samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  7  Conclusion In my remarks today, I have provided my current thinking about the U.S. growth and the inflation outlook, and the implications for monetary policy. To sum up, the U.S. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years. The risks to growth appear generally balanced, without unusually high risks that growth will either be much stronger or weaker than my forecast. On inflation, I remain confident, despite the recent softening, that inflation will begin to move up towards our 2 percent objective next year. This move will not likely happen immediately, however, given the recent weakness in energy prices and the fact that non-energy import price trends are also likely to soften a bit over the near-term. With respect to monetary policy, I believe that market expectations as captured by the most recent New York Fed’s surveys of primary dealers and market participants are reasonable – with lift-off expected to take place sometime around the middle of next year. But, life is uncertain and my judgment of the appropriate timing could change in response to incoming data and other factors that change the economic outlook. When we do begin to tighten monetary policy, the pace of tightening will depend not only on the outlook but also on how financial market conditions respond as we begin to remove monetary policy accommodation. Financial market conditions are an important transmission mechanism of monetary policy.

As the FOMC concluded in its most recent statement: “The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month.”  BIS central bankers’ speeches  3  But this sentence should not be viewed as an iron-clad commitment unaffected by economic and financial developments. The statement goes on to say: “However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.” In other words, the FOMC’s monetary policy actions and the timing of lift-off will depend on how the economic outlook evolves, particularly with respect to the labor market and inflation. In considering the appropriate timing of lift-off, there are three important reasons to be patient. First, the Committee is still undershooting both its employment and inflation objectives. Unemployment is too high and inflation is too low. Thus, monetary policy needs to be very accommodative in order to close these gaps relative to the Committee’s objectives.
Moreover, we see a pick-up in consumption of durable goods as confidence increases, aided in part by the continued strong growth of farm income by 21.1 percent during the first quarter of 2008. As for the strength of the investment engine, private investment indicators have continued the uptrend while investor confidence has been boosted by the public investment plan over the next 5 years. During the first three months of this year, the Private Investment Index was up by 7.2 percent from the same quarter of 2007. Though we know that actual disbursement  BIS Review 63/2008  1  of government investment expenditure may not occur till the final quarter of this year, the strong government commitment has already led to stronger investor confidence. Additional expenditure for land acquisition for mega projects would also boost domestic demand to some degree. This should prompt the pent-up demand for private investment, which has been held back over the past several years, to begin to materialize. Turning to the external sector, the strong trading partners’ demand, seen in 2007, will unlikely reoccur in 2008. The world now expects the US economy to weaken substantially. Clearly, we will have to wait quite sometime for the clear upturn of the US economy after the US Fed’s sharp and substantial interest rate cuts to shore up the economy and confidence.

In order to ensure an orderly transition, it is vital that the changeover to SARON on the credit and derivatives markets occur as early as possible. The supply of SARON-based products on the credit market is increasing. For example, various banks have launched SARON-based mortgages in recent months. However, the SARON-based derivatives market is still significantly less liquid than its Liborbased counterpart – turnover on the SARON-based derivatives market remains considerably lower than turnover on the Libor-based market (cf. chart 4). As we do not have a consistently liquid government bond curve in Switzerland, the interest rate swap curve is very important as a reference for pricing fixed-interest loans and bonds. With the discontinuation of Swiss franc Libor, this critical reference function will be performed by the SARON-based interest rate swap curve. It is important that Libor-based contracts that cannot be switched to SARON before the end of 2021 are furnished with robust fallback clauses. The International Swaps and Derivatives Association (ISDA) has recently published such fallback clauses for derivatives contracts. Robust fallback clauses minimise the risks associated with the discontinuation of Swiss franc Libor, thereby providing a safety net. The SNB itself continues to make progress with the changeover to SARON – we will have no outstanding Libor-based derivatives in our investment portfolio by the end of 2021. Moreover, from end-2021, we will exclude all Libor-based floating-rate notes from the list of collateral eligible for SNB repos when implementing monetary policy.
In tandem with the SLDILSS, the Central Bank may direct the existing shareholders to infuse fresh capital, or invite a strategic investor to acquire a strategic stake in the financial institution through an infusion of new capital. Step 4: Implementing the financial sector consolidation plan Ladies and gentlemen, let me now take you through the implementation process of the consolidation plan. The implementation was structured under 4 phases, of which 2 phases have already been completed while the third phase is progressing now. Let me briefly explain to you the accomplishments made under the first 3 phases and our plans under the final phase of the programme. Phase I (from 17 January to 31 March 2014) Action 1: Unveiling of the master plan and meetings with the Boards of Directors As the starting point to the execution of the consolidation programme, the Master Plan on Consolidation of the Financial Sector was unveiled by the Governor on 17 January 2014, giving the necessary guidance to the banking and NBFI sectors on the way forward. This special forum was attended by the Chairpersons and the Chief Executive Officers of all  12  BIS central bankers’ speeches  banks and NBFIs, and all other stakeholders. The Central Bank requested all banks and NBFIs to continue a close dialogue with the Central Bank and obtain guidance if the need arises and also to submit their preliminary proposals regarding the consolidation plan by 31 March 2014.

