samchain/econo-pairs-v1 huggingface dataset:
The more transparent, the more cautious board members will be in pronouncing their judgments. That is why we have decided not to reveal board members’ names in the minutes, so as not to inhibit an open, technical and independent discussion. In the pursuit of monetary policy effectiveness and predictability, we feel that the discussion itself is more important than names. A recent study by Meade and Stasavage (2008) compared the Fed’s Federal Open Market Committee discussions before and after 1993, at which time it was decided to publish detailed records of deliberations of the meetings five years after they had been held. The study concluded that knowing the transcripts were to be made public had made members of a monetary policy committee more reluctant to offer dissenting opinions. In general, transparency and its limits depend chiefly on the characteristics of the Board. For example, at one extreme we have the European Central Bank which does not keep minutes and dissent is very limited; and at the other extreme we have the Bank of England where each board member has individual responsibility. 4 Chile, like the United States, takes an intermediate stance. That’s why Blinder (2004) says, there is no “one-size-fits-all” approach to communication and transparency. Communications policy The Central Bank website carries a document called “Communications Policy” which specifies the principles and norms governing the Bank’s communication with the public.

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My former colleague Lyndon Nelson gave a speech last year3 setting out how the approaches in the two policies complement each other. In his remarks he very clearly stressed that whilst firms can outsource services, their boards and senior management cannot outsource their ultimate accountability and responsibility for their resilience. Our Op Res policy further emphasises this point. The identification of IBS, determining the maximum tolerable level of disruption to those services and taking measures so that firms can remain within those tolerances under severe but plausible scenarios, means firms and their boards need to assess in detail the dependencies that they have on other parties. 2. Our initial supervisory assessment of firms’ progress Having provided a brief summary of the policy, I wanted to share some initial feedback on the progress that UK banks and building societies (firms) have made in meeting our expectations. We are still at a relatively early stage in our analysis and engagement with firms, with it being less than a month since we have received the initial responses from firms. So I want to emphasise that this initial feedback will be preliminary, and we won’t at this stage be able to say what “best in class” looks like for each aspect of the policy. However, there are some important 2/6  BIS central bankers' speeches  themes that are already emerging from our review of the board-approved lists of IBS and impact tolerances which we received.

At the PRA we have found this two way dialogue valuable in guiding the development of the Op Res policy, and in that spirit, my remarks today aim to keep you informed on the next steps on our Op Res roadmap. The need to focus on this topic has never been more pressing. Since our original Discussion Paper: the Covid pandemic; the ongoing shift of services to the Cloud; and, more recently, the terrible events in Ukraine have all brought fresh challenges to the overall operational resilience of the sector. This has included the need to shift to remote working at short notice, address the risk posed by dependencies on services and third party providers (including those located in highly disrupted areas of the world), and highlighted an increasing need to focus on cyber resilience. The good news is that the sector has, to date, shown itself to be resilient in the face of these challenges. However, while clear progress has been made, there is still distance to travel to a point where firms across the sector reach the level of operational resilience we expect to see. This has been highlighted by a variety of operational outages still occurring frequently, such as payment outages, app and website failures, and incidents at third party providers. These incidents often attract significant attention from both customers and the media, emphasising the need for demonstrable resilience to underpin broader confidence in the financial sector.
It is also necessary to ensure that the behaviour of the organisation is in practice aligned with these values and that employees buy into them, so that the organisation actually practises what it preaches. Let me try to put some flesh on these arguments with some practical examples of ethical dilemmas involving banks that have been in the news recently. I have said that banking business is becoming more complex. One aspect of this is the globalisation of business activities which may be summed up as the tendency of the world to become one market place. As banks reach out beyond their home market, they become exposed to unfamiliar business environments and customers whose ethical standards may be very different from their own. This puts extra strain on the “know your customer” policy upon which regulators are so insistent. Business dealings with Russia are a case in point. Here you have the situation of a country that is making the transition from a communist to a capitalist economy. This naturally creates profit opportunities for Western banks. It could indeed almost be argued that these banks have a moral responsibility to assist in transforming the Russian economy. Unfortunately, somewhere along the line, this transformation has gone wrong, and the borderline between what is legitimate and illegitimate business in Russia has become blurred, to say the least. In this situation, what should a bank do? The decision can obviously be viewed in strictly commercial terms. But there is an ethical dimension as well.

