samchain/econo-pairs-v1 huggingface dataset:
It is also meant to counter the so-called redenomination or convertibility premium that compensates investors for the perceived risk of a breakup of the monetary union. It ties intervention to strict conditions: it will be used only for countries under an EFSF or ESM programme. Transactions are limited to the shorter end of the yield curve, and would complement ESM intervention at the longer end. Moreover, the ECB will not take on a senior position in the debt’s structure, therefore safeguarding the interest of private-sector investors. As is well known, the announcement of the OMT programme has already helped to stabilize the financial markets and reduce sovereign spreads (see Chart 1). It is really equivalent to traditional open market operations that central banks have long resorted to in order to provide stability and a better functioning of the monetary transmission process that can get impaired in certain circumstances. The Maltese situation The Maltese economy has encountered some persistent headwinds. Still, the recession observed in the last quarter of 2011 and the first quarter of 2012 was relatively short and mild. Since then, the economy has shown a modest recovery. During the second and third quarters of this year, real GDP was up 1.6% on the same period of 2011. The inflation rate in Malta has recently exceeded that of the euro area average. The HICP measure of the year-on-year rate of inflation stood at 3.2% in October 2012, compared with a rate of 2.5% in the euro area as a whole.

Needless to say, had the debtor’s solvency and ability to pay been strictly used as the main consideration when granting credit, as proposed in the new law, this would have helped curb the runaway growth of credit before the crisis. At this point, it is worth asking where we currently stand in terms of ability to pay. We can see in the left-hand chart that, having peaked in 2007, the ratio between the price of housing and the median household income declined until 2012 and subsequently rose again after 2014. However, if we consider the red line, which represents the affordability of housing, we see that the instalments payable in the first year are currently slightly above 30% of monthly household income, in contrast to the level of over 50% reached in 2008. Admittedly, we need to treat these affordability data with caution. Since interest rates remain at historic lows, monetary policy normalisation in the medium term will inevitably have an effect on mortgage payments. 9/15  We should not forget that, although the proportion of fixed rate mortgages has recently reached 40% of all new transactions, 87% of the existing stock of mortgage loans remain linked to a variable rate, so that our mortgage market continues to be particularly sensitive to rising interest rates. Consequently, we take a positive view of the facilities to encourage conversion of variable to fixed rate loans introduced by the new law.
Danske bank is an example of a bank that has chosen to organise its operations in this way. The relatively extensive operations conducted by the bank in Sweden are largely under Danish regulations and supervision. If a bank instead chooses the form of subsidiaries for its foreign operations, then its subsidiaries – as they are regarded as independent entities – will be covered by the regulations and supervision that apply in the respective countries in which they are domiciled. In this case, there are in a formal sense several "home countries”. Nordea’s operations in Sweden, Finland, Norway and Denmark are organised in this type of subsidiary structure, which means that the group is covered by four different systems of regulation and supervision. In both of these cases there is reason to ask whether a pure “home country principle” is the best basis for supervision of banks with considerable operations in several countries. In the case of Danske bank, where the foreign operations are conducted in the form of branch offices, the most important question is whether it is reasonable and appropriate that the responsibility for supervision is concentrated to one single country. This question becomes particularly relevant if the bank is a large actor outside of the home country and in these countries plays a decisive role in the stability of the financial system. In the case of Danske bank’s Swedish operations, one perhaps cannot say that this is currently the case. However, it is not inconceivable that this situation might arise in the future.

