samchain/econo-pairs-v1 huggingface dataset:
AMSE | Aix-Marseille School of Economics Marseille, 11 December 2018  Speech by Denis Beau First Deputy Governor  “Trends in financial intermediation and implications for the regulation and supervision of the European financial sector”  1/9  Ladies and Gentlemen, dear students, It’s a pleasure to be at the Aix-Marseille School of Economics today to discuss the trends affecting a key channel of the financing of the real economy: financial intermediation. This topic is well chosen the year of the tenth anniversary of both Lehman bankruptcy and Nakamoto’s paper underlying the Bitcoin. This is not just a coincidence. For crypto-assets’ proponents, the “old world” of bank-centric financial intermediation failed in 2008 and had to be replaced by disintermediated peer-to-peer systems like Bitcoin. Where do we stand now? Central bankers, regulators and supervisors have worked to strengthen the traditional bank centric model of intermediation, and the highly intensive finalisation of Basel III has concluded ten years of regulatory efforts in that field. Banks are stronger and more resilient than before 2008. At the same time, quite ironically, the Bitcoin itself has generated the biggest bubble ever, which is now bursting. So, in 2018, are there new developments in financial intermediation? Yes, indeed. A number of factors contribute to push the European bank-centric model towards a more diversified, unbundled financial intermediation model. Hence, I will focus the first part of my presentation on those drivers and their impact on financial intermediation (I).

7/9  Steps towards a more integrated financial system at European level have already been taken since the crisis, with the Banking Union and the Capital Markets Union projects. These projects need to be further developed and implemented. The Banking Union, which was set up to put an end to the link between sovereign risk and banking risk, is now operational. What remains to be done in order to finalise it includes completing the resolution pillar by implementing a backstop and adopting a common framework to enhance the provision of liquidity and putting in place a European deposit insurance scheme. Finalising the Banking Union is of prime importance for the development of pan-European banks, and will make it possible to achieve a better balance of risks, economies of scale, a better allocation of savings towards productive investments and increased competitiveness of European banks at the international level. The other major initiative at the European level to strengthen financial integration is the Capital Markets Union project which aims to boost investment in the EU. Speeding up this Union will not only foster growth but will also enhance risk-sharing across European countries and mitigate the procyclicality of bank financing. We, at the Banque of France, support in particular three initiatives which should have a decisive impact on cross-border investment: First, the harmonisation of the insolvency procedures framework and its implementation by companies to promote investment in equity across Europe.
Jiří Rusnok: Currency, taxes and other institutes of financial law Welcome speech by Mr Jiří Rusnok, Governor of the Czech National Bank, at the Currency, taxes and other institutes of financial law conference, Faculty of Law, Charles University, Prague, 20 September 2018. * * * Good morning, everyone. It is an honour and a pleasure for me to welcome you to today’s conference on the currency, taxes and other institutes of financial law. The 100th anniversary of the foundation of the independent Czechoslovakia is a good opportunity to look back and identify the main features of our national economic history. As you know, we have been through four periods since 1918 – the period of political and economic emancipation from Austria-Hungary, the wartime economy, the era of central-planning-based totalitarian communism, and finally almost three decades of democracy and a market economy. So, more than enough has happened in our country over the last 100 years. Although these periods could not have been more different, two common features have appeared in various guises. I would characterise them on the one hand as economic moderation, prudence and discipline, and on the other as a struggle for economic independence and a willingness and ability to bear the consequences. Let me give some examples of both. Czechoslovakia’s founding fathers Tomáš Garrigue Masaryk, Karel Kramář and Alois Rašín were well aware that nurturing a sound financial environment was crucial to the prosperity of the young nation.

