samchain/econo-pairs-v1 huggingface dataset:
Marzunisham Omar: Capital flows management for monetary and financial stability Remarks by Mr Marzunisham Omar, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Seminar and Meeting of the SEACEN Expert Group on Capital Flows, Kuala Lumpur, 11 June 2019. * * * I am delighted to be here today. Let me take this opportunity to express Bank Negara Malaysia’s appreciation for the collaborative efforts of the SEACEN Centre and the Bank of Japan that have gathered us here for this biennial SEG event. It has been six years since I last attended the SEG Seminar in Manila, back in 2013 as the newly appointed co-chair. I am truly honoured to have had the opportunity to work alongside Deputy Governor Diwa. Under his capable stewardship and intellectual guidance, the SEG has developed into a beneficial platform for its members since it was established 19 years ago.

This imperative translates into high demands on the use of standardised documents and agreements among financial market players, so as to increase market efficiency, transparency and uniformity, as well as to reduce the cost of transactions as we strive towards seamless global inter-linkages. Standardised documentation and practices for a number of products have already been adopted between jurisdictions through bilateral and multilateral agreements. This has facilitated issuance of financial market instruments, contributing towards enhanced liquidity in Islamic financial markets and greater inter-market linkages. Greater understanding and clarity on Shariah matters, will also contribute towards convergence and harmonisation of such interpretations across jurisdictions and thus contribute towards the development of Islamic financial products and services. Realising cross-border potentials and bridging economies With its international outreach and ability to provide comprehensive financial solutions, Islamic finance beckons us with a new frontier that presents new opportunities. As we enter into a more uncertain global environment, it also promptsus to revisit strategies to enhance the resilience of Islamic finance. The theme of this year’s Global Islamic Finance Forum 2012, “Internationalisation of Islamic Finance: Bridging Economies” focuses on the international prospects surrounding the Islamic finance industry and its tremendous potential role in strengthening cross-border economic linkages. More than 500 participants from over 50 countries across the continents gather today in this Forum to explore this prospect.
Leigh-Pemberton, R. (1989), Speech given at the Ernest Sykes Memorial, 24 May 1989 available from Bank of England Archive, ref. 7A320/10. Mahate, A A (1994), “Contagion Effects of Three Late Nineteenth Century British Bank Failures”, Business and Economic History available at http://www.thebhc.org/publications/ BEHprint/v023n1/p0102-p0115.pdf Norman, B, Shaw, R and Speight, G (2001), “The history of interbank settlement arrangements: exploring central banks’ role in the payment system”, Bank of England Working Paper No. 412. Orbell, J (1985), “Baring Brothers & Co., Limited. A History to 1939”, Butler & Tanner Ltd. Roberts, R and Kynaston, D (1995), “The Bank of England: Money, Power and Influence 1694–1994”, Oxford, Clarendon Press. Roberts, R, Reading, B and Skene, L (2009), “Sovereign Rescues: How the forgotten financial crisis of 1914 compares with 2008–2009”, Lombard Street Research, Special Report. Saw, R (1944), “The Bank of England, 1694–1944”, George G Harrap & Co Ltd. Sayers, R S (1976), “The Bank of England 1891–1944 (Volumes I–III)”, Cambridge University Press. Wood, G (1999), “Great Crashes in History, Have they lessons for today?” Oxford Review of Economic Policy, 15 (3), pp 98–109. BIS central bankers’ speeches  9

