samchain/econo-pairs-v1 huggingface dataset:
In particular, should central banks continue to use their single monetary policy instrument – in our case Bank Rate, supplemented when necessary by unconventional operations – to aim solely at price stability, or should they aim also at wider financial stability objectives, as some have suggested? For over fifteen years Bank Rate has been set to meet an inflation target. And it was very successful in achieving that objective until commodity prices pushed up inflation in 2007. Since the Monetary Policy Committee was established, the average inflation rate has been only 0.1 percentage points away from the target. The strategy of inflation targeting ensured that the MPC maintained a balance between overall demand and supply in the economy. We could, of course, have pursued a different policy. We could have set interest rates consistently at a higher level in order to lower the growth of domestic demand below the rate at which inflation was stable and close to the target. In the words of my predecessor, we could have rejected the approach of accepting “unbalanced growth rather than no growth”. But to argue that Bank Rate should have been set to achieve not price stability but other objectives would have meant accepting rising unemployment and falling inflation. And that would not have altered long-term interest rates in world capital markets and “irrational exuberance” in financial markets in the US and elsewhere.

In the panic of 1906, the founder of what is now the Bank of America displayed his gold reserves on the street and offered to convert deposits into gold, creating confidence in his bank at a time when many others failed. Forty years ago, the clearing banks in London held around 30% of their assets in short-term liquid instruments. Today that liquid assets ratio is about 1%. For the major UK banks, almost 25% of customer loans are now funded by short-term borrowing in wholesale markets. At the turn of the new century it was close to zero. This was the distinctive feature of the contemporary British model of banking. Distinctive it may have been; sensible it was not. HBoS and RBS paid the price as the availability of this funding dried up, and not one of the building societies that de-mutualised in the 1980s and 1990s in order to expand beyond the constraints of their deposit base has survived as an independent entity. Banks have changed. They have encouraged the expansion of proprietary trading, the funding of long-term assets in short-term wholesale markets, a rapid expansion of balance sheets and a marked rise in leverage. Commercial banks followed the path of investment banks. Balance sheet size and high leverage were seen as the key to obtaining funds at lowest cost. The total assets held by the world’s largest banks roughly doubled in the five years to the end of 2008, and leverage in UK banks rose on average by two-thirds.
Income distribution of consumer credit borrowers relative to the general population  Sources: Finance & Leasing Association, Society of Motor Manufacturers and Traders (SMMT) and Bank calculations. (a) Annual sterling gross lending to individuals on dealership car finance for new car purchases provided by Finance & Leasing Association members, attributed to personal contract purchase (PCP). (b) Annual transactions on dealership car finance for new car purchases provided by Finance & Leasing Association members, as a proportion of SMMT new car registrations. Sources: NMG Survey and Bank calculations. 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  Chart 15. Stylised PCP deal  Chart 16. Market share objectives as a factor contributing to changes in secured credit (a)(b)(c) availability Net percentage balances (c)  Balance remaining Car value/amount left to repay £  Car value  40  20,000 Deposit  20  18,000 Monthly payments  16,000 0  14,000 Margin  12,000  -20  10,000 Optional balloon payment  8,000 2007  2009  2011  2013  2015  -40 2017  6,000 4,000  5  10  15  20 Month  25  30  35  Source: Bank calculations. Example shown: • Car value at new is £ Car value depreciates 45% after 3 years with most of the depreciation occurring in the first year. • Initial deposit of 10%. • 36 month contract with monthly repayments of £ per month. • Optional balloon payment of £ at the end of the contract.

