samchain/econo-pairs-v1 huggingface dataset:
Andrew Bailey: The new approach to financial regulation Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the Chartered Banker Dinner 2013, Edinburgh, 1 May 2013. *  *  *  It is a great pleasure to be here this evening for the Chartered Banker Dinner. President, in the description of tonight’s dinner you made the important point that the Chartered Institute supports “ordinary” bankers providing a vital service to their customers at a very difficult time. I want to speak tonight about the importance of those vital services. The fact of the matter is that banks are in the dog house, and for reasons that are very well documented I am afraid. But, in saying that, it would be wrong to believe that this makes banks irrelevant and unwanted. On the contrary, the financial crisis has through adversity reminded us of the importance of banks to the functioning and health of the economy and their role as providers of critical financial services. Going back in history, it was Walter Bagehot in the 1870s who argued that the development of joint stock banks played an important part in the growth of the mid-nineteenth century British economy with its very high degree of openness to world trade.

For insurance companies, the PRA will have the second objective of contributing to securing an appropriate degree of protection for policyholders. Why do we need a second objective for insurance? One reason is that in taking out some forms of insurance policies, the public can become locked into very long-term contracts, much longer often than is the case in banking with deposit contracts. Bearing this in mind, the public interest I think justifies a second objective for insurance, which is more directly targeted at the situation of individual policyholders. There are a number of important points in this description of the PRA’s objectives. First, the emphasis on economic well-being as an ultimate goal aligns the supervision of banks and insurers more closely to the field of macroeconomic policy. This is in line with the definition of financial stability in terms of the continuity of supply of critical financial services which are important to the functioning of the economy. Four services stand out here: the protection of savings; the provision of payment services including access to funds; credit extension; and risk transfer. This definition is critical to clarifying the public interest-objective in a stable financial system, and that this public interest can diverge from the private interest of a firm in profit maximisation without reference to the public interest. One of the biggest lessons I take from the financial crisis is the need to ensure that the boards and management of firms appreciate and act consistent with the public interest.
This divergence in the regional focus becomes even more apparent when Asia is viewed as a whole. This is because Switzerland maintains far closer trade ties with Asia’s industrialised countries than the EU does, particularly with the four Asian tiger economies of Hong Kong,  6  The USD value of goods exports to developing and emerging economies (excluding the tiger economies of Hong Kong, Singapore, South Korea and Taiwan) has grown by an average of 7.5% since 1990, i.e. it has quadrupled. Goods exports to industrialised counties increased by 4.7% annually during the same period, representing an increase by a factor of only 2.5. 7  From 1990 to 2008, the GDP of developing and emerging economies rose by an average of almost 8% (China alone grew by more than 10%). The GDP of the EU15, by contrast, rose by just 1.9% on average (US: 2.7%). 8  The USD value of Swiss goods exports to emerging Asia (excluding the tiger economies) has grown by an average of 9.1% since 1990 (since 2000: 18%). The corresponding growth rates for Germany amounted to 11.4% (since 2000: 17.8%), and for the EU, 9.6% (since 2000: 13.6%). 9  Including intra-EU trade. BIS Review 157/2010  3  Singapore, South Korea and Taiwan. Overall, Switzerland’s share of exports to Asia, including Japan, came to 15% last year – more than twice the EU average. 10 Furthermore, Switzerland is one of the few European countries – alongside Ireland, Sweden and Finland – to run a trade surplus with Asia.

