samchain/econo-pairs-v1 huggingface dataset:
Climbing Mountains Safely  Speech given by Sarah Breeden, Executive Director, UK Deposit Takers Supervision  Building on remarks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020 22 July 2020  I am grateful to Nick Lock, Will Saunt, Philip Sellar and Alex Stringer for their assistance in drafting these remarks 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction Today the Prudential Regulation Authority (PRA) is launching a consultation1 on a new guide for banks – a guide that is designed to help new and growing banks scale the mountain from initial authorisation to becoming an established player in the banking market. The guide builds on the steps we have already taken to lower barriers to entry for new firms, and which over the past few years have helped support real change in the UK banking system. But there is more to do. And we hope these clear expectations will promote continuing competition in the sector by allowing firms to plan a safe route higher up the mountain. As firms plot their path out of the Covid stress, we must do our best to support competition, not risk a return to the ways of the past. The start of our climb In the years following the financial crisis, consolidation rather than competition seemed to be the norm.

We therefore aim to agree a glide path to the new level, which, depending on circumstances at the time, could involve a multi-year transition period of incremental increases. But let me emphasise one perhaps rather obvious but nevertheless vitally important aspect of this – that a clear path to profitability (whilst meeting full capital requirements) is a necessary condition for success in this part of the climb. Two other points are worth emphasising here. The two factors that invariably provide a harness to firms that are successful in climbing the competitive and regulatory mountain are the quality of their governance and the strength of their relationship with the PRA. Our expectations of boards are high – and rightly so. Good, proactive governance is key to delivering a sound and well-run business. And, I should note, the opposite is often a leading indicator of a firm in trouble, and the root-cause of firm failure. In addition, just as mountain guides require an increasingly diverse set of skills as they ascend the varied terrain of the mountain, so too does the board. This means the board composition will invariably have to change as the firm grows, not only to become predominantly independent but also to ensure sufficient diversity of specialisms to support the executive and hold it to account. Relationships with the PRA need to be open, honest and constructive too. And for local entities of international groups, this is true not only for the local entity but for our relationship with the group and home state supervisor.
Chart: Central bank balance sheets – government bond purchases The money ends up as increased bank deposits at the central bank – also known as central bank reserves. This strengthens banks’ holdings of liquid assets and may induce them to increase lending. The pricing of government bond holdings in the private sector is also affected. Chart: Central bank balance sheets – private sector bond purchases Private sector bond purchases can ease funding conditions for firms more directly than purchases of government bonds by depressing interest rates on private sector market funding. As with government bond purchases, central bank reserves also increase in this case. The latest measure implemented by the Federal Reserve, known as QE3, is a plan for the purchase of mortgage-backed securities. Chart: Central bank balance sheets – foreign exchange purchases A third form of balance sheet policy is interventions in the foreign exchange market. Central bank foreign exchange purchases are also balanced by an increase in banks’ deposits in the central bank. Chart: Central bank balance sheets. Index In September 2011, the Swiss National Bank decided to announce a minimum exchange rate, a floor, for the Swiss franc against the euro owing to the substantial appreciation of the Swiss franc. Interest rates and inflation in Switzerland were close to zero and growth was low. According to the Swiss National Bank, a further appreciation could have resulted in a recession with deflationary developments. In order to defend the floor, the Swiss central bank has purchased foreign currency in large quantities.

The upturn followed a period of slower growth as from 1998 and a mild recession in 2002 and into 2003. Even though there have been cyclical changes, growth has been very high over the past 15 years. Norway is one of the nations that has gained most from trade liberalisation and increased cross-border flows of capital, technology and labour. Norway has experienced the benefits of shifts in the division of labour across countries and regions. First, Norway’s terms of trade have improved markedly. We can buy one and a half to two times the volume of imports for the price paid for our exports than was the case only 5-6 years ago. Prices for oil and gas, shipping, fish, industrial commodities and engineering products have increased considerably. Moreover, Norwegian importers have gained access to new markets in central Europe and Asia which offer considerably cheaper consumer goods. A similar situation has not been seen since World War I, when earnings in the shipping industry and other export industries were exceptionally high for a period.16  16  Tore Jørgen Hanisch, Espen Søilen, Gunhild Ecklund (1999): Norsk økonomisk politikk i det 20. århundre (Norwegian economic policy in the 20th century), HøyskoleForlaget, page 60. 2  BIS Review 15/2007  Second, the supply of foreign labour has increased markedly after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for more than 30 per cent of growth in our labour force.
13  It could be argued that wage formation should be based on inflation always being 2 per cent, as periods below and above the target should cancel each other out in the long term. However, if inflation deviates significantly from the target for a long time, it can be difficult for wage setters to stick to this. Therefore, wage formation would be facilitated if the inflation target were formulated in term of CPIF or HICP inflation rather than in terms of CPI inflation. 14  Until 1999, when the Executive Board was established, monetary policy decisions were made by the General Council of the Riksbank. 6  BIS central bankers’ speeches  The interval remained a part of the monetary policy framework for a long time, but was finally abolished in 2010. The reason for this was that the Riksbank assessed at that time that it had fulfilled its role and was not serving any practical function. In the memorandum published in connection with the decision, it was noted that: “There is considerable understanding for the fact that inflation commonly deviates from the target and that the deviations are sometimes larger than 1 percentage point. Inflation can thus be outside the tolerance interval without threatening the credibility of the inflation target. Such deviations have proved to be a natural part of monetary policy.”15 So as a few years now have passed, it may be justified to evaluate the period where there has been no interval.