These factors combined have resulted in a large increase in the different measures of inflation, bringing CPI and CPIX1 (a measure of core inflation that excludes perishable foods, energy and regulated tariffs) annual change close to 4%. By contrast, labor cost pressures and other inflation trend indicators are nearer to 3%. Similar problems (i.e., increased inflation due to sudden rises in food prices) have been recently suffered in such diverse countries as South Africa, Brazil, Colombia and China. It is interesting to note that a price measure that excludes foods and energy prices, similar to the CPI core inflation calculation applied by the US, shows annual change below 2% in July (Figure 2). 2  BIS Review 97/2007  Figure 2: CPI, CPIX1 and CPI inflation excluding food and energy (annual change, percent)  Note: In brackets participation in total CPI basket. Sources: Central Bank of Chile and National Statistics Bureau. This phenomenon is not new. Given the supply-side or specific price shocks, the 2000s have seen annual inflation drop below 2% and climb above 4% during temporary episodes. In this picture of higher CPI inflation due to various supply shocks, short-term inflation expectations have increased substantially, but remain close to 3% for medium and long term. Because monetary policy affects inflation with lags that are largely unknown, but long – usually more than a year – not much can be done to reverse a short-term inflation jump.
The FPC was able to do so because of its policy I mentioned a moment ago: it maintained a non-zero UK CCyB resting rate in normal times, which was its assessment of the financial system before the pandemic struck.10 A regulatory buffer is said to be usable if banks will dip into it when faced with shocks – that is, they will willingly allow their capital (or liquidity) ratios to decline below it – without taking actions that could have undesirable consequences either for micro-prudential resilience or for macro-prudential stability, including restricting lending to the real economy in a way that amplifies the initial adverse shock. In practice, there is an observable spectrum of usability (Chart 3). 10  See Bank of England’s December 2019 Financial Stability Report (pg 8) 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Chart 3: Spectrum of usable and releasable buffers  At the more usable end are management buffers: firms can dip into these with no regulatory consequences, although even here they may be reluctant to do so. That reluctance may stem from their internal risk appetite and/or because the market judges that regulatory buffers are insufficient to absorb losses. At the other end is the Capital Conservation Buffer (CCoB): use of this regulatory buffer triggers distribution restrictions which firms may prefer to avoid if they believe reductions in dividends (for example) are viewed as a sign of weakness by investors.

Zeti Akhtar Aziz: Central banking in the 21st century – implications of economic and financial globalisation Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at Central Bank of Malaysia’s High Level Conference 2009 “Central Banking in the 21st Century: Implications of Economic and Financial Globalisation”, Kuala Lumpur, 10 February 2009. *  *  *  Honourable Governors, Distinguished guests, Ladies and Gentlemen, It is my pleasure to welcome you to the Bank Negara Malaysia Conference on "Central Banking in the 21st Century: Implications of Economic and Financial Globalisation" that is being held in conjunction with the 50th Anniversary of Bank Negara Malaysia. Indeed, the conference takes place at a time when we need to reflect on the many issues that are emerging from the current global financial and economic crisis and the new challenges and lessons it brings to central banks. We are most honoured by the presence of central banks from more than 50 countries who have come to be with us on the occasion of our 50th Anniversary. This gathering has also brought together distinguished speakers not only from the central banking community but also outstanding scholars and senior practitioners from the financial services industry. It is hoped that this conference will contribute to a greater understanding to the issues confronting central banks in the 21st century.
There is some evidence of underlying measures of UK inflation having been subdued, both absolutely and relative to target.6 Chart 4 shows some measures of underlying UK inflation over the past decade. While they have fluctuated cyclically, these have more often undershot than overshot target-consistent levels over the past decade. UK inflation expectations have, nonetheless, remained stable at low levels (Chart 5). A number of reasons have been given for subdued levels of inflation, in the UK and globally, over the past decade in particular. Some of these factors are cyclical, demand-side factors, while others are structural, supply-side factors. Let me discuss each in turn. 5 6  26/02/21: These series have been corrected for a basing error in the original version. Tenreyro (2020).

Despite the much larger hit to activity, the peak output gap following the Covid crisis, at 3% of GDP, is materially smaller than following the global financial crisis. The output gap is also judged likely to be significantly less persistent, lasting only around 18 months. 13 14  These compositional effects were discussed in the February 2021 Monetary Policy Report. Broadbent (2021). 13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  Chart 11: Demand and Prices across Sectors (a)  Source: ONS and Bank calculations. Notes: a) Data points refer to goods and services that have been predominantly affected by a demand shock. These are spending categories where consumption and inflation have both increased, or where they have both decreased. Categories affected by changes in energy prices and those where prices are regulated are excluded. Air travel is also excluded. Dashed line represents the line of best fit. (b) Changes in inflation rates between the three-month average to February 2020 and October 2020, measured as the number of standard deviations from their 2012–19 average. c) Consumption growth over the four quarters to 2020 Q3. These differences in output gap profile seem plausible. The fall in output after the Covid crisis was atypically sharp due to restrictions being imposed. So we might expect an atypically sharp recovery in activity as restrictions are eased.
Muhammad bin Ibrahim: Catalysing SME growth Speech by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the Official Book Launch of “Catalysing SME growth”, organised by Credit Guarantee Corporation Malaysia Berhad (CGC), Kuala Lumpur, 21 June 2013. *  *  *  Saya ingin mengucapkan tahniah kepada CGC atas pelancaran buku “Catalysing SME Growth”, sempena menyambut ulangtahun yang ke-40, yang merakam sejarah CGC dalam menyokong institusi kewangan di Malaysia bagi mambantu menyediakan pembiayaan kewangan untuk perusahaan kecil dan sederhana. CGC sebagai satu institusi, terus kekal kukuh dan teguh serta mempunyai pengetahuan yang dalam mengenai teras perniagaannya setelah melalui pelbagai kitaran perniagaan dan ekonomi sepanjang 4 dekad. Izinkan saya meneruskan ucapan saya dalam bahasa Inggeris. The Malaysian economy has undergone many changes in terms of both size and sectoral composition since CGC’s establishment in 1972. From being an agricultural-based economy with a GDP per capita of RM1,5981, Malaysia has become a more industrialised and serviceoriented economy with a GDP per capita of RM32,124 as at end-2012.1 This remarkable story of growth is supported by the expansion of financing to the private sector by the financial system. In 1973, outstanding loans by commercial banks in Malaysia stood at RM5.5 billion. As at 30 April 2013, total outstanding loans by commercial banks increased to RM1,138.6 billion2 with annual growth rate (CAGR) of 19.6% since 1973. The outstanding amount of SME financing stood at RM184.5 billion (16.2%).

