samchain/econo-pairs-v1 huggingface dataset:
The legislation also provides for the resolution of Islamic financial institutions to be in line with distinctive elements of the relevant Islamic contracts, thus improving the legal and procedural aspects for the orderly resolution of Islamic financial institutions. Another important area of priority is to achieve the further harmonization and mutual recognition of Shariah interpretations across jurisdictions. The progressive harmonization will be a major driving force for the internationalization of the Islamic financial system. The reduced uncertainty from differences in Shariah interpretations will also contribute to safeguarding financial stability. The continuous and constructive engagement amongst scholars, regulators and practitioners within and across the regions will pave the way for greater understanding and mutual respect for the Shariah views. This also needs to be supported by in-depth research and greater transparency on Shariah rulings and resolutions. The International Shari’ah Research Academy for Islamic Finance (ISRA), through its Shariah research undertakings and activities in promoting constant engagement among international scholars, has been at the forefront in driving progressive harmonization of Shariah at the regional and international levels. Its annually organized Muzakarah Cendekiawan Shari’ah Nusantara has emerged as an important platform for greater consensus to be forged among the Shariah scholars in the Nusantara. Finally, is the imperative for a robust liquidity management infrastructure for Islamic finance, both at the national and international levels. This is vital not only to ensure the resilience and stability of the Islamic financial system but also to reduce the cost of intermediation.

Cross-border liquidity risk management in the Islamic financial system still remains a significant challenge, with the lack of short-term Shariah compliant instruments in international currencies. The global efforts to strengthen the liquidity arrangements for the international Islamic financial system will be an important breakthrough in facilitating more efficient cross-border liquidity management by Islamic financial institutions, thereby meeting the challenges of the trend of greater internationalisation. Conclusion Let me now conclude. The growing role of the emerging economies as an anchor to global growth in particular, in Asia, represents a major shift in the global economic landscape. In this environment, Islamic finance is well-positioned to assume a much larger role as a competitive form of financial intermediation for supporting economic activity, and as a channel for enhancing greater global connectivity. Efforts to strengthen the foundations for Islamic finance to ensure its continued resilience amid the more challenging environment must remain a priority going forward into the future. Indeed, our commitment to act guided by this foresight will strengthen the prospect for Islamic finance to realize its potential in the region and beyond. 4  BIS central bankers’ speeches
To illustrate this point, I want to focus on three key markets for the SNB that have experienced major changes: the goods and services market, where digitalisation may be influencing pricing and where we, in turn, must remain alert if we are to fully grasp the associated dynamics; the foreign exchange market, where the emergence of new technologies and players has led us to expand our in-house capabilities and redouble our efforts to stay at the cutting edge of technological progress (Thomas Moser, Deputy Head of Department III since 1 September, will give you more detail on this topic); and finally, the money market, where structural changes are prompting us to work on modernising infrastructure and maintaining appropriate framework conditions in order to ensure effective implementation of monetary policy. Evolution of the goods and services market and weak inflation So let me start with the goods and services market and inflation developments. This market is presenting central banks with an important conundrum: why, given that the economy has firmed significantly since 2017, has inflation remained low in most advanced economies? Page 2/9  Two major reasons stand out: on the one hand, monetary policy geared to price stability has firmly anchored inflation expectations; on the other, various structural factors linked to globalisation may have had a moderating effect on prices.

