samchain/econo-pairs-v1 huggingface dataset:
Thomas Jordan: The Swiss banking sector and the next steps in resolving the “too big to fail” issue Introductory remarks by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Geneva, 17 June 2010. *  *  *  Introduction A year ago, the financial system was still in an extremely fragile state. Crisis management was at the centre of our efforts. Yet even then, we were emphasising the urgent need to alleviate the “too big to fail” issue. Much has happened since that time. The financial sector, hit hard by the crisis, has recovered considerably, and on a national and international level, politicians, supervisory authorities and central banks are working intensively to ease the “too big to fail” issue. The goal is clear: in future, the public and the taxpayer should not have to shoulder the responsibility for rescuing banks. Based on our latest Financial Stability Report, I would like to review first the situation in the banking sector, and second, the next steps in resolving the “too big to fail” issue. Conditions in the Swiss banking sector Conditions in the Swiss banking sector have improved. Following a catastrophic 2008, the situation at UBS stabilised over the course of last year. With regard to Credit Suisse, it is now even possible to speak of a return to normal.

As you may have guessed though, the main reason for central bank transparency is not to make your weekends more relaxing. Central bankers today pursue a policy of broad information because we believe that transparency helps us fulfil our mandate. We are convinced that monetary policy is most effective and least disruptive if it is predictable: no news on monetary policy is good news. In the following, I would like to discuss why, today, central bankers think transparency is crucial for a successful monetary policy and how the Swiss National Bank attempts to achieve transparency in practice. I shall then debate the limitations of what transparency Finally, I would like to reflect upon how transparency in monetary policy may affect the relationship between you, the journalists, and us, the central bankers. 1. The case for transparency  At the Swiss National Bank we see three main reasons to be transparent about our monetary policy. The first reason is that we count on transparency to enhance the effectiveness of our monetary policy. In the public eye, central banks may be viewed as almighty. The plain reality is, however, that our open market operations only have a direct influence on current short-term interest rates. Economic activity and thus future price developments are, however, determined primarily by the shape of the yield curve, i.e. by the expectation of future monetary actions. Transparency about how we judge future inflationary pressures enables us to guide expectations about future short-term interest rates and thus also long-term interest rates.
Though this added flexibility needs to be recognised for the positive effect it has on potential output, the role of retraining programmes by the ETC remains of utmost importance in better matching skills with vacancies and further reducing the rate of unemployment. Turning to the fiscal dimension, government forecasts the deficit to decline to 2.1% of GDP this year and to 1.6% in 2015. This is a financially responsible objective which needs to be truly maintained. The government debt-to-GDP ratio has reached around the 70% level. This ratio needs to plateau and eventually to drop and this requires sustainable management of both budgetary inflows and outflows. Clearly, budgetary performance depends on economic performance as higher growth ensures higher tax revenues. In turn, faster growth is only possible by producing and delivering more goods and services. This can only be attained by being competitive. Moreover, other significant challenges remain. Inefficiencies in public administration processes hamper the development of the Maltese business environment and need to be improved, so as to better support competitiveness and encourage foreign direct investment. As I already mentioned, there is also room for further improvement in the business environment in terms of access to credit. The cost of credit in Malta remains on the high side and further easing would help our businesses to invest at a lower cost. Going forward, various initiatives are envisaged to improve the current situation, including the introduction of  BIS central bankers’ speeches  5  a credit register that will be administered by the Central Bank.

6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches
Let me give a recent example. One major lesson from the great financial crisis was the need to be far better at identifying the many entities and organisations operating within the financial system. When the crisis hit, the lack of any uniform international method of identifying the huge number of legal entities scattered across the world added to the crippling uncertainty over who owed what to whom. We all remember that uncertainty causing panic on the financial markets. So was born the Legal Entity Identifier, or LEI – a 20-character alphanumeric code that uniquely identifies a legally distinct entity. It allows data relating to a single bank, insurer or whoever, to be combined. Over one and a half million entities in over 200 countries have now registered for an LEI. And it has had a wide range of benefits. It has supported the portability of data between organisations. It has aided the fight against money laundering. And it has been helpful in our data collections: for example, when we ask firms to submit counterparty exposure data to us, it provides a clear way for us to compile data about each entity. So the LEI is a growing success. But it also demonstrates that the adoption of standards is a long journey, with a continued need for public sector involvement. The G20 endorsed the LEI system as a global standard back in 2012. It has come a long way since then, but it still has further to go, and we will continue to support it.

