samchain/econo-pairs-v1 huggingface dataset:
The City is not purely an entrepot. It intermediates between domestic saving and investment, as well as international flows of funds and risk. And the connections into our domestic economy – via credit flows, as well as taxation – gives us a vital macroeconomic interest in the health of global capital markets and the international banking system. “Mopping up” and missing instruments: macroprudential policy I was always doubtful about the consensus around the authorities relying entirely on “mopping up” by slashing interest rates after bubbles burst, and frankly, with hindsight, I wish I had expressed my reservations more strongly. 9 The mess created by this crisis – the cost to businesses and millions of people around the world – surely puts beyond doubt that if, using a wider range of instruments, we could tame the credit cycle, we should. There is a debate about whether, around the world, monetary policy inflated the bubble. Research economists will take a long time to reach anything like a consensus. But I would make one observation today. The suggestion that I have heard most frequently from thoughtful market participants is not that monetary policy was directly responsible for the bubble, but that it contributed to an appreciation of asset prices which then got out of hand. Any easing in monetary policy inevitably pushes up asset prices (compared with the counterfactual) because it reduces the discount rate used to value the cash flows from securities and the rental income on property.

In the light of higher price and cost inflation in Norway than in other countries, it has been appropriate to maintain higher interest rates in Norway than in most comparable countries. Norges Bank increased the sight deposit rate - which is our key rate - by a total of 1½ percentage points last year. So far this year, the key rate has remained  1  2  The relationship between wage growth and price inflation was also discussed in the Annual Address in February this year. BIS Review 72/2001  unchanged. As a result, the difference between short-term rates in Norway and other countries has increased. The economic outlook The Bank last analysed the outlook for the Norwegian economy in the June 2001 Inflation Report. Price inflation is projected to fall to 2½ per cent by next year already. The risk picture is mixed. The Norwegian economy is still characterised by high capacity utilisation. The labour market is tight. There is a risk that domestic pressures may gradually translate into a stronger price impetus than we have projected. The consumer price index has risen by 2.7 per cent since July 2000. The consumer price index excluding the direct effects of changes in excise duties and energy prices (CPIXE) has risen by 2.6 per cent since July last year, as calculated by Norges Bank. Statistics Norway publishes a consumer price index excluding electricity prices and a consumer price index excluding energy prices. They have a broader definition of energy prices than we use in our calculations.
For those banks that do experience reductions in capital as a result of Basel II, some observers have questioned whether the lower requirements might provide certain advantages and make it easier for those banks to acquire other banks that do not share in the same benefits. History suggests that this particular concern may be unfounded. In a paper published this past February by the Federal Reserve, researchers reported that they did not find convincing evidence that past changes in capital requirements have had a substantial impact on mergers between banks. The issue of competition between banks has also come up in the context of competition between countries. Here, we should remember that Basel II is intended to help ensure that international competition in banking markets is driven by the strengths of each bank, rather than by differences in each country’s rules. One way that the Committee has sought to promote a consistent application of the new framework is by providing banks and supervisors with detailed requirements where necessary. As I have already mentioned, these details may add to the appearance of length and complexity in Basel II, but that is a small price to pay for greater consistency and a more level playing field. However, given the need to have a framework which can be adapted to a wide range of circumstances, cooperation among supervisors is clearly the most important tool in achieving an appropriate level of consistency.

In a similar vein, I would like to address a related comment that I have often heard. Some observers argue that Basel II will have a detrimental effect on capital flows to emerging market economies because the new framework does not recognise the diversification benefits that characterise investments in such markets. It is true that Basel II falls short of recognising the diversification benefits of full credit risk models, although the internal-ratings based approach recognises the benefits of diversification to some degree by assuming that a bank’s assets benefit from the same degree of diversification as that of an  1  In the standardised approach the risk-weight of residential mortgage is 35% instead of 50% in Basel I. For SME’s and other retail the new risk weight is 75% versus 100% in Basel I. Past due loans can have a capital charge of 50% when there are enough provisions (loss reserves > 50%). 4  BIS Review 33/2004  average, internationally active bank. Under the evolutionary approach of Basel II, the Committee recognises the importance of continued active dialogue with the industry regarding both the performance of this models and their comparability across banks, and we have included this issue in our agenda for future work.
The need to improve the use of language is even more pressing, bearing in mind that the dialogue between banks and their customers is not, shall we say, a dialogue between equals. In this respect, since 2008 both the Banco de España and the National Securities Market Commission (the CNMV) have made great efforts with a view to improving financial knowledge among the general public through the Financial Education Plan. The initiatives taken in this period, to cite just a couple, include the launch of the Finance for All portal (www.finanzasparatodos.com) and the project to include financial education in the school syllabus. A second key aspect of this process is to improve selling practices. Financial institutions have made advances in the service they offer and the resources they dedicate to the monitoring of regulatory compliance. But greater efforts are needed to ensure that bank customers – banks’ main assets – are able to understand the terms of the transactions concerned (clauses of agreements, the cost of services provided, etc.). In this respect, greater zeal is required to ensure that customers receive appropriate precontractual information, and the sale of products to customers whose profile does not fit the product in question must be eradicated. 6/7  Lastly, with regard to transparency, and as I have indicated, banks must be clear about the cost of the services they offer and pass on those costs to bank customers in appropriate fashion. To that end, the Banco de España is stepping up its activities relating to supervision of banking conduct.

