samchain/econo-pairs-v1 huggingface dataset:
Jessica Chew Cheng Lian: Empowering financial consumers in the digital age Welcoming remarks by Jessica Chew Cheng Lian, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the BNM-OECD Conference on “Financial Education and Financial Consumer Protection in Asia-Pacific”, Kuala Lumpur, 11 December 2019. * * * As I made my way in to work this morning, I glanced through my smartphone to check on my monthly bills, how much pocket money my sons had spent over the week and on what. I also browsed for money changers offering the best exchange rates for my next trip. Having all this information available to me literally at my fingertips would have been unthinkable years ago. Today, I can organise my financial matters quickly and conveniently over a 20-minute car ride to work! It is my great pleasure to extend a warm welcome to all delegates to Kuala Lumpur and to the Conference on Financial Education and Financial Consumer Protection in Asia-Pacific. We are delighted to co-host this event in collaboration with the OECD. At risk of repeating what many others have already acknowledged, let me say at the outset that financial education and financial consumer protection have never been more important, or more confounding, than in the digital age that is upon us.

Predictive models used for decision-making must be subject to regular reviews against consumer outcomes and redress channels need to be aligned with the digital experience. Indeed, we should be concerned that while the delivery of financial products and services is taking on increasingly digital dimensions, when something goes wrong, processes for consumers to seek redress are still heavily manual in nature. As for financial education, I am reminded of the old adage by Sir Francis Bacon: “Reading maketh a full man, conference a ready man, writing an exact man”. Today’s digital consumer – at least many of them – has neither the patience nor time to read, confer or write. In fact, this is almost the entire premise of digital financial solutions – brevity, speed and convenience. The short attention spans of financial consumers are further constrained by an overload of information and misinformation. Digital solutions that can efficiently deliver financial education to masses of people, while simultaneously providing capabilities to tailor knowledge and information to one’s personal circumstances (such as through loan affordability calculators), have gained increasing traction. However, the fact that digital interventions are more cost-efficient, accessible and scalable, do not automatically make them any more effective than more traditional interventions in the past that have failed to achieve a consistent and lasting impact in changing behaviour. We need to develop reliable insights into behavioural influences that may help or prevent consumers from making good financial decisions. This sounds simple in theory, but is as complex as an understanding of human psychology itself.
According to rating agency assessments, the big banks’ intrinsic financial soundness improved significantly last year. However, two aspects should be borne in mind when assessing the big banks’ situation: First, their exposure to credit and market risk relative to their capital remains considerable. Although credit quality abroad has improved slightly, it still remains at historically low levels, particularly in the US and Europe. In view of this, lower-than-expected economic growth or a deepening of the debt crisis in Europe could potentially lead to a further deterioration in the creditworthiness of individual countries. Yet, the big banks’ exposures to sovereign debt in  BIS central bankers’ speeches  1  peripheral euro area countries are only moderate. Should the debt problems in the already vulnerable international banking system or in other sovereigns become amplified, however, these banks could face considerable losses. Second, the big banks’ economic capital situation is less comfortable than their very high regulatory capital ratios under Basel II might suggest. A considerable portion of both institutions’ regulatory capital is made up of capital components that proved to be not fully loss-absorbing during the recent crisis. These include, for instance, deferred tax assets, which are only realised if a bank is profitable, or certain hybrid Tier 1 capital instruments, which only become loss-absorbing in the event of bankruptcy. Thus, such capital components will no longer be recognised under Basel III and will be phased out by 2019. The transition period granted to banks gives them sufficient time to meet the new requirements.

