samchain/econo-pairs-v1 huggingface dataset:
“We’ll see”: 摸 石 頭 過 河 The point is: Forward guidance can be a complicated monetary policy tool. I had an interesting discussion about this two weeks ago with a couple of the members of the Bank of England’s Monetary Policy Committee (MPC). They noted that Chris Giles of the Financial Times has devoted a substantial amount of thoughtful attention to the discussion of forward guidance. In Giles’ Money Supply blog post of Oct. 2, 2013, he wrote: “Forget triggers, thresholds, knockouts and long lists of conditions. Paul Fisher, the Bank of England’s head of markets, says everyone is wrong to think forward guidance is complicated. The policy was summarized in a single simple sentence of the [Bank of England’s] explanatory document, he said in a speech today. This is the sentence,” and I’m quoting Giles quoting Paul Fisher: “In essence, the MPC judges that, until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the current exceptionally stimulative stance of monetary policy, provided that such an approach remains consistent with its primary objective of price stability and does not endanger financial stability.” To a central banker, that may have seemed about as concise a Delphic statement as possible.

Likewise, Malaysia’s currency in circulation (CIC) over GDP of 6.1% is much higher than 3.8% on average in these countries. Over the past three years (2010 – 2012), cheque volume has declined only marginally at an average rate of 0.2% annually and the CIC over GDP remained at 6%. Malaysia has a banking population of 92% of which about 70% are internet banking subscribers. Moreover, the household broadband penetration rate in Malaysia has increased significantly from 32% in 2009 when we introduced the electronic processing of cheques, to 67% as at end-Sept 2013. With the necessary infrastructure in place, it is timely that all Malaysians migrate to electronic payments in our quest to become a high income, high value-added economy by 2020. To nudge the systematic migration to electronic payments, Bank Negara Malaysia has set targets in its Financial Sector Blueprint to reduce the number of cheques processed per annum by half from 204 million in 2012 to 100 million by 2020. At the same time, there are also targets to increase the number of Point-of-Sale terminals from 9 in 2012 to 25 unit per 1,000 inhabitants and to increase electronic payment transactions per capita from 56 in 2012 to 200 by 2020. Only by migrating from cheques and cash to electronic payments, can the country anticipate to achieve further cost savings and efficiency gains. Cost of cheques Although significant improvement has been made in the cheque processing infrastructure, cheque remains an expensive payment instrument to process at about RM3 per cheque.
That was why Basel II provided not only for the use of internal models in Pillar 1 of the regulatory framework, but also for the Pillar 2 and 3 requirements so as to provide a second view on banks’ solvency (Pillar 2), including one based on stress tests and performance measurement, and to facilitate market discipline via disclosure (Pillar 3). Unfortunately, the financial crisis and subsequent analysis have shown that bank and supervisory practices are not as consistent as they could be. For example, the risk weights of some banks that introduced internal models under Basel II have been trending downwards in recent years, when experience and intuition say they should have been moving in the opposite direction. Many people worried that Basel II would be procyclical. It would seem that those fears are largely unfounded, but for reasons that may be far from satisfactory! Increasingly, this has led to questions about the credibility of internal model-based capital ratios. Therefore, alongside the assessment of national regulations, the RCAP has also started studying the consistency of outcomes at individual banks. As with the introduction of a rigorous peer review programme, the significance of this initiative should not be underestimated. Never before have we had international teams of supervisors looking at the modelling practices at individual international banks. I think this is a quite telling example of the regulatory community’s commitment to improving the consistency, comparability and reliability of bank capital ratios.

