samchain/econo-pairs-v1 huggingface dataset:
The Bank of Thailand has been working closely with the banking communities in Thailand, on how to implement it in practices. ·  Though we applaud the Basel Committee in their efforts to create a framework that is more sensitive to risk and incentive compatible, I believe there are many areas which would benefit from closer consultation with the academia. ·  First, to apply the Internal Rating-Based approach or the IRB approach of the New Accord requires a substantial build-up of capacity: Human resource, Database, Business model re-engineering, to name but few. ·  As far as the data on the default probability on credit risk is concerned, most countries that just embarked on developing the required database will be at a disadvantage with a shorter and probably less representative series. Moreover, for those just recovering from crisis such as Thailand, the implied risk from such series collected during the crisis period will be higher than average over a complete business cycle. Thus, developing countries will find a high cost before emerging from crisis. Ladies and gentlemen, ·  This pro-cyclical aspect of the default statistics may be an important issue for the global economic recovery. ·  Secondly, some technical aspects remain unclear. In many cases, capital is being calculated to support both expected and unexpected losses, and overly costly. ·  Thirdly, the proposed capital charge for operational risk needs to be made more refined, incentive compatible to risk management, and more practical and less cumbersome in its application.

The solution centres on a programme of Government guaranteed bond issue that would provide for the full financing of the estimated cost. This programme of bond issuance will run for a maximum period of twenty years, and the financings will be provided for in the Government budget. This incorporation is projected to keep the share of the debt-service ratio to an average of 13.6% of the Government budget in the first decade and 11.5% in the second decade. This means that there will be little crowding-out effects on the Government’s investment expenditure in the period ahead, while the public debt stock-to-GDP is projected to trend down in the long term. With this programme, Thailand’s long-term fiscal sustainability is now assured. With monetary stability in place and fiscal stability enshrined in the Government’s long-term fiscal sustainability framework, I believe the operating environment in Thailand in the period ahead will be more assured and remain conducive to growth. But to really put the growth engine back on its feet, notably the recovery of the domestic demand, more works will have to be done at the micro level to remove the bottlenecks that inhibits the real economy. This leads to our second challenge: to put the banking system back to normal lending. Our banking system is returning to health and profitability with strengthened capital base, and a much lower level of non-performing loans. Yet, the growth in credit has been very minimal with deposit growth rising and liquidity remaining ample.
The latest released January economic figures point to more strength in the fourth quarter of 2001 than we had anticipated, given the event on September 11. And, with the current more supportive fiscal and monetary policy stance as well as the expectation of a rebound in the US, the overall environment this year is more conducive to growth than last year. From this vantage point, we are of the view that the economy could grow by 2-3 per cent this year while inflationary pressure would be virtually absent. A continuing expansion in domestic demand and a rebound in exports in the latter half of the year would be the key drivers of this year’s growth. The outlook for inflation remains tame, with core inflation expected to hover around 1-1.5 per cent, well within the target corridor of 0-3.5 per cent. Last year, notwithstanding the slowdown in the global markets, the Thai economy exhibited a noted degree of resiliency. While the world economy was in a slump, Thailand’s exports did not fall to the extent observed in many countries in the region. And, even as export fell by about 7 per cent, output growth remained positive in every quarter. In terms of macroeconomic stability, we saw an improvement both on the domestic and external fronts. In fact, Thailand external position strengthened significantly over 2001. The current account registered a large surplus and external debt continued to fall sharply in 2001. Our reserve position remains strong.

Surprisingly, in the light of the fall in G7 saving, UK long-term real interest rates as measured by the forward rates implied by the yields on index-linked gilts - are near their lowest levels for twenty years. US and euro-denominated rates are also low relative to past experience. There may be other factors that have offset the effect of fiscal policy on real interest rates, such as demographic developments and higher saving and more open capital markets outside the G7. But there remains a risk, as discussed in the Bank’s recent Financial Stability Review, of an unwinding of low long-term real interest rates as the stimulus from highly accommodative monetary policies across the G7 economies is gradually withdrawn. What do these arguments mean for monetary policy today? They imply, I believe, three main challenges for central banks. First, the factors that affect the level of real interest rates in capital markets around the world also determine whether a given official interest rate is an expansionary or restraining influence on demand. When driving a car we normally know whether our foot is on the accelerator or the brake. That is less obvious in the case of monetary policy - hence the debate among economists about the level of the so-called neutral interest rate. Uncertainty about the extent to which monetary policy is applying the accelerator or the brake justifies central bankers’ continued interest in the monetary and credit aggregates which contain information about the pace of nominal activity and hence future inflation.
But transmission through the exchange rate channel is uncertain and volatile, as the exchange rate is also an asset price that fluctuates with speculative capital flows and can deviate from equilibrium over extended periods and then correct quite suddenly. Unless the financial system is that much better protected, this process can interact negatively with financial stability, as was the case in Iceland during the financial crisis. From a theoretical standpoint, it is possible to resolve or mitigate the problem facing small countries in this regard in three ways: by joining a currency union, adapting monetary policy to that prevailing in larger economies even though it is not suitable for domestic conditions, or imposing restrictions or other measures that directly reduce non-residents’ profits on carry trade. As has already emerged, such measures are being examined by the Central Bank, and they could constitute part of our arsenal of policy instruments after the capital controls have been lifted. But we mustn’t think that they represent some sort of magic bullet. Such instruments would have adverse side effects and could push international obligations to their limits, particularly if they are designed for maximum efficacy. But experience shows that it could be risky not to have them if they are needed, but we must attempt to conduct other matters so as to ensure that they will be needed as seldom as possible.

