samchain/econo-pairs-v1 huggingface dataset:
John C Williams: Banking culture - the path ahead Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the conference "Building Cultural Capital in the Financial Services Industry: Emerging Practices, Risks and Opportunities", Federal Reserve Bank of New York, New York City, 4 June 2019. * * * As prepared for delivery Good morning, everyone. I’d like to begin by welcoming you to the Federal Reserve Bank of New York and to the fifth conference on culture in financial services that we’ve hosted. Before I launch into my remarks, it’s time I remind everyone that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. When I took on the role as President of the New York Fed last year it so happened that my first day coincided with this conference. In my remarks that day, I emphasized that culture is a longterm project, a constantly evolving one, which is never done. The trouble with long-term projects with no distinct finish line is that they can lack a sense of urgency. The pressure to make real progress is often missing, especially when there are so many other priorities competing for our time. Headlines in the financial news illustrate the lack of progress. In the year since our last conference, stories of money laundering and fraud have been an all-too-frequent feature.

Culture is at the heart of many of these issues, and addressing the root causes of misconduct must remain a high priority for the industry and regulators. The Supervisory Approach Given this imperative for change, the question is, what can we do to improve culture in financial services? Culture is like many of the risk management issues challenging businesses. Cyber threats, digital transformation, and climate change are all facts of life that companies face today, and will be facing 10 years from now. But I don’t hear any CEOs saying that securing their servers is a project that can wait until 2029. Nor does anyone think that there are “once and done” fixes for these problems. Indeed, one important lesson from cybersecurity is that this is not purely a technology problem, but one that requires a fundamental shift in mindset and culture over the long term. So the first thing is the industry, the regulatory agencies, and the banks need to take culture seriously, now. A major and essential part of this is that there must be meaningful consequences for firms and people when things go wrong. We have learned that simply levying large fines on companies is not enough to create lasting change. More is needed. Regulators must hold management and boards of directors to account. The legal element of supervision will always remain paramount. And a scandal often spurs change. But if leaders wait until things have gone wrong to think about culture, they’re leaving it too late.
Although growth remained high in the emerging economies and exceeded the long-term trend in Europe, economic activity in the US slowed considerably in autumn on the back of the credit crunch on the property market. The last few months of 2007 were characterised by the emergence of considerable uncertainties regarding the future path of the global economy, with the latest energy price hikes and, of course, the destabilisation of the financial markets in autumn being the main sources of concern. Switzerland has not remained unscathed amid all this turmoil. Since the summer, we have seen substantial stock market corrections and a return to lower-risk investments, particularly in Swiss francs. However, we experienced these turbulences during a very dynamic phase in our economic cycle. Despite the volatile climate of recent months, the Swiss economy has continued to enjoy sustained growth. For the fourth year in succession, real GDP growth was significantly higher than the longterm average, reaching 3.1%. We owe this gratifying result to the extremely broad-based nature of Swiss economic growth. As already in 2006, the global economy and the performance of the Swiss franc facilitated exports, accounting for a jump of some 10% in this sector. What is more, robust domestic demand also played a role this time round. Significant increases in real salaries and the continued labour market upturn had a positive impact on private consumption, while the robust financial health of the corporate sector coupled with a rosy business outlook helped to stimulate investment.

Through the events of recent months, we are called upon to learn the lessons from the banks’ limited ability to measure risk and – as a logical consequence – the limited scope afforded to the relevant supervisory authorities. Despite the welcome improvements provided by Basel II, it is naive to assume that weighted capital requirements can guarantee fool-proof bank capitalisation assessments. There is a substantial margin of error which must be taken into consideration. In order to take account of all the variables, a tightening of the traditional requirements in the area of the bank capitalisation, liquidity and indebtedness is necessary. For a financial centre like ours – which includes international banks whose private banking arms generate substantial revenue and consequently rely on having a spotless reputation – such action is vital. BIS Review 50/2008  3  Finally, the banks that have been buffeted by the financial storm must take a careful look at the various ways in which they apply corporate governance. In particular, they should examine the role of their respective boards of directors in carrying out the necessary checks and balances to ensure efficient risk management, and they should correct the excesses of their remuneration systems in a manner that does not put short-term results ahead of the long-term performance. The latter aspect has been the subject of debate for some years already, and now it is time for answers. Impact on monetary policy The turmoil on the financial markets has also had implications with regard to monetary policy.
Table 2: Weighted average bilateral tariffs Tariffs imposed by:  the US  China  US  the EU  On imports from:  China  the US  the EU  the US  Prior to any measures taken  2.6  9.1  3.3  3.0  With measures already implemented  13.7  22.4  3.7  3.3  With contemplated measures as well  25.0  25.0  6.7  7.7  Sources: Bank calculations. Notes: Measures already implemented are the US tariffs on steel and aluminium and the reciprocated 25% tariff on $ of US imports from China. Contemplated measures are 25% US tariffs on all imports from China and retaliatory measures and the US tariffs on EU motor vehicles and parts. Moreover, these estimates may underestimate the non-linear effects of tariffs on tightly integrated global supply chains. In this regard, the early indications are not promising. The more hostile and uncertain trading environment is coinciding with sharp slowdowns in global trade, manufacturing, industrial production and capital goods orders (Chart 7). As a consequence, the quality of global growth has deteriorated. Across the G7, the growth rate of business investment has almost halved since its peak in late 2017, leaving the global expansion more reliant on consumer spending (Chart 8) and reducing its resilience.6  6  BIS analysis finds that increasing shares of private consumption in GDP can be a leading indicator of future growth slowdowns.

