samchain/econo-pairs-v1 huggingface dataset:
Zeti Akhtar Aziz: Reflections on financial reform – Malaysia’s experience Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 2013 China Business News (CBN) Annual Meeting and Finance Summit “Reflections on financial reform – Malaysia’s experience”, Beijing, 8 December 2013. *  *  *  It is my honour and pleasure to be invited to speak at this 2013 China Business News Finance Summit. As the globalisation of finance intensifies, the world is becoming increasingly more inter-connected and integrated. This has largely been due to the trend towards increased financial liberalisation by most parts of the world. It has been maintained that such deregulation and liberalisation would facilitate the development of more efficient and robust financial systems and that it would result in a more efficient allocation of financial resources across borders. While such financial liberalisation may indeed bring such wide ranging benefits, it also brings with it increased risks that needs to be effectively managed. It was for these reasons that Malaysia adopted a conscious effort to put in place the financial and economic pre-conditions so as to enable us to benefit from such financial reforms involving the deregulation and liberalisation of our financial system. Allow me to share our experience in pursuing this agenda. Following the Asian Financial Crisis, Malaysia embarked on strategies for an orderly development of the financial sector.

That the Riksbank always aims at the objective of 2 per cent unfortunately does not mean that the price increases will always be limited to 2 per cent. First knowledge of the path leading from interest rate changes to their impact on inflation is insufficient to enable us always to expect to be able to achieve the objective. Second price increases as measured by the consumer price index will continually be affected by various kinds of temporary factors. There may be, for example, changes in indirect taxes or external shocks in the form of changed oil prices. Often such disruptions should not be counteracted (as long as they do not risk affecting the long-term inflation process). In addition, there is a continuous flow of new information that can change the inflation outlook. These factors can make the consumer price index diverge from the target ex post, so to speak. This insight is the reason for the Riksbank’s decision to establish a tolerance interval around the inflation objective. (Diagram 5. CPI and Underlying Inflation) In the Inflation Report of December, the assessment was that economic growth would be around 3 per cent in 1998 and somewhat more in 1999. The rise in demand was expected to result in a gradual reduction of the output gap in the coming years and in increasing inflationary pressure. Given an unchanged repo rate, inflation was expected to rise gradually to 2.5 per cent during 1999.
The annual growth rate of credit to the private sector climbed further in December 2021, albeit visibly more slowly, reaching 14.8 percent from 14.6 percent in November, solely due to the component in local currency. Leu-denominated loans saw their annual dynamics accelerate further in 2021, to 19.6 percent in December from 19.0 percent in November, also backed by government programs, with their share in total thus widening to 72.4 percent. Nowadays, as many other EU member states, Romania is preoccupied by the geopolitical and energy situation and their considerable impact on inflation. Inflationary shocks on the energy components of the consumption basket hit repeatedly throughout second half of 2021. These were partly offset by a government support scheme, in effect from November 2021. Nevertheless, the energy component still accounted for more than half of the overall annual inflation rate by the end of 2021. It is a fact now that approximately 85 percent of the CPI has root in the energy price surge. Therefore, the inflation expectations on the 1-year horizon have risen sharply, reflecting current developments. The positioning of the 2-year ahead expectations close to the target variation band suggests that the anchoring mechanism is still in place. However, specific measure to address energy situation is a need. Uncertainties continue to stem from the evolution of the pandemic as well, given the current wave, triggered by the more contagious Omicron variant of the coronavirus although the variant seems to be less virulent.

