samchain/econo-pairs-v1 huggingface dataset:
Coordinating the “interest rate lever” and the “regulation lever” I mentioned initially that monetary policy may receive support from, but can sometimes be counteracted by, measures primarily aimed at maintaining financial stability. Regulation and supervision can support monetary policy in two ways. For one thing, one can try to design a regulatory framework that remains the same over time, but nevertheless prevents creditdriven bubbles from arising. But one can also use regulation more actively so that there is not just an “interest rate lever” but also a “regulation lever” to pull on. Normally, one may imagine pulling on the two levers for different reasons – the interest rate lever for monetary policy reasons and the regulation lever to maintain financial stability. But the levers are nevertheless connected in different ways. When one pulls on one lever, the resulting effects are often similar to those one gets if one pulls on the other. For instance, a regulation change, such as a higher amortisation requirement on mortgages, will lead to higher payments for households in the same way as an interest rate increase does. Regardless of which lever you pull, it is difficult to ensure the effects are only of a monetary policy nature, or only aimed at financial stability. One of the lessons of the financial crisis is that there are close links between these two policy areas, and that one therefore needs to coordinate how one pulls on the levers.

On the other hand, I strongly suspect that it would be difficult to gain understanding for a policy that involves private individuals also encountering negative rates on their deposit accounts; in other words having to “pay to save”. This is perhaps a limitation that simply has to be accepted. Ultimately, the legitimacy of, and confidence in, an independent institution like the Riksbank is based on the general public understanding the policy conducted, or at least not considering it to be illogical and unjust. But it is exactly this that I think constitutes the limitation. That zero per cent should be some magical limit for the repo rate is for me more difficult to understand, however. 7  6  Jansson (2018). 7 It is worth noting that the real yield on bank accounts is often negative, even if the nominal rate is positive. That  a negative nominal interest rate is special is, in this sense, an example of so-called “money illusion”. That said, I realise of course that the figure zero is of particularly psychological significance in many contexts. When the zero as such (and negative figures) was introduced in mathematics, it was, for example, met for a long time with confusion and even loathing, see, for instance, Weiss (2017). 5 [17]  During the almost three years that the repo rate was –0.5 per cent, normal banksaver deposit rates never became negative, so there seems nevertheless to be some scope for negative interest rates.
11 Chart 5. International allocation of euro area equity Chart 6. International allocation of euro area debt assets relative to total equity holdings by region instrument assets relative to total debt instrument holdings by region (percentage) (percentage)  Sources: IMF, Thomson Financial DataStream, Sources: BIS, IMF, ECB calculations. ECB calculations. Note: Country groupings are listed in footnote 10. Note: Country groupings are listed in footnote 10. 12 EMU countries = Share of intra euro area non12 EMU countries = Share of intra euro area nondomestic assets in total euro area holdings. domestic assets in total euro area holdings. Other country groupings = Share of euro area Other country groupings = Share of euro area assets held by non-euro area residents in total assets held by non-euro area residents in total non-euro area residents’ holdings non-euro area residents’ holdings  One important conclusion can be drawn from this analysis. By reducing the barriers for cross-border portfolio allocation, EMU has had an impact on regional financial integration not only among euro area member states, but also vis-à-vis other European countries, which is particularly sizeable in the fixed income market. This brings me on to one of the key achievements since the creation of EMU: namely, the fostering of European financial integration, which goes well beyond the mere elimination of the exchange rate risk. 12 By providing a higher degree of financial integration, EMU has enhanced risk-sharing among participating Member States and contributed to a smooth and effective implementation of monetary policy in the euro area.

