samchain/econo-pairs-v1 huggingface dataset:
27.04.2021  Financial stability and macroprudential policy: objectives, tools and challenges* Universidad de Zaragoza Pablo Hernández de Cos Governor  *English translation of the original speech in Spanish  Distinguished Rector of the University of Zaragoza, Distinguished Dean of the Faculty of Business Economics, academic and other authorities, ladies and gentlemen. Good morning. It is an honour and a pleasure to be able to participate in this event organised by the University of Zaragoza. I should like to begin by expressing my gratitude to Vicente Salas, Chair of Business Economics at this University and the promoter of this meeting, who was linked for many years to the Banco de España in various capacities, as an economic adviser and as a member of our Executive Commission and our Governing Council. Over these years of intense collaboration, he played a pioneering role in theoretical and empirical works on the subject to which I wish to devote my address today: financial stability and macroprudential policy. In these papers he did not confine himself solely to studying various aspects relating to the financial system, but also devoted much of his research to analysing the interaction between the financial sector and the real economy, especially as far as firms are concerned. As I shall attempt to convey in my address, this interrelation is one of the key distinguishing characteristics that warrant and condition macroprudential policies. Financial stability is of fundamental significance for society’s well-being.

This focus is helping to contain inflationary pressures in the near term. Indeed, across advanced economies, wage growth remains weak and labour markets soft. Reflecting the combination of improving, but still subdued, demand and considerable, if uncertain, slack, monetary policy remains exceptionally stimulative. Recall that the recent  BIS central bankers’ speeches  1  decision of the Federal Reserve to begin tapering asset purchases meant only slowing the rate of additional stimulus. And that the 7% unemployment rate in the UK is merely the point at which the MPC begins to even think about adjusting policy. The key question for central banks is the expected evolution of the supply side of their economies. This is unusually uncertain at present. We know that our economies are operating well below their, admittedly unsustainable, pre-crisis trends, but we don’t know how much capacity was destroyed following the crisis. We know that depressed business investment is limiting productivity growth in the short term, but we don’t know to what extent and whether such shortfalls can be caught up. From a longer perspective, we know that total factor productivity growth has slowed over the past decade, but given the incredible flourishing of innovation, we don’t know whether this is due to lags, measurement errors or more fundamental factors. Statistical trend measures of labour productivity growth suggest it has slowed in the United States, the euro area (both core and periphery), the UK and even Korea.
During a financial crisis, it is important that there is a system of deposit guarantees to reduce the likelihood of a bank run. There have been such schemes in all of the EU countries for several years now with a minimum level of EUR 20,000. However, they are designed differently in different countries. The Riksbank has therefore argued in the context of European cooperation that these schemes should be harmonised. Under the pressure of the financial crisis last autumn it was decided that the guarantee level should be at least EUR 50,000 in all countries and in the longer term EUR 100,000. However, there are still differences regarding the funding of the guarantees and other regulations. These differences distort competition between the banks in different countries. They also make it more difficult to achieve effective crisis management. 4  BIS Review 7/2009  How Sweden is affected by the financial crisis Sweden's dependence on the outside world Sweden is highly dependent on events in the world around us. Sweden is a small and open economy with extensive foreign trade and a financial market that is well integrated with the international markets. Sweden's dependence on the outside world has increased over time. This means that a global financial crisis combined with a severe international economic downturn has a substantial impact on the Swedish economy. One way of illustrating a country's dependence on developments internationally is to consider exports and imports as a proportion of the total balance of resources.

