samchain/econo-pairs-v1 huggingface dataset:
Ravi Menon: The next phase in Islamic finance Opening address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the 3rd Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2011), Singapore, 5 June 2012. *  *  *  Dr Ahmad Mohamed Ali Al-Madani, President, Islamic Development Bank, Your Excellencies, distinguished guests, ladies and gentlemen, good morning. And to all our foreign guests, a warm welcome to Singapore. An increasingly difficult conjuncture We are meeting here for the 3rd Annual World Islamic Banking Conference Asia Summit, at a time of increasing stress in the global economy and financial system. •  The effects of monetary stimulus, which had helped to support the economy and prevent a full-blown financial crisis, are now levelling off in both the Eurozone and the US. •  The labour market remains a significant drag on growth in the advanced economies. Unemployment has hit new highs in the Eurozone while employment and production numbers in the US are showing signs of weakness. •  The story of a two-speed global economy is coming under strain, with demand weakening across emerging Asia. The moderation in China’s economic growth appears to be somewhat sharper than expected. India is undergoing an even more pronounced and broad-based slowdown. But the key risk that has increased in recent months and poses the biggest threat to global economic prospects is the situation in Europe.

Islamic finance and global regulatory reforms A second factor that Islamic finance will have to contend with is the ongoing global regulatory reforms. The scale and scope of these reforms are probably unmatched in recent history. Islamic financial institutions will have to devote considerable resources to meet the new international standards. But there are certain inherent characteristics of Islamic finance that will stand it in good stead in the emerging regulatory environment. Take for example, banking, where the emphasis of regulatory reform is on more capital and more liquidity. Islamic banks have consistently held higher levels of capitalisation vis-à-vis conventional banks, by some 2.5 percentage points on aggregate, according to research from the World Bank. Islamic banks also start off with a higher level of liquid assets compared to their conventional counterparts. Islamic finance is also well placed to meet the increased “return-to-basics” investor demand. Following the global financial crisis, investors have become more averse to the unknown risks embedded in complex financial instruments. Islamic finance, with its stronger emphasis on transparency, price certainty and risk-sharing, can benefit from this renewed demand for more basic investments, from Muslim and non-Muslim investors alike. Integrating Islamic finance with global finance The third, and perhaps most important, challenge that Islamic finance must overcome is its present fragmented state. Islamic finance currently suffers from low economies of scale. The overall size of Islamic assets is still less than 1% of the global financial system.
In the case of this country these adverse international influences really began to affect us just as overall demand was already weakening in response to the earlier monetary, and incidentally fiscal, tightening. The result was a very sharp decline in industrial – especially manufacturing – confidence, and widespread, and often exaggerated, fears of recession, which in turn appeared to undermine consumer confidence. The slowdown – or soft landing – we had been consciously seeking to engineer threatened quite rapidly to become a much sharper decline – or harder landing – than we had either expected or needed. And that, of course, is why we promptly changed our monetary policy stance as we did, cutting interest rates by 2% to 5½% in the space of five months. In doing so, we have demonstrated that the inflation target is – as we have frequently said it is – symmetrical, so that we would be at least as determined and aggressive in cutting rates if we thought we were likely to undershoot the inflation target as we had been earlier in raising rates to avoid an overshoot of the inflation target. So, where do we go from here? I would strongly advise you to regard anyone who claims to know with any great certainty where we go from here with the gravest possible suspicion. Forecasting the economy is very definitely an art rather than a science – though some artists craft their work rather more carefully than others.