This includes the following main elements: BIS Review 28/1998  ˝  -4-  • Clear responsibilities and objectives for the supervisor set out in a suitable legal framework • Operational independence for the supervisor and the necessary resources to do the job • A proper licensing regime for banks • Sound prudential regulations and requirements that address the main types of risk faced by banks • The means to enforce supervisory requirements and gather information through on-site examination and off-site review • The power to take action against problem banks, including closure • The ability to conduct consolidated supervision and to cooperate and exchange information with other supervisors at home and abroad 15. These may seem like statements of the obvious. But the necessary measures were evidently not fully in place in a number of countries in the region. Reforms are now being implemented, in some cases with the help of the IMF and the World Bank. These include tighter limits on loan growth and on lending to sectors such as property; tightening of the loan classification framework and provisioning requirements; more disclosure of non-performing loans; strengthening of on-site examination to introduce a more risk-based approach; and enhanced legal powers for the supervisors to take prompt action to deal with problem banks. In a number of countries, problem banks and finance companies have been closed down or are being merged and efforts are being made to realize as much value as possible from their bad assets.
This will make it possible to make instant payments 24 hours a day, seven days a week, and is expected to be ready at the end of 2018. It will also be prepared to be able to handle other currencies than the euro. One alternative could therefore be for 21 See “Payment patterns in Sweden” at www.riksbank.se/sv/statistik/betalningar-sedlar-och-mynt/betalningsstatistik/. 22 Swedish Retail and Wholesale Council (2018). “När slutar svenska handlare ta emot kontanter?” (When will Swedish traders stop accepting cash?) Research report 2018:1 http://handelsradet.se/wp-content/uploads/2018/01/Sammanfattning-2018_12.pdf. 23 Cash payments are instant: When the seller has received the payment in the form of cash, the payment is settled. If cash is unavailable, a need arises for the rapid transfer of money between different participants in other ways. Swish is an example of such a solution. 24 Companies combining financial services with software technology. 25 Retail payments are payments of lower value and between private individuals, companies and authorities. A distinction is made in retail payments between cash payments and payments in the form of account transfers. 26 Sveriges Riksbank “The Swedish retail payment market”. Riksbank Studies, June 2013. 9 [15]  the Riksbank to open a central bank account in Swedish kronor in the European system for instant payments. The ECB’s menu of systems for creating a single market for payments will mean that economies of scale can be utilised even more and is thus basically a positive development. There are also plans among some Nordic banks to create a pan-Nordic payment infrastructure with joint products.

The situation of a supply that is not adjusted to demand is reminiscent, in its way, of the situation with the gold standard that I mentioned earlier. However, there is nothing to prevent the supply of other crypto-currencies, which are close substitutes to Bitcoin, from increasing. At present, there are over 1500 different kinds of virtual currency and, if prices rise, there will probably be more. We have also seen how the value of Bitcoin, for example, varies heavily due to fluctuations in demand. This alone makes it difficult to use them as a means of payment. Even if Bitcoin is used for payments between certain private persons over the Internet and in a few on-line shops, it is likely that most owners of Bitcoins do not use them as a means of payment, but rather as an asset that is expected to increase in value. The situation remains that few shops accept them – for example, only three of the world’s largest on-line shops. 27 Even though they are called currencies, the crypto-currencies do not fulfil the criteria for what we usually call money that I mentioned earlier; at present they do  27 For more information on crypto-currencies, see Söderberg, G. (2018) “Are Bitcoin and other crypto-assets money?”. Economic Commentary No. 5, 2018. Sveriges Riksbank. 10 [15]  not work well as units of value, stores of value or means of payment as few shops accept them and their value fluctuates heavily over time.
The first essential is that the design features of the DIS itself should provide incentives for risk-minimising behaviour by market participants. This means in particular avoiding over-generous protection and limiting the scope of the DIS strictly to the protection of small depositors. There was general agreement in the public consultation that coverage in the DIS should be kept relatively low, in the range of $ to $ It appears that the lower end of this range would probably be acceptable. The second element in reducing moral hazard is to maintain effective supervision to curb excessive risk-taking by banks. In this connection, we are presently in the process of enhancing our supervisory system to make it more risk-focussed. The final safeguard derives from the market discipline exercised by those stakeholders in a bank – the uninsured depositors, bank creditors and shareholders – who are exposed to the risk of loss if a bank fails. Such persons have a vested interest in monitoring the behaviour of banks and in sending the appropriate market signals, in the form of withdrawal or higher cost of funds, or lower share price, to banks that are taking too much risk. To do this, of course, the market needs sufficient information about the financial position and performance of banks. Increased financial disclosure is something that the HKMA has been encouraging over the last few years. The other main issue to emerge from the consultation is that of cost.

