samchain/econo-pairs-v1 huggingface dataset:
Reforms to Market Structure We should also keep in place the key structural reforms of financial markets that are making the financial system safer. In my mind, the most important of these include money market mutual fund reform, tri-party repo reform, and the mandate for the centralized clearing of OTC derivatives. In each case, the post-crisis structural reforms have made the system more resilient to the potential insolvency of a major financial institution. As a result, the level of stress placed upon the entire financial system by the failure of a single firm should be considerably lessened. As part of this, we must maintain the capability for robust oversight of key FMUs. Centralized clearing is a beneficial development for financial markets. It reduces the amount of risk in the system by facilitating the netting of exposures to the central clearing party. As a result, centralized clearing makes the financial system more resilient and enables greater efficiency and transparency for trading counterparties. However, the trade-off for these benefits is that more residual risk is now concentrated in the FMUs. Consequently, it is important to retain the protections contained in the regulatory framework provided by Title VIII of the Dodd-Frank Act. We must ensure that FMUs are appropriately supervised and can withstand the failure of one or two of their largest counterparties and continue to operate. Worth Another Look So, what hasn’t worked as well as we might have expected, or might be less crucial in light of the principles that I discussed earlier?

Zeti Akhtar Aziz: The International Centre for Education in Islamic Finance Governor's luncheon address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of The International Centre For Education In Islamic Finance (INCEIF), Kuala Lumpur, 23 March 2006. *  *  *  It is my great pleasure and honour to welcome you to this luncheon in conjunction with the Meeting of the 1440 Hijrah Vision Commission of the Islamic Development Bank (IDB) and the Launch of the Vision Document that has taken place this morning for the transformation of the Islamic Development Bank to become the premier catalyst for greater shared prosperity and development among the ummah. We are most honoured today by the presence of Yang Amat Berhormat Dato Seri Abdullah Ahmad Badawi. I would like to take this opportunity to congratulate the IDB for the successful launch of the IDB 1440 Hijrah Vision. The Vision Document would serve as an important blue print for the transformation of the IDB into a dynamic Development Bank that will contribute to the "comprehensive human development", and thereby achieving prosperity for the ummah. We are also honoured today by the presence of His Excellency Tun Dr. Mahathir bin Mohamad, Chairman of the Commission, and His Excellency Dr. Ahmad Mohamed Ali, President of the Islamic Development Bank Group.
Mary will say a lot more about this in her keynote address, so let me highlight briefly some of what MAS has been doing on this front. MAS has conducted a stocktake of culture and conduct practices across selected financial institutions. Our supervisors had extensive one-on-one conversations with not just the management of these financial institutions but staff across the ranks. These conversations allowed our supervisors to gain insights on the staff’s perceptions of culture and their level of risk awareness. They helped us develop a keener sense of: whether the tone-from-the-top echoed from the bottom; and whether the organisational values plastered on the walls of the board room were practised on the ground. What have we found? Culture and conduct practices are uneven in the industry. Many financial institutions still struggle to articulate the conduct risks they face. Many are only starting to develop tools and indicators to obtain a holistic, cross-functional view of the culture within their organisation. What’s next? MAS with the banks have set up a steering group to identify emerging trends in conduct and behaviour as well as share best practices in “getting the culture right”. MAS has also set up a small behavioural sciences unit to build up our capabilities in this 4/5  BIS central bankers' speeches  area and support our supervisors with methodologies to get a better understanding of culture and conduct issues in the institutions they supervise. Let me conclude. Financial institutions have restored their capital, but not public trust.