Against this background of low profitability, banks have already made significant efforts to reduce their operating expenses, by adjusting their productive capacity. The number of banking groups has been reduced by 44% since 2007. And, from their peak levels in 2008, 3/7  the number of offices and employees in the banking industry have been reduced by 37% and by 31%, respectively. Orderly correction of the excess capacity in the Spanish banking industry has raised its level of efficiency relative to the banking systems of other European countries. However there is still room for further improvement. 2 New technologies - FinTech The second challenge facing traditional banking activity arises from the development of new technologies and entry into the banking market of so-called FinTech companies. Banks are sometimes presented as rigid, inefficient institutions, in contrast to new agile unregulated businesses, which seek to offer a better service to customers through a broad range of innovations. An extreme view is that these businesses could actually displace credit institutions from the provision of traditional financial services. In my opinion this is a simplistic, distorted view of a much more complex reality. Certainly we are facing a major technological transformation of banking activity. Permanent connectivity and the sheer number of mobile devices affect the way in which financial services are provided and used. Users increasingly demand the ability to access their current accounts and to initiate transactions at all times and in all places.
While each financial market has many idiosyncratic factors, fintech can offer solutions that cut through different geographical and market boundaries. For example, breakthrough in biometric authentication technology is helpful not only in the advanced markets but also in the developing markets. By the same token, cybersecurity threats can originate from anywhere in the world and is not bound by national boundaries. There is a high degree of commonality in the application of fintech, especially in the context of cross-border financial transactions and flows. So it is crucial for Hong Kong to enhance its collaboration with other financial centres to share experience and learn from each other. In this context, I am very pleased to announce that I have just signed a Cooperation Agreement on fintech with the Managing Director of the Monetary Authority of Singapore (MAS), Mr Ravi Menon. To mark the occasion, a simple ceremony will be held later this morning to exchange the signed Agreement. May I take this opportunity to thank my MAS colleagues for working very hard with us on this most meaningful collaboration. 4. Hong Kong and Singapore are the two leading international financial centres in Asia. Both the HKMA and MAS are actively promoting the use and development of fintech respectively. There is considerable scope for the two places to collaborate and achieve a win-win outcome. A priority area of collaboration is the use of fintech in advancing the hitherto paperbased trade finance system that has been in use for as long as trade existed.

