but we now plan to do even more. This work can be divided into three target areas: markets, companies and the portfolio. This results in a complete chain of tools. I will not review this work in detail here, but focus on a few key aspects. Establishing standards The first, establishing standards, concerns standards for reporting and measuring companies’ climate risk. Good common standards are important. They help us as an investment manager to assess companies’ prospects, prioritise our ownership efforts and make sound investment decisions. And not just us. Better reporting will also make financial markets function better and channel capital better. International standards provide consistency across markets and set the bar for all companies. We, and other large investors, have an important part to play in the development of such standards. One particularly important initiative we have supported is the climate reporting framework from the Task Force on Climate-related Financial Disclosures (TCFD).

Øystein Børsum: Ownership and climate risk in the Government Pension Fund Global (GPFG) – on the tools for addressing climate risk in the fund Speech by Mr Øystein Børsum, Deputy Governor of Norges Bank (Central Bank of Norway), Oslo, 21 December 2021. * * * Accompanying presentation:www.bis.org/review/r212312d_presentation.pdf Actual presentation may depart from the published text  Introduction Climate change is an issue that matters. Chart: Emissions must come down The global economy as it stands today is not sustainable. But it needs to be, and so emissions must come down. This is an issue for everyone – and not least the fund. With our broadly diversified, global portfolio and long-term horizon, in many ways we stand or fall with the global economy. Norges Bank is a financial investor. Our mission as the manager of the fund is to build and safeguard financial wealth for future generations. But the way we manage the fund can also have an impact beyond the purely financial, such as on the transition to a low-carbon economy. What our role should be – and what our work should involve – is what I will be discussing today. Back in the summer, an expert group delivered its report to the Ministry of Finance with recommendations for how climate risk should be addressed at the fund. Norges Bank has spent the autumn assessing these recommendations and how they might be implemented. This week, the Executive Board submitted its response to the Ministry.
On the one hand, the central bank’s legitimacy among the general public could suffer if short-term interest rates have to move sharply, causing output to fluctuate widely while inflation is held stable and exactly on the target. Maximum stability in output could, on the other hand, result in sharp fluctuations in the rate of inflation and erode the credibility of the monetary regime. A point somewhere midway between the two extremes must therefore be found. Let me also stress the importance of central bank independence. In order to be successful with the implementation of an inflation target approach, the central bank must be able to act independently of day-to-day party politics and to set interest rates continuously according to the specified inflation target. Otherwise a credibility problem arises because it will be hard for policymakers to convince the general public of monetary policy’s long-term nature. Lack of credibility, in turn, means that the central bank has to set its interest rates higher than otherwise would have been the case. Looking ahead, I believe there are at least two major questions that central banks have to address more thoroughly. First, how should monetary policy react to asset prices, such as equity and/or real estate prices? We know from history that the development of asset prices can have a significant impact on both inflation and real economic activity.

If asset prices have been driven up to unsustainable levels that do not correspond to the underlying fundamentals, we are faced with a special kind of problem. We know from experience that speculative asset price bubbles eventually burst. When they do, collateral values will fall and balance sheets deteriorate, potentially threatening the stability of the banking system. To avoid this kind of development, the central bank needs to closely monitor the potential for excessive credit growth and the possibility of asset price bubbles building up. It seems that historically the forming of speculative price bubbles has been closely linked to an excessive expansion of credit. But we need to operationalise both the concept “excessive” and the difficult concept of an asset’s “fundamental value”. As history has shown us, judging to what extent rising asset prices reflect strong fundamentals, rather than the “irrational exuberance” of investors, is easier said than done. Nevertheless, certain important risks related to asset prices need careful watching in today’s world. The first risk is that imprudent lending could fuel unwarranted asset price increases - as so often in the past. Although there is little evidence to date of a general lowering of credit standards, credit growth has been very rapid and loans to finance equity purchases have risen sharply in some countries. BIS Review 65/2000  4  Ensuring that investors are not sheltered from the consequences of their sometimes misguided investments is important for maintaining prudent lending standards.
In such a situation it was natural to study the form of the economic recovery following previous crises. The overriding conclusion that could then be drawn was that the recovery would be slower than normal.6 However, it is also the case that every crisis is unique in many respects and there were circumstances that pointed in the opposite direction. Among other things, the emerging economies in Asia, led by China, recovered relatively quickly and became something of a driving force for the recovery in the rest of the world. Another positive factor was that growth was rather good around the world when the crisis began.7 With hindsight, it can be noted that the recovery in many areas, and not least in Sweden (see Figure 1 above), has been much more rapid than we could have expected. As can be seen in Figure 2, the Riksbank began to increase the repo rate somewhat earlier than predicted during the most severe phase of the crisis and the repo-rate path was given a somewhat more “top heavy” profile. It is natural to try to learn from previous crises, but at the same time we must be careful not to draw too far-reaching historical parallels. In the midst of the crisis there was, for example, sometimes a slightly careless tendency to refer to the Swedish crisis of the 1990s, despite the fact that the circumstances at that time were entirely different.