They have repaired their balance sheets, but not their compact with society. They have reformed their systems, but not their culture. Only with trust can the financial industry earn the “social license” it needs to thrive and grow. To strengthen this trust, we must: ensure that finance is not abused for illicit purposes; that it places its customers first and deals with them fairly; and that it fosters a culture of good conduct grounded in strong values and ethics. It is my pleasure now to invite Mary to share her views on fostering stronger culture and conduct at financial institutions. 5/5  BIS central bankers' speeches
The two objectives of monetary policy Let’s start with the objectives of monetary policy and the mission of the MPC to hit the 2% inflation target but to do so in a way that supports growth and employment. Those twin objectives were highlighted starkly only last month by the Committee’s reaction to its updated forecast for inflation contained in the February Inflation Report. Inflation was projected to rise further in the near-term – to above 3% in the second half of this year – and to remain above the 2% target for the next two years or so. But rather than tighten policy, we issued a statement explaining that, in present circumstances, we thought it appropriate to bring inflation back to target more slowly than usual. Our reaction was partly driven by the judgement that this protracted period of above-target inflation would, for the most part, reflect higher university tuition fees and domestic energy  BIS central bankers’ speeches  1  bills. Importantly, these price rises are largely the consequence of regulatory decisions, rather than market forces. In contrast, costs and price pressures resulting from the balance of demand and supply in the domestic economy looked to be well contained. Although the inflationary impact of these higher administered and regulated prices is likely to persist for several years – as is the impact of the recent weakening of sterling which is also pushing up on inflation – they are likely to wane over time.

Companies comment to us that the time and resources needed to win new business and secure contracts has increased sharply in the face of weak demand.7 I’m sure that these mechanisms and many more like them are at work today. But are they sufficiently strong for us to be confident that the likely relationship between growth and inflation would be unusually favourable were demand to increase strongly? Why should these mechanisms be so much more pronounced now than in previous recessions? Wouldn’t most of them have seemed equally important in the past? I find it hard to believe that these types of effects are the entire – or even the main – explanation for the weakness in productivity. What is unusual about this downturn is that it has been associated with a severe and prolonged financial crisis. Several of our banks are still not in a position to lend normally. Many firms have had to economise on working capital as the cost has increased and the availability reduced. The ability of many SMEs to raise finance to fund new investments or business expansion has been constrained. The efficiency with which banks have been able (or willing) to reallocate funds from outdated businesses and sectors towards new and dynamic companies has been stunted.
Jon Cunliffe: The outlook for countercyclical macroprudential policy Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at The Graduate Institute, Geneva, 10 November 2015. *  *  *  In 1909, Albert Einstein received his first honorary doctorate from the University of Geneva. In 1905, in his mid-twenties, Einstein published four papers which ushered out the Newtonian age of physics and changed forever our view of the Universe in which we live. It is an interesting experiment to think what Einstein might have accomplished had he chosen the world of economic policy rather than physics. Would he have brought to our world the same brilliant simplicity and achieved the same lasting change in our understanding? Economic policy of course is rather different to physics even in central banks. We may aspire to the same rigour, the same evidential base, the same level of proof. And we may apply many of the mathematical tools. But our world is more indeterminate and shot through with the vagaries of human behaviour. As policy makers, we have on a daily basis to take decisions on the basis of both imperfect information and imperfect understanding. The subject I want to talk about today, the credit cycle and how policy makers charged with financial stability should take it into account, is a very good example of this world. The concept itself is a difficult one.

A third will be how far in advance one needs to act. If you thought that the impact of changes in the CCB happened with a lag, that there were benefits in a CCB above zero that could be relaxed, that risks were building or that there were benefits to moving policy gradually, these would point to moving earlier rather than later in the cycle. This approach is intended to maintain the resilience of the system over the cycle. But, clearly, requiring banks to hold more capital will very probably also have a dampening effect, leaning against the cycle. The third approach to time varying macroprudential policy I mentioned would take this further. It would set policy with the explicit objective of pushing back on the cycle until the level and perhaps the composition of credit was judged to be more acceptable in risk terms. This of course would be a bigger “call” for the macroprudential authority than targeting resilience. Again it requires a very careful assessment of costs and benefits. I do not think the macroprudential policy framework should “start” there; the starting point should be maintaining resilience. But given the history and the objective of maintaining financial stability, I do not think that the macroprudential authority can foreswear making such calls when necessary. Indeed, the FPC has implicitly already done this in taking action on the flow of high loan to income mortgages.
The synchronization and shortening of cycles will probably also increase the volatility of international interest rates. Economies with liquidity constraints and limited access to international financial markets will suffer the most. The policy prescription here is to strengthen fundamentals and open and deepen the integration of both product and capital markets with the rest of the world. The effect of synchronization and shortening of the cycle on international interest rates will probably also be an increase in the volatility of those rates. Coverage against interest rate volatility is an additional argument in favor of integrating the emerging country economies with that of the world. 4. Monetary policy  Another by-product of the new information technology is the blurring of the traditional definitions of money. It is now clearly possibly for the non-banking private sector to create money substitutes on demand. This development will tend to render inefficient the regulation of limited definitions of money as a tool to influence economic activity and prices. If this is so, interest rates will reign unchallenged as a monetary policy tool, while inflation targeting will be in the forefront as a nominal anchor for the economy. By the way, under these conditions it will become extremely difficult to differentiate between financial and non-financial firms. Until a greater synchronization of the cycle becomes evident, the need for an independent monetary policy will necessarily lead to floating exchange rates.