As we have demonstrated, the Swiss National Bank is prepared, in a crisis situation, to take exceptionally far-reaching measures to fulfil its mandate. In doing so, the SNB is making its contribution to a favourable and stable business environment and, ultimately, to a continuously prosperous economy. 18  The extent of the real appreciation of the Swiss franc varies depending on the country sample, the deflator and the weighting method. In terms of the real exchange rate indices calculated by the SNB and the BIS using the CPI deflator, the Swiss franc has appreciated between 14% and 15% in real terms since the collapse of Lehman Brothers. The SNB’s export-weighted exchange rate vis-à-vis 40 trading partners shows an appreciation of 14%. 19  Cf. Jean Monnet (1976): Memoires. 8  BIS Review 157/2010
Indeed, as these costs look set to accumulate further with the ongoing crisis, there is much for us to do. Most of this, naturally will be led by government. A whole of government approach, whole of nation, is absolutely necessary in dealing with the challenges. Development Financial Institutions (DFIs), as instruments of policy and agencies of government, will thus have a critical role to play, in particular to deal with the economic and financial challenges faced by businesses in the economy. We are well familiar with the role of DFIs as complementing the market-based and commercially driven financial institutions. This already calls for DFIs to adopt a balanced approach to financing, promoting and supporting public interest or development initiatives. Some would involve higher risks in particular in new ventures or industries or financing those who, at the margins, are unable to obtain financing under normal commercial terms from financial institutions. All this while at the same time, managing risks and ensuring long term financial sustainability. Let’s not forget DFIs are also generally required to make a reasonable return on capital and are answerable for the use of public funds. In this crisis, we have also emphasised a need to act countercyclically – that is to continue extending, even expanding financing – when most commercial driven financing takes a highly risk averse approach. In 2020, Malaysian DFIs rose to this challenge. Financing outstanding by DFIs grew by 7.7%, outpacing the commercial banks growth of 0.8%.

First, in response to the Global Financial Crisis of 2008 the Bank increased the supply of liquidity in pesos and dollars – through repos and swaps –, augmented the extensions of the swap program, and broadened the range of eligible collaterals. They were all measures designed to align market rates with the Monetary Policy Rate and to mitigate foreign currency liquidity tensions. Forward guidance was also an important tool. With the Monetary Policy Rate close to zero – we cut the interest rate from 8.25% to 0.5% in less than a year – , communicating that we planned to keep a very low short-term interest rate for an extended period of time. This was essential in keeping medium and long term interest rates low. These measures – as well as some other more exogenous developments such as the rapid recovery of commodity prices – allowed the economy to rebound quite fast from a mild recession in 2009. Actually, in the post-crisis years GDP growth was above 5% in a context of low inflation. Over time, these measures were eliminated, but certainly the lessons we learned from the crisis have been incorporated into our policy analysis and toolkit. Among the most significant I would mention two: First, the fact that the central bank must be rapid to respond and use all the available tools if necessary.
Paul Tucker: The crisis management menu Speech by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the SUERF, CEPS and Belgian Financial Forum Conference: “Crisis Management at the Cross-Roads”, Brussels, 16 November 2009. *  *  *  It is a great pleasure to be here today. The current crisis has thrown up so many lessons in so many dimensions of the “rules of the game” for the financial system, that I congratulate the organisers on devoting a whole conference to crisis management. That in itself is a meaty enterprise. But a vital one. By way of setting the scene for today’s conference, I will offer the Bank of England’s perspective on the various components of a crisis management package: central bank liquidity insurance for viable firms and markets; firm recovery plans, and contingent capital; resolution plans for winding down failed businesses, including payouts from depositinsurance regimes; and official-sector support operations, including emergency liquidity assistance and Capital of Last Resort. Every country’s authorities need a policy on each of these components, because some day in the future our successors will find that, however good, the improvements our generation makes in the structure, regulation and supervision of the financial system will let them down. A thread that runs through the discussion is how to preserve the core financial services provided to the economy through periods of extreme stress without bailing out banks’ equity holders or uninsured wholesale creditors. That is the essence of the “Too Big/Important To Fail” debate.

