samchain/econo-pairs-v1 huggingface dataset:
Muhammad bin Ibrahim: Financial services industry – opportunities and challenges for Asia and Europe Speech by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the 12th Asia-Europe Business Forum: “The Potential Role of Islamic Finance in Contributing to Global Financial Stability”, Brussels, 4 October 2010. *  *  *  I am honoured to be invited to speak at this Asia-Europe Business Forum themed “Financial Services Industry: Opportunities and Challenges for Asia and Europe”. During a time of global economic challenge and uncertainty, following the recent unprecedented global financial and economic crisis, it is timely for this forum to take place as a platform for business leaders and policymakers across Asia and Europe to reflect on the challenges and to discuss on solutions that can contribute to restoration of global financial stability. My address has a specific focus on Islamic finance since over the last ten years it has grown phenomenally and it will play an important role in promoting greater global financial stability. In the current search for an enduring solution to ensure stability of financial systems, Islamic finance offers tremendous potential in shaping more resilient financial systems that enables financial intermediaries to function efficiently within national economies and across borders. The much talk about discussions that banking should return to its fundamental functions of providing financial services which add value to the real economy, represents the very principle of Islamic finance that explains its relative resilience during the crisis.

Effects of the 2008/09 global financial crisis and Asia’s response The recent crisis had the global financial system badly shaken with widespread effects of an unprecedented scale across the world. The Asian region has however demonstrated remarkable resilience during the crisis as most countries in Asia entered the crisis period with a sound set of economic and financial fundamentals, mainly attributed to the lessons learned from the Asian financial crisis of the late 1990s. It was painful. It was a bitter lesson. We embarked on a bold reform that fundamentally alters the landscape of our financial system. But the payouts have been tremendous. The governments of the Asian economies have now the flexibility to implement large stimulus, given the strong economy and low public debt levels in the region. Credit flows to the private sector remain undisrupted as financial institutions in the Asian countries were strong and well capitalised. The household and corporate sectors in Asia were also not over leveraged. Furthermore, Asia was not confronted by widespread unemployment. The various reform measures had enabled the Asian economies to build more shock absorbers and reduced the number of shock amplifiers in their economies following the 1997/98 financial crisis. What we have learnt is that there are no short cuts in reforming a broken system. We also learnt that we should always have an open mind in looking at probable solutions. Just like what a good doctor would prescribe, some time, administering bitter medicines are the only way to go.
While the Bank has decided to implement a more systematic approach to risk assessment, other supervisors - who traditionally operate a rule book - are (in a fast moving marketplace characterised by rapid product innovation) moving towards a regime that gives more scope for supervisory judgement. But the fact that regulators internationally are converging in their approach does not necessarily mean that they are right. They may all be converging on an inappropriate model. Indeed some would argue that regulators do as much to create problems as to solve them: that regulators create perverse incentives - even as we speak bankers may be designing products whose whole rationale is to exploit anomalies in our rules. Perhaps we would all be far better employed elsewhere, leaving the market to regulate itself. Why should we not facilitate that process by concentrating on rules of disclosure, obliging banks to publish accurate information on their capital adequacy and risk profiles, and leaving the rest up to the market - perhaps with some safety net for small depositors and investors? As you know, the New Zealanders have made an interesting move in this direction in the last couple of years. Should we then get out of the business and leave it all to the markets? To answer that question, it may be helpful to go back to first principles. Back in 1958, Modigliani and Miller demonstrated that in a frictionless world a firm’s capital structure cannot affect its value.

