samchain/econo-pairs-v1 huggingface dataset:
If it were possible to eliminate or reduce at least one source of unpredictability, wouldn’t that be a good thing? And since the MPC is in control of interest rates why can’t it just tell us what it’s going to do? The problem is that we can’t be sure. Interest rates are not an end in themselves. They’re a means of meeting our objectives: the stabilisation of inflation over the medium term and, subject to that, the stabilisation of economic activity. And because there are lots of unpredictable shocks hitting the economy, things that would otherwise (and often do) move output and inflation around, the appropriate path of interest rates is necessarily unpredictable as well. The skipper of a boat, adapting to a skittish wind, and interested in making the journey as smooth as possible, may have perfect control of the tiller. But that doesn’t mean she can tell you exactly which position it will be in at every point in the future. That will depend on the direction of the wind at the time. It’s not that monetary authorities are unconcerned about expectations of future interest rates. Quite the opposite: these expectations are central to the transmission of policy. We directly determine only one particular – and very short-term – interest rate (what commercial banks get paid on their overnight deposits, or “reserves”, at the central bank). But demand and spending depend more on longer-term interest rates. In the UK, around half of corporate borrowing has a maturity of three years or more.

An important aspect of the recent developments to strengthen Islamic financial services industry is that this is being undertaken during the stable and good times. This will position Islamic finance to deal with future challenges. A clear indication of that is the growing relevance and importance of the sukuk market. This event in Kuala Lumpur is commemorating the talent, expertise and the successes of the Islamic financial community. BIS Review 95/2010  3
But, whatever may be the reasons behind these failures, the challenge that we now face is as to how to manage risks optimally in this even more challenging environment, knowing that the opinions provided by the rating agencies may not be too accurate, after all. 5. Let me now highlight another couple of recent developments. One such development is the greater significance of the sovereign wealth funds in the context of the phenomenal rise in reserves in non-Western countries. In the midst of the recent sub prime crisis, these funds have injected significant amounts of long term funds to the large ailing institutions to resurrect them or to prevent them from continuing with poor financial health. In that sense, the sovereign funds have acted as an immensely useful stabilizing force during the financial crisis. However, the injection of such funds has been received with mixed feelings in the geo-political context. I would think the debate on this development is just beginning and it would be useful for all of us to carefully watch the movement of this issue in time to come. Another important development in reserve management is the extensive use of external fund managers. External fund managers are being increasingly engaged by central banks, as many central banks are yet to acquire the technical skills and competencies required to manage the new asset classes that are developing in these dynamic market conditions.

More broadly speaking, the RMB is now the seventh most used payment currency according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and the ninth most actively traded currency according to the Bank for International Settlements (BIS). 4. To me, the extent and pace of the development of offshore RMB business depends on three key factors. The first factor is the relaxation of controls and restrictions by the Mainland authorities. The second factor is the availability of the necessary financial market infrastructure, such as clearing and settlement systems. The third factor is the awareness and willingness of corporates and financial institutions, especially banks, to develop RMB business opportunities. 5. Since the RMB trade settlement pilot scheme was launched back in July 2009, the Mainland authorities have incrementally removed many controls and restrictions on the flow of RMB out of and into the Mainland. Presently all trade and current account  BIS central bankers’ speeches  1  transactions between Mainland China and other parts of the world, as well as inward and outward direct investment into and out of China, can be conducted in RMB. Moreover, some cross-border portfolio investment flows, such as investments into China’s bond and equity markets, can also be made in RMB via the RMB Qualified Foreign Institutional Investors (RQFII) scheme. 6. More importantly, in April this year the Mainland and Hong Kong authorities announced a milestone project, i.e. the Shanghai-Hong Kong Stock Connect scheme.
A further segment that will gain in importance is that of the small and medium-sized enterprises (SMEs) given its growing significance in the economy. The main concern with respect to banking for the SMEs is access to credit. Among the issues that have been raised is the quality of service delivered in terms of accessibility, the lack of responsiveness, lack of understanding of their business, poor branch level service, and poor turn around time. Other complaints have centered on the high collateral demands and the general perception of a lack of willingness to extend financing by the banking institutions. While the recent year showed an encouraging trend with loans to SMEs increasing by 3.1%, the issue of the overall services provided to SMEs need to be enhanced. Bank Negara Malaysia has undertaken a survey through the banking institutions on the SME profile and requirements. This will represent an important database for the development of a comprehensive framework for the development of SMEs initiated by Bank Negara. The survey findings will also be useful for the banking industry in formulating its own strategic plans with respect to this segment. With the advances in technology, banking institutions should be in a position to enhance access and quality of service for the SMEs. Ladies and Gentlemen, The performance of the banking institutions is also being gauged from the perspective of the shareholders. There are several significant issues affecting shareholders in the current environment.