During the period 1986–1988, several finance companies showed some distress due to mismanagement of funds. This required the Central Bank to bring in swift reforms to maintain overall stability and efficiency of the companies in the non-bank financial sector of Sri Lanka. Accordingly, the Finance Companies Act, No. 78 of 1988 was enacted and the Department of Supervision of Non-Bank Financial Institutions was established at the Central Bank in late 1988. However, with the continuous and rapid development in the NBFI sector, the regulations effected by the 1988 Act became futile, despite the amendments made in 1991. Ambiguities in the supervisory powers in respect of the Licensed Finance Companies and inadequate regulatory framework to deter unauthorised deposit taking persons and institutions that existed in the Act compelled the Authorities to introduce a more effective legislation. Accordingly, Finance Business Act, No. 42 of 2011 was enacted addressing all prevalent concerns and lacunas of the Finance Companies Act. With regard to the banking sector, the Banking Act was also amended from time to time, inter-alia, to introduce more prudential standards such as the amendments made in 1990, 1995, 2005 and 2006. These banking laws and regulations are regularly updated in line with the best practices in the industry, both locally and internationally, covering requirements, principles and guidelines issued by the “Basel Committee for Banking Supervision” of the Bank for International Settlements (BIS). Basis 3: International experience on financial sector consolidation Ladies and gentlemen, I would like to share with you the global experiences of financial sector consolidation.
One thing I should emphasise is that this is a reform of the whole of financial regulation. I say that because it is easy to conclude from observation of the issues we face as regulators, and the public debate, that we are just dealing with reforming the regulation of banks. That is not the case, and what we are doing is not about dragging the rest of the financial services industry into reform to solve a problem that is in essence only about the banks. We have to design a system that works effectively for all sectors of the industry. The 1997 reforms created the FSA as an integrated regulator – by which I mean regulation which combined Prudential and Conduct of Business in one regulatory body covering the broad sweep of the financial services industry. The record now shows that this approach did not work as effectively as it needed to do. I think there are a number of closely related reasons for this. First, on a rather practical point, I think it is hard for a single organisation to balance, particularly during a period of crisis, a wide range of very demanding issues which are individually rightly of great concern to the public and can come from anywhere in a landscape of around 25,000 authorised firms. Second, I think the evidence suggests that over the last 15 years there have been periods when either conduct or prudential supervision has been more in the ascendancy to the detriment of the other.

Christian Noyer: A central banker’s personal perspective on hedge funds Introductory speech by Mr Christian Noyer, Governor of the Bank of France, at Conference on hedge funds, Washington DC, 15 April 2007. *  *  *  Thank you all for coming. It's a pleasure and a privilege to have you all here to day. Special thanks to the IMF and John Lipsky for organizing this event for us and with us. The purpose of our meeting is to present the special issue of our Financial Stability Review on hedge funds. So I want to say a few words on why we embarked on such a project and how we did it. As you noticed, this issue of our Review is mostly based on external contributions. Some authors are with me to day and I also want to thank them. We are very happy that we could assemble such an eminent roster of contributors. Let me say from the outset that we did not intend to reach a conclusion at this stage. The international community is working on this issue, in particular in the framework of the FSF. The main question is: how can we best reconcile keeping the positive inputs of this activity for financial markets functioning and innovation, while keeping the risks that may be generated for financial stability to a minimum. This is why there is a debate on hedge funds, which we think, is legitimate.
Our approach is closer to Duesenberry (1952), who introduced relative income instead of the rate of change of income as the explanation of the differences in saving at the same level of income. He referred to the influence of past living standard on current consumption. Saving depends, he wrote, on the level of current income relative to higher incomes in previous years. However, he stopped short of calling a wage gap or of considering the influence his consumption and saving theory may have on inflation. What matters most for consumption during and after a crisis is not the unit change of income, the savings for retirement, or the future income. A recession is a game – changer. A global financial crisis is a global game-changer. In a recession, the transitory component of income becomes negative not only for one person or for a small group, but for the national or global economy. This makes it very difficult to predict future income. When nothing is steady anymore, the only valid reference remains the past income. In a crisis, the reference is not ahead of us, but rather it is in the past. Retirement savings and linear employment prospects are uncertain. People relate to their peak gains in the not so distant past rather than to uncertain future gains. Consumption does not depend only on current income and future expectations, but also on past income. Stock is more relevant than flow, because people have a strong reference which is their previous income levels.