From the book, we can see a long list of CGC schemes introduced throughout the years, each reflecting the stage of development of the country then, and also consistent with the strategy of the country’s economic policies. From CGC’s earliest products such as the  1  Keluaran dalam Negeri Kasardan Pendapatan Negara Kasar pada Harga Semasa dan Harga Malar, Economic Planning Unit (EPU) statistics  2  Bank Negara Malaysia data  BIS central bankers’ speeches  1  Hawkers and Petty Traders Loan Scheme, catering to financing as low as RM500, to the recent Green Technology Financing Scheme, CGC has done well in providing the needed support to the ever-progressing and expanded nature of the Malaysian economy. CGC’s achievements would not have been possible without the support of the financial institutions. The successes of CGC’s guarantee schemes were the result of the trust and collaboration between the corporation and the participating financial institutions. It is for this reason that over the years many achievements have materialised. CGC has achieved a lot of success it can be proud of, but as with life, we must move forward. Change is constant it becomes more rapid. There are a few things that we could do for the SMEs. First, we can lower the financing cost for SMEs which obtain guaranteed financing under CGC. On the average, SMEs are being charged between 10 to 12 percent. This is about BLR plus 5 to 6 percent. The rate imposed is much too high.
The growing sophistication and complexity of financial activities, brought on by financial innovation and globalisation, have made risk management a key and important task for all banks. In particular, the integrity of real-time information on changing prices, valuation of financial position, and warning on breaches of internal control is most critical now for bank’s top management in taking timely and prudent decision. The recent episode in the global financial market has demonstrated again the costly implication of weaknesses in this area. For these reasons, information technology and its management has become a key part in business strategy as it can provide lever to create competitive edge and innovate business model, especially for providing customer reach in a cost-effective manner. But on top of this, pressure from competition and the need to cut costs also have forced banks to rethink their business models and strategies, leading to fundamental changes in the business process that include the proliferation of outsourcing, electronic banking, and the use of the internet. Again, while these developments are positive, they also expose banks to a different aspect of risk management, for example how to manage and control outsourced activities. Such an environment, if not properly managed, can lead to greater technological and security risk, as well as to malicious activities. For central banks, one of our key mandates is to ensure financial system stability.

