samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: Financial systems for economic growth Speech by Mr Christian Noyer, Governor of the Bank of France, at the 3rd Conference of the Monetary Stability Foundation, Frankfurt am Main, 6 July 2006. *  *  *  Ladies and gentlemen, •  Thank you for inviting me to this conference. It is a great pleasure to address a topic, namely “Financial systems for economic growth”, which is of the utmost importance not only to central bankers but also to all economic agents, in mature as well as in emerging economies. •  In modern economies, financial systems fulfil two main functions: (i) first, allocate savings to investment opportunities and (ii), second, distribute and allocate risk between economic agents. I will address each in turn before concluding with some thoughts on the role of central banks. I  Financial systems, saving, investment and economic growth  It is generally recognized that financial development contributes to higher long-run economic growth. There is a debate however, as to whether some financial structures are more efficient than others in allocating savings to investment. My own pragmatic view is that financial intermediaries and markets should be viewed as complementing, rather than substituting one another. A  Financial development contributes to higher long-run economic growth  Well-developed financial intermediaries and well-functioning markets can generate growth by improving the efficiency with which savings are used and increasing the amount of funds allocated to firms.

The emergence of substantial markets in forward, futures, options swaps and other derivative instruments has significantly altered the conduct of borrowing, investment and risk management activities. The significant economic benefits of financial derivatives include: (i) permitting the unbundling and trading in risks, (ii) the ability to hedge price risks and to synthesise investments with greater efficiency and lower costs, (iii) and an increasing liquidity of and trading in financial assets. I would expect this process of constant innovation to continue in the decade ahead. First, because innovation is a natural feature of modern financial markets. The expansion of the credit derivatives in the last five years illustrates how fast new instruments cans develop and expand. And, second, because markets are still incomplete, in the sense that some risks cannot be efficiently hedged or transferred in the current environment. B  Incomplete markets and intergenerational risks  One interesting example is demographic risk, and more generally, the efficient transfer of risk between different generations. Currently, markets may not be well equipped to deal with intergenerational risk that simultaneously affects different generations living at the same time. Many developed countries are going through a demographic transition, sometimes called the old age crisis. According to the World Bank’s 1994 report for instance, by 2030 there will be 1.4 billion people in the world aged over sixty, versus 500 million in 1990. So, we are experiencing a transition to an economy with many more aged dependents relative to the active workforce.
Growth in business investment is an important factor, contributing over 25% in 2011. Business investment measured 9½% of GDP during the year. This is somewhat below the 30-year pre-crisis average of 13%, but the good news is that in Q4 the ratio of business investment to GDP was up to 12.2%. Of course, business investment should rise up above the average in a conventional upswing. But our upswing, as that of most other countries hit hard by the financial crisis, is not conventional. Iceland suffered a deep banking and currency crisis in 2008. Research shows that the contraction following such a twin crisis is usually deeper and more protracted than a contraction following either one of these crises. In addition, research shows that the economic recovery following a financial crisis is generally weaker than after a normal recession, as domestic debt levels are high. And finally, studies show that the post-crisis recovery of investment is usually slower than usual if the investment level was high before the crisis struck. All of these factors apply to Iceland and should be borne in mind in any discussion of the strength and pace of the economic recovery. The labour market has developed broadly in line with the business cycle and the historical experience of Iceland and other countries. During the downswing, firms appeared to have tried to avoid layoffs, opting instead to reduce the number of hours worked and step up parttime employment.

And in closing, I wish to say this: We have a tendency to give little thought to our important economic and societal infrastructure until it gives way. This is true of electricity and heat utilities, water and sewage systems, and matters such as payment intermediation. But fortunately, we have specialised groups of people who monitor such systems, and within the Central Bank and its subsidiary, Greiðsluveitan, is just such a group specialising in payment intermediation. The banking crisis put domestic payment intermediation to the test. The system passed that test, although banknote inventories were very slim at one point. Since then, significant work has been done to enhance payment intermediation security and to learn from the weaknesses that came to the fore during the crash. In 2011, changes were implemented in the banks’, savings banks’ and Central Bank’s decades-long joint ownership and operation of payment intermediation infrastructure, which is now solely in the hands of the Central Bank. In addition to improvements in security, emphasis has been placed on enhancing transparency and disseminating information on payment intermediation. In part for this purpose, the Bank has issued two reports on payment card transactions: a report on credit card transactions, issued in 2011, and a recent report on debit card transactions. We hope that both of these reports will increase all stakeholders’ knowledge and understanding of the payment card market and will highlight the items in need of improvement.
From this position, what the BNB is focused on today are two groups of tasks: the legal framework and the technical preparations. We have been working on these two topics methodically and consistently. As regards the Law on the BNB, we have two key dates. By the end of December we had to put forward amendments, ensuing from the convergence reports issued in recent years. I am talking about only a few amendments, but very complicated from a legal point of view, including the judicial protection of Governing Council members other than the Governor. We drafted these amendments, consulted the European Central Bank about them in accordance with the established practice, and submitted them, through the Government, to the National Assembly which approved them in December by a Law amending and supplementing the Law on the BNB. The second key date is 31 March 2023. By then we will have to draw up an entirely new draft of the Law on the BNB, which will incorporate the latest amendments and will govern all other issues relating to the Bank's operation within the euro area. Significant progress has been made on this draft. The first draft will be ready by the end of this month. We are going to devote the whole month of March to finalising the draft. The approach that we have adopted is to place the work on this draft on the broadest possible institutional basis, with the involvement of the management and of all key directorates and units of the BNB.

