samchain/econo-pairs-v1 huggingface dataset:
Climate Finance Day 2018 – Paris, 28 November 2018 The role of finance: Anticipating climate risks, financing transition opportunities  Closing session: Speech by François Villeroy de Galhau Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 sur 6 Ladies and Gentlemen, It is a great pleasure to be here to conclude this fourth edition of Climate Finance Day. This event gives a concrete picture of what I like to call the “powerful coalition of the willing”. Each and every one of us – public authorities; academics, NGO’s and think tanks; corporates and financial institutions – have a part to play in this coalition. It is a shared challenge that no one can tackle alone, and you have worked during these last three days to bring tangible solutions to quickly and effectively finance the transition. Paris, chère Madame la Maire, has been a driving force committed to translating momentum into concrete action. Let me mention three key milestones: the COP 21 back in 2015, the “One Planet Summit” in December 2017, and this fourth edition of Climate Finance Day. To better address concretely the financial risks stemming from climate change, the Banque de France initiated a Network for Greening the Financial System (NGFS) at the One Planet Summit, with eight founding members. i In less than one year, we have been joined by 13 other members ii and five observers iii from the five continents. They work together with great energy and enthusiasm.

The NGFS will not stop there and next year will publish its first comprehensive report, which will provide – on a voluntary basis only – policy recommendations for central banks and supervisors. This will take place at the upcoming NGFS Conference, at the Banque de France in Paris, on 17 April 2019: you are all most welcome! To prevent the airplane from crashing, we can help by shedding light on climate risks in order to take accurate and timely decisions, and by seizing opportunities while aligning incentives and mobilising capital. II. Anticipating climate-related risks 1/ Our first priority should be the disclosure of existing exposures in the financial sector, what I call “the snapshot of risks”. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), chaired by Mr. Bloomberg with sponsorship from the Financial Stability Board (FSB), have been groundbreaking as they provide a practical framework allowing companies to disclose their climate-related financial risks. However, an accurate and consistent vision of the risks requires a wider implementation of the TCFD’s recommendations. Significant room for progress remains in this area. To enable markets to price risks, we need comparable metrics – thanks to a common taxonomy – and better access to higher quality and more consistent data. I therefore fully  Page 3 sur 6 support the work of the Technical Expert Group on Sustainable Finance of the European Commission which is concretely developing a taxonomy; our first NGFS workstream is also working in this field.
There are several reasons why payment costs are low in Norway. New technology resulted in an early introduction in Norway of cost-efficient electronic systems. Banks led with new solutions, and the public adopted them quickly. Banks have collaborated on both the establishment and the operation of new services. The resulting economies of scale made it possible to keep costs low. Norwegian and Nordic banks are at the forefront of developments in this area. Norway is among the world leaders in the use of payment cards. Eight out of ten card transactions take place using BankAxept, one of the solutions that banks have developed. According to Norges Bank’s estimates, the social cost of using BankAxept is around NOK 3 per payment. By comparison, payments using international payment cards cost society NOK 13, or four times as much. Credit card use is increasing. It is the point of sale, typically a shop, which pays the costs connected with use, and not the cardholder. While the merchant pays around NOK 0.10 when the customer uses BankAxept, the merchant must usually pay between 1 and  3  2  See Norges Bank Papers 5/2014. BIS central bankers’ speeches  2 percent of the purchase amount when the customer chooses Visa or MasterCard. Merchants are free to pass on this cost to card users, but this seldom happens in Norway. Customers are thus not charged correct prices when given a choice of payment solution.

