samchain/econo-pairs-v1 huggingface dataset:
This is  BIS central bankers’ speeches  3  because the longer such measures persist, the greater the risks that can come with it. And in the euro area context there are two main risks that can in principle arise: first, greater financial instability (and let me stress here I am talking only about the situation in the euro area and not in other jurisdictions); and second, the delay of much needed structural reforms. To provide a framework for how to think about these risks I find it useful to invoke the wellknown “Tinbergen rule”, which states that a macroeconomic authority must have at least as many instruments as it has objectives. In terms of the first risk – financial stability – one has to distinguish between conflicting and complementary objectives. In normal times, it might be appropriate for monetary policy to take financial stability into account in its assessment of the appropriate level of interest rates. The reason is that, especially if one extends the concept of the medium-term, raising rates to choke off excessive credit developments will actually contribute to our price stability objective. It helps to prevent deflationary episodes emanating from large financial crises. And the symmetrical argument is also true: lowering rates in a downturn to support the financial sector will safeguard the transmission of monetary policy and hence support the achievement of our mandate. In this sense, I am supportive of the “leaning against the wind” argument in both directions, provided instruments and objectives are consistent.

My hope is that governments are recognising that accommodative monetary policy and low oil prices, rather than removing the need for reforms, creates the perfect environment to do them. Research suggests that reforms can be more costly in a weak macroeconomic environment and, in particular, when there are serious credit constraints. With our successful credit easing policy we are progressively removing each of those barriers. More generally, however, I would question how much monetary policy decisions should be based around reform incentives. Applying again the Tinbergen rule, this creates two objectives to be attained with one instrument – and just as for financial stability, in the current environment those objectives conflict. The ECB has to prioritise price stability rather than acting as the censor of governments. Euro area governments as a community must ensure that each economy meets the requirements of membership. And it is in this context that I and other ECB Executive Board members have recently called for a stronger Economic Union in the euro area with improved common governance of structural reforms. Conclusion Let me conclude. The diminishing price pressures over recent years have required the ECB to act forcefully and repeatedly to fulfil its mandate. This culminated in January 2015 with our decision to expand our asset purchase programme to stave off deflationary risks and stop the fall of inflation expectations. In doing so we have sent a strong signal that we will safeguard price stability no matter what. This is our mandate as enshrined in the Treaty.
And US corporate bonds are almost fully intermediated. 9 This was aided too when the NYSE, in 2001, reduced the minimum increment for trading in listed US equities to 1 cent from one sixteenth of a US dollar. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Finally, technology promises changes to wholesale payment, clearing and settlement infrastructure. Emerging technologies, such as distributed ledger, could in future offer significant gains in the accuracy, efficiency and security of processes across payments, clearing and settlement as well as better regulatory compliance. In the process, tens of billions of dollars of capital may be saved and resilience could be significantly improved. 10  Securities settlement in particular seems ripe for innovation; a typical settlement chain can involve many intermediaries, making securities settlement comparatively slow, operational risks and costs high. 3. Broader Public Policy Issues Before turning to some specific financial stability issues created by these developments, let me acknowledge a few of the other important public policy considerations that G20 authorities must bear in mind – not least because how they are addressed will influence the extent to which certain financial technologies are adopted and the system is transformed. First, a host of conduct issues with these new products and services, must be addressed including client suitability, Anti-Money Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”).