The rapid spread of the pandemic in March 2020 also led to wide, abrupt swings in financial markets. The global composite equity index fell by 20 percent in 22 days. However, markets recovered rapidly, and by the second quarter the GPFG had posted one of its best ever quarterly results. For the year as a whole, the GPFG’s investments posted an overall return of 10.9 percent before management costs. The return was 0.27 percentage point higher than the return on the benchmark index the GPFG’s performance is measured against. The Executive Board is pleased that a solid excess return was achieved in a turbulent year. The positive trend has continued, and the return on the GPFG in the first quarter of 2021 was 4 percent. The GPFG’s performance must be assessed over time. The Executive Board is satisfied that the return over time has also been good. The substantial market fluctuations in 2020 nevertheless serve as a reminder that the return on the GPFG may vary considerably. The GPFG’s equity allocation is the decision that has the greatest impact on the volatility of the fund’s return. The equity allocation is not specifically assessed in this year’s report to the Storting, but the Ministry has proposed a number of changes in the equities selected to be included in the benchmark index. Norges Bank has provided analyses and advice when requested by the Ministry.
In this respect, the Banco de España has already approved the incorporation of sustainability and responsibility criteria into its investment policy for the reserve portfolio it manages. As a result, and taking into account our mandate obligations, we are progressively increasing our holdings of green bonds and, for example, we are one of the founder members of the green investment fund set up by the Bank for International Settlements. Conclusions In conclusion, the challenges associated with climate change require coordinated action, both at international level and at the level of the various different economic policies. Allow me to stress that it is governments who have the legitimacy and are best prepared to lead the process of transformation to a more sustainable economy. Thus, fiscal policy should play a leading role in this process, and also in the measures needed to mitigate the social costs of the transition. In any event, the importance of the financial sector in channelling the enormous funds needed to make the investments required by this transition and to identify the opportunities that may arise in this process is unquestionable. We supervisors and  15  https://www.ecb.europa.eu/press/pressconf/2020/html/ecb.is200123~0bc778277b.en.html. See B. Couré (2018), “Monetary policy and climate change”, speech at the conference Scaling up Green Finance: The Role of Central Banks, Berlin, 8 November. 16  7  central banks must ensure that financial institutions properly incorporate climate change risks and concentrate on creating the appropriate conditions conducive to the capital flows needed for the transition to a sustainable economy.

This underlines the importance of policy coordination at international level for effective reduction of greenhouse gas emissions and to reduce the magnitude of the transition costs. Obviously a world with differing sensibilities and environmental policies poses significant challenges. In particular, there is a risk of a significant “carbon leakage” towards countries that decide to adopt a more gradual transition path. Also, in the absence of sufficient coordination, there is a risk that unilateral measures may hamper trade and the functioning of the world economy, with the consequent loss of global welfare. In this respect, in the sphere of central banks and bank supervisors, I wish to highlight the coordination carried out by the Network for Greening the Financial System (NGFS), which the Banco de España joined in 2018. Meanwhile, the Basel Committee on Banking  4  This is precisely the essence of the proposed Carbon Dividend Act promoted by the Climate Leadership Council, which states that “a carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary”.
The challenges  In my introductory comments, I suggested that much of the anxiety surrounding SWFs stems from the fact that their increasing presence in mature markets presents a challenge to some long-held assumptions about how the global economy works. Let me elaborate a little bit on three such assumptions. As you will see, they are very much interlinked. 7  This is shown in table 1 in the appendix. Sources: Truman (2007a, 2007b), IMF, Morgan Stanley, FT.  8  Morgan Stanley, Standard Chartered, Deutsche Bank and Merrill Lynch all recently produced estimates, ranging from USD 2.5 to 3.5 trillion. 9  Global reserves amounted to USD 4.7 trillion in the second quarter of 2007, according to IMF's COFER database. 10  2006 estimate by Mckinsey Global Institute. The size of pension fund assets held by OECD countries is estimated at USD 13.2 trillion by the OECD. 11  The estimates of Merrill Lynch, Deutsche Bank, Morgan Stanley and Standard Chartered are, respectively, that SWFs will grow to USD 7.9 trillion by 2011, USD 9 trillion by 2015, USD 12 trillion in 2015 and USD 13.40 trillion by 2017. 12  According to SNB calculations, excess reserves of developing countries according to the Greenspan-Guidotti rule reached USD 2.5 trillion in the second quarter of 2007. 13  These are located in the US (Alaska Permanent Reserve Fund), Australia and Norway.