And the trigger for conversion from debt into equity could be at a margin of comfort away from true catastrophe; say, a percentage point or so above the minimum regulatory capital ratio. Of course, this would entail a structural shift over time in investment portfolios. But the system might be able to manage that adjustment. After all, it managed the all together less desirable adjustment to the development of the existing hybrid capital markets. But demand for contingent capital is, inevitably, uncertain at this stage. As are the terms on which it will be provided. We welcome the growing private sector focus on this. 4  King Mervyn A. (2009), “Speech by Mervyn King, Governor” to Scottish Business Organisations, Edinburgh, October 2009. See also Tucker P M W (2009a), “Remarks by Paul Tucker”, Panel session at the Turner Review Conference, London, March 2009 (pp. 5) and Tucker P M W (2009b), “The repertoire of official sector interventions in the financial system: last resort lending, market-making, and capital”, Bank of Japan’s 2009 International Conference, Tokyo, May 2009 (pp. 19). In the academic community, the idea was aired in “An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities”, Squam Lake Working Group on Financial Regulation, April 2009, Council on Foreign Relations. Dudley, William C. (2009) “Remarks by William Dudley” at the Institute of International Bankers Membership Luncheon, New York City, October 2009.
Risks and monetary policy  Distinguished Guests, I would like to dedicate the last part of my speech to the upside and downside risks to inflation and monetary policy in the upcoming period. Uncertainties about food and energy prices still continue. Our baseline scenario is based on quite conservative assumptions for food and energy prices, implying that downside risks on these factors are as apparent as upside risks. In order to enhance the predictability of the monetary policy, in a period when uncertainties pertaining to oil and agricultural commodity prices continue, we deem it to be useful to share with the public the inflation and monetary policy outlook, which is based on alternative scenarios for food and energy prices. In our pessimistic scenario, we assume that food price inflation materializes at 16, 12 and 10 percent in 2008, 2009 and 2010 respectively; whereas oil prices rise to USD 180 at the end of 2008, staying constant thereafter. Additionally, adjustments in electricity tariffs are forecasted to be made in compliance with this assumption. Assuming a gradual monetary tightening during the rest of the year, our forecasts under this scenario suggest that inflation will be 9.1 percent at the end of 2009 and around 7 percent at the end of 2010 (Figure 15). In our optimistic scenario, we assume that food price inflation materializes at 12, 6, and 4 percent respectively, in the 2008-2010 period, whereas oil prices ease to USD 100 at the end of 2008, staying constant thereafter.

Assets under management of these non-bank investors went from less than 1% of GDP in 1984, to 65% in 2000, and to almost 100% of GDP in 2018. Currently, around 85% of total domestic corporate bonds and around 65% of sovereign bonds are held by institutional investors, as a result of which reliance on banking credit of these corporations has gone from 91% of financial debt in 1986 to around 25% in the recent years. High-level Policy Seminar on Integration or Fragmentation?
This predominantly affects the lower2/4  BIS central bankers' speeches  skilled workers who are at risk of lay-offs or are already being displaced and facing daunting challenges to shift to the new norm, and those with daily incomes that are halted due to suspension of certain economic sectors. The disparity shoves wider. It is indeed a sobering wake up call for us. I reminisce on how Islamic history is replete with prophetic precedence on the importance of positioning inclusive and equitable growth and wealth as the foundational principle. We have learned from the exemplary leadership under the reign of Khalifah Umar bin Abdul Aziz, where social finance instruments such as zakat, waqf and sadaqah were optimised to reduce poverty and empower the community. In today’s landscape, we do acknowledge efforts in similar light. Institutionalised forms of social finance which blend social dimension and financial returns are being pursued to provide alternative funding options for micro-entrepreneurs to venture, sustain, and grow their business. Such integration of diverse social finance instruments into micro financial products is envisioned to address the growing concerns on over-dependence on debt-based instruments that could reduce the financial flexibility of businesses in supporting their recovery. Before I conclude, I would like to touch on the importance to future-proof the industry and the role of Shariah scholars. As we navigate beyond the pandemic, agility in thinking, approach and process is the way forward in dealing with the transformed future.

Industry players need to step up to next level to enhance consumer experience The Project Greenback initiative in Sabah will lay a strong foundation for industry players to take the digitalization agenda to the next level. We must remember that disruptive technologies can radically change the way things are done. The old ways may not work anymore. Consumers are increasingly looking for convenience, speed, and low cost remittance services. Most importantly, they are looking for service providers they can trust. Competition is getting more intense. To illustrate this, let me share with you a CNN article on Amazon Go. Amazon Go is the future of retail shopping. You can walk into the convenience store, grab what you need, and you will receive a message that your credit card is charged for your purchase. The question is, what will be the future of the remittance sector? For the industry players, y o u can re-shape the remittance landscape. Use technology to eliminate the major pain points in remittance, to better understand consumer behavior and needs, and to offer consumers a positive remittance experience from the start. Within the migrant communities, words travel fast. We know that word-of-mouth is the most effective form of marketing. Although I believe that the brick-and-mortar stores are here to stay with digitalization, the savings incurred from not having to pay for overheads can translate to lower remittance costs for consumers. Ultimately, when there is greater use of authorised remittance channels, we can reduce remittances that are transferred through illegal operators.
Access to payments and infrastructure has changed for consumers – contactless payments are a daily reality for many now, and smartphone payments are sharply on the rise. But the fundamental role of banks as intermediaries, and the structure of the UK retail banking industry, has remained much the same. There are 3  signs of evolution – such as the entry of 36 new banks over the past 4 years. But arguably, finance has yet to face its “Uber” moment. It is important that the Bank of England is attuned to the needs and challenges of a changing financial sector so that it can translate that to facilitating the infrastructure changes needed to support the UK’s financial sector and fintech development. But how to do this? In my view, by being open. More specifically, by the Bank of England being open minded, keeping an open door, and being open to change. Open minded  To react appropriately to an evolving financial sector, the Bank of England needs to make sure it is open minded to the opportunities and potential for change that fintech offers. 1  The UK’s Real-Time Gross Settlement infrastructure, operated by the Bank. George, E (1996) 3 36 legal entities have received deposit-taking permissions since April 2013 which includes overseas firms setting up subsidiaries. 2  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  As a member of the Monetary Policy Committee, I need to be open minded about the way fintech could impact the economy of the UK.

