samchain/econo-pairs-v1 huggingface dataset:
The 1946 Bank of England Act conferred upon us powers, subject to the agreement of the Chancellor of the Exchequer, to issue directions to bankers - though the term “bankers” was not defined; and it provided for the Treasury to give such directions to the Bank as, after consultation with the Governor, they thought necessary in the public interest. Such directions would necessarily have been made public: none were in fact ever given. In any event the Bank of England was in a formal, statutory, sense throughout this period well along the spectrum towards the subservient polar extreme which I described earlier, in relation to policy making, although we did enjoy elements of independence, for example, in relation to security of tenure for the duration of fixed term appointments for Governors and Directors, and in some degree in relation to our finances. I am bound to say though that this was not at all how it felt in practice. Even within this statutory framework independence is rather like age - you are as independent as you feel! The question really came down to how far we were able to influence the Government, which in turn depended upon how far they themselves valued our advice and how far they felt a need to take account of it in the light of possible public - including importantly financial market - reactions in the event of disagreement.

That, in our context, is I think now much easier to understand than a more consensual approach would be, but there was certainly a learning period. It has been suggested to me that the arrangements I have described somehow diminish the position of the Governor. Well if that’s true this Governor at least welcomes it! I am sure that all of you are well aware of how finely balanced monetary policy decisions are at the margin, and that all of you have agonised, just as I have, over the right thing to do and the right time to do it. I find the cross-bearings on those decisions provided by the other Committee members - and they are I remind you all highly qualified experts in their own right - immensely reassuring. If a majority of them argued for a particular decision, that would certainly weigh heavily with me, although - as a matter of personal integrity - I always reserve the right to take a different point of view from that of the majority on those occasions when I am particularly confident of my own judgement. That has not so far happened but it almost certainly will; people should not be unduly surprised. Finally, in relation to monetary policy, let me say a few words about accountability.
23 24  25  All speeches are available online at www.bankofengland.co.uk/speeches  25  Figure 1 : Single and double pendulum Single pendulum  Double pendulum  Sources: https://codepen.io/anon/pen/XQLNaZ  HANK-type models do a better job of capturing heterogeneity across agents than their RANK cousins. The number of interactions among their internal moving parts is nonetheless heavily constrained. Certainly, they do not come close to capturing the granularity, spatially or sectorally, that exists in real-world economic systems. Are there alternative modelling approaches that capture more of these moving, interacting parts? Agent-Based Models (ABMs) use a larger array of distinct agents and permit a far-larger scale of interaction among them.26 They have been used extensively to model complex systems – natural systems (rainforests and oceans), physical systems (electricity grids and war zones) and social systems (swarms of birds and bees).27 These are systems where it is recognised that an understanding of interactions among the internal moving parts is crucial for capturing behaviour of the system as a whole, in line with Simon’s dictum. For economists used to dealing with highly-aggregated models, the very dimensionality of ABMs is striking. The largest in physics can now simulate interactions of up to 400 billion distinct particles at any one time.28 That is around 50 times as many agents as there are humans on the planet. By way of comparison, the largest-scale macro-models would typically have fewer than 10 distinct agent types.

One of the key channels through which this economic disruption might take place is the inability of lorries to move seamlessly through UK ports. To track this disruption in the event of a disorderly Brexit, the Bank put in place a system for monitoring traffic flow around the UK’s main ports using geospatial data from Google Maps. This allowed close to real-time monitoring of potential port bottlenecks. As an illustration, Chart 18 plots traffic times into and out of Dover during February, March and April this year. The first highlighted mini-spike in traffic times is the Friday evening and Saturday morning before the school holidays. The second is Easter weekend. A disruptive Brexit would potentially have pushed these needles off the Richter scale. There is huge potential for more extensive use of geospatial data such as these to track goods and service flows across the economy, in normal as well as abnormal times.41  40  Haldane (2018a). A geospatial commission has recently been set up, under Sir Andrew Dilnot, to look at precisely these questions. See Geospatial Commission (2019) for a discussion of its work to date and longer-term priorities. 41  30  All speeches are available online at www.bankofengland.co.uk/speeches  30  Chart 18: Traffic times into and out of Dover  Sources: Google Maps API and Bank calculations. A second example concerns the housing market. This, too, is a local market. That is why the most popular house-buying show on TV is called “Location, Location, Location”.
Coming to my second question, how should central banks react if they see the risk of an emerging asset price bubble? The options range from not reacting at all to consciously trying to prick an emerging bubble. Obviously, attempts to deflate an asset price bubbles are likely to require substantial interest rate increases which, in turn, could adversely affect economic activity and inflation. In view of the difficulties in identifying a bubble, it seems established wisdom today that central banks should be exceedingly careful in dealing with asset bubbles. There is, however, a more subtle way: to cautiously consider “leaning against the wind” when an asset price bubble is developing. Indeed, some academics have argued that, by accepting some short-term deviation from the pursuit of its stated objective of price stability, a central bank may improve the conditions for maintaining price stability over the medium to long-term. If a potentially costly bubble is firmly under way, then a somewhat tighter monetary policy stance than would otherwise be needed could be warranted. Certainly, there are also risks involved in “leaning against the wind”. First, as I mentioned already, there can never be full certainty as to whether an asset price bubble is under way. Second, by influencing market psychology, a monetary policy tightening could trigger dynamics that are difficult to foresee and may be hard to control ex post. Effective communication, as always, is crucial, especially in situations of heightened uncertainty.