The Basel Committee’s two recently published studies on RWA variability have compared banks’ estimates of risk-weighted assets on hypothetical portfolios of financial instruments (for the trading book) and credit counterparties (for the banking book). To give you an idea of the size of the task, in the case of the banking book, for example, the Committee collected banks’ probability of default (PD) and loss-given-default (LGD) estimates for 46 sovereigns, 77 banks, and more than 1,200 large corporates. Both reports suggest that the underlying differences in risk remain the core driver of differences in risk weights and capital requirements, as intended. However, there are also supervisory and practice-based variations, and they are material. While it is difficult to be precise on how much variation is “too much”, the observed range of practice-based variations analysed by the two studies appears too wide. To give you a flavour of that: just taking the banking book results alone, two banks with exactly the same assets could report capital ratios that differ by 4 percentage points – the most conservative bank would report a regulatory capital ratio of 8% when the least conservative one would report 12%. Of course, this simply compares the extremes in the sample – many banks were much closer to the average. But if outsiders have no way of identifying who is “average” and who is an “outlier”, this variance is clearly too wide to underpin confidence in the measurement of bank capital. So what are we doing about it?
Øystein Olsen: How does the key policy rate operate? Speech by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics (CME), BI Norwegian Business School, Oslo, 25 September 2018. * * * Accompanying charts of this speech. Introduction Just over a week ago, we marked the tenth anniversary of an event that shook the global economy. The Lehman Brothers bankruptcy added fuel to a smouldering financial crisis, which gathered strength and spread quickly. Financial market activity came to a halt. Investors demanded high risk premiums. Faced with a crisis that could lead the economy into a deep recession, central banks cut policy rates sharply and injected liquidity into the market. It was the beginning of ten years of historically low interest rates and the use of unconventional instruments. It would take a long time to get economies back on their feet again. For Norway, the financial crisis brought an abrupt end to a three-year long period of gradual increases in the key policy rate. In the course of autumn 2008, the key policy rate was lowered three times, by a total of 2.75 percentage points. By the following summer, the key policy rate had been lowered further, to 1.25 percent. Even though growth in the Norwegian economy picked up fairly quickly, Norwegian interest rates over the next few years were influenced by a persistently low international interest rate level.

Some instances of misconduct that have been uncovered have also resulted in fines, legal proceedings and convictions. [4] Control and monitoring requirements in relation to Libor submissions have been tightened, and a number of banks have become sceptical of taking on the legal risk involved in being a panel bank. The UK Financial Conduct Authority has finalised an agreement with the Libor panel banks whereby the banks have committed to remain as submitters until the end of 2021 (Bailey (2017)). After this time, the authorities can no longer guarantee that quotes will be submitted for Libor. Prospects that Libor may be discontinued in a few years’ time have amplified the need to establish alternatives to today’s reference rates. Some countries have already published recommendations for alternative reference rates. All the proposals are based on the shortest rates, ie overnight rates, as the new reference rates are required to be based on actual, observed transactions. The transition to new reference rates in other countries also has an impact on the use of reference rates in Norway. The removal of foreign ibor rates would change the markets on which the Norwegian banking sector currently relies. Norges Bank has, in consultation with Finance Norway, taken the initiative to establish a working group with a mandate to consider alternative reference rates for the Norwegian market. The working group comprises Norwegian banks and branches of foreign banks with a good understanding of the Norwegian money market. Finance Norway and Norges Bank have observer status, while Norges Bank also provides secretariat support.
This has to do with the fact that the development of the Swedish economy further ahead would be even worse if high inflation were allowed to become entrenched – we know this from experiences both in Sweden and in other countries. The question is not, therefore, whether inflation will return to the target, but how it will happen, and how the Swedish economy will develop during this process. It can be painful, but it can also be relatively smooth. 9 For a more detailed discussion, see Jansson (2020). 8 [15]  How well the Swedish economy in general develops depends on the interaction between different agents. This is an insight that I think has become somewhat neglected, and that was the reason for the speech I held a year ago on the division of roles between fiscal and monetary policy. But it is not just a question of the macroeconomic policy mix. It is about a broader interaction, involving many economic agents. Let me describe how inflation can be brought back to the target in a favourable scenario. In principle, it is the Riksbank’s current forecast that I am describing, but without numbers and in more general terms. The increases in the policy rate that the Riksbank has made, and expects to make, contribute to the fact that inflation will start to decline in 2023.

(Cunliffe 2017) 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Chart 1: Inflation Report pay growth forecasts  Chart 2: Inflation Report productivity per head forecasts  Percentage change on a year earlier  Percentage change on a year earlier  6  4 3  4  2 1  2  0  May 2013 - May 2016 IRs  -1  Pay growth 1996-2007 average  May 2013 - May 2016 IRs  0  -2  Productivity growth  -3  1996-2007 average  -2  -4  96 98 00 02 04 06 08 10 12 14 16 18  96 98 00 02 04 06 08 10 12 14 16 18  Source: ONS and Bank calculations  Source: ONS and Bank calculations  Chart 3: Deviations from pre-crisis trends (%)  Chart 4: Average absolute error of cumulative growth in forecasts  Per cent  Per cent  5 1999-2004 average 2010-2015 average  0  5.0 4.5 4.0 3.5  -5  3.0 2.5  -10  2.0 Productivity per head  -15  1.5  Pay per head  1.0 -20 -25 96 98 00 02 04 06 08 10 12 14 16 18  0.5 0.0 1 year ahead  3 years ahead Pay  1 year ahead  3 years ahead  Productivity  Notes: shows nominal pay per head, and real productivity per head.
The SME Bank, a specialised agency dedicated to the promotion of SME development, will commence operations in October 2005 and is envisaged to better serve the needs of SMEs through the provision of a comprehensive range of financial and non-financial services. In particular, the SME Bank will focus on nurturing the SMEs and promoting entrepreneural development, through the provision of financial and business advisory services, including financial management, business diagnosis and marketing support. Recognising the importance of human resource development as part of the capacity and capability enhancement strategy, several initiatives have also been undertaken to enhance the skills of DFIs, particulary in the provision of advisory services and micro financing. In collaboration with the Japan International Cooperation Agency, Bank Negara Malaysia is currently embarking on a project to enhance the capabilities of DFIs in providing advisory services to the SMEs. It is envisaged that the provision of quality advisory support can be used to supplement the financial services of DFIs, in order to enhance their effectiveness in supporting the development of the SMEs. In addition, Bank Negara Malaysia has developed and distributed a set of micro finance manuals to DFIs engaging in the provision of micro finance, for use as reference to acquire the knowledge of micro finance principles and best practices. This is to ensure a sustainable provision of micro finance by these DFIs. Going forward, the role of DFIs would not diminish, but continue to remain important and relevant, providing greater complementary and developmental role in addressing the nation's development strategies.