And we will advocate at global regulatory and central banking fora for public sector involvement on data standards, similar to the public sector role on the LEI. So our call to action today is that firms, large and small, join this process, and give it the benefit of their expertise and perspective on the design of common data standards, and on which standards the group  9  A fuller description of our approach to promoting standards, including timeframes, is set out in the Transformation Plan. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  should focus on first. Different firms with varying business models may have different preferences, so we need a broad range of views represented. I hope that some of you listening or reading are already dreaming of better, more commonly adopted standards and reporting solutions in your area of expertise. In which case, step forward! We will need industry to contribute experts who work with data to collaborate with their peers on the development of these crucial data standards. The task ahead is a considerable one. The lesson from the development of the LEI is that the development and adoption of common data standards is a long-term process, and one that needs patience, continued engagement and sustained, expert resource.
In particular, downside risks to the achievement of our employment and inflation goals amid very low interest rates were compelling arguments for a relatively cautious and predictable approach to policy. This proved its worth: The U.S. economy continued to expand at a healthy pace even as the Fed raised rates numerous times. For those who follow the Fed closely, you’ve noticed that the FOMC has been slimming down its statements of late and using less forward guidance about the future path of policy. In this vein, the FOMC in its recent statement removed language indicating that monetary policy remains accommodative.3 Let me make clear, these more concise statements do not signify a shift in our monetary policy approach. Instead, they represent the natural evolution of the language describing the factors influencing our policy decisions in the context of the strength of the economic outlook and inflation being near our 2 percent longer-run goal. These changes in our communication of policy views are a sign that we are nearing the end of the process of normalizing monetary policy and are inching closer to conducting normal monetary policy. Arguably, it’s been a long time since monetary policy was normal, so it’s worth describing what “normal” looks like in some detail. At its most basic level, monetary policy-making will remain the same: The path of interest rates will continue to be guided strategically by our dual mandate objectives and shaped tactically by the data and their implications for the economic outlook.

(c)  A Distributed Architecture  Central banks historically have tended to be, well, centralised. But in a world where understanding of the economy is often localised and trust is built on a distributed basis, a centralised infrastructure may be far from ideal. What is needed instead is a distributed architecture for engagement. In response, central banks have over time changed their structures and further change seems likely. The Bank of England has had a network of Agents around the UK for around 90 years. Today, the Bank’s twelve regional agencies cover all corners of the UK, with an extensive network that generates around 9,000 meetings with company contacts each year. This is a valuable source of intelligence on the economy and financial system. Indeed, I would say it is increasingly valuable. It provides colour and context to accompany our data and models. It offers folk wisdom, the wisdom of the company crowd. But companies are only one crowd among many. Companies are an important lens on the economy, but far from being the only one. Reflecting that, the Bank has recently sought stronger connections with some other crowds, crowds with a different lens on the economy with which it has perhaps had less contact historically – trades unions, charities, community organisations and the like. For more than a year, I have augmented those Agents’ efforts with my own “Townhall” meetings across the UK.
Banks will rationally respond by increasing interest rates to cover the rise in expected losses. FISIM will score this increased compensation for expected losses on lending as a rise in output. In other words, at times when risk is rising, the contribution of the financial sector to the real economy may be overestimated. This goes some way towards explaining the 2008Q4 National Accounts paradox of a rapidly rising financial sector contribution to nominal GDP. Of course, the financial sector does bear the risk of other agents in the economy. Banks take on maturity mismatch or liquidity risk on behalf of households and companies. And banks also make risky loans funded by debt, which exposes them to default or solvency risk. But it is not clear that bearing risk is, in itself, a productive activity. Any household or corporate investing in a risky debt security also bears credit and liquidity risk. The act of investing capital in a risky asset is a fundamental feature of capital markets and is not specific to the activities of banks. Conceptually, therefore, it is not clear that risk-based income flows should represent bank output. The productive activity provided by an effectively functioning banking system might be better thought of as measuring and pricing credit and liquidity risk. For example, banks screen borrowers’ creditworthiness when extending loans, thereby acting as delegated monitor. And they manage liquidity risk through their treasury operations, thereby acting as delegated treasurer. These risk-pricing services are remunerated implicitly through the interest rates banks charge to their customers.

