samchain/econo-pairs-v1 huggingface dataset:
BIS Review 70/2002  1  The euro area performance since 1999 and Sweden’s situation So what can we say about the state of the Monetary Union, some three years after its inception? Let me first emphasize that three years is a very short time span to evaluate a project of this scale, not nearly enough for anyone to make an authoritative judgement. But, undoubtedly, for those who had great expectations regarding convergence, increased competition and higher productivity during these first three years the euro will have been a disappointment in some respects. Many were hoping that the creation of the euro, with the integration of financial markets, increased cross-border competition and the reduced transactions costs, would usher in a period of higher growth and productivity gains for the euro area. Instead, we have seen a slowdown in productivity and an economic performance steadily below that of the US, and also slightly below that of Sweden and other pre-in countries. Since 1999 GDP growth has on average been 2.3 percent in the euro area against 2.9 percent in Sweden, while overall productivity in the euro-economy according to the OECD has been only 0.6 percent in the euro area 1999-2001, against 1.0 percent in Sweden. So, at least superficially, it does not appear to be the case that Sweden has underperformed because of its non-participation in the euro area. During the economic boom in 1999 and 2000 the euro area lagged behind the US and Sweden in productivity increases.

This implies that fiscal policy is given a clear mandate, with clear targets, strong institutional arrangements and a high degree of openness. Of course, using fiscal policy as an effective tool additionally implies a strong budgetary position over the cycle - which is also important given the present demographic trends which point to increased costs for supporting an ageing population. I believe this discussion could also be of some interest in relation to the present debate on the Stability and Growth Pact, as it stresses the importance of strengthening the institutional framework and the long term goals for national stabilisation policies in the monetary union, as opposed to a more passive policy simply letting automatic stabilisers take their course. And, like Sweden, the euro area needs a strong fiscal stance in order to cope with the future fiscal burden of ageing populations. Even more important than the alternatives for stabilising the economy are the structural reforms which are needed to increase potential growth and contribute to an economy more responsive to changing circumstances. If this is done successfully the problems of instability will probably not arise or will be of less significance. As we analyse Sweden's labour markets it is worrying that unit labour costs have increased slightly more rapidly in Sweden than in the Euro area recently. As the possibility to conduct an independent economic policy decreases, the need for functioning adjustment mechanisms increases which implies greater flexibility in factor and product markets in Sweden.
These decisions interact appreciably with the solvency requirements set by the prudential supervisor and they give shape to a series of regulatory demands that may affect the viability of institutions and the structure of the industry. A fruitful framework of collaboration between the SRB and the SSM is thus needed and, specifically, the criteria the SRB develops to exercise the discretion afforded it by the regulations should be properly discussed with the prudential authority. 5 Final remarks  In conclusion, I have referred in my address to the intense work in all jurisdictions to amend the bank crisis management framework so that it strengthens the capacity available to maintain financial stability without this requiring the massive use of public funds, as occurred in the recent financial crisis. The progress made in Europe has been considerable, having incorporated the most demanding international standards into the regulations. The new resolution regulations pose most considerable constraints, which are in many cases weightier determining factors than solvency requirements themselves for financial institutions. It is thus necessary to harness the ongoing revision of European legislation and the subsequent re-definition of the policies to be pursued by the resolution authorities so as to fine-tune demands in a way that provides for the orderly adjustment of the industry to the new regime. As earlier discussed, adding flexibility to some requirements and setting transitional arrangements for others may be of help here, while also reinforcing the authorities’ ability to manage crises in the short and medium term.

