samchain/econo-pairs-v1 huggingface dataset:
What objectives should a central bank have? The most fundamental question to ask when one is on the point of reforming the monetary policy framework is, of course, what the objective of monetary policy should be. On a very general level the objective of monetary policy can be said to be to create an environment where the economy can develop in the best possible manner. However, this definition is too general to be of any great practical use, although it excludes some tasks that are sometimes imposed on central banks. To obtain a more operational definition, it is necessary to take the discussion one step further and ask the question of how monetary policy can contribute to favourable economic development. On a fundamental plane, one could say that the central bank’s main task should be to ensure that the payment system in the economy functions efficiently. This means in simple terms that payments and financial transactions can be made easily and smoothly and entail as little risk as possible. Many scholars also regard this as the main reason why central banks were originally founded 1 . An economy’s payment system can be regarded as a sort of infrastructure in roughly the same way as the country’s communications network or energy supply system. It also essentially fulfils the same purpose, i.e. to ensure that the flows essential to the economy – in this case the flow of money – functions properly.

One strategy for maintaining financial stability can briefly be described as consisting of three different parts: a clear regulatory framework, an efficient day-to-day prudential supervision and oversight and a preparedness to act strongly and quickly in a crisis. Exactly what role is played by the central bank in this strategy is also something that varies from country to country. Many central banks contribute in different ways to the formulation of the regulatory framework for the financial system, for instance, by giving their views on proposed bills and by participating in committees where domestic and international legislation is formulated. With regard to the day-to-day prudential supervision and oversight, one solution that is applied in Sweden and other countries is that the supervision of the financial sector is delegated to a special, independent authority with the power to apply sanctions. In other countries the supervision work is done by the central bank itself. In the cases where supervision is delegated to an independent authority, the central bank usually has an oversight role that entails regularly monitoring and analysing developments in the financial sector and presenting its views of the risks in the financial system. Ever since the bank crisis at the beginning of the 1990s, this has been perceived as a very important task in Sweden; in fact, it could be argued that the bank crisis was allowed to arise partly because no authority previously had the specific task of monitoring the overall financial stability.
10 The market responded rapidly to that development and, towards the end of the £ programme, some contacts were telling us that gilt market liquidity had actually improved relative to March 2009. One small point to clear up in relation to maintaining the programme is whether we should be re-investing the interest receipts earned on the gilts. In the United States, the Federal Open Market Committee recently decided that, to maintain the effectiveness of their asset purchases they needed to re-invest the proceeds from maturing assets and interest receipts. That reflects the fact that in large part they purchased (pass-through) mortgage-backed securities where, in addition to receiving coupon payments, a proportion of the underlying assets are constantly maturing or being pre-paid. Absent a re-investment programme, and making assumptions about pre-payment rates, the stock of assets in the US programme might have declined at a rate of around 17 ½ % pa. In the UK purchase programme we bought nearly all gilts 11 , with at least 3 years to maturity. The earliest gilt redemption won’t occur until the second half of 2012. We are receiving dividend payments and those have currently cumulated to a value around 5% of the total stock of purchases. 12 These receipts were anticipated, are currently held in the Fund and will contribute to repaying the original funding of the programme. A good argument can be made that, to keep the monetary stimulus of asset purchases constant, this cash should be reinvested in more gilts.