As the operator of NBO, Norges Bank is also working on measures that will strengthen the settlement system centrally. 5  Committee on Payments and Market Infrastructures (CPMI) – previously the Committee on Payment and Settlement Systems (CPSS) – and International Organization of Securities Commissions (IOSCO). 6  The financial infrastructure comprises the payment system and securities settlement system, including central counterparty systems. 7  The following systems were evaluated: Clearing and settlement systems for payments, the securities settlement system, the VPS registry function and the central counterparty Oslo Clearing, the latter two in collaboration with Finanstilsynet. The evaluation was presented in the Norges Bank Financial Infrastructure Report 2014. 4  BIS central bankers’ speeches  Outsourcing Today’s financial infrastructure is based on advanced technical solutions. This places considerable demands on system developers and operators. This expertise is costly and may be difficult to retain. Owners have largely outsourced technical operations. This provides greater flexibility. At the same time, outsourcing can make it more challenging to manage operational risk. The fixed costs associated with operation and development can be high. This allows operators to exploit economies of scale. A possible result of outsourcing is that several systems use the same service provider. This may reduce costs. On the other hand, such a concentration may weaken competition, while risk is concentrated in a single provider. Any failure in the service provider may then impact large parts of the financial infrastructure. The systems are vulnerable to technical failure and to external attacks.
Today I would like us to look at globalisation from the perspective of a central bank, taking into consideration the objective of the central bank, its ability to contribute to the shape of the economy and the instruments that a central bank has at its disposal. To start with, let us consider what channels there are through which globalisation may impact the monetary policy and the central bank. 1  “Economic globalization is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders.” According to: “Globalization: Threat or Opportunity?” IMF Staff, April 12, 2000 (Corrected January 2002). 2  See e.g. Mussa M. “Factors Driving Global Economic Integration” presented in Jackson Hole, Wyoming at a symposium on “Global Opportunities and Challenges,” August 25, 2000. 3  Economic Policy Committee “Responding to the Challenges of Globalisation”, November 2005. 4  Roach S. “The New Macro of Globalization”, Morgan Stanley Global Economic Forum, 6 June 2005. BIS Review 32/2006  1  Firstly, globalisation — through shaping real economic processes abroad, its influence on the global business cycle and commodity prices on global markets — influences the external environment of the national economy, which is monitored by the central bank and in which the central bank operates.

The aim of the plan is to provide clarity of the vision and objectives that are to be achieved in the context of a more challenging environment that is driven by rapid change in a world that is becoming increasingly more integrated and more technology and knowledge-based. In the development of our Islamic financial system, a comprehensive approach has been adopted. Malaysia has given emphasis to the development of a comprehensive financial infrastructure that includes the Islamic financial markets, Islamic financial instruments, contract law and law enforcement procedures, Shariah governance framework, Islamic accounting practices and valuation standards, appropriate disclosure requirements as well as an efficient and secure payment and settlement system. Attention has also been directed to develop the prudential regulatory and supervisory framework that underpins the stability of the Islamic financial industry. Today, my remarks will focus on three key areas in which greater attention is needed in order to secure a promising future for the Islamic financial services industry. These areas include accelerating the pace of financial innovation, strengthening risk management capabilities and leveraging on information technology. Accelerating the pace of financial innovation As we advance forward in the development of Islamic finance, innovation will be key in securing the competitive advantage. It will be vital to the future of Islamic finance.
The academy has a special role in the ecosystem of ideas by providing an independent place where different perspectives are heard. But as well as being heard, these views are also subjected to scrutiny and challenge, and judged by rigorous standards. Universities have well established principles governing what is valued as an intellectual contribution. These principles are enshrined in things like the Haldane principle which states that the subjects of research should be chosen by academics and not by politicians. 31  Practices such as peer review, competitive processes for  funding research, requirements to publish data and transparency about conflicts of interests in publications are well established in the academic world. 32  Perhaps some of those standards and principles widely used in academia need to be adapted and applied more widely to the world of think tanks, websites and the media? For example, should think tanks have to report transparently about where their funding comes from? Should journalists and bloggers be exposed for reporting or recirculating falsehoods or rumors? Should digital platforms take greater responsibility for their content as part of their duty to inform and to protect their own brands? The debate on standards and good practice has just begun, and is very welcome. 33  29  Edelman Trust Barometer, 2016.