Már Guðmundsson: Managing capital flows in a financially integrated area – lessons from the Icelandic financial crisis Remarks by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at a conference organised by the International Monetary Fund, Bank of Estonia and Sveriges Riksbank on Nordic-Baltic financial linkages and challenges, Tallinn, 13 December 2013. *  *  *  Accompanying charts can be found at the end of the speech. I would like to thank Eesti Bank, Sveriges Riksbank, and the IMF for inviting me to speak at this most interesting event. In my remarks, I will focus on those aspects of the Icelandic financial crisis that are most closely associated with the topic of this session, which is financial integration. I will draw out some salient features of that story and then link them to several lessons that might be of more general relevance. In the autumn of 2008, two separate but interrelated sub-stories of the recent Icelandic financial and economic saga converged in a tragic grand finale. These are: 1. Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland. 2. The rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”).
Paul Tucker: Monetary strategy and prospects Speech by Mr Paul Tucker, Deputy Governor Financial Stability at the Bank of England, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Authority Board, at the Association for Financial Markets in Europe flagship conference on “Financing growth”, London, 24 September 2013. *  *  *  Around the western world monetary policy is at a critical juncture. As differences in the relative pace of recovery in different economies become apparent, each central bank is having to articulate how it sees the particular conditions it faces. Contrast that with early 2009, when we were all simply priming the monetary pumps to prevent our economies slipping into depression and deflation. Indeed, contrast it with 2011 and 2012 when, again, central banks acted more or less in unison to contain, as best we could, the spillovers from the crisis in the euro area periphery. Today, although normality is hardly restored, we are back to circumstances where differences in local economic conditions matter to domestic monetary prospects and to exchange rates. The big policy trade off In the UK, the core challenge lies in balancing two medium-term risks – to the economy’s productive capacity and to price stability.1 Concretely, the longer the weakness in activity, the greater the erosion of the economy’s capital resources and the damage to the skills and capabilities of our labour force.

The UK economy entered the crisis with too much debt in banking, in the household sector, in government and, for the nation as a whole, externally. And the UK entered the crisis with the composition of demand imbalanced – too much public and private consumption, too little net trade. Indeed, aggregate demand had been unbalanced for so long that the economy’s productive capacity was (and probably still is) unbalanced, investment in capital having followed the pattern of demand. For prosperity to be put on a secure footing for the longer term, adjustment is still needed. With one vital exception, engineering structural change in the economy is not the responsibility of the central bank. The exception of course is the safety and soundness of the banking system, which is a precondition for broader monetary stability. An undercapitalised banking system would not be able smoothly to supply sufficient credit to aid recovery as demand picks up, enabling investment in innovations and efficiency. Nor has it been able to do so as much as needed to help capital shift to firms and sectors that are beneficiaries of the new pattern of global and domestic demand. In my view, that may explain some of the weaknesses in productivity growth.9 The Financial Policy Committee required recapitalisation of the UK’s big banks and building societies not simply because that is needed to underpin stability, which it is, but also because a resilient banking system is a precondition for sustained and better balanced recovery.
In a tribute published in the newspaper Troms Folkeblad on the occasion of the 50th birthday of the manager of Troms football league, he is described as “as safe as Norges Bank” in his handling of protests and violations. 56 With that, the expression was brought back to its original source. And perhaps that means that Norges Bank’s reputation has survived the financial crisis – at least in Troms! 54  Per Egil Hegge noted in particular the following sentence in the annual report: “The expected tracking error increased more than the absolute market volatility, primarily reflecting a closer correlation between returns from the different investment strategies.” See Hegge’s column in Aftenposten, 16 April 2009. 55  Lars Weisæth and Ragnar Kjeserud (2007): Ledelse ved kriser: en praktisk veileder (Management during crises: a practical guide), Gyldendal Akademisk, p. 71 (Norwegian only). 56  See article “Mr. Fotballkretsen fyller 50! (Mr. Football League turns 50)”, Troms Folkeblad, 6 October 2009 (Norwegian only). 12  BIS Review 140/2009  When the Bank of England came under attack, many citizens had already volunteered as soldiers to defend the bank. They were outnumbered, but the very sight of them probably demoralised the mobs and led to their defeat. Expectations and confidence were as important then as now. But there is a significant difference – that can summarise today’s lecture. While central banks at that time upheld the value of money with walls and thundering muskets, today the value of money is safeguarded by confidence rooted in disclosure and transparency.