In this phase of development of the financial system, the commercial bank in the banking group would hold two licences, a commercial banking licence and a finance company licence. Under this arrangement, the domestic commercial banking institutions would in addition to its banking business, be able to undertake finance company business. Commercial banks would therefore be able to leverage on the opportunities presented by the two licences to take advantage of economies of scale, diversify and strengthen their earning base and create an enhanced market presence. 2  BIS Review 33/2002  Other areas of improvement in respect of operational efficiency was in terms of the average core system downtime which showed that for the first quarter this year, seven domestic banks did not experience any computer downtime or disruptions in their payments system matching the performance of the foreign banks. Of significance is that in the operations of the ATM networks where seven domestic banks reported downtime of not exceeding 2 hours compared to four foreign banks. In terms of turnaround time for retail loan applications, an indicator of customer service standards, during the final quarter of 2001, the top quartile domestic banks took 2 days on average to approve a housing loan application compared to 2.5 days taken by the top quartile foreign banks. Meanwhile, lost credit cards were replaced within a day for both the domestic and foreign banks in the top quartile.
It will also require a more fundamental look at the way Europeans save and the way those savings are invested, including for their pensions which in many member states are concentrated in public sector schemes. In practice, this will mean examining whether there are obstacles and competitive distortions that restrict savings being invested in financial markets; ensuring investors have the information they need including about the landscape of investment options; and reducing any barriers that restrict market access or encourage any home-bias in portfolios. The result of these examinations could well entail greater standardisation of investment products. UCITS could be a model here. The demand side of the equation involves enabling borrowers to access funds from marketbased sources. Creating more diverse forms of borrowings will be part of the story. This could include forms of finance in which investors directly acquire assets, such as equity and  BIS central bankers’ speeches  5  corporate bonds, and indirect forms of finance in which banks and markets work together through securitisation markets to lend to the real economy. The US example is again useful here. Despite the US having an equity market that is nearly twice as large as that of the EU as a proportion of GDP, the leverage of non-financial companies is only marginally higher in the US than in the EU. The reason is that the companies in the euro area, particularly smaller ones, have equity but issue a much smaller proportion of marketable quoted equities, instead relying heavily on non-marketable, unquoted shares.

The rationale for this was brutally underlined in the euro crisis. The members of the euro share more than a single market. They share a currency, they share risk of the break up of that currency and they share a lender of last resort. With the creation of the European Stability Mechanism, they have begun to share a common backstop. At that level of integration, it is right to ask to what extent financial stability is ultimately primarily a national responsibility and where the buck should stop. The creation and full implementation of the Banking Union should in my view increase the financial stability of the currency union, thereby improving stability for everyone in the EU. It is, however, impossible to ignore the fact that to do so, the Banking Union must continue to develop the necessary backstops – painful though that may sometimes be. There are agreed plans to move further in this direction. It is important that they are implemented. To return to the history for a moment, one sees the need to find a balance between the single market and financial stability in the way in which Europe ultimately came to free movement of capital, with strong Treaty prohibitions on restrictions but within that – and within constraints – a recognition of the need for member states to be able to take the necessary action to defend stability including in relation to prudential supervision.
In addition, the local banks’ all-currency liquidity coverage ratio (LCR) are already above 100%, well ahead of Basel’s implementation timeline of 1 January 2019. 11. However, we should not be complacent. Banks should continue to improve risk management processes, and watch out for risks arising from new and emerging trends such as persistently low interest rates, increasing interconnectedness between financial institutions and markets, and the growing use of sophisticated technology. 2  BIS central bankers’ speeches  12. Stress tests will become an increasingly important and integral part of risk management in the financial sector. •  For individual participating banks, the results facilitate discussions with MAS on their resilience to plausible adverse scenarios, planned responses, and actions to mitigate risk management gaps identified from the exercise. •  For the banking sector, the stress test results help to identify common vulnerabilities across FIs, such as exposures to a particular sector or country. This helps banks enhance their risk mitigating responses. 13. To make the exercise more useful, MAS encourages banks to compare the IWST results against their internal stress tests and sensitivity analyses and to assess whether the differences in scenarios and corresponding results reflect particular risk exposures faced by the bank. 14. In addition to prescribed scenarios, MAS has also been working with participating banks to conduct reverse stress tests. This involves banks describing scenarios under which their solvency could come under threat, thereby providing further insights on the risks that could impair the financial system.

