samchain/econo-pairs-v1 huggingface dataset:
BIS Review 21/2006  5  optimism regarding the role monetary policy can play in long-term real economic growth was one important reason why inflation was so high during the 1970s. The value of independence How can one then construct a framework for monetary policy that provides the central bank with the best possible conditions to carry out its tasks? Here I intend to be fairly brief as this is something that will be discussed in more detail in the next contribution to this conference. Let me just note that there is currently general agreement that the central bank should be given the opportunity to work independent of the political system in order to attain the objective of price stability. It has been observed that if monetary policy is conducted at arm’s length from party politics, there is greater confidence in the price stability objective. This is linked to the fact that there has often been a tendency for politicians to use monetary policy for more short-term purposes which have conflicted with the long-term price stability objective and which have often entailed loosening the nominal anchor. Making the central bank independent is probably the element of the past decades’ monetary reform process that has triggered the most debate and has been perceived as the most controversial. It is probably natural for politicians to feel uncomfortable giving the central bank increased independence as it unavoidably means that they give up some of their decision-making powers, and moreover in a field perceived to be central.

It is a question of monetary policy, as I said earlier, being first and foremost aimed at ensuring there is a credible nominal anchor in the economy. As long as this nominal anchor does not risk coming loose, monetary policy can be aimed at stabilising the real economy. I shall return to this shortly and for now merely emphasise that the key word here is stabilise the real economy and nothing else. It may be interesting to note in this context that the experiences from the period of low, stable inflation have meant that price stability is now increasingly perceived as both an objective in itself and as a means of achieving other macroeconomic objectives 5 . There are many indications that price stability has beneficial effects on efficiency and growth in the economy. The reasons can be those I just mentioned, i.e. that the price system functions better as a signalling mechanism in a low inflation environment and that households and companies can spend more time on productive activities instead of trying to protect themselves against inflation. Essentially it is a question of price stability being a necessary condition for an efficient payment system, as I said earlier. In addition, the period of low and stable inflation has also been characterised in many countries by less fluctuations in growth in the real economy than was previously the case.
SMEs can enjoy lower financing costs offered by this scheme with a 2% reduction in financing rate. Sukuk issuers also benefit from the three year extension of the double tax deduction for additional expenditure incurred for sukuk issued under Ijarah and Wakalah principles. Other cost savings for sukuk issuers include reduction in professional fees relating to due diligence, drafting and preparation of prospectus; and various fees charged by Securities Commission Malaysia and Bursa Malaysia. Islamic finance is anchored on sustainable values beyond profit The unique propositions of Islamic finance are drawn from its underlying Shariah principles that have universal applications, which fundamentally advocate the prevention of harm or attainment of benefits. All Islamic finance transactions must reflect Islamic values which are ethical and fair. Any financial conduct or transaction relating to goods or services that are contrary to Islamic principles are prohibited, thus promoting fairness, equality and justice. As such, Islamic finance practitioners are duty-bound to observe the norms of high ethical conduct to uphold the values and the sanctity of Shariah. Businesses can therefore take assurance that their financial needs are well served, managed and protected. For the halal industry, players could benefit greatly from appropriately raised funding and protection, which ultimately nurture an end-to-end halal ecosystem. Beyond this, the Islamic financial system also promotes Value-based Intermediation (VBI). Through VBI, Islamic financial institutions are encouraged to adopt more structured frameworks to assess how they create value and impact, particularly in response to changing economic, social and environmental conditions.

There is an exciting line-up of events, which includes a panel session that will feature CEOs of Islamic banks and takaful operators, as well as corporate customers who will 2/3  BIS central bankers' speeches  share their experiences. This will be followed by a knowledge sharing session; industry dialogues including a dialogue with Bank Negara Malaysia; and a business matching session. I invite everyone present today to actively participate in the programme and to explore what Islamic finance has to offer. Thank you. 3/3  BIS central bankers' speeches
When the Committee set out to revise the 1988 Accord, we wanted to resolve the arbitrary treatment of country risk that the Club Rule introduced. Our solution in Basel II was to assign risk weights, and hence capital charges, to exposures to sovereign borrowers and to banks that reflected a measure of their credit risk. Banks on the standardised approach to credit risk will determine the risk weights on their exposures to sovereigns and to banks based on those borrowers’ external credit ratings. Banks adopting the internal ratings-based approach to credit risk will rely on their own sense of the credit risk involved. Basel II eliminates the arbitrary distinctions imposed by the Club Rule and sets capital requirements based on external or internal measures of credit risk. Yet some observers have assumed that a more risk-sensitive approach might drive up not just capital requirements, but also the pricing of credit for loans to emerging market countries and banks. This assumption is where the debate breaks down. Indeed, the arguments suggesting that Basel II will reduce flows of capital into emerging markets requires us to accept the view that regulatory capital drives loan pricing – something that has not been proven in any research. In fact, research and the Committee’s own discussions with banks suggest that something else drives loan pricing. When determining the price of a loan, banks consider all of the economic risks associated with a particular borrower.