As part of this effort, two key global standards are relevant to the trust industry – (i) transparency of beneficial ownership, and (ii) tax transparency through Automatic Exchange of Information (“AEOI”) between tax jurisdictions. These rules, when applied appropriately and consistently across all jurisdictions, can help to more effectively combat money laundering and other serious financial crimes including on tax. This in turn, will safeguard the integrity of the global financial system, of which the trust industry is a part, and create the conditions for sustainable growth. Increased focus on transparency of Beneficial Ownership 11. Let me first touch on the increased focus on beneficial ownership. 12. Given the risks of the misuse of corporate vehicles for illicit purposes, there has been increased international focus on transparency of beneficial ownership. Initiatives such as the FATF Anti-Corruption Work Group and the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes (“Global Forum”) are good examples. 13. There is also growing recognition that transparency of beneficial ownership will help to prevent and combat financial crimes. We can thus expect international standards setters such as the FATF to probe deeper in their assessment of how countries promote transparency of beneficial ownership. For example, the revised FATF Recommendations  2  BIS central bankers’ speeches  now include additional elaboration on the manner in which countries can go about enhancing the transparency of trusts.
There is a practical reason for such a review: we need to formulate the monetary policy that will take over from the IMF programme because the current arrangement will not suit once the capital controls have been lifted and Iceland has re-established its financial links with other countries. But there are also lessons to be learned from monetary policy implementation during the upswing and in the run-up to the financial crisis. The inflation target and the floating exchange rate did not cause the banks to collapse; after all, if they had, many more banking systems around the world would have fallen. But monetary policy was part of the chain of events here in Iceland, and a  8  BIS Review 39/2010  number of difficulties emerged in monetary policy implementation under the conditions then reigning. There will be opportunities to discuss this in greater depth later, but in my view, the inflation target as such was not the problem, as studies show that countries with inflation problems are likelier to be hit by banking crises, and fare worse in the event of such a crisis, than their counterparts without problem inflation. The problem was rather that the various elements of economic policy did not interact as they should have, and it has come to light that implementing a floating exchange rate regime is complex and difficult in very small, open economies with strong financial ties to other countries.

Many of them will remain in operation, and their guarantee capital owners will have an opportunity in the future to repurchase a stake in them from the Government. Although writing down guarantee capital now is painful, it is a far less drastic measure than the shareholders of the failed banks were faced with. On this occasion, I would like to encourage all savings bank investors and employees to take this opportunity to begin building their savings banks for the future. For the most part, domestic payment intermediation withstood the shocks of 2008 and 2009, but the same cannot be said of cross-border payment intermediation, as Icelanders discovered in the fall of 2008. The Central Bank plans to work with financial institutions and the appropriate authorities in the next few weeks, with the aim of reducing risk in payment intermediation. Furthermore, it is necessary to consider strengthening infrastructure and separating infrastructure from competitive operations. *  BIS Review 39/2010  *  *  7  Honoured guests. This is neither the time nor the place to conduct an in-depth analysis of the Icelandic financial crisis. We are now awaiting the release of the report from the Parliamentary Special Investigative Commission, which presumably will generate extensive discussion. We hope that discussion will aim at getting to the bottom of the matter: determining what went wrong and suggesting improvements.
In this regard, I welcome the European Commission Action Plan which provides one of the most ambitious policy blueprints ever published on sustainable finance. But we should go further, at least at the European level, including with the United Kingdom: we should work towards common standards for the green bonds market. At present, two are widespread: the Green Bond Principles (GBP) and the Climate Bond Initiative (CBI). It would certainly make sense to promote a convergence towards a harmonised European standard, leveraging the GBP approach in terms of processes and transparency, and building on the CBI approach with regard to taxonomy. There should also systematically be an independent measurement of the impacts. Last but not least, we need to infuse sustainability into our own activities, because our credibility also depends on our exemplarity. At the Banque de France, we took a pioneering step last month with the adoption of a Responsible Investment Charter. We are among the first central banks to commit ourselves to improving the contribution of our own funds and pensions portfolios to the environmental transition, and we intend to report annually on our progress. 3/4  BIS central bankers' speeches  ** Let me conclude by quoting one of the greatest European writers of the 19th century, Victor Hugo, who once wrote: “How sad to think that nature speaks and mankind doesn’t listen.” We now have sufficient evidence that climate change speaks for itself. It is high time that we listened and acted in consequence.