12 In my lecture here last year, 13 I noted that it can be demanding for the political authorities to ensure price stability because low interest rates are often more popular than high interest rates. An appropriate interest rate may therefore be demanding to  8  See NOU (Official Norwegian Report) 1973:36 Om prisproblemene (On price problems). 9  For an account of economic policy in Norway in the twentieth century, see Tore Jørgen Hanisch, Espen Søilen and Gunhild J. Ecklund (1999): Norsk økonomisk politikk i det 20. århundre. Verdivalg i en åpen økonomi (Economic policy in Norway in the 20th century. Ethics in an open economy), Høyskoleforlaget. 10  See i.e., chapter 5 in the Norwegian Act on Securities Trading. 11  In Norway, the concept is also associated with Jahn Teigen’s contribution “Glasnost” in the national final of the Eurovision Song Contest 1988. 12  During the financial crisis last winter the Government wrote: “Monetary policy is the first line of defence in countering a setback in the economy”. See Report No. 37 (2008-09) to the Storting (Norwegian parliament) “Om endringer i statsbudsjettet 2009 med tiltak for arbeid (On changes in the 2009 Budget and labour measures), Ministry of Finance, p. 6. 13  The lecture entitled “On keeping promises”, remarks by Endre Stavang and Henrik Syse and Francis Sejersted’s summary of the debate have been published in Nytt Norsk Tidsskrift 1/2009. BIS Review 140/2009  3  set in government corridors.
Households, businesses, and investors will often extrapolate the recent past to form their expectations of the future – if house prices have been growing, they consider further growth more likely.13 Robert Shiller’s 2000 book, Irrational Exuberance, demonstrated how there had been a clear, negative correlation between price to earnings ratios for US stocks in the 20th century and realised returns in the following ten years. At the time of publication, US stock markets had record high price to earnings ratios of more than 40 times – soon to be followed by the dot-com crash. Asset price bubbles and investment manias are often attributed to such ‘extrapolative’ expectations.14 In the first stage investors extrapolate from past performance which pushes up the price of the asset. A bubble dynamic then develops in which investors are drawn to buy the asset not for the extrapolated underlying performance but for the very short term capital appreciation. As the price growth represents demand for the asset based on the past behaviour of its price – and not information about what it will yield in the future – it will not be sustainable. These are of course very different views of how expectations are formed. Where prices in a rational expectations model are fully forward-looking (future performance determines today’s price), prices in an extrapolative world are fully backward-looking (past performance determines today’s price).

In Malaysia , several steps have been taken. The establishment of the International Shariah Research Academy for Islamic Finance (ISRA) aims to engage in applied research on dynamic Shariah-centric innovation. ISRA can provide a global platform for greater global engagement and research with the focus on innovation. In addition, the Central Bank has also embarked on the initiative to develop the Shariah Parameters to promote more consistent application of Islamic financial contracts. This initiative aims to determine the essential features of Islamic financial products derived from underlying key Shariah contracts. These features will serve as a guide for the application of the Shariah contracts for the Islamic financial products. The second strategy is to raise the bar in the status of the Islamic financial infrastructure that supports the risk management and governance of Islamic financial institutions. To ensure sustainability of the resilience of Islamic finance, it is important to have the comprehensive enabling infrastructure that allows for the management of the risks that are peculiar to Islamic finance. There is a need for Islamic financial system to have the capital requirements, effective risk management and strong governance that are fully equipped to manage the risks that are specific to Islamic financial transactions. It is also important for the institutions to spread the risks by having prudent asset allocation based on different Islamic contracts so as to ensure a sustainable revenue stream and to ensure the institutions are in a position to absorb the extreme circumstances that occur during a crisis.