samchain/econo-pairs-v1 huggingface dataset:
We might then ask how these can people become living, breathing “nudges” in favor of better behavior. Third, and more generally, I wonder whether our approach to compliance is, at times, too rulesbased. This is a classic “rules versus standards” debate, that is familiar to many lawyers.3 A surfeit of rules may cause employees to believe that they are not trusted. This could create the misimpression that it is someone else’s job to consider long-term consequences or what is the right thing to do. Now, I am not suggesting that there should be a wholesale elimination of rules. But, in some areas, compliance programs may be more effective if some rules were redeployed as standards. That way, front line businesses would have to exercise good judgment in interpreting and applying those standards. Simply put, some empirical basis for evaluating the right balance of rules and standards would be helpful. So, there is room for improvement and creative thinking in compliance—even in ways that challenge basic assumptions on how compliance should work. You are familiar, no doubt, with the phrase, “Don’t let the perfect be the enemy of the good.” My first message to you is, “Don’t let the good be the enemy of the better.”  Compliance and influence Progress aside, I still see confusion about the basic roles and responsibilities of compliance functions within supervised financial institutions. Or, perhaps, there is a degree of entrenched resistance. Before I tell you what I mean by that, here is what I don’t mean.

Durmuş Yilmaz: Enhancing “ShamGen” banking – Turkey, Syria, Lebanon, Jordan Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the conference on enhancing “ShamGen” banking – Turkey, Syria, Lebanon, Jordan, hosted by the Central Bank of Turkey and co-organized by the Al Bank Wal Mustathmer Group, Istanbul, 28 March 2011. *  *  *  Distinguished Guests, Welcome to the international “Enhancing “ShamGen” Banking: Turkey, Syria, Lebanon, Jordan” conference hosted by the Central Bank of Turkey and co-organized by the Al Bank Wal Mustathmer Group. We are delighted to host Governors and Deputy Governors of Central Banks, Chairmen of Banks Associations, CEOs of banks from Syria, Lebanon and Jordan as well as international economists and finance specialists. During the two-day conference, issues towards improving banking and financial cooperation among Syria, Lebanon, Jordan and Turkey will be discussed in the context of Turkey’s recently developing relations with her neighbors and other countries in the region. The conference will address issues such as enhancing banking cooperation between these countries, Banks Associations’ possible contributions to the process, payment systems, Islamic banking implementations and prospective cooperation fields, funding of small and medium-scale enterprises in the region and the future political and economic outlook of ShamGen countries. As we all know, the share of developing countries in the global economy has been growing and, in line with the increased importance of these economies, we witness significant changes in decision-making mechanisms worldwide.
The objective of such further guidance is to ensure we achieve for stablecoins the level of risk mitigation we expect of payment systems that are, or are likely quickly to become, of systemic scale. So, for example, if a stabecoin is being used as a ‘settlement asset’, in transactions – in other words, as the means of settlement or the ‘money’ – it must be as safe as the other forms of money – central bank money or commercial bank deposits – that is currently used as the settlement asset in payments systems. So the guidance makes clear that if used for this purpose, the holders of such stablecoins must have a clear legal claim that enables them to redeem the coin within the day and at par in central or commercial bank money. To meet the international standard, stablecoin issuers will have to demonstrate they can meet this requirement – in much the same way that commercial banks that issue deposit based money have to be able to repay depositors at par, in fiat, and on demand. This in turn will determine the nature – stability of value and liquidity – of the assets backing a stablecoin used for systemic payment systems and the legal, technical and operational arrangements for ensuring the requirement can be met. Needless to say, such a requirement is a long way from the world of Terra and Luna.