The third and last initiative we are working jointly with Shenzhen relates to talent development. You may recall that last year we launched the Fintech Career Accelerator Scheme and, since then, more than 70 Hong Kong students have been working on fintech projects in 12 banks and the HKMA. Building on the success of this scheme, and with the support of the Shenzhen OFDS, we have secured commitments from several high-tech firms in Shenzhen, including Ping An Technology, WeBank, Tencent and others, to offer summer intern positions for Hong Kong students to learn the latest technologies, not only in financial application but also in areas such as big data analytics or artificial intelligence. This people-to-people approach will deepen collaborative ties between Hong Kong and Mainland China in fintech development to our mutual benefit. 3/4  BIS central bankers' speeches  Enhanced research 15. Finally, I want to talk about enhanced research, which is one of the seven initiatives in the package helping Hong Kong to migrate to the new era of Smart Banking. Today we will publish our second whitepaper on DLT. You may recall that we released the first DLT whitepaper around this time last year, in which we explained how the technology works, outlined proof-of-concept projects and, more importantly, identified potential implementation challenges and issues.
Another risk stems from a continued weakening of the dollar, although this may be motivated to the extent that it contributes to easing the adjustment to smaller deficits in the United States' budget and current account. The problem is that there is a risk of negative effects on exports, production and employment in the euro area and also Sweden. Adjustment problems and the effects on activity in the world economy could prove problematic if the dollar continues to depreciate at a rapid rate. However, there are also factors indicating that inflation could be higher than in the main scenario. The impending wage bargaining rounds comprise one risk. The Riksbank's current assessment is based on the assumption that a weaker labour market will hold back the rate of wage increases. However, there are examples of wage bargaining rounds where wage formation has got out of control despite a low demand situation, for instance, in 1995. The conflict concerning the Municipal Workers' Union is evidence of tensions in the labour market, which could have the effect of pushing up wage costs. No single factor is as central to inflation trends - and thereby to monetary policy - as wages. The Riksbank will therefore follow the development of the wage negotiations closely during the autumn. Another risk stems from energy price trends and in particular developments in electricity prices. The monetary policy stance so far has been based on the energy price rise being of a transient nature.

William C Dudley: Improving financial institution supervision – examining and addressing regulatory capture Testimony by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Senate Committee on Banking, Housing, and Urban Affairs Financial Institutions and Consumer Protection Subcommittee, Washington DC, 21 November 2014. * I. *  *  Introduction  Chairman Brown, Ranking Member Toomey, and members of the Subcommittee, thank you for this opportunity to testify on the effectiveness of financial institution supervision and the issue of regulatory capture. In 2008 and 2009 our country faced its worst financial crisis since the Great Depression. I mention those years as a touchstone for my remarks today. Despite the passage of time and an economy that is steadily improving, the financial crisis is hardly something that happened in the remote past. For the too many people who are still unemployed or underemployed, or who otherwise continue to struggle financially, it is living history. While the causes of the crisis remain subject to debate, it is undeniable that banking supervisors could have done better in their prudential oversight of the financial system. This conclusion raises two fundamental questions: •  First, how can we improve the stability of the financial system? In other words, how can we make the financial system more resilient and productive? •  Second, how can we improve our supervision of financial institutions? The Federal Reserve is working diligently to improve both stability and supervision. The two concepts are linked.
As long as economic fundamentals do not support the krone exchange rate at the initial range, it is highly unlikely that this would persist. If monetary policy has contributed to a deflationary recession, it could not be characterised as successful even if the krone has been stable around the initial range for a period, because this would have created the basis for future fluctuations in the exchange rate. Similarly, a krone exchange rate around the initial range combined with high inflation will not be sustainable. Monetary policy could not be said to have been successful in relation to the guidelines because, also in this case, it must be assumed that it was partly responsible for creating the basis for an unstable krone exchange rate at a later stage. The Norwegian economy may be exposed to economic disturbances that contribute both to higher inflation and to a temporary appreciation of the krone exchange rate. In this situation, monetary policy should have attempted to counter a sustained higher level of inflation because higher inflation provides the basis for subsequent krone instability. However, Norges Bank should in advance have notified the government authorities, which should also have evaluated other measures for stabilising economic developments. The Norwegian economy may also be exposed to negative events that provide the prospect of a deflationary recession and a depreciation of the krone. For example, a fall in oil prices may influence the economy in this direction.

