samchain/econo-pairs-v1 huggingface dataset:
Prasarn Trairatvorakul: Journey towards a more competitive, inclusive, connected and sustainable Thai banking system Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Association of International Banks (AIB) Dinner Talk, Bangkok, 21 May 2015. *  *  *  Ladies and gentlemen, It is a great pleasure for me to be here on this special occasion. The topics I addressed in previous occasions focused on economic situations and developments. So much has been said and discussed on those issues, so today I would like to talk about the future development of the banking system in Thailand which is equally important. As many of you here are already aware, we are drafting the third Financial Sector Master Plan which will cover the next five years time span. The process is quite challenging because it involves many stakeholders, both in the public and private sectors, including foreign banks like yourselves. We thank you for your suggestions and feedback provided individually and also as a group through the AIB. Today I will share with you briefly the concept and aspiration behind the development plan for the banking system in Thailand. Thailand is currently at a crossroad in need of structural reforms to cross over the middle income trap. This requires commitment from all stakeholders. The public sector is already taking the lead on infrastructure development to promote urbanization and more equitable income distribution. For the private sector, they will need to make a transition toward production with innovation and higher value-added.

Out and proud – a note-worthy cause Speech given by Sarah Breeden, Executive Director, UK Deposit Takers Supervision  LGBT The Network of Networks (TNON) breakfast, Bank of England 25 July 2019  I would like to thank Zane Jamal, Nick Strange and Eoghan McArdle for their help and assistance in preparing this speech 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  I am very pleased to welcome you all here to this cross-industry employee Network of Networks (TNON)1 event at the bank for banks that is more famously known as the Bank of England. Being a bank for other banks is just one of our roles. For many people, we are known best for printing Sterling banknotes. On that theme, I am sure that many of you are aware that just last week we announced that the new face for our next 50 pound note will be Alan Turing - father of computing and artificial intelligence, the basis of our modern economy, and a gay man persecuted for his sexuality2. The response to this news from the Lesbian, Gay, Bisexual, Transgender plus (LGBT+) community has been incredibly positive. Speaking personally, I was thrilled to hear it given my role as executive sponsor of the Bank’s LGBT+ and Allies network. Building on this positive momentum, I want to use my opening remarks today to set out what more we can do to support this community.
6  BIS central bankers’ speeches  Chart: Household debt burden and interest burden In Norway, house prices and household debt have reached historically high levels. The rapid growth in incomes has been a primary driving force. The high household debt burden in Norway represents a risk of financial instability in the longer term. Households can be a source of both direct and indirect losses for banks. Banks’ loan losses will depend on households’ capacity to pay interest and principal, and to the value of the underlying collateral, which is primarily in the form of dwellings in Norway. Banks are also exposed to the economic repercussion effects that may occur in the event of a fall in household consumption. In the short run, the risk of disturbances is probably small because interest rates are low and the vast majority of households have job and income security. Chart: Household financial wealth by debt burden Household saving has been high in recent years, but households with the highest debt have the lowest financial wealth. In 2009, only about ten percent of financial assets were held by households with a high debt burden – that is to say those with debt that was more than five times their disposable income. These households also accounted for around one third of total household debt. Chart: High population growth and low residential construction rate In recent years, pressures in the housing market have been amplified by high population growth.

It is low because inflation is low and because adverse conditions abroad are curbing growth in a number of industry sectors in Norway. Very low interest rates abroad and high risk premiums in money and capital markets underpin this picture. Norges Bank’s conduct of monetary policy is geared towards low and stable inflation. The operational target of monetary policy is consumer price inflation of close to 2.5 per cent over time. At the same time, monetary policy shall contribute to stabilising output and employment. We also give weight to the risk that low interest rates may over time lead to excessive risk-taking and debt accumulation in the household and business sector. Such imbalances can give rise to negative ripple effects further ahead, with a considerable impact on output and employment. Chart: Criteria for an appropriate interest rate path and loss function In Norges Bank’s March 2012 Monetary Policy Report, the Bank clarified how the various considerations are expressed in Norges Bank’s response pattern. Adjustments were made to the criteria for an appropriate interest rate path. In the Bank’s system of analysis, the criteria are expressed as a loss function for monetary policy. BIS central bankers’ speeches  5  Criterion 1, which states that the inflation target is reached, is covered by the first segment, where the loss is higher the more actual inflation πt deviates from the target π*.
First, the yield curve for government bonds may become distorted and lose its normal relationship to other yields. This has been especially noticeable in the United States, where the concentration of buybacks in the longer dates has caused an inversion of the Treasury yield curve which has not been paralleled in, for instance, the swap curve. As a result of this distortion of the historic pricing relationship between government issues and the rest of the market, that yield differential may become less well representative of intrinsic credit spreads, so that investors may have to discover or devise new benchmarks in other parts of the credit spectrum. Next, one might expect the reduction in the stock of government debt to open the way to so-called “crowding-in” of private sector debt issuance. Indeed, in the US and the international markets there has been quite a surge in corporate bond issuance. But the process is not so smooth or straightforward as one might imagine. Because investors in government paper are typically those who are the more risk averse, they would expect to earn a suitable risk premium as compensation for moving down the risk ladder into corporate paper - at any rate a better return than typical existing holders of such paper would be content with. Consequently, although top-rated corporate paper may benefit from the scramble for quality, lesser ratings may face a rather inelastic demand for any additional issuance.