Green markets remain niche markets: green bonds still account for less than 2% of global debt issuance.xvii The success of the transition will also depend on our ability to broaden the sources of financing: we should not rely solely on green bonds. We also need more green loans, and more green financing in general, accessible to individuals, SMEs and start-ups. Green financing requires an innovation-friendly framework: green securitisation, green covered bonds, green derivatives, green crowdfunding platforms and green private equity should all be promoted. In addition, we have to carefully assess the impact of existing regulations. In the face of strong pressure from the financial industry, we must not however lose sight of our main goal as supervisors, which is financial stability. So far, there is no empirical or theoretical evidence that “green” assets are less risky and could warrant lower risk weights in the form of a “green supporting factor”. We should instead target brown assets with a “brown penalising factor”, because the transition risks will at some point materialise. This could be designed either as a dedicated Systemic Risk Buffer or be integrated into Pillar 2 requirements. The latter would have the advantage of spurring banks to improve their risk management capabilities for climaterelated risk. This leads me to the qualitative challenge. [slide 6] The risk of green washing may undermine the reputation of green markets and impede progress. To me, the prerequisite for an orderly development of the markets is a clear and harmonised taxonomy of green assets and sectors.
As you may be aware, Zambia has in the recent past recorded macroeconomic stability and growth in the economy, reflected in low and falling inflation, relative stability in the Kwacha exchange rate, falling lending rates and positive real GDP growth rates underpinned by strong private sector investment in all growth or priority sectors. Further, the financial sector has been stable, and continues to post growth. In 2006, the performance of the Zambian economy continued to be encouraging as it registered a positive growth of 6.2% in real GDP, marking the eighth consecutive year of positive real growth. You will note that over the period 2001-2006 growth in real national output averaged 5.0% per annum and was above the average population growth over the  BIS Review 113/2007  1  same period, while inflation declined to 8.2% in December 2006 from 15.9% in December 2005. Distinguished journalists, it is worth-mentioning that the growth, which has been broad-based has extended beyond the recovery of the mining sector and shown resilience to adverse shocks, such as droughts and record increases in oil prices, Agriculture, construction, transport and communications, and tourism sectors have been the other key contributors to the sustained increase in economic activity. A lot of progress continue to be made on the inflation front, as shown in September 2007, when inflation declined to 9.3% despite having risen to 12.7% in March.

We can note that the real repo rate is presently below zero, and according to the Riksbank’s forecast it is not expected to be above zero until the end of this year. If the forecast proves correct, the real repo rate will have been negative for a two-year period – this is very unusual in an historical perspective. The Riksbank’s assessment is that a long-term normal level for the real repo rate is around 2 per cent. 9 Seen from this perspective, the repo rate path thus indicates a very expansionary monetary policy. We have previously seen that in April the market was expecting a lower nominal repo rate in relation to the Riksbank’s forecast. Figure 6 shows that this also appeared to apply to the real repo rate. Figure 6 The Riksbank’s real repo rate forecast Per cent  Note. See footnote 8 for a description of the calculation of the real repo rate expectations. Sources: Reuters EcoWin, TNS SIFO Prospera and the Riksbank. 8  The real repo rate forecast is calculated as a mean value of the Riksbank’s repo rate forecast for the coming year minus the inflation forecast (CPIF) for the corresponding period. Prospera’s interest rate and inflation expectations are based on surveys carried out on 28 April and 28 April–7 May respectively. Interpolation has been used for the interest rate and inflation expectations to produce the expected repo rate for the coming year and inflation expectations for the corresponding period.
According to a 2018 global surveyxvi, trust in a better future was at 30% on average in Europe, compared with 45% in the United States and … 66% in India. But knowing where we come from – so many wars, and deep-rooted traumas – should not stop us from asserting the success of our European Union, and what we truly believe in. Just think of what Europeans have been able to accomplish in more than five centuries: from 1492 to the 19th century, from Amsterdam and Madrid to London and Paris, we, Europeans, were the inventors of the world. Yes, Europe also is “bound to leadxvii”, not out of fear but out of hope, not out of violence but out of exemplarity. In the current crisis of globalisation, Europe does not need to keep its head bowed; it should assert and propose a model – its own social, environmental and multilateral model… one that can fulfil the strong expectations of your generation worldwide: respect for our planet, desire for social justice and ethics. As young European leaders, this will be the opportunity and duty of your generation. In this quest, let me quote another illustrious European, Emperor Charles V, born in Gand, 40 km from Bruges. His motto can inspire us: “Plus oultre”… look beyond, take risks and strive for excellence. Good luck to you and thank you for your attention.

But the 1/20 linear rule of yearly adjustment towards it is too demanding and should be made more country-specific. Second, for the operational target, relying only on the current interest burden, as suggested by some, would be at the same time shorttermist and too partial. But interest payments could be included in the net expenditure target, unlike the EFB proposal which excludes them. This inclusion would give more fiscal space to governments as long as interest rates remain low. However, if tensions arise in interest rates, as in an economic recovery, they would have to make more of an effort on primary expenditure. The bottom line is that the long-term sustainability of public debt should be ensured by credible but flexible fiscal rules. Page 10 sur 14 Sound fiscal rules are also crucial to improve the quality of public expenditure and boost growth: spending on the future, on your generation – education, research, the ecological transition, investment – must take priority over spending on the day-to-day operation of public services, or on some of the social transfers. But unfortunately, this key debate over the quality of spending is the blind spot in our European democracies. C. Our lack of innovation? If the main explanation is neither social nor “macro”, and hence not Keynesian, it is more on the “micro” and Schumpeterian side. Over the last two decades, growth has had to confront numerous “headwinds”v, to quote a seminal article by the famous American economist Robert Gordon.