I will return to the important issue of transparency in a moment, when I discuss the ECB’s monetary policy strategy. With regard to accountability, let me simply highlight that, drawing on the successful experience of several central banks, in October 1998 the Governing Council of the ECB decided to publish a quantitative definition of price stability. This definition of price stability as an annual increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2% provides a clear yardstick against which the public, its elected representatives and agents in the media can hold the ECB accountable. The ECB’s monetary policy strategy Within this institutional framework, how should price stability be maintained? This question is addressed by the ECB’s monetary policy strategy. It is obvious that the development of the ECB’s strategic framework drew heavily on the experience of euro area NCBs prior to Monetary Union. This is one area where the experience of national central banks was extremely influential and important. Prior to the introduction of the euro, several central banks, including the Banque de France, assigned a prominent role to money within their monetary policy strategy. Some announced intermediate monetary targets, while others adopted monitoring or reference ranges for monetary growth. At the same time, other euro area central banks emphasised the role of inflation forecasts as the key monetary policy indicator. Of these, several proceeded to announce direct inflation targets, as became fashionable in the 1990s.
Before I discuss Norges Bank’s suite of models in greater detail, I would like to look at a few key macroeconomic variables and their interaction. Studying fundamental statistical relationships provides important insight into the functioning of the economy. Along with the theoretical foundation, such insight is one of the most important building blocks of a good analytical apparatus for implementing monetary policy. Chart: Output and inflation Let me begin by taking a look at the relationship between output and inflation. In recent years, consumer price inflation (CPI) has fluctuated between 0 and 3 per cent. Mainland GDP growth has also fluctuated, giving rise to economic cycles. The chart shows developments in the two variables measured as deviations from long-term trend growth, in other words an “inflation gap” and an “output gap”3. The blue line in the chart shows that GDP growth was markedly higher than trend growth in the latter half of the 1990s and in the period from 2003 to 2008, but that it has risen somewhat more slowly in the period following the financial crisis. When developments in output are compared with inflation, a pattern emerges. A pickup in GDP growth has consistently occurred 4–5 quarters before a rise in inflation4. While the chart says nothing about causality, turning points in GDP growth seem to be a fairly reliable leading indicator of turning points in inflation.

Jean-Claude Trichet: I expect that the cooperation with the UK authorities, particularly with the Bank of England, and for me personally with its governor, will be extraordinarily close. It’s a job at the level of the EU 27 where you will need a very close cooperation between Mervyn King and all of us, and I expect that this is the way we are all looking at it. 4  BIS Review 115/2010
There is also the possibility in the euro area to ask for refinancing by the ESM. Those developments are key for providing a comprehensive response. We still have some work to do to finalise the consolidation of public finances and establish them on a stronger footing. But clearly we are well advanced in the process of doing so, and the same is true of the banks’ capital base, although we may have to finish that with the SIFIs’ capital surcharge as from next year or thereafter, and with banking union which is in the process of being negotiated. BIS central bankers’ speeches  5  EUROWEEK: You’ve made some very strong comments about London. But what role does Paris see itself playing as a financial centre in the European context? Noyer: First, it’s clear that London is and will remain a major financial hub which brings a lot of advantages to the global economy, given its skills base and the capacity of its infrastructure. The comment I made was not a suggestion that Paris should replace London but simply that I do not believe in the trend of financial services concentrating more and more in London. This is something that should not be acceptable from a financial stability perspective by the euro area authorities. Why? Because, in the event of any problems, the central bank needs to be able to provide liquidity without any time lag where and if it is needed, and in a strictly controlled way.