As recently pointed out by the G20 Finance Ministers and central bank governors, recent events have highlighted the importance of sustainable public finances : those countries with serious fiscal challenges need to accelerate the pace of fiscal consolidation;  2)  Secondly, the announcement of a EUR 110 billion financial aid package for Greece, agreed between the European Commission and the IMF conditioned to a package of substantial fiscal consolidation measures by Greece contributed to alleviate concerns in the markets. 3)  Thirdly, to restore confidence in the whole euro area and to contain contagion, a plan with a broader scope has been adopted at the euro area level, the European Financial Stabilization Facility, for a global amount of 750 billion euro with the financial participation of the IMF. One of the key features of this Facility will be the possibility to be used on short notice without involving further national Parliaments. Finally, let me focus on the other recent actions of the European central bank which have been essential in response to these challenging circumstances. Central banks complemented these actions by specific and innovated measures 1)  After careful consideration of all implications of this option and based on its positive assessment of the Greek consolidation package , the Eurosystem decided to suspend the reference to credit rating and current market prices in the collateral requirements for marketable debt instruments issued or guaranteed by the Greek government.
Fourth, actual equity in the financial system proved too little to offset the indebtedness and other risk that had accumulated. Fifth, the regulatory framework for cross-border banking operations was deeply flawed, not least in the European Economic Area. Sixth, there is significant risk associated with building a relatively large banking system with cross-border operations based on a small country and small currency. These problems remain more or less unaddressed here in Iceland, and as a result, there is little in the regulatory environment to prevent the problems Iceland had before the crisis from developing once again, although it is unlikely that this will happen in the next few years, as our financial systems are still recovering and risk awareness is keen. Now is the time to solve these problems because, if we wait until operations have resumed their full pace, it might be too late, and the will and incentive to take action will be lacking. The Central Bank is determined to set policy on these matters during the current year, and to contribute to joint policy-making with the Government. This process involves, on the one hand, macroprudential rules – that is, rules that reduce systemic risk and obstruct the development of credit and asset bubbles, and on the other, it involves institutional elements, not least possible forms of closer collaboration or merger between the Central Bank and the Financial Supervisory Authority. And monetary policy will be reviewed as well.

Decisions on the level of monetary policy restraint are always taken under conditions of uncertainty – about the current economic situation and probable future developments, and whether monetary policy instruments will be effective at any given time. This is why responsible and well-informed parties can easily disagree on what is the best course of action at any time. In the Central Bank’s Annual Report, which is available for perusal here, you can see how individual members of the Monetary Policy Committee voted at the various meetings in 2009. The minutes of the MPC meetings reflect the in-depth coverage of economic affairs at each meeting and the issues the Committee deals with at any point in time. I take the liberty of asserting that all MPC members vote as they deem most appropriate in view of current circumstances and the Committee’s objectives. Moreover, I strongly doubt that interest rate decisions based on some other arrangement, where professional views are less important and transparency less, would yield better results. Under the current circumstances, however, decisions on the level of monetary policy restraint are more complex than they generally have been in the past. That complexity stems in part from the fact that it is not clear where we are headed in the immediate future.
These include Thai banks’ aim to reduce cash usage and payment cost, leading to collective investment in the new faster pay infrastructure; banks’ and non-banks’ leveraging on the interoperability of our open infrastructure and common standards to compete and expand the range of products and services; and regulators’ and policy agencies’ active roles in promoting financial innovations and digital adoption. FinTech and digital finance have been and will continue to be among the top policy agenda of the Bank of Thailand. We need to further develop digital finance infrastructure, promote innovation, enable dynamic competition, and enhance adoption by the Thai people and businesses. Ladies and gentlemen, While technology advancement and technology adoption will remain crucial, there is another important aspect of financial services that we must not forget as we move on with our FinTech agenda: the value of financial network. Unlike other products and services, financial services will serve the people and the society best only when money—either in the form of physical cash or digital money—can freely flow without cost and friction. In today’s digital world, it is equally important that individuals and society can benefit from financial transaction  2  data. Therefore, preserving and strengthening the value of financial network will be imperative in advancing the development of our financial system. On the opposite end of a strong financial network is fragmentation, whereby financial systems and payment services become fragmented by the use of different core infrastructures or different standards that are controlled by a few dominant players.

I wish you a productive and joyful conference ahead. 5
This firm anchoring of expectations and various measures of underlying inflation trends confirm that price developments over the medium and longer term will be in line with price stability. In 2010, HICP inflation is likely to remain positive and below 2%, in an environment of sluggish demand in the euro area and elsewhere. Since last October, the Governing Council of the ECB has eased monetary policy significantly and rapidly, but also provided unlimited liquidity to the banking system and implemented “non-standard” enhanced credit support measures, which aim at ensuring that the monetary policy impulse deriving from the decrease in central bank rates is efficiently transmitted to the real economy. It is encouraging to observe that these policy actions, together with the substantial fiscal stimulus being implemented by governments and their measures aimed at supporting the banking system, are progressively having a visible positive impact on the growth performance of the euro area. In time, they should lead to a normalisation of conditions in financial markets and the recovery of the economy to a path of sustainable growth. And this leads me to some final remarks on the conference theme – “planning an exit strategy” – which is crucial. An exit strategy will need to have three elements: an exit from the environment of exceptionally low interest rates and unlimited liquidity provision; an exit from the extensive government support measures to the banking system, and an exit from the substantial fiscal stimulus.