Such regulations are usually called into question by both the industry and the legislative authorities. BIS Review 113/1999  4  There is undeniably something to be said for their view of this matter as well. It is, moreover, easy to create the impression that the state by its control takes a special responsibility for the collateral in the bonds, which is not the intention. Perhaps one should also ask whether a gilt edge to the bonds would really give the effects hoped for. The large liquid securities with the best creditworthiness (AAA-rated) in the European mortgage market (Öffentliche Pfandbriefen) have in the first place collateral in loans to local governments or federal states and not in the market that the Swedish housing companies can use. They would rather issue “Hypotheken Pfandbriefe” with collateral in office premises and housing and both interest and liquidity are less favourable in the market. It does not seem either as if any uniform market for mortgages is in process of being established, but the regulatory framework differs considerably from country to country. Investors will hardly avoid making separate appraisals for each of these markets. Moreover, it seems, not wholly unexpectedly, as if EMU would affect developments in the direction from relatively rule-governed national markets such as the Danish and German to internationally open markets, where new instruments can be developed in a flexible way as the need arises.
That, in turn, would have provided some offset to the global inflationary pressures we have been experiencing over the past year. Instead, as Chart 5 shows, sterling has remained relatively weak, both against the full trade-weighted basket of the currencies of our trading partners, and particularly against the euro – which is the most important currency for UK trade, with the euro area accounting for around half of our total exports and close to half of total UK imports. Chart 5 Sterling depreciation since 2007 Rebased to 100 in January 2005 110 105 100 95 90 Euro-Sterling exchange rate  85  Sterling EER *  80  Average EER *, 97-07  75 70  2005  2006  2007  2008  2009  2010  2011  *: Effective exchange rate Source: Thompson Datastream and Bank for International Settlements  This weakness of sterling is one of the key reasons why UK inflation has been much higher than our peer group of European economies. As Chart 6 shows, the differential between inflation in the euro area and the UK is closely associated with the relative strength and weakness of the sterling/euro exchange rate. And there are good reasons for this. While the  BIS central bankers’ speeches  7  UK has an independent monetary policy, it is a member of the Single European Market which covers all European Union economies.

But the longer this process of accommodation goes on, the greater the risk that it becomes ingrained in expectations of relatively high future inflation and then credibility needs to be re-established with more abrupt interest rate changes and tighter policies in the future. It may be that indicators of an upward drift in inflation expectations are only flashing amber at present. But if the MPC waits until they are flashing red, and if other pressures continue to push up UK inflation in the meantime, the Committee could face a very difficult situation later this year or next. A well-conducted monetary policy should aim to move policy in anticipation of events and in a smooth and orderly way if possible. And as I prepare to leave the Committee at the end of next month, I do worry that the MPC’s credibility and commitment to the inflation target may already have been eroded by not adjusting policy settings soon enough – as the challenge for monetary policy has shifted from preventing deflation to curbing inflation and from halting recession to managing the recovery. Concluding remarks I started studying economics in the mid-1970s and my career as a working economist began in the mid-1980s. Throughout this time as a student and practitioner of economic analysis, we have seen UK monetary frameworks come and go, generally in the midst of an economic crisis. Since the Bretton Woods system of exchange rates collapsed about 40 years ago, the UK struggled to sustain a stable monetary policy framework for any substantial period.
QT and the MPC’s forecasts I want to turn now to the second question I posed at the beginning: should the MPC not recognise in its forecasts some particular and additional drag on demand and on inflation, on top of that induced by higher Bank Rate, from the ongoing “quantitative tightening” (or “QT”)? This began over a year ago, initially by failing to replace maturing gilts in the APF. In September, the MPC commenced outright sales of assets and said that, by both means, it would reduce the size its size by £ over the following year. Page 28  Readers who’ve come this far will be glad to hear that this section will be pretty brief because I’ve actually gone through the main points already. There are two. First, because the impact of QE has been variable I don’t think it would be right to pretend there’s some fixed, unchanging effect on the economy – to translate, for example, a given quantity of asset purchases (or sales) into some notional equivalent in terms of Bank Rate. It’s partly because of this, and the fact that we can only be less sure of its impact than that of conventional policy, that the MPC views Bank Rate is its “primary” policy instrument. By design, the Committee did not embark on QT until the official interest rate reached a certain threshold – a level from which (were the need to arise) it could then be cut.