The intensification of trade tensions has increased the downside risks to global and UK growth. In this regard, the news at the weekend that the US and China agreed to restart trade talks is welcome – though as we have learnt, progress today is no guarantee of progress tomorrow. To recap, the direct effect of the measures announced thus far would have only a marginal impact on the UK, of -0.1% of GDP. That would rise to -0.4% if all measures, including auto tariffs, were implemented. If there were a Brexit-style business confidence shock in the US and China, the total impact on the UK would start to be material, rising above -1% of GDP (Table 3). Since the middle of last year, expectations of UK rates three years ahead have fallen by around half a percentage point and 10-year gilt yields are similarly lower. That would roughly offset the hit to UK GDP in the downside scenario of a significant, Brexit-like hit to US and Chinese business investment. But global trade tensions are not the only factors influencing UK financial conditions. They also remain highly sensitive to the perceived probabilities of different Brexit outcomes. That’s because asset prices are mean expectations, reflecting the weights that market participants place on every possible outcome. 12  As the MPC noted in the minutes to its June meeting, several major car manufacturers had brought forward their regular annual shutdowns from the summer to April, as part of their Brexit contingency plans.
Normalisation of the Swiss franc money market The effect of the monetary policy crisis measures introduced in recent years was also felt in the area of monetary policy implementation. By buying foreign currency against Swiss francs, we created a structural liquidity surplus on the Swiss franc market. We have since largely reabsorbed this excess liquidity via a set of instruments that are already well established. Liquidity is absorbed, on the one hand, through weekly issuance of the SNB’s own money market bills (SNB Bills) with terms of 4, 12, 24 or 48 weeks, and on the other through daily one-week repo transactions (cf. chart 4). We are currently using both instruments to absorb around CHF 140 billion of liquidity, of which some CHF 110 billion is accounted for by SNB Bills. This brings banks’ sight deposits, which ultimately determine the level of interest rates on the money market, to around CHF 20 billion. Compared to the period prior to the financial crisis, this level of liquidity is still high. However, our experience with liquidity-absorbing operations shows us that we can reabsorb the excess liquidity at any time. This allows us to manage the three-month Libor. There is a liquidity overhang in the banking system as a result of the interventions. This does not pose a problem for monetary policy, as we reduce the monetary base directly through the liquidity-absorbing operations.

