samchain/econo-pairs-v1 huggingface dataset:
This is the basis for central bank independence. If price stability, by contrast, were regarded as just one out of a long list of political and economic objectives - rather than as a common goal and a precondition for the successful pursuit of other objectives - then there would be no legitimacy for entrusting this task (and only this task) to independent central banks. Making value judgements when trading-off different objectives and balancing conflicting interests is the legitimate job of elected politicians with a popular mandate and not of appointed technocrats. An independent central bank thus pre-supposes a broad consensus on the “quasi-constitutional” nature of the common good of price stability. Assigning the central bank a clear overriding objective also imposes limits on its discretionary exercise of power and makes it easier for the public to hold the central bank accountable for its mandate. This is important to keep in mind if we entertain the possibility that while, yes, “money is too important to be left to the politicians” one could similarly concur with Poincaré that “money is too important to be left to central bankers” (as quoted by Milton Friedman in his 1962 essay on “Should there be an independent monetary authority?”). In other words, why should one trust central bankers more than politicians?

Friedman, at least at the time he wrote, trusted neither of the two and advocated a constitutional rule for constant money growth as his preferred solution of the long-standing debate on “Rules versus authorities in monetary policy” (which is the title of the classic paper by Henry Simons from 1936). His concerns reflect what I would regard as a healthy distrust of the unfettered “rule of men” as opposed to the “rule of law” which he much prefers - in line with the long and venerable tradition of British liberal thinking. Friedman, at the time, was quite sceptical on central bank independence and asked whether it was “really tolerable in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control?” This is why I believe it is important to stress that, if an independent central bank is assigned a clear and limited mandate, this represents a constraint on the discretionary exercise of power by the government but also by the central bank itself. In the absence of a complete and universally applicable rule for monetary policy an independent central bank which focuses firmly on the single overriding goal of price stability is the closest realistic and credible substitute for a literal “rule of law”. In particular such a central bank does not have the discretion to pick and choose at will among several objectives. A clear commitment to a single overriding objective is the key to credibility and it is also the key for accountability, i.e.
This may require you to take the higher ground, to set aside the temptation to promote such risky investment or insurance products that can earn you high commissions. While this may dampen your earnings prospects in the short term, you stand to gain the trust, confidence and loyalty of your clients over the long term. I have faith that all of you – who have taken the time to participate in this conference – will rise to this challenge and contribute to the building of a financial intermediation industry that is both profitable and ethical. I began with Shakespeare, now let me end with Confucius, the ancient Chinese philosopher. He once said: “I used to take on trust a man’s deeds, after having listened to his words. Now, having listened to a man’s words, I go on to observe his deeds”. To put this in context, it is not enough for financial institutions and practitioners to publish client charters that claim the customer is king and that their interests will always be prioritised. Given the pace and pervasiveness of social media platforms, if your actions do not match your words, you will soon be called out very publicly by your own dissatisfied customers. On the other hand, if you successfully build a reputation of high professionalism and integrity, this will ensure the longevity and growth of your business and consumer base. 1  The FEN is an inter-agency platform comprising of institutions and agencies committed to improving the financial literacy of Malaysians.

It is my pleasure and honour to be invited to deliver today’s keynote address, to share my views on the importance of ethical conduct in upholding the trust of financial consumers in the quality of financial services and advice offered by financial practitioners. Alleviating the Impact of COVID-19 The wide-reaching impact from efforts to contain COVID-19 has exposed long-standing fault lines and gaps in financial management among households and businesses. While essential for the protection of lives, the impact of global and national containment strategies in the form of mass or targeted lock-downs have inadvertently impacted the livelihoods of many segments of society. These lock-downs have been gradually uplifted and are temporary in nature, but for consumers who lack adequate financial safety nets, the after-effects are real and significant. In line with our intent of providing financial reprieve to those adversely affected by this pandemic, 1/3  BIS central bankers' speeches  Bank Negara Malaysia has worked tirelessly with the banking industry to provide loan moratoriums and targeted repayment assistance to individuals and entrepreneurs who have lost their jobs or whose earnings have been adversely impacted. Similarly, we have also worked with the insurance and takaful operators to implement premium and contribution deferments from 1 April 2020 until the end of this year, to ensure policyholders and takaful participants who face temporary financial constraints can preserve essential coverage during these unprecedented times.
For my purpose tonight is to explain what it is that the Bank through the MPC is trying to do in its conduct of monetary policy, to say something about where we are and to explain some of the risks and uncertainties that we are facing as we look forward. What then are we trying to do? The MPC’s mandate from the Government is to maintain price stability (currently defined as an inflation rate of 2½% - on a specific measure of retail price inflation) and subject to that to support the Government’s economic policies, including its objectives for growth and employment. Now no-one can reasonably suppose that inflation could be held precisely at 2½% consistently over time. But we are consistently to aim at that target. Now what that involves essentially is trying to keep aggregate nominal demand in the economy more or less continuously in line with the overall supply-side capacity of the economy – as a whole – to meet that demand. In fact, although our objective is defined narrowly in terms of price stability – the 2½% target – we can only hope to achieve it by maintaining stability in a much broader sense – that is by consistently maintaining a balance between overall demand and supply. That, essentially, is how best we can contribute to the Government’s objectives for growth and employment. It is in fact a necessary condition for maintaining the steady economic progress that we have seen in recent years.