There is a lively debate in the US at the moment about the most appropriate regulatory structure for all financial institutions, and particularly for investment banks. This tends to be regarded in the US largely as an internal matter. But the fact that the large US financial institutions have a global reach inevitably makes that debate a matter of great interest and concern to the international financial community. We are optimistic that legislation will soon be enacted to address these concerns. It would certainly be disappointing if it is not. Conclusions Though I have attempted this morning to identify some features of regulation on which we might well agree, I doubt whether there is such a thing as an ‘optimal’ regulatory structure. Each country has its own legacy of supervisory structures and approaches. But an appropriate international structure is one which works as seamlessly as possible and has clear lines of responsibility (at least, that is what we expect from international banking groups’ controls). One co-ordinating regulator for each institution could play a crucial role in such a structure. The question of the number of regulators is, in my view, less important; no one has yet suggested we set up one body world-wide to carry out all supervision, so whatever our own vision of an optimal regulatory structure, it will have at its centre a requirement for supervisors from different disciplines and in different countries to communicate effectively with one another. This weekend’s conference is a good opportunity to do that. BIS Review 21/1997
They proposed a vision which is now shared by all stakeholders, contributed to a constructive review of the banking community’s deliverables and cooperated with the European Commission to address legal and regulatory impediments. While the design phase of the SEPA project is almost completed, the next challenge is to ensure that migration towards the SEPA is well-organised and delivered. Because the starting point in each  BIS Review 53/2006  3  country is different, migration plans to the SEPA will primarily have to be organised locally. This should naturally lead to a further involvement of the Eurosystem’s central banks at national level, at least to help co-ordinating the efforts of the wide range of stakeholders. For example, the Banque de France and the French banking federation have created a national committee dedicated to the implementation of the SEPA. This committee gathers representatives of banks, different categories of users – public administration, corporates, retail business and citizens – as well as members of the French Parliament. It is in charge of coordinating works relating to the migration towards the SEPA. Having held its first meeting in April 2006, the committee foresees to adopt the French migration plan by October. 2.3. Overseeing payment systems  As overseers, the central banks of the Eurosystem have also contributed to the objectives of European financial integration, technological progress and higher resilience of the financial system.

7 Dovern, J. and G. Kenny (2017), “The long-term distribution of expected inflation in the euro area: what has  changed since the great recession?”, ECB Working Paper No. 1999. 8 See Kozlowski, J., L. Veldkamp and V. Venkateswaran (2015), “The Tail that Wags the Economy: Beliefs and  Persistent Stagnation”, NBER Working Paper No. 21719. The authors argue that if people base their beliefs on past realisations, then extreme, albeit transitory, events can generate persistent changes in our cognitive framework. 9 See e.g. Gerba, E. and D. Żochowski (2017), “Knightian uncertainty and credit cycles”, ECB Working Paper No  2068. 10 See e.g. Benigno, G. and L. Fornaro (2017), “Stagnation traps”, ECB Working Paper No 2038. 11 See Rossi, B., T. Sekhposyany and M. Souprez (2017), “Understanding the Sources of Macroeconomic  6/7  BIS central bankers' speeches  Uncertainty”, Barcelona GSE Working Paper No 920. 12 See e.g. ECB (2017), Financial Stability Review, May and November. 13 See e.g. Draghi, M. (2017), “Accompanying the economic recovery”, speech at the ECB Forum on Central  Banking, Sintra, 27 June. 7/7  BIS central bankers' speeches
  Banks become dependent on optimal market functioning at all times and on the confidence of market participants. BIS central bankers’ speeches  1  If this process goes too far, an external shock could turn a situation of vulnerability into a crisis. This is what is referred to as systemic risk – the risk that shocks will weaken the functioning of the financial system, rendering it unable to provide funding, execute payments or redistribute risk effectively. Systemic risk can build up over time through a rapid rise in asset prices and debt and in the form of increasing interdependence among institutions. Or systemic risk can build up when many institutions are exposed to the same risk factor, for example on the funding side. Vulnerability also in Norway A financial crisis can be triggered by domestic conditions or it can be triggered by external factors. This time, the crisis came to Norway through external channels. International funding channels dried up, creating a liquidity crisis in the Norwegian banking sector. We can never fully insulate the financial system from shocks. But we can increase our resilience. One of the ways we can do this is by keeping our own house in order – by preventing major imbalances from building up in the economy or in the financial system, and by ensuring that the financial system in general is robust. We will then also be capable of withstanding disturbances generated by external conditions.

Ravi Menon: Singapore's financial sector agile and resilient amid Covid-19 Edited transcript of fireside chat by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at ACI Live Aid: Financial Markets Give Back, 29 May 2020. * * *  Operational Resilience The financial sector has been quite remarkably resilient in the face of Covid-19. All financial services have remained open, except those involving face-to-face interactions with customers outside of bank branches. During the circuit breaker1 period, 85% of workers in the financial industry have been able to work from home. MAS itself is close to 90% of staff working from home. I am sure there is some degradation of productivity but, by and large, the sector has been able to function. We are grateful for the strong investments that Singapore’s financial sector has made in digital transformation over the last five to six years. This has put the financial industry in a good place during the circuit breaker. If our financial sector had not made these investments - imagine if there was no retail electronic payment system, or if there were no infrastructure for digital banking or selling insurance online or trading from home - we would be in a much worse situation today. A good part of financial sector activities has moved on to virtual platforms. The current situation is of course not without its challenges. Many financial institutions have had to make significant adjustments to the new environment.
We think we have an approach that can meet that challenge – but we need to keep testing that, with your help. The Bank of England balance sheet: theory and practice  To develop these points, let me start with some basics. The Bank of England’s balance sheet is special for one key reason – and that’s the nature of our liabilities. Central bank money – whether banknotes or central bank ‘reserves’ (deposits held with us by financial institutions) – provides the ultimate means of settlement for all sterling payments in the economy. And that gives our balance sheet a central role in supporting monetary and financial stability:  -  It supports financial stability by providing the reserves banks need to make payments to each other and help insure against bank runs;8 and  -  It underpins monetary stability because the interest rate we pay on reserves – known as Bank Rate – influences interest rates throughout the economy; and we can use reserves to conduct less conventional monetary policy, include asset purchases and term lending. This last point has of course been the primary driver of our balance sheet expansion over the past decade.