Second, yields rose globally in the summer on the back of expectations that the US Federal Reserve was about to taper its asset purchase program; more recently they fell back when the Federal Open Market Committee (FOMC) unexpectedly decided not to begin phasing out its asset purchases at its September meeting. Given the relatively high degree of substitutability between UK gilts and US treasuries, and assuming that long-term inflation expectations are anchored in both countries, it is reasonable to expect a high degree of correlation of UK long rates with US long rates. But one might expect the correlation to be less pronounced at the short end of the curve, where differences in cyclical positions – and therefore differences in monetary stances – should come to the fore. Strong co-movement should only be seen if either the shock is common in nature, or the international transmission of a shock from one country to the other is strong. 4  BIS central bankers’ speeches  Now, as it happens, measures of co-movement have generally been high since the start of the financial crisis. In the earlier phase of the crisis, when contagion through financial markets was particularly strong, it was reasonable to believe that what happened in the United States was critical to the outlook here. That seems less plausible now, given the substantial progress in repairing the banking systems in the two countries.
2 The configuration of an independent agency: the case of the Banco de España If the independence of an agency that assumes functions in the general interest is to be effective, such independence must be formally acknowledged in the regulatory sphere. It is worth distinguishing here between institutional, legal, functional and financial independence and the personal independence of an agency’s senior officials. The regulatory reference to the Banco de España as an independent agency is set in the 1994 Law of Autonomy, in the Treaty on the Functioning of the European Union (EU), in the Statutes of the European System of Central Banks and in the Single Supervisory Mechanism (SSM) Regulation. This independence is no mere legal expression since, as I shall now stress, it is accompanied by several elements that enable it to be effectively exercised. 2  Also, in the realm of the European single market, the necessary consistency of the various coexisting supervisory frameworks advises that banking supervision be exercised by an independent institution. This was reflected in the assumption by the ECB of the supervisory responsibilities for European significant financial institutions as from 2014. 3  First, the Banco de España has institutional independence in that the regulations ensure the capacity of its governing bodies to act autonomously, without hierarchical subordination to any higher authority.

In this connection, I wish to emphasise the desirability and timeliness of independent public institutions having this type of ethical conduct framework, as a key element to proper performance by their high-level officials of their roles. From this standpoint, the aforementioned Code of Conduct for high-level European Central Bank Officials includes ethical conduct criteria that are particularly relevant to independence, impartiality, professional secrecy and public and private appearances by those high-level officials, in addition to specific obligations for avoiding conflicts of interest, for relationships with interest groups, for private financial transactions and for advantages, awards and invitations offered as a result of their positions (for more details, see Annex 5). As I reported to this very Parliament, early this year the Banco de España approved its Strategic Plan, whose essential content has been made public. Based on an analysis of the challenges facing the institution and its main strengths and weaknesses, the plan sets out the priority objectives for the coming years and the actions required to accomplish them. Aside from the importance of this exercise from the standpoint of internal coordination, I believe the drawing up and publication of this plan is a fundamental transparencyenhancing factor that will facilitate evaluation of the effectiveness of the Bank’s actions. Accordingly, under the Strategic Plan our activities will be subject to assessments. Should you see fit, we could report to this House on the content of the Strategic Plan, headway made in its implementation and the results of the assessments.
In the case of Romania, where the supervision of banks and non-bank financial institutions is the task of the NBR, while the Financial Supervisory Authority (FSA) oversees the other financial markets, the solution that emerges as adequate is the one identified in the draft law promoted by the Government: a National Committee for Macroprudential Oversight. The decision-making body of this committee is to be made up of nine members: the Governor, the First-Deputy Governor, the two Deputy Governors and the Chief Economist of the National Bank of Romania; the President and the First-Vice President of the Financial Supervisory Authority, as well as two Government representatives appointed by the Prime Minister. Addressees of National Committee recommendations – the NBR and the FSA, as sectoral financial supervisory authorities, and the Government – should act on them unless inaction can be adequately justified (“act or explain” mechanism). 6. Reforming central bank governance after the fall of communism I have always been of the opinion that one cannot truly understand the present or have a glimpse into the future without knowing the past and learning its lessons. These lessons begin with the transition from a monetary authority in a command economy to a modern central bank operating in a market economy, an experience that is, for sure, familiar to many of us present here – I believe half of the central banks in this constituency, including Romania’s, are “new kids on the block”. Of course, there are different stages of development in terms of institutional framework.