Although we have seen marked improvements in the critical areas of capital, liquidity, and resolution, we have not yet fully addressed the root causes of many of the problems that have plagued the financial sector. I am thinking of not only the excessive risk-taking and leverage in the run-up to the crisis, but also the repeated scandals related to LIBOR, FX, money laundering, sales practices; unfortunately, the list goes on and on. Underlying these scandals is often an inadequate corporate culture, where accountability and ethical conduct have fallen by the 1/3  BIS central bankers' speeches  wayside. The good times we’re in can exacerbate these problems in three ways. First, there’s a risk of complacency setting in—an “if it ain’t broke, don’t fix it” mentality. Second, in a strong economy, the hard numbers that we tend to focus on when examining profits, losses, capital, and liquidity can look like everything’s coming up roses, even when an uncomfortable reality lies beneath. And, finally, culture is a long-run investment that takes many years to develop and requires constant reinforcement to preserve. If you let it erode, you can’t go to the market and obtain a new “culture” overnight. As I mentioned, establishing a more robust regulatory framework was absolutely necessary for a healthier, more resilient financial system. But, it is far from sufficient. The danger we face today is that people may conclude that the hardened defenses are enough, and other supervisory activities around culture, conduct, and governance are superfluous.
Economic and political philosophers from Adam Smith (1759) to Hayek (1960) have long recognised that beliefs are part of inherited social capital, which provides the social framework for the free market. Social capital refers to the links, shared values and beliefs in a society which encourage individuals not only to take responsibility for themselves and their families but also to trust each other and work collaboratively to support each other. 9 So what values and beliefs are the foundations of inclusive capitalism? 10 Clearly to succeed in the global economy, dynamism is essential. To align incentives across generations, a long-term perspective is required. For markets to sustain their legitimacy, they need to be not only effective but also fair. Nowhere is that need more acute than in financial markets; finance has to be trusted. And to value others demands engaged citizens who recognise their obligations to each other. In short, there needs to be a sense of society. Social capital has been eroded These beliefs and values are not necessarily fixed; they need to be nurtured. My core point is that, just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself. To counteract this tendency, individuals and their firms must have a sense of their responsibilities for the broader system. All ideologies are prone to extremes. Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith.

As an economist who should know the importance of comparative advantage, I will spend the balance of my time focusing on what central banks can do to support inclusive capitalism. The Bank of England’s mission “to promote the good of the people of the UK by maintaining monetary and financial stability” suggests that central banks have an important role to play in supporting social welfare. Central banks can contribute in two areas. First, our core macroeconomic objectives promote social welfare. Second, we can help to create an environment in which financial market participants are encouraged to think of their roles as part of a broader system. By building a sense of responsibility for the system, individuals will act in ways that reinforce the bonds of social capital and inclusive capitalism. Some of this is straightforward. Inflation hurts the poor the most and the real costs of financial instability – unemployment and the seizure of credit – are likely to be felt most  11  Padoa-Schioppa (2010). 12  Sandel (2012). 13  See Martin (2012), also Lewis (2014). BIS central bankers’ speeches  3  acutely by the poor. 14 Conversely monetary and financial stability are cornerstones of strong, sustainable and balanced growth and therefore directly affect distributive justice. Some is more nuanced. While to not have acted would have been catastrophic for all, the distributional consequences of the response to the financial crisis have been significant.
Bank Negara as service provider has started OKU friendly environment On that note, I would like to share that Bank Negara Malaysia, in our modest ways, has taken some efforts towards being more disabled friendly. Our new premises at Lanai and Sasana Kijang and newly renovated Regional Offices, are OKU friendly with ramp passages at major entrances, lifts equipped with braille buttons, OKU toilets at all floors, OKU designated parking lots and wheelchairs made available when requested. BIS central bankers’ speeches  1  Our Bank Negara Malaysia’s Museum and Art Galley (MAG) provides special services to the OKU. We have four front liners who are trained in basic sign language. By 2016, the numismatic gallery will have a “Touch and Feel” corner, with special exhibits to cater for the visually impaired. In 2014, we have started our series of financial awareness programme to the OKUs, starting with trainees and staff of Pusat Latihan Gurney, Malaysian Association of the Blind in Brickfields. This year, we plan to conduct more of such programmes. Having said that, for Bank Negara Malaysia, we acknowledge that there are still a lot more that need to be done and we will continue to intensify our efforts in striving to provide a user friendly and barrier–free environment to increase accessibility to our services and products.