This implies a lower and abating severity of related restrictions, including in many European countries. As always, NBR will continue to use all policy tools to control inflation and to be supportive of the recovery of economic activity. By doing the work on our side, with a “balancing act” we also hope to support improvements in firms’ sentiment with positive effects on longer term economic development. With these in mind, I would like to invite our honored guests and audience to have a fruitful 2/3  BIS central bankers' speeches  discussion. I hope that we will be able to see each other in person at next year’s edition. As for now, I trust that this virtual environment proves to be an adequate opportunity for promoting productive debates and exchanges of ideas. Please allow me to invite Vice-President Thomsen to take the floor. Thank you for your attention. 3/3  BIS central bankers' speeches
BIS Review 2/2002  1  The market for apartment blocks, on the other hand, is more complex, as it is affected by a number of different regulations and restrictions. This has led, for instance, to the relationship between rents and prices in this market not being stable. Normally, there should be a connection between the development of prices and rents for apartment blocks, as the future cash flows that constitute the basis for the valuation of the property are primarily governed by rent income. However, the statistics regarding prices and rents for apartment blocks show that the rise in prices of apartment blocks has been clearly higher than the rises in rents since 1995. A similar development took place between 1987 and 1990, although the price rise was much more rapid then. The price increase at the end of the 1980s was driven by expectations of future price rises. Regulations in the form of the utility value system and central rent negotiations provide modest changes in rent every year. The changes in rents do not vary substantially in connection with economic activity and demand. These regulations may have a stabilising effect on the property sector in that they stabilise income flows, given that the vacancy rate for housing is low and does not vary. Stable income flows are a good thing from the lender’s perspective. Do these regulations cause any problems? I can see two main problems, which I shall discuss.

We should stress here that, of the larger euro area countries, France has the highest proportion of market-based financing, at 40%. Non-bank financing in France totals EUR 1.748 trillion, and the leading asset manager in Europe is a French firm, Amundi. France also has an internationally recognised regulator, in the form of the AMF, while Paris is home to the European Securities and Markets Authority, ESMA. After Brexit, I also have every reason to believe that a significant share of the market activities of the largest global banks will be based in Paris. First of all, I want to put an end to the non-debate over whether market-based financeis better than bank-based finance and vice versa, and the misconception that the US system should be 1/3  BIS central bankers' speeches  replicated in Europe: working towards a balanced development of non-bank finance simply means giving companies the option of diversifying their debt financing. Fun damentally, the real debate lies elsewhere: it is about switching from debt to equity.This is crucial in advanced economies, where growth is dependent on innovation. Equity financing is better suited to the uncertainty and often long-term returns associated with innovative projects. The euro area is seriously lagging behind in this respect: equity only accounts for 74% of GDP, compared with 125% in the United States. Moreover, it only makes up half of the total external financing of euro area corporations (equity + debt), compared with three quarters in the United States.
Global macroeconomic imbalances, fundamental shortcomings in the risk management of the financial players and gaps in regulatory frameworks and supervision together formed the underlying layers in the current financial and economic crisis – a crisis that many observers regard as the worst since the 1930s. In order to avoid a total breakdown in the financial system, governments, central banks and other authorities around the world have been forced to take a range of massive and unusual measures. Massive and unusual measures on the part of the authorities So, what have the authorities done? The central banks have lent large sums of money to the banks at longer maturities and against other forms of collateral than has normally been the case. This has improved the short-term funding situation for the banks. Several central banks have also provided emergency liquidity assistance to individual institutions. The Federal  BIS Review 41/2009  5  Reserve, the European Central Bank and other central banks have also entered into agreements to provide loans in their own currencies to other central banks to mitigate the effects of the crisis in other countries. The central banks have also cut policy rates rapidly and forcefully, sometimes in coordinated actions, to alleviate the repercussions of the financial crisis on production, employment and inflation. Governments have offered guarantees and capital injections to reduce the risk of further bankruptcies in the banking sector. Deposit guarantee schemes have been extended. Several countries have also adopted fiscal policy stimulation packages to mitigate the effects on the real economy.

