samchain/econo-pairs-v1 huggingface dataset:
The thrust of the recommendations in the Consultancy Study is greater competitiveness through liberalisation, deregulation and simplification. But an equally important message is that greater competitiveness should not be achieved at the expense of the safety and soundness of the banking system. The challenge is how best to exploit future opportunities while containing the risks. Recognising that the global trends it has identified are likely to increase the level of risk to which banks are exposed, the Study makes a number of recommendations designed to enhance the safety and stability of the system as a whole. You are aware of the details of the recommendations. You may also wish to be aware of the fact that the internal deliberation within the Government, after the threemonth public consultation period earlier this year, is drawing to a close, and an announcement on the Government’s decision on the recommendations will likely be made shortly. I would like to take this opportunity to thank HKAB again for the very helpful views expressed on them. I would also like to take this opportunity to deal specifically with one of the recommendations that has been widely supported in the comments received during the consultation period, although the subject matter itself may involve a certain degree of controversy both in theory and practice. This is the recommendation that the HKMA should clarify its role as lender of last resort.

Mr Yam elaborates on the role of the Hong Kong Monetary Authority as the lender of last resort Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, JP, at the Half-yearly Dinner of the Hong Kong Association of Banks in Hong Kong on 29 June 1999. The HKAB and HKMA Partnership I am delighted to have this opportunity to speak to the Hong Kong Association of Banks (HKAB) at its half-yearly dinner again. The last opportunity for doing so was in December 1992 when, ahead of the formation of the Hong Kong Monetary Authority (HKMA), I spoke as the Chief Executive (Designate) of the HKMA. It has been almost seven years, and although it is rare for the HKAB to invite the same speaker a second time, I must confess that I was privately beginning to wonder. Then your current Chairman picked up the phone with this very timely invitation that I gladly accepted. This is perhaps yet another good indication of the close partnership and understanding built up over the years between HKAB and HKMA. Together we have been through a lot and have achieved a lot. Our work together has embraced the continuous process of monetary reform; the strengthening of our supervisory framework; the building of a sophisticated financial infrastructure, notably the establishment of CMU and the introduction of RTGS; the preparation for the handover; and the handling of the Asian financial turmoil or, to give it perhaps a more appropriate term, the crisis of globalisation.
But effective delivery extends well beyond mechanically changing parameters within our systems. The Bank’s operations in money, gilt, corporate bond and foreign exchange markets, its operation of the Real Time Gross Settlement (RTGS) system, all supported by its comprehensive financial and operational risk 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  management framework, afford it a unique insight into the workings of the financial system. Markets and Banking staff are thus able to advise members of the MPC, FPC and PRC about key developments in monetary and financial conditions. Our operations also leave us well placed to assess the resilience and effectiveness of markets and the infrastructure that underpin them. The Bank has always stood ready to use its convening powers or, where necessary, intervene directly in order to help ensure the smooth functioning of core sterling markets. But this has been given new impetus in recent years as initiatives such as the Open Forum and the Fair and Effective Markets Review made clear that the Bank considers scanning the horizon for emerging vulnerabilities as important as stepping in when risks have crystallised. Working to monitor and improve resilience and effectiveness is something I consider to be a core part of delivering not only monetary, but also financial stability. And I believe the Bank’s work in this area will play an important role in ensuring the UK has a resilient, effective and innovative financial system as it leaves the EU.

