samchain/econo-pairs-v1 huggingface dataset:
Tharman Shanmugaratnam: Opportunities facing Islamic finance and challenges in managing capital flows in Asia Outline of special address by Mr Tharman Shanmugaratnam, Chairman of the Monetary Authority of Singapore, at the 8th World Islamic Economic Forum, Johor Bahru, Malaysia, 4 December 2012. *  *  *  The Prime Minister of Malaysia, His Excellency Dato’ Sri Najib Tun Razak The President of Comoros, His Excellency Ikililou Dhoinine The President of the Islamic Development Bank, His Excellency Ahmad Mohamed Ali Chairman of the World Islamic Economic Forum Foundation Tun Musa Hitam Ministers and distinguished guests Ladies and gentlemen Introduction It is my pleasure to be here today and have the opportunity to share some thoughts. Let me first congratulate the WIEF on the progress it has made in establishing itself as a leading international forum for economic leaders and opinion shapers from a broad range of countries to discuss issues of interest in Islamic Finance and related themes in global finance. The theme of the Forum, “Changing Trends, New Opportunities” is particularly relevant. Allow me to first offer a brief perspective on opportunities facing Islamic finance. I will then go on to talk about the challenges we face in Asia in managing capital flows in the aftermath of the Global Financial Crisis. Islamic finance: opportunities for growth The Islamic finance industry is estimated to have grown by some 19% per year since 2006 – to record nearly $ trillion of total shariah compliant assets in 2012.

I will mention three sets of policy responses that will inevitably have to figure in our toolkits. First, there is much sense in curtailing volatility in the exchange rate over the short-term. The costs of volatile and uncertain exchange rates are high in small open economies especially – which is what most of our ASEAN economies are. Accordingly, Malaysia, Singapore and several other Asian countries have not felt comfortable leaving their exchange rates entirely to market forces. Their central banks, within each of their monetary policy frameworks, have sought to instil a focus on longer term fundamentals. There is merit in allowing exchange rates in Asia’s emerging economies to appreciate gradually over the long term, reflecting their more rapid growth. If we resist these long term trends, we are likely to see more inflation in our economies. But some stability in the short term is wise. Second, macro-prudential policies are now an important part of the policy tool kit. Many Asian countries have introduced new macro-prudential measures to try and avoid bubbles in  BIS central bankers’ speeches  3  their property markets over the last two years. Malaysia brought in stricter limits on loan-to-value ratios on housing loans. Singapore and Hong Kong have done similarly, and have introduced additional stamp duties or transaction taxes to discourage speculative demand for residential properties. These targeted administrative and prudential measures are not conventional macro-economic tools.
Remember, the important thing here is that CPI inflation is 2 per cent. So the Riksbank should actually have raised rather than cut the repo rate. The direct effect would then have been that CPI inflation would have been higher through the effects on the interest-expenditure component of the CPI. Of course, this would also have had a dampening effect on activity in the economy and on the inflation rate that is not affected directly by changes in mortgage rates, namely CPIF inflation. But this could have been compensated with more and larger interest rate increases and CPI inflation could thus have been kept at 2 per cent. CPIF inflation would then fall increasingly, but this would not matter as the calculation assumes that it is solely the average CPI inflation rate that creates the unnecessary unemployment. Before anyone thinks that I have gone over to the dark side, let me say that this would of course have been an absurd and destructive monetary policy. But it illustrates the difficulty of interpreting the results of calculations that solely focus on the average of CPI inflation. Söderström and Vredin (2013) discuss this, among other things, in an analysis of inflation, unemployment and monetary policy. One conclusion of their analysis is that the link between CPI inflation and unemployment has many causes and that it in itself therefore does not give much guidance as to how well monetary policy has been conducted.