Most importantly, it has achieved a high degree of sustainable convergence with the euro area and is about to adopt the euro, a feat many believed unachievable in such a short time span. Here I would like to express my gratitude to the entire banking community, including the staff of the Central Bank of Malta, for their hard work and commitment in preparing for a smooth currency changeover. How did this marked change in fortunes come about? Three factors at least played a role. Like other small countries which leveraged their participation in regional economic groupings to overcome size and resource limitations, Malta has adapted its institutions and policies to the requirements of EU membership and is starting to derive the expected benefits. At the same time, under the pressure of globalization, polices have been implemented to start correcting endemic weaknesses. And finally, advantage has been taken of the cyclical upturn  BIS Review 143/2007  1  in external demand. As a result, the economy has grown by more than 3% in each year since 2005. Recent measures have included the restructuring of the public and public-enterprise sectors, a wide-ranging privatization programme, the first stage of a pension reform, and the complete liberalisation of the trade and capital accounts. As a result, the public sector’s profile in both product and resource markets has been reduced, and the price mechanism now plays a more prominent role in the allocation of resources. Perhaps the most striking change has occurred in the fiscal situation.
Consider that the Bank monitors risks that threaten the operational resilience of the UK financial system. At the Financial Policy Committee’s instigation, we have been working with other authorities to encourage firms to improve their cyber defences. Over the past two years, twenty-three firms have undergone CBEST penetration tests, with all core banks expected to have completed tests by the end of this year. To complement these efforts, the Bank has begun examining how public data could be used to assess firms’ cyber resilience, including looking for malware on a firm’s systems, software vulnerabilities, or weak encryption that could be exploited by hackers. 12 As a proof of concept and good cyber hygiene, we are using data publically available on the web to assess our own resilience. Early results indicate these techniques could complement existing tests in our regular assessments of firms’ operational resilience. We are also exploring how we - and others - could use the data the Bank collects more effectively. Big Data has the potential to help the Bank’s policy committees identify trends in systemic risk and the economy. Much of the data we collect is rightly subject to strict limits on confidentiality and sharing. For example, our regulatory mortgage contract data comes under strict control to guarantee personal data protection. We can’t just share the private data to which we have access with external researchers, foreign authorities or even across the Bank.

BIS central bankers’ speeches  1  To its advocates, the wave of innovation sweeping through the world of financial technology promises nothing short of revolution. ‘FinTech’ heralds the dawn of narrow banking and portfolio optimisation. It will change the nature of money, 1 shake the foundations of central banking and deliver nothing less than a democratic revolution for all who use financial services. Revolutions are not always abrupt, and sometimes their origins remain obscure. In noting the possibilities at the start of the Twentieth century, Keynes remarked that “the inhabitant of London could order by telephone, sipping his morning tea in bed … the various products of the whole earth … adventure his wealth in the natural resources and new enterprises of any quarter of the world…; [or] decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend…” Such global portfolio management was made possible by technological developments stretching back decades, ranging from the ‘pantelegraph’ of the 1860s – capable of transmitting signatures to verify bank deposits – to the cable buried deep beneath the Atlantic that could transmit eight words a minute. Such remote trade confirmation and low latency that made the Flash Boys of the day possible. The financial globalisation these innovations enabled was built on a much earlier, simpler, and more profoundly transformational development: the ledger. For there is no finance without the ability to record transactions, balances, and obligations.
Others might argue that liquidity on October 15 was reasonable, because the ability to transact, albeit in smaller than usual sizes, appears to have been there, even in the most volatile times. As previously noted, trading volumes were many times their normal levels during that morning, and trading took place on a continuous basis. If liquidity had really deteriorated so significantly, it may be unlikely that such extraordinary flows would have been possible. That being said, the simple ability to transact does not necessarily equate to strong liquidity, particularly if transacting is only realistic in a relatively small size, or if it is only possible to conduct a trade of reasonable size by “paying” a significant spread to the midpoint of the best bid and offer. Regardless of one’s definition of liquidity, recurring periods of heightened and unexplained volatility – especially if prompted by little new information, as with the event window on October 15 – could prompt end-investors and market makers to question the superior liquidity of the Treasury market and perhaps hamper the critical roles the market serves. The Treasury market serves as a liquid investment option for global investors, a ready source of collateral for other financial transactions, a benchmark for pricing other securities, an important component of the Federal Reserve’s framework for implementing monetary policy, and a market for financing the government that determines borrowing costs to the taxpayer.