Examples include using the Kuala 2  BIS central bankers’ speeches  Lumpur Regional Centre for Arbitration that offers services as dispute resolution for Islamic financial contracts; Hong Kong issuers tapping the Ringgit sukuk liquidity for cost-effective pricing given the depth of the sukuk market in Malaysia; as well as enhancing knowledge and expertise in Islamic finance through our higher learning education centres such as the International Centre for Education in Islamic Finance (or INCEIF). Forward-looking scenario – A common trading platform for sukuk Future growth prospect for the sukuk market is tremendous. Growth is expected to come from the GCC and Asian regions as infrastructure projects are estimated to be USD2 trillion and USD8.3 trillion respectively till 2020. Hong Kong, with its sizeable bond market to GDP of 72% can play a role in funding these projects. Moving forward, more efforts are needed towards developing financial inter-linkages between our two markets. One area is for our financial communities to explore a common sukuk trading platform for cross-border transactions. A common platform that incorporates international standards and best practices in all aspects of the sukuk trading is key to instil confidence in secondary markets. It can also increase cross-border activities. It has the potential to spur further diversification of product offerings, reduces cost of intermediation and boosts trading activities.
Household debt and the housing market Norges Bank’s analyses show that high house prices may explain most of the growth in household debt. Sales of new dwellings have also made a positive contribution. The contribution from changes in the interest rate was high in 2003 and 2004, but has diminished recently. Lower unemployment in 2004 and increased house sales have pushed up debt growth. Household debt also depends on the number of students aged 20-24 as a share of the total population. This reflects demand for student loans and the fact that persons with higher education normally have larger housing loans than those without higher education (all else being equal). Our analysis shows that higher house prices affect debt with a considerable lag. The main explanation is that the change in the loan-to-asset value ratio of a dwelling is closely related to the sale of the dwelling and that only a small portion of the housing stock is for sale at all times. Even if house prices stabilise following a sharp rise, there will be a long period during which houses change hands at a higher price level than the last time they were sold. Other factors may also contribute to a high level of household debt. Compared with other countries, many households in Norway own their own dwelling. Factors such as centralisation, a larger number of single persons, fewer persons in each household and available loan products may also have had an effect. House prices are determined by supply and demand in the housing market.

Chart 2  The interest rate differential is still wide, however, as can be seen in Chart 2, particularly the long-term differential, which has only narrowed by 1 percentage 5  point (and much less, if adjustments are made for CDS spreads). It would therefore have been imprudent to lower the SRR to zero now, and furthermore, there is limited experience of the impact of adjustments in capital flow management tools of this type. However, this does not change the fact that the objective is to keep the SRR at zero whenever possible. We have said that this tool should be our third line of defence, after conventional economic policy (including intervention in the foreign exchange market) and conventional macroprudential tools. This is not to say that the SRR is some sort of emergency device, as distressed economies hardly need worry about excessive voluntary capital inflows. The capital flow management tool, or CFM, is not a capital control in the sense that it restricts or halts certain capital flows explicitly, as was the case during the tenure of the comphrehensive capital controls on outflows. It changes the incentives for inflows — the shorter the investment horizon, the stronger the impact. But this brings some costs with it, in terms of Iceland’s image and the effectiveness of its markets, and it would be better to do without the SRR if possible. This prioritisation of policy tools is consistent with the position taken by the International Monetary Fund (IMF).
This has permitted the creation of today’s globalized financial industry and has made possible an impressive growth in value. The role of central bank oversight Now, let me turn to the role of central bank oversight: Every transaction - be it a commodity or a service - eventually leads to a transfer of money. From trade to settlement at least one system of the financial market infrastructure is usually involved. Given this, it is not surprising that the regulators are keeping a keen eye on market developments. Central banks, with their core mandate of monetary policy, have an especially close relationship with the payment systems. To the overseers of payment systems the main objective is safety. The definition and standards of safety have evolved with the years. For a long time the main interest of central banks in payment systems came from computer experts. Payment systems used to be viewed merely as ‘computers’ that cleared and settled payment obligations. In the late 1980s the focus started to shift towards the financial risks, i.e. credit and liquidity risk inherent in payment systems. Slowly it became common knowledge that payment systems could be a source of systemic risk by providing a channel through which the failure of one participant to meet its payment obligations could be passed on to other participants. In their own best interest and under the influence of the overseers operators started to protect their systems against financial risks - in most cases by building Real-Time Gross Settlement systems (RTGS).