This is the approach  20  https://www.bankofengland.co.uk/-/media/boe/files/report/2019/response-to-the-future-of-finance-report.pdf 12  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  12  adopted by the US Federal Open Markets Committee (FOMC).21 The assets of the Federal Reserve have fallen by over $ since US QT began in autumn 2017 – and US reserves are now more than 40% below their 2014 peak (Chart 11).22  Chart 11: QE and QT in the United States  Source: FRED, Federal Reserve Bank of St Louis  We know from our own experience that this ample reserves floor system can be an effective way to deliver unconventional monetary policy whilst also maintaining control of interest rates. It is particularly suited to the US context, where the supply of reserves is subject to relatively large day-to-day variation as government deposits with the central bank and other items fluctuate. But a key implication of this approach is the need to maintain an estimate of when reserves will become scarce, in order to keep reserves supply well above that level. As we have seen, this estimate is intrinsically uncertain. The market impact of the early stages of US QT was extremely smooth, assisted by clear communications in advance about the way in which the Federal Reserve’s assets would run off progressively over time. But risky asset prices began moving more sharply in the later part of 2018 and into 2019, and there was persistent upward pressure on some short-term money market rates relative to official rates (Chart 12).
Among the causes behind this, the author highlights how the opening up and globalisation of economic relations has promoted the rise of new emerging powers – with China to the fore – on the global stage. These powers are significant not only economically, but also politically and geo-strategically. This has resulted in the growing complexity of global governance and in a rivalry that currently threatens to break the multilateral arrangements in force since the Second World War. We should recall that Chinese membership of the WTO was not accompanied by a parallel process involving its transformation towards a market economy. Indeed, China retained high export subsidies, was hardly open to foreign investment and pursued industrial and technological policies that distorted international relations. This has prompted continuous complaints by the Western powers. Partly, one of the arguments behind the protectionist reaction led most recently by the United States has been the WTO’s inability to correct these distortions. Yet it should be stressed that the US shift towards bilateralism in international relations has significant consequences, beyond merely trade considerations, that stretch to the struggle for leadership of technological developments and, more generally, to an effort to sustain a privileged position in the economic and political arenas. The United States is not an isolated case in the shift. And undoubtedly bilateralism, linked in part to free market economy constraints, has gained weight recently in how other nations operate globally.

In parallel, the illusion of progress may unquestionably have led us to be somewhat naive in failing to properly assess the potential adverse consequences that globalisation and, above all, the rapid parallel process of technical change may have had for certain segments of the population, and for free-market structures and institutions. Rising inequality within countries, including the developed economies, has dented citizens’ confidence in the ability of the political and economic system to respond to their yearning for generational improvement. That is contributing to reconsideration of certain key elements behind the functioning of our open societies. Thus, a second lesson to be drawn from globalisation is that we should design instruments and policies aimed at increasing opportunities for all and ensuring that the defining features of our societies, such as individual and collective progress, are strengthened. a. Strengthening and re-designing multilateral institutions Because I am firmly convinced that the globalisation of economic relations goes hand-inhand with enhanced overall well-being, I consider it a priority to strengthen the workings of multilateral institutions and, in particular, of the WTO. Here, too, we should acknowledge that, when assessing the capacity of the WTO to absorb changes, we have perhaps underestimated the risks associated with the – at times rushed – opening up of certain emerging economies, especially China’s entry on the international stage.
7 In line with, and in full support of these efforts, the Swiss authorities are convinced that a more robust capital framework needs to be built around the following features: First, the amount and quality of capital need to be increased very substantially. In the medium term, this will be feasible without giving rise to drastic adjustments at banks that might be harmful to the overall economy. The key to this will be a sufficiently long time horizon and, crucially, more discipline in retaining earnings. The outlook for future earnings is by definition uncertain. Nonetheless, if we review the banks that have received public support, it is striking that many of them paid out more in dividends and share buybacks during the years preceding the crisis than they subsequently faced in losses. Second, as a supplement to the risk-based capital requirements, a simple, commonly and coherently defined leverage ratio restriction needs to be introduced, of the sort already applied in a number of major financial centres. A leverage ratio prevents the build-up of excessive leverage and serves as a backstop to the complex, but fallible risk-based capital requirements. Fundamentally, anybody who claims that the leverage ratio is a useless or even a counterproductive complementary regulatory instrument is arguing that gross exposure doesn’t matter. If there is one lesson we should learn from the crisis, it surely is that gross exposure manifestly matters a great deal. Third, to address procyclicality, banks will have to build up capital buffers above the minimum requirements in good times.