That “portfolio rebalancing” channel is thought to have been largely absent in Japan, where most of the Japanese government bonds purchased were held by the banks, which in turn used the proceeds to directly de-leverage without obviously increasing the demand for other assets (although the purchases may have had an impact through other channels). Buying assets held by non-banks was relatively straightforward in the UK. At the time, insurance companies and pension funds were the largest category of holders of gilts in issue. Although commercial banks act as market-makers for gilts, and were thus the immediate conduit for the gilt purchases, they typically held only a very small amount on their own balance sheets as part of their liquidity portfolios. Market-makers had to source gilts in the market before selling on to the Bank. Moreover, because the banks’ own liquidity holdings were generally very short-dated, we were able to target our purchases by restricting them to be longer-dated: initially we only bought gilts over 5 years maturity. 9 We were also conscious of the pressures on pension funds and their need to match longdated liabilities by buying index-linked and longer-dated nominal gilts. Real yields and ultra-long nominal yields were already being driven to low levels by that demand. Hence, we restricted the Bank’s purchases to nominal gilts only and initially capped the maturity at 25 years. The latter restriction was later relaxed as the purchase programme expanded.
Encik Abdul Rasheed Ghaffour: Revolutionising Microfinance Welcoming remarks by Mr Encik Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Symposium on Microfinance, Kuala Lumpur, 22 May 2017. * * * In biology, the transformation of a species is said to happen in rapid bursts. Imagine an ecosystem of marine life along a shoreline. For millions of years, it can remain relatively unchanged. But an extraordinary event – such as a sudden move in sea levels – can alter everything quickly. Within decades, fishes, mollusks and plants alike can dramatically change in size and shape. Ultimately, those that adapt emerge as the stronger species in the ecosystem. We are gathered here today in the very different context of microfinance. Nonetheless, parallels can be drawn with the theme of this event, ”Revolutionising Microfinance”. Think of the incredible pace of technological change in recent years. In 2016 alone, machine prevailed over man in the world’s hardest board game. Reusable rockets became a reality. Twitter helped a nation elect their president. For microfinance, that rapid burst of change is already upon us. It is therefore a great honour for Bank Negara Malaysia to partner with the World Bank in hosting this Global Symposium on Microfinance. We are privileged to have so many learned speakers here with us to share their invaluable insights.

But exit strategies from this support need to be developed and consistently implemented to contain moral hazard, to forestall a rise in long-term real interest rates and crowding out effects, and to insure sustainability of public finances. If this challenge is not met, the current crisis is bound to be exacerbated by a sovereign debt crisis. •  In the area of regulation a broad set of measures is under way and considerable progress has been made. But as signs of stabilisation in the financial system and the  BIS Review 102/2009  3  economy are emerging, reform appetite is waning and there is a risk of missing the opportunity of a paradigm shift in the financial system. •  Especially as the crisis intensified, central banks took immediate and unprecedented action by lowering rates to historically low levels and providing ample liquidity. •  Keeping interest rates too low for too long may well lay the basis for new imbalances and instability. Central banks need to prepare for credible strategies to phase out their support and stand ready to prepare financial markets when they come to unwind their credit support measures. •  In academic circles the financial crisis has revived the debate whether central banks, in the conduct of monetary policy, should pay more attention to financial variables, and specifically, whether inflation targeting strategies do not focus too narrowly on economic developments alone. Relative to this the ECB’s monetary policy strategy has proved to be robust.
The second external challenge facing Russia is the changed growth model and the slowing economic growth in China, which also affect the Russian economy due to the downward pressure on commodity prices. According to our estimates, 1 percentage point of China’s slowing GDP may cause a loss of almost 0.5 percentage points in annual rates of economic growth in Russia in the medium term. It should be noted that this is true if the current structure of our relationship and the current structure of trade turnover persist. The Chinese economy now ranks second in the world and the role played by that country in the global economy and financial markets has increased considerably. The challenge for Russia is to reorient to the fast growing sectors of the Chinese economy related to consumption and post-industrial economy (the so-called tertiary sector). Low growth rates of the world economy intensify the need to carry out structural and institutional reforms in many countries to remove the obstacles to a faster economic growth. Insufficient attention was paid to such transformations over the past decade. It seemed that nothing should be changed and the global economy showed a confident growth. Structural reforms are a formidable challenge. They are often painful, infringe on somebody’s interests, and face counteraction. Each country should judge for itself what structural reforms are the most important ones and which of them may be implemented with due account of political, cultural and other factors.