The central bank can consider adjusting its communication pre-emptively in order to discourage the formation of overly optimistic expectations regarding future returns and/or in order to signal concerns about too low risk premia. In any case, monetary authorities, through their communication, should avoid appearing complacent, thus possibly contributing themselves to unrealistic expectations and asset-price dynamics that are not in line with fundamentals. Finally, central banks should not be seen as reacting asymmetrically to asset price movements; that is, as only reacting to mitigate the consequences of a fall in asset prices. Obviously, such asymmetric behaviour can lead to moral hazard in the market, with the central bank becoming a potential contributor to excessive asset price fluctuations, if its actions induce private agents to take higher risks than would otherwise be the case. What is the situation in the euro area housing and equity markets? After these rather general considerations, let us look at the current situation in the euro area? What are the underlying factors fuelling recent developments in asset prices? Are these developments a cause for concern and what are the associated risks? Let me first focus on residential property markets. As already noted, growth rates in euro area property prices have been rather dynamic in recent years. After relatively modest price increases of less than 3% between 1993 and 1998, residential property prices on average for the euro area as a whole have been rising at annual rates of around 6-7% in each of the past four years.
redemptions to CBRT)  -14.8  Redemption of net TRY government bonds (redemption-issue)  18.9 -28.9  Primary surplus inflow TRY denominated operations  privatizations  and  other  -4.8  Accordingly, while the Central Bank’s foreign exchange purchases and interest payments boosted liquidity by TRY 11 billion in 2008, the Treasury’s operations amounting to TRY 14.8 billion and the TRY 10.5 billion increase in monetary base eroded liquidity by a total of TRY 25.3 billion. Significant uncertainties exist regarding liquidity conditions in 2009. The reason is that the Central Bank’s foreign currency purchase/sale operations against TRY and the Treasury’s net foreign exchange collections or payments are not yet clear, and the realizations can also be different from the envisaged within the year. Under the assumptions that the Central Bank will not conduct foreign currency purchase/sale operations against TRY and that the Treasury will act as net foreign currency payer at a reasonable level, it is predicted that though the liquidity shortage in the market will be at moderate levels throughout the first quarter, it will be gradually permanent from the second quarter onwards. If the Central Bank sells foreign exchange against TRY, a permanent liquidity shortage might emerge earlier than expected. On the other hand, in case the re-commencement of FX buying by the Central Bank due to improved conditions in international markets or the utilization net FX inflows of the Treasury in terms of TRY might hinder occurrence of permanent liquidity shortage.

This is because it is inherently difficult for firms to predict which stress might tip them into failure. Firms will need to ensure that they are embedding robust assurance, governance and oversight arrangements within everyday processes so that they are always ready for the unpredictable. This is particularly important given that resolution is not something which we will have a second chance to deliver. Framing our approach around the three outcomes requires firms to think holistically and ask: “how will we be able to keep the business operating, while losses are borne by investors, and restructuring occurs?” This is more fundamental than just complying with individual policies or submitting data to authorities, and helps ensure that capabilities can be sustained for the long-term. We have also been flexible in our application of the RAF. In May 2020, in recognition of the operational burden on firms arising from the Covid pandemic, we extended the submission deadline for firms’ first reports by a year.19  19  See Statement by the Bank of England and Prudential Regulation Authority on resolution measures and Covid-19 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  The RAF is also designed to be proportionate. I am quite conscious that I have dedicated a large chunk of my remarks focussing on larger banks and building societies – however being able to fail in an orderly way is a concept which speaks more widely than this – and is something which all firms need to take into account.
Everyone understood that the law should be enacted fast, and market players were deeply concerned then, which all resulted in the compromise decision that the law would come into force in 2022. The discussion was extended, but at the time we assumed a smoother growth in the number of individuals entering the stock market. Ultimately, we came to have a really soft and compromise version of this law with deferred enactment. Yet, we are seeing, in current market developments, intensive inflows of non-qualified investors — ordinary citizens entering the stock market. What we have to report now is that financial companies, taking advantage of the transition period before entry into force of the law, are touting and hard-selling products unfit for non-qualified investors. When a deposit account matures, the customer is offered an alternative investment product instead of deposit extension. An inexperienced investor is flooded with the windy talk of capital protection, guaranteed yield, and the likes of structured bonds and structured instruments. Our view is that this situation calls for decisive action.The reasons for this are, regretfully, the misuse of consumer trust becoming commonplace, and offerings including structured products of a complicated nature without guaranteed yield or return of investment — unlike stateguaranteed interest income. We therefore intend to launch, before the non-qualified investor protection law enters into force, so-called key information documents. A key information document is essentially a clear, transparent description of a financial product. These documents will lay out product specifics and risks.