It is also precisely these questions that have been discussed in the general debate on the role of monetary policy in this context. I therefore intend to discuss these questions one by one and in relative detail. Can the repo rate affect housing prices and lending? It is probably true that the effect of a typical change in the policy rate on housing prices and lending to households is on average not very large. In addition, the policy rate is a blunt instrument when it comes to influencing housing prices and lending, as it is an interest rate that applies to the whole economy. This is why more specific tools, what are known as macroprudential tools, are generally perceived as more appropriate than the policy rate for counteracting this type of specific imbalances. But the effect of the policy rate most likely varies quite substantially depending on the circumstances prevailing at a specific time. In some situations it may be enough to make fairly limited increases to subdue an overly rapid upswing in the housing market, for instance, if the central bank combines these increases with communication emphasising that current developments are perceived as cause for concern.13 Small interest rate increases then function more as a concrete "reminder" that the central bank is concerned over  10  King (2012), p. 12. 11  IMF (2013), p. 3. 12  See, for example Svensson (2012).
A couple of the rate-cutting phases we have had during this period have also been a little unusual. What happened in 1996 in particular, when the repo rate was cut from almost 9 to just over 4 per cent, was largely a question of confidence in the inflation target become established and enabling a substantial cut in the policy rate. The substantial rate cut in connection with the global financial crisis, from 4.75 to 0.25 per cent within the course of a year, was also special, as crises of this kind are fortunately rare (see Figure 3). In the United States, which has a longer history of a floating exchange rate, it is usually estimated that the policy rate is cut by around 5 percentage points in economic downturns. 5 It is reasonable to assume that in Sweden, which is a small open economy, a larger share of the adjustment in an economic downturn will come through the exchange rate than is the case in the United States. Let us say, without claiming any scientific exactness, that it would be desirable to cut the repo rate by 2.5–3 percentage points in a normal economic downturn. If the downturn were to occur at the beginning of 2021 and the policy rate were cut  4 Rudebusch (2016) shows that the probability of an economic upturn being broken does not now increase in  proportion to the time it has lasted. However, this was the case with the economic upturns prior to the Second World War.

Firms whose failure is unlikely to have financial stability consequences also have a part to play: they need to take a forward-looking realistic assessment to ensure they prepare for the event that they fail, which is likely to be a bank insolvency, and meet PRA rules on The RAF applies to such firms where they are a ‘material subsidiary’ of an overseas-based banking group for the purposes of setting internal MREL in the UK. 20  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  depositor protection. In placing an emphasis on the responsibility of individual firms to understand and plan for their own resolution, we are making firms accountable for this essential planning, reinforcing the credibility of those plans and the regime as a whole. Conclusion  Resolvability is better regarded as a spectrum than as a binary judgement. It is about ensuring authorities have credible options and the flexibility to respond to a crisis. A resolution is ultimately a transaction which occurs in a crisis situation and is unlikely to ever be a smooth process. But the work done by firms under the RAF should increase the chances that resolution is conducted in an orderly fashion and disruption to the financial system is minimised. Banks and building societies need to prepare themselves fully for these situations now.
The exercise assesses the foreseeable position of banks in two scenarios: one, a baseline or more likely scenario (a macroeconomic scenario approved by the European Commission); the second, an adverse – and severe but not impossible –  BIS central bankers’ speeches  1  scenario (set by the European Systemic Risk Board), in the period 2014–2016. The consolidated balance sheets at year-end 2013 were taken as the starting point for the exercise. 3. Scope of the exercise  The comprehensive assessment examined 130 banks from 19 countries. The main data from the exercise as follows: –  The assets reviewed account for 81.6% of the total assets of banks supervised by the Single Supervisory Mechanism. The remaining assets, somewhat more than 18.4%, are assets of banks supervised indirectly by the Single Supervisory Mechanism. –  15 Spanish banks were examined, accounting for 90% of the assets of Spanish deposit-taking institutions. –  Along with teams from all the supervisory authorities, including naturally the Banco de España, consultancies, appraisers, audit firms and, evidently, the banks themselves under examination all participated. –  More than 6,000 experts, 600 of whom in Spain, were involved at the European level. –  For Spain, the cost of the exercise was € million in total, of which € million correspond to the consultancy, Oliver Wyman, and € million to the audit firms and consultancies.