Eddie Yue: Asian Development Bank – working to reduce poverty in Asia Statement by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority, and Head of Delegation, Hong Kong, for the 49th Asian Development Bank Annual Meeting, Frankfurt am Main, 3–5 May 2016. *  *  *  I would like to thank the Government of Germany for hosting the 49th Annual Meeting of the Asian Development Bank (ADB), and the Management and staff of ADB for the excellent arrangements of the event. I would also like to congratulate ADB for the successful conclusion of the Eleventh Replenishment of the Asian Development Fund, which would provide critical resources to ADB to further its work in poverty reduction in Asia. ADB is approaching its 50th Anniversary this year. Over the past fifty years, Asia has undergone tremendous development. The economic miracle in Asia, together with the important work of the Bank, have lifted millions of people out of poverty and substantially improved our standard of living. After decades of rapid growth, however, there have been signs that the trend growth of the region is slowing. This reflects, to a considerable extent, supply-side constraints on potential output. In particular, a number of emerging economies in the region have been held back by infrastructure bottlenecks. As I have noted during the past few Annual Meetings, to sustain growth and propel the economy to the next stage of development, boosting infrastructure investment is a top priority for many developing members in the region.
Using Section 13(3) of the Federal Reserve Act, the New York Fed agreed in principle to lend $ billion to JPMorgan Chase and to secure the lending with a pledge of Bear Stearns assets valued by Bear on March 14 at approximately $ billion. This step made it possible for JPMorgan to agree to acquire Bear and to step in immediately to guarantee all of Bear’s short-term obligations. This guarantee was especially important to stave off the feared systemic effects that would be triggered by the panic of a Bear bankruptcy filing and of the failure to honor its obligations. And by agreeing to lend against a portfolio of securities, we reduced the risk that those assets would be liquidated quickly, exacerbating already fragile conditions in markets. The portfolio of securities is described in Annex II to this testimony. On the evening of Sunday the 16th, I sent a letter to James Dimon, the CEO of JPMorgan Chase, to memorialize the fact that we had reached a preliminary agreement that the New York Fed would assist the acquisition with $ billion in financing, with the understanding that the parties would continue working during the week towards a formal contract. We also  6  BIS Review 39/20086  provided regulatory approvals, including under Section 23A, to assist with the merger and a transitional period for phasing in the assets under our capital rules.

Whether it concerns developing a European system of financial supervision or setting up a Systemic Risk Council under the auspices of the ECB and the ESCB, these ideas are truly conducive to greatly strengthening the surveillance of risks both at individual institution level and for the European financial system as a whole. The reforms that I have just described should make it possible for the incentives of financial system players to be compatible with the stability of this system. The crisis has highlighted two types if not of incompatibility, at least of divergence that need to be corrected. First, within the financial industry itself. Financial innovation and developments in the business models of financial intermediaries have weakened credit discipline in favour of a strict return-oriented discipline. Regulators are working on correcting the regulatory sources of these incentives, which are dangerous for financial stability. I am thinking notably of the work aimed at reducing regulatory arbitrage and at countering the short-termism encouraged by certain prudential and accounting provisions. Second, we need to reconverge the incentives of private- and public-sector players. Their divergence is a natural phenomenon in periods of economic and financial boom. In these periods, regulators and supervisors find it harder to limit risk-taking when the risks to financial stability are unclear and competition is fierce. Maximising profit and competition considerations stand in the way of prudence and the prevention of financial imbalances. Countering these forces requires in particular the implementation of an independent macroprudential policy.
Economic policy should be designed so as to minimise uncertainty and so that the regulatory framework and tax system do not distort the allocation of resources in the economy. If fiscal policy is carried out so that the central government debt is stabilised at a reasonable long-term level, certainty is established in the design of the transfer systems and coming tax burdens and investment and consumption decisions are facilitated. Structural policy also has an important role with regard to creating good conditions for growth. Structural policy is such a broad concept that I can only point to some important components. The tax and transfer systems, for instance, should be designed so that they do not create motives for citizens to act in a way that is harmful to long-term growth and welfare. The task of the educational system is to provide access to relevant, high-quality education and that of labour market policy to ensure that demand and supply of labour power match. 1  BIS Review 48/2000  The tasks of the Riksbank A monetary policy aiming at price stability reduces uncertainty about future real incomes. Agreements on future payments and assessments of future income are thereby facilitated. Demands for compensation for risk are reduced which, among other things, stimulates real investments. Price stability also improves the ability of the price system to spread information about how resources are to be distributed to areas where they most benefit citizens.