This blueprint also outlines the broad strategies for the development of the key components of the various parts of the Islamic financial sector, including the guide for determining the best options for the different stages of development of the Islamic financial system so as to ensure that it would contribute to the growth and development of the economy and also become an integral component of the international financial system. Of importance is that the master plan not only represents a blueprint for the development of a cohesive and a comprehensive Islamic financial system but also it promotes increased understanding and appreciation for those that wish to participate in the Islamic financial system, including providing information on the expected level of achievements that are required. Another important global initiative in Islamic finance already mentioned is the promulgation of the international prudential and supervisory standards by the IFSB. The IFSB has fast-  2  BIS Review 59/2008  tracked the development of these standards to address the unique and peculiar characteristic of risks of Islamic financial contracts. Fundamental to the implementation of the standards is the strengthening of the risk management capabilities of the financial institutions. In addition, the implementation of these standards needs to be complemented by the continuous surveillance so as to ensure the early identification of the new emerging risks and to ensure that the institutions undertake to manage the risks. Resilience reinforced by the intrinsic features of Islamic finance The intrinsic features of Islamic finance also contribute to its overall resilience.
The various Islamic finance centers operating around the globe must operate as one! We should allow a diversified number of players to operate in our market. Recognising the benefits of foreign competition and presence, we have announced a further opening of the Malaysian financial system to new players. Islamic banking market share in terms of asset vis-à-vis total banking asset as at the end of 2009 is 19.6% (2000: 6.9%) including DFIs. This data is very close to our target of 20% by the end of 2010. Domestic Islamic banks accounted for about 85% of market share in Islamic banking sector. Annual growth rate of Islamic banking assets was 20.8% per annum for the years 2000 to 2009. For takaful, the market share, although still small, it has shown significant progress of 7.9% and 11.09% in terms of asset & contribution respectively. Annual growth rate of takaful assets was 24.2% per annum (2000–2009). Total financial assets had also increase significantly. The Islamic sukuk is larger than the conventional PDS. What are the factors that contributed to the development of Islamic finance in Malaysia? One of the factors is a comprehensive legal, tax, accounting, regulatory and supervisory framework and this are well articulated and generally known. Let me attempt a few additional factors that might not be that well appreciated. It is the willingness of the players and the  2  BIS Review 49/2010  developers of Islamic finance to explore new initiatives.

The reason is that in the new system the risk-averse Clients will be crowded out of the market, allowing the risk-taking individuals to gain the most from a profit-sharing system because they have better access to information. The costs may outweigh the benefits. Let us now analyze the Business and Bank’s perspective and the client’s perspective. Here we are talking about the potentially real issues – the practical aspects that Banks, Entrepreneurs and Clients will face. Firstly, in terms of information asymmetry, banks will need to have perfect information on the Entrepreneur. This cuts both ways – Clients of the Banks will need to have perfect information on the Banks as well. Banks will need to keep detailed records and then reveal such information to their Client and Entrepreneur. Of course we need transparency – but when transparency requirement start to conflict with giving out information to your competitors (perhaps in conventional banking), then this could have a serious impact on competitiveness. Requirement for information will certainly result in an increase in costs – which is then passed on to customers, potentially causing services to be more expensive. This could result in Islamic Banks losing its competitive edge. We should also question what is the expertise of the Bank? Would the Bank possess sufficient expertise to invest in a business venture? If it does not have the expertise or take an active role – then the Bank is merely financing the business venture. That is no different from debt based financing.
Common to the central bank’s different measures regarding efficiency and stability in the payment system and the financial system is that they involve ensuring that the supply of liquidity is functioning – that there is sufficient means of payment and short-term credit for the economy to grow at a good pace without severe fluctuations in interest rates or other disruptions. One might wonder whether the financial system might not be able to function entirely without central banks and other state intervention. Would not a large private bank or other large and stable company be able to guarantee that there were sufficient means of payment and credit in normal situations, and also to act as lender of last resort in a crisis situation? Historical experiences show that it has been difficult to create sufficient security in the payment and credit systems with private central banks. One such example is that the state was forced to take over Stockholms Banco when there was a bank run on it, which led to the establishment of the Riksbank 350 years ago. But in those days there were no other banks and the financial system was largely undeveloped. As the private banking system grew, it was common at first that the private banks funded themselves by issuing banknotes, in Sweden and in other countries. 3 However, during the 19th century the view emerged that this was not a sufficiently stable financial system and central banks run by the state began to be established.