Further, measures have been set in place to mitigate the effects of banking crises, when they occur, on the public coffers and the economy in general. As regards solvency requirements, the reform agenda has practically concluded, while awaiting the Basel Committee’s final agreement on the so-called Basel III accord. Today I shall focus on the second objective of the international reform agenda, i.e. on the package of measures aimed at smoothing the management of bank crises while preserving financial stability and minimising the use of public funds. At the base of the regulatory reform in this area is the work of the Financial Stability Board (FSB) conducted at the behest of the G-20 following the Lehman Brothers debacle. In 2011 the FSB published the Key Attributes of Effective Resolution Regimes for Financial Institutions, which lay down the principles for ensuring an orderly resolution of banking institutions. Indeed, the Key Attributes specify the powers and tools the administrative authorities should have to see through the orderly resolution of non-viable banks, ensuring the maintenance of their core functions and their restructuring at the least possible cost to the taxpayer. The Key Attributes further envisage the availability of recovery and resolution plans for each institution that set out a roadmap ahead of a potential crisis situation. Lastly, they establish the principle whereby bank shareholders and creditors are those who should bear the bulk of the costs of the crisis.
Mohd Razif bin Abd Kadir: Islamic finance and the collaboration between Malaysia and Bahrain Special remarks by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the Signing Ceremony of Memorandum of Understanding between Bursa Malaysia – Bahrain Financial Exchange, Manama, 24 January 2010. *  *  *  It is my great pleasure to be here today on this occasion of the signing ceremony of the Memorandum of Understanding between Bursa Malaysia Berhad and the Bahrain Financial Exchange. The signing we are about to witness today will lay the foundation for the collaboration by the two exchanges on Bursa Suq Al-Sila’. I wish to thank the two exchanges for inviting me to give some remarks at this auspicious occasion. I also wish to applaud this commendable effort by the two exchanges which marks another important milestone in the development of the global Islamic financial services industry and in bridging further our two countries. Maintaining the stability of Islamic financial system This effort takes place at a time when the global economy is entering into a period of improved international economic and financial conditions. The global financial crisis has highlighted several structural weaknesses and drawbacks in the international financial system. While Islamic finance is not insulated from the effects of the current environment, the Shariah principles and values that are inherent in Islamic finance provide an important underlying foundation. The Islamic financial system has continued, during this period, to become increasingly integrated with the international financial system.

At the same time, I believe that the Federal Reserve System’s monetary policy responsibilities are allocated appropriately by the Federal Open Market Committee, with New York playing an important role to ensure that monetary policy is executed effectively even during periods of duress. Of course, the Federal Reserve System and the New York Fed are not perfect institutions. That is why we always must strive, in an open and transparent manner, to improve what we do and how we do it, for the benefit of the American people. Thank you for your kind attention. I would now be happy to take some questions. BIS central bankers’ speeches  5
In some senses the Bank is like a conventional trading company: we have our own capital and balance sheet, we trade, we make profits, and we pay both tax and a dividend to our shareholder, the Government. But there are also parts of our public policy functions - relating to monetary and financial stability - that, by their nature cannot be directly charged out to individual beneficiaries of our activities and which we need to finance in other ways. Like other central banks we, therefore, take unremunerated deposits from the banking system on which we earn income, for this purpose. Central banks generally levy this charge on the banking - or deposit-taking - sector specifically, because one of the essential services we undertake is the provision, through our money market operations, of sufficient cash day-by-day to the banking system to allow it to balance its books. Without that the banks collectively would need to hold more cash with the central bank in place of interest-bearing liquid assets than they do at present. These “cash ratio deposits” in this country have hitherto been voluntary. The new Bill puts them on a statutory footing, with the rate of deposit to be determined by the Government. The charge on the banks in this form has always been lower than in other major centres.