This is a difficult question that requires more detailed analysis, but it is unlikely that it will be easy to reach a general policy conclusion. I am convinced, on the other hand, that many central banks will review their macroeconomic models and more precisely define the role of asset prices in the transmission mechanism. I do not believe, however, that we should exaggerate the ability of monetary policy to prevent crises from arising. Even if excessively expansionary monetary policy can contribute to the build-up of a bubble, it is less clear to what extent monetary policy can entirely prevent this from happening. It is probable that it would require fairly substantial interest rate increases, something that may not be received sympathetically when the reasons for the increases are not crystal clear. But more moderate interest rate increases could, of course, contribute somewhat. If nothing else, it  14  BIS Review 41/2009  would provide a signal from the central bank that it envisages certain development problems. I also believe that risk scenarios with a longer forecast horizon may be an option for clarifying what the risks may be in the longer term. It is conceivable that the price of housing or some other asset may be driven by factors that are difficult to explain or which may be assumed to give rise to inefficient risk allocation and large fluctuations in economic activity and inflation.
As a result of this elastic provision of a riskfree investment opportunity, overnight secured and unsecured rates were only modestly affected by these large flows, and overnight markets continued to move as intended following changes in the FOMC’s target for the federal funds rate. That said, the runoff in prime fund assets did leave an imprint on term unsecured rates, although some of this has retraced recently as markets have adapted. I will return to this later. Third, for some time now we have been keenly focused on the impact on the structure of money markets that ensues from higher balance sheet costs for financial institutions.15 When I refer to balance sheet costs, I mean costs that are primarily related to the size, but not the composition, of a financial institution’s balance sheets. One example of such a cost is the leverage ratio, which is a requirement that a bank has, at minimum, capital of certain percentage of its overall assets.16  4 / 13  BIS central bankers' speeches  The leverage ratio was introduced as a simple non-risk-based backstop to the risk-based capital requirements and sets an amount of required capital that depends exclusively on the size of the balance sheet, plus off-balance sheet exposures for the largest U.S. banks, and does not depend on the composition of the balance sheet or the risk of those exposures.

Ladies and Gentlemen, Given the strong progress to date and the positive economic environment, I am confident that the Malaysian takaful operators will continue to make significant strides in becoming world-class players. In the process, this will strengthen the positioning of Malaysia as an international Islamic financial centre. On this note, I wish to congratulate Prudential Corporation Holdings Limited and Bank Simpanan Nasional on the occasion of the official launch of Prudential BSN Takaful Berhad. I wish Prudential BSN Takaful Berhad every success in achieving its objectives. Akhir kata, dengan lafaz Bismillahir Rahmanir Rahim, saya dengan sukacitanya merasmikan pelancaran Prudential BSN Takaful Berhad. Terima kasih. 2  BIS Review 73/2006
The authorities had always been clear that they competed with commercial banks in credit markets (including before the repeal of Glass Steagal), but they were not regarded as monetary institutions and so they did not have access to central banks’ liquidity-insurance facilities and were not regulated alongside commercial banks. It turned out that this was a misthink; or, rather, that over time it was overtaken by developments in parts of their business. During the crisis, the big US securities dealers suffered a liquidity run on two fronts. Repo markets closed to some of them; I shall come back to that later. Also, hedge fund prime-brokerage clients withdrew surplus balances (and transferred trading positions, with the associated collateral, to banks). Some dealers had been using them to finance their business, effectively on-lending “deposits” into the credit and securities markets. And some of them could not easily raise the funds to repay. As a sense of this spread, the demand for repayment inevitably intensified, into a panic. Whatever the details of the law in the US, the UK and elsewhere, the dealers’ prime brokerage services seem to have taken them into the core monetary territory of banks. Lehmans was running a bank, perhaps without knowing it. The dealers, or at least their prime brokerage outfits, should have been banks, with access to the central bank’s Window and subject, at entity and group level, to US led bank regulation. Alternatively, they should not have been providing de facto demand deposit services and using those deposits to finance themselves.

It does however claim that there is a discrepancy between word and deed that raises questions regarding what status the stabilisation of the real economy really has in relation to stabilising inflation. I should perhaps underline here that this criticism, as I understand it, does not say that there has been greater clarity in countries that do not have specific targets for inflation. In my opinion, the assertion that the communication of inflation-targeting central banks generally tends to focus a lot more on the stabilisation of inflation than of the real economy is essentially correct. Inflation forecasts undeniably have the leading role in the reports published by these central banks, and it is usually on the basis of these forecasts that the banks explain their policy decisions. So why have central banks that pursue a flexible inflation targeting policy chosen to concentrate on inflation in their communication and often been rather vague as regards how they look upon the trade-off between stabilising inflation and stabilising the real economy? One important explanation, which I already have touched upon, is probably that many of the economies that have adopted inflation targeting policies were previously beset with high, sharply fluctuating inflation. The task, accordingly, was to create broad understanding and credibility for a new policy focused on price stability.
11 See: Bank of England: A Blueprint for a new RTGS service for the United Kingdom (May 2017). 10  4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  RTGS settlement account, to give assurance that non-bank PSPs can safely take their place at the heart of the payment system. We can go even further. Today, the Bank of England is announcing plans to consult on opening access to our balance sheet to new payment providers.12 Historically, only commercial banks were able to hold interest-bearing deposits, or reserves, at the Bank.13 That reflected their role at the core of the payment system. As new payment providers and systems emerge, access to the Bank’s core infrastructure should change and it makes sense to consider whether they too can hold funds overnight on the Bank’s balance sheet. From the Bank’s perspective, expanding access can improve the transmission of monetary policy and increase competition. It can also support financial stability by allowing settlement in the ultimate risk free asset, and reducing reliance on major banks. Users should benefit from the reduced costs and increased certainty that comes with banking at the central bank. From the perspectives of UK households and businesses, wider access can improve inclusion and services. This access could empower a host of new innovation. In wholesale markets, consortia of broker dealers are working to develop settlement systems using distributed ledger technology that could overhaul how markets operate.