In my view, this notion is nothing more than a financial analyst’s fantasy. In fact, over the last six months, we have seen constant confirmation of the anti-inflationary stance of monetary policy with, for example, the FED actually establishing a quantitative definition of price stability for the first time (in fact, identical to the one used by the Eurosystem). Sixth remark. Our immediate priority is therefore to construct or reconstruct the mechanisms and structures of a sound and efficient financial intermediation framework. That is why, at the euro area level, the financial union project is fundamental. At the global level, the FSB’s role is crucial in developing a robust technical, regulatory and prudential architecture, adapted to the interconnection of our economies. Seventh and last remark: fiscal policy and debt management. Here, I would say that we are all guilty of a certain degree of ambiguity, both at the market level and at the political level: •  on the one hand we want public debt markets that are broad, deep and liquid, because they form the base on which our entire financial system is built. In particular, government bonds are the safest and the most liquid assets. They act as reserves of value for a large number of investors, starting with the central banks themselves which hold them as foreign currency reserves or as monetary policy collateral. •  And on the other hand we want solvent States, i.e.
DLT may provide a more efficient alternative to credit bureaus that compile consumer credit information from banks. The insurance industry in Singapore is looking at how DLT can help prevent duplicate insurance claims. 2/5  BIS central bankers' speeches  Probably, one of the potentially more powerful applications in financial services is in customer verification, the so-called “know-your-customer” or KYC process. Banks spend an inordinate amount of time and money on KYC, and yet struggle to effectively detect and deter money laundering, tax evasion, and other forms of illicit finance. DLT brings about opportunities for a shared industry-wide KYC utility that can verify customers and transactions in a more efficient and robust manner. This is not just conjecture. It is beginning to happen. In Singapore, OCBC Bank, HSBC and MUFG announced last week that they have completed a KYC blockchain project to reduce the duplicity of KYC processes, providing convenience for customers and efficiency across the banks. The “killer app” for DLT is really in cross-border transactions. When multiple entities across different jurisdictions are involved, there is no natural trusted central party. DLT allows the possibility of various parties working directly with one another to make crossborder transactions cheaper, faster, and safer. Cross-border trade is a good example. In Singapore, we are exploring two specific applications – trade finance and trade documentation. In trade finance, DBS Bank and Standard Chartered Bank are exploring the use of DLT to prevent the problem of duplicate invoicing while preserving client confidentiality.

So what’s on the docket for monetary policy in 2016? The answer is that it depends on how the incoming data weighs on the outlook, and how changes in the outlook influence our views on the appropriate setting for monetary policy. What I can say is that our expectation at the December FOMC meeting was for further interest rate hikes in 2016 and beyond. Participants anticipated that the federal funds rate would likely continue on a gradual upward path. Over the longer term, FOMC participants expected that the federal funds rate would eventually reach 3 to 4 percent as inflation rose back to our 2 percent objective and the headwinds from the financial crisis that had been restraining economic activity fully dissipated. Even though this path is shallow relative to previous tightening cycles, the median federal funds rate path of FOMC participants in the December Summary of Economic Projections (SEP) is well above the path implied by the federal funds futures market. Should this be a concern? Does this imply that there is a significant risk of an abrupt future spike in short- and long-term interest rates as market rates realign to levels more consistent with the median FOMC participants’ projections? I don’t think so for several reasons. First, the SEP projections are modal forecasts – that is, what the participants believe is most likely to happen – whereas those embodied in market prices are a mean – that is, an average across all possible outcomes.
The Riksdag’s possibility of sanction is to replace a member of the executive board each year, as the members of the executive board have varying periods of office. The Chairman and Vice-Chairman of the Governing Council of the Riksbank follow the executive board’s work by having the right to attend and speak at board meetings. This is how it must be in a democracy. Delegation of power must be accompanied by a possibility of holding to account. By the Riksbank being open about its objectives, its forecasts and the assessments that have been made by the executive board, confidence can be established in the Riksbank’s policy among politicians, investors and the general public. I consider that Sweden has a found a reasonable and balanced approach to implementation of the EU directive. 5. Are there alternatives? We have thus noted that Sweden has undertaken a fundamental change of policy. From having directed stabilisation policy at full employment as the highest priority, policy has been realigned to create stability. Low inflation is to constitute the economic environment in which full employment shall be restored. 7  BIS Review 59/1999  The objective of “price stability” is delegated to an autonomous Riksbank instead of – as previously – fiscal and monetary policy being co-ordinated by the Government to achieve both full employment and price stability. Full employment is aimed at by long-term economic growth. I have given a fairly detailed account of the failures of stabilisation policy that have led to this change of course.