One usually says that the central banks are the lender of last resort. The need to have a “liquidity emergency service” is based on normal banks’ operations being characterised by borrowing money at short maturities and then lending this money at longer maturities. This is the so-called maturity transformation that exposes the banks to liquidity risk. Sometimes the banks’ access to funding may suddenly decline, without it being possible – or socio-economically desirable – for them to reduce their lending at the same pace. This does not usually lead to any problems. A bank that needs more funding can normally borrow from other banks that have a surplus (or it can issue its own bonds). However, sometimes the liquidity problems are so serious that the banks cannot manage them on their own. If, for instance, confidence in a bank were weakened so that depositors feared they would not be able to get their money back, the bank might be subjected to a bank run that it is unable to manage on its own. There is also a risk that problems in one bank may spread to other banks, as the banks are interconnected. Even banks that do not have any problems may be affected as a result of rumours spreading.
With the sustained budget surplus and accumulated surplus on the Exchange Fund and Land Fund assets, the actual amount of foreign reserves in Hong Kong amounted to $ billion at the end of September, the third largest in the world. This is more than seven times Hong Kong dollar cash in circulation or over three times $ M1. 30. The currency board system has an automatic adjustment mechanism to maintain exchange rate stability. When there are outflows of funds from the Hong Kong dollar, the Hong Kong Monetary Authority (HKMA) will sell US dollars to banks for Hong Kong dollar. On settlement day, the HKMA will debit the clearing accounts of the banks for the necessary amounts of Hong Kong dollars in return for the US dollar that will be credited to the New York accounts of the same banks. Since banks may have sold more Hong Kong dollars than they have in their clearing accounts with the HKMA, they can only obtain Hong Kong dollars by borrowing from other banks, by bidding up the interbank rates, or selling back the US dollars to the HKMA, that is, by reversing their short position. In fact, the banks do not hold excess Hong Kong dollars because they are generally long in foreign currency. The latest data at the end of July shows that the Hong Kong banking system is short roughly $ billion or $ billion. 31.

In addition to the robust currency board mechanism, the linked exchange rate system is underpinned by some of the strongest fundamentals in Asia, if not the world:  •  Growth is strong, at 5.5%. •  Fiscal position has been consistently strong, with an average fiscal surplus averaging 2% of GDP for the past decade. Fiscal surplus in 1997 so far is 4.4% of GDP and is expected to exceed 5% of GDP. •  The government has no external debt. •  Exchange Fund and Land Fund together have more than $ billion in assets. •  Corporate debt ratios are amongst the lowest in Asia. •  The external account is broadly in balance. 32. The free markets and strong fundamentals mean that the nature of the shock is absorbable. Hong Kong does have a strong competitive edge, since we are a service economy with 83% in the services sector. As a major investor and integrator of production in the region, with manufacturing concerns in China and Southeast Asia, Hong Kong companies could adjust production to areas which have the greatest export competitiveness. In addition, the mainland Chinese economy is still growing at 8-9% per annum, with low inflation, a balanced external account and strong BIS Review 109/1997  commitment to reforms in the enterprise and financial sectors. All these auger well for Hong Kong as the main gateway to the Chinese market. 33. The current higher interest rates reflect somewhat a slightly higher risk premium in Asia due to the currency turmoil.
And, this teacher continued, “in the unlikely event that you physicists become rich, you will not only need accountants to look after your money but the accountants could also end up spending your money for you!” The teacher’s name was Brother Conrad, and I have no doubt that many of the senior accountants here tonight will remember this very learned Marist Brother. Anyway, in 1973, seven of us from the “SJC Class of 1972” won scholarships to study in New Zealand to become a doctor, engineers, a teacher, a lawyer, an air traffic controller and a master mariner. No scholarships were offered for accountants or physicists! The end result was, the Minister (Niko Lee Hang) and most of our other class mates eventually became Accountants, whilst one became an Economist and another an Engineer. I suppose because of Br. Conrad’s warning, there was no physicist from our group. And, fortunately for me, I don’t have any money to start worrying about an accountant spending it on my behalf! We have just witnessed the awarding of Certificates to those who have passed their “final qualifying exams” (or FQEs). And, later on this evening, we will also witness the Induction of New Members into the Samoa Institute of Accountants. On behalf of everyone here tonight, I wish to congratulate all of you on the achievement of these important milestones in your education and career lives. You have continued to make your families both proud and happy.

