samchain/econo-pairs-v1 huggingface dataset:
The situation would be even more critical if the bank was at the same time a relatively small actor in its own country. In this type of situation the supervisory authority in the home country – which in this case is the one that decides – would probably consider that the need for supervision was not as great as the other countries might consider it to be. There is an evident risk of a conflict of interests between the countries. 2  BIS Review 38/2007  There are elements of similar problems in the Nordea case, too. However, here the problem is rather the opposite – namely that the bank group’s different companies (parent and subsidiaries) would be covered by supervision in several countries. The fact that each cross-border bank group has to obey and report to several supervisory authorities leads to additional costs and administrative duties for the bank. This is an obstacle to continued integration and to the competitiveness of the European bank market. Another problem is that there are no common arrangements for crisis management within the EU. Basically the only EC regulations defining how responsibility should be divided between the countries in the event of a cross-border crisis are regulations for compensating depositors in the case of bank failures. However, these regulations are not primarily intended to ensure efficient crisis management. They should rather be seen as protection for consumers.

The fact that the allocation of responsibility between countries in the event of cross-border crises is in principle unregulated leads to at least two serious problems. Firstly, it lays the foundation for the conflict of interests I just described. Even if the responsibility for crisis management is formally unregulated, it will unavoidably fall to the country whose economy is to a large degree dependent on the bank that is in distress. This country is not necessarily the same country that has the responsibility for supervision of the bank. One consequence could thus be that a country which is substantially influenced by foreign banks could be forced to pay the bill for unsatisfactory supervision exercised by another country. The lack of a formal link between responsibility for supervision and crisis management is in this case an evident problem. Secondly, the unregulated allocation of responsibility for crisis management means that each country that is involved in a cross-border crisis is thrown upon its own national crisis management and on the goodwill of the other affected countries in contributing to efficient crisis management. It is far from certain that this will lead to the optimal solutions. Without uniform regulations, forms for cooperation or mechanisms for joint decision-making, there is a considerable risk that we will find ourselves in “gamelike situations” where the countries involved act in various ways to avoid paying the crisis “bill”. In this type of situation there is a clear risk that all parties involved will be the losers.
After all, the central rate can be re-aligned if necessary, although such a move would require the agreement of the ECB and the other national central banks participating in the euro area. In practice, however, the initial central rate chosen is important because it conveys a signal to the market about what the ECB and the national authorities consider to be the equilibrium exchange rate. The determination of the central rate is also crucial because if the selected rate turns out to be incompatible with economic fundamentals, market intervention by the ECB and the Central Bank of Malta could become too frequent in relation to the resources available. Determining the appropriate central rate, however, is not an easy task. Nevertheless, though the available evidence suggests that in the current economic climate the Maltese lira exchange rate is sustainable at prevailing levels, work is being undertaken in order to estimate an equilibrium rate. The second choice concerns the fluctuation band. It is a matter of choosing between the lower degree of uncertainty and volatility associated with a narrow fluctuation band and the flexibility inherent in a wider fluctuation band. On the one hand, the flexibility necessitated by the absence of capital controls would strengthen the case for a wider band. On the other hand, Malta’s dependence on foreign trade and investment, the country’s track record with a fixed peg as well as the Central Bank’s commitment to price stability would seem to justify the adoption of a narrow band.

