samchain/econo-pairs-v1 huggingface dataset:
In addition, we will consider the question of how settlement should be structured in central bank money in accordance with our second principle, and take a look at the SNB’s planned projects in this area. Finally, we stress that the seamless integration of tokenised money with existing and new payment and settlement systems is particularly important, especially if DLT and tokenisation become mainstream. This would satisfy the third principle. Forms of money Turning to the first question, in what form should central bank money be used for the settlement of token transactions? The table on slide 8 gives an overview of possible forms of money that could potentially be used as a means of payment in token transactions. On the top level, we differentiate between privately issued money and government-issued money, i.e. central bank money. On the second level, we differentiate between book money and token money. Token money is a new, DLT-based form of money. Like book money, it can be issued by both private issuers and the central bank. In the latter case, it is referred to as a central bank digital currency – CBDC for short. Depending on the user, a distinction can be made between retail CBDC and wholesale CBDC. Wholesale CBDC would correspond to a tokenised form of sight deposits held by commercial banks at the central bank. Retail CBDC, on the other hand, would be available to the general public; it would essentially be tokenised cash. Examples of private token money are tokenised account balances at commercial banks, and stablecoins.

At the country level, however, it must be said that production, employment, wages and investment are growing strongly. Our economy is totally back on its feet after the global recession and the outlook is good. 5  I am convinced that our country must grow in a harmonious way and the benefits of progress must spread to all the country. Economic growth and global integration generate sectoral and regional adjustments; some economic activities expand and some contract, with all the associated tensions. This is what progress is all about. To mitigate the costs of sectoral adjustments – and, above all, the social costs involved – without hurting economic growth, public policies face a tremendous challenge, but the instruments with macroeconomic reach such as the exchange rate are ineffective when it comes to resolving sectoral difficulties. Next week we will be presenting our Monetary Policy Report. We hope that our economy will continue dynamic over the next 24 months, boosting higher income and employment for our people. Our role is to ensure that the process is sustainable in an environment of stable prices. We will watch over it taking every measure necessary. In this presentation I have shown all the factors that may explain parity adjustments. However, many of the elements now pressuring the exchange rate may be reversed in the long term. As a matter of fact, today the real exchange rate is around the minimum levels believed to be consistent with its long-term fundamentals, hence the importance we assign to this issue.
According to Statistics Norway’s business tendency survey, the shortage of labour and intermediate goods is now at a higher level than during the booms in the 1980s and 1990s. The strong rate of growth has only to a limited extent fed through to a higher rise in prices for consumer goods and services. Consumer price inflation adjusted for tax changes and excluding energy products (CPI-ATE) has admittedly picked up gradually since late summer 2006, but in relation to the economic situation, underlying inflation remains low. The year-onyear rise in the CPI-ATE was 1.4 per cent in July. Other measures of underlying inflation show approximately the same rise in prices. According to our assessment, underlying inflation is between 1 and 1½ per cent, as it has been for a longer period. The year-on-year rise in the total consumer price index (CPI) has been just under ½ per cent in recent months. This is because electricity prices have been substantially lower this year than in 2006, when unusually high electricity prices due to low precipitation levels pushed up the year-on-year rise in the CPI close to the inflation target. In recent months, electricity prices have been at their lowest level since 2002. There are probably a number of reasons why inflation has been low in an environment of high economic growth. First, Norway’s terms of trade have improved. Prices for oil and gas, freight, fish, industrial commodities and engineering products have increased considerably. In addition, market growth abroad has provided market opportunities for Norwegian export goods.

Given the inflation target, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. Nonetheless, the interest rate path published in Monetary Policy Report 1/07 was higher than in Inflation Report 3/06. The reason for this is that the prospect of stronger-than-expected growth in both Norway and among our trading partners pointed to a higher interest rate path. On balance, this had a greater impact on the interest rate path than a stronger krone. Over time, however, the nominal exchange rate is not the main force. The most important influence on competitiveness in Norwegian business and industry and the purchasing power of the Norwegian krone is changes in the real exchange rate. The real exchange rate can be measured in a number of ways, for example by consumer prices or labour costs in Norway relative to our trading partners measured in a common currency. The real exchange rate has fluctuated widely over time and has deviated over longer periods considerably from the average level since 1970. The real exchange rate has nonetheless shown a tendency to revert to this level. Over time, the exchange rate acts as a buffer in the global economy. When economic activity is high in one country, an appreciation of the country’s exchange rate will have a dampening effect. Conversely, when there is a need to stimulate the economy, a weaker exchange rate will boost growth.
And also worthy of note is our work, together with the Ministry of Finance, on the initiative for the pension savings formation model through Individual pension capital. By our estimate, the work on this project is now quite advanced. We have undertaken a few rounds of both departmental and expert discussions. I very much hope that these changes will be accepted, as they will provide citizens with better quality of life, and generate a long-term source of funding for the economy, which is vital for investment development. And the last thing I wanted to mention, which I believe to be particularly important – when working on scenarios, on forecasts, on the budget – is our interaction with the Ministry of Finance and the Ministry of Economic Development in preparing a firmly grounded medium-term macroeconomic forecast. Because this forecast provides direction not only for the budget, but also for businesses in our economy and economic subjects, and I hope that this work will also help to ensure consistency of views on macroeconomics and economic policy, because this is also very important. In the last two years we really have been consistently working together, and in our opinion this work has indeed paid off. And to wrap up I would like to extend my thanks once again to all the 3/4  BIS central bankers' speeches  staff of the Ministry of Finance for the constructive cooperation that we have developed, for your high professionalism, and for your responsible and involved attitude to work.