“Lender of last resort” assistance, even when it is extended by the central bank, involves the commitment of public money - ultimately taxpayers’ money - and it needs to be justified in terms of the damage that would otherwise result to the financial system and to the wider economy. For this reason the MOU, to which I referred earlier, BIS Review 18/1998  -8-  provides that the Bank should always seek the Chancellor of the Exchequer’s explicit prior approval wherever circumstances allowed, or at least his tacit prior approval in emergency situations and where the risks are manageable in relation to the size of our capital. These arrangements ensure that we have the capacity to act to limit systemic damage where that becomes necessary; but they rightly make such intervention subject to appropriate authorisation and accountability, by and to, both the Chancellor and Court. Conclusion Mr Chairman, we have come a long way in the Bank, even since I first joined it some 35 years ago. We tended at that time to explain our role as being the “Banker to the Government and Banker to the commercial and other central banks”. And the truth is that our responsibilities, and the extent of our authority, were never very clear. Today we remain a bank, as we always have been, at the heart of the financial system, as indeed we must in order to carry out our wider functions.
The liberalisation of the capital controls is a collaborative project undertaken by the Central Bank and the Government, which actually means that elected representatives have the last word on the actions taken – particularly if and when tools are used that are not in the Bank’s toolbox. Honoured guests: I have spoken at some length on monetary policy and the labour market, on the one hand, and the capital controls, on the other. But I have done so with a purpose, as these are by far the greatest economic challenges facing us at the moment. Yet the Central Bank’s sphere of activity includes many other functions as well, not least those centring on the structure and stability of the financial system. Let us hope that, when we convene a year from now for the Central Bank of Iceland’s 55th Annual General Meeting, we will have resolved successfully the urgent issues now facing us and can turn our attentions to these other areas of activity. In the field of financial stability, emphasis has been on the risks related to the capital controls and on the formulation and implementation of the prudential rules that, in our opinion, must be in place once the controls are lifted. That work is well underway. And as regards risk assessment and contingency planning, the Systemic Risk Committee and the Financial Stability Council will be meeting next month, and the Central Bank’s Financial Stability report is scheduled for publication on 22 April.

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Clearly, I think it is neither probable nor desirable that negative rates will be applied to private individuals – except in the case of certain large fortunes – or to SMEs. Firms in the euro area, and especially SMEs and VSEs,ix have benefited from easier access to credit at low rates: it should be noted, however, that on the  Page 9 of 14  whole, they are no longer net borrowers, in other words they can completely self-finance their investments; nonetheless, this historical, and perhaps temporary, inversion is less evident in France. Last, state governments are clear winners, and alongside them the taxpayers, thanks to the savings on government interest payments. In the case of France for example – which can borrow at negative rates at maturities of up to nine years – interest payments, as a percentage of GDP, have been halved in the 20 years since 1998,x whereas the level of debt [% of GDP] has been multiplied by a factor of 1.6. Page 10 of 14  But this very gain has raised questions: are low rates responsible for the increase in government debt, as well as in private sector debt – that of households and firms? In France, they have undeniably facilitated the rise.

In the euro area and the United States, R* is estimated to have fallen by between 150 and 200 basis points over the past 15 years. Page 3 of 14  The scale of this variation can only be explained by structural factors. Slower growth in the working population and in total factor productivity have led to a slowdown in the trend rate of GDP growth, and this is estimated to account for roughly a quarter of the decline.iv  Source: Bergeaud, Cette, Lecat, 2016  The other three quarters are estimated to stem from the increase in the supply of savings coupled with reduced investment demand. The global savings glut is being fuelled by increased life expectancies, rising inequality – older and wealthier individuals tend to save more – and the accumulation of foreign exchange reserves in emerging economies. Page 4 of 14  Source: IMF  Conversely, the decline in investment demand can be attributed to the rise in the non-material economy, which requires more human capital than physical investment, and no doubt to lower confidence in the future. The euro area in particular has seen a rise in its saving ratio and a marked weakness in its investment ratio since the financial crisis. Source : Refinitiv Datastream  These trends, which can be observed the world over and have been going on for a long time, are not, therefore, attributable to monetary policy: I shall nonetheless turn now to the role of central banks.
Bank Negara Malaysia also looks forward for a more active role by all shareholders, including the non-  BIS Review 73/2006  1  controlling shareholders, in the transformation of the new takaful operators into efficient and world-class players capable of competing against the best in both the domestic and international marketplace. Ladies and Gentlemen, On the regulatory front, as the financial services industry transitions to a more deregulated and market-driven environment, the regulatory and supervisory approach will continue to evolve into one that is more principle and risk-based. The regulatory initiatives will also continue to emphasise competition, efficiency, and innovation whilst maintaining financial stability. For the takaful industry in particular, the consultative paper on the principle-based guidelines on the takaful operational framework will soon be issued. The aim is to establish the parameters within which the takaful operators operate their business, whilst allowing for the different takaful models currently adopted by the respective takaful operators to continue to operate. This consultative process is a further reflection of the approach adopted to take into consideration the feedback from the industry players in designing appropriate regulatory framework and thus towards balancing the interests of the various stakeholders. The industry can also expect to see progress on the development of international best practices for the takaful industry by the Islamic Financial Services Board (IFSB) in the near future. An important step towards this direction has been taken with the recent establishment of an IFSB working group to develop supervisory standards on corporate governance.