The first is the greater income and consumption volatility that have been observed in emerging markets, both in terms of the level and in terms of growth relative to developed economies. And the second is the fact that economic agents in  1  The views expressed in this paper are those of the authors and do not necessarily represent those of the Bank of Thailand or Bank of Thailand policy. I would like to thank Piti Disyatat, Ashvin Ahuja, Sarawan Angklomkliew, Jaturong Jantarangs, Nawaporn Maharagkaga, Don Nakornthab, Kobsak Pootrakool, Mathinee Subhaswadikul and Supradit Tangprasert of the Bank of Thailand for their substantial contribution to the drafting the original paper. BIS Review 98/2008  1  emerging markets face greater limitations in the ability to smooth consumption in response to shocks. The empirical evidence from two recent studies are summarized in Table 1. As documented by Aguiar and Gopinath in 2007, consumption is around 40 percent more volatile than income at business cycle frequencies for emerging markets, while the ratio is less than one for developed economies. The same is true when comparing relative volatility in growth rates of consumption and income. A study by Kose, Prasad, and Terrones in 2005 also shows greater income and consumption volatility in emerging markets relative to developed economies. Such heightened volatility in macroeconomic outcomes undoubtedly has adverse implications for welfare.
Half of the respondents surveyed were not aware of the PDS while the majority of those that are aware claimed that they were given the PDS only after they had already decided to enter into a financial contract. Many of them were not informed of its purpose. The study also revealed a bias towards highlighting the benefits of a product in explanations given by sales agents or  BIS central bankers’ speeches  3  advisers on the product, while risks and costs were not adequately explained. It should therefore not be surprising that 75% of respondents make financial decisions without adequately considering risk factors associated with a financial product, while almost half did not understand the costs involved. These findings are obviously a concern to the Bank as they undermine informed judgments by financial consumers. I raise these observations today because financial advisers clearly have a key role in addressing these concerns. Indeed, you have a professional obligation to your clients to present clear, unbiased and objective information to help your clients make informed decisions. The Bank intends to address these issues aggressively, through regulatory improvements, education, more intensive reviews of sales practices and continued enforcement actions. With effect from the second half of 2015, financial advisers and insurance and takaful brokers will also be brought within the scope of the Financial Ombudsman Scheme that will be approved under the Financial Services Act, providing an avenue for consumers to address complaints against advisers for non-disclosures or misrepresentations.

There is also evidence of them arising from coordination failures, which generate spillover effects across banks and countries. 1  See IMF (2010). BIS Review 168/2010  1  Drawing on this evidence, Section 5 identifies some implications for the design of public policy. It suggests that neither monetary nor micro-prudential policy may be well-equipped to tackle the credit cycle. Instead, some new policy apparatus may be needed which (unlike monetary policy) targets bank balance sheets directly but which (unlike micro-prudential policy) does so systematically. This is one key dimension of so-called macro-prudential policy. 2 Various international macro-prudential policy committees are, or are about to be, put in place – in the US the Financial Stability Oversight Committee, in the euro-area the European Systemic Risk Board and in the UK the Financial Policy Committee. These provide one element of a macroprudential policy framework. Other elements remain to be put in place. Knowledge of the sources and dynamics of the credit cycle will be important in assembling those missing pieces. This paper is intended to be a contribution towards that goal. 2. A model of the credit cycle  We begin by sketching a model which captures some key features of past and in particular the present, credit cycle. There are a number of existing models of the credit, or leverage, cycle. In all of these models, cyclicality in financial variables is aggravated by various microeconomic frictions. These frictions typically then amplify fluctuations in the real economy.
A major infrastructure issue for the Treasury market has been the clearing and settlement practices of the cash market. This can be opaque, with a majority of trades cleared away from central counterparties (CCPs). While central clearing is more uniformly used in other segments of the Treasury market—such as futures—many market participants elect to clear and settle cash Treasury transactions in a bilateral fashion. This process includes many market participants: trading venues, clearing agents, and clearing banks. No single participant has a view of the entire clearing and settlement system. The Treasury Market Practices Group (TMPG), a New York Fed-sponsored group of market professionals working to support the integrity and efficiency of the Treasury market, has concentrated its recent efforts on this topic. Preliminary findings include an increasing volume of linked trades that clear centrally on one side and bilaterally on the other. This work has also uncovered information asymmetries in clearance and settlement risk management, which potentially could lead to a mispricing of these risks. Moreover, increased understanding about the depth, breadth, and durability of credit arrangements that support clearance and settlement seems desirable. This would improve market integrity through greater understanding of risk throughout the clearing and settlement process and how it is affected by different conditions. Since the financial crisis, there has been an effort to strengthen the resiliency of repo market infrastructure, which is another important element of Treasury market plumbing.