Aside from anything else, for us this is a development which will increase effectivity of the monetary policy transmission mechanism, and as for the people – it provides them with an absolutely reliable and profitable alternative to deposits. We are not anticipating any negative impact on the banking system – currently the volume of such securities is not large, and under conditions of excess liquidity a small flow of funds in the form of OFZ deposits will not prove problematic for banks. Another project concerning government debt is the issuing of renminbi-denominated sovereign bonds. In our view, the issuing of renminbi-denominated sovereign bonds will provide Russian corporate issuers with a benchmark for borrowing securities. Major Russian issuers have already expressed interest in this financial instrument. All necessary financial infrastructure has now been created, and changes to the law have been introduced accordingly. We are in cooperation with the People’s Bank of China and currently there are no obstacles to this project’s deployment. We can now say that technically we are ready to issue these securities. In his speech Mr. Siluanov already mentioned some important initiatives, and here I would like to add to this list those initiatives which we consider to be important for the development of the financial sector. One of the major projects we are working on in cooperation with the Ministry of Finance is the reform of the leasing industry.
On the liability side, foreign currency liabilities fell slightly (from 8 to 7 percent of the total) in comparison with the previous year, whereas domestic liabilities increased by 16 percent. Currency in circulation is the indicator that bears the main weight in this growth (about 45 percent of the growth), followed by the “due to the government” item (about 29 percent of the growth) and “due to banks” item (about 26 percent of the growth). In general, the accounting balance sheet of the Bank of Albania and the income and expenditure statement reflect some basic developments that have occurred in the economy, where the Bank of Albania plays an important role. The revenues realised during 2006 outstripped the level of the previous year only by about 5 percent. The main impact on this growth was given by income on foreign currency interests (about 20 percent more than in 2005). This reflects the performance of interest rates in foreign exchange markets. This effect absorbs the reduction of “income from ALL interests” item (about 7 percent less than in 2005), which reflects an average interest rate below that of 2005, irrespective of the upward trend at year-end. On the other hand, interest expenses outstrip the previous year level by about 25 percent, reflecting the positive phenomena of the increased level of deposits and liquidity position in the banking system. Foreign currency interest expenses have been outstripped by 64 percent compared to the previous year, whereas ALL interest expenses have increased by 14 percent.

Multilingualism is important in our world today not only in terms of communicating and advancing in the global economy, but also in order to understand other cultures. It is important because we need to know more about other nations’ cultures and history to improve world relations. In this regard, in October 2004, the Bank entered into an agreement with the Embassy of the Republic of France for the provision of French lessons to members of staff. To date several members of staff have benefited from this programme and can comfortably speak, write and understand the French language. Ladies and Gentlemen, the importance of China on the world economy cannot be overemphasized. With the sustainable development of the Chinese economy and the increasing promotion of the status of China in the world, particularly the China’s access to the World Trade Organization, the successful hosting of the 2008 Olympics in Beijing and the World Expo 2010 in Shanghai, it is imperative to understand the Chinese language owing to its important role in business and trading. There is therefore a need for people to understand Chinese culture, economy, politics, and the lives of 1.3 billion Chinese people. Furthermore, the rapid growth of the Chinese economy has entailed greater demand for primary commodities like copper. Coupled with this, the demand for manufactured goods from China has increased in a number of countries including Zambia.
This is no easy task, because the future cost is unknown and far away, while an ongoing financial market crisis is a clear and present danger. Recent events have clearly shown that moral hazard is not just a textbook phenomenon, but is in fact a serious problem. Market players do indeed rely on the implicit insurance granted by central banks and other authorities, and central banks and authorities, having no choice, do indeed step in to support markets in a crisis. There is no easy way to address the moral hazard problem. However, the right time to tackle it is probably not primarily during a financial crisis, but during the preceding calm. Since a strict declaration of no intervention by a central bank may not be fully credible, regulation must aim to neutralise the distortion of incentives which financial market participants face because of moral hazard. Larger capital and liquidity requirements are probably a robust means of countering that distortion. Larger capital and liquidity requirements do not eliminate moral hazard, but they limit the risk of an accident and thus the cost to the public in the event of a rescue. Related to the moral hazard issue is also the issue of the risk-bearing capacity of a central bank. A central bank can only act as a lender of last resort if it has the means to act as one. This is especially important if the banking system has relatively large liabilities in foreign currency.

Indeed, I would subscribe to the idea that, by and large, the crisis does not provide clear arguments with which to question a particular business model or line of activities, such as retail intermediation, wealth management or investment services. It does however encourage us to analyse whether those banking activities are conducted in a sufficiently efficient way by specific institutions so as to make them profitable. That said, pure European retail banks admittedly face specific challenges in the current environment, which need to be effectively addressed in order to preserve the social function that those institutions provide. Let me mention three of the most obvious challenges. First, the low interest rate environment, which is putting heavy pressure on financial margins, particularly for institutions –such as most of those belonging to the ESBG - with little investment in securities that could be revalued as rates go down, and with much funding obtained from retail deposits, which impedes a full transmission of very low or negative market rates to funding costs. Second, the accumulation of non-performing loans in several regions of the euro zone. This is particularly a challenge for banks, again mostly retail banks, with a significant concentration of exposures in a single country or even a single region subject to a subdued macroeconomic performance in the recent past. Third, regulation. Banks are now facing new requests to raise more and better-quality capital. More importantly, significant institutions will have to hold on their balance sheets substantial volumes of liabilities that could be subject to bail-in.
A long term of office may also be advantageous from the standpoint of accumulation of experience, and may determine the capacity of influence in the different international fora in which