I’ll begin with an overview of the market’s basic structure, including some historical perspective on how that structure has evolved over time. I’ll then turn more specifically to the subject of electronic and automated trading – a topic that has become increasingly important across many markets, including the market for U.S. Treasuries. I will then review the intraday volatility witnessed on October 15 of last year. As you all know, October 15 was a highly unusual day in the Treasury market, particularly given the very sharp round-trip in yields that took place mid-morning with no obvious immediate trigger. I will conclude with a few words on the updated best practice recommendations from the Treasury Market Practices Group (TMPG) in light of the changing market structure, and some observations on how you, as primary dealers, are expected to help promote the market’s efficiency and integrity. As always, the views I express are mine alone and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Background The Treasury market is the largest and most liquid sovereign debt market in the world. There are about $ trillion in marketable securities outstanding, and primary dealers trade an average of around $ billion every day with their clients and with other parties.2 Treasury securities play a variety of roles in the U.S. economy. They are, of course, the federal government’s primary vehicle for financing the federal deficit and refinancing maturing debt.
As I mentioned before, the ECB’s independence in implementing monetary policy towards the price stability objective can be ensured in this way. The second important characteristic of the ECB is its credibility. High credibility will increase the confidence of the public in the ECB’s policies and objectives, which in turn will help it achieve its primary objective. The most important ingredients of credibility are transparency and success in attaining its monetary policy objectives. For years now the central banks of Germany, France and the UK have been earning credibility, and the confidence of firms, institutions and individuals in these banks has increased considerably. The ECB, established in an environment of confidence provided by the credibility of national central banks, believes its growing credibility will translate into confidence in its conduct of monetary policy. The third important characteristic of the ECB is transparency, already mentioned as one of the keys to greater credibility. Transparency means openness about the ECB’s objectives, its policy implementation, its monetary policy deliberations and the forward-looking orientation of its policies. The ECB has explained, clearly and explicitly, that its main goal is maintaining price stability and described the strategies by which it is seeking to achieve it. I have already pointed out the additional issues of growth and unemployment. There is still discussion, but there is consensus concerning the primary objective. Discussion of these topics will continue in publications, announcements, speeches by ECB authorities and discussions. This kind of transparency is an important characteristic of the ECB.

For a start, the adoption of the euro should not involve any major regime shift. In fact, since the collapse of the Bretton Woods system the Maltese lira has been pegged to a basket of major currencies. Since then the lira was only devalued once, in the wake of the ERM crisis in 1992. Apart from that episode, the currency has enjoyed relative stability. In each of the past five years, for example, fluctuations in the euro/lira rate have moved within a band of between 1.4% and 3.3% around the average rate for the year. The fact that the currency peg has been successfully maintained for so long - as testified by the underlying upward trend in the external reserves, which today represent nine months of imports suggests that this is a viable exchange rate regime for Malta. The choice of a fixed exchange rate as the intermediate target of monetary policy is dictated by the key characteristics of the economy. First, Malta’s size implies that it is a price taker and cannot hope to influence its terms of trade through nominal exchange rate movements. In addition, because of the economy’s openness, the conduct of monetary policy must take the exchange rate into account.
And, more fundamentally, should there be a Glass-Steagall type of provision to prevent retail deposits from being used to fund investment banking activities? There are good arguments in favour – to separate the utility functions of a retail bank taking household deposits and running the payments system from the casino trading of an investment bank, and good arguments against – the difficulty of maintaining a credible boundary between those institutions that are eligible to receive government support and those that are not. We need a public and informed debate on the merits of the arguments. We also should reflect on the fact that the belief that the authorities will step in when risks materialise encourages risk taking and means that risk-adjusted returns to financial activity are too high. The experience of unsustainably high returns in normal times interspersed by regular crises has been repeated across countries and over time. So if banks are to bear the true cost of the risks they take, changes need to be made to the environment in which banks operate. All these are important issues. While committing at international level to broad principles on regulatory reform, such as extending the net to all highly leveraged institutions and making capital requirements counter-cyclical, there is time to think through carefully the best way to implement them, and it is important that we take it. Many of these questions about the future of the regulatory structure will be discussed in the Turner review to be launched tomorrow. The Bank awaits the Review with interest.

These trends may have potentially important implications for the functioning and resilience of financial markets, in particular at times of stress. Third, a number of challenges remain relating to implementation of some of the approved reforms, in particular the latest package of Basel III reforms agreed in December 2017. Finally, now is the time to assess whether the approved reforms are effective and to identify any unintended consequences. In this respect, the FSB is due to launch an assessment of the policies agreed to address the too-big-to-fail problem next year. Reviewing globalisation and world trade rules  1  The FSB defines OFIs by exclusion. This is not a statistical definition, therefore, since it covers  various categories of the national financial accounts: all non-bank intermediaries other than the central bank, public institutions, insurance entities, pension funds and financial auxiliaries. 5/14  The political and social consequences of the crisis have had an impact on economic policy in the area of trade policy, at global level. Trade tensions and the proliferation of protectionist measures are one of the worst legacies of the economic policy response of some countries in the current post-crisis period. In fact, protectionism is currently a significant risk factor for world trade, and given the latest developments, we cannot rule out further escalation of such tensions, with severe consequences for global growth. There is a broad consensus in the academic literature on the economic costs of protectionism.
The exchange rate has, in fact, tended gradually to soften since last spring when the decision to go ahead with the euro was finally confirmed; but increasingly since the autumn the internationally-exposed sectors of the economy have been dealt a further massive blow as a result of global economic turbulence. This started, in fact, with the financial disturbances in Asia in the latter half of 1997, but even as late as the beginning of last summer it seemed as if it might have only limited impact on the overall world economy. The IMF, for example, was then still projecting 3-3¾% world growth in 1998 and 1999 respectively, which was certainly a setback compared with their forecast of over 4% just six months before, but it was hardly catastrophic. Since last summer it has become increasingly clear that things are likely to be significantly worse than that. The financial collapse in Russia, deepening recession in Japan, the long battle – then sudden defeat – in Brazil to hold its exchange rate, and fluctuating fears of possible knock-on effects on the major countries’ financial markets, all contributed to an increased sense of financial fragility, which has not been easy to contain, though I am now hopeful that we will be able to stop the financial rot.