Immediately after the crisis, the Federal Reserve was active in pushing reform of the tri-party repo market, which had been a locus of stress in 2008. More recently, Treasury repo markets have undergone further changes, including market adaptations to post-financial crisis regulations, and the introduction of multiple programs expanding access to central clearing to a wider range of market participants. These markets also have been affected by efforts to set heightened expectations for CCPs with regard to liquidity risk management, margins, and governance and recovery planning. This is consistent with the Treasury Department’s recommendation that regulators ensure appropriate risk management at CCPs and other financial market infrastructures. For example, earlier this month, the SEC approved the Capped Contingency Liquidity Facility—a liquidity risk management tool for the DTCC’s Fixed Income Clearing Corporation (FICC). This tool helps to ensure that FICC will have sufficient liquidity to cover the default of a Government Securities Division member to which FICC has the largest exposure. This development reflects another positive step toward a safer centrally cleared repo market, and aligns well with broader official sector efforts to maintain a well-functioning and robust Treasury repo market. Finally, the Joint Staff Report identified the importance of strong interagency monitoring of the Treasury market, in close collaboration with the public. Judging by this gathering, the commitment to this task is strong—which is good because many questions remain.
The ACPR is paying close attention to the impact of the rising risk of bankruptcies on banks’ solidity, and has not so far noted any significant increase; I have already taken the opportunity to put some of the overly alarmist readings of the ESRB’s recent report into perspective. With the recovery, the lifting of the public health restrictions will need to be followed by a winding down of public aid mechanisms. Support for businesses has to switch from the widespread provision of liquidity to a more selective phase of quasi-equity based support, targeted at firms that are economically viable but that have been financially weakened by the crisis. As the health and economic situation gradually normalises, there will be no reason to maintain the exceptional crisis support measures beyond next year: this applies to the buffers and flexibilities decided on at the start of 2020. The restrictions on dividends could also be lifted from as early as September 2021. This is vital if we are to ensure that our financial institutions remain attractive in a context of heightened international competition, where the exceptional measures are often more flexible, as in the United Kingdom, or are in the process of being lifted, as of 30 June this year, for the majority of US banks. Three longer-term challenges I shall turn now to the three structural challenges that financial institutions will need to address in the next decade: profitability, innovation and climate action. For banks, profitability is no longer an issue linked to monetary policy.

Hopefully we are also moving away from the days when regulators set regulations which have no real relation to how banks themselves look at risk, and how they manage risk. Basel II is a major step in this direction. It aims to link the way regulators look at risk to how banks themselves look at risk; to encourage the use of modern risk management techniques; to encourage innovation; and to encourage banks to ensure that their risk management capabilities are commensurate with the risks of their business. As a result Basel II brings regulation into the 21st century. Previously, regulators' main focus was on credit risk and market risk. Basel II takes a more sophisticated approach to credit risk, in that it allows banks to make use of internal ratings based systems - or "IRB systems" as they have become known - to calculate their capital requirement for credit risk. It also introduces, in addition to the market risk capital charge, an explicit capital charge for operational risk. Together, these three risks - credit, market, and operational risk - are the so-called "Pillar 1" risks. But Basel II goes much further than this in looking at risk. As you will I am sure know, as risk management professionals, these three risks are only scraping the surface. Banks' risk management functions need to look at a much wider range of risks than this - interest rate risk in the banking book, foreign exchange risk, liquidity risk, business cycle risk, reputation risk, strategic risk.
Conclusion When I look back at monetary policy since the current monetary-policy regime, with a floating exchange rate and an inflation target, was introduced at the beginning of 1993, I think that it has on the whole functioned fairly well. One might possibly think that monetary policy was too tight in 1994–1995 when the Riksbank raised the repo rate at the same time as the budget consolidation work was holding back inflation. However, it was important to bring down inflation and inflation expectations to a much lower level than in the 1970s and 1980s. One might also think that the assumption of an unchanged repo rate that was used as a basis for the forecasts during the first years was too simple. On the other hand, one has to see this more as a part of the communication strategy that was being followed then. And it worked. Inflation expectations fell and have been established close to the target. I also think that monetary policy has worked well during the six years, 2006–2011, that I have been a member of the Riksbank’s Executive Board. CPI and CPIF inflation have on average been 1.7 and 1.8 per cent a year respectively. This is somewhat lower than the inflation target. However, given that the world has undergone the deepest recession since the 1930s during this period, it should nevertheless be regarded as a good result.