Monetary policy is based on forecasts The Riksbank also uses forecasts to “plan” monetary policy. This planning is reflected in our repo-rate path and if developments take a different turn than forecast then we have to adjust the repo-rate path. It may seem that the Riksbank uses forecasts in roughly the same way as other players whose operations are also affected by the development of economic activity. There is, however, an important difference. The Riksbank can, in contrast to most other forecasters, affect the forecasts. This is the whole point of monetary policy. Put simply, we can say that a well-balanced monetary policy is characterised by the forecast for inflation being close to the inflation target and the forecast for resource utilisation being close to its normal level.1 There is nothing to say that we have to publish our forecasts. Life would in some respects be easier if we did not publish them. We would avoid the criticism we are subjected to when our forecasts prove to be wrong and we would be able to write in more general terms about economic developments without needing to present a detailed and cohesive forecast. For a long time, central banks were rather closed and secretive bodies and when, for example, the Riksbank began publishing its inflation forecasts in 1997 there were many people, not least in the world of central banking, who had misgivings; wouldn’t confidence be eroded if the forecasts turned out to be wrong?
I have developed a few simple rules for selecting variables to keep an eye on:  2  BIS central bankers’ speeches  Over time, governments cannot run an increasing deficit. To prevent the debt level from exploding, the deficit must be kept in line with nominal GDP growth. That figure is around 4 per cent annually, for most Western countries. A fiscal balance can hide important imbalances. If one sector in the economy is far too large, the taxes from this sector can contribute significantly to the fiscal budget. An example is the construction sector in some European countries in the years leading up to the crisis. In normal times, this sector is around 3–5 per cent of GDP in most countries. In Spain, housing construction was 9 per cent in 2006. In Ireland, the contribution was 11 per cent. When problems arose, construction activity decreased and tax income was reduced significantly. Therefore, one should also look at the current account. Inflation above 4 per cent might indicate that price stability is not firmly anchored. If unemployment is above 4 per cent of the labour force, it might signal a labour market out of order. Finally, the risk of running into a crisis seems to increase if the total assets of the banking sector constitute more than 4 times GDP. This table illustrates the 4 per cent rule. Many countries had negative fiscal balances through the last decade despite moderate to high economic growth.

This is not a cause for concern because it is the foreign currency value of the reserves that matters. •  Financial stability. Our financial system is sound. It will be resilient against a normalisation of global monetary conditions. But household balance sheets are a source of concern – not at the aggregate level, but a significant minority could be over-leveraged. Hence, the variety of macroprudential measures we have taken over the last three years. •  Financial supervision. We are fully compliant with international standards, and have taken strong measures to ensure we remain a clean and trusted financial centre. We have stepped up to meet enhanced global standards on information exchange and have intensified our supervision of financial institutions to ensure we keep illicit money out from our financial centre. •  Financial development. The key drivers of future growth in our financial centre are showing good promise. The asset management industry has reached a new peak. We are now clearly the insurance and reinsurance hub in a growing Asia. And we are off to a good start to building a vibrant ecosystem as an offshore RMB hub. 8  BIS central bankers’ speeches
This requires not only stronger financial intermediaries and better supervisors, but deeper and more liquid capital markets that provide greater access to capital for firms and greater freedom for households to borrow and to invest their savings. Certain features of today's emerging economies, notably the size of current account surpluses and the high levels of reserves, tend to be seen principally as sources of comfort against future crises. But you can also look at these phenomena as measures of the incompleteness of the institutional changes achieved in the monetary and financial arena, and as a sign of the persistent ambivalence in the emerging world about financial integration. The current account surpluses are, of course, the mirror image of the high rates of savings relative to investment. There are a range of factors that affect the flows of goods and services across international borders, but the sustained outflow of funds from some emerging economies witnessed in recent years may have as much to do with the limited intermediation capacity of the local financial systems as with the scarcity of profitable domestic investment opportunities. And in this sense you can read a large current account surplus as a sign of financial sector under development rather than of financial strength and maturity. The pattern of intervention in exchange markets and the scale of reserve accumulation provides a similar perspective on the challenges ahead. Policymakers in many emerging markets still reveal a substantial degree of reluctance to allow the exchange rate to adjust to market forces.