The Urban Hub has also partnered the Singapore Cooperation Enterprise – a platform that leverages on the public sector expertise of Singapore. Together, they have implemented six projects in Indonesia, Vietnam, China and Mongolia. This includes helping these governments develop a regulatory and financing framework to prepare PPP projects for private sector investment. 4  BIS central bankers’ speeches  37. Regional governments have also introduced schemes to encourage private sector investment. For example, the Indonesian Ministry of Finance has worked with the World Bank to set up the Indonesia Infrastructure Guarantee Fund. This fund provides guarantees to the private sector against risks arising from government actions, so as to improve the creditworthiness and quality of PPP infrastructure projects. 38. A critical success factor for achieving Asia’s infrastructure investment potential is a well-developed financial sector. Asia needs financial markets that are deep enough to effectively intermediate its considerable savings pool and broad enough to provide a range of suitable instruments for risk mitigation. Although ASEAN has made progress on these fronts since the 1997 crisis, more needs to be done. These include strengthening legal and regulatory frameworks, increasing market access, harmonising cross border regulations, and raising the level of corporate governance. 39. ASEAN has set in motion several initiatives. It has drawn up a scorecard to identify gaps in the development of bond markets. Its capital markets regulators are working on initiatives to harmonise domestic laws, regulations, and practices.
Its strong fiscal position is exemplary, and the population is relatively young, well educated and quick to adapt to technological and scientific innovations of all kinds. A strong pension system has been built up and – unlike other countries that have great fears about the future of their pension systems and their sustainability – it is clear that Iceland’s pension system is becoming increasingly stronger. Admittedly it is still not mature enough to have begun to pay out a representative proportion of its owners’ lifetime earnings, but this proportion is growing every year and all the pointers indicate that, for the foreseeable future, it will be highly sustainable. Thus the pension system is going from  BIS Review 34/2007  3  strength to strength in Iceland, at the same time as significant weaknesses are coming to the fore in many comparable economies. Real incomes in Iceland rank with the highest in the world, and unemployment with the lowest. Large-scale investments have recently been made which will generate handsome export revenues. Traditional sectors currently enjoy secure markets and high product prices. Undeniably this picture looks very bright and many more positive signs could be cited. But this does not alter the fact that, as I said earlier, the foundation has been precarious in many areas and the medium term will have a decisive significance for the outcome. Uncertainties abound and many households in Iceland thread a narrow path of debt and wages, where if they lose their footing, the fall could be heavy.