Our own forecast for the interest rate has the advantage that it is produced together with the forecasts for GDP, inflation, employment and so on. Moreover, market expectations can vary substantially over time, which can lead to the information content in the macro forecasts as a whole declining. The evaluators also consider that the Riksbank’s schedule for the different stages in the monetary policy process does not correspond to how the forecasting and policy-making work is carried out since the new repo rate path was introduced. In their view, the changes have meant that, in practice, the actual interest rate decision has been brought forward. They therefore recommend that the Riksbank should announce the monetary policy decision and  2  BIS central bankers’ speeches  interest rate path earlier, namely directly after the meeting of the Executive Board that is held a couple of days after the second monetary policy group meeting. However, we consider this proposal to be difficult to implement. Although the analyses and forecasts are largely complete by the second monetary policy group meeting, the monetary policy decision is made at the monetary policy meeting and not before then. Any reservations against the decision are put forward at this meeting, too, and not earlier. In conclusion, let me once again thank Professors Goodhart and Rochet for their valuable contribution to our continued work on both monetary policy and financial stability.
The events of recent months have highlighted the problems posed, as regards exiting the crisis, by the rapid fiscal deterioration which took place during the recession and which was exacerbated by the contagion of the Greek fiscal credibility crisis to other potentially vulnerable economies, including Spain. To put the scale of this challenge in context, I shall review the factors which led the Spanish general government deficit to a level of 11.2% of GDP, from a surplus position of 1.9% of GDP two years earlier, and which increased the public debt ratio by around 17 pp of GDP over this same period. An initial factor, while not the most important one, is that stemming from the economic contraction which accelerated expenditure on unemployment benefits and on other items linked to the cycle, and dented tax bases, causing a sharp reduction in revenue from certain taxes linked to labour and corporate activity and to spending. Adding to this was the impact of the exceptional support measures adopted by the government in the face of the depth of the recession, in line with agreed global action, and which in our country exceeded those in other developed countries. But what proved of great importance was the loss of tax revenue as a consequence of the sharp adjustment in the real estate sector and which, unfortunately, has a very high permanent component. All these developments combined with a rising trajectory of public spending systematically higher than that of the economy’s trend growth.

In the current circumstances any deviation from projections could have serious consequences for the credibility of the fiscal consolidation efforts. To ensure strict compliance with targets, monitoring and supervision procedures will have to be strengthened and contingency plans designed to ensure that targets are met and certain expenditure items are behaving adequately. The cooperation of local and regional governments is essential if the ambitious process of fiscal consolidation facing us is to be tackled successfully. The fiscal effort to be made by the Spanish economy, in a situation in which the available projections point to moderate growth, is considerable, and may become even more so if nothing is done to correct the upward path of interest rates triggered by the Greek fiscal credibility crisis and the contagion spreading it to other vulnerable economies. To make this effort feasible, the fiscal consolidation programme has to be accompanied by structural measures designed to strengthen the potential growth of the economy, since this largely determines the sustainability of public finances. In this respect, it is vital to correct the inefficiencies which have grown up in the labour market, since here the required reform will largely determine Spain’s ability to become more competitive and generate employment. Nor should it be overlooked that a relatively significant part of the increase in the budget deficit in the last two years is directly or indirectly related to the rise in unemployment.
As the restructuring process moves on, moreover, the industrial sector is increasingly composed of more resilient firms producing higher value added products, while new, important sources of output growth are emerging, such as financial and ICT-related services. I, therefore, believe that there are grounds for cautious optimism, provided we persevere. It will, however, take time; there are no easy short cuts to faster growth. 2. EU accession was meant to boost our trade. In fact, exports were down by 11.3 per cent in 2005, although the EU’s share edged up slightly to 51.5 per cent. Don’t tell me the problem is the EU economy, not ours ... First, let’s get the facts right. While Malta’s exports did fall by 11.3% last year, exports to the EU were only 5.2% lower. The drop, moreover, was entirely due to reduced sales of electronic goods and clothes. Sales of some other product categories to the EU increased. And do not forget that Malta is also increasingly an exporter of services, which are not included in these numbers. Second, in the real world it is hardly ever the case that things are either black or white. For a start, it is a proven fact that membership of a single market, particularly in the presence of a monetary union, results in a marked expansion of intra-market trade. That has been the experience of existing EU and euro area members. It is not reasonable, however, to expect that to happen in the first full year after membership!