How shall monetary policy be designed if there is a risk for exaggerated indebtedness and overheating? A decision-making rule the Riksbank sometimes uses to motivate its monetary policy decisions can in simple terms be described as follows: when inflation exceeds the target in a one-to-two year horizon, then the interest rate is increased. Interest rate increases reduce the demand for goods and services, which in turn reduces inflationary pressure. In our simple conceptual framework, inflationary pressure is then assumed to vary with the use of resources in the economy. When there is free capacity, inflationary pressure is low in the absence of so-called shocks. When demand is so high that it exceeds the level that is compatible with the long-term production path, inflation tends instead to exceed the target. The line of reasoning is based on inflationary expectations being established close to the target for monetary policy. Price increases when demand is strong may for instance depend on bottlenecks being created in some part of the production chain. As the company in this situation, cannot improve its profits by increasing its volume of sales, profit margins are increased by price increases. Shortage of labour also increases the risk for excessively high wage increases. The result will be higher inflation. If we strictly apply such a simple rule for decision-making, we shall then disregard the risk of building up of financial imbalances and overheating as long as inflation is not deemed to exceed the target during the forecast period.
I understand that attendance at this seminar and related AML/CFT courses has been growing each year, and I hope this positive trend continues. Attention to AML/CFT has certainly been increasing, with certification providers like the International Compliance Training Academy and the Association of Certified Anti-Money Laundering Specialists (ACAMS) seeing more sign-ups. ACAMS had also set up a Singapore Chapter late last year. In all, the resources and training avenues are there, so it is for all of you to tap on them. An effective culture of AML/CFT cannot be created by hiring a few experts from elsewhere. Instead, it is about raising awareness throughout the firm; so do focus on “growing your own timber” alongside importing relevant expertise. Strengthening the framework further 23 Before I close this morning, I would like to announce two further measures that MAS will undertake to strengthen our AML/CFT regime: a. First, MAS has been progressively increasing the level of disclosure on supervisory actions taken for breaches of AML/CFT requirements. At this seminar last year, we disclosed aggregated figures of sanctions imposed for the preceding three years. While a gross picture can give an indication of how well the industry has implemented AML/CFT measures, they do not sufficiently highlight any common or severe issue. Building on this, MAS will be looking to publish details of more severe penalties imposed on financial institutions for such breaches.

Global economic outlook  Let me turn to the global economic outlook. Growth was modest in the advanced economies in the first quarter of 2023. Although inflation declined again in many countries, it remains clearly above central banks’ targets. Core inflation in particular is still stubbornly elevated. Page 2/8  Zurich, 22 June 2023 Thomas Jordan, Martin Schlegel and Andréa M. Maechler  News conference  Against this background, numerous central banks have tightened their monetary policy further, albeit at a somewhat slower pace than in the previous quarters. The growth outlook for the global economy remains subdued. This is in particular attributable to the loss of purchasing power due to inflation in recent quarters and to tighter monetary policy. At the same time, inflation is likely to remain elevated worldwide for the time being. Over the medium term, however, it should return to more moderate levels, not least thanks to the more restrictive monetary policy and due to the economic slowdown. Our scenario for the global economy remains subject to large risks. In particular, the high level of inflation in some countries could be more persistent than expected. Equally, the energy situation in Europe could deteriorate again in Q4 2023 and Q1 2024. Swiss economic outlook  What is the economic outlook for Switzerland? GDP growth was solid in the first quarter of 2023. The services sector gained momentum, and there was also a slight increase in value added in manufacturing. The labour market remained robust, and overall production capacity has been well utilised.
Indeed, in the case of those prepared by the Banco de España, the impact of the crisis on Spanish public finances is estimated to be somewhat more severe than what was envisaged in the scenarios published on 20 April, given that they were made on the assumption that the duration of some of the measures was more time-limited than what certain subsequent economic policy decisions infer. The Banco de España will publish an update of its macroeconomic and fiscal projections in early June. 13  The impact of the crisis on the financial system The severe impact of the pandemic on economic activity has significant consequences on many fronts. One such front is financial stability. In this connection, as highlighted in the Banco de España’s latest Financial Stability Report,5 published on 4 May, the economic impact of the crisis has substantially increased the risks to financial stability. That said, the national, European and international economic policy measures adopted should help mitigate these risks. In the specific case of banks, the disruption of activity is increasing credit, market and operational risks. 5  See Banco de España (2020), Financial Stability Report, Spring 2020. 14  Indeed, the pandemic has meant that credit risk has increased substantially. This is particularly the case of credit exposures to non-financial corporations, which have seen how their revenue has fallen, initially as a result of the shutdown in productive activities and subsequently further to the lower demand for their products.