Yet, at around 1%, they are still close to the long-term average inflation rate. Interest rates, too, have remained very low across all maturities in the past few quarters. Mortgage rates have declined further, reaching a new low in October. Government bond rates have also fallen to new lows. My colleague, Fritz Zurbrügg, will discuss developments on the financial markets in more detail. Despite falling mortgage rates, mortgage lending growth slowed again. At the same time, real estate prices continued to rise. However, as in 2013, price momentum is weaker than in previous years. This suggests that the measures to contain developments on the mortgage and real estate markets are starting to have an impact. Yet the imbalances that have built up on these markets in recent years remain the same. It is still too early for an all-clear. The SNB will continue to monitor the situation closely. My colleague Jean-Pierre Danthine will discuss this topic in more detail in his presentation. 2  BIS central bankers’ speeches  Since the last monetary policy assessment, the Swiss franc has moved closer to the minimum exchange rate, and has thus strengthened against the euro once again. At the same time, both it and the euro have depreciated against the US dollar. Overall, the exportweighted real external value of the Swiss franc is virtually unchanged compared to last year, and thus continues to lie considerably above its long-term average. The Swiss franc is still high.
What do you think explains such divergence: the fiscal situation, growth rates or redenomination risk? First, I do not want make comparisons between Spain and Italy. But focusing on Italy, I think the main problem has been very low growth. You have not recovered the level of GDP that you had in 2008. What do you think is the reason for that? I think there are two elements. The first is the extremely high level of public debt, which is a sword of Damocles hanging over your head. Second, there is a problem with structural reforms. But there are pros and cons in the Italian economy. The cons are slow growth, public debt, a lack of structural reforms and so low productivity growth. But Italy also has some advantages that we have to acknowledge. The first is that it has a current account surplus. The net investment position is good, and that reduces the vulnerability of the economy. And when one looks at the country’s budgetary track record, it has not been bad because it has had a primary surplus almost every year. This is not something that is very easy to achieve, so it’s a very good track record, especially when compared with other countries. So we come back to the problem of slow growth, which immediately leads us on to structural reforms, barriers to market entry, labour 2/4  BIS central bankers' speeches  market efficiency… These are the kinds of things that are sometimes a little bit overlooked.

Among other things, restoring confidence involves being transparent about the problems and about the measures for dealing with them. It also means that measures are implemented as stated by the responsible authorities, without any deviations in timing or application. Just the suspicion that specific industries or other interest groups may be receiving unjustifiably favourable treatment would quickly erode any confidence. 2. Transparency is important. A severe crisis wipes confidence out - rightly so. We realised that it was up to Sweden to regain it. To do so, all the cards had to be on the table. The extent of the losses and the magnitude of the bad loans had to be revealed in their entirety and valuation had to be prudent. If you hide losses initially or are overly optimistic in valuations, you risk having to apply again to the international investment community or to taxpayers for additional support. This, in my view, might jeopardise confidence and legitimacy. It is also necessary to have highly transparent and fair “rules of the game” for government support to the financial sector, not least to avoid political bickering. The responsibility for transparency falls primarily on two parties: the authorities and the banks. The authorities must be transparent about the broad framework for the solution of the crisis and the banks must be transparent about their losses and other deficiencies, financial position and need for external support. 3. Someone must take the losses.
Mr Erçel discusses the monetary policy of the European Central Bank Opening speech by the Governor of the Central Bank of the Republic of Turkey, Mr Gazi Erçel, at the Economic Research Foundation, Istanbul. 18/12/98 European economic and monetary union (EMU) will come to life at the beginning of next year. The European Central Bank (ECB) will commence operations, and the euro will become an official reserve currency. Eleven of the 15 countries in the European Monetary System will link their domestic currencies to the euro by January 1, 1999. They will stop issuing their own currencies three years later. There will no longer be independent domestic monetary and exchange rate policies. Instead, monetary and exchange rate policies will reflect the needs of the euro region as a whole, as determined by the European Central Bank. This stage has obviously not been reached easily or quickly. This new institutional arrangement was the product of years of effort. First the philosophical groundwork had to be established, before the technical work could even begin. The final stages were only reached gradually. The European Union was thoroughly thought out. Under German initiative, with French support and British technical assistance, and contributions from all the others, the institutions were established which will be responsible for monetary and exchange rate policy decisions under the Maastricht Treaty and the Stability and Growth Pact. Countries have made heroic efforts to satisfy the Maastricht convergence criteria.