Niklaus Blattner: Value, vulnerability and resilience of the financial market infrastructure Speech by Professor Niklaus Blattner, Member of the Governing Board of the Swiss National Bank, at the SIBOS Conference, Opening Plenary, Geneva, 30 September 2002. *  *  *  Ladies and Gentlemen As a central banker sharing the responsibility for overseeing payment and settlement systems, I have of course been closely following the developments of the financial market infrastructure. There is no doubt that these developments have greatly contributed to an enhanced efficiency of the financial sector. They have also highlighted the fact that not only the payment and settlement systems but also other providers of standardized services in the field, not least S.W.I.F.T., have become more important over time. The developments have further shown that safety and resilience have clearly gained more weight for the system operators, for the system participants as well as for the regulatory authorities. In the first part of my address I would like to consider the economic value added by the payment and settlement infrastructure and to briefly discuss the driving forces underlying its development. In the second part I shall focus on the role of central banks as agencies of oversight. In the third part I shall describe the factors that shape the vulnerability of financial markets and their infrastructure and examine how these factors have changed over time. The fourth part is devoted to the implications of identified vulnerabilities for resilience.
6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 5: Brexit as a source of uncertainty Aug-Sep 2016 Feb-Apr 2017 Aug-Oct 2017 Feb-Apr 2018  9  Share of respondents (per cent) 50 40 30 20 10 0  Not important  One of many sources 2 or 3 top sources  Top source of uncertainty  On the demand side, while Brexit did not lead to an immediate fall in GDP, it is nonetheless exerting a drag. In addition to its effects on investment, it has had a significant impact on real household incomes and therefore on consumption. The main vehicle for this impact has been the fall in the exchange rate, which remains some 15% below its pre-referendum peak. The rise in import prices caused by sterling’s depreciation has had a material and persistent effect on incomes: real household income has only risen by 0.2% in the seven quarters since the referendum, compared with averaged growth of over 1½ % per year in the five years prior to it (Chart 6). Given that slowing in real income growth, you could argue that it’s surprising that households haven’t adjusted consumption even more. Consumption growth has certainly slowed: it has averaged around 0.3% per quarter since the referendum, compared to 0.6% in the previous five years and nearly 0.9% in the pre-crisis decade. But households have also in aggregate reduced their savings – the household saving rate has fallen by some two per cent of income (Chart 7).