This is a role the Bank has endeavoured to play consistently, and for good reason. The more people understand how our economy works, the challenges it is facing and the limited options available to overcome them, the greater the likelihood that policymakers will feel comfortable to take the required decisions promptly, leading to a faster pace of wealth creation, which is one thing we all want. 11. The adoption of the euro will greatly reduce the role of the Central Bank of Malta. What will you be doing in January 2008? Your question reflects a perception that is commonly held but which is not borne out by the experience of the current members of the euro area. It would be more correct to say that the Bank’s role will be greatly changed rather than reduced. Some existing functions will become less important, others more so, and yet others created. On the institutional level, the transfer of responsibility for monetary policy to the ECB would be replaced by the Governor’s participation in the Governing Council where interest rates are set for the euro area. For this purpose, we will need to strengthen our capacity in the areas of economic research, forecasting and statistics and redirect its focus. This also applies to our activities in support of monetary policy, such as open market operations, which would be conducted within the parameters set by the ECB.
In a 2009 report on the crisis, the OECD observed that “corporate governance routines did not serve their purpose to safeguard against excessive risk taking”. A crucial shortcoming in many cases was the corporate culture within financial institutions. It is therefore no surprise that “weaknesses in risk culture are often considered a root cause of the global financial crisis”. We all know too well how loans were systematically sold to people who were clearly unable to repay. Lenders operated on a legal, but ethically questionable, originate-to-distribute business model – this saw the risks associated with sub-prime mortgages being repackaged and sold off to unsuspecting third parties. Another sobering example of the link between culture and crisis comes from a finding of the Financial Crisis Inquiry Commission in the United States on Lehman Brothers. The Chief Risk Officer was stripped of her role after raising red flags on risks, in the face of intense competition from other investment banks. As we all know, the bank went on taking much more risk that it could reasonably manage – and the rest, is history. While the global financial crisis has inspired much conversation about ethics and culture, these issues are by no means new. Throughout the 2000s, an estimated 45 million payment protection insurance (PPI) policies worth around £ billion were widely mis-sold to customers in the UK. Many people did not even know that they were buying a PPI policy.

This will lead to increasing the confidence in the financial system. The Basel Committee on Banking Supervision and the Board for International Accounting Standards have already undertaken certain activities. •  The regulation on determining and measuring banks' solvency deserves special attention. The appropriate level of capital is the main anchor for a stable banking system. When this issue is discussed internationally, primarily a reference is made to the New Capital Accord, the so-called BASEL II. It is being criticized even before its full implementation and therefore it is inappropriate to refer to it as one of the reasons for the current crisis. However, it is important to mention that draft amendments have already been prepared as a response to the new developments. Those are, inter alia, the following: -  Improvement of the manner of covering the risks arising from the use of structural financial products. -  Changes in determining the capital necessary for covering the risks from banks' trading portfolio, especially of those instruments characterized with lower liquidity on the market. -  Measures for reducing the effects from the economic cycles on the level of the capital requirement. The purpose is: to allocate more reserves in periods of expansion in order to provide sufficient capital for covering the losses in times of crisis. This is Spanish experience, known as "dynamic provisioning". -  Expanding of the type of data which the banks will be obliged to disclose.
  To overcome these difficulties supervisors need to look ahead, be sensitive to changing practices in banks, and anticipate the impacts of emerging risks not only to new products but also to new or disproportionate sources of income. I believe that some sort of “benevolent skepticism” towards them is warranted from supervisors. Indeed, the potential costs in terms of financial stability and economic output of not digging deeply enough into complex products or not controlling that firms do understand their own risks may simply be too high. Supervision should spur better risk analysis and control at the firm level. 31. Regulated financial entities are complex and evolving institutions. Internal governance processes are the first line of defense against excessive risk-taking whether at the management or technical level. To make sure that this first line of defense is solid, supervisors should pay attention to compensation and governance issues. 32. Under the aegis of the Financial Stability Board, major advances have been made to ensure that compensation policies in financial firms are better aligned with long-term value  BIS Review 113/2010  5  creation, and do not support excessive short term risk-taking. Principles for sound compensation practices have been published at the end of last year. Endorsed by the G20 they will be incorporated into supervisors’ rule book.