In today’s global financial system, the Spanish banking system is not immune to problems if serious global macroeconomic imbalances materialise or if the current situation persists. Banks’ managers and directors alone are responsible for running institutions and for their results. But central banks and bank supervisors must rise to the challenge and collaborate closely with each other so as to help return stability to the global financial system. BIS Review 70/2008  3
1  Nonetheless, the buoyancy of activity has not yet been accompanied by a sustained increase in the inflation rate. Once the more volatile components such as energy and fresh food prices are stripped out, core inflation remains, as it has done for several years now, at low levels of around 1%. Many factors are behind this behaviour of prices, some of which are external in nature, such as globalisation, changes in oil and commodities prices, and technological progress, which have exerted very durable effects on prices. But to date, moreover, there has been very contained wage growth in the euro area as a whole, which is in contrast to the clear improvement in employment. Low productivity, the weight of past inflation on wage-setting processes and the presence – still – of some slack in the area’s labour markets, as reflected by high long-term unemployment and the presence of a notable volume of involuntary part-time employment, hamper, in my opinion, higher growth in wage income. The recovery of the Spanish economy I shall now move on to the essential features of the Spanish economy’s recovery and to the outlook for the continuation of the upturn. The current recovery is proving most intense. GDP grew in 2017 by 3.1%, the third consecutive year of growth above 3%. The strength of growth, which has throughout the expansionary phase outpaced that observed in the euro area as a whole, enabled Spanish GDP to resume its pre-crisis level by mid-2017.

If they materialize, they may reshape the macroeconomic outlook and, therefore, may alter the course of monetary policy. We have identified two types of risks in the external front facing the Chilean economy. Some of them may potentially have a material impact, yet are hard to quantify (such as political-economic uncertainty). Others risks have been mentioned for quite some time, but their likelihood have varied. Regarding the latter, the expected trajectories of fiscal and monetary policy in the U.S. may potentially generate upside or downside risks. China remains a source of concern although its authorities appear to have successfully managed a gradual deceleration without a major disruption thus far. These are probably risks for most economies of the world, but particularly for a small open economy, such as Chile. 16. On the domestic front, after several years of subdued growth, we cannot rule out that a more persistent phenomenon may be affecting the economy’s ability to grow, in which case it would be necessary to revise the public and private expenditure plans. Moreover, while the labor market has gradually adjusted without generating a significant increase in unemployment, it is possible that after several years of low growth, firms require larger personnel adjustments, especially if the expected growth recovery towards the end of the year stalls.
Banking services coverage: international comparison 100 90 80 70 60 50 40 30 20 10 0  Adult population with debit or credit card (percent) 90  Debit  Adult population with savings in financial institutions (percent)  Credit  80 Saving accounts (% of pop > 15 yo)  70 Cards (% of pop > 15 yo)  Accounts in financial institutions (% of pop > 15 yo)  Adult population with any type of account in a financial institution (percent)  60 50 40 30 20 10 0  OECD High Middle Low  LAC  OECD High  Low  Slide 7  50 45 40 35 30 25 20 15 10 5 0 LAC  OECD High  Low  All figures at the end of 2014. Source: SBIF (2016), “Financial Inclusion Report in Chile 2016”. [SLIDE 7] In middle and low-income countries, the proportion of population holding any type of account in a supervised financial institution under supervision amount to 37% and 20%, respectively. These figures are far below the 92% and 90% of OECD countries and high-income countries. The use of bank-intermediated debit and credit cards and savings in financial institutions follows a similar pattern. [SLIDE 8] Insurance services contribute to deepen the financial system due to their long-run investment perspective. Both life and non-life insurance is far less extended in emerging markets compared to high-income OECD countries.

Zeti Akhtar Aziz: Global challenges and local opportunities Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the IBBM-APABI Conference: “Global challenges and local opportunities”, Kuala Lumpur, 8 May 2012. *  *  *  It is my honour to officiate this Asian-Pacific Association of Banking Institutes (APABI) Conference hosted here in Kuala Lumpur by the Institute of Bankers Malaysia (IBBM). This Association has an important role in bringing together financial industry training institutes that share a common goal to equip financial institutions with the capacity to deal with the transformational developments that are shaping the financial sector – by supporting the continued renewal of its most valuable asset, human capital. The global financial industry is experiencing a period of profound change. In the advanced economies, decades of exceptional growth are giving way to contracting financial and economic conditions, greater regulation and significant government intervention, while in the emerging world however, financial and economic growth have continued. In addition, the intensification of policies and reforms to address structural issues in several of the major advanced economies will also have a significant bearing on the future growth prospects for many financial institutions and businesses. This is reinforced by the implementation of new prudential standards, both at the national and global levels, which are also set to substantially redefine the expected norms and the boundaries of modern finance.