These two decisions hopefully give some indication of where the Central Bank considers that it currently stands in the battle against inflation. This battle is a priority and there is no doubt that a successful outcome is very much in the national interest, not least for young people who have taken on heavy liabilities to secure themselves short-term or long-term housing. Household debt with the deposit money banks has surged in Iceland in recent years. However, debt service as a proportion of income has not grown, due to the more favourable credit terms now available, as well as rising incomes. Loan delinquency is still minimal. Both these indicators are very positive. However, this does not alter the Central Bank’s concerns about excessive borrowing, or at least very precarious borrowing, which could make the foreseeable economic contraction very tough for indebted households, and in some cases insurmountable. In such conditions, rising inflation could deal many households a heavy blow. Some people have responded to Iceland’s relatively high interest rates and price indexation by switching their debts to foreign currencies, but the benefits could prove short-lived if the króna  2  BIS Review 34/2007  depreciates. A depreciation would be instantly reflected in repayments on these foreign loans. Its impact on domestic indexed borrowing would be less and come later. At the last annual meeting, it was pointed out that the Central Bank had strongly encouraged financial institutions to curtail their credit growth at that time which, in the Bank’s view, had gone beyond all reasonable bounds.
The property cooling measures, while also aimed at reining in inflationary pressures and promoting financial prudence, had the additional aim of promoting a stable and sustainable property market. The contribution of accommodation costs to inflation has come down  BIS central bankers’ speeches  3  significantly. Household balance sheets have started to strengthen, with annual growth in household debt moderating to 1.7% in the first quarter of this year, down from about 8.0% over the last five years. The property market has also been stabilising over the last two years, with prices moderating from their peak in the third quarter of 2013. But there is still some way to go, to entrench the gains in stabilising the property market and restoring household debt sustainability. Property prices have thus far adjusted only modestly after a strong run-up that exceeded income growth. Prices have moderated by a cumulative 9.4% from their peak in the third quarter of 2013. But they had gone up by 60% between 2009 and 2013 when nominal incomes had increased by only 30% during the same period. The risk of a renewed surge in property prices is not trivial given that interest rates are likely to remain low and global investors continue to search for yield. And while the growth in household debt has eased considerably, it will take time for household balance sheets to strengthen and become more resilient to interest rate and income shocks.

It is essential that we all ensure that there is a real-time and ambitious approach across the globe. Second, central banks shall continue to be active players in innovation. A few have already launched digital currencies, some – including the Eurosystem – are testing it in pilot experiments. We at the ECB decided a two-year investigation phase under the leadership of my colleague Fabio Panetta, before taking a decision about whether to go further by the end of 2023. Retail CBDCs have caught the attention of the public; however, they raise sensitive questions, especially regarding the use cases for households and the role of commercial banks. That is why I would call for a ceiling of the individual CBDC holdings. Let us not forget the other possible digital currency, a “wholesale” CBDC for banking institutions. DLT could bring the benefits of central bank money digitalisation to a new level, with increased efficiency of some interbank processes and the development of new services, especially in a cross-border context. Let me be clear, CBDC is not about the Big Brother of central banks threatening the free world of decentralized finance. Rather it could be about providing further tools to help make Defi successful and sustainable. The Banque de France carried out nine successful experiments in 2021, with a wide array of partners and on different segments, and a new series of experiments focusing on cross-border payments will take place in 2022.
What is more surprising is that the ONS estimate of the net rate of return, actual returns and, by implication, hurdle rates has been so stable around 12%, despite the historically low level of Bank Rate since 2008. Bank Rate has been at or below ½% for the past eight years and some of this has fed through to a lower cost of corporate borrowing. One might have expected the very low risk-free rate to have brought down the rate of return demanded by firms on investment. If, as seems likely, hurdle rates, like the ONS rate of return, were around 12% before the crisis, firms now seem to be looking for a 12% return over the risk free rate compared to around 7% prior to 2007. Some of this can probably be explained by the fact that the cost of financing investment has come down but not by as much as the risk-free rate. The weighted average cost of capital has come down since the crisis. But the reduction has been smaller than the reduction in the risk-free rate. This is because providers of debt and equity finance have increased the premium they charge for risk (Chart 4).