Yields on bonds with high credit ratings are also very low in Switzerland. At the beginning of June, ten-year Confederation bonds attained a new all-time low, at around 0.5%. Thirty-year bonds were trading in the market at yields of under 1%. For short to medium-term maturities, yields were in negative territory, in some cases very negative. The low interest rates continue to be reflected in robust growth in lending and rising real estate prices. As a result, the imbalances on the Swiss residential mortgage and real estate markets have increased further. Following my presentation, my colleague Jean-Pierre Danthine will take a closer look at the risks for financial stability in connection with the mortgage and real estate markets. SNB monetary policy Let us now return to the SNB’s monetary policy. The debt problems in some euro area countries have deteriorated seriously over the recent period. Accordingly, the euro has lost value against most countries since May. This has led to increased upward pressure on the EUR/CHF exchange rate. Even in this difficult environment, we have consistently enforced the minimum exchange rate of CHF 1.20 per euro. To defend the minimum exchange rate, we purchased foreign currency. This has led to a further expansion in Swiss franc liquidity and the SNB balance sheet. Even when the minimum exchange rate was first introduced, we drew attention to the fact that its enforcement could have significant consequences for our balance sheet.
Conclusion In conclusion, my goal here today was to leave you with several things we need from you to help us achieve a stronger supervisory framework for foreign banks operating in the U.S. and also recognize that there are things that supervisors need to continue to work on to strengthen our oversight of global firms. We want to ensure we are doing everything we can to be an effective host supervisor, including ensuring consistency and equivalence in how we approach all global firms. We also have a responsibility to facilitate, to the greatest extent possible, the job of the home country supervisor, and we expect the same from our supervisory colleagues around the world who are our eyes and ears on the ground in those other jurisdictions. While this is very important in our routine day-to-day operations, it becomes even more important in effectively dealing with crisis situations. We have a common interest – a safe and stable global financial system. In pursuing this common interest, there are three fairly simple – yet important – things we need you to do: •  ensure robust communication with host supervisors;  •  continue to build out your risk reporting and broader MIS capabilities; and  4  BIS central bankers’ speeches  •  encourage deeper and more intensive dialogue among your senior leaders and directors with key host supervisors.

A further reason for tackling the problem at its roots is that the inefficient use of resources in the public sector can have serious long-term repercussions. At best, these include a growth rate below the economy’s potential because the private sector is deprived of resources it could use more profitability; and, because of the persistence of the deficit, the loss of fiscal policy as a counter-cyclical stabilisation mechanism. At worst, the inefficient use of resources can threaten the viability of the economy itself. Many a financial crisis has been sparked off by the behaviour of profligate and inefficient governments. In today’s globalized financial markets, the retribution for such excesses is quick and unforgiving. Implications for fiscal management It would appear that, like all human endeavours, the benevolent, interventionist role of governments was developed with the best of intentions but, as often happens, something went wrong along the way. Judging by the present state of its public finances, Malta is no exception. For a start, fiscal deficits have become a permanent feature of the economic landscape, which suggests that they do not reflect temporary slippages or cyclical downturns, but rather fundamental policy choices and inefficiencies. Since 1990 the annual shortfall between revenue and expenditure has averaged 6% of GDP, or Lm1 out of every Lm16 earned by the economy.1 There were periods when the deficit tended to fall, but these were not sustained.
We all have a role to play. We have to acknowledge that in good times, there is heavy intertemporal discounting of future bad events, with calls for less regulation. This temptation must be resisted. We need a balanced view that is stable and fair, but also sufficiently rigorous and intrusive irrespective of economic cycles. Otherwise regulators will keep being found wanting when the bad times come, adversely affecting many ordinary people and feeding mistrust in authorities. The Central Bank of Malta welcomes the supervisory authorities’ commitment to step-up their supervisory intensity as this is crucial for regulation and oversight to keep pace with market developments. Supervision must remain on-going to safeguard the system from moral hazard, while keeping the bar sufficiently high to minimise adverse selection at entry point. Practitioners also have a duty of care to their clients and the financial system as a whole. They play a critical role in safeguarding its integrity. Christine Lagarde has recently said that while policies had addressed the mistakes that led to the crisis, there is still much more to do as a ‘lot of the murkier activities are moving toward the shadow banking sector’. This risk is also indicated in the most recent IMF Global Financial Stability Review as well as the work of the ESRB and ECB related to the non-bank financial sector. The CBM and MFSA  Page | 8  participate actively in this work. The domestic non-bank financial sector in Malta is linked with the banking sector through cross shareholdings.