Brief description of the exercise  Before turning to the results, allow me briefly to recall the nature of the exercise. As you know, the Comprehensive Assessment comprised two components: an asset quality review and a stress test. Assessing asset quality involved a detailed review of bank balance sheets to determine, among other things, whether the classification of financial instruments, provisioning levels and the valuations of specific assets are appropriate. The process, conducted in a decentralised fashion, was very complex. It required the support of leading audit firms, and was subject to stringent quality assurance, where the national supervisory authorities – in our case the Banco de España – played a very important role. As a result of this part of the exercise, adjustments were made to the level of CET1 (i.e. maximum quality) capital, as defined under the Basel III Accord, which were taken into account to determine the starting point of the stress tests. The second key element of the Comprehensive Assessment was the stress test. This is an exercise that seeks to evaluate the resilience of banks in hypothetical scenarios. The stress test is an exercise basically prepared by the banks themselves, using the socalled bottom-up approach and applying the methodology of the European Banking Authority. The test was subject to strict quality assurance by the ECB and the national supervisory authorities.
As Iceland's growth period progressed, symptoms emerged of the economic overheating which has been one of the main concerns of the Central Bank in the implementation of monetary policy in recent years. For the Icelandic economy, the period from 1990-1995 was one of stagnation, apart from 1994 when growth shot up to 4.5%, only to fall back to virtually zero the following year. In 1996, however, the growth phase began which we have been enjoying ever since. Over this period, the entire output gap that was present then was closed, and more besides. National expenditure has been growing at a faster rate than national income, resulting in a large current account deficit. National expenditure rose by more in 2000 than the preceding year, so the current account continued to widen. GDP growth was less than the year before, although it did not slow down sufficiently to ease output pressure. In all likelihood, the overheating that has characterised the Icelandic economy in recent years peaked in 2000, since there were indications of a slowdown in domestic demand growth in the course of the year, although it remained very strong. The outlook is for a substantial reduction in the rate of economic growth in 2001. Clear signs of overheating were seen in the labour market. Seasonally adjusted unemployment decreased from 1.5% in January 2000 to 1.2% in July, then remained unchanged to the end of the year.

BIS Review 42/2007  1  Beyond that, there may be some additional questions to consider which, for the sake of argument and in order to launch the debate, I will put on the table rather in a provocative mode, but are dealt with in more detail and balance in my own (and some other) contributions to the Review. First question: what are the conditions to ensure an appropriate level of investor protection, and in particular, what are the consequences of the increased "retailization" of hedge funds? A second question is the future of the hedge fund industry. It is the nature of technological progress to spread in a way that the profits it creates to be competed away. Replicating hedge funds strategies – at lower costs – seems to be expanding. M. Hsieh will tell you more about it during the panel discussion. A third and important issue relates to the evolving relationship between banks and hedge funds. This relation is complex and multi-faceted. It is at the heart of the concept of indirect regulation. Finally, we have an ongoing debate about "transparency", on which I am sure that members of the panel will tell you more in a few minutes. By nature, hedge funds are secretive investors. They do not publish information about their positions and strategies. On the one hand, for markets to be fully efficient, some investors must be able to hold proprietary information and make profits on this basis.
Moreover, commentators have noted that exporters have responded to the depreciation by expanding their profit margins rather than cutting their foreign currency prices in order to boost market share. Does this mean that the depreciation will prove ineffective at boosting demand? I do not think that would be the right conclusion. Experience after previous large depreciations, such as following sterling’s exit from the Exchange Rate Mechanism in 1992, suggests that it is normal for the initial impact to be seen mainly in expanded profit margins and only after some while does one see an impact on market shares. One reason for that may be that expansion in overseas markets requires some investment and businesses are likely to be cautious about making that expenditure until they are sure the improvement in profitability will be maintained. For that reason, I expect to see the contribution from net exports gradually building as the global recovery proceeds. The path of the recovery will be determined by the balance between these two sets of forces. Our central expectation, as laid out in our February Inflation Report, is for four-quarter GDP growth to gradually strengthen as the year proceeds (Chart 6). But the quarterly path is sure to be uneven and there remains a risk of setbacks. And even if things turn out well, it is likely to be a considerable time before the substantial margin of underutilised resources in the economy developed in the downturn is whittled away (Chart 7).