No, I believe that if one really aims at exchange rates that are irrevocably fixed, then one should move all the way, that is go for monetary union. As long as two currencies are distinguishable, their relative price might change. So the choice is between flexible exchange rates and monetary union. Needless to say, since Switzerland is not a member of the European Union, joining the eurozone is not an option worth discussing at this stage. Fixing the franc against the euro would not even be a second best. It would rather be the worst of all worlds by suppressing our monetary independence, and, at the same time, exposing us to all the dangers of speculative attacks by setting us up, the back against the wall, alone against the market. 3. Our post-euro experience  What has happened since January 1, 1999, all in all, has proven very reassuring. Our worst fears have not materialized, and indeed, in some ways, the outcome has been even much more favourable than we could have hoped for. First, let me briefly sum up our experience with regard to the fears of “euroization” and of the loss of our monetary degree of freedom. As expected, the Swiss franc was not crowded out by the euro. Sure, the euro circulates in Switzerland, just like the Swiss franc circulates in neighbouring France and Germany, but the phenomenon remains marginal, and it does not exceed the use of the French francs, German marks and Italian liras in the pre-euro world.
Until recently, most firms were using a rules-based approach to AML monitoring. But this is changing and firms are introducing ML software that produces more accurate results, more efficiently, by bringing together customer data with publicly available information on customers from the internet to detect anomalous flows of funds. About two thirds of banks and insurers are either already using AI in this process or actively experimenting with it, according to a 2018 IIF survey.4 These firms are discovering more cases while reducing the number of false alerts. This is crucial in an area where rates of so-called “false-positives” of 85 per cent or higher are common across the industry. ML may also improve the quality of credit risk assessments, particularly for high-volume retail lending, for which an increasing volume and variety of data are available and can be used for training machine learning models. But it is a prudential regulator’s job to be gloomy and to focus on the risks. We need to understand how the application of AI and ML within financial services is evolving, and how that affects the risks to firms’ safety and soundness. And in turn, we need to understand how those risks can best be mitigated through banks’ internal governance, and through systems and controls. Firms’ rates of adoption of AI and ML So what do we know about how – and how fast – the application of AI and ML is evolving within UK financial services?

Nevertheless, promoting the right outcomes, even if framed as principle-based expectations, will require appropriate, up-to-date systems and controls across the three lines of defence to ensure an appropriate control environment throughout the firm. Further thought is needed. The third challenge posed by greater use of AI/ML to boards is around change. As the rate of introduction of AI/ML in financial services looks set to increase, so too does the extent of execution risk that boards will need to oversee and mitigate. It appears to supervisors, and consistent with the early results from the Bank of England/FCA survey, that some firms are approaching the introduction of AI/ML piecemeal, project by project; others appear to be following a more integrated, strategic approach. Either way, the transition to greater AI/ML-centric ways of working is a significant undertaking with major risks and costs arising from changes in processes, systems, technology, data handling/management, third-party outsourcing and skills. The transition also creates demand for new skill sets on boards and in senior management, and changes in control functions and risk structures. Transition may also create complex interdependencies between the parts of firms that are often thought of, and treated as, largely separate. As the use of technology changes, the impact on staff roles, skills and evaluation may be equally profound. Many of these interdependencies can only be brought together at, or near, the top of the organisation. Conclusion  I noted at the beginning that I would conclude by trying to extract three principles for governance from the observations I had made.