This will leave a wealth of information for authorities to exploit as they direct efforts into strengthening further the current institutional framework and operations. All stakeholders are encouraged to seize the opportunity to improve the reputation, soundness and resilience of our financial services sector. Malta is also actively working to embrace blockchain technologies, including virtual assets. 2018 will also be remembered as the year when Malta was propelled to the fore with the introduction of a holistic legislative and regulatory framework for fintech and virtual assets, asserting itself as a digital hub. Such technologies provide the benefits of reducing transaction costs which can be passed on to consumers; greater efficiency, transparency, advancement in KYC capabilities and competition. While these benefits are acknowledged and duly welcomed, one must also be sensitive to the underlying potential risks they might pose as they become more main-stream. The effective implementation of the new legislation and regulation requires expertise not only in the underlying technology, but also in its legal aspects and all the risks involved, such as cyber risks. The fast technological advancements are also a challenge and staying ahead of the game from a  Page | 9  regulatory perspective should be given high importance for the successful development in this new field. Thus, while all the legislative initiatives for this new technology to succeed augur well, the authorities need to remain vigilant about the implications for financial stability stemming from the digital economy.
Rather than take you through the legislative history of this evolution, I want to refer you to the Financial Crimes Enforcement Network—or “FinCEN,” for short. Its website contains short and accessible histories of major anti-money laundering laws.3 These summaries highlight the important public goals of the Bank Secrecy Act and other anti-money laundering statutes—why they are more than just a compliance cost. One theme that emerges is the increasing reliance on banks and other financial institutions to safeguard the payment system. Our laws and regulations increasingly bring the industry into partnership with the government on combatting national security risks to the United States and financial crime. Anti-money laundering is not just a matter of historical record. Our rules continue to evolve. For example, in 2016 the Treasury Department updated its regulations to require that banks and other financial institutions verify the identity of the natural persons—that is, the “beneficial owners”—who own or control companies that hold accounts.4 The beneficial owner rule, like other “know your customer” rules, is a regulatory floor, not a ceiling. Covered firms can take the initiative to implement more stringent internal rules based on their risk. Indeed, in December 2018, the federal banking agencies published guidance that encouraged innovation in anti-money laundering compliance—pilot programs that exceed the legal minima, or at least make compliance more efficient.5 Experiments in ratcheting up internal thresholds are welcome.

When criminals take advantage of your firms and our financial system to make use of their ill-gotten gains, they make every institution involved play the fool. And here I am going to use the “M” word: morals. Now I know that whenever a lawyer starts talking about morals, eye rolling ensues—often justifiably. But I do think that detecting and deterring financial crime is not just a legal obligation. It is a moral one. Thanks for letting me get all of that off of my chest. I’m honored that you wanted me back this morning. Forums like this highlight important issues and choices. Make the right choices, not just the legal ones. I wish you all a good conference. Thank you. 1 Richard Charlton, Meghan McCurdy, Brett Phillips, Thomas Noone, Sean O’Malley, and Edward Silva assisted in  preparing these remarks. 2 See Adolf Berger, Encyclopedic Dictionary of Roman Law 467 (1953). See also Marcus Tullius Cicero, In  Verrem 2.1.108 (tracing the crime of counterfeiting to the Cornelian laws). 3 FinCEN, History of Anti-Money Laundering Laws. 4 5/6  BIS central bankers' speeches  4 31 C.F.R. § 1010.230. 5 SR 18–10: Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing, Dec. 2,  2018. 6 See Michael Held, Reforming Culture and Conduct in the Financial Services Industry: How Can Lawyers Help?,  Remarks at Yale Law School’s Chirelstein Colloquium, Mar. 8, 2017. 7 Cf.
Table 1 International baseline scenario assumptions 2021  2022 (f) Mar.22 Jun.22 Report Report  2023 (f) Mar.22 Jun.22 Report Report  2024 (f) Mar.22 Jun.22 Report Report  (annual change, percent) Terms of trade Trading partners' GDP World GDP at PPP Developed economies GDP at PPP Emerging economies GDP at PPP  11.8 6.3 6.1 5.1 7.0  -3.1 3.3 3.1 2.9 3.2  -4.0 2.7 2.6 2.4 2.6  LME copper price $ Average WTI-Brent oil price $  423 69  435 94  425 104  (f) Forecast. Source: Central Bank of Chile.

The greater dynamism of consumption during the first part of the year prompts an upward revision of its growth forecast for 2022, delaying its adjustment to the second half of this year and 2023. The opposite is true for GFCF, for which more significant falls are expected this year and next. Investment fundamentals have also worsened. In the case of financial conditions, the deterioration that has already occurred in the capital market and the lower levels of longterm savings for financing investment play an important role. Add to this the revisions to the Capital Goods Corporation's investment survey, persistently high uncertainty and a pervasive fall in business sentiment (figure 12). The adjustment of the 2021 overspending will allow for a reduction in the currentaccount deficit and an increase in national saving over the policy horizon. Nevertheless, a current-account deficit similar to that of 2021 —in the order of 6.5% of GDP— is expected this year, reflecting higher projected consumption and an unfavorable evolution of external prices. In 2023 and 2024, the deficit will narrow to between 4% and 4.5% of GDP, consistent  5  with the adjustment in domestic spending. In this scenario, domestic savings will rise from around 18.5% to 20% of GDP between 2022 and 2024. Externally, the impulse to the Chilean economy has dwindled, particularly because of the worsening of global financial conditions in the face of the withdrawal of monetary stimulus. The central scenario projections assume that international prices of foods and commodities will remain high for several quarters.