Despite this progress, the causes and implications of the crises remain the subject of contentious debate. In fact, if you'd fallen asleep in early or late 1998, and awakened in the IMF boardroom yesterday, you would find officials discussing many of the same questions. Were the crises the result of fundamental economic and financial weakness at the national level, or the result of forces largely beyond the control of governments in emerging market economies? Can small open economies grow and prosper with open capital markets and floating exchange rates? Did moral hazard induced by the success of the Mexican package earlier in the decade cause the buildup in lending that led to crises that followed? Did the initial response of the IMF and its creditors make the crises worse? What level of insurance, in the form of reserves or debt structure, is adequate to protect against crises? How should the IMF differentiate between conditions of illiquidity and insolvency, and decide when it should help a member country restructure its debt obligations? Even among people who probably agree on the most important issues in economics and finance, you can still find stark differences in their answers to these questions. The diversity in the circumstances of the countries involved, and in the policy responses adopted, makes it easier for people to find evidence to support fundamentally different views.
The new appointment would be subject to the formal approval of the European Parliament, and the Finance Minister would be member of the Commission, as well as chair of the Eurogroup. The Minister would thereby have the legitimacy to represent internationally the euro area in Economic and Financial fora, alongside the President of the ECB. Second, the euro area Finance Minister would need to be backed by a genuine Treasury administration, which could include staff from the Commission’s Economic and Financial Directorate General, the ESM, and the Economic and Financial Committee Secretariat. Such a civil service would also benefit from the public advice of two independent bodies, the European Fiscal Board and the Competitiveness Council. Last, if we succeed in implementing further integration, we will need stronger democratic control over euro area affairs. To this end, we will need to consider institutionalising a euro area format of the European Parliament. Relationships between euro area MPs and national parliaments will also need to be enhanced, through an inter-institutional agreement, or by creating dedicated commissions. *** To conclude, let me quote Robert Mundell 4, father of the theory of optimal currency areas and a famous analyst of international spillovers. He did acknowledge that the euro area was far from optimal. Yet he remained confident, saying: “it will be achieved because, for Europe, it isn’t just the best game in town, it’s the only game.” Economic policy as a whole, not central banking alone, is indeed the only game in town.

The reported balance is too high because nominal appreciation of the franc is not taken into account. And vice versa, for the same reason, the figure reported for income from foreign investment in Switzerland is too low. Our estimates show that inflation differentials play an important role in explaining the Swiss current account surplus. The blue bars in the chart are striking – and they are consistently positive; they explain a substantial share of the surplus. If we were to correct for (i.e. factor out) both of these statistical distortions, the current account surplus would almost halve. The corrected value is represented by the orange bars in the chart. It is still positive, but it is considerably smaller than the surplus when the distortions are factored in. Of course, this perspective implies that Switzerland’s savings surplus is also overstated. As we have seen, statistical distortions are responsible for a significant part of the Swiss current account surplus or savings surplus, but how is the remainder of this surplus explained? Demographics The bulk of the remaining current account surplus or savings surplus is attributable to demographic developments. Chart 6 shows the size of the various age groups of the Swiss population over time. In the last 45 years, the share of the population in the 40–64 age range (yellow line) has steadily grown. More than 35% of the Swiss population is currently between 40 and 64 years old and it is this age range that demonstrates the highest propensity to save.
Encik Adnan Zaylani Mohamad Zahid: Prevention of corruption in project management Opening remarks by Mr Encik Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Anti-Corruption Commission (MACC) Talk entitled "Prevention of Corruption in Project Management", Kuala Lumpur, 3 April 2017. * * * It is my great honour and pleasure to welcome officers from the Malaysian Anti-Corruption Commission (MACC), particularly the speaker for today, Assistant Commissioner Mr Mohan Munusamy. A warm welcome is also extended to the project teams comprising the steering committees, contractors and consultants. My appreciation also goes to all my fellow Bank staff who are here today. In more recent times, the Bank and MACC have collaborated on a number of fronts. The recent strategic cooperation between the Bank and MACC, together with LHDN to combat financial crime, particularly corruption, signifies our commitment to work together in this area. From the Bank’s perspective, this demonstrates our effort to instil integrity for and beyond our regulatees in the financial market. Integrity is taken very seriously at the Bank where we continually and consciously maintain the highest standards, given that we enforce these standards on our regulatees in our supervisory capacity. We proactively manage integrity hazards and corruption risks and tackle those risks pre-emptively. Corruption is not simply a crime on its own. Its consequences can be far-reaching in terms of economic losses and irreparable reputation damage. Thus, we must actively keep abreast of the management of integrity risks.