The SNB’s additional interest costs – which amount to some CHF 100 million for the current year – are offset by the additional income from the correspondingly higher foreign exchange reserves. 2  BIS Review 173/2010  Experience shows that, in the longer term, the income on diversified foreign exchange holdings will exceed the interest costs on the Swiss franc money market, even after any exchange rate losses are taken into account. However, as we can clearly see from this year’s income statement, the fluctuations in income can be very large. Swiss market considers participation in Target2-Securities, the European securities settlement system Finally, I would like to briefly discuss the planned pan-European securities settlement system. Target2-Securities (T2S) is designed to replace, either totally or partially, the existing domestic settlement systems of the national central securities depositories (CSDs), and to drastically reduce the cost of cross-border securities settlement in Europe. The European Central Bank (ECB) regards T2S as a contribution to the harmonisation and integration of the European market. T2S is scheduled to go into operation in 2014. The ECB’s project will also have an impact on the Swiss financial centre. The question of how the Swiss financial market infrastructure will be connected is important for both the banks and the SNB. In 2009, with the agreement of the SNB, SIX SIS AG – the Swiss CSD and a subsidiary of SIX Group – signed a memorandum of intent to participate in T2S with euro-denominated securities.
Aside from the important role that the solutions being considered in the European Union to better control budget deficits must play, overcoming the recessionary tendencies experienced by the Spanish economy since 2008 requires the correction of some structural features that hinder its ability to adapt. The fall in employment, which has been much greater in Spain than in the other euro area countries during the crisis, is largely explained by the insufficient adaptation of labour conditions. Indeed, wages and prices continued to grow as if no significant cyclical change had occurred. The labour market reform has addressed the serious distortions that have existed in this area for decades. Their effects on wage moderation have already begun to be noted and, although the improvement in terms of job creation is taking longer, I have no doubt that it will materialise, if the possibilities opened up by the reforms are fully harnessed and completed. The sharp deterioration in public finances since 2008, which only began to be corrected seriously in 2012, has unavoidably required the implementation of severe and unpopular austerity measures and reforms. Despite their initially restrictive impact, they are vital for restoring confidence in the sustainability of our public finances and for normalising our access to international financing, which is essential for our exit from recession and for the resumption of growth in the euro area.

In the course of the Review, representatives of the Bank of Russia will hold meetings with business associations, representatives of small, medium-sized and large enterprises, government authorities, the academic and expert community, including professional financial market participants, and citizens from various social and demographic groups. Some of these meetings will take place at the Bank of Russia’s regional branches. Such analysis is conducted by many central banks, in the first place by those having a long experience of inflation targeting. Some central banks carry out such reviews on a regular basis (Canada, Sweden, Norway). The US Fed accomplished its review not so long ago. The ECB completed a similar project in July 2021. As to the Bank of Russia, this is our first experience of such a profound and comprehensive analysis of the achievements of our monetary policy, but we will definitely continue this practice. In the future, the Bank of Russia plans to make 1/3  BIS central bankers' speeches  such reviews regularly, every five years. The range of topics to be reviewed by our analytical units includes six work streams. Work stream 1. Inflation target format. This topic is obviously drawing the greatest attention. Within this work stream, we will consider once again what format of the target would ensure the highest confidence in it and what inflation rate could be the best measure of price stability. Furthermore, we will analyse whether the Russian economy has formed the conditions for reducing the inflation target. Work stream 2. The operational procedure of monetary policy.
Inflation and interest rates should be low and in line with those in the other participating countries. The exchange rate should be stable. Last, but certainly not least, the budget deficit should be under control and the level of official debt sustainable. Over the last five to ten years, most member states of the EU have come a long way towards fulfilling these criteria. Inflation rates are at or close to historical lows in various countries. The same is true for interest rates, where differentials have diminished considerably. Much less successful was the quest for fiscal stability. Budget deficits in most countries are still too high and debt levels have often, instead of falling, risen over the last years. Without any doubt, the pursuit of the convergence criteria with a view to joining the EMU has been instrumental in improving economic policies in various member states of the EU. Who, for instance, would have thought ten years ago that Italy would today post an inflation rate lower than the one in Germany? Yet, despite the progress achieved over the last decade, two problems remain: First, convergence in important areas is still far from being satisfactory. Second, the convergence criteria require the aspiring members of the EMU to achieve certain goals by spring 1998. But what about their future policies? There is a widespread belief in the economics profession that nominal convergence -- as expressed by the convergence criteria -- is less important for a successful monetary union than real convergence.