Muhammad bin Ibrahim: Developments in Malaysia’s banking sector Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Official Launch of the Asian Banking School, Kuala Lumpur, 17 August 2015. *  *  *  Thank you for inviting me to deliver my remarks at this official launch of the Asian Banking School (ABS). It is my great pleasure to be a part of this momentous occasion. Today is the culmination of the vision to take professional development and continuous learning in the Malaysian banking sector to new heights. It also marks the beginning of another important and exciting journey in our overall effort to enhance the standards, quality, productivity and competitiveness of the workforce of the financial services industry. It’s an important first step in professionalising the industry. The banking sector in Malaysia has come a long way to grow both in strength and stature, steadily advancing and maturing as it seeks to become more effective and efficient in performing its intermediation function. In the last decade alone, the industry has undergone some fundamental changes following a period of transformation facilitated by the Financial Sector Masterplan (FSMP). Today, our banking system is placed on a solid footing on the back of strong capitalisation, strengthened by improved risk management and governance practices. We are also seeing increased sophistication and a wide spectrum of products and services being offered by diverse players in the marketplace.
However, it is still interesting to adjust monthly inflation figures for temporary effects to determine whether developments are broadly in line with our projections. Norges Bank analyses and presents figures for consumer price inflation where the effects of some temporary factors are excluded. The chart shows developments since 1995 in the CPI, the CPI excluding the direct effects of changes in excise duties (CPIX) and the CPI excluding the direct effects of changes in excise duties and energy prices (CPIXE). As the chart shows, the CPIXE will normally be more stable than the CPI and the CPIX. This is because energy prices have historically been among the most volatile components of the CPI. Since energy prices have a substantial weight in the CPI, wide fluctuations in these prices will have an impact on the total CPI. However, measured since 1996, CPIXE inflation is not systematically lower or higher than CPI inflation. Substantial changes in inflation as a result of extraordinary swings in prices for certain products or changes in direct and indirect taxes may occur on occasion. The effects of such random and temporary factors on developments in consumer prices are analysed in the Inflation Report. Norges Bank's forecasts two-three years ahead may be perceived as projections for consumer price inflation excluding the direct effects of changes in interest rates, direct and indirect taxes and extraordinary temporary disturbances. However, there are seldom any reasons for substantial deviations between estimates for the total CPI and the other CPI measures in this context.

Internationally, a number of empirical studies have been conducted on the effectiveness of exchange market interventions. The studies of interventions in the 1990s find that they were more effective than 5 studies conducted in the 1980s. This may be due to shifts in monetary policy regimes and greater emphasis on transparency. It is probably easier to win credibility when market participants know that interventions are anchored in stabilisation policy considerations rather than a short-term exchange rate objective. However, this presupposes market confidence in the ability of economic policy in general and monetary policy in particular to deliver nominal stability. It is first and foremost the signal effects of interventions that have been found to be effective and particularly when interventions are made publicly known and justified by the central bank. 4  Lars E. O. Svensson. ”Independent Review of the Operation of Monetary Policy: Report to the Minister of Finance”, February 2001. 5  L. Sarno and M.P. Taylor. ”Official Intervention in the Foreign Exchange Market: Is it Effective, and if so, How does it Work”, Discussion Paper No. 2690, February 2001, Center for Economic Policy Research. BIS Review 74/2001  7  For Norges Bank, it may be appropriate in special situations to intervene to a limited extent to stabilise inflation, should the krone move to a level that we do not consider reasonable on the basis of fundamentals, and if this could contribute to stabilising inflation. However, Norges Bank will not act in a way that prompts unilateral bets against the krone.