In other words, monetary policy is always implemented under conditions of uncertainty – to varying degrees, of course. This is why we consider a large number of economic indicators and use several models. Furthermore, we do not put a single economist in front of a computer and assign that person the task of determining the monetary stance; instead, we have a committee that exchanges opinions and assesses the current situation and outlook at the time in question. The observations I have just made are general in nature and apply to large and small countries alike. But we know that monetary policy in small, open economies is accompanied by particular challenges – challenges that we must take into consideration when developing a monetary policy framework for Iceland. In this context, it should be noted, first of all, that smaller economies generally have a tendency to be more volatile than larger ones, owing both to less economic diversity and the greater relative weight of individual shocks. Second, the relative weight of the tradable sector is often greater than in larger economies. Because of this, economic developments are more dependent on the exchange rate, and pass-through from the exchange rate to inflation is generally stronger. Third, financial markets are shallower than in larger economies, other things being equal, and this contributes to greater volatility of financial prices. Fourth, in an environment of unrestricted capital flows and increasing international financial integration, the possibility for small economies to affect their own financial conditions through monetary policy diminishes.
I was head of government during the critical period of 1999-2000 and I know exactly how difficult it is to adjust domestic consumption, even by two percentage points of GDP only. This time, the difficulty posed by the adjustment will be perceived as rather big, because it must be accomplished after several years of significant increases in consumption. The trend seemed to go on forever, which led to the decoupling between aspirations and real possibilities to fulfil them. Therefore, it is adequate to adjust domestic demand sooner rather than later, as long as we still enjoy a marked economic growth, given that at this point adjustment implies only resizing and not amputation. An essential issue that the Romanian society must solve without delay refers to what should be adjusted first: consumption or investment. I realise that we must ponder on this matter. The question is whether we should opt for buying an increasing number of cars or set aside resources in order to build the adequate road infrastructure. In a few years, the former choice could lead us to a total traffic jam, and the only additional consumption left for us could be that of carbon monoxide released by the exhaust pipes. This example is not only metaphorical.

In 1999, Romania’s GDP stood at merely EUR 33 billion, while GDP per capita was lower than EUR 1,500. This leap, which led to significant changes including higher consumer standards, will have to be accompanied by similar progress in understanding economic issues, so that the path forward should be as smooth as possible. If we look at the long-term development of the Romanian society, the decade elapsed since the launch of Ziarul Financiar is a significant landmark, which can be compared with the significant upturn after World War I and the achievement of the Grand Union of 1918. At such turning points, the quantitative developments, which are nonetheless important, need to be accompanied by qualitative changes that are related to social philosophy as a whole, as well as to progress in national standards and values. From this perspective, the opinionmakers and the press in general play a major role. Economic newspapers in particular find themselves in a very special position. As a matter of fact, the National Bank of Romania has steadily promoted economic education and has done its best to raise journalists’ level of professionalism when approaching economic issues. Let us remember that Ziarul Financiar was launched ten years ago in the very Marble Hall of the NBR. Numerous occasions have arisen over the years when NBR representatives participated in events organised by Ziarul Financiar and vice versa. There has been a steadfast dialogue benefiting, in my opinion, both Ziarul Financiar journalists and central bank experts.
Where possible, individual functions - personnel, finance, property services - are benchmarked against equivalent functions in private sector firms. However the Bank’s cost effectiveness in all functions, even those where benchmarks are hard to identify, is monitored closely by management and is subject also to the scrutiny of the Court of the Bank of England. Corporate governance The role of Court and changes to the Bank’s corporate governance arrangements is the second area I would like to address. The powers of Court to oversee the operations of the Bank were substantially enhanced by the 1998 Act. In particular the Act: (a)  requires the Court of the Bank to determine our Objectives and Strategy for the year; and  (b)  sets up a non-Executive Committee to review the Executive’s performance against the Objectives. This is chaired by our Senior Non-Executive, a position formally designated under the Act. So our latest Annual Report for the year to February 2000 sets out the Bank’s ten key Objectives for the year, includes a long description by the Executive of the Bank’s performance against the Objectives; and finally a section, written by the Non-Executives, commenting on our performance. The aim of the Act was quite plainly to increase the level of transparency of our operations; and to raise the accountability of the Executive to Court as a whole, and in particular to the Non-Executive Directors appointed to review our performance. Risk control Thirdly, I would like to comment on the enhancements we have made to our risk controls.