It is not easy, however, to disentangle the relative contribution to bank credit developments of demand and supply-side factors on the basis of the available evidence. Having said that, it is evident that the effects of the financial crisis on banks’ profitability and capital position have been sizeable. Banks’ efforts to deleverage their balance sheets and build capital and liquidity buffers are constraining, other things being equal, their lending to the private sector. So far, by early May 2009, write-downs on the securities and loans of large euro area banks amounted to USD 179 billion, which corresponds to just over 18% of the total write-downs of major banks globally (USD 986 billion). 9 Euro area banks have successfully raised capital from both private and public sources, amounting to USD 192 billion, which exceeds the recorded write-downs. 10 Of course, a key issue is the amount of potential further write-downs that could be faced by global and euro area financial institutions and the additional capital that should be raised by them to safeguard their solvency. Recently the IMF has estimated that the total amount of potential future write-downs of euro area banks could be around USD 750 billion, largely on their loan exposures. 11 This estimate, however, is based on assumptions and methodology that can be challenged and it is subject to a high margin of error. Estimates based on alternative methodologies and assumptions yield a much lower, yet sizeable, figure.
Financial services is an industry that is dynamic and complex, with rapid product innovation. To excel and produce results in a more challenging environment, practitioners of financial services need to be highly qualified and equipped with technical finance calibre and knowledge. Recognising the importance of human capital development in the industry, the Central Bank has established several centres of excellence for learning for the overall financial services sector, including covering the areas of corporate governance, leadership development and Islamic finance. Conclusion Let me conclude my remarks. This Financial Inclusion Advisers programme is an example of the smart partnership advocated by the CPTM movement. I would like to take this opportunity to thank CPTM and JICA as well as the participating resource institutions – Bank Rakyat Indonesia, National Bank for Agriculture and Rural Development (NABARD) of India, Amanah Ikhtiar Malaysia (AIM), SIRIM Berhad, Agro Bank and the Non-Aligned Movement – Centre for South-South Technical Cooperation (NAM-CSSTC) for contributing to this event. I also wish to welcome the members of the microfinance community from Kenya, Malawi, Tanzania, Uganda and Zambia to this programme. On that note, I wish you a very successful learning experience and a pleasant stay in Malaysia. Thank you. BIS Review 4/2010  3

vii This largely falls within national remits, but should be pursued within an upward-levelling European convergence: namely the Northern European solutions, including a much greater development of apprenticeships and professional training. Lastly, by pooling our funding. I mean, partly, public investment programmes, such as those enabled by the famous "Next Generation EU", that decisive breakthrough from the Covid crisis. But a private driver is at least equally important: Europe must be able to harness and  Page 7 sur 15 redirect its domestic savings, which are the largest in the world; in recent years, we have had a surplus of domestic savings over investment of almost EUR 300 billion per year. These savings should be channelled towards the equity financing of companies, which is a method of financing that is particularly well suited to innovative projects – which are inherently riskier and require long-term support, but which are also more profitable if successful. Our lag visà-vis the United States in this area is striking: the largest European venture capital firm appears to be three times smaller than the 10th largest US one. The technical agenda has been identified, but politically is not very clear and is far too slow in its implementation: it is the Capital Markets Union (CMU). On the one hand, we have resources – savings – and on the other, the investment needs of companies: we must decisively accelerate a European financial ecosystem that better allocates the former to the latter, if we want to finance the forthcoming digital and environmental revolutions. III.
Currently, the new life insurance premiums transacted through financial advisers were still insignificant compared to the premiums transacted through agency forces and bancassurance. Any effort to improve the performance of financial advisers must include the takaful sector, which has evolved considerably over the years to become a thriving global business to complement conventional insurance. On that note, Bank Negara Malaysia has recently approved the inclusion of takaful products and services within the scope of business which can be distributed by financial advisers. The inclusion of takaful products is a significant initiative as it will allow financial advisers to capitalise on the potential for growth of the takaful sector given that the market penetration rate for takaful products is low at 7.7% and the large number of untapped Muslim population in Malaysia who are usually more inclined towards Shariah-compliant products. However, to undertake the marketing of takaful products, financial advisers’ representatives must first equip themselves with the necessary knowledge in takaful and understand the Shariah requirements and the differences between takaful and conventional products. In this regard, I commend FPAM and MFPC on their timely effort to formulate and develop Islamic-based professional qualifications in order to satisfy the growing needs among professionals within the financial advisory fraternity. FPAM, together with the Islamic Banking and Finance Institute of Malaysia has jointly developed Islamic Financial Planner module whereas MFPC has recently launched a Shariah Registered Financial Planner module.