It is also possible to use other methods, e.g. foreign exchange interventions, as we did in the summer, as a means of achieving our objective. However, the repo rate is the monetary policy instrument normally used. Our monetary policy strategy can be described, somewhat simplified, with the rule of thumb that when inflation one to two years ahead is estimated, taking into account the risk scenario, to deviate from the inflation target, the steering interest rate is adjusted. The Riksbank’s assessment of the future inflation rate is communicated, for instance, in the Inflation Reports presented four times a year. The Riksbank has chosen to set its inflation target in a medium-term perspective. This is because monetary policy influences inflation with some time lag. An ambition to try to ensure that inflation also developed in line with the target in the short term would probably require significant changes in the steering interest rates and thereby contribute to unnecessarily large fluctuations in demand. The fact that the inflation target is expressed in terms of a medium-term perspective also plays down the importance of temporary price changes. Consumer prices are sometimes affected by various disturbances that have temporary effects on inflation. Political decisions, for instance, on tariffs and indirect taxes, can also have a temporary effect on the rate of price increase. It may also be useful here to describe briefly how monetary policy affects inflation. A change in the interest rate has effects on the rate of price increase via a number of different channels.
This tool was last used in June 2010 to facilitate the settlement of Fannie Mae 5.5 percent coupons, which stopped being originated shortly after purchase because of a sharp drop in primary mortgage rates. 18 This number includes settled and unsettled agency MBS positions. SeeH.4.1 report on October 2, 2014. 19 For example, the Bank of England’s latest corporate bond purchase program targets purchases of up to £  billion of outstanding bonds, which is less than 10 percent of the estimated outstanding eligible corporate bond market of roughly £ billion. 20 At its highest pace, the Desk purchased more than $ billion of agency MBS in a given month. The last time  the Desk’s purchases exceeded $ billion per month was in June 2009. Since 2009, the Desk has improved its ability to execute agency MBS transactions. Beginning on March 2, 2010, the New York Fed began to use internal staff to execute MBS purchases. Beginning on April 9, 2014, the New York Fed began to increasingly conduct agency MBS purchases over FedTrade, its proprietary trading platform. Combined, these changes allow the Desk to conduct large-scale agency MBS operations with all of its counterparties. 21 This represents purchases between September 14, and October 13, 2016. On October 13, the Desk announced  plans to purchase $ billion in its reinvestment purchase operations between October 14 and November 10, 2016.

Most important among these are: improper lending to related parties if directors or senior management; improper lending to influential personality to maintain the goodwill and relationship, improper lending to clients in exchange for the right to equity participation or to benefit sharing from their businesses; and the improper profiteering by management from large procurement projects. The directors should be alert and on the look out for such situations. Sixth, the long-term future of a bank rests on continued acceptability from clients and society at large. Therefore, the directors must pay special attention to ensure that clients are treated in a fair manner. Of even more importance is the social perception of the bank. If there is a social perception that the bank has not conducted its business in high moral standings, or fails to look after the interest of the country, then social mistrust and sanction can lead to reputational risk, and the damage may have far reaching implications and difficult to restore. The directors can play a very important role here. Typically, high-flyer managements tend to aggressively pursue growth and profits, often at the expense of social perception. Directors, on the other hand, tend to comprise more eminent personalities, who are relatively more mature and broadly experienced than management who may have been in one profession all along. Seventh, this principle applies to the person performing the role of Chairman.