I remember that moment vividly, as it happened during my mandate as Prime Minister of Romania. As a veteran, in office since 1990, I am fully aware to what extent Romania has benefited from the significant support provided by the European Investment Bank. The projects financed by EIB proved to be a catalyst for development, with a multiplier effect in all the economic sectors. Nevertheless, Romania continues to need (i) to develop solid growth strategies based on investments and (ii) to accomplish the development priorities in infrastructure, healthcare and small and medium enterprises (SMEs), as well as (iii) to enhance cohesion with the other EU member states. The future will certainly bring challenges as well as opportunities. One opportunity, as per the latest European Investment Bank’s flagship report on investment, is the present context of low interest rates, which could provide support for speeding up lending and investments. There is adequate room for upscaling public investment in areas such as: smart infrastructure, digital technology and education. Fairly new topics like the digital economy and FinTech, as well as climate change risks and Green Finance are gaining ground and importance on everyone’s agenda, having the potential to shift capital allocation and contribute to new investments. Ladies and gentlemen, please allow me to stress the importance of the EU structural and cohesion funds for Romania and to point out the need for further foreign direct investments.
I was really encouraged by the implicit acceptance, in putting this on the agenda of a banker’s summit, that it is primarily for the industry to seek to regain the moral and ethical highground it once enjoyed. I wholeheartedly agree. This is not something which can, or should, be regarded as a “policing” or “enforcement” matter for the regulator. Getting caught out, taking the fine as a “cost of doing business” and moving on with making money, is just not acceptable as a sustainable banking business model going forward. I do not subscribe to the view that banks’ primary role is to generate maximum shareholder value, leaving the regulator to worry about the safety of deposits and the interests of the banks’ customers. Now, don’t get me wrong I am not thinking of banks as break-even utility operations but, making a reasonable return should be a result of what banks do – to quote Jack Welch when talking to the FT a few years ago “Shareholder value is a result not a strategy”.1 3. Having a licence or franchise to take deposits, which represent the hard earned savings of millions of people, and use these funds for private gain is a privilege conferred by society on a bank, which merits exemplary professional and ethical behaviour. Moral and ethical highground: trust and respect 4. Returning to the theme of the Summit “regaining the moral and ethical highground” – what do we really mean here? I think, in a word, “trust”. With “trust”, comes “respect”. 5.