In this respect, a regulatory and supervisory framework based on high international standards is already in place. Maltese legislation in this area in fact incorporates almost all the features of the corresponding EU directives, and the legislative  4  BIS Review 70/2002  amendments I have just referred to have brought about almost total harmonisation. Institutional responsibilities are divided between the Malta Financial Services Authority, which is responsible for the regulation and supervision of banking, insurance and investment services; and the Central Bank, which is charged with ensuring the stability of the system as a whole. The Bank is also responsible for the domestic payments system, which is being upgraded in line with developments in the euro area. According to a recent background paper prepared by the ECB , Malta already has a financial intermediation mechanism that broadly mirrors the composition of different market segments in the euro area member states. Despite the growth of non-bank financial intermediaries and the development of money and capital markets, the banks remain the key financial institutions. Total bank assets amount to more than double GDP, whereas the ratio of domestic credit to GDP is broadly in line with the EU average. More importantly, the banking system is generally healthy, enjoying ample liquidity and a broad capital base, with the ratio between own funds and risk-weighted assets standing close to 14%. Some institutional aspects of EMU preparations I shall conclude with some remarks on preparations of a more operational nature for eventual integration within the ESCB.
During 2005 and 2006, anecdotal evidence suggested that UK pension demand for gilts (and associated hedging by dealers) was a contributory factor in driving long-horizon sterling nominal and real interest rates lower. Indeed, this may have been one reason why UK long-term real interest rates fell by more over this period than overseas rates. Assessing the impact on gilts prices is important for the Bank because we commonly use the differences between indexed and conventional gilts to estimate longer term market inflation expectations. And these calculations have shown an increase in forward inflation breakevens especially in the last few months as nominal long term rates have increased (Chart 10). If that reflects a genuine increase in investors’ expectations of future inflation in the long term that would imply a loss of credibility in the UK regime. However, there are few signs from surveys and market intelligence that UK long-run inflation expectations have picked up. Market contacts cite the sheer weight of institutional demand in the relatively illiquid index-linked gilt market as a more likely explanation why the price of long-dated index-linked gilts has not fallen by as much as conventional bonds over recent months. The comparisons are complicated by the fact that the measure of inflation that is used to index gilts is the RPI while our target is set for the CPI and the gap, which largely reflects the impact of interest rates and house prices on the RPI is significant, is about 0.7% on average and variable (Chart 11).

It is perhaps not a great surprise then that their central projections tend to cluster in a remarkably narrow range. For example, take the forecasters who were surveyed by Reuters prior to the July MPC meeting last year. At that point there were only two out of 47 who expected interest rates to rise above 5% by now and only one expected them to be below 4.25%. Fast forward to the most recent survey and you will see that none of the 52 expect rates to go above 6% in the next year and only two expect rates to go below 5.5%. To gauge the real range of uncertainty you need to look beyond the central forecasts at the full probability distribution of possible outcomes. The fact that most forecasters agree on the prospect does not mean it is likely to happen. Central banks need to be particularly cautious in putting weight on market expectations and outside forecasts because they are based at least in part on judgements about what we will do. In my view it is sensible for independent forecasters to assume that we will do our job and keep inflation low; but we can’t take comfort from the fact that most external forecasters therefore expect inflation to return and stay around target – its our job to justify their faith and keep their confidence. We must avoid chasing our own tail. Of course, the uncertainty of the future and of the past is a factor in our decisions on interest rates.
Several regional economies have already implemented measures including macro prudential measures to preserve macroeconomic and financial stability. Against the backdrop of continuing uncertainties, Asia is expected to continue to lead global growth, supported by strong macroeconomic fundamentals and sound financial systems. The revival of private sector economic activity has been an important factor in sustaining the strong growth prospects in Asia. On the domestic front, the Malaysian economy is set to register a growth in the region of 7% for 2010. While the external sector may be affected by  BIS central bankers’ speeches  1  the slower global growth, the growth momentum of domestic demand is projected to be sustained in 2011, supported by the continued firm expansion in private sector activity. Most encouraging is that private investment is expected to strengthen and become an important contributor to the growth. Achieving financial stability objectives Let me now turn to the efforts to achieve greater financial stability. While there is still much work to be accomplished at the international level, an immediate priority ahead is to achieve effective and well coordinated approaches to the implementation of the announced financial reforms. This is important given the greater inter linkages in the global economy. While the outcome of the quantitative impact studies have predicted that the long term benefits of the measures will outweigh the short term costs arising from the adjustments, actual experiences are likely to vary across different jurisdictions.