Broad money grew more than twice as rapidly in the first fifteen years of inflation targeting (when there was no QE) than in the decade or so after the financial crisis (when there was lots). And average inflation, in both periods, was close to 2%. This definitely does not mean that these indicators are somehow intrinsically unhelpful or misleading. Apart from anything else – and this is a more general point, relevant for other variables too – the act of targeting inflation is likely to reduce its correlation with just about every leading indicator (those things, at least, to which policy has a chance to react, given the lags involved). There might be several indicators that would have told you something about future inflation had monetary policy failed to react to them. But because in practice policy does just that, using and then offsetting that information, what’s left will inevitably be less well correlated[17] with inflation. In the case of broad money, and at least with the benefit of hindsight, it’s not that difficult to explain  Page 29  “what’s left” in these historical data. For a long period of time, right the way through from the early 1980s to the financial crisis over a quarter of a century later, household wealth rose (relative to income) and, because banks increasingly paid interest on their deposits, it became increasingly attractive to hold financial assets in that form.
Sound and safe cross-border consolidations would make banks better able to diversify their risks across the euro area, and channel savings more effectively towards investments across borders; this would foster the Financing Union I talked about. From a supervisory point of view, it involves supporting an approach on a consolidated basis by granting more waivers on liquidity and capital so as to allow more flexible capital allocation and limit ring-fencing. Swift execution of cross-border transactions is also essential: the implementation of a fast-track process by the SSM would address this issue. From a resolution point of view, internal MREL requirements could be a tool to facilitate the resolution of institutions, but they would become meaningless if calculated on a national basis. Indeed, having internal MREL in all countries could be an obstacle to the single market and European banking crossborder mergers. Finally, we should address business and legal impediments to cross-border mergers: information asymmetry, non-performing loans (NPL) or anti-takeover legal structures in different countries. As a first concrete step, I suggest that the EBA publish a comprehensive stock-taking of all the regulatory and supervisory obstacles to cross-border activities and mergers. The aim is crystal clear: within a Monetary and Banking Union, a cross-border merger must not be more difficult and cumbersome than a “domestic” merger. The logic of the banking union is that it should be considered for banking purposes as a unique jurisdiction. I would like to conclude by quoting one of the founding fathers of Europe.

All told, institutions should be mindful that the new resolution framework will require those banks that exceed a certain size and are liable to generate systemic risk to ensure that their balance sheet structure allows their resolution at the expense, essentially, of their shareholders and creditors. They should, therefore, ensure that their business model is compatible with the issuance of loss-absorbing instruments on the capital markets and that their income statements allow for the remuneration of the supplementary risk that the new resolution regime entails for holders of bank debt. It thus seems likely that several institutions will face objective difficulties adjusting to the recently established resolution framework. These new regulations, therefore, contribute to reinforcing the perception of excess capacity in the sector and, foreseeably, they will contribute to promoting a change in the industry structure that will correct such excess by means of consolidation processes giving rise to banks more capable of comfortably complying with the new demands. The supervisor’s role essentially consists of setting in 9/10  place the means needed for this seemingly inevitable adjustment process to unfold in as orderly a fashion as possible. 10/10
Indeed, at that time, the ECB was subject above all to criticism contrary to that levelled by Franco Bruni. At least three European heads of state, and many ministries of finance, not to mention business people, trade unionists, journalists, politicians and commentators, exerted public pressure on the ECB to finally cut rates. And when, at the end of 2005, the ECB decided (rather late, in Bruni’s opinion) to increase them, many of those persons lined up, together with renowned international institutions, to severely censure the decision, because  1  2  La Stampa, 2 December 2005. BIS Review 82/2009  they felt it would have cut off the legs of the recovery. The ECB is independent, fortunately, and cannot dump on others the responsibilities of its own choices. But what we should not forget is the context in which it operates, largely influenced, also in the countries of continental Europe, by an “activist” vision of monetary policy with an Anglo-Saxon inspiration. It is also surprising how the teachings taken from that period of monetary policy are quickly put aside when you go from the historical analysis to that of the economic juncture, in particular the current economic situation.

The Bank of Zambia has continued to encourage local banks and other financial institutions to partner with international financial institutions and other banks in Africa, Europe and Asia. In this regard, in December 2007, the Bank organised a forum to exchange information on sources of finance in Lusaka. The forum was well attended and the international institutions showcased their products to their local counterparts. I am happy to note that institutions present here today such as Zambia National Commercial Bank, AFREXIM Bank, PTA Bank, ALS Capital and Loita Capital were all represented at the forum. I imagine that such fora are  2  BIS Review 77/2008  instrumental in structuring tangible financing agreements like the ones we are witnessing today. Finally, I would, like to request all parties involved in the management of these facilities to ensure that the funds reach the intended beneficiaries and that controls are put in place to avoid abuse. The beneficiaries should also ensure that their projects are implemented effectively and expeditiously without any delay. In this regard, may I request the Zambian Mining Services Companies and the Export Fund of Zambia to take necessary measures in a timely manner to fulfill the requirements for declaring these loans effective and for starting implementation. I would like to wish all those involved success in their management of the funds and implementation of the projects so that we can ensure that the development impacts expected from these important initiatives become a reality for the intended beneficiaries and the country at large.
Nevertheless, the past two years have witnessed a squeeze in firms’ gross profit margin as a result of increased competition and the appreciation of the baht relative to other regional currencies. BIS Review 46/2007  3  And as for the banking sector, which was at the center of the crisis, painful financial restructuring has now bore fruits. The banking sector has gained strength, with stronger profitability. The level of nonperforming loans has been cut down by four-fifth from its peak in 1998 to about eight percent in Q3 2006. And with the BIS ratio of nearly 15%, the banking system appears well cushioned to unexpected shocks. Finally, the fiscal sector benefits greatly from the economic upturn. Increasing corporate profits and consumption spending have resulted in higher tax revenues, allowing the government to strengthen its fiscal position significantly. Public debt to GDP has declined and is currently at only 41% of GDP. Ladies and gentlemen, I hope my account of these selected developments has shown you how far the Thai economy has come since 1997. The improvement was not due to luck or natural recovery process. It took a concerted effort by both the public and the private sectors to enable this turnaround. A natural question that follows then is whether this renewed dynamism will be sustained and this leads to my second point. 4  BIS Review 46/2007  That is, despite important challenges both domestically and externally, the medium-term outlook of the Thai economy remains positive.