•  He finds that if monetary policy in the US had been appropriately configured to macroeconomic outcomes in the 2000s, the housing boom would have ended in 2003 instead of 2006 and that mortgage debt levels would not have risen so high. 14  1  2  Let me now take up the second and third approaches in more detail. The phrase is taken from Eichengreen and Mitchener’s 2003 BIS working paper on “The Great Depression as a Credit Boom Gone Wrong”. BIS central bankers’ speeches  Monetary policy: getting in all the cracks 15 The intellectual underpinning for the second approach is based on the insight that monetary policy has the potential to affect financial stability through the “risk-taking channel”.2 •  Jeremy Stein puts it succinctly – “Monetary policy is fundamentally in the business of altering risk premiums”. 16 Loose monetary policy can heighten vulnerabilities in the financial system by altering both the perception of risk and the tolerance for risk. •  In conventional monetary policy, lower policy rates boost incomes and profits, and enhance asset and collateral values. This reduces banks’ estimated probability of defaults and losses, leading to greater leverage and risk-taking. •  In unconventional monetary policy, large scale asset purchases by central banks depress returns along the entire yield curve. This provides asset managers the incentive to take on more risk, often in a herd-like fashion.
We have also discovered that it is possible to design an e-krona that would not have excessive consequences for monetary policy or financial stability. 5 On the legal side, we interpret this as meaning we have a mandate to issue a simpler, value-based variant of the e-krona that we will develop as a pilot version. We also intend to approach the Riksdag to propose legal amendments that will clarify our mandate and make it possible to issue an account-based e-krona. We need to prepare ourselves for a cashless future As regards the rapid rate at which cash usage is declining, the Riksbank Committee has submitted an interim report with a few proposed measures to brake this development. 6 The decline in cash usage that we are now witnessing is going too fast for certain vulnerable groups who are unable to use digital technology or who do not even have access to it. The Riksbank therefore welcomes the proposals that the Riksbank Committee has submitted. The Riksbank has been requesting protection for cash usage since 2016, when the Payment Accounts Directive was introduced. I therefore consider it a welcome step that there is a broad political will to speak with a clear voice in this matter and that the legislator intends to increase its influence over this structural transformation so that it is not steered by the private sector alone. The Riksbank Inquiry’s proposal, supported by representatives of all parties in the Riksdag, would ensure access to cash.

History shows that innovative capacity in the private sector functions best when it can use state infrastructure and clear regulations that develop apace with the possibilities offered by technology as a launching pad. 11 And, if the payment market is to be privatised completely, an active decision should be required in this case from the legislator regarding choosing such a new direction. It cannot be allowed to just happen. Confidence in money is a socio-economic asset Since confidence in money among the general public is a public good, there is a social benefit in monitoring the development of the payment market. The confidence that has been built up is a kind of social capital and there are many examples from other countries of how badly it can go when confidence in money is lost. 7 PTS-ER-2017:20. 8 See Erlandsson, F. and Guibourg, G. (2018), “Times are changing and so are payment patterns”, Economic Com-  mentary No. 6, Sveriges Riksbank. 9 See the Riksbank’s e-krona project report 2 for more information. 10 See Söderberg, G. (2018), “Why did the Riksbank receive a banknote monopoly?” Sveriges Riksbank Economic Review, No. 3. 11 This relationship is also pointed out in Carney, M. (2018) “New economy, new finance, new bank”. Speech published 21 June. Bank of England. 4 [8]  Theoretically, it is often assumed that the possibility of converting private bank money into secure central bank money is a basic precondition for maintaining confidence in privately issued money.
The second half of my contribution will address in particular why an appropriately defined range for price stability and a narrow mandate are key factors in being able to conduct effective monetary policy over the longer term in an ever-changing environment. Here I will draw especially on the SNB’s experience, taking the Swiss perspective of a small open economy with an important currency. I. Aftershocks of the global financial crisis In the two decades prior to the global financial crisis, the nominal interest rate level had declined worldwide. On the one hand, central banks’ success in combatting inflation, coupled with cheap production opportunities resulting from an increasingly integrated global economy, had led to falling inflation rates. On the other hand, the real rate of interest had declined in many countries due to structural factors such as decreasing productivity growth and the ageing of the population. When the global financial crisis and the associated economic slump required a decisive easing in monetary policy, many central banks quickly reached the zero lower bound on interest rates. To continue to ensure an appropriately expansionary monetary policy in this situation, ‘unconventional’ measures then had to be introduced. Switzerland, too, was unable to escape these international developments. As a small open economy, in the wake of the financial crisis it was hit hard by the slump in global demand and the turbulence on the international financial markets. Our country’s situation was exacerbated by strong upward pressure on the Swiss franc.