The existence of a wage Phillips Curve, its stability, its slope and its identifiability in the data are collectively one of the more contentious subject areas in economics – and for some of you my next chart (Chart 4) may not do much to persuade you of any of these. Nevertheless I think most practising economic policymakers would expect to see at least some link between 4  falling unemployment and rising wages. Indeed one reason for the fall in the curve over time is arguably policymakers’ success at using that link to control inflation and bring down nominal wage expectations. At any rate, the stubborn failure of wage growth to rise much above 2% - that is, above half its pre-crisis rate – and workers’ surprising willingness to absorb that in real wages represents one more surprising feature of the British economy. 4  The original observation was made in: Phillips, A. W. (1958). "The Relationship between Unemployment and the Rate of Change of Money Wages in the United Kingdom 1861-1957". Economica, 25 (100): 283–299. For more recent MPC discussion, see: Tenreyro, S (2018). “Models in macroeconomics”, speech at the University of Surrey, 4 June 2018; Vlieghe, G (2018), “From asymmetry to symmetry: changing risks to the economic outlook”, speech at the Confederation of British Industry, Birmingham, 23 March 2018; Broadbent, B (2017), “Brexit and interest rates”, speech at the London School of Economics, 15 November 2017; Cunliffe, J (2017).
Excessive reliance on consumption or non-tradable sectors, such as housing, all financed by borrowing abroad at an overvalued exchange rate would prove only temporarily satisfying. The UK’s current account deficit is at a record level. The perennial trade deficit has been reinforced by the fact that the UK is growing much faster than its main trading partners. More  3  In May 2013, the MPC projected annual growth of 1.7% for 2014Q1, only half of the rate at which it now estimates the economy to have grown over that period. Meanwhile the 2014Q1 outturn for unemployment, at 6.8%, was some 0.8ppt below the MPC’s May 2013 central projection. Despite these upward surprises to activity, annual earnings growth in 2014Q1 was 0.5ppt weaker than expected in May last year. That contributed to annual unit wage costs growth around 1ppt below the MPC’s May 2013 central projection. 4  Private non-financial sector debt is 163% of GDP. Around two thirds of bank loans to individuals and more than half of loans to businesses are at variable interest rates. BIS central bankers’ speeches  3  recently the sharp fall in the returns we earn on our investments abroad has led to a negative 3% swing in our net investment income. This is not an immediate cause for alarm. As the world and particularly Europe recovers, demand for our products and returns on our investments should increase.

V.  Conclusion  This morning, I have shared some of my views on the need for risk management and supervision to evolve together and to reinforce each other. All of us recognise that both areas must keep pace with changes in accounting practices, and I think you would agree that the work we have to undertake in all three areas - risk management, supervision, and accounting - is quite demanding. To develop new ways of thinking about risk and about the techniques for measuring it, we will require hard research and significant resources. We must gather and pour over large amounts of data to sharpen our understanding of various risks and their relationships to each other. We must dedicate our talent, staff, and indeed funds to undertake this work. I would argue that is equally demanding to develop a supervisory structure that capitalises on and further encourages those advances, especially when we are trying to implement a shared framework across many jurisdictions. But the benefits are many. On a microeconomic level, the virtuous circle I have described should help individual firms to improve the quality of their controls in the short run and strengthen their competitiveness in the long run. Yet supervisors are especially motivated by the benefits we expect at the macro level. We believe that, when all financial institutions have the right incentives to pursue profits responsibly, the financial services sector becomes better managed, more resilient, and better able to serve as a source for sustainable growth for the economy.
It is part and parcel of an optimal allocation of resources – including capital – and of a financial system that enhances growth and welfare. But there can  1  Schumpeter, J. (1934), The Theory of Economic Development, Duncker & Humblot,Leipzig. Trans. R. Opie (1934), Cambridge, MA: Harvard University Press. 2  King R, Levine R. (1993), Finance and Growth: Schumpeter might be right, The Quarterly Journal of Economics, Vol. 108, No. 3. BIS central bankers’ speeches  1  be such a thing as excessive indebtedness. And indeed, the indebtedness of banks, sovereigns and households was growing exceptionally strongly. For instance, on a global scale, the ratio of domestic credit to GDP increased from 74% in 1980 to around 138% in 2009.3 This very high level of indebtedness is considered to have been a key feature of the crisis. This raises two major questions in my mind. First, what is the reason for the disconnect between our initial perception of financial development as being something positive, and the observed dismal outcomes? And, second, what lessons can we draw from our diagnosis? Market failures, behavioural biases and regulatory design failures When our economic system malfunctions, it is natural to try and identify sources of what we generically refer to as “market failures”. Typical market failures include market power, information asymmetries, external effects and public goods. Uncorrected, these traditional market failures give raise to sub-optimal outcomes. To analyse the case at hand it is useful to extend the list of these usual suspects.

Together, we can pave the way for a transformed banking industry. Thank you. 4/4  BIS central bankers' speeches