Prevailing academic consensus requires this sustainability to be anchored in simple and effective policy rules, such as an inflation targeting regime and some kind of fiscal sustainability law. Furthermore, sustainability is mutually reinforcing: inflation expectations can only be anchored if the fiscal policy does not rise destabilizing fears while, at the same time, the fiscal policy can be more sustainable if it is not burdened by excessively high interest rates, fueled by a not so credible monetary policy;  –  Policy credibility: monetary and fiscal policies need to be credible. Policy credibility arises from a combination of a clear and sustainable policy framework, the right structure of incentives, as well as a positive track record;  –  Policy awareness: in other words, the recognition of different goals, different transmission channels and different time frames, informing and constraining monetary and fiscal policies. In the long run, a balanced policy mix would minimize demand volatility, enhance the allocation of resources, and promote long-term growth. Effective policy coordination would limit the fiscal deficit to a level that can be financed via capital markets, without recourse to monetary financing, without distorting the allocation of resources, and without unsustainable external borrowing. Effective policy coordination would also bind monetary policy towards achieving its price stability mandate, thus reducing long-term risk premia and supporting financial stability. As a corollary to all what I mentioned, a weak stance in one policy area burdens the other policy area with excessive demands.
This suggests that the probability of such an event occurring would be no more than once in 300 years under even the very conservative assumptions. But the event had occurred within five years of LTCM’s birth. 7. It is natural, and indeed probably inevitable, that, in seeking to predict the probability of an event occurring, we tend to look to past experience. However, as we all dutifully warn investors when selling investment products, “past performance is no guarantee of future performance” and so we must stand ready to admit that there are fundamental limitations in our existing risk management tools. That is, the predictive powers of models are inherently restricted by historical experience. Where we encounter something new, such as innovative products or business model changes resulting in different forms of connectedness and creating different and new transmission channels, the models face significant difficulty in accurately estimating risk. Furthermore, even if one could find better models, any models must inevitably assume market behaviour remains constant to some degree, yet we know too well that uncertainty and panic may and do engender irrational or herd-like behaviour which a model struggles to accommodate. So, if the model’s findings can be “misguided”, too great a reliance on them, or too limited an understanding of what the model actually tells us, may result in a significant misjudgement of risk. 8. All of this prompts the question of how far we should reflect on the efficacy of our methods for assessing, measuring and managing risks in the financial system.

Norman T L Chan: Three questions on the nature and management of risk Keynote speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Monetary Authority-Global Association of Risk Professionals (GARP) Global Risk Forum Opening Dinner, Hong Kong, 28 May 2013. *  *  *  Richard (Apostolik), Ladies and Gentlemen, 1. It is my great pleasure to welcome you all to this dinner gathering tonight. I would like to take this opportunity to thank GARP for co-hosting tomorrow’s Global Risk Forum with the Hong Kong Monetary Authority. 2. This is the third in a series of joint fora which GARP have organised with regulators, and follows similar events in New York and London, focusing on risk and risk management from a global perspective in the wake of the Global Financial Crisis. 3. In contrast to the two previous host cities, Hong Kong (and indeed Asia more generally) has been fortunate not to have borne the full brunt of the recent Crisis. But, we have had our own fair share of crises in the past and, speaking as someone who was tasked with tackling aspects of the Asian Financial Crisis in somewhat unconventional ways, I can assure you that we are only “all too well aware” of the severe economic and social disruptions that financial crises can and do cause.