However, the banking system’s relative well-being does not mean that the banking sector resolution is over. Problems accumulated by banks turned out to be more significant than we expected. As I have mentioned, here belong sizeable loans to companies connected with banks’ owners. Not all of these companies are successful, and their projects remain unimplemented for years. Similar to owners, large creditors often use their funds deposited with banks to fund projects of their owners or chief executives, shifting all the risk to the banks. Complications in obtaining relevant information from a foreign jurisdiction by the supervisor allowed banks to accumulate sizeable assets abroad (loans to non-residents, large correspondent account balances with foreign banks, securities in foreign depositories, letters of credit and other transactions outside the RF jurisdiction). A detailed inspection reveals that most transactions with non-residents are of fiduciary nature, and a foreign company or bank is not the ultimate recipient of funds. As a result of such transactions, funds are ultimately used for loans to owners or fictitious increase in the bank’s capital. Currently, the supervision’s main objective is to timely reveal such fiduciary transactions which undermine financial stability of credit institutions. Today, we are completely rebuilding the whole system of bank supervision, accelerating supervisory decision-making, and, moreover, striving to enhance the proactive nature of the supervision.
If we did only that, we will all be sitting around at some point in the future saying how appalling it was that a big dealer had failed and that they had had to be rescued in order to avoid a seizure in the capital markets. So where are we on resolution regimes? It is worth saying upfront that we recognise that it is not easy for banks to assist the authorities in drawing up resolution plans when the full resolution legislation is not yet in place; it will matter enormously exactly what the legislation says. A year ago, the G20 Leaders endorsed an international standard – the FSB’s Key Attributes – that lays down what resolution regimes need to look like in the different jurisdictions around the world. It’s now a matter of countries putting those regimes into place. The US has largely done so through Dodd Frank. Europe is on the verge of doing so. It has a draft directive on recovery and resolution which seeks to implement the FSB standard very faithfully. This will be an enormous step forward. I think Asia will then follow that pattern, to the extent that it hasn’t done so already. The FSB’s Standards’ Implementation Committee currently has an exercise underway, led by Martin Gruenberg, Acting Chairman of the FDIC, and of course chair of the IADI, to review progress on legislating the Key Attributes. Their report is due to be published in the first quarter of 2013.

Rather than a Deposit Insurer having to wait to discover its losses until the end of the process of a potentially destructive realisation of the bank’s assets, it would hear up front how much it had lost. Its losses should be smaller that way. And it might gain a stake in a surviving business, which it could sell once conditions had calmed. This approach could, if necessary, be applied in different regions to different distressed subsidiaries of the group. I must stress that in no way does any of this dilute the protection to insured deposits. It puts losses to bondholders and also transfers them to the surviving parts of the various local banking systems standing behind each local Deposit Insurer. But, as I have outlined, so do other resolution techniques that draw up on the Deposit Insurers’ resources. “Liquidation and payout” would entail much bigger losses for the Deposit Insurers and thus for other banks. Work is underway on how to operationalise this strategy. It requires active cooperation amongst home and host authorities. Recovery & resolution planning: making it happen Indeed, a lot of work is underway, some of it publicly, some of it with firms, some of it quietly in the background. This is top level stuff. It isn’t about writing 3,000 or 30,000 page essays.
Joseph Yam: Competition and cooperation among global and regional financial centres Speech by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Concurrent Panel Sessions of the Lujiazui Forum, Hong Kong, 9 May 2008. *  *  *  There are two points that I would like to make. First, given that many jurisdictions claim to be or wish to develop as international financial centres, we need to be clear about what actually defines an international financial centre. We in Hong Kong have given much thought to this, principally because Article 109 of the Basic Law of the Hong Kong Special Administrative Region requires that "The Government of the Hong Kong Special Administrative Region shall provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as an international financial centre". We obviously do not wish to fail in this legal responsibility. I do not believe that being the nth largest foreign exchange trading centre or the presence of many of the largest international financial institutions are good definitions for an international financial centre. Indeed, with the advancement of information technology, there may be a tendency for the market place to migrate into cyber space. In my opinion, an international financial centre is a centre in which the function of financial intermediation, which is so important for supporting economic growth and development, takes place on an international dimension.