Hopefully we are also moving away from the days when regulators set regulations which have no real relation to how banks themselves look at risk, and how they manage risk. Basel II is a major step in this direction. It aims to link the way regulators look at risk to how banks themselves look at risk; to encourage the use of modern risk management techniques; to encourage innovation; and to encourage banks to ensure that their risk management capabilities are commensurate with the risks of their business. As a result Basel II brings regulation into the 21st century. Previously, regulators' main focus was on credit risk and market risk. Basel II takes a more sophisticated approach to credit risk, in that it allows banks to make use of internal ratings based systems - or "IRB systems" as they have become known - to calculate their capital requirement for credit risk. It also introduces, in addition to the market risk capital charge, an explicit capital charge for operational risk. Together, these three risks - credit, market, and operational risk - are the so-called "Pillar 1" risks. But Basel II goes much further than this in looking at risk. As you will I am sure know, as risk management professionals, these three risks are only scraping the surface. Banks' risk management functions need to look at a much wider range of risks than this - interest rate risk in the banking book, foreign exchange risk, liquidity risk, business cycle risk, reputation risk, strategic risk.
José De Gregorio: The role of central banks after the financial crisis Keynote speech by Mr José De Gregorio, Governor of the Central Bank of Chile, delivered at the Bank of Korea International Conference 2010, 31 May–1 June 2010, Seoul, 1 June 2010. *  *  *  I am very grateful to Luis F Céspedes and Kevin Cowan for insightful discussions and contributions. As a response to the global financial crisis of 2008–2009, we witnessed a period of unprecedented central bank activism. Many central banks, particularly in developed economies, implemented diverse policy actions. Central banks around the world reduced monetary policy rates to their lower bounds and announced their explicit commitment to keep these rates at that level for a prolonged period of time. Some of them went further, including the purchasing of private securities, lending to financial institutions other than banks and exchange rate interventions. All these actions contrast with how monetary policy was conducted during the so-called “great moderation”, which extended since the mid 1980s. During this period, most central banks relied exclusively on short term interest rate management in order to achieve their goals. This dramatic change of events has led many observers to argue that central banks forgot about a crucial task in their mandates – financial stability – and/or they were imprudent for thinking that an adequate management of the short term interest rate would suffice to secure price and financial stability at the same time.

The dose will depend on the initial conditions of the economy and the magnitude of the shock. A simple example is dealing with uncertainty in financial markets that increases demand for liquidity, which requires the provision of liquidity by the central bank. Is this consistent with price stability? Yes, indeed. If the financial shock consists of a collapse in asset prices that weakens balance sheets and leads to further declines in asset prices, the economic contraction can be substantial. The monetary policy response in this case will be to reduce interest rates, consistently with price stability (as in Bernanke and Gertler, 1999). In the aforementioned cases, policy interventions under financial stress, either lender of last resort (liquidity injections) or interest rate types, are consistent with PS and FS. But it may be the case that the magnitude of the financial shock is so severe than neither price nor financial stability may be fulfilled. The problem is not that these two objectives are mutually inconsistent, but that the shock is too large to be addressed with the standard tools. Nevertheless, the fact that the targets may not be achieved within the “policy horizon” does not mean that monetary policy cannot be effective to reduce the costs of the crisis. If something, output costs associated to the global financial crisis have been, so far, significantly lower than the ones we observed in previous comparable episodes. Macroeconomic policy has a lot to do with this.
Chart 6: Financial market implied measures of inflation expectations US (5yr5yr from swaps) EA (5yr5yr from swaps) UK (5yr5yr from swaps)  Per cent  Japan (1yr forward rate to 2018 from index linked bonds)  4.0 3.0 2.0 1.0 0.0 -1.0  2008  2009  2010  2011  2012  2013  2014  -2.0  Source: Bloomberg and Bank calculations. Notes: The UK line is adjusted down by 1pp to take account of the RPI-CPI wedge. As there are very few index linked bonds for Japan, the 1 year forward inflation rate in 2018 is shown as a rough proxy. BIS central bankers’ speeches  19  Chart 7: Probability of a high-impact event in the UK financial system Net percentage balances Short term  Medium term  40 30 20 10 0 -10 -20  Very high  2013 H2 2013 H1 2012 H2 2012 H1 2011 H2 2011 H1 2010 H2 2010 H1 2009 H2 2009 H1 2008  2014 H2 2014 H1 2013 H2 2013 H1 2012 H2 2012 H1 2011 H2 2011 H1 2010 H2 2010 H1 2009 H2 2009 H1 2008 High  Low  Very low  -30  Net  Sources: Bank of England Systemic Risk Survey and Bank calculations. Notes: Respondents were asked for the probability of a high-impact event in the UK financial system in the short and medium term. From the 2009 H2 survey onwards, short term was defined as 0–12 months and medium term as 1–3 years.