Its importance, however, should not be overstated. Otherwise, rational decision-making is made difficult. It is therefore important to de-emotionalize the discussion and to take decisions based on facts, economic and political common sense rather than on wishful thinking and unrealistic expectations. The introduction of the Euro presents Europe with both opportunities and risks. Let me first dwell on the opportunities. A successful monetary union will contribute to sustainable economic growth in Europe. It will complement the most important part of the EU, which is the single market. The free movement of capital, labor, goods and services will be made easier when only one currency exists. The allocation of resources will reflect expectations BIS Review 102/1997  -2-  about the profitability of investments and will not be distorted by unexpected exchange rate movements. Comparing prices of the same goods in different countries will become much easier as they will all be expressed in the same currency. Competition will thus be enhanced. Monetary union will also most likely contribute to lower interest rates in at least those participating countries which now have interest rates above the average. This should further enhance growth prospects. All of these advantages depend of course on the belief that monetary union will be a success. The likelihood of this happening is relatively high. The new ECB will have as its primary statutory goal price stability. In the performance of its task, it will enjoy a high degree of political independence.
The remuneration schemes in financial undertakings and the decisions made by credit rating agencies added fuel to the fire. Financial supervisors tended to focus on risk attached to individual financial institutions more than on system-wide risk. There was also a tendency to practise somewhat lax supervision in order to stimulate the development of financial centres. As a result of all of the above factors, the financial system became far too leveraged. At this writing, a variety of efforts are being made internationally towards correcting these flaws, as is described more fully in this report. The Central Bank of Iceland is following these developments closely, not least through its membership in the Bank for International Settlements in Basel, which is the venue for a number of the committees and institutions that assess risk in the global financial system and formulate the regulatory framework and standards that govern it. The experience of this financial crisis – both in Iceland and abroad – calls for a reassessment of the most effective architecture for financial supervision, with particular emphasis on the nature of the relationship with the central bank. For some time, the trend was towards separating central banks from financial supervision, particularly in countries with developed financial systems. But as is discussed in this Financial Stability report, banking supervision has remained within the central banks of a majority of European countries, and the pendulum might be swinging in that direction once again in countries with developed financial systems.

According to some estimates, in the past ten years European investment banks have lost 10 percentage points of their market share to US banks.iii This can be attributed to the difficulties European banks face in achieving the critical mass needed to operate in a global market. And Brexit will do  Page 3 of 5  little to change this trend if the European market remains fragmented. Conversely, US investment banks have the benefit of a huge domestic market where margins are higher. Their size gives them a decisive advantage when it comes to achieving economies of scale and competing for large-scale financing transactions. Faced with these structural challenges, French banks’ CIB divisions have already begun to refocus on more profitable activities and implement major cost-cutting plans. However, there is still a lot to be done, notably when it comes to industrialising processes and flows; digitalisation is also changing trading activities. 2.2  Banks and regulators therefore have three focuses for action  The main prerequisite for improving profitability is for banks to put in place individual restructuring strategies. There are a number of levers they can use for this: technological innovation, cost control or the diversification of revenue sources [slide 5]. On this latter issue, I would like to underline the resilience of the French “universal” or diversified banking model.
Kristina Persson: Globalisation, imbalances and possible ways forward Speech by Ms Kristina Persson, Deputy Governor of the Sveriges Riksbank, at a conference on social economics, Stockholm, 3 May 2006. *  *  *  Thank you for the invitation to come here and speak on a topic that interests me very much, both in my role as representative of the Riksbank and privately, as a person with a strong interest in social issues. Let me begin by saying that I will not be talking about the current economic situation in Sweden. The discussion from the most recent monetary policy meeting will be published on 11 May. I shall begin with a run-through of the opportunities and challenges that economic globalisation entails for a country like Sweden. I will then go on to discuss the imbalances that currently exist in the global economy, particularly in the exchange of goods, services and capital between Asia and the United States. The trade deficit is financed through the global financial markets, which are an important driving force in the globalisation process. Finally, I shall talk about some of the reforms currently being discussed within the International Monetary Fund (IMF). Introduction Ten years or so ago the word globalisation did not arise in the public debate, the term used then was internationalisation. The question is whether this indicates that something new has happened?

Joseph Yam: Fourth Hong Kong Monetary Authority Distinguished Lecture: opening remarks Opening remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Fourth Hong Kong Monetary Authority Distinguished Lecture on the theme of Monetary Policy and Financial Stability, Hong Kong, 13 February 2001. *  *  *  It is an honour for me to welcome Mr Andrew Crockett to deliver this Fourth Hong Kong Monetary Authority Distinguished Lecture. I am also delighted to welcome Dato’ Dr Zeti Akhtar Aziz as the Discussant. Both are good friends of the HKMA, and it is a special pleasure to see them here today before this large and diverse audience. I extend to all of you, on behalf of the HKMA, a very warm welcome. The subject matter of this Lecture – monetary policy and financial stability – is at the heart of central banking. Much attention has been given to resolving the apparent conflicts between the two desirable objectives of monetary stability and financial stability, at the policy as well as the operation levels. The recent experience of a number of jurisdictions has indicated problems in achieving both simultaneously. Some have gone as far as to introduce institutional changes to alleviate the tension, or the embarrassment, or the risk of policy credibility being undermined as a result of such conflicts.