The reality during this period was that everyone was tempted to grab as much as they could while the going was good, because they knew it would not last. But we have learned from that experience. We’ve learned that in anything other than the short term there really is no trade-off between growth and inflation. What we are trying to do now through monetary policy is to keep overall demand in the economy growing continuously broadly in line with the supply-side capacity of the economy – as a whole – to meet that demand. Both the previous Government and the present one set a low inflation target as the immediate objective of monetary policy, not as an end in itself, but in effect as a barometer of our success in keeping demand in line with supply. So the real aim of monetary policy these days is to achieve stability across the economy as a whole in this much wider sense. Now, there is not a lot, frankly, that we can do, directly through monetary policy, to affect the supply side – the underlying rate of growth that can be sustained without causing inflation to rise. That depends ultimately on the ingenuity, the productivity, and the flexibility, of the economy, though it can, of course, be influenced by the whole raft of Government policies, ranging from education and health, through taxation and social security, to the balance between regulation in all its forms, including regulation of the labour market, and productive efficiency.
The Central Bank, meanwhile, has adopted many measures aimed at providing liquidity to the markets and stimulating the flow of credit to the productive sector, in order to avoid a more severe disinflationary cycle and prevent risks to financial stability, which could raise the economic and social cost of the ongoing shock. Thus, following the June Monetary Policy Meeting, interest rates at different terms posted an important decrease, in line with the intensification of the monetary stimulus through the purchase of assets and the announcement of phase 2 of the Financing Facility Conditional on Increased Lending (FCIC). The decline in long-term interest rates was reversed during the final phase of the discussion of the withdrawal of part of the pension savings, consistent with the fall in the prices of the assets in which they are invested. However, after a set of measures were announced by the Central Bank and the regulators, and the Pension Funds Administrators (AFPs) implemented 3  a portfolio management strategy that mitigated the impacts on local markets, volatility has been reduced and interest rates have fallen again. Stock market valuations, meanwhile, have followed a trajectory below their foreign counterparts (Figure 11). Policy measures designed to confront the current crisis must be able to recognize its distinctive characteristics.

The adequacy of such measures has yet to be seen, but the swift and proactive response of policy makers is a positive step forward, as the most recent events have clearly demonstrated that it is likely to cost less to undertake preventive measures prior to a crisis than to clean up in its aftermath. Of course, economic conditions and institutions differ across countries. An effective macro prudential tool in one country might not work in another country. Therefore, policy makers need to take country specific factors into account in designing their own framework. It is also imperative for the academic community and international organizations to focus on this issue and develop a set of concrete policy tools that national authorities, at their own discretion, can use to identify, assess and manage systemic risks. Financial stability and central banks The critical importance of financial stability from a central bank’s perspective is not new. Smooth functioning of the financial system and payment mechanism has been a concern of central banks since their foundation. In fact, that is the reason they are called as “the bank of banks” or “the lender of last resort” for financial institutions. However, over time as the financial system gets more complicated and expanded exponentially, its supervision and regulation has been partially transferred to other institutions.
This is at least what the Riksbank believes (see Figure 13). For the service sector, however, the situation is different in the case of a floating exchange rate. If the service sector sets the norm for wage increases and the increases are higher than the level compatible with the inflation target, the Riksbank will, under normal circumstances, raise the interest rate. This normally results in a strengthening of the krona and a dampening of economic activity and inflation. For the manufacturing industry this leads to a doubleedged pressure on competitiveness in that wages increase more than in other countries at the same time as the krona is strengthened. However, the restraining effect of too high wage increases in the service sector is less direct and less tangible than the effect of too high wage increases in the manufacturing industry. The effect of too high wage increases in the service sector must be explained in several stages (higher wages, higher inflation, interest rate increases, lower real growth and so on) while the effect of too high wage increases in the manufacturing industry has a direct impact on the competitiveness of industrial companies. The normative role of the manufacturing industry is also dependent on more than the fact that it is a part of the Swedish economy that is exposed to international competition.

But, despite our efforts, banks regularly lose money in the same old way: while pursuing profits, growth and market share without adequate heed to risk. Unfortunately, they often find clever new ways of doing this, so that it isn’t always easy to see how the same old habits will be repeated. While today’s Committee members are, I’m sure, looking for some respite from the ambitious work programme of post-crisis reforms, we also need to recognise that nobody can guarantee a crisis-free future. Therefore, we must remain vigilant against old risks reemerging in new shapes and forms. I will speak shortly about some of the key influences that have shaped the evolution of the Basel Committee over the years. Before I start, however, I would like to warmly welcome a number of special guests today: •  First let me welcome Peter Cooke. Having headed the Committee for more than a decade, Peter has been our longest-serving Chair – and, probably more than any other person, he was instrumental in laying the foundations for the Committee’s subsequent achievements. Indeed, his contribution is best highlighted by the fact that, for many years, people did not refer to the Basel Committee, but to the “Cooke Committee” and the “Cooke ratio” – although I know Peter is the first to acknowledge that the credit for the Accord is shared by many. Peter – we are very pleased that you and your wife Julia can be with us today.
BIS central bankers’ speeches  5  There are a couple of other difficulties related to the use of national policies. The shock absorbing capacity of fiscal policy is in too many instances limited by the narrow fiscal space existing before the crises. The recession has further eroded fiscal positions and fiscal rules have failed to tame unsustainable fiscal paths so that the ability of fiscal policies in the EU to deal with another blow of crises is quite limited. Also, a need for national macroprudential policy immediately opens the issues of harmonisation and coordination on the international level in order to avoid unintended consequences, which I will comment in more detail later on. Additionally, for macroprudential policy to be effective it must be intrusive, affecting the “normal behaviour” of agents and markets 19, yielding benefits in reducing long-term costs generated by the systemic risk that makes it hard to attenuate public interest thus creating a central bank’s legitimacy paradox 20. Unconventional expansionary monetary policy, which was pursued after reaching the zero lower bound, and out of the fear of “the risk of doing nothing” 21, may be risk-inducing by fuelling search for yield behaviour. Abundant liquidity and low borrowing costs have the capacity to generate bubbles, confirming a notion that rational individual decisions may lead to irrational social outcomes – albeit as a reaction to highly non-conventional policies.