The concern is not so much about control over access to restricted areas and cash vault, but about ensuring proper authorized access to the IT systems and the electronic funds transfer network. And the issue is not so much about keeping bank premises open after a major disaster, but about ensuring that all key banking operations and network continue to function uninterrupted under a proper business continuity plan. These are aspects of modern security risks to banks. They are part of the broader operational risks, which have received greater attention as the business of banking moves further and further away from face-to-face transactions. In Thailand, to address this challenge, we as bank supervisors, have over the past years provided best-practice guidance to the local banking industry in a number of important areas, including loss data collection, business continuity management and plan, IT security, outsourcing, and IT disaster recovery. In addition, Basel II will, for the first time, impose an explicit capital charge on banks for operational risks, on top of the traditional credit and market risks. Implementation of Basel II in Thailand will begin at the end of this year, and the preparation for its implementation is progressing on schedule. I am confident that with the implementation of Basel II, the quality of risk management by banks in Thailand, especially with respect to operational risks, will improve further. I have taken a lot of your time in this opening remark. But the topic of today’s seminar is important.
Firstly, it is strongly influenced by energy prices, which in the closing stages of 2007 are unlikely to repeat the favourable pattern of late 2006, so the growth rate of the HICP is being subjected to an upward base effect of some size. Secondly, the demand pressures and decreased supply in the markets for certain food products are exerting upward pressure on the prices of those products. This is, in short, the macroeconomic situation of the euro area as it faces the financial market shocks. The time elapsed and the information it has been possible to gather since the summer are clearly insufficient to predict with any accuracy the most likely effects of this turbulence on the European economy in the medium term. Before July, the persistence of the global imbalances and of protectionist pressure in some markets, the uncertainty over the future behaviour of oil and commodity prices, and the pressure that more buoyant employment might exert on wage demands made for a scenario in which the balance of risks to euro area activity growth and price stability was moving downwards in the first case and upwards in the second. Subsequent events in international financial markets since then suggest an increase in downside risks to activity, which may have mitigated to some extent the risks to price stability, which continue to be upward. However, uncertainty is still very high in relation to at least three factors that may be crucial for the outcome of this bout of turbulence.

That said, it is equally important for policymakers to ensure that mechanisms for swift NPL resolution remain appropriate, not only to prevent an accumulation of legacy NPLs in the banking sector but also to provide borrowers impacted by this pandemic an opportunity to bounce back once the crisis abates. Such a balanced approach helps to preserve the value and productive capacity of borrowers in turn limiting long-term damage to the economy. For Malaysia, work is underway to strengthen legislation which will expand the coverage of businesses that can benefit from court-sanctioned recovery mechanisms. This will help flatten the insolvency curve and avoid more permanent scarring, if NPL cases were to spike. Admittedly, this is an area where there are opportunities to do more and one where all of us can potentially learn from each other. Concluding remarks Let me conclude. Looking ahead, we are cautiously optimistic that the tide may be finally turning in this crisis. However, we certainly can’t conclude that the COVID-19 pandemic is firmly behind us. We humbly admit that the virus has wrong footed us several times. The hallmark of good policymakers is to, as the saying goes, “hope for the best, but prepare for the worst”.
In parallel, the disruption to supply chains I have mentioned above has increased corporate pricing power. After all, for every producer that has difficulty sourcing its inputs, there is supplier one step earlier in the supply chain that faces strong demand and scope to raise prices. Both a tight labour market and strong corporate pricing power are likely to increase the possibility that price and wage setting dynamics add to the intrinsic persistence in inflation. Another influence on intrinsic inflation persistence is the magnitude of the shock itself. Our standard models are linearised around the steady state defined by the inflation target. This approach is robust to small deviations from inflation target. But where deviations are substantial, non-linear effects may kick – and our standard models may underestimate inflation persistence. For example, now that inflation is substantially higher than target owing to the size of the energy price shock, firms may shift from a ‘time-dependent approach’ to pricing behaviour – say raising prices just once a year – to a ‘state-dependent approach to pricing – say raising prices more frequently as energy costs pass different thresholds. [21] Such a change in behaviour will naturally change the dynamics of the inflation response, possibly creating additional intrinsic inflation persistence in ways that are not captured by our existing models. In principle, we can estimate new models incorporating such non-linearities.

But I think that, rather than an expense, we should consider enhanced systems or governance as long-term investments. Despite the difficulties, we are seeing adjustments to bank business models, partly as a result of the pandemic but also in response to a trend that had been under way for some time. Headway is being made in digitalisation and process optimisation, which may impact internal control functions. We are also seeing greater resort to outsourcing, and nimbler and more flexible ways of working are being implemented. All these trends involve changes that redress problems and improve efficiency. But, regrettably, they also pose additional risks. It thus seems that neither banks nor supervisors can lower their guard as regards risk. In fact, I believe future work is guaranteed for those of us who make a living from risk measurement and management. Financial education I will conclude referring to an area which I believe is not given sufficient attention, despite it being crucial for ensuring a responsible financial culture that will contribute to the future economic viability of banks, companies and individuals. Clearly, end-financial consumers, especially individuals, are the weakest part of the customerbank relationship. That makes it important for banks to take the utmost care when they advise customers to take up their services. 5/6  BIS central bankers' speeches  But we must acknowledge that a shortfall in financial knowledge among citizens is the starting point here. And this may have prompted mistaken decision-making.