samchain/econo-pairs-v1 huggingface dataset:
This limit ensures that banks still have to borrow from the Eurosystem at the monetary policy rate set by the Governing Council. Here is where the ANFA comes in. Its purpose is to limit the size of the NCBs’ non-monetary policy portfolios, net of the related liabilities, and thus to ensure that the Eurosystem can effectively implement the single monetary policy. Of course, when performing national tasks, the NCBs must comply with the Treaty including the prohibition of monetary financing. Moreover, if these tasks were to interfere with monetary policy in any other way, they can be prohibited, limited or have conditions placed on them by the Governing Council. The publication of the previously confidential ANFA text was a unanimous decision of the ECB and the NCBs in the Eurosystem to live up to our commitment to be transparent. This publication should resolve misunderstandings about ANFA. In particular, it clarifies that the sole purpose of ANFA is to set limits for non-monetary policy operations related to national tasks of the NCBs, which they are allowed to conduct according to the Treaty. Nothing more and nothing less. These limits ensure that the NCBs’ operations do not interfere with the objectives and tasks of the Eurosystem and, in particular, with the single monetary policy. BIS central bankers’ speeches  3  Finally, complementing the information on ANFA, the ECB also published data on the Eurosystem’s aggregate net financial assets. The NCBs will follow suit and disclose their respective net financial assets when publishing their annual financial accounts.

The Agreement on Net Financial Assets Let me conclude by turning briefly to the recent decision to publish the Agreement of Net Financial Assets, also known as ANFA. This is another step to live up to our commitment to be accountable and transparent, both towards you as Parliament and towards the public at large. The ANFA is an agreement between the ECB and the euro area National Central Banks – the NCBs. It ensures that monetary policy is unaffected by NCB operations related to their national, non-monetary policy tasks. The right to perform such tasks dates back to the start of Economic and Monetary Union. At that time, the founding member states decided to centralise only central bank functions and tasks that are necessary to conduct a single monetary policy. All other tasks remained with the NCBs. Such national, non-monetary policy tasks include managing the NCBs’ remaining foreign reserves – including gold – after the transfer of foreign reserves to the ECB, managing some non-monetary policy portfolios including those related to pension funds for their employees, or providing payment services to national governments. When the NCBs hold portfolios not related to monetary policy as part of their national tasks, these portfolios are financed either by central bank money provided by the NCBs or by nonmonetary liabilities. This does not interfere with monetary policy as long as it is limited to less than the amount of banknotes needed by the public.
The aggregate net book value of permitted property holdings will be subject to a revised Section 33 limit of 20% of a bank’s capital funds (reduced from the existing 40%). The 20% limit translates into less than 5% of each of the local bank’s total assets currently. It will apply on the basis of both bank and group capital. As with the present Section 33, properties held for the purpose of the bank’s business premises will be excluded from this limit. But whilst the present Section 33 applies only to properties directly held by banks and their subsidiaries, the new limit will also include properties held by companies in which the banking group has shareholding of 10% or more. Investments made by insurance funds Most of the local banks have insurance companies within their groups. These insurance companies present a slight complication. They invest two separate types of funds: the equity in the company belonging to its shareholders, and the insurance funds managed by the company but belonging to the policyholders, For example, the life fund of life insurance companies. Portfolio investments made using the shareholders’ funds of the insurance companies will be subject to the same single security limit of 2% of the group’s capital funds and the limit of 10% of the investee company’s capital. The portfolio limits for the banking group as a whole will therefore include the investments using these shareholders’ funds of their insurance companies.