But, speaking for the Monetary Authority itself, we see our role as confined largely to that of a catalyst for innovation or a provider of public goods in cases where market mechanisms are unable to respond effectively to an evident need - although it may in practice be difficult to define particular situations in quite such clear-cut terms. It was, for example, partly in that catalytic role that we first issued Exchange Fund paper a decade ago as a means of kick-starting the debt market and supplying high quality assets for liquidity management purposes, accompanied by the establishment of the Central Moneymarkets Unit as a centralised electronic depositary for debt instruments. More recently the CMU has established electronic links with Euroclear, Clearstream and some other national depositaries in our own region. In some of these developments, as in the emergence of initiatives to develop internet trading in bonds, we may be seeing the beginnings of a more global and potentially more liquid and transparent market than has hitherto been typical for debt instruments. Returning to the matter of the Monetary Authority’s role, we do not seek to coerce any parties to use a particular market; nor without very sound reason to stimulate activity artificially; nor to take a lead as issuer, investor, arranger or market-maker when others should be equally capable of fulfilling such 3  BIS Review 57/2000  functions; nor ourselves to subsidise activities the viability of which ought clearly to be left to market determination.
Our working assumption is that banks and others active in the wholesale financial markets will in fact choose to transact most of their wholesale business in the euro-denomination more or less from the start. And we assume that they will wish to offer euro-denominated facilities to major business customers that wished to use them. So, for example, non-financial companies, including large retailing companies, with an active business in other euro-area countries may wish to be able to quote prices or undertake transactions in euros from an early stage, although they would certainly still need to transact most of their local business in national currencies for some considerable period. On the other hand, we would not expect there to be much demand for banking facilities denominated in euros either for individuals or for the vast majority of smaller local businesses much before euro banknotes and coins become available in late 2001 or early 2002. At that point, the conversion of retail facilities into euros might proceed quite rapidly during the subsequent six-month period when national currency notes and coin are to be withdrawn - but again the principle of no compulsion and no prohibition would apply. Retail conversion is of course a massive undertaking. But the timetable does at least provide some 4-5 years from now for people to prepare.

Whatever happens in relation to monetary union it is vital, it seems to me, that we hold on to this fundamentally important consensus. Moving on from there to the narrower question of monetary union, the potential economic benefits and risks have now become much clearer, and are rather well illustrated by our own present monetary policy dilemma. On the one hand, any manufacturer will tell you after his experience since last summer - about the great advantage of intra-European exchange rate certainty. On the other hand, with the single currency comes the single monetary policy the single, one-size-fits-all interest rate throughout the euro-area. The risk very simply is that the single interest rate may not in the event suit the domestic monetary policy needs of all the euromember countries - just as the present level of German interest rates of around 3%, reflecting the disappointing weakness of the German economy, would not at this point suit the UK - where, as I have said, we need to moderate the pace of our economic expansion. The potential economic risks, as well as the potential benefits, were recognised when the Maastricht Treaty was signed - and the famous “convergence criteria” were put into the Treaty precisely in order to limit the risks.
Subject to the statutory rules applying, the responsibility for sound banking primarily rests with the banks themselves. BIS Review 124/1999  8

The decision on foreign currency purchasing was taken under completely different conditions than existed later in the winter when the major development projects in East Iceland changed from plans to reality. The Central Bank’s foreign currency reserves are currently ISK 36 billion (USD 460 million) and it could be argued that they need to be considerably greater. Considering the new circumstances and the altered outlook due to the expected major development and resulting influx of foreign currency, barring unexpected changes the Central Bank will very likely continue its regular purchases of foreign currency on the domestic interbank market even after reaching the ISK 20 billion point. By so doing the Bank would avail itself of the opportunity to boost its foreign currency reserves beyond that which would otherwise be practical. Public discussion in recent weeks has been characterised by considerable criticism of the Central Bank and its monetary policy. From the Bank’s point of view, the debate seems a bit peculiar in some respects, not least because views have typically been attributed to it which have no basis in the writings, speeches or other statements issued by the Bank or its executives. As has been pointed out, people also seem to overrate the ability of the Central Bank to direct market developments, as well as to expect it to strive to achieve all sorts of objectives which it has practically no possibility of accomplishing, and which are in fact not part of its role, such as ensuring a certain exchange rate, full employment, etc.
Our journey officially began with the establishment of the first Islamic bank in 1983 and in the year that followed, the first Takaful operator. We have never looked back since then to evolve a comprehensive domestic Islamic financial system operating alongside the conventional financial system, comprising the Islamic banking institutions, the takaful industry, the Islamic money and capital markets. These respective components have been progressively liberalized over the years, allowing for more foreign presence in the market to become internationally more integrated. This has led to diversity in market players, and the increased competitive forces now provide the impetus for increased innovation in the market. The dynamism in the market has been supported by a robust regulatory and supervisory framework, reinforced by the legal and Shariah framework, the payment and settlement systems. Our Shariah framework in particular is distinctively robust, through the consultative role of the Shariah Advisory  BIS Review 102/2010  1  Council of Bank Negara Malaysia and Securities Commission, complemented by the Shariah board of individual Islamic financial institutions. This strategy has served us well, as it had nurtured innovation whilst ensuring stability in the marketplace. Collectively, the strategies that we had adopted have brought about significant progress on several fronts, in the areas of institutional structure, diversity of players, operational efficiency and the wide range of products and services. Several global players have chosen Malaysia as their regional base for Islamic finance.