Public-Private Partnerships 21 Moving on, I would like to touch on public-private partnerships – the other equally important arm of our alternative risk transfer strategy. 22 Continued industrialisation, expanding cross-border trade, and infrastructure development are at the heart of Asia’s growth. These create vast investment opportunities in the region, and will also drive demand for insurance solutions to mitigate a variety of business risks. 23 One such initiative is China’s One Belt One Road (OBOR) initiative, the most ambitious infrastructure project of its kind to-date. OBOR seeks to connect China and countries across Asia, the Middle East and Europe through a series of land and sea trade routes. Vital public infrastructure, such as roads and railways, gas pipelines, power plants and ports will be built in over 60 countries, with total estimated infrastructure investment to exceed USD 1 trillion. 24 However, modern risks lie along these ancient routes. There are a myriad of geopolitical, legal, credit and environmental risks in many countries along the corridor. Political instability, rioting, terrorism and conflict can lead to contractual issues and financial losses. Unfamiliarity with legal frameworks and regulations can lead to expensive delays. Non-payment risks can be exacerbated by emerging markets’ vulnerability to external shocks, such as currency and commodity price volatility. 25 The MAS is thus seeking to co-create new risk solutions with regional governments and the industry, and utilise these solutions on a pre-emptive basis to help governments and investors safeguard against key risks like natural catastrophes, construction risks and political risks.
To prevent interbank lending rates from rising too much, a number of central banks have increased their short-term lending to banks. In addition, the Federal Reserve has lowered its key rate by 0.75 percentage point in recent months. A further cut in the key rate in the US is now expected, and the interest rate is also expected to fall in the UK. In the euro area, market participants expect a more stable key rate ahead. But developments are not the same everywhere. The central banks in Sweden, Switzerland, Canada, New Zealand and China have raised their key rates. In Sweden, which has a lower interest rate level than our main trading partners, further interest rate hikes are expected. BIS Review 139/2007  5  The interest rate differential between Norway and other countries can have an impact on the krone exchange rate. In the short term, however, the factors that influence the krone exchange rate vary. High oil prices and krone appreciation appear at times to be related, but there have also been periods when the krone has appreciated while oil prices declined. The krone appreciated when the interest rate differential against other countries was high in 2002, but as interest rates in Norway moved down to the level among our trading partners, the value of the krone fell back. In the past, we have observed that market turbulence has occurred in tandem with a weaker krone.

Consider the example of fixed income, currencies and commodities (FICC) markets, which have historically relied heavily on informal codes and understandings.17  12  Recall that the Arrow-Debreu world relies on people being able to calculate the odds of each and every possible scenario. Then they can trade contracts and insure each other against risks they are unwilling to bear. Even a moment of introspection reveals the absurdity of these assumptions as a description of the actual world. More often than not, even describing the universe of possible outcomes is beyond the means of mere mortals, let alone ascribing subjective probabilities to those outcomes. 13 Knight, F (1921), Risk, uncertainty and profit, Signalman Publishing. 14 FA Hayek Nobel prize speech 1974 “The pretence of knowledge”. 15 In Keynes (1936), Chapter 12, he wrote: “Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.” Keynes, J M (1936), The General Theory of Interest, Employment and Money, Palgrave Macmillan.
Financial advice The third aspect of investor protection is the provision of sound financial advice by intermediaries when they sell investment products. The Fair Dealing Guidelines issued by MAS require intermediaries to conduct their own internal assessment to ensure that a new product being launched for sale is suitable for its targeted investor base. Intermediaries must also ensure that their representatives have the competencies to understand and explain the product features to their customers. MAS has introduced new rules requiring intermediaries to assess their customers’ investment knowledge or experience before investing in complex products. The rules will come into effect in January 2012. Where an investor does not possess the requisite knowledge or experience, intermediaries must provide appropriate advice. Investors who choose not to heed their advice or insist on buying a product which has been assessed to be unsuitable for them must take responsibility for their decision. This approach recognises that investors’ capacity to understand complex products is uneven, while respecting their right to invest as they see fit. 4  BIS central bankers’ speeches  Over the last two years, MAS has conducted surveys and inspections to assess intermediaries’ delivery of these fair dealing outcomes. We will use our findings to fine-tune the Guidelines on Fair Dealing. While MAS has taken these steps to ensure that the financial advisory industry is able to help investors make informed decisions, the best way to instill discipline on the industry is for investors to demand good advice.