The design of financial protection has to evolve and, for many underserved segments, financial protection has become even more pressing. Islamic finance and takaful should therefore embrace its transformative role, responding to these evolving needs, rather than merely reacting to past and existing demand. It is thus imperative for takaful industry to be agile and adapt to these changes. In my remarks today, I will outline three dimensions that offer significant opportunities for the transformative role of takaful: First, takaful can be a key enabler for the Muslim economy; Second, it can be a solution of choice for Malaysians; and Third, it can also be a game-changer in empowering financial resilience. 1/5  BIS central bankers' speeches  Takaful as a key enabler for the Muslim economy For hundreds of years, merchants and traders have relied on arrangements based on mutual assistance to protect each other against the perils of sea travels, damage to property and other forms of misfortunes. Marine protection schemes, similar to the schemes offered in Edward Lloyd’s coffee shop more than 330 years ago, can be traced back to the Islamic civilisation of the Ottoman Empire. One could argue that such protection arrangements were part of the ecosystem that made such empires the marine superpowers of their times. Fast forward to modern times, households and businesses continue to experience various risk events that could impact their lives, financial capabilities and assets. From nature-driven risks to man-made risks, these risks will directly impact those we protect and cover in increasingly significant ways.
The credit demand and credit supply shocks are intended to capture movements in credit resulting from other factors, while the house price shock captures movements in house prices attributable to factors not elsewhere accounted for. Other factors driving both credit and house prices will include the low level of long-term real interest rates and associated international current account imbalances. The identification scheme employs a combination of ordering assumptions and theoretical sign restrictions on the impulse responses (see Uhlig, 2005). Macroeconomic volatility should be a slowly moving variable that is little affected by contemporaneous developments in the economy. One would expect that most of the variance in macroeconomic volatility – a second moment – is not well explained by the other shocks; that is borne out in the results, especially for the United Kingdom. Macroeconomic volatility is therefore assumed to be  BIS Review 111/2010  5  contemporaneously unaffected by any of the other shocks. The aggregate demand/supply block comes next, affecting credit and housing markets and monetary policy contemporaneously, but not being affected by contemporaneous developments in them; an aggregate demand shock affects inflation and growth in the same direction, while an aggregate supply shock drives them in different directions. That is followed by the credit market block: again, a credit demand shock drives credit growth and the bond spread in the same direction, while a credit supply shock drives them in different directions.

Central banks usually set policy not on the basis of past inflation but rather their expectations of future inflation, looking through temporary movements in inflation that result from shocks to commodity prices or indirect tax rates. During 2002–5, the FOMC judged that prospective underlying (“core”) inflation was considerably weaker than realised headline inflation, and that the latter would move down towards the former in the medium term once the temporary effects of one-off disturbances had passed through. Bernanke finds that merely substituting Greenbook inflation forecasts  2  4  Three broad drivers for the Great Moderation have been advanced: structural changes that reduced volatility, such as enhanced inventory management and easier access to credit; better policy making; and plain good luck in the form of smaller, or more benign, shocks. As yet, the academic literature has not reached a firm conclusion as to the relative roles of these factors, in part because of the difficulty in distinguishing the influences of good luck and better policy. BIS Review 111/2010  for actual inflation in an otherwise standard Taylor rule eliminates much of the discrepancy with the target Federal Funds rate. That, of course, still leaves open the possibility that the FOMC’s fears that inflation would turn out too low were, at least with hindsight, exaggerated. Whether or not policy was appropriate ex ante will always be difficult to answer because we do not know what would have happened under a different policy path.
Being pragmatic means having the right reservation about it, taking a careful step toward it, and be willing to take the needed action to deal with the unintended consequence. This is not going to be easy, but it is probably the best that we can do for now. Thank you. BIS Review 142/2008  3

A raft of measures have moved shadow banking into the light, eliminating its toxic elements and ensuring more resilient market based finance. And, perhaps most importantly, the crisis led to a reformed governance structure with the creation of the Financial Stability Board (FSB), accountable to both the G20 Finance Ministers and Governors and to the G20 leaders. The FSB brings together the central banks, regulators, and finance ministries of jurisdictions representing around 90% of the global financial system. It has a broad mandate to promote financial stability, monitor and assess risks, and coordinate standard setting bodies to ensure no regulatory gaps. The FSB has driven the great reform programme to address the fault lines exposed by the crisis. That programme is largely complete and in its implementation phase. We cannot and do not need to be forever in a post crisis reform phase. But, looking forward, there is always the danger that we fall behind again. The progress we have made in governance since the crisis gives us the ability to prevent this from happening. We have far better institutional machinery today, through the FSB and G20 to bring governance into line with new risks and challenges before rather than after a crisis. The FSB’s work on cryptoassets in 2018 is a good example. The G20 identified the rapid growth of cryptoassets as a potential problem and tasked the FSB with analysing the risks posed. In the space of less than a year the FSB concluded that cryptoassets did not currently pose financial stability risks.
FT: And that would have put the single market at risk? Trichet: And that would have put the single market at risk, sure. Not only have the central banks had to cope with exceptional situations. Governments were called upon to take action in various forms, and the fact that Europe is a union of sovereign states means that a lot of decisions implying taxpayers’ money or risks to taxpayers are taken at the level of governments and parliaments. Hence there is a constant need to ensure that we maintain the single market and its level playing-field, and that we do not re-nationalise segments of the market. This is a big challenge at the level of the institutional framework of Europe, but it has been done well so far. FT: In the past, some warned that the first test for the euro would also perhaps put intolerable strains on the currency union, and some academics even suggested it would fall apart. This has not happened, but are you worried about some member states in the currency union that are facing greater challenges, say, than others? Trichet: Europe’s institutional framework is solid, and it has proved its solidity. The euro itself has functioned, by and large, as a protection against these intense international challenges. On the other hand it is clear that each economy has to be run as properly as possible. We are in a market system that punishes those who behave improperly.