So, in other words, not only will banks get lower capital requirements in respect of lower risk credits; but they’ll also get lower capital requirements if they can demonstrate that they manage risk well. It is for this reason that Basel II might perhaps be better thought of not as the second “Capital Accord” but rather the first “Risk Management Accord”. Because it focuses attention not only on the more accurate measurement of risk, but on the management of risk. Banks looking to reduce their capital charge will have two choices: either reduce the risk, for example by substituting better risk credits for lower risk credits, or by reducing positions; or simply manage the risk better. And this will apply not only to credit risk. Again, to take the example of operational risk, banks will have the option of investing in more advanced approaches which will translate into lower capital charges. You may have noticed that I just mentioned banks having options, having choices. This is another key feature of Basel II. No longer will there be a “one size fits all” approach whereby banks of varying shapes and sizes are shoehorned into one inflexible system of capital charges. Instead, banks will be able to choose what approach they take; for example, whether they adopt the standardised approach or IRB approach for credit risk, and which of the various approaches to operational risk they adopt.
Credit risk mitigation With regard to credit risk mitigation, although no paper was released on this topic, the Committee has made good progress in this area. While some issues are not yet finalised, the Committee has agreed to make some refinements to the rules. For example:  BIS Review 12/2004  5  •  The Committee decided to eliminate excess conservatism in an approach to assess repostyle transactions. That is, it decided to reduce the level of multipliers to be applied to the outcome of the VaR model (backtests) from the level proposed in CP3 to that which would restore the 99th percentile confidence level. •  It also decided to recognise credit risk mitigants whose maturity does not match that of the underlying exposures up to three months before these mitigants mature. In the January press release we signalled that we recognise that the existing treatment of credit risk mitigation must continue to evolve in order to reflect industry practices, particularly as they relate to double default effects. The Committee plans additionally to undertake a review of counterparty credit risk and trading book issues in coordination with the International Organisation of Securities Commissions (IOSCO). This brings me to a concept that we have emphasised many times: the Basel 2 approach is evolutionary. This means that some issues - such as those just mentioned plus others such as recognising the economic benefits of diversification in credit risk models - will be considered by the Committee as part of its future work.

The members of the Committee viewed this challenge as an opportunity to advance the state of the art in risk management worldwide. Just over the past few months we have resolved some of the most difficult technical issues that arose in recent discussions with the industry. This brings me to the status of our work today, my second topic. The Status of the New Accord To test the quality of our proposals, and to ensure that our new framework would be more sensitive to risk and would create incentives for advances in risk management, the Basel Committee has undertaken three global public consultations. The third consultation concluded last summer attracted over 200 comments from the industry and the public. We’ve also conducted massive impact studies, gathering detailed information from over 350 banks worldwide on how the new rules would affect their capital requirements. This public consultation process and our series of impact studies would have been impossible without the tremendous support, candour, and hard work that so many banks and other organisations worldwide offered. I would like to express my thanks to the many organisations in North America that, together with peers from around the world, wrote comment letters, participated in discussions, and provided data to the Committee. You have helped us to ensure that the proposals reflect best practices. Your suggestions have helped us to clarify and simplify the proposals.