Zeti Akhtar Aziz: The International Centre for Education in Islamic Finance Governor's luncheon address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of The International Centre For Education In Islamic Finance (INCEIF), Kuala Lumpur, 23 March 2006. *  *  *  It is my great pleasure and honour to welcome you to this luncheon in conjunction with the Meeting of the 1440 Hijrah Vision Commission of the Islamic Development Bank (IDB) and the Launch of the Vision Document that has taken place this morning for the transformation of the Islamic Development Bank to become the premier catalyst for greater shared prosperity and development among the ummah. We are most honoured today by the presence of Yang Amat Berhormat Dato Seri Abdullah Ahmad Badawi. I would like to take this opportunity to congratulate the IDB for the successful launch of the IDB 1440 Hijrah Vision. The Vision Document would serve as an important blue print for the transformation of the IDB into a dynamic Development Bank that will contribute to the "comprehensive human development", and thereby achieving prosperity for the ummah. We are also honoured today by the presence of His Excellency Tun Dr. Mahathir bin Mohamad, Chairman of the Commission, and His Excellency Dr. Ahmad Mohamed Ali, President of the Islamic Development Bank Group.
The real exchange rate is currently slightly below its average over the past twenty years but, with respect to said period, terms of trade, even excluding copper, are today much better. Similarly, our economy is enjoying a much easier net external position – that is, how much we owe and how much is owed to us by the rest of the world – than in the 1980s and 1990s and the real exchange rate has only appreciated slightly over what it was then. Since the floating exchange rate was adopted, there have been three occasions on which the board considered that intervention was warranted. In general, these interventions affected the exchange rate. Other episodes, that showed how difficult it is to apply an effective intervention, were experienced in the 1990s, when the real exchange rate was significantly  BIS Review 135/2010  3  more appreciated that it is today, despite worse terms of trade, a weaker net external position, massive purchases of foreign currency reserves and restrictions on capital inflows. In emerging and industrialized economies that have successfully weathered the crisis, export activity today faces considerable challenges. The financial crisis and the Great Recession have had profound consequences on the developed world because of their financial excesses. In this sense, they are facing a situation similar to what we lived through in the mid-1980s, only now the adjustments they make locally have global implications.

To begin with, the Central bank is not indifferent to the movements of the exchange rate, in the same way as we are not indifferent to the evolution of unemployment, credit or any other variables relevant to the country’s economic performance. The Bank’s constitutional act mandates that we safeguard price stability and the normal functioning of internal and external payments, but fulfilling this mandate requires us to adopt those measures which will drive the economy to making full use of its resources and maintaining a sustainable balance of payments. Price stability and financial stability are cornerstones of our economy’s performance, growth potential and human well being. I could make a lengthy discourse about how the Central Bank reconciles its mandate with welfare objectives but I think it is enough to observe our track record over the past two years to recognize that if output and employment are recovering so strongly today, it is largely thanks to the flexibility of our monetary policy in facing the worst global economic downturn in almost a century. Our second principle is that we have to evaluate the effectiveness, costs and benefits, of our actions. We must also explain with maximum rigor and transparency our decisions and opinions regarding the main trends of our economy. Our reputation and credibility would suffer if we took any actions without being soundly convinced that they would be both convenient and effective towards achieving our objectives and at the same time inflict the smallest possible social cost.
It is rather the case that by focusing clearly on the inflation target we will be able to avoid considerable costs to the real economy in the slightly longer term. I should perhaps add that the forecast in the Monetary Policy Update, as I just mentioned, is that resource utilisation will be roughly normal, rather than low, at the end of the forecast period. So from this perspective too we can question the claim that the Riksbank pays too little attention to the real economy. In my view, all the arguments for an increase in the interest rate that were put forward by the majority are reasonable. So even though I voted to leave the repo rate unchanged I respect the majority's view. But this does not mean that I share it. It is possible to have different views of how great the risk of contagion effects is, and here I have a different view than the majority. My own view So, what was my thinking at the time? As I said in the minutes, I already saw clear signs of a slowdown in the Swedish economy at the time of the monetary policy meeting in July. The outcome figures and indicators that have been presented since the July meeting also clearly indicate a weakening of economic activity. Resource utilisation, as calculated by the Riksbank using various measures, is currently estimated to be higher than normal, but is falling rapidly.

In 2005 the interest rate had fallen to a historically low level of 1.5 per cent. Although the Riksbank predicted in 2005 that inflation would remain low in 2006, albeit rising slightly, we were counting on strong growth in demand, partly due to the expansionary monetary policy. The low interest rates had also led to a rapid rise in household borrowing and house prices. If we had tried in that situation to push up inflation more quickly by means of further interest rat cuts, I believe there was a risk that the economy would have overheated later on, with excessively high price and wage increases and other imbalances. In that case we would have been forced to tighten monetary policy much more than we now envisage. Ultimately, we would have risked an unstable economic development. Monetary policy’s ability to stabilise the economy Let me also briefly mention in this context the question of monetary policy’s ability to stabilise the economy in general. By considering how quickly we should aim to bring inflation back on target, we try to contribute to the most stable development of production and employment possible. But the fact that we give consideration to the real economy when formulating monetary policy does not mean that we have any targets for employment or production. There are several reasons for this. Firstly, it could probably easily lead to unrealistic expectations of what we can achieve by raising and cutting the interest rate. Monetary policy cannot in the long run affect either production or employment.