Let me share with you another observation from Preet Bharara. A common element in many of the frauds his office has prosecuted is the failure of colleagues to call out bad conduct by raising their hands. This is so telling of a culture that condones or promotes misconduct. People see something, but do not say something. And, it is so shortsighted. It prevents problems from being addressed while they are small. By not raising their hands, these colleagues are “quietly adding risk to your books [and] invisibly enlarging your liabilities.”8 They are also tacitly encouraging bad conduct by skewing incentives. There may be many reasons for choosing silence over raising your hand. You may face a conflict of loyalties. It’s uncomfortable to tell on a colleague. You may think that the problem will just go away, or that calling attention to a problem will harm the firm. Raising your hand is difficult. But, it is also absolutely necessary. As rising leaders in the industry, you need to lead by 4/6  BIS central bankers' speeches  example. In doing so, you will make it easier for others to follow your lead. My final message is a request that each of you commit to a candid assessment of yourselves, your firms and your industry. For Adam Smith, candid observation was a cornerstone of economic behavior: “We suppose ourselves the spectators of our own behavior, and endeavor to imagine what effect it would, in this light, produce upon us.
Third, if the government is still running a primary deficit, it will not have the funds to pay for some of its key functions. Fourth, in the euro area the sovereign does not have a domestic central bank that will finance its deficit. Fifth, after a default/restructuring the banking system of the country would be unlikely to pass the stress test and have sufficient adequate collateral to access the ECB’s refinancing operations. What are the implications of this analysis? Imposing haircuts on private investors can seriously disrupt the financial and real economy of both the debtor and creditor countries. It ultimately damages the taxpayers of both the creditor and debtor country. This is particularly the case in a region like the euro area, consisting of advanced economies with highly integrated financial markets – an integration we have encouraged for years. This is why such restructuring should only be the last resort, i.e. when it is clear that the debtor country cannot repay its debts. Incidentally, this is the way the international community has functioned and cooperated since the Bretton Woods agreement, which set up the IMF. Countries are never encouraged to default or restructure their debts unless they are in a desperate situation and have no alternative. This is why there have been relatively few cases of debt restructuring and defaults, and they have affected poor and often undemocratic countries. Where is the problem?

Historical experience has also rejected the Panglossian view that there exists such a thing as an orderly debt restructuring. While some restructurings have indeed been successful and can arguably be said to have occurred in an orderly fashion, they were often on a small scale and executed under specific circumstances. The most striking and oft-quoted case is Uruguay. However, more often than not, restructurings have been disorderly, harmful and fraught with difficulties. The average length of the negotiations is 2½ years6 and it can vary greatly. In some cases, negotiations have taken just a few months (for instance, Uruguay in 2003, Pakistan in 1999, Chile in 1990 and Romania in 1983); in other cases they have taken many years (for instance, Vietnam from 1982 until 1998, Jordan from 1989 to 1993, Peru from 1983 to 1997 and Argentina more recently). Empirical evidence also shows that private investors are likely to penalise a country which has a history of restructuring and to demand higher risk premia.7 When considering a euro area economy, the following points should be kept in mind. First, the domestic financial market would be severely affected by a default/restructuring of the public debt. Large losses would have to be accounted for, as no forbearance would be possible, and recapitalisation of the domestic banking system would require additional public money. Second, given the role of the state as implicit guarantor of many financial and economic transactions, the impact on the real wealth of the domestic population and on the economy would be substantial.