However, the technology did not go away but rather re-emerged in a different form, focussed on the development of platforms which have now come to dominate internet commerce. So the interesting question for regulators is not what will happen next to the value of crypto assets, but what do we need to do to ensure that these developments, this prospective innovation about which I shall say a little more later, can happen without giving rise to increasing and potentially systemic risks. This brings me to my third lesson: the extension of the regulatory framework to encompass the use of crypto technologies must be grounded in the iron principle of ‘same risk, same regulatory outcome’. The starting point for regulators should be to apply the same regulation to the risks inherent in the provision of a financial service no matter how it is provided. But differences in technology may mean that existing regulation may not work in this new context or, indeed, may not effectively manage the risk. Implicit in our regulatory standards and frameworks are the levels of risk mitigation we have judged necessary. Where we cannot apply regulation in exactly the same way, we must ensure we achieve the same level of risk mitigation – in other words, the “same regulatory outcome”.
For one thing, are all familiar with the changes that have taken place in the banking sector, in financial systems in general and in banking supervision since 1997. New challenges have emerged or existing ones have grown in importance, and this has often led to new recommendations being developed by the Basel Committee and other international bodies. In addition, experience has been gained in applying the Core Principles in different countries. The Financial Sector Assessment Program (FSAP), a joint initiative by the IMF and the World Bank, has become the main source of information on their application, with over 100 FSAP missions completed to date. Second, when the Methodology was published in 1999, the Committee already envisaged that the formulation of these principles should be regarded as an iterative process, with advances in regulation and supervision being incorporated as experience was gained in applying them. The Committee therefore decided that, in order for the Core Principles to remain a fully effective, flexible and globally applicable standard, the time had come to update its content. Of course, the changes that have taken place since 1997 also include Basel II. However, I would like to point out that the Committee has explicitly stated that, despite the advisability of moving towards Basel II, full and strict implementation is a decision that rests solely with the authorities in each country, and that it may not be the first priority for some countries.

Of course, considerations of market sensitivity, commercial confidentiality, and statutory restrictions on disclosure of confidential information place some limits on the amount of material we can make public. Given the increasing transparency and the extremely limited discretion over the currency board arrangements, which draws its credibility from a strict rule-based system, a certain constructive ambiguity is also necessary if we are to have the flexibility to deal decisively with sudden crises. Within these limits, we are committed to developing our policy of transparency, and to increasing the quality and comprehensibility, and not just the quantity, of the materials we put out for public consumption. The challenges of this year We see it as one of our challenges to seek to maintain public interest in our work, even though it is possible that some of the controversies and concerns that sustained that interest in 1998 will fade away as economic recovery moves closer. This brings me to the prospects for the remainder of this year and beyond. I leave the predictions and forecasts to others in the Government entrusted with this task. But I think it appropriate to say something here about the monetary environment. Recent months have witnessed the return to a more stable monetary environment in Hong Kong. Speculative pressures on our currency have moderated sharply, allowing a significant decline in interest rates from the peaks last year. As you know, under the linked exchange rate system, our interest rates are closely tied to those in the United States in normal circumstances.
Properly structured, this creates investment opportunities for British savers, reinforces trading ties for UK firms and improves access to credit for the real economy  13  14  15  6  See the FSB’s “Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities”, http://www.financialstabilityboard.org/publications/r_130829c.htm. Nevertheless, there can sometimes be a case for such action, and the Bank will be considering what it should stand ready to do and in what circumstances. Clearly the Bank should not support any market that would otherwise be unviable. But we have, for example, intervened in the corporate bond market, buying and selling bonds to maintain the market during the crisis until it again became self-sustaining. See http://www.bankofengland.co.uk/publications/Pages/speeches/2013/687.aspx. BIS central bankers’ speeches  across this country. London’s international markets in turn provide a valuable service to the global economy. These benefits, on both sides, will be greatest as part of an open, integrated global financial system. The Bank of England’s task is to ensure that the UK can host a large and expanding financial sector in a way that promotes financial stability. Only then can it be both a global good and a national asset. To those ends, we are working to complete the jobs of making banks more resilient and tackling too big to fail. We are making markets more robust in order to turn the shadow banking system from a source of risk to a pillar of resilience. And we are changing how we backstop private firms’ liquidity management.

To take it one step further, we are prepared to take a liberal view if an overseas bank wishes to engage in both retail banking through a subsidiary and, in parallel, corporate or private banking that would more appropriately be conducted through a branch. We have had several precedent cases and the HKMA is prepared to consider applications on the basis of the merit of the case. 18. While we maintain an open mind on the use of branches by overseas banks, we have to take steps to mitigate the potential risks arising from cross border contagion. This is particularly important given that Hong Kong is a net provider of funds, i.e. our banks collect a lot more customer deposits than they lend out locally. Hong Kong therefore has to closely monitor intra-group or inter-bank funding that flows from Hong Kong to overseas centres. We have seen in the Global Financial Crisis very clearly how wholesale funding through this kind of cross border intra-group or inter-bank channels may be susceptible to significant shocks in times of market stress. The problem could be exacerbated if the host supervisors, in selfdefence, sought to ring-fence domestic liquidity by blocking the flow of funds at the most difficult time. So the HKMA has been in discussion with banks in Hong Kong on how best they could achieve a better match between liabilities derived from Hong Kong and assets booked in Hong Kong.
As a result, conditions in the banking sector are likely to continue to act as a brake on the recovery. As far as the public finances go, the public deficit widened sharply in the wake of the recession, reaching more than 11% of GDP in 2009/10, in large part reflecting the endogenous response of spending and revenues to the downturn in activity. Action would be needed to address such an unsustainable deficit, unless an early resumption of the pre-crisis growth path is expected. As already noted, that is usually not the case after banking crises. And the maintenance of such a large deficit for any length of time runs the risk of the cost of debt finance rising sharply, as we have seen in the countries of the euro-area periphery. But the necessary fiscal consolidation that is now under way is likely to weigh on domestic demand in the coming years. Moreover, a worsening of the sovereign debt problems in the euro-area periphery could also hold back the recovery here, particularly through its impact on the banking systems here and abroad. Finally, household and business spending, both of which fell sharply in the recession, remain depressed. In part, that reflects subdued growth in households’ real incomes since the onset of the crisis. But in addition, it takes time for confidence and spending to recover after such a shock. Some households need to maintain higher savings in order to repay debts taken on before the crisis.