Indeed there will be inevitable calls by some vested interests to turn back. To give in, to drop out, would be a tragedy. The prize for running the longer race is great. By fixing the fault lines that caused the last crisis we have created strong foundations for a truly global financial system that can benefit us all. Now we must have the courage to seize that opportunity and build on those foundations. Today I will refresh the case for financial reform and set out what I believe should be the drivers of the future reform agenda. But before turning to that next stage, allow me to take stock of the immense amount that has been accomplished since the crisis.1 Completing the job of fixing the fault lines A safer financial system Banks are now much more resilient. They have more capital, more liquidity and are less susceptible to procyclical spirals. Capital requirements for banks are much higher, as are risk weights and the quality of bank capital. In all, new capital requirements are at least seven times the pre-crisis standards for most banks. For globally systemic banks, they are more than ten times.2 Large internationally active banks are on course to meet the new requirements 4 years ahead of the 2019 deadline. Despite the scale of the changes, the aggregate shortfall of those banks that still have shortfalls was € at end 2013, having been € two years ago. It is just as clear that banks’ liquidity positions before the crisis were precarious.
A fair comparison of the accuracy of different forecasts should take into account the fact that the forecasts are made at different points in time and that different forecasters therefore do not have the same information available to them. In the comparison of forecasts made in the material for the assessment of monetary policy, a method is used that takes such differences into account. 9 Figure 10 shows an adjusted absolute average error for the inflation forecasts for the period 1999–2009, that is the absolute forecasting error for CPI inflation adjusting for differences in the forecast horizon. 10 The shorter the bar, the smaller the forecasting error and the higher the accuracy of the forecast. 9  See M. Andersson and T. Aranki, “A comparison of different forecasters’ ability given the publication date effect”, Sveriges Riksbank Economic Review, No.1, 2009. 10  The average error is calculated as the mean value of the forecaster's forecasting errors during the forecast period. The absolute average error means that the sign of the individual forecast deviations is not taken into account. 14  BIS Review 32/2010  The major forecasters – the Swedish Ministry of Finance, the National Institute of Economic Research and the Riksbank – are reported individually, while the others are reported as an average. It may be worth noting that the Riksbank’s forecasts up to the third Inflation Report of 2005 were based on the assumption of an unchanged repo rate during the forecasting period. This may have hampered the accuracy.

As a result of the turbulence on the financial markets, however, the impact of monetary policy was weaker than normal in 2009. The Riksbank responded to these problems by complementing monetary policy with extensive lending to the banks. So, what was the nature of the forecasts and assessments that formed the basis for the monetary policy decisions? The repo rate was cut to 1 percent and the repo-rate path was adjusted downwards in February In February, it appeared that the downturn in economic activity, in Sweden and abroad, would be more severe and would happen much more quickly than previously assessed by the Riksbank. At the monetary policy meeting on 10 February, the Riksbank therefore decided to cut the repo rate by a whole percentage point to one percent. The repo-rate path was adjusted downwards and a further repo-rate cut during 2009 was indicated (see Figure 1). 1  For a more detailed description of how one can assess monetary policy see Lars E.0. Svensson, “Assessing monetary policy”, speech at Uppsala University, 13 March 2009. 2  For a more detailed description of the arguments behind my reservations see Lars E. O. Svensson: “Why a lower repo-rate path?”, speech at Umeå University, 24 February 2010. BIS Review 32/2010  3  The Monetary Policy Report from February 2009 presented forecasts based on the Report’s main scenario and alternative forecasts based on the repo-rate path adopted at the meeting in December 2008.