The industry needs to develop and implement an action plan to increase access of the OKUs to the financial products and services. Role of individual institutions – to ensure enabling environment for OKUs For a start, individual financial institution is encouraged to address immediate needs mentioned earlier that was highlighted by the OKUs such as providing lower counter, Talking ATMs, sign language for the deaf, website which is W3C compliance and offer appropriate insurance products for the OKUs. In providing the accessibility to the OKU community, the industry players need to ensure that the services and products are relevant, sustainable and affordable in meeting the needs of the OKUs, associated risks are mitigated and the OKU consumers are protected. 4  BIS central bankers’ speeches  Role of Bank Negara Malaysia – to consolidate effort and move forward together As mentioned earlier, it has always been high on Bank Negara Malaysia’s financial inclusion agenda that all facets of the Malaysian society are served by the financial industry. As such, I would like to call upon all of us here, let us embrace this journey together towards a more caring and responsible industry by ensuring the needs of the OKUs are provided for. Launching of “Cash Test” for the visually impaired As part of Bank Negara Malaysia’s continuous initiative to support the needs of OKU community, the Bank has introduced a device known as Ringgit Cash Test Cards, a credit card-sized plastic card with gauges designed to assist the visually impaired in identifying banknotes and coins.
But, there remains considerable uncertainty about that forecast and, given the persistent over-optimism about the growth outlook by Federal Reserve officials and others in recent years, we shouldn’t count our chickens before they hatch. Business fixed investment and housing are two key areas where activity has been disappointing. They need to kick in more forcefully for the economy to grow at an above trend rate for a sustained period. With respect to capital spending, the recent trajectory has been very soft relative to the apparent strong underlying fundamentals. Corporate cash flows have been strong, profit margins are high, balance sheets are healthy and financing generally appears readily available at low interest rates. Moreover, the absolute level of capital outlays is low so that the capital stock is expanding only slowly. Despite these positive fundamentals, real business spending on equipment and software has risen only 3.2 percent over the past four quarters and contracted in the first quarter. This is a bit of a puzzle to me. But, I expect it to be resolved by a pickup in capital spending. Recent trends in durable goods orders and conversations I have had with businesses in my district suggest that such a pickup may finally be occurring. On the housing side, residential investment has stalled out over the past few quarters.

One obvious wildcard is the situation in Ukraine and relations with Russia. How this will evolve is difficult to predict. The big risk is that conditions deteriorate and the ultimate outcome is a disruption to energy supplies from Russia. When all these cross-currents are considered, the impetus to growth from abroad appears little changed from last year. Now a reasonable question would be: If the outlook is improving, then how does one explain the sharp slowdown in growth in the first quarter? My own view is that the principal factors behind the slowdown were transitory so we should not be overly concerned at this point. Some slowing in the first quarter was nearly inevitable. Foreign trade and inventories provided unsustainably large contributions to growth over the second half of last year and payback for those large gains was expected in the first quarter of this year. Also, the expiration of extended unemployment compensation benefits and bonus depreciation at the end of the year was likely to take some of the starch out of consumer spending and business fixed investment. Beyond these anticipated factors, we had unusually harsh winter weather, which likely depressed housing activity, manufacturing production and some aspects of household spending such as motor vehicle purchases. With the fundamentals of the economy improving and fiscal drag abating, I expect the economy to get back on to a roughly 3 percent growth trajectory over the remainder of this year, with some further strengthening likely in 2015.
Community banks will play a key role in spurring this progress, so it is essential that they remain financially sound and engaged. The financial crisis provides many lessons for how banks can thrive even in turbulent economic conditions. The vitality of the Bronx and other communities depends on the ability of entrepreneurs to establish and grow new businesses. While access to credit is important, success depends on a wide range of factors, and we need to make sure new business owners have the help they need to prosper. BIS central bankers’ speeches  5

Assuming that this process begins later this year and continues uninterrupted, the balance sheet size would likely normalize in the early part of the next decade.4 There is uncertainty about the exact timing for several reasons. We don’t know how fast our agency MBS holdings will pre-pay, how quickly currency outstanding will grow, how many bank reserves will be required for the efficient execution of monetary policy, or the evolution of other liability items on the Fed’s balance sheet that affect the amount of bank reserves. Against that backdrop, one major issue that remains outstanding is whether the Fed will continue to operate with a “floor” system, in which the Fed maintains a relatively abundant supply of reserves and the effective federal funds rate is managed by periodic adjustments to the interest rate the Fed pays on bank reserves. Or, whether the Fed will move back to a “corridor” system, in which reserves are relatively scarce and the effective federal funds rate is managed by frequently adjusting the supply of reserves to meet demand at the desired federal funds rate level. In this type of regime, it is the quantity of reserves, rather than the interest rate the Fed pays on reserves, that is the primary driver of the federal funds rate.5 Having managed the System Open Market Account during the financial crisis—a period during which the demand for reserves was very volatile—I very much favor a floor-type system. It is much easier to manage on a day-to-day basis.
And taking the period since the beginning of 2007 as a whole, inflation has averaged 3.2%, implying a cumulative excess rise in prices of 5 percentage points relative to the path prescribed by our target. Why has inflation turned out both above the 2% target, and higher than the MPC expected? There have been primarily three factors at work: strong global price pressures, particularly for energy and other commodities; the nearly 25% depreciation in the sterling effective exchange rate between the onset of the crisis and the end of 2008; and the increase in the standard rate of VAT to 20%. We estimate that the rise in the price of energy, incorporating both direct and indirect effects can, in an arithmetic sense, account for between 3 and 5 percentage points of the rise in consumer prices since the beginning of 2007. The rise in non-fuel import costs, which is mainly attributable to the fall in sterling, can account for between 5 and 7 percentage points. And, while the cut in VAT in 2009 and its subsequent reversal should be broadly neutral, the latest rise in January 2011 should, on the assumption of complete pass-through by suppliers and retailers, have added over 1 percentage point. Global prices have risen sharply as the international economy – particularly the emerging economies – rebounded from the globally synchronised downturn that followed the collapse of Lehman Brothers.