4  For instance, a cyclical divergence between the United Kingdom and the euro area would affect the relative price of goods in the two jurisdictions, but would not affect the price of goods relative to that of services within the United Kingdom. Similarly, a period of unusually rapid productivity growth in manufacturing compared to that of services would affect the affect the price of goods relative to that of services within the United Kingdom, but not goods prices in the United Kingdom relative to those in the euro area. 5  See pp.34–35 of our February 2011 Inflation Report for details on how to do this. 6  See e.g. : J. Campa and L. Goldberg (2002), “Exchange rate pass-through into import prices: a macro or micro phenomenon?”, National Bureau of Economic Research Working Paper no. 8934; IMF (2006), “How has globalisation affected inflation?”, World Economic Outlook, Chapter 3; H. Mumtaz, O. Oomen, and J. Wang (2006), “Exchange rate pass-through into UK import prices”, Bank of England Working Paper no. 312; J. E. Gagnon and J. Ihrig (2004), “Monetary policy and exchange rate pass-through”, International Finance Discussion Papers no. 704, Board of Governors of the Federal Reserve System. BIS central bankers’ speeches  5  What are the implications of all this for monetary policy?
It’s easy to think of the Fed as just setting interest rates, and of course that’s a major part of what we do. But we do so in order to achieve two goals set by Congress: maximum employment and price stability. In Fed-speak it’s called the dual mandate. There are serious debates taking place amongst economists and policymakers about what maximum employment actually looks like, and they probably deserve another speech of their own. But I promised not to deluge you with numbers, so I’ll focus on a few highlights. The unemployment rate last year averaged just under 4 percent, the lowest such annual figure since 1969. The latest jobs numbers also showed very strong growth, with over 2.6 million jobs added last year. The ongoing strength in the labor market has led to encouraging gains in wages. No matter how you cut it, the labor market is strong, consistent with our maximum employment goal. When we say price stability, our goal is to keep inflation around 2 percent.1 Those of you who are of my generation will remember the runaway inflation of the 1970s and early 1980s. Obviously that’s something we must avoid repeating. But the challenge of more recent years actually hasn’t been too high inflation. Instead, it’s been inflation that’s persistently too low. Over the past decade, inflation has more often than not come in below our goal. But things are looking better.

But underpinning these is a strong economy, and ultimately that’s what we’re always using monetary policy to support. So, as the year unfolds I’ve got my eyes wide open, looking at the data and listening to experience—whether it’s coming from household surveys, market indicators, or from leaders in my District. The economy is strong, the outlook is healthy, and my number one priority is using monetary policy to keep it that way. In short, I’m watching, listening, and prepared to adjust my views depending on the data. 1 For more information on how the FOMC specifies its goals, see Statement on Longer-Run Goals and Monetary  Policy Strategy, Board of Governors of the Federal Reserve System, amended January 30, 2018. 2 This question on whether jobs are “hard to get” is part of the survey conducted by Nielsen for the Conference  Board that is used to calculate the Conference Board’s consumer confidence index. Information about the survey, including the latest press release of the index, is available at www.conferenceboard.org/data/consumerconfidence.cfm. 3 For example, the minutes of the December FOMC meeting stated that “Participants also reported hearing more  frequent concerns about the global economic outlook from business contacts” (page 8).
This was formalised in guidelines set out in the Exchange Rate Regulation laid down by Royal Decree of 6 May 1994. If stabilisation policy is to have the intended effect, all components of policy must function effectively. This has not been the case in the last three years. For several years, average annual growth rates and employment growth have been markedly higher in Norway than the average for the rest of Europe. In part fuelled by the sharp expansion  BIS Review /1998  –2–  in petroleum investment, pressures built up in the economy, accompanied by growing labour shortages. Following the currency crisis in autumn 1992, Norwegian interest rates rapidly fell to European levels. The interest rate level in Europe fell after the turmoil early in the 1990s. As growth gradually picked up in Norway, the economy was stabilised by tightening fiscal policy. In order to stabilise the krone exchange rate, Norges Bank reduced its key rates at the beginning of 1997 after the krone had appreciated markedly over a period. Fiscal policy is an important instrument for smoothing fluctuations in the economy. However, it has proved difficult to prevent fiscal policy from being influenced by mood shifts that occur when the economy approaches a peak and memories of earlier recessions fade. Monetary policy shall provide a nominal anchor for economic developments. With exchange rate stability as the anchor, monetary policy may be pro-cyclical in periods.