At the same time, a number of new, more structural risks are also emerging, brought about by digitalisation and global warming Digitisation first gives a systemic dimension to cyber risk. The expansion of digital practices contributes to the propagation of cyber risk and amplifies it, through the interconnections between financial institutions, but also between them and their service providers. The fact that some of these providers are Fintechs and Bigtechs, which are unregulated and not easily substitutable, is an additional vulnerability factor. To cope with these risks, we must resist the temptation to set up a bunker-style security system, which is a dead end, but rather imagine a system which combines openness and innovation. This is why we, at the Banque de France and the ACPR, are working with the other supervisors of the Eurosystem to ensure that the entities we supervise take cyber risk into account and to set up a broad programme for protecting the infrastructures that we operate. Cyber security is one of the key priorities of the French Presidency of the G7 in 2019. The Banque de France also contributes to the work conducted in this wider framework by coordinating the preparation and implementation of a cyber resilience test for the global financial sector. As regards the risks associated with climate change, they can no longer be ignored. Physical risks – which correspond to the rise in the frequency and severity of extreme weather phenomena – are obviously the most visible and immediate for the financial sector.
19  For instance, Arrowsmith et al (2013) examine the prevalence of bank forbearance  across the small to medium-sized enterprises (SME) sector, finding the effect to be small. The same study finds a potentially larger impact of monetary policy on company failure and productivity. 20  That said, it is  important to note that employment was also higher as a result of looser monetary policy, with potentially smaller crisis-related scarring effects on labour markets. 13  Chodorow-Reich (2014), Greenstone and Mas (2012) and Edgerton (2012) for the US, Amiti and Weinstein (2013) for Japan, Paravisini et al (2015) for Peru, Bentotila et al (2013) for Spain and Franklin et al (2015) for the UK. 14 Bahaj et al (2016). 15 Riley et al (2015), Barnett et al (2014). 16 For example, Newman et al (2015), Hoekman et al (2004). 17 Barnett et al (2014), Broadbent (2012), Hseih and Klenow (2008), Calligaris et al (2016). 18 For example, McGowan et al (2017) and Pessoa and Van Reenen (2014). 19 Cette et al (2016), Reis (2013), Gopinath et al (2015) and Gorton-Ordones (2015). 20 See also, Broadbent (2012). 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  (d) Slowing Innovation  Some economists believe that the type of technological progress behind productivity growth over the past two centuries may not continue at the same pace in the future.

This is sometimes known colloquially as r*. Policies which boost r* mean that a given interest rate is likely to impart greater stimulus. Or, put differently, they mean the same level of demand in the economy can be achieved with a higher interest rate. And a “pivot” in the mix of policies, with somewhat less of a contribution from monetary policy and more from structural policies, would probably be desirable. Not least, it could help mitigate any adverse impact of accommodative monetary policies on productivity or the distribution of income and wealth. Conclusion  Productivity is a gift for rising living standards, perhaps the greatest gift. It is not, however, one that always keeps on giving, as recent events attest. Whether in supporting living standards, or in shrinking their distribution, tackling the global productivity puzzle is among the most pressing public policy issues today. If history is any guide, there is unlikely to be any single measure which puts productivity growth back on track. But measures which support the long tail of companies, currently operating at low levels of productivity, have the potential to do considerable good. As Olympic athletes have shown, marginal improvements accumulated over time can deliver world-beating performance. Applying those marginal gains to the population of UK companies could significantly improve UK living standards, even if those are harder to measure than gold medals.