The scope of our consultation is potentially huge. So I want to say a few words about how we will give focus to our work, and to give a sense of the questions we are asking in our consultation document. The framework we will be using is shown in Figure 3. It divides up areas where the fairness and effectiveness of FICC markets may be deficient into six categories. Three of these relate to the structure of those markets: so-called market microstructure; competition and market discipline; and benchmarks. And three relate to conduct: standards of market practice; firmlevel responsibilities, governance and incentives; and surveillance and penalties. Let me say a little more about each in turn. 1. Microstructure  The first category relates to the microstructure of FICC markets – covering such things as the arrangements for trading, price transparency, market access and the range of asset types. As I noted earlier, many of the products in these markets are tailored to the specific needs of individual borrowers or investors. Although that may be good news for them, it does  BIS central bankers’ speeches  5  mean that quite a number of FICC markets are relatively thin and lack widespread transparency and are hence intrinsically more vulnerable to manipulation. So there may be a tradeoff between the benefits of customisation, and the costs in terms of weaker liquidity and potentially greater vulnerability to abuse. Regulatory and technological change is already leading to greater standardisation and transparency across many FICC markets.
Jean-Paul Redouin: Risks may be transferred, but they do not disappear! Address by Mr Jean-Paul Redouin, Deputy Governor of the Bank of France, at the Paris Europlace, Financial Forum, Stockholm, 29 March 2007. *  *  *  The international financial system is going through an extraordinarily benign phase. The world is enjoying stable inflation and strong and broad-based GDP growth. At the macrofinancial level, corporate profits have been sustained, risk premia have been very thin for a broad set of asset classes, and volatilities remain unusually low. Based on these market signals, risks appear very low. Do risk premia correctly reflect the risks currently facing the financial system? Or is their low level the result of excessive risk appetite on financial markets? Indeed, some recent warning signals have reminded us how fragile the current pricing of risk is, and how much it relies on the expectation that an “ideal scenario” of strong growth and contained inflation will prevail. In this context, I would like to focus my remarks on a very important structural development: credit risk transfer. Basically, the transfer of risks helps to spread them, according to a process I shall call the “atomisation of risk" (namely risk being split into elementary particles and then re-packaged). But do these techniques mean that risks disappear? The breakthrough of CRT has gone hand in hand with constant innovation and the emergence of powerful non-bank players.

Denis Beau: Moving beyond the first generation of innovation and regulation for tokenized finance - the case of DeFi Address by Mr Denis Beau, First Deputy Governor of the Bank of France, at the occasion of the change of Bank of France Head of the Asia-Pacific Representative Office, Singapore, 31 March 2023. *** I am glad to be here with you today for this handover reception. It gives me the opportunity and the pleasure to thank François Haas and to welcome Stéphane Latouche as our outgoing and incoming chief representative in Asia and head of the Bank of France Office in Singapour. It also gives me the opportunity to underline our very good and multifaceted cooperation with the MAS, in particular on financial innovation. In my remarks today, I would like to illustrate this cooperation, notably with our work on the development of tokenised finance, and the so-called decentralised finance, and how we, at the Banque de France and the ACPR, are working to respond to this change of paradigm, in line with our financial stability mandate. I. A strengthening of bilateral ties between the ACPR, BdF and MAS, a very close and sustainable partnership between Singapore and France Let me start with what the ACPR, BdF, and MAS have achieved together.
The ECB is no fortune teller or oracle, but no doubt you already know what 2017 will look like? As we see it, 2017 will be a year when activity accelerates. We are very confident about the recovery in Europe. But aren’t there risks? There are political risks just about everywhere, both within the euro area and outside it. But it isn’t the ECB’s task to manage political risks. That’s for politicians to deal with. It’s up to us to draw the economic conclusions. The euro area will still require some sort of financial protection to navigate what will be a risk-filled 2017. But when you talk about political risks, that means you see people going to the polls in the Netherlands, France, Germany and, probably, Italy, as a risk. That’s not a risk, that’s democracy. So more precisely, what would you describe as a risk? For us, the risk is that Europe comes under increasing strain and pressure from nationalists, protectionists and sovereignists, who... So you are worried about the rise of extremism and nationalism in Europe, and in all countries, maybe even including France. It’s a concern for us in all countries, because it reduces our ability act jointly. Europe is strong when its countries can act jointly.

1/4  BIS central bankers' speeches  More will be done if necessary, of course, but the diagnosis that was reached yesterday by the Governing Council is that a little less is necessary today because growth is stronger and Europe is doing better. And to make this quite clear, how much will the ECB disburse in, say, 2017? The decision that was taken yesterday is to extend our asset purchases for a further nine months by buying € billion per month of various financial instruments, which makes an additional € billion euro. That’s the decision: we will add € billion to the € billion per month planned for the first three months of 2017, making € billion, so for the whole of 2017 that comes to slightly less than € billion extra compared with what we are doing already. And since March 2015? Asset purchases today come to around € trillion in total, so if we add 1,500 and 800 it means that, at the end of next year, we’ll be at just over € trillion. Yes, and you realise that with this € trillion growth is good, average, but it’s not stronger. What would happen without this € trillion? Well, without it, if the ECB wasn’t doing what it’s doing, growth would be between 0% and 1%, inflation would be close to zero and unemployment wouldn’t be falling in the euro area. But as you know, unemployment is now falling fairly quickly in the euro area.