This may give rise to considerable challenges in terms of the Government’s and the Storting’s (Norwegian parliament) ability and will to maintain a firm fiscal stance. Under a system designed to maintain exchange rate stability, it is important that the authorities actually manage to implement fiscal policy in such a way that pronounced and undesirable cyclical fluctuations do not occur. During the last cyclical upturn, fiscal policy has been relatively tight, but the tightening element became weaker as growth gained momentum. Fiscal policy should have been tighter in 1996, 1997 and 1998. Another lesson from this period is that investment in the petroleum sector should be managed better in order to avoid fluctuations in the mainland economy. One cannot expect the central government budget to be able to counter the shocks to the mainland economy originating from the wide fluctuations in demand from oil companies. 2) Internal instability Fiscal policy has not had a sufficient stabilising effect on the economy in recent years. This has given rise to a dilemma for the social partners involved in the income settlements. Moderate wage settlements made a substantial contribution to achieving broad-based employment growth from 1992. In the period 1993-1998, employment rose by more than 250 000, while unemployment fell from about 6.5 per cent to below 3 per cent, the lowest rate BIS Review 10/1999  –3–  recorded for 10 years. Whereas 20 unemployed were competing for each vacancy at the employment offices in 1993, the ratio was reduced to a little more than 2 in 1998.
We also need to explore the possible channels of contagion that may result in adverse market dynamics. Gaining a better understanding of the functioning of the shadow banking system is a key element of and a precondition for improving the efficiency of financial regulation and supervision across markets and jurisdiction. I strongly encourage the FSB to continue to work very actively on all of its work streams regarding the regulation of the non-banking sector. This includes regulatory reform of money market funds, securitisation and the interaction with the banking sector. I am looking forward to the progress report to be delivered for the G20 meeting in October. Further regulatory challenges In a number of key domains, decisions have been taken by the international community. It is no time to challenge them. It is time to implement. In a crisis period where confidence is of the essence, it would be extremely damaging if the authorities were to hesitate, demonstrate an absence of resolve and of the fortitude that is required by the circumstances. I see resistance of some in the financial sector against Basel III. I see similar messages on the SIFIs. For me, it is crystal clear: what has been decided is decided. But there are other areas of regulatory reform where work is still underway. Let me briefly highlight two key areas on which we need to stay committed and where swift progress is of the essence.

Once the private sector backed away from AIG, the Fed, with the full support of the Treasury, was called upon to do something extraordinary and lend to AIG. The Federal Reserve had no oversight authority over this institution whatsoever, but it stepped into the breach and lent to AIG to prevent a catastrophic collapse of the financial system and to protect the public from the fallout that would have resulted. There has also been a lot of criticism – in the recent SIGTARP report and elsewhere – that the Federal Reserve should have forced AIG’s major counterparties to take haircuts in conjunction with setting up Maiden Lane III. The reasons for the Fed’s actions in this situation are straightforward. From the moment the U.S. government made it clear that its goal was to prevent AIG’s bankruptcy in order to stem a broader collapse of the financial system, this undercut the ability to obtain concessions from AIG’s counterparties. To put it starkly, power in a negotiation comes either from being able to issue a credible threat or from coercion. Bankruptcy at that point for AIG was simply not credible in the context of the actions taken to rescue the firm in the first place, and threatening bankruptcy would have been at cross purposes to the broader goal of stabilizing the financial system. Using our supervisory power in a coercive manner would have been an abuse of that supervisory power.