On the Friday before the monthly MPC meeting we meet with the Economics and Markets staff of the Bank, in what is known as pre-MPC, to go through the latest data; and this process takes a whole morning. Doing it on a Friday allows us a few days to commission any additional work we need ahead of the MPC meeting itself. This is held in our main committee room under the watchful eye of Augustus John’s portrait of Montagu Norman (Governor of the Bank between 1920 and 1944) and starts on a Wednesday afternoon. This meeting is given over to a discussion of the key issues raised by the data presented at the pre-MPC; and of any tactical considerations. The following day, Thursday morning, we meet and after a brief resume of the previous day’s discussion from the Governor, proceed to go around the table with each member indicating the factors he or she considers relevant and his or her vote. The policy decision (ie interest rates up, down or constant) is released to the market at 12 noon on the Thursday. The minutes of the meeting, including the individual votes of members, are released two weeks later. Much has been written about the MPC’s constitution and operation, but perhaps I might make a few observations. In the first place, whilst there is a good deal of talk about the Bank of England’s independence, it is important to put this in context.
One is the target variable, in which case I believe we should consider changing to an index upon which policy rate changes do not have such a major direct impact as on the CPI. Another is an interval surrounding the target. The main reason for considering a reintroduction of an interval is the need to constantly remind people that monetary policy is pursued under significant uncertainty and that the Riksbank is not able to fine-tune the economy and inflation. I look forward to continued discussions about these issues. BIS central bankers’ speeches  9  References Dorich, José, Nicholas Labelle, Vadym Lepetyuk and Rhys Mendes (2015), Assessing the Benefits of a Higher Inflation Target. Under publication in Staff Discussion Papers, Bank of Canada. The Economic Commission (1993), “Nya villkor för ekonomi och politik.” (New conditions for the economy and policy) (In Swedish) The Economic Commission's proposal, SOU 1993:16. Flodén, Martin (2015), Sweden needs its inflation target. Speech at Fores, 13 October. Fromlet, Hubert (2015), “Så kan Riksbanken fungera bättre.” (How the Riksbank can work more efficiently) (In Swedish) Svenska Dagbladet Debate, 13 November, http://www.svd.se/ekonom-sa-kan-riksbanken-fungera-battre. Heikensten, Lars and Anders Vredin (2012), “Akademikerna och penningpolitiken” (Academics and monetary policy) (In Swedish). In Per Molander (ed. ), “Kunskapen och makten – om det offentliga beslutsfattandets kunskapsförsörjning” (Knowledge and power – on public decisionmaking knowledge management) (In Swedish) Atlantis, Stockholm. Johansson, Jesper (2015), How is inflation measured? Economic Commentary no. 5, 2015.

At international level, there should be an efficient cooperative framework adapted to the diversity of risks and challenges raised by stablecoins. The second action is to foster the major private project to create a unified, innovative and autonomous European solution, the European Payments Initiative (EPI). The Eurosystem has supported it right from the start. Concretely, EPI will provide citizens with an innovative and competitive European payment solution, as an alternative to the dominant and extra-European players already established in Europe or the Bigtechs in the future. EPI will be a company based within the EU, controlled by European authorities: we will thus have greater control over its risks, its economic model for meeting European consumers’ needs, and how it uses its data. Let me pay tribute to those who are driving the EPI project, and encourage them to implement it as quickly as possible. We need to speed up Autumn 2021’s “go/no go” decision stage and the governing bodies also have to be put in place as soon as possible to help EPI deploy on a pan-European scale. Public authorities are and will remain completely committed in their support: the European Commission, in order to validate the economic model; ministers in the different countries – starting with France and Germany. We as Eurosystem are committed to providing the underlying settlement infrastructures, including TIPS, which is a powerful European asset. And EPI will be most welcome to participate in the front-end prototype of CBDC.
At the same time, however, changes in the structure of the financial system and an increase in product complexity could make a crisis more difficult to manage and perhaps more damaging. Consolidation has produced a system in which a smaller number of financial institutions, banks and non-banks, account for a substantially larger share of financial intermediation. Therefore, while the probability of a major crisis induced by the financial failure of a major institution may be lower, the damage associated with such an event could be higher. An event large enough to threaten the solvency or liquidity of one of these core institutions could have more severe impact on the stability of the system than was the case in a less concentrated market. The substantial increase in the role of hedge funds in our financial system also complicates the challenge of risk management. Although hedge funds help improve the efficiency of our system and  BIS Review 28/2005  1  may also contribute to greater stability over time by absorbing risks that other institutions would not absorb, they may also introduce some uncertainty into market dynamics in conditions of stress. The rapid growth in instruments for risk transfer, most recently in the credit world, has produced a large universe of exposures in complex products, whose future value is uncertain and difficult to model.