Mugur Isărescu: Recent developments in central bank governance Panel presentation by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the "Central Bank and Supervisory Governance" conference, organized by the National Bank of the Netherlands, Amsterdam, 12 February 2016. *  *  *  Ladies and gentlemen, It is a great honour to address the audience during this high-level conference on a subject of special interest to all of us, the recent developments in central bank governance leading to heated debates every time they are brought to the fore. Mr. He has done a wonderful job in structuring the challenges of nowadays’ central banking and in outlining the importance of effective governance arrangements in order to meet these challenges – his presentation is a testimony to IMF’s unique ability to draw upon a vast set of worldwide institutional experiences. I, in turn, will draw mainly upon a narrower, but hopefully no less relevant, set of institutional experiences, gathered during my tenure as Governor of the National Bank of Romania. In my address today I intend to deal with the issue of recent developments in central bank governance by looking at: 1. The central bank objectives as the starting point in designing its governance framework; 2. How the NBR dealt with the financial stability as an objective, from an institutional point of view; integrating or separating monetary policy and supervision; 3. A short history of institutional developments within the NBR for ensuring financial stability; 4. The internal control layers in the NBR; 5.
And direct support for the financial system has been equally swift and large, at around a quarter of global GDP. In the US and UK, it is nearer three-quarters of GDP (Chart 2). The road to recovery The good news is that these measures appear to be working. The recovery in global financial markets and the world economy over the past year has been almost as remarkable as the preceding fall. Certainly, it has been far earlier and far sharper than during the Great Depression (Charts 1 and 3). Having fallen off a cliff, the bounce in financial markets has been more startled bunny than dead cat. 1  Deloitte (2009), “Safety in numbers: Annual Review of Football Finance”. BIS Review 10/2010  1  From their trough almost a year ago, global banks’ equity prices have risen by over 130%, recovering more than half of their losses. For UK banks, the recovery has been even more dramatic, rising 140%. Since 1900, there has been only one 9-month period when the rally in UK financial sector equity prices has been greater (Chart 4). This rebound in asset prices has been broad as well as steep, spanning the maturity and risk spectrum. Yields on safe securities have fallen across all maturities. Policy rates in the UK fell to their lowest levels since the founding of the Bank of England. And long-term real interest rates in the US and UK, at around 1%, are around half their average level over the past decade.

A year ago there were grounds for hoping that the external storms were beginning to abate, but those hopes were deferred - by the after-effects of corporate governance and accounting failures in the US and by uncertainty associated with the war in Iraq. There nevertheless remain reasonable grounds for  BIS Review 29/2003  1  thinking that the external environment will now gradually improve as we move through the second half of this year into next, and that this will help to offset the gradual moderation we are beginning to see in the growth of consumer spending. That would open the way to continued relatively steady and better balanced growth - at or above trend, with inflation remaining close to target. But there are certainly short-term risks on either side, and given those risks - including the risk of slow growth in the Eurozone, particularly in Germany - I agree with your assessment that the economic case for euro-entry has not yet been made. More generally on that subject, I very much welcome the Treasury’s exhausting - I mean exhaustive - broader assessment of the longer-term pros and cons which I hope, when people have had time to digest it properly, will result in a better balanced - less polarised - debate on the economics of the euro question. I confess that I had hoped that we would by now be further along the narrow channel I have described on past occasions between the Charybdis of external weakness and Scylla of unsustainable consumer demand.