Ultimately, the outlook for business investment, like the outlook for the economy more generally over the forecast period, depends largely on how households and businesses react to Brexit and on the process that accompanies it. The central case outcome in the February Inflation Report is that the economy will gently slow as higher inflation squeezes households' real earnings. But that's not the only conceivable scenario. There are, however, both upside and downside risks. So as the Committee has made clear, we will be looking closely at the incoming evidence, particularly on pay growth, labour market slack, household consumption, inflation expectations and the impact of the lower level of sterling on consumer prices. Conclusion  I want to conclude by saying a little about why all of this matters to the Bank and our role in issues surrounding investment and productive finance. As I noted at the outset, it was the great financial crisis of 1825 – when the country, according to one contemporary commentator, was within 24 hours of returning to barter and a run on the Bank of England was only halted by a last minute shipment of gold by Nathan Rothschild – that led to the establishment of Bank of England branches in Birmingham and elsewhere. That crisis was due in part to the constraints on the UK’s under-developed banking system.
As you are aware, the Comprehensive Assessment of major banks undertaken by the ECB marked the start of a trilateral relationship between banks, National Competent Authorities and the ECB in its role of supervisor of banks in the Euro area. The Single Supervisory Mechanism’s micro-prudential responsibilities will complement the existing ECB’s macro-prudential role in shaping the future of banking in the Euro area. Banking supervision, viewed as one of the tools at the disposal of the ECB, will help ensure financial stability which is needed to sustain macroeconomic growth. The demanding Asset Quality Review and stress tests coupled with an overall result that  BIS central bankers’ speeches  3  exceeded expectations set a positive mood in the market and should lead to easier access to bank funding for investment growth. Financial sector dimension of Malta’s competitiveness Turning to the Maltese context, it would be a pity if the low-cost credit conditions that are being offered by the ECB are not fully exploited in Malta. Broadly speaking, the overall participation in the TLTRO programme by core Maltese banks has been somewhat disappointing, with the participation of very few banks and with the actual take up being way short of the limits available. On the positive side, we have noted the introduction of a lending scheme that a domestic bank is funding from the ECB’s TLTROs. These TLTROs provide funds at very favourable terms – at a very low interest rate that is fixed for four years.

Turning to Chart 3, the solid line shows that in spite of the various measures adopted by the ECB, whether those operating through the interest rate channel or through credit volumes, the net injection of liquidity remains relatively low. The upper part of the Chart, in blue, shows the liquidity injected by the ECB into the Euro area economies. The lower part, in red, shows the balances deposited with the Eurosystem by Euro area banks. The Chart also shows how a large part of new liquidity was deposited back at the ECB by banks. The objective of the current Targeted Long Term Refinancing Operations (TLTROs) is to inject more liquidity at a low rate that is fixed for four years while the negative deposit rate is to discourage funds going back to the ECB. There are indications that the contraction in credit supply is bottoming out. This signals a potential turnaround in credit dynamics in the Euro area. Also, the latest ECB’s Bank Lending Survey saw banks report a further easing of overall credit standards. The various announced measures are expected to inject liquidity into the system in two different ways, namely through direct asset purchases and through bank borrowing from the Eurosystem. Both routes essentially transfer risks from the financial system to the Eurosystem, and hopefully should lead to a greater ability to fund investment in the economy. In the process, the Eurosystem’s balance sheet will expand. Prudential reform in the Euro area I will now turn to financial stability issues.
Philipp M Hildebrand: Asset management at central banks - a special case? Speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the University of St Gallen, St Gallen, 5 December 2003. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Summary Next to monetary policy, the management of international reserves is another important task of the Swiss National Bank (SNB). Since its obligations cannot be defined precisely, there can be no exact determination as to the optimal level of a country’s international reserves. In accordance with the buffer stock model, the level of international reserves should be determined - just as one would choose an appropriate insurance - based on the likelihood of a crisis, on their contribution to managing or avoiding the crisis as well as on the opportunity costs implied in holding reserves. Both the insights derived from this model and from international comparison have shown that Switzerland holds a reasonable level of international reserves. The long-term development of these reserves should be based on a set of clear goals, as is the case in Switzerland with the growth of nominal GDP as a strategic benchmark. In defining its investment policy, the SNB takes into account safety, liquidity, and performance. The new National Bank Law will enable the SNB to better adapt its investment profile to its needs, which ought to lower the opportunity costs implied in holding reserves.

This decline in home bias - as Alan Greenspan has spoken about extensively - seems to have made it easier for countries to sustain larger current account deficits than might have been possible in the past. However, we don’t know much about how much further room there is to run in this phenomenon. We don’t know much about the present degree of concentration in the exposure of private savers to the United States relative to their longer term preferences, or how stable those preference are likely to be. And, therefore, we don’t know how likely it is that those outside the United States are going to be willing to continue to acquire claims on the United States at the recent pace. Finally, a number of observers have suggested that the present imbalances reflect what could be called a balance of interests, and that this balance is likely to endure for sometime. On one side of the balance is the substantial part of the world economy that has an interest in shadowing the dollar closely, as they absorb excess capacity, and that these governments are likely to continue to want to acquire dollars to make that exchange rate objective possible. On the other side of the balance is the United States, which is able to sustain higher rates of private spending and larger government deficits than it could if others were not willing to lend us their savings.