It is now clear that rating agencies’ models failed in the recent past as a result of wrongly basing their ratings on the correlations observed during good times. In my opinion, the recent methodological changes, imposing stricter rating caps (above the rating of the sovereign), in particular for EMU countries, amount to treating crisis times as structural changes making the new methodologies based again on extreme assumptions. Thus, the error is the same, this time in the opposite direction. Policy-makers timely acknowledged the fragilities in the design of the EMU, identifying the most crucial reforms needed. These will increase the robustness of the euro area economies against adverse shocks. Rating agencies do not fully recognize the ongoing process. Instead, they decide to change their procedures exactly at the moment in which the institutional framework of the EMU is responding to the very same conditions that motivated such move. In this regard, it is important to emphasize that EMU countries are about to be equipped with a banking union, which will contribute towards breaking the link between sovereigns and the banking/financial system. Further relevant institutional changes include the creation of the European stability mechanism, the Fiscal Compact, the new role of the ECB in eliminating runs on sovereign debt (through the Outright Monetary Transactions programme) and a comprehensive set of EU regulations aimed at avoiding fiscal and macroeconomic imbalances. Therefore, rating agencies are moving countercyclically with the EU institutional advances and risk becoming irrelevant.
This is the most tangible way to ensure a high level of competency in the wealth management industry. Sound market conduct Competency without integrity is useless at best, and dangerous at worst. A second imperative for successful private banking is therefore to strengthen market conduct. At its core, private banking is about trust. This means acting with integrity, putting the interests of the client first and safeguarding the confidentiality of the client at all times. Let me highlight two areas for improvement. First, we are seeing increasing cases of mis-selling and mis-conduct in the private banking space. Such practices are ultimately self-defeating. Wealth managers must move away from a transaction-driven approach of pushing products to a client-centred approach that focuses on customised advice to meet long-term needs. Private banks must move away from remuneration structures that rely primarily on commissions, or which are biased towards rewarding staff for recommending certain investment products. Dealing fairly with customers must be made a priority. The Private Banking Code of Conduct developed by the industry sets out principles for proper business conduct by private banks and their staff, and seeks to enhance transparency to clients. MAS’ Guidelines on Fair Dealing emphasise the responsibilities of the Board and Senior Management of financial institutions to deliver fair dealing outcomes to customers and instill a culture of fair dealing that goes beyond compliance with regulatory requirements. Second, the aggressive poaching of private bankers and rapid churning of professional staff are not healthy for the industry.

We must foster a culture in the industry that looks beyond the question of “is this legal?” to the larger question of “is this right?”. Finally, staying clean. Confidentiality of customer information will continue to be protected: it is a basic right and underpins confidence in Singapore as a wealth management hub. But confidentiality cannot and will not be used to conceal financial crime or the flow of illicit funds. Neither will confidentiality stand in the way of cross-border exchange of information for investigating crimes. There is no conflict between high standards of financial integrity and our attractiveness as a centre for managing wealth. On the contrary, Singapore will continue to be a vibrant wealth management centre only by having a clean regime that safeguards legitimate funds and weeds out tainted money. Only a competent, trusted, and clean financial centre can be a successful financial centre. Thank you. BIS central bankers’ speeches  7