The development towards a more equity-based financial system where risk-sharing takes place reduces the over-reliance on debt funding, thus avoiding excessive debt and speculation and thus financial system fragility. In Islamic finance, this is further reinforced by Shariah principles that strongly discourage excessive debt given its detrimental effects on society. The use of risk-sharing transactions and undertakings under participatory finance models in Islamic finance thus offers the potential to reinforce the links between finance and the real economy. The contractual arrangements between the financier and the entrepreneur place  2  BIS central bankers’ speeches  strong emphasis on the value creation and economic viability of the enterprise. This results in a close link between the growth of the financial sector and real sector activities in which the expansion or contraction of credit is dependent on developments in the real sector. This would provide a restraint on financial engineering and innovation as financial transactions need to be supported by real assets, thus aligning innovation to productive economic activities. As a result, the dangers of unbridled innovation are also substantially reduced. The move to embrace the risk-sharing dimension of Islamic finance also presents new opportunities for financial management. The profit sharing and risk-sharing characteristics of Islamic financial transactions strengthen the incentives for Islamic financial institutions to undertake the appropriate due diligence on the transactions to ensure that the profits are commensurate with the risks assumed.
For the reasons I noted a moment ago when discussing the level of the inflation target – that the interest rate hits its lower limit more easily and it becomes difficult to counteract a recession – it is important to avoid inflation and inflation expectations falling too far and get stuck at a level that is too low. This would be the case even if we had had a target range of 1–3 per cent. Inflation and inflation expectations which creep downwards and get stuck near the lower limit of this range could be  15  The Riksbank (2010). 16  See for example Fromlet (2015) and Lars Jonung in Svenska Dagbladet (2015). BIS central bankers’ speeches  7  as problematic as if the inflation target itself had been lowered. It is thus difficult to see that the Riksbank would have pursued a notably different policy even if there had been a target range, or that there would be grounds to adjust the current policy if a target range were to be introduced tomorrow.17 This is probably also the reason why central banks in countries which have a formal target range, such as Canada and New Zealand, usually aim for the midpoint of the range.18 After all, the safest way to prevent inflation and inflation expectations beginning to slide out of the range is to attempt to keep them in the middle of it.

However, the financial reforms and development of the financial systems in Asia during this decade since the Asian crisis have, to a significant extent, insulated our financial systems from these developments. However, the openness of the Asian economies have resulted in a significantly slower growth with economic contraction occurring in several countries. In the immediate future, several favourable factors will support growth in Asia. Strong fundamentals, pro-growth policies and structural factors will support an early recovery. This is also being reinforced by greater regional integration. Going forward into the future, the global shifts taking place calls for a new economic model, one that would leverage on regional strengths, address the current and future risks and recognise the new global opportunities. In the context of these developments, this conference will be discussing these issues and the new directions that are likely to emerge for Asia. Also important are the lessons that we can draw from the European experience. The agenda is for us to discuss the alternative economic models for the future, including the financial aspects and the role of policies and the international institutions. It is hoped that this will contribute to an increased appreciation and understanding of Asia and its changing role in the global economy. In closing, I would like to once again thank you for your participation in this conference. The bringing together of speakers from Europe and Asia to discuss these important issues is likely to result in stimulating discussions. I wish you a successful and productive conference.
Allow me a few examples: (i) reporting systems and technological platforms have become essential, and as any banker can confirm, they have become a key component of any viable business model; (ii) the prevention of money laundering has taken on a most significant dimension in Europe, following various scandals and cases of fraud. Indeed, an overhaul of the attendant regulatory and supervisory framework is on the table; (iii) finally, given what has been discussed in this conference, I need not convince you that the nature of the retail banking business calls for great care as regards conduct towards customers. On this last point, there have been many scandals in recent years. In fact, calculating all the losses from the avalanche of fines and lawsuits that have rocked the financial sector during the crisis and in the subsequent period is no straightforward task . The European Resolution Board evaluated the losses arising solely from misconduct to December 2014. Despite not including such recent and significant cases as the floor clauses, estimated accumulated losses exceeded € trillion worldwide, of which more than € trillion 4/6  BIS central bankers' speeches  related to EU banks. Yet despite the size of these figures, the direct financial consequences are not the sole reason for concern. This is because these losses usually give rise to “second round” effects, mainly through the reputational harm generally affecting the financial sector as a whole more than specific banks.