Specific arbitration rules for Islamic banking and financial services have also been enacted to compliment the court system and enable disputes relating to Islamic finance to be dealt by the Kuala Lumpur Regional Centre for Arbitration. This infrastructure is unique to Malaysia and reflects the support and cooperation from the legal fraternity to keep up with the development of Islamic finance. Importantly, a supportive judicial system helps create an  BIS Review 102/2010  3  environment where players and consumers are able to execute financial transactions efficiently, with sufficient certainty and enforceability. In recent times, we have witnessed a number of legal disputes involving Islamic Financial transactions that have been brought to the common law courts for settlement. These recent cases tried in the English courts have highlighted the hesitancy on the part of the common law judges to deliberate on issues concerning Shariah principles in Islamic finance transactions. This is quite understandable given the lack of expertise on the matter. While evidence on Shariah matters can be admitted from subject matter experts but such evidence or advice is not binding. The scenario in Malaysia is different. We have a dedicated High Court for Islamic finance related cases and our judges shall refer to the SAC for questions or rulings relating to the Shariah and these rulings are binding. Malaysian courts, therefore are well equipped to uphold the sanctity of the Islamic financial contracts as they have the avenue to make references.
Today it is appropriate to reflect on the motives that prompted the ECB to adopt these measures, to review their progress and, lastly, to analyse the financial and macroeconomic impact they have had, both in Spain and in the euro area overall. COVID-19 emerged in the euro area in a setting of low inflation and broad monetary stimulus, with policy rates at all-time lows, new net purchases of assets under the asset purchase programme (APP) and a schedule set for the targeted longer-term refinancing operations (TLTROs-III). From the outset, the ECB faced three significant pandemic-related challenges: first, the need to stabilise financial markets throughout the euro area, to head off cross-country financial fragmentation; second, to protect the supply of bank credit, which is especially important for funding for households and SMEs; and third, to endeavour to neutralise the downward pressures on inflation stemming from the COVID-19 crisis, in accordance with the ECB’s price stability mandate enshrined in the EU treaties. Against this backdrop, the ECB adopted a series of measures that may be grouped into two main blocks: first, those designed to encourage the supply of bank credit to the real economy; and second, those relating to the asset purchase programmes. Taking the first block, the ECB approved a broad raft of measures to provide liquidity to banks so that they, in turn, were able to ensure access to credit for households and firms. These included, in particular, the improvements to the conditions of the TLTROs-III.

21  framework and regulatory environment, the purpose of which is to increase well-being and opportunities in society. It is frequently the case, however, that even though aggregate well-being improves, the costs and benefits of measures are unevenly distributed, whether among agents (because a redistribution of income is involved), or in terms of their time profile (because the costs are more immediately visible than the benefits). As a result, the implementation of some measures is difficult. In this respect, international evidence shows that, in practice, reforms tend to be introduced more often in crisis periods, perhaps because, under such circumstances, the short-term economic and social costs of postponing their adoption tend to be greater than the cost of implementing them.11 Hence the need to forge a broad consensus, which will sometimes require the support of efficient compensation and incentive arrangements, but which, above all, needs to be based on a long-term perspective, as this is essential to generate the necessary certainty and credibility. In the current context of elevated uncertainty regarding the impact of the pandemic, both as regards its duration and persistence and its varied impact across countries and industries, one of the main contributions of economic policy is precisely to help provide firms and households with a horizon of greater certainty. This is a task for all institutional levels, both domestically and internationally. Ladies and gentlemen, we need to be aware of the scale of the challenge facing us, which is to restore a path of prosperity and opportunities for all.