But the confidence crisis that followed in the wake of Lehman filing for bankruptcy protection also affected the Swedish financial system. To counteract the effects of the financial crisis, the Riksbank has supplied the market with loans in kronor and US dollars in a similar manner to what other central banks have done in their currency areas. The loan facilities have allowed a different class of collateral than usual. The maturities have been longer than those the market has been able to offer and longer than the Riksbank normally provides. In total, the Riksbank has increased its lending by more than SEK 400 billion. We will continue to provide the market with liquidity as long and as far as it is needed. During the autumn the Riksbank has received signals from Swedish industrial and trade companies that they have been unable to find satisfactory credit. Quite simply, they have not been able to borrow on the market or from the banks in the same way as usual. This problem originates outside of Sweden and has arisen despite the Swedish banks being financially strong. As a preventive measure, the Riksbank established a new, temporary, credit facility on 29 October. The aim is to improve the opportunities for companies to borrow money. Companies can organise their financing through this facility by issuing and selling commercial paper to the banks. The banks can in turn use commercial paper as collateral for loans from the Riksbank.
The SSM allows us to compare and adapt supervision across 19 countries, to identify best practices and to ensure that they are implemented consistently through effective quality assurance. There are now completely new possibilities for comparative and cross-sectoral analysis than were available at the national level. For our tasks, we can use information and insights from banks with very different business models. This enables us to identify risks and undesirable developments more clearly and at an earlier stage, and to take suitable countermeasures. We can also put work on banks’ internal models, which have a significant influence on a bank’s capital requirements, on a new footing. We will use the opportunity, given the improved level of data and insight, to implement strict rules for the approval and ongoing supervision of internal models. Despite this progress, there is still a lot to do in the further development of supervision. The effectiveness and efficiency of supervision is dependent on the legal framework it applies, although this is not the sole determinant. Soft European standards or diverging national rules impair the SSM’s ability to take action and its effectiveness. And this does not just concern  4  BIS central bankers’ speeches  national rules that affect the quality of banks’ equity. The SSM applies 19 different national legal frameworks and not only when, for example, we examine the professional suitability of managers in large, internationally active banks.

Many people yearn for a pause in regulation, would perhaps rather leave the market to regulate itself – rely on self-regulation. At the moment in Europe, we are a long way off from self-regulation. And I hope that it will stay like this, even if people like to quickly forget bad memories. I do not believe in selfregulation, at least not in financial markets. You cannot have stable and functional banks without comprehensive regulation and energetic supervision. A sustainably stable banking sector demands a set of regulations which can keep up with the innovativeness of the financial sector and progress in banking, but which sets adequate limits in order to uncover and correct abnormal trends and excessive risks in their business activities. To this end, the rules have to be adaptable and both leave room for discretion and provide leeway for a clever supervisor with good judgement skills. 2. A retrospective  The past speaks for itself. A light touch in regulation and supervision, or even self-regulation, has not proven to be a convincing solution. Over the last two decades, global financial markets have been characterised by a high level of volatility, a series of rapid booms, major upheavals and severe slumps. The Asian financial crisis of 1997, the dotcom bubble of 1997–2000, the US subprime crisis as from 2007 and the European debt crisis are merely the most prominent examples.