Bandid Nijathaworn: Thailand’s economic outlook – an update Speech by Mr Bandid Nijathaworn, Member of the Board of the Bank of Thailand, at the Australian-Thai Chamber of Commerce dinner talk, Bangkok, 14 July 2010. *  *  *  First, let me thank the Australian-Thai Chamber of Commerce for the invitation. This year has been a particularly challenging year for Thailand, on account of both developments in the global economy and the political situations at home. So, what I want to do today is to give you an update on Thailand’s economic outlook, particularly to see what these challenges have meant for the Thai economy, as well as for the outlook going forward. A keyword this year is “uncertainty”. As you well know, the market does not like uncertainty because it raises risk and costs. For the global economy, this year has been an exceptionally “complicated” year because of the two major uncertainties that have contributed to an unusual degree of volatility in global financial markets. The first is uncertainty surrounding the strength of global economic recovery which has been weighed down by the high levels of unemployment and slow bank-lending growth in the advanced economies, as well as prospect for higher long-term interest rates in the major economies linked to the financing of public sector deficits. This is the first uncertainty. The second uncertainty is policy.
Within this framework, assuming that financial markets always operate efficiently, we can list the reasons for the crisis as deregulation, financial innovations, problematic accounting standards and global instabilities. The liberty brought by deregulation led to shortsightedness  BIS Review 79/2010  3  driven by over-confidence and short-term profits were preferred at the cost of risking the financial system in the long run. Financial innovations generated complex derivative products, where who owes how much to whom is not clear and, which actually lead to multiplying of risk instead of distribution of it. Meanwhile, the accounting standards based on “Fair Value” principle made cyclical effects and fuelled the destructive power of the crisis. Having mentioned the stages and reasons for the crisis, now I would like to share with you the monetary policy implemented by the Central Bank of Turkey during the crisis and my evaluations on the recent developments in the Turkish economy. Projecting that inflation would decrease sharply as of the last quarter of 2008, the Central Bank of Turkey implemented a monetary policy focusing on restraining the potentially harsh impact of the global financial crisis on financial activity without conflicting with the primary objective of maintaining price stability. During this process, the CBT has delivered sizeable cuts in policy rates and a counter-cyclical monetary policy has been implemented with the aim of supporting the smooth operation of credit markets. Between November 2008 and November 2009, the CBT cut policy rates by 1.025 basis points, playing a pioneer role among central banks of developing countries.

In normal times, if the ECB lowers its key rates, the banks’ financing costs decrease, allowing them to pass these lower costs on to the lending rates they offer to customers, companies or households. BIS central bankers’ speeches  3  However, we noticed that this channel was no longer functioning correctly in the euro area. In fact, we noticed that a drop in key rates was feeding through to lower lending rates in certain parts of the euro area, but not everywhere. This means a fundamental aspect of our monetary policy and of its efficacy – i.e. its singleness – was impaired. As a result, major differences in bank lending rates appeared across euro area countries, which could not be explained by disparities by the fundamentals of the countries concerned. For example, two hotels with the same activities and financial characteristics and located on each side of the Austro-Italian border are obliged to borrow at substantially different rates. This is not because of a real difference in the credit risk. In reality, this rate differential stems from the fact that certain segments of the financial markets had developed fears regarding a possible break-up of the euro area. They were adding to the rates they were offering certain countries a risk premium to cover a “re-denomination” of bonds into the local currency.