Following the intensification of the financial crisis in Autumn 2008 – and against the background of rapidly receding inflationary pressures – we have taken monetary policy measures that are unprecedented in terms of nature, scope and magnitude. These measures fall into two categories: first, standard measures in the form of interest rate changes (Since October 2008, our key policy rate has been cut from 4.25% to 1%); second, what is known as “non-standard” measures, encompassing a policy of fully accommodating banks’ liquidity needs, enlarging the list of eligible assets, lengthening maturities for refinancing operations, the provisioning of liquidity in foreign currencies but also the purchasing of covered bonds and, more recently, government bonds. 8. Let me add that we never ruled out to implement asset purchases, when it appeared necessary to repair dysfunctional markets to ensure a proper transmission of monetary policy impulses. Indeed, in 2009, the ECB embarked into a program of covered bonds purchases, which is now completed. Although modest in size (60 bn euros), this program has been fairly successful in reviving a market segment which in turn supported bank funding at a time where bond issuance were secure. 9. The recent decision to purchase Government securities should be seen in the same light. The objective of this program is to address the malfunctioning of securities markets to restore an appropriate monetary policy transmission mechanism. These interventions are sterilized as liquidity injected is exactly drained, thus fully neutralizing the effect on the banking system. 10.
In particular, critical financial institutions were not resilient enough to cope with large scale disruptions without assistance, and problems in one institution quickly spread to others. In response, the Federal Reserve has made significant changes in how we regulate and supervise financial institutions. We have raised capital and liquidity requirements, put banks through annual stress tests, established the Large Institution Supervision Coordination Committee (LISCC) to enable us to evaluate the largest firms collectively and relative to one another, and set up the Office of Financial Stability to enable  9  The Federal Reserve was unable to prevent the bankruptcy of Lehman Brothers. 10  For example, see “Federal Reserve: Emergency Lending,” Marc Labonte, Congressional Research Service, January 6, 2016. 11  In retrospect, I believe more government support could have been provided to homeowners. Although the Federal Reserve did not have the authority to implement a mortgage modification loan program, we did implement a mortgage-backed securities purchase program to lower mortgage interest rates. 4  BIS central bankers’ speeches  us to look at the financial system more holistically. Financial stability now receives the attention it deserves. For example, there are now regular briefings and discussions on financial stability at FOMC meetings. As discussed earlier, the Federal Reserve has the responsibility to be the lender of last resort. In normal times, this occurs through discount window lending to depository institutions. During the financial crisis, Section 13(3) of the Federal Reserve Act enabled extensions of credit in “unusual and exigent” circumstances to individuals, partnerships and corporations.

The Dodd-Frank Act left intact the decentralized structure of the original federated Federal Reserve System – the twelve Reserve Banks and the Board of Governors in Washington. Each Reserve Bank continues to operate as a separately capitalized corporation with its own Board of Directors. 14 But, to limit the role of bankers on the Federal Reserve Bank boards, the Dodd-Frank Act prohibited the bankers on each board from participating in the selection of its Reserve Bank president. 15 Even prior to the Dodd-Frank Act, it is important to emphasize that the directors played no significant role in setting policy. 16 Instead, their role has been to advise the Reserve Bank  12  Several other conditions had to be satisfied as well. 13  Although considerable progress has been made in ending TBTF, I think it is premature to declare victory. Some banks still have work to do to make their resolution plans credible, and there needs to be more work on cross-border issues to ensure that such a resolution would proceed smoothly. 14  Each Board is made up of nine members divided evenly into Class A, B, and C directors. The Class A directors represent the banks of the District that are Federal Reserve member banks, the Class B and C directors represent the broader public interest. Only eligible Class B and Class C directors can participate in the process for selecting Reserve Bank presidents.
The key to addressing the tension between development and decarbonization lies in credible and inclusive transition pathways, based on strong public-private partnerships. Transition plans should enable progressive decarbonisation that is aligned to net zero goals while taking account of developmental needs and providing support for communities to pivot to new growth opportunities in a green economy. The GFANZ Asia-Pacific Network has the potential to spearhead this effort in Asia, mobilising banks, insurers, asset managers, and service providers in this part of the world, and facilitating alignment in a credible and inclusive transition towards net zero. I am pleased to be part of this effort as Chair of the Advisory Board of the GFANZ AsiaPacific Network, from two perspectives. First, as Chair of the Network of Central Banks and Financial Supervisors for Greening the Financial System (“NGFS”), I look forward to opportunities for collaboration between the NGFS and GFANZ, exploring further how financial regulators and financial institutions can work together to address climate related risks and advance the net zero agenda. Second, from the perspective of the MAS, which is actively working with the financial industry to develop green finance solutions, markets, and infrastructure, I look forward to opportunities for partnership between MAS and the GFANZ Asia-Pacific Network to promote a vibrant green finance ecosystem here in Asia. The task ahead is daunting. Asia is diverse – across stages of economic development, and across a variety of climate related risks and transition challenges. But the task is hugely purposeful, and if we succeed, transformative.

For if we can successfully help Asia transition to net zero, it will go a long way in getting the world to net zero. Thank you very much. *****