Here, the emphasis should be on ensuring that these financial market utilities can open for business the day after the failure of one or more of their participants. Credible resolution regimes for large banks and securities firms—and credible recovery regimes for CCPs and other critical financial market utilities—should help support confidence during times of stress. These measures would make the financial system less prone to booms and busts. Financial intermediaries would be more robust to stress when busts inevitably occur, and contagion to the broader system would be reduced when a systemically important firm fails. Such changes should reduce the likelihood of the failure of a large, systemically important firm and the negative consequences of such a failure on the broader financial system. These steps should help to ensure that credit flows can be sustained throughout the business cycle. Considerable progress So, where are we relative to what is needed? As I see it, there has been considerable progress. The nation’s largest banks are much safer as a result of substantially higher capital and liquidity requirements, as well as robust stress tests. This enhanced resiliency has been achieved without a significant negative impact on the broad availability of credit—recognizing that it is now more difficult for households with low credit scores to obtain a mortgage. Most importantly, improving the capacity of such firms to continue to lend during times of stress should make the overall economy more stable. We have also made significant progress in addressing many of the structural weaknesses uncovered by the financial crisis.
It is one thing to try to make global financial integration safer and to mitigate unwanted spillover effects – which might involve some retrenchment, as it did in this country and many others after the crisis – but it is another matter entirely to bring about a large-scale reversal of the global financial integration of recent decades. Most likely, such a reversal would seriously undermine real economic integration and the benefits associated with it. We are going to discuss these issues and others that pertain to the current state and future prospects of global economic integration. After Jaime’s keynote speech, we will have two sessions with substantive presentations and discussions on different aspects of the topic. This afternoon, we aim to take stock of recent trends in global and regional economic and financial integration, assess country responses to these trends, and discuss how the responses in turn affect the level of integration. This includes macroprudential and capital flow management measures. We will probably hear something about how the challenges have been addressed in this country. 2  Tomorrow we turn to the international monetary and financial system. Part of that discussion will aim at identifying potential reforms that would better allow individual countries and the global economy to reap the benefits of economic and financial integration and avoid the risks associated with it. We will then wrap up with a policy panel. Looking at the programme, I am particularly pleased to note the high level of the speakers.

Opening remarks by Már Guðmundsson, Governor of the Central Bank of Iceland, at a conference organised by the Bank and the Reinventing Bretton Woods Committee on The uncertain future of global economic integration, Harpa Concert Hall and Conference Centre, Reykjavík, 14-15 September 2017. I welcome all of you to this conference and the foreign participants to Iceland. The conference is organised by the Central Bank of Iceland and the Reinventing Bretton Woods Committee. The heading is broad and probably reflects in part the worries that some of us might currently have about the future of global economic integration. The topic encompasses both real economic integration – that is, trade in goods and services and the flow of labour and equipment across borders – and financial integration – that is, cross-border capital flows and stocks and associated activities of banks and other entities. The financial integration part will probably dominate the proceedings, not least because most of the speakers are current or former central bankers. I do not see that as a problem, as in my mind more work remains to be done in assessing the costs and benefits of global financial integration than regarding real side economic integration. After all, the post-war global economic order was initially based on the principles of free trade in goods, current account convertibility, and monetary stability through fixed but adjustable exchange rates vis-à-vis the US dollar. Open capital accounts were the exception, however. Real side economic integration was seen to be more important for economic progress than financial integration.