One significant characteristic of the current expansionary period is the fact that the sustained growth of activity has given rise to a high rate of increase in employment. Here, however, much remains to be done, since the current level of occupation is still some distance off the pre-2008 level. Another notable feature of the current recovery is the progress made in restoring macroeconomic and financial equilibria. This is playing a key role when it comes to explaining the intensity and duration of the current upturn. In this respect, it is worth mentioning the continuing and notable positive external balance and the subsequent reduction in the economy’s – and in particular the private sector’s – over-indebtedness; such progress has proven vital for restoring the confidence of foreign investors and of Spanish households and firms. The current account balance stood at close to 2% of GDP in 2017, a similar figure to that observed the previous year and up on the figures recorded in the early years of the recovery. True, some factors that have contributed to this improvement in the economy’s external balance have effects that tail off over time. This is the case of oil prices which, despite their recent rise, remain lower than those in force until mid-2014. Also, the improvement in financing conditions in recent years has provided for significantly lower interest payments abroad. Other explanatory factors behind the improvement in the balance vis-à-vis the rest of the world are structural in nature.
The Discussion Paper sets out how we intend to operationalise these principles and incentivise firms to put in place, and abide by, credible plans to reduce emissions over time. Conclusion  As I have outlined, we have come far, but have further to go. When it comes to climate change, we cannot stand still. We need to continue to be bold and learn from our work so far to deepen our understanding and inform future actions. Greater ambition and cooperation is still needed, including wider adoption of best practices. For this reason, as well as evolving our domestic work, we also need to evolve our collective approaches. This year presents central banks, regulators and policymakers with a unique opportunity to do this, and I have been encouraged by the progress we have made in the G7 and G20 in the build up to COP26. Under the UK’s Presidency, the G7 has started meaningful discussions on the role of finance ministries and central banks in the transition to net-zero. Under Italy’s Presidency, the G20, through the Sustainable Finance Working Group and the FSB, is developing climate-focused roadmaps to coordinate and galvanise  11  See MPC Remit statement and letter and FPC Remit letter, March 2021 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  international work. These fora allow us to share experiences and develop common best practice. Listening and learning how others are thinking about the potential macroeconomic, macroprudential and microprudential implications will be important to that.

First, there is increasingly persuasive evidence that emissions, and so climate risks, are systematically underpriced in financial markets. This means that continuing to replicate the structure of the sterling corporate bond market, without taking explicit account of the climate impact of bond issuers, is no longer in fact a truly ‘market neutral’ approach. And second, the remit of the MPC was updated in March this year to clarify that, subject to achieving price stability, the Committee should support the transition to net-zero as part of the government’s economic strategy.11  The CBPS will remain a monetary policy tool, with its overall target stock of assets set by the MPC in order to achieve its primary inflation objective. However, from Q4 this year we intend to modify our approach to the composition of assets we buy, in order to take account of climate considerations. Our approach will be guided by three principles. First, we will look to incentivise companies to take decisive actions which contribute to an orderly transition of the overall UK economy to net-zero. Second, given the relatively small scale of the CBPS in the context of capital markets, we will seek to influence the thinking of other, larger investors, as well as learning from them. Thirdly, our requirements of firms will become more demanding over time, including as improvements in data and metrics allows us more precisely to monitor climate behaviour, and further to sharpen the incentives we set.