04.10.2016  Finalising Basel III VII Expansión-KPMG Financial Meeting: “Transformation of the banking business model” Luis M. Linde Governor  Allow me to begin by expressing my gratitude for the invitation to inaugurate this VII edition of the Expansión-KPMG Financial Meeting. Last year we met, around these same dates, to analyse the move from “restructuring” to “transformation” of the banking sector. Today, the focus of the discussion is on “transformation”; and this is positive, as it shows that banks are already immersed in a process of change, enabling them to face the new landscape in the wake of the crisis. The conference programme identifies three areas that are key to the complex setting in which banks are now pursuing their activity. First, the search for profitability, which in a context of very low interest rates is a fundamental challenge for European and Spanish banks alike. Second, how to address the challenges and opportunities arising from growing technological innovation, a question to which the banking sector cannot remain immune. Third, adaptation to the regulatory changes that have come about as a response to the weaknesses identified in the wake of the international crisis that began in 2008. Regarding this latter area, I shall devote my address to the changes in the global solvency framework, not only because of their significance but also because of the timeliness of the matter. The Governors and Heads of Supervision comprising the body overseeing the Basel Committee on Banking Supervision met on 11 September.
Here is the CliffsNotes summary: The play opened with the great financial tempest of 2008–09, during which it appeared the ship of the mighty American economy would founder. A humble, once unassuming but suddenly daring captain named Ben Bernanke took firm control of the nation’s monetary helm in Act II, working with his officers – the FOMC – to contrive innovative ways to keep the economy afloat by jury-rigging monetary policy and adopting radical tactical maneuvers. These efforts succeeded in steering the ship of the economy away from the shoals of depression and deflation and into more tranquil waters. Act III began with a recovering economy heading on a more promising course. But the headway being made was substandard, hindered by the flotsam and jetsam of fiscal incompetence and rising fears of a new storm brewing in Europe. In an effort to propel the economy forward at a better clip, the FOMC commanded that unprecedented amounts of monetary fuel be provisioned for the financial system through large-scale asset purchases, the proceeds of which were pumped into the stores of banks. But as Act IV began, the banks lingered in the wings rather than taking center stage. Rather than shovel their abundant means into their loan boilers, they were parsimonious and hoarded their fuel. Other members of the financial fleet, however, were heartened by the turn of events, especially those who finance themselves through the issuance of stocks and bonds rather than through bank loans.

They danced a happy jig while they decorated their balance sheets with cheaper debt and improved their margins and earnings per share  4  BIS central bankers’ speeches  through share buybacks. Slowly they began to hire new workers, and the ship of the economy started gathering momentum to steam along at an improved clip. As Act IV came to an end, the FOMC evaluated the utility of its navigational tactics, and having tentatively decided that it was on course to its desired destination, began cutting back on the amount of fuel it was pumping into the financial system. Initially, it fumbled the dialogue, but eventually the articulation of its intention was accepted, if not applauded, by its audience. Now we have entered Act V. Not until the final scene will we know whether we have achieved the auspicious outcome of arriving at the desired port of an economy that grows sufficiently to bring about full employment without giving rise to inflation. With Shakespeare, the most pleasant plays typically end in marriage. The happy outcome to our economic predicament would entail the marriage of sensible fiscal policy with prudent monetary policy, carrying the American economy to new horizons, allowing the Fed to emerge a hero. One can envision less-pleasant outcomes, however, some of them tragic.
The analysis of a total of 52 balance of payments crises experienced in the 1980-2001 period in 19 countries including Turkey show that 51 of these crises erupted under managed floating exchange rate regimes.1 Thus, in almost all countries facing a balance of payments crisis it can be seen that pegged or foreseeable exchange rate regimes were being implemented. In addition, there were problems related to financial stability or the implementation of tight fiscal and incomes policies that were supposed to support the exchange rate regimes in these countries. A second issue I would like to touch upon is that the open positions of the banking sector are so low that they are even comparable to those of the past. Within this framework, the amount of open positions of the banking sector is closely monitored and necessary warnings are given. Meanwhile, the real sector should also be cautious about open positions. Another important issue that needs to be kept in mind in relation to the current account deficit is that the Central Bank does not try to artificially keep the New Turkish Lira overvalued. US dollar 21.7 billion worth of foreign exchange purchase since 2002 is an indicator of this. Besides, short-term capital is not encouraged, and market players are continually reminded that the exchange rate risk lies in the market.

The lessons that can be drawn from a comparison with the French experience may seem limited since, in the 1980s, France was facing capital outflows, whereas emerging economies are now often facing speculative capital inflows. However, I believe that, while the challenge has become more demanding, successful financial liberalisation for EMEs still rests on the same two key conditions that applied to France: •  Building a resilient domestic financial system while or before opening the capital account. •  Shaping appropriate institutions and policies. I will illustrate these two conditions in the reminder of my speech. BIS Review 64/2007  1  1. A successful liberalisation requires to strengthen the domestic financial system while, or sometimes before, opening the capital account  I will briefly remind you why and how this can be done. First, why? This is because an efficient financial sector ensures both a better financing of and a better protection for the economy. On the one hand, it ensures a better financing of the economy by broadening the investor base and enhancing their ability to make use of diversified financial instruments. Not only does competition within the financial sector contribute to limiting the cost of capital but it also fosters innovation and thus allows for more efficient risk management. For example, securitisation provides financial institutions with instruments to manage the composition of their balance sheets and thus contributes to buttressing credit distribution while supporting the development of financial markets.