Prasarn Trairatvorakul: Managing Thailand’s turnaround Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Association of International Banks (AIB) Dinner Speaker Series, Bangkok, 15 May 2014. *  *  *  Introduction It is my great honor and pleasure to be back here in this auspicious occasion, and, first of all I would like to thank the Association of International Banks for inviting me to give a talk this evening. Much has changed, since I gave an address at this event last year. Though it is still warm and sunny in Thailand, the economic condition is not quite the same. The economy continues to slow down after accelerated domestic spending in the past few years, worsened by political uncertainty that continues to this day. On the external front, the recent global economic recovery and monetary policy abroad has evolved with less uncertainty than before. For this exclusive evening, it is timely for me to share with you the recent economic developments and outlook of the Thai economy as well as our roles to support sustainable growth of the Thai economy and safeguard financial stability amid prolonged political uncertainty. Recent and current economic situations Let me first start by describing the economic developments. Thailand’s recent economic circumstances have been unfavorable, but may have reached the trough. Internally, growth has decelerated since the second half last year, owing mainly to diminishing domestic spending.
Lim Hng Kiang: What’s next for hedge funds? Keynote address by Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of the Monetary Authority of Singapore, at the SkyBridge Alternative (SALT) Conference, Marina Bay Sands, 17 October 2012. *  *  *  Mr Anthony Scaramucci, Managing Partner, SkyBridge Capital Distinguished guests, ladies and gentlemen. A very good morning to all of you. I am very pleased to join you at the inaugural Asian leg of the SALT conference. Global outlook As we move into the last quarter of 2012, the world economic outlook remains uncertain. Advanced economies continue to encounter headwinds as deleveraging, fiscal consolidation and a still-weak financial system act as a drag on growth. With US and Europe facing economic difficulties, Asia will not be immune to a global slowdown given its heavy reliance on trade. This can be seen by Asia’s slowing growth in the last two quarters as weak demand in the G3, especially the Eurozone, exerted a sharp drag on exports from the region. 1 The IMF has recently revised its growth estimates downwards. Global growth is now expected to be 3.3% in 2012 and 3.6% in 2013. 2 However, this is dependent on the assumption that there will be sufficient policy action to ease financial conditions globally and that recent policy easing moves in emerging market economies will gain traction. Overall, global growth is expected to remain muted for an extended period.