Stress regimes need to capture market risk and credit risk across the firm, incorporating exposures in priced credit products, such as credit default swaps and structured credit products, and the strong linkages between these priced credits and traditional credit  2  BIS Review 28/2005  instruments such as bank loans. Stress regimes need to take into account the effects of a firm’s own actions and trading strategies on market prices during times of stress, and the constraints on their room for maneuver imposed by size. Banks hold a special place in our financial system, and most of our focus on improving the regulatory framework for capital will always be on banks. Getting to a greater degree of comfort about the adequacy of the capital cushion for banks is a necessary but not sufficient condition for achieving a higher level of comfort about the resilience of our financial system. This point applies equally well to non-bank financial firms that play critical roles in our financial system. These institutions, too, need to have internal controls and risk management systems and capital levels commensurate with their critical role in the financial system. The SEC’s initiative to implement internal-models-based regulatory capital requirements for securities firms as part of the Consolidated Supervised Entity (CSE) framework will help bring more consistency and more sophistication across banks and securities firms in the capital treatment of traded positions.
Time is limited, and this is, after all, a luncheon speech, so I shall not go into detail about these standards. The point to make here is that, as an international financial centre, we have no alternative but to implement these standards as fully as we possibly can and as soon as international agreements have been reached on them. Many of these standards will be, to put it mildly, quite onerous. In this connection, I wish to ensure you all that the HKMA has been adopting a proactive approach in participating in the relevant international standard setting forums and in influencing the standard setting processes in the best interests of Hong Kong. We have also consulted widely in Hong Kong. Insofar as the banks are concerned, there is a clear need for bank management to allocate adequate resources to the process of implementation, which will involve substantial changes to IT systems and compliance arrangements. For Basle II, for example, banks should not be acting under the misapprehension that they can simply sub-contract the implementation processes to third party service vendors, such as their external auditors. Active involvement of bank management is crucial in ensuring that most, if not all of these international standards are properly incorporated into the daily operations of banks, especially since each bank may face different focuses and challenges in the process.

Equally, we are confident that full implementation of the Swiss ‘too big to fail’ regulations will reduce the false incentives that underlie the issue and create the necessary conditions for resolving the issue here in Switzerland. The state should no longer be obliged to use government funds to bail out a bank. Page 12/14  Bibliography Afonso, Gara, João A. C. Santos and James Traina (2014), Do ‘too-big-to-fail’ banks take on more risk?, Federal Reserve Bank of New York, Economic Policy Review, 20 (2), pp. 41–58. Alessandri, Piergiorgio and Andrew G. Haldane (2009), Banking on the State, speech given at the Federal Reserve Bank of Chicago Twelfth Annual International Banking Conference, Chicago, 25 September. Basel Committee on Banking Supervision (2016), Explanatory note on the revised minimum capital requirements for market risk. Bernanke, Ben (2006), Modern risk management and banking supervision, speech held at Stonier Graduate School of Banking, Washington, D.C., 12 June. Branson, Mark (2011), The case for more and higher quality capital, FINMA annual media conference, Berne, 22 March. Cecchetti, Stephen G. (2014), The jury is in, Centre for Economic Policy Research, Policy Insight No. 76. FDF (2016), Bericht des Eidgenössischen Finanzdepartements über die Anhörung zu Änderungen der Eigenmittelverordnung und der Bankenverordnung (Eigenmittelanforderungen Banken – Rekalibrierung TBTF und Kategorisierung). FDF (2017), Erläuternder Bericht zur Änderung der Eigenmittelverordnung (leverage ratio und Risikoverteilung) FINMA (2009), Financial market crisis and financial market supervision, report. Gambacorta, Leonardo and Hyun Song Shin (2016), Why bank capital matters for monetary policy, Bank for International Settlements, BIS Working Papers, 558.