Mojmír Hampl: Czechs and Austrians – even closer than they appear Speech by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the Wirtschaftskammer Österreich, Vienna, 14 November 2012. *  *  *  Ladies and gentlemen, dear guests, It is a great honour and utmost pleasure for me to speak here today. And believe me, these are not just standard nice opening words. I really mean it. As if there is anywhere I particularly enjoy visiting, it is Vienna and also Austria as a whole. And as the statistics show, the same goes for many Czechs. More than two million of us visit Austria annually, and the number is going up every year, regardless economic circumstances (not the other way around). This is not due solely to the typical and widespread enthusiasm among Czechs for skiing. Many Czechs simply like Austria as a country. It would be hard for me to find a Czech who does not feel good, safe and comfortable here. And it is no accident. So, please forgive me if I do not discuss today macroeconomic trends, the extraordinary synchronisation of economic cycles in our two countries, and factors behind continually rising mutual trade. Much of this will be surely covered in the discussion. There is something else I would like to talk about. I would like to make a personal comment about the closeness of our two countries.
In the audience today there are representatives from businesses across the East of England, from all sectors and sizes. No doubt the factors affecting your different businesses and sectors will vary. There are four features that are worth highlighting: First, weakness in productivity relative to pre-crisis isn’t unique to the UK. Part of that global weakness is likely to reflect weak investment, which fell during the crisis and has only recovered gradually since then. The expansion in global trade and broadening of supply chains in the decade prior to the crisis is likely to have been one factor contributing to robust total factor productivity growth during that period. Since then, growth in global trade and TFP have both been subdued. Second, the growth ‘puzzle’ – the weakness relative to pre-crisis trends – is concentrated in just a few sectors, with the finance and manufacturing sectors accounting for over half of the recent weakness. The Monetary Policy Committee’s latest Inflation Report, published two weeks ago, included a chart with 5  different sectors’ contributions to the whole economy labour productivity growth (Slide 4). The manufacturing and finance & insurance sectors made no contribution to average annual productivity growth in 2010-16. Pre-crisis, these sectors contributed around ¾pp to annual average productivity growth. So combined, they accounted for over half of the growth puzzle to 2016, despite employing only 11% of the workforce.

That means that with very little spare capacity in the economy, even the unusually weak actual growth of around 1¾% over the forecast horizon – which you can see here in the MPC’s projection for GDP from the latest Inflation Report (Slide 7) – is still sufficient to generate excess demand. There are of course significant risks in both directions to the outlook for productivity. To the downside, there are at least two reasons to think that productivity won’t pick up to its pre-crisis rate. The first is that after such a long period of weak productivity growth it is reasonable to argue that we are in a new paradigm of lower productivity growth, and that is reinforced by the global nature of the weakness. The second is that that the dampening effect of Brexit on productivity growth – both through the effect of uncertainty on business investment in the short run and through the need to anticipate and respond to post-Brexit trading relationships – is likely to continue for some time. To the upside, productivity, although volatile, has tended to grow by around 2% on average for many decades, if not centuries. Productivity could ultimately pick up by more than expected globally and if there is a global upswing in trade and investment that benefits the United Kingdom. Additionally, if there is clarity around the transition and future trading arrangements post-Brexit, this could continue to reduce uncertainty, support business investment and lead to a stronger-than-expected pickup in productivity growth.
Jaime Caruana: Presentation of the Bank of Spain’s annual report Speech by Mr Jaime Caruana, Governor of the Bank of Spain, to the Governing Council of the Bank of Spain on the presentation of the annual report, Madrid, 14 June 2002. *  *  *  A year ago I addressed you in my first presentation of an Annual Report, that for the year 2000. At the time I highlighted the importance of an impending event: the introduction of euro notes and coins. This event clearly symbolised the culmination of monetary union in Europe, a process set in train ten years earlier and coming to fruition against a background of enormous expectation not free from uncertainty. It is only fair today to start by stressing the success of the cash changeover, which was notably smooth despite the complexity inherent in such a singular, large-scale and radically novel operation. Underpinning this success was the collaboration of all the sectors concerned: households and firms and, in particular, the banking system and the distribution sector, without whose contribution the changeover of notes and coins would have simply been unviable. The fact that such a far-reaching change should have found such widespread support in society ultimately reflects European citizens' acceptance of their new currency and their confidence as to the benefits they may reap from it. With the culmination of this process, the euro area is consolidated as an extensive and stable monetary zone.

As a complement to a good corporate governance structure, credit institutions should be equipped with a sound risk culture. Such a culture should infuse the design and workings of the organisation and its management criteria, systems and methods; it should be founded on control procedures whose reliability has been duly tested; and its application should be overseen by departments possessing sufficient power and independence. All this should be substantiated by internal and external auditors and be highly visible to the market. Finally, I would like to stress the need for all types of financial institutions to apply due diligence. They should know their clients and systematically monitor their operations so they might prevent, and where necessary curb, not only money laundering and the funding of terrorism but also any other attempt to use the financial system for illegal or unethical purposes. Beyond the obligation all individuals and corporations have to observe and comply with the law, good practices in this area have an important supervisory dimension, as they play a decisive role when preventing or curbing such serious risks as those pertaining to reputation, legal risk, and so on. Despite the unquestionable importance of market discipline and good corporate governance, these are complements to banking supervision and, therefore, cannot replace it in respect of its essential task, namely "to promote the sound functioning and stability of the financial system", as stipulated in article 7 of our Law of Autonomy.