As you know, we have a branch office up here in Yorkshire, in fact in Leeds, which serves as a part of our network of eyes and ears and indeed voices at 13 locations throughout the UK. The new responsibility made us more conscious than ever of the importance also of visits around the country by senior members of the Bank in London, including members of the MPC and indeed our Directors, both to inform themselves about local economic conditions and to explain locally what it is that we are trying to do. That explains why you have been seeing much more of us in recent years and it explains in particular tonight’s invasion of Yorkshire, by 11 of our 16 Directors and 6 of the 9 members of the MPC. Tomorrow in Leeds will in fact be the third occasion on which our Court has held one of its monthly meetings outside London since the new legislation was introduced in 1998, a practice which we intend to continue. So that I hope explains why we are here – and I hope that you will avail yourselves of the opportunity to bend the ears of our representatives where you can – but preferably not until I’ve finished speaking to you!
The first wave of speculative crypto-assets such as bitcoin – which are very volatile, with no real underlying economic basis and perhaps no real future – has been succeeded by a second generation of assets – stablecoins – based on the same promising blockchain technology, but now backed by mechanisms designed to stabilise their value. Thanks to network effects, these stablecoins could offer a concrete solution for cross-border payments which are still – undeniably – far too costly and slow. But – and this is the downside – these crypto-asset projects, which are global in reach, also generate considerable compliance, financial and political risks. I’m thinking notably of money-laundering and terrorism, for which they could provide new channels of financing, and of the more systemic risks to financial stability. II/ Our response: Step up the pace on payment solutions and consider the possibility of a 1/4  BIS central bankers' speeches  CBDC Of course, as central bankers and supervisors, there is no question of us standing by and letting this change happen unchecked. We have to remain fully committed to our dual objective – safeguarding confidence/supporting innovation – which is written into the very DNA of our institution. We are determined, first and foremost, to safeguard confidence – at the global level – through strong and coordinated action. Under France’s presidency, the G7 reacted swiftly and strongly last June: alongside Bruno Le Maire, we entrusted Benoît Cœuré with a mandate immediately after the announcement of the Libra project.

It can also reduce the costs of financing, enabling easier access to finance and better opportunities for business decisions. The single currency and the participation in the monetary union provides the country with a backstop in case of financial difficulties and disabled access to international markets through the so-called European Stability Mechanism. Of course, adopting the single currency would mean giving up on the monetary policy independence, which is already limited given the exchange rate peg, and would not require major adjustments. This cost is lesser compared to the benefits that the single market and single currency would bring, under the assumptions that all the policies would be in place and prudent enough to secure sound fundaments and stability of the economy. To recap, the EU integration is a process, which will provide boost and will shape reforms in many areas, underpinning the process of real, social and institutional convergence of the country. It will also impact the monetary policy making, both before and after the final stage of complete monetary integration. The challenges for the central bank are of a multidimensional nature– macroeconomic, institutional, and operational. Steering the wheel properly would require strong institutional capacity and awareness of all the policy makers that smooth integration requires healthy economy, absence of imbalances and sound policies. Thank you. 2/2  BIS central bankers' speeches
The most famous of these is probably the West German bank Herstatt, which I expect many of you have heard of. As a result of the ensuring financial unease, the central bank governors of the G10 countries agreed to form what would later be known as the Basel Committee. This committee had its first meeting at the beginning of 1975 and its purpose was then and still is that the representatives of the member countries shall cooperate on issues regarding the supervision and regulation of internationally active banks. This is to reduce the risk of global financial crises occurring. Sweden has been a member of the Basel Committee since its start. I myself have been the Riksbank's representative in this context for some years now . Finansinspektionen also takes part in the Basel Committee meetings. Smoothly-functioning international cooperation between central banks and financial supervisory authorities is very important to financial stability in a small and open economy like Sweden’s. We know from experience that other countries’ problems can soon become our own. It is thus extremely important that we are involved in influencing the work in these international contexts in the right direction. It also creates good conditions for the banks to conduct their operations in several countries, if the regulation in these countries meets certain minimum standards and the supervisory authorities are in tune with one another.