Following the financial crisis, the model for prudential regulation in the UK has been further developed by the establishment of the Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA). The mandates for both the FPC and PRA are set out in primary legislation: the FPC is responsible for protecting and enhancing the overall stability of the UK financial system; and the PRA’s primary objectives are to promote the safety and soundness of regulated firms and to contribute to the securing of an appropriate degree of protection for policyholders. But importantly, the mandates for the FPC and PRA ensure that other factors such as long-term productivity and economic growth are taken into account when setting policy. The FPC must pursue its financial stability objective without causing serious harm to the wider economy in the medium or I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 6  long term. In other words, the FPC must avoid the ‘stability of the graveyard’. 6 And, the FPC also has a secondary objective, subject to its pursuit of its primary objective: that of supporting the economic policy of the government. The PRA also has an important secondary objective to facilitate effective competition, and must have regard to a set of regulatory principles, including the desirability of sustainable economic growth.
The global economic recession paved the way for Keynes’ concept of demand management and active government intervention, and the rewriting of textbooks began. After the war, universities produced a new generation of economists filled with ideas of planned economies and regulation. The interest rate was regulated downwards to promote distributional aims. Other regulations had to be tightened to curb the consequences of distorting market prices. And new  1  Odd Nordstoga, Lykkeliten from the album November, Universal in 2010. BIS central bankers’ speeches  1  regulations were then added to alleviate the consequences of the former ones. One regulation came on top of the other and so on. That was the case not only in Norway, but also in many other countries. Detailed regulation – or fine-tuning – prevailed until the 1970s. The scale of regulation was summarised in a speech by Norges Bank Governor Knut Getz Wold at the Norwegian School of Economics in 1972: “Pursuant to the Act relating to access to regulating monetary and credit conditions of 1965, the King can decide to use a wide spectrum of instruments, such as liquidity reserves, foreign exchange reserves, supplementary reserves, investment obligation, direct lending regulation for certain credit institutions, interest rate caps on loans and issuance control in addition to reporting requirements in certain areas.

The FROB legislation not only provides the Banco de España with the necessary tools to act when there are serious problems of viability, but also provides for a second course of action, of a preemptive nature, geared to preventing these problems from materialising. With the approval of the FROB, institutions and their managers were urged to assess their own situation and to adopt the decisions needed to ensure their viability, preventing the more traumatic effects that might stem from supervisory intervention, both for the institution itself and for economic activity in the regions in which it pursues its business. This second means by which the FROB may act involves supporting integration processes between institutions which, without being in serious danger, are seeking to improve their efficiency, streamline their management and re-scale their productive capacity. When the FROB undertakes such “pre-emptive” action, the Banco de España is entrusted with ensuring that the operations approved have a sound business plan that contributes to strengthening our financial system and that is accompanied by measures aimed at a realistic adjustment of bank resources to the new market conditions, using in this connection the smallest volume of public funds possible. Unlike cases in which institutions are taken under control and their directors replaced, and where decision-making is entirely the prerogative of the Banco de España, authority to pursue this second course of action lies with credit institutions and, in the case of savings banks, authorisation by the regional government is also required.
The current debate sometimes gives the impression that the Swedish economy has for some time been in a situation of almost overheating. But the fact is that we fairly recently, according to most empirical estimates, once again attained a level of resource utilisation that can be described as normal. Thus, although such estimates are uncertain, the Swedish economy appears to have been producing below, rather than above, its long-term capacity for several years following the financial crisis. 6 [20]  Confidence in the inflation target unimportant or possible to maintain with a different policy? One thing that is rarely done, but I think is of utmost importance, is to spell out the practical consequences of this criticism. It is of course easy to agree that if the Riksbank had not needed to defend confidence in the inflation target, then monetary policy would not have needed to be so expansionary and the repo rate would perhaps not have needed to be negative. One may therefore draw the conclusion that those who say that monetary policy is wrong are arguing one of the following: Either that confidence in the inflation target is not so important, or at least less important than other things, or that the Riksbank should have been able to conduct a less expansionary policy while still being able to safeguard confidence in the inflation target.

Competitiveness and market reform To put the favourable external sector performance on a firm footing, we must build on and further the improvements in competitiveness. In this connection, the markets for factors and goods and services must function in a way conducive to containing costs, margins and prices. Clearly, in the labour market, we need a stable employment-promoting regulatory framework which, at the same time, affords sufficient flexibility to attune working conditions to the circumstances of the business cycle. Indeed, greater moderation and flexibility can be seen in wage-setting in recent quarters, as can – and this is also important – a lesser degree of indexation. A more intensive use of the wage and non-wage flexibility mechanisms envisaged in the new regulatory framework would lend continuity to this ongoing improvement in competitiveness. But our problems of lack of flexibility and competition were not and are not only in the labour market. In the market for goods and services, the recently approved National Reform Plan includes a set of measures aimed at removing obstacles to competition, attaining productivity gains in various sectors and improving the functioning of various institutions. Private-sector deleveraging and lending The overindebtedness of households and firms is another of the major problems that arose in the last upturn in the Spanish economy. Private debt/GDP ratios have fallen from their peaks in 2010, but at a relatively slow pace. The main explanation for this sluggishness lies in the downturn in private-sector nominal income since the onset of the crisis.