In my opinion, a balance must be sought between the structure of ownership of a credit institution in resolution and the origin of the public funds which may be used in the process, with home country fiscal authorities covering the majority of the proceeds, once the asset quality review has proven that host country supervision was carried out correctly and effectively. I hope that an appropriate solution will be found to this matter, the same as in the case of the concerns voiced by some non-euro area countries in the early stages of the Banking Union project. What I have in mind is the issue of the representation in the decision-making mechanisms and that of the contribution requirements in the event of their opting in the Banking Union. Both concerns have been addressed during the negotiations. Specifically, the unequal status of non-euro area countries in the single supervisory mechanism decision-making bodies – given their lack of representation in the Governing Council of the European Central Bank, even though they enjoy representation in the Supervisory Board – has been addressed by establishing a mediatory body which would intervene in case a decision of the Supervisory Board is overturned by the Governing Council. BIS central bankers’ speeches  5  Furthermore, the current decision-making setup of the Single Resolution Mechanism ensures equal treatment of the countries participating in the Banking Union, regardless of whether they are Eurozone countries or countries that have established “close cooperation”.
We learnt this lesson the hard way in the wake of the GFC, and that is why the Committee's membership – comprising both central banks and supervisory authorities – is crucial to ensure that we benefit from both the system-wide and institution-specific perspectives. Moreover, given the increasingly cross-sectoral nature of many of today's financial stability issues – such as digitalisation and climate – I believe that more cooperation across different sectors – for example, on accounting, competition, anti-money laundering, data privacy, and taxation, to name a few issues – is also vital. In many instances, we are all working on similar issues from a slightly different angle, and so we would surely all benefit from sharing notes and ensuring that there are no unintended gaps or overlaps. Let me end by noting that cooperation need not mean full harmonisation. While having a single, uniform "global rule book" may be theoretically appealing, the fact is that we live in a heterogeneous world, with structural and cyclical differences across banking systems and jurisdictions. Moreover, many of our central bank and supervisory authority members are accountable to their national legislatures, so it is crucial that global standard setting bodies are perceived to be legitimate and transparent. This is why the Basel Committee has an extensive outreach programme with a wide range of stakeholders that go beyond market participants, to include academics, public sector bodies, legislatures and civil society. Indeed, there needs to be an appropriate balance between globally-agreed decisions and national measures.

The latest forecast took note of the global slowdown and foresaw a precarious recovery. Overall, at global level, it looks like we are facing a slowdown at the end of a long expansion rather than an outright downturn. However, uncertainty is rising markedly: trade tensions, geopolitical risks across the globe, political risks in Europe, etc. This makes the current juncture harder to navigate. In the US, the macroeconomic outlook has led the Fed to, somehow, pause in its normalization process. In emerging markets, potential problems could be brewing as geopolitical issues (from trade tensions to Middle East developments) are compounded with financial fragilities. Europe also has its fair share of uncertainties, with a few risks still unresolved. The macroeconomic outlook remains uncertain: last year slowdown was mostly driven by idiosyncratic developments but their consequences over the next quarters and, more broadly, the influence of the global slowdown are still unclear. According to the latest projections of the Eurosystem, GDP growth in the euro area would decelerate significantly in 2019 at 1.2% (after 1.8% in 2018) before gradually increasing to 1.4% 1/4  BIS central bankers' speeches  in 2020 and in 2021. This deceleration is mainly driven by Germany and by Italy. The Brexit situation is unsettled.
9  David Miles (2014) points out the significant widening in the spread between interest rates on retail loans and Bank rate since the crisis. Part of this might reflect the more generalised widening in risk premia but it could also reflect factors specific to the banking system. 10  Some of these institutional changes – requirements for banks to hold great quantities of liquid assets, for example – post-date the crisis; others (changes in the accounting for pension fund liabilities) have been in place for longer. A good source for these and other arguments is an ebook on secular stagnation published earlier this year by VoxEU (2014). 11  The numbers in Chart 9, which was published in a recent Quarterly Bulletin article by Phil Bunn and May Rostom, are derived from the British Household Panel Survey. This is less detailed than the ONS’s Wealth and Asset Survey but it goes back further. BIS central bankers’ speeches  7  Chart 7  Chart 8  Age an important determinant of net wealth  That much more important after mid-1990s  Source: IFS calculations using Wealth and Assets Survey 2006/08  Source: British Household Panel Survey (BHPS) and Bank calculations  Second, the implications of the trends in more recent years, during which bonds have done well but equities relatively poorly, are obviously more complicated. It depends on who, precisely, owns which asset.

7  6  Chart 6a  Chart 6b  Stylised effect of drop in discount rate  Decline in expected growth  Chart 6c  Chart 6d  Rise in two sided uncertainty  Rise in downside tail risk  This obviously depends on the sizes of the changes involved. Chart 6(c) simulates the effect of increasing the standard deviation of annual growth from 2% to 3%. Given that, even over the past twenty years, the true figure – for both world and UK growth – has been around 2%, that’s a fairly significant rise. Chart 6(d) shows what happens when you raise the perceived probability of an economic “disaster” by only 1% point (from 3% to 4%) and, although the simulated disaster is indeed very bad (a 20% drop in output) it’s not out of line with some of those that have occurred in the past (Barro 2009)). BIS central bankers’ speeches  Now these are extremely stylised simulations and one should obviously take them with a pinch of salt. Even within this basic framework there are plenty of other things that might have reduced the equilibrium risk-free interest rate.