BIS central bankers’ speeches  3
These innovations have resulted in notable developments in the financial sector, such as: (i)  Growth in Investments in Loans and Leases: total loans and leases have increased to K10,182 billion as at 31st May 2011 from K1,079 billion as at 31st December 2001. The 843% increment has resulted in the introduction of various credit facilities, for example employer backed salaried loans, trade finance products, vehicle finance leasing, SME loans, invoice discounting, mortgages, etc;  (ii)  Growth in Bank’s Total Assets: total assets have increased by 614% to K24,693 billion as at 31st May 2011 from K3,460 billion as at 31st December 2001. (iii)  Growth in Deposits: total deposits have increased by 661% to K18,297 billion as at 31st May 2011 from K2,405 billion as at 31st December 2001. (iv)  Growth in Branch Network: currently there are 237 branches and agencies countrywide. Ten years ago, there were a total of 161 outlets. (v)  Continuous Improvement of Risk Management Systems resulting in the creation and update of the range and quality of the products and services; for example hedging products, derivatives, credit risk rating systems, interest rate risk management. (vi)  Introduction of the Credit Reference Bureau is expected to provide key information to lenders on borrower’s credit history. (vii)  Access to credit has been further enhanced through the Country’s membership in international multilateral financial institutions such as the African Development Bank, the African Export-Import Bank, PTA Bank and the International Finance Corporation (IFC).

Imagine the developments following the World War II, when central banks widely accepted their transition from private to public ownership and when they realised that it was not only necessary but also imperative to cooperate, regardless of physical barriers. Imagine, for example, the president of the Federal Reserve, who wasted three months to travel to Europe and two weeks to receive a letter from his homologues overseas. Actually, central banks have increased their efforts for a better and more fruitful cooperation. This is an undeniable truth. It has been a distinct feature of our work in recent years. Since my first public appearance as Governor of the Bank of Albania, I have pronounced my ambition for Bank of Albania’s legal and institutional transformation in line with the model of the European System of Central Banks (ESCB). I am fully confident that the successful conclusion of the Twinning Project with the Banca d’Italia and Banque de France is another determinant step forward in the joint efforts to strengthen cooperation and elevate our work standards to European levels. Today, we see that, in a few months, a brilliant idea has turned into reality and the project has been crowned with success. The project objective was to improve our work practices in the field of banking supervision, statistics, payment systems, interbank market, coordination of EU integration process and financial literacy. More specifically, cooperation in banking supervision focused on implementing major reforms in areas such as consolidated supervision, approval of new regulations and staff training.
In the aftermath of the oil price fall, the krone exchange rate tracked the oil price and wage settlements remained moderate. With inflation expectations well anchored, the Bank’s target rate could be reduced, thus underpinning a weaker krone. As a result, relative labour costs declined markedly, strengthening the position of Norwegian firms exposed to international competition. Over time this could enable new exports to emerge as the production of oil and gas dwindles. Over the past few quarters, growth has picked up, the labour market has improved and 1/2  BIS central bankers' speeches  unemployment has fallen. The policy mix has played an important role, helped by a recovery of the oil price. Competitiveness in the oil service industry has also improved considerably, particularly after the substantial cost-cutting measures introduced by companies in this industry in recent years. With a floating exchange rate, domestic interest rates can differ from external interest rates, but an interest rate differential that becomes too wide can have a substantial effect on the exchange rate, generating instability in inflation, output and employment. Thus, the domestic interest rate will also be influenced by external rates to a large extent under an inflation-targeting regime. This was illustrated by a positive, but limited, interest rate differential in the first years following the global financial crisis, when the effect on Norway’s economy was less severe than for most other European economies. This allowed monetary policy to respond to the economic downturn that followed in the aftermath of the fall in oil prices.