Another important example of delegation to experts has been the creation of independent central banks to decide on monetary policy to deliver an inflation target set by government. Frustration with high inflation in the 1970s made many countries move towards de-politicizing decisions about monetary policy and interest rates. Research suggested that political pressure led to an ‘inflation bias’ in policymaking, which could be 8  solved by delegating responsibility for price stability to independent central banks. The following decades  1  Source: Ourworldindata.org Source: World Health Organisation 3 Source: The World Bank 4 Where poverty is defined as living on less than $ a day at 2011 prices. Source: World Bank (http://data.worldbank.org/topic/poverty) 5 Source: World Bank 6 Source The Food and Agriculture Organisation (FAO) of the United Nations 7 Until 46 BC, the calendar used in the Roman Empire consisted of 12 months of a total of 355 days, with the intention that an additional month would be added in some years so as to keep the calendar in line with the solar year (of 365¼ days). The pontifices had some discretion over the calendar, meaning they could use it for political advantage by lengthening or shortening the terms of Roman magistrates who were supposed to serve for a calendar year. This led to considerable confusion for ordinary citizens as to what date it was. Moreover, by the 40s BC the Roman calendar was three months ahead of the solar calendar.
Among the future challenges that are likely to confront Asia is whether our prevailing growth model is sustainable given the consequences from erosion of our demographic advantage, the rising indebtedness, the rising cost of living in an apparent period of low inflation, the need to meet the massive infrastructure requirements and the need to address the rising income disparities and the environmental challenges. What then are the ways economic management can prepare us for the future? This will involve policies and reforms that will reduce leverage that will address the widening income disparities, that will effectively manage infrastructure development and urbanisation, that will accord environmental sustainability and finally that will accord importance to governance, accountability and integrity in the implementation and execution of the many endeavours to achieve a sustainable advancement. For most Central Banks in the emerging world, our mandate is broader. Most certainly we are expected to have a role in contributing to addressing many of these challenges both directly and indirectly. Most of all, not only do we have a voice but we also provide support to addressing many of these issues, whether it is on financial inclusion, financing of infrastructure or putting in place financial and social safety nets or on environmental  2  BIS central bankers’ speeches  sustainability.

Our transition into the flexible regime with China allowed for us to achieve it without being destabilised by the financial markets. Bank Negara Malaysia also became one of the first Asian Central Bank to be accorded the QFII status in 2009 as we took steps to diversify our reserves into Chinese and other Asian denominated papers. While China in the current environment is being confronted with challenges as it addresses its areas of vulnerabilities and as it takes steps to rebalance and reform its economy and financial system, it is these very actions that will provide the ground for a more sustainable China that will in turn become a source of stability for the region and for the global economy. Looking ahead, there is much to be done by all of us. I have said that the business of Central Banking is an unfinished business. In view of the highly dynamic environment, there will always be new challenges on the horizon. For Asia, it is the future challenges that we now need to be concerned with. And it is what we do now that will prepare the ground for us for the future. There has been too much focus on the present. In Asia, while we have successfully prepared ourselves for the current environment, we now need to prepare ourselves for the future.
I think that pragmatism should prevail as to the form of the private sector involvement in crises resolution. But there is a need for general principles to highlight the roles and responsibilities of the public and private sectors, such as those that have been defined in the framework adopted by the G7 at the Köln Summit in June 1999. Among these principles, I would particularly stress: –  the focus on the medium term sustainability of a country’s financing position;  –  the objective to achieve comparability of treatment between and within a country’s bilateral official and private creditors. 1.5  Choice of the right exchange rate regime  The sustainability of any exchange rate regime depends crucially on its consistency with a country’s domestic macroeconomic and structural policy framework. This being said, the choice of an exchange rate regime should rest on the following principles: –  So-called “corner solutions” are not necessarily the only available options. Free floating rates may help to accommodate volatile capital flows and asymmetric shocks; however, they might not prevent misalignments leading to balance of payments desequilibrium, they might prove disruptive for the real sector of small open economies, which often lack the size for developing the necessary market infrastructure to cope with exchange rate instability. Currency boards can be warranted only under very specific circumstances.