This is a dynamic process as the requirements and expectations of consumers are also changing rapidly in tandem with the increased education levels and growing affluence. In recent years, consumers have become more discerning and demanding better product choices, more efficient delivery channels and more customer friendly practices from takaful operators. Bancatakaful, for example, has made noticeable headway to account for 20.4% of takaful contributions in 2005, compared with only 6.5% in 2004, reflecting the consumers' preference for selected products to be made available through this channel. While product offering among takaful operators will eventually converge, the consumers ultimately expect speed in service delivery, simplicity in dealings, stretching or going the extra mile in satisfying customer's needs and unquestionable integrity. Thirdly, Malaysia still has competitive advantage in terms of takaful and is well-positioned to be a takaful and retakaful hub in this region . During the past two decades, we have seen the gradual opening up of takaful operation in many jurisdictions throughout the world, primarily in Islamic countries and countries with large Muslim communities. In this period, Malaysian takaful industry has gained significant attention with the remarkable growth rate recorded domestically and in other countries as far afield as Saudi Arabia. Malaysian takaful industry alone successfully garnered approximately 26% of global takaful contributions and our takaful operator has been recognized as among the leaders at the global front.
Finally, in order to be more flexible against the variability of capital flows, a new method for foreign exchange purchase auctions was designed and put into effect on 4 October 2010. To this end, a total of USD 1.76 billion was purchased in the first three weeks, USD 1.2 billion of which was additional purchase. Within the framework of these developments, while the yield curve has shifted down across all maturities during the third quarter, the decline was more significant for longer-term interest. Although surging capital inflows towards emerging markets have been effective, factors specific to Turkey have also contributed to the downward shift in the yield curve, as I  BIS Review 159/2010  5  mentioned at the beginning of my speech. Lower-than-expected core inflation has contributed to the downside movement in the short term, while the drop in longer-term interest rates mostly reflects perceptions that the improvement in the relative creditworthiness of Turkey would become permanent (Figure 15). Dear Guests, Along with decreasing nominal interest rates, real interest rates have continued to hover at historically low levels during the third quarter. Moreover, Turkey’s real interest rates do not differ significantly from those of other emerging markets (Figure 16). 6  BIS Review 159/2010  Meanwhile, with the removal of extra tightness in financial conditions that emerged during the crisis, the effectiveness of the monetary policy on credit market enhanced; thus, the low level of real market rates were better reflected in credit interest rates (Figure 17).

By contrast, monetary tightening may be implemented at an earlier stage, should the recovery in economic activity turn out to be faster than expected. The weakness in the global economic outlook not only delays recovery in external demand but also leads to continuing expansionary monetary policies across developed economies, which in turn fuel domestic demand through an acceleration of capital inflows to emerging markets. Should capital inflows continue, the divergence in the growth rates between domestic and external demand is likely to intensify in the forthcoming period. Additional policy instruments, other than the short-term policy rates, would be needed to curb risks emanating from this channel. In this respect, should the disparity between domestic demand and external demand continue and be accompanied by rapid credit expansion and deterioration of the current account balance, all to lead to financial stability concerns, it would be necessary to utilize other monetary policy instruments such as reserve requirement ratios and liquidity management facilities more effectively. Food and commodity price inflation has accelerated recently. The aggregate demand is not yet at a level to exert inflationary pressures. Along with this, the strength of the Turkish lira limits the pass-through from food and commodity inflation to core goods and services inflation. However, the potential second-round effects continue to pose a risk, if increases in food and commodity prices persist.
Still, further steps could be taken to improve productivity levels and increase the employment rate. Also, as I argued recently, COLA increases should not be superimposed on wage increases agreed in collective agreements, but should form part of the negotiation process, so as to ensure that firms are able to match all wage increases with productivity increases. Faster productivity growth depends on many factors, including investment, the infrastructure, the quality of the human resources and  BIS central bankers’ speeches  7  hence the quality of the educational system and its ability to meet the skills requirements of a growing economy. Measures that increase the employment rate could include further policies that incentivise a higher female participation rate, as well as measures that facilitate more flexible work conditions, including part-time employment. A further requirement for economic growth is the smooth functioning of the financial system. Particularly during these turbulent times, continued economic growth depends also on the uninterrupted supply of credit by the financial sector to firms and households, and to that end the stability of the financial system is essential. It is important to note that although its rate of growth has declined, bank credit has continued to increase in Malta, unlike the situation across the euro area, where widespread deleveraging by financial institutions has led to a contraction in the volume of credit, as shown in Chart 7.

The recent IMF report that I mentioned earlier noted the strong performance of Malta’s financial sector but also stressed the importance of strengthening the resilience of the sector. 8  BIS central bankers’ speeches  The elevated levels of credit and concentration risks call for stronger financial buffers, through higher provisioning and retention of profits. Such measures would strengthen the banks’ ability to absorb potential shocks and would also allow them to prepare themselves for compliance with stricter Basel III regulatory requirements. On the positive side, credit risk is being mitigated by prudent credit standards and cautious lending behaviour on the part of the banks. On the funding side, the resilience displayed by the banking system in the face of adverse international conditions is explained by the business model that has been a traditional characteristic of domestic banks, which rely strongly on retail deposits. Another indication of the overall prudent bias of the Maltese domestic banks is evident in the first chart presented earlier, which shows that leverage ratios of Maltese banks are considerably lower than in euro area in general. While the euro area average has declined on account of widespread deleveraging, the ratio remains significantly higher than the Maltese ratio, which has been quite stable. A further indication of the traditional funding model is the loan to deposit ratio, as shown in Chart 8, which is significantly low when compared with the major economies. This business model has served the domestic banking sector well.