The policy responses mitigated the recession but could not stop it from becoming the deepest in Iceland’s post-war history and a severe one in international comparison, as can be seen from this slide. 4  BIS central bankers’ speeches  But Iceland was not the hardest hit, as can also be seen from the slide, and this would be still clearer if we were to look at the labour market. Iceland lost 12% of GDP from peak to trough, slightly more than Ireland. However, as was probably also the case in Ireland, that peak was unsustainable and was associated with a significant positive output gap. Iceland has regained 7½% since, which is significantly more than Ireland but less than Latvia, which suffered a much deeper recession. Finally, I would like to mention selected lessons that I think can be drawn from this experience. First, dealing with failing big banks in small countries: Guaranteeing the entire banking system in Iceland’s case would probably have resulted in sovereign default and the bankruptcy of the country. In general, taking such a step with big banks in small countries is risky, especially if a significant part of their balance sheets are in foreign currencies. The alternative is to save only key infrastructure elements, such as the domestic payment system. Second, dealing with volatile capital flows: Deal with the inflows if you want to avoid having to take drastic measures to deal with the outflows.
An institutional mechanism should exist to ensure that the recommendations adopted by the ESRB as regards the actions to address the systemic risks identified by the macro-prudential assessment would be followed up by the competent national authorities. However, as the recommendations will not be binding, there should be institutional mechanisms to ensure that they are implemented. And if they are not implemented, an explanation has to be provided. The ESRB may decide to make the recommendations public. As the recommendations aim to address systemic risks, their publication will increase pressure on the Member State to implement such recommendations. A peer review mechanism should be set up. In particular, the ECB, on behalf of the Risk Board, would closely monitor the implementation of the recommendations by Member States and national authorities. Cases of non-compliance could be reported to the Council and, where relevant, to the European Supervisory Authorities for appropriate follow-up. 2. The concept of systemic risk and its analysis by the ESRB  How well this institutional framework will enable the ESRB to perform its tasks will depend on its understanding of systemic risk, the amount of relevant information at its disposal, the analytical tools that are available to assess the risks, and the framework used to distil the  3  This was, for example, a clear conclusion of the de Larosière Report (2009), “High-level Group on Financial Supervision in Europe”, Brussels. 2  BIS Review 115/2009  most important results from all these elements.

Its tasks will be to identify and assess risks to systemic stability in the EU, issue risk warnings where risks appear to be significant  1  I would like to thank L. Cappiello, I. Cabral, P. Hartmann, and F. Recine for their contributions, and D. Clarke for reviewing the document. I bear responsibility for the views expressed and for any errors. 2  See, for example, European Shadow Financial Regulatory Committee (1998), “EMU, the ECB and Financial Supervision”, Statement No. 2, 19 October, which proposes a “European Observatory of Systemic Risk” as an initial step towards a European-wide supervisory structure. Aglietta and Scialom (2003), “The Challenge of European Integration for Prudential Policy”, FMG Special Paper, No. 152, October, provide an elaborate discussion of such a body. BIS Review 115/2009  1  and, where necessary, give recommendations on measures to be taken to contain such risks and follow up on their implementation. The Risk Board will have 33 full members: the 27 EU central bank Governors, the ECB President and Vice-President, a Commission member and the three Chairs of the new European Supervisory Authorities. To ensure close cooperation with supervisors, a representative from one national supervisory authority for each EU country may attend the meetings of the ESRB, but will have no voting rights. In addition, the President of the Economic and Financial Committee (EFC) will participate, but likewise will have no voting rights.
At the same time, we know that the implementation phase of the new banking regulations will be lengthy. Consequently, there is reason for Sweden both to proceed more rapidly than planned and to introduce stricter regulations than required by Basel III. The Riksbank’s work with financial stability Perhaps the most important lesson of the financial crisis is that we must take a broader approach to understanding and analysing systemic risks. Even if, before the crisis, we and other central banks pointed out individual factors as possible threats to financial stability, nobody really succeeded in predicting the situation that then arose. The traditional approach of analysing institutions, markets and infrastructure separately was not sufficient. During the  7  See the Riksbank’s report to the Riksdag 2009/10 RB:4 “Report on certain areas that require investigation as a result of the financial crisis”, www.riksbank.se. See also Economic commentaries no. 1, 2010, www.riksbank.se. 8  BIS central bankers’ speeches  crisis, problems in individual institutions and markets rapidly spread and had far-reaching consequences for completely different markets in other parts of the world. The financial crisis also revealed the strong link between the Riksbank’s two main assignments – monetary policy and financial stability. Without stability in the financial system, it is difficult to conduct monetary policy, at the same time as price stability promotes financial stability. Normally, we use different types of measure for each of these two tasks. However, during the crisis, we needed to use both types of measure.

In particular, I have addressed ways in which the Riksbank could play a stronger role in this connection. Thank you! 15  14  My colleague Lars Nyberg has proposed that charges be introduced. BIS central bankers’ speeches