I'm bound to say I welcome that distinction because the fact that the Government sets the target for monetary policy means that it is unambiguously committed to what we are tasked to do, and that, in turn, helps in some degree to distance the Bank from political debate. But there are two necessary consequences of this arrangement. The first is that you need independent, technical, experts to do the technical job entrusted to the MPC - not people appointed for their political convictions, nor representatives of particular economic or social interests. In that respect I think we have been extremely well served: the members of the Committee have been invariably well qualified for the technical jobs they've had to do; but more than that they have typically known enough, including about the inevitable uncertainties I have referred to, to know when they could be reasonably confident in their views and when they were guessing - as we all have to do at the margin. The Committee has been divided, generally very narrowly divided, in its forecasts and policy judgements more often than not since we started. That is both natural and healthy. But what is important is that the debate has typically been measured and reflective - and remarkably free of acrimony and dogma. And that to my mind is fundamental to the strength of the process. The second corollary is that the MPC process should be transparent and that its members should be individually and collectively publicly accountable for their decisions.
Immediately upon reaching the zero bound, we provided additional stimulus by expanding our balance sheet and deploying forward guidance on the policy rate. These actions, in the context of a strong commitment to both our inflation and employment mandates, succeeded in preventing deflation expectations from taking hold, even though real outcomes were disappointing. We also took steps to formalize our 2 percent inflation objective.7 The Fed’s large-scale asset purchase programs differed from those originally undertaken in Japan both in theory and in practice. They were concentrated in longer-term securities – Treasuries and agency mortgage-backed securities. This reflected a different perspective on how purchases affect financial conditions and the economy, as well as the different structure of our financial system. Our view is that asset purchases work primarily through the asset side of the balance sheet by transferring duration risk from the private sector to the central bank’s balance sheet. This pushes down risk premia, and prompts private sector investors to move into riskier assets. As a result, financial market conditions ease, supporting wealth and aggregate demand. The fact that such purchases increase the amount of reserves in the banking system and the size of the monetary base is a byproduct – not the goal – of these actions. The U.S. also moved relatively quickly to recapitalize core financial institutions – partly as a result of good judgment, but also because the intense pressures of a capital markets-based financial system forced us to confront these issues.

Negative interest is intended to make it less attractive to hold large amounts of liquidity in Swiss francs. It is thus logical from a monetary policy perspective that banks which hold large quantities of Swiss franc liquidity relative to the size of their balance sheets should shoulder a heavier burden. As already mentioned, the introduction of negative interest rates on sight deposits at the SNB has also caused longer-term interest rates to fall. And yet, we have been living through a period of exceptionally low interest rates for around six years already, with even long-term investments bearing virtually no interest. The Swiss are a nation of savers and many people are concerned about low interest rates. I understand this, however we should not forget that what really counts for savers is not the nominal but the real (i.e. inflation-adjusted) interest rate. For some time now, inflation has been very low and now it is even negative. If inflation is negative, the real interest rate is higher than the nominal interest rate. As chart 5 shows, there have often been periods in the past when real interest rates were even lower than they are today. During this challenging phase for the Swiss economy, it is important that the negative interest rate be allowed to take effect and help to bring about a weakening of the Swiss franc. Efforts to circumvent negative interest rates by obtaining exemptions or shifting to cash are not in the interests of Switzerland as a whole in the current climate.
This is encouraging and suggests that the reforms implemented in recent years have made the economy more resilient to external shocks. There is, however, no room for complacency, particularly at this time of renewed financial market turmoil. It is clear that further difficult policy choices remain to be made. The lessons from the ongoing sovereign debt crisis should serve as a stark reminder that the benign neglect of accumulating imbalances, especially in the context of a monetary union, will have serious economic and social repercussions, sooner rather than later. Allowing short-term considerations to delay the timing of reforms, therefore, only serves to make the inevitable corrections more painful. This challenge should be faced with pragmatism. Rigorous fiscal consolidation and structural reforms may well cause some pain and even keep growth subdued, but this is a temporary phenomenon as the ensuing gains in efficiency and competitiveness should improve the economy’s ability to take fuller advantage of new export opportunities. On their part, businesses need to respond flexibly to changes in global demand, especially in a likely scenario in which foreign markets will be characterized by more efficient competitors and more cost conscious consumers. In these circumstances, innovation and the quality of human capital will be of paramount importance. Malta’s ability to compete internationally will depend increasingly on a more cost-effective use of human and physical resources and sustained efficiency gains in both the public and the private sectors.

Finally, at an EU level, the efforts of individual countries to correct macroeconomic imbalances – and Malta is not alone in facing such a challenge – would be greatly facilitated by an early completion of the Single Market project, particularly in the area of services, and by a strengthening of the economic component of EMU, including the Stability and Growth Pact. In this regard, it should not be forgotten that the economic rationale of a monetary union foresees an important role for surplus countries as well in redressing imbalances within the Union. BIS Review 73/2010  5