The total amount of guarantees applied for is € million, which have enabled funds to be mobilised through new loans and other forms of financing for a total of 28  € million. This means that, on average, 76% of the amount of these operations has been covered by public guarantees. 29  The need for a common response from the euro area countries As I explained before, various euro area countries taking purely individual action will not provide the most effective response to the crisis. We have forged increasingly closer links as European citizens over recent decades, and this process has intensified over the last 20 years following the creation of the single currency. Europe has been one of the regions hardest hit by the current crisis, with the result that all Europeans have been affected, to a greater or lesser extent, by the same problem. Some of the reasons for joint action by European countries in response to this emergency even transcend the economy. Europe embodies the ideas of freedom and progress. And in a crisis of this gravity, it is essential that European citizens perceive their governments to be capable of acting jointly if we want to consolidate and strengthen public support for the European project. Furthermore, going beyond these ideals and from a strictly economic rationale, if there is one lesson we should have learnt from the sovereign debt crisis ten years ago, it is that a lack of unified action is detrimental to all.
A small purple foil on the reverse side of the note echoes the spiral staircase at Tate Britain, which holds most of the Turner Bequest in the Clore Gallery. The main foil of the note contains an image of Turner Contemporary in blue. And the shape of the window around the foil is based on the Trafalgar Fountains, which are an iconic feature in the square outside The National Gallery where The Fighting Temeraire hangs. The purpose of design features like these is not simply to make the banknotes beautiful but also to strengthen their security. The new £ will be our most secure note yet, featuring several innovative elements. For example, rather than having a single foil element – the Turner Contemporary in blue – there is an additional foil in a second colour: the Margate Lighthouse in gold. And there is a second transparent element in the bottom corner of the note, inspired by the windows of Tintern Abbey, which was a popular tourist spot in Turner’s times and which he memorialised in another of his great watercolours in 1794. These security features are made possible by printing the new £ on polymer, rather than paper. Polymer banknotes also remain in good condition for longer, meaning the new £ will be safer, cleaner and stronger. 2  The self-portrait is currently on display in Tate Britain, and The Fighting Temeraire can been seen in The National Gallery. P. Ackroyd, Turner (Vintage, 2006) page 136. 4 See: http://news.bbc.co.uk/1/hi/entertainment/4214824.stm.

Before Turner, landscapes were generally viewed as subjects unworthy in their own right; their role was merely to provide backdrop to the real action. Turner elevated the genre by showing how paint could not only convey the appearance of a place but also capture something of its spirit. Turner also used art to hold a mirror to the technological and social transformations happening around him. Masterpieces such as Rain, Steam and Speed – The Great Western Railway captured the advent of the steam age. The Slave Ship reflected on the moral preoccupations of his times. The artistic developments that Turner pioneered resonated well beyond his lifetime, providing inspiration to the Impressionists and leading Mark Rothko to joke “This man Turner, he learnt a lot from me”. A  contemporary reviewer may have put it best when he placed Turner among ‘the masters whose day is not so much of to-day, as of “all times”’.1 Indeed, Turner’s legacy endures today through his influence on art for over two centuries, to the prize that bears his name to celebrate British contemporary art, to this magnificent gallery, the Turner Contemporary. Soon Turner’s work will feature on another 2 billion works of art – the new £ notes from the Bank of England. 1  The Champion, Newspaper Article, published 7 May 1815. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Banknote design The new £ note celebrates Turner, his art and his legacy in all their radiant, colourful glory.