However, flexibility can be made fully operational only on the basis of strong fundamentals. In fact, exchange rate flexibility implies taxing the capacity of the financial system to adapt, as well as that of private enterprise to adjust. Moving towards exchange rate flexibility implies a structural change, as the costs of exchange rate risk coverage fall upon the private sector, rather than the Central Bank or the government. To be successful, a change of this magnitude requires strong fundamentals. The role of fiscal policy must be emphasized in this context. Predictability of public sector reactions to shocks is a must for the appropriate functioning of all markets. Chile has recently moved to a fiscal policy guided by rules. The budget is planned in such a way that, under conditions of a long-term rate of growth of the economy and long-term prices for copper, a surplus of 1% of GDP is achieved. The level of expenditures is maintained through the cycle while government reserve moves with it, generating larger surpluses during booms and smaller surpluses, or deficits, in a slowdown. Today, Chilean macroeconomic policy is defined by a monetary policy based on inflation targeting, the free float of the Chilean peso and a fiscal policy guided by rules. We expect that this policy set-up, together with well-established strong institutions in all areas will help us ride the waves of a rapidly changing world.
Second, declines in the market value of government bonds led to liquidity strains, insofar as these bonds are widely used as collateral in interbank markets. And third, in some instances, governments had to step in to recapitalise vulnerable domestic banks, thereby increasing their own debt in turn. This “tale of two debt overhangs”, as some have called this twin crisis of banks and sovereigns, had uneven effects across euro area countries.4 Some countries were markedly more affected than others, which contributed to increased financial fragmentation in the euro area. This also laid bare further fragilities that had been accumulated in the past, including the fact that some euro area countries had neglected structural reforms and as a result faced competitiveness losses and the built-up of external deficits. While these fragilities had not gone completely unnoticed, and had been pointed out early on by the ECB, they had not received the attention they deserved until the crisis struck. This bears similarities with the Asian financial crisis, which is well remembered in this part of the world. Some experts saw it coming and warned at an early stage against the causes that led to it, such as short-term  1  See e.g. Berkmen, P., G. Gelos, R. Rennhack and J. Walsh (2009), “The global financial crisis: Explaining cross-country differences in the output impact”, IMF Working Paper, No. 280; Berglöf, E., Y. Korniyenko, A. Plekhanov and J. Zettelmeyer (2009), “Understanding the crisis in emerging Europe”, EBRD Working Paper, No. 108; Lane, P.R. and G.M.

The need to focus attention on the level of economic activity is of course well understood by the academic community. It is now standard practice in the literature on monetary policy to assume that the authorities seek to minimise a social loss function, defined in terms of the deviation of the level of output or unemployment from their equilibrium values, and in terms of the deviation BIS Review 103/1998  –6–  of inflation from its desired value. But if this is so obvious, why, in discussions of the economic conjuncture and economic policy, is so much attention placed on growth rates rather than on levels? Why are commentators and pundits so concerned with whether economic growth is going to be above or below its trend rate, or even whether it is likely to be above or below zero? That is not what matters for economic policy nor, more importantly, for social welfare. An excessive focus on growth rates of output and employment, rather than on their levels, may reflect a rather natural, but dangerous, optimism about the degree of spare capacity in the economy. After all, is not the belief that we could always achieve lower unemployment without an increase in inflation the mark of a kinder, gentler, altogether more civilised approach to economic policy? Or is it simply wishful thinking?
So I do want to emphasise that a key part of our supervisory approach is to be alert to emerging risks that may not seem as relevant when you are at the lending coalface as they appear to be when aggregated and analysed on a supervisor’s desktop. I know that many of you will be familiar with our Supervisory Statement 20/15 on building societies’ lending and treasury operations (commonly known as “the Sourcebook”, reflecting its origins as an FSA document). This document sets out our expectations as to how society boards and management should achieve adequate risk controls over the business that they choose to undertake. These expectations have not emerged from a vacuum, but are informed by what we saw happening in the run-up to the crisis of 2008. The Supervisory Statement does not seek to stop boards from developing new strategies and lines of business, but it does articulate supervisory expectations as to how this activity can be done safely, in line with the PRA’s objectives. Across the wider market, we are observing – not from all firms, but definitely from a few (and some of them building societies) – a shift in credit risk appetite as lenders compete with each other to find ways of widening the pool of available borrowers, increasing the size of loans available to them, or reducing the credit premium  46  http://www.fsa.gov.uk/library/communication/speeches/2004/sp176.shtml 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  charged for inherently more risky loans.

Under Solvency II valuation rules, this business is usually profitable and provides a boost to a firm’s balance sheet; no credit for future premiums therefore reduces the recognition of expected future profits and leads to a lower solvency ratio. In response to this, some firms have sought to amend existing insurance contracts in order to extend the contract boundary and recognise more future profit. The most common example is the addition of free marginal insurance benefits that are of questionable value to policyholders and which are (arguably) not economically discernible. Some amendments might meet the letter of the regulation, but they are designed to circumvent the spirit. The PRA will continue to scrutinise proposals by firms which seek to strengthen their balance sheets but which pay little attention to the additional risks they carry. Keeping across these issues, and leaning against any risks they create to our objectives, will require us to make good use of the full range of the Bank of England’s intelligence and analytical techniques. The new strategic plan that we have just adopted for the Bank (‘Vision 2020’) is exactly in this spirit and I’m delighted that my beady-eyed colleague Vicky Saporta will lead some horizon-scanning work in this area. Conclusion  Today I have provided a potted history of how banks, building societies and insurers have been supervised in the UK over the past 100 years.
In this respect, the concept of financial stability was seen as a by product of monetary stability. Economists believed that by stabilizing consumer prices, financial assets would also behave in a stable and predictable way. The crisis painfully reminds us that: this is not necessarily true. Behaviour in financial markets is not always rational and lack of confidence in the markets can spiral out of control, sending shockwaves throughout the economy. Fortunately, the Bank of Albania adopted a more conservative approach considering monetary policy and financial stability issues simultaneously, conditioning either decisionmaking process by the other one. Due to this behaviour, the crisis had a direct but trivial impact on the financial system. Despite this, the banking system faced immediate difficulties in the form of deposit withdrawals, emerging as indirect effects of fear contagion and irrational expectations. The liquidity problems that emerged spilled over to the credit market and later to the real economy and foreign sector. The Bank of Albania reacted quickly to this changing economic climate. Liquidity was abundantly injected to our banks and more stringent regulations were applied in regard to the transfer of funds. However, unlike in most other countries where monetary policy was used initially to boost aggregate demand, in Albania, monetary policy stayed in its course giving way to expansionary fiscal policy. Due to a relatively long period of consolidation, fiscal policy at the outburst of crises had abundant room for manoeuvre and has a more direct impact on the economy.

Ardian Fullani: The financial future of the region Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the summit of finance ministers and governors “The financial future of the region”, Becici, Montenegro, 14 June 2013. *  *  *  Dear Ministers of Finance, Dear Governors, The crisis we are going through, being so profound and lasting, will leave its mark on economics in general, and central banking in particular. Up until the Great Recession, monetary policy was living in a world that we may call “the inflation targeting era”. To anyone that has followed the discussions regarding the optimal central bank policy ever since the onset of the crisis, it is clear that the validity of the previous approach has been heavily questioned. In many ways inflation targeting made the central bank’s job simple, as long as it followed the policy correctly. The Central Bank, seen by the public as an independent institution, had to credibly commit to an explicit inflation target, in order to anchor mid-term inflation expectations. Self-fulfilling expectations from economic agents and price setters would, in turn, help deliver the objectives of monetary policy. Unfortunately, as shown recently, this strict approach to monetary policy has some shortcomings. What this approach missed, due to its focus in consumer prices, was the drift in prices of assets in general. Escalating asset prices and their sudden burst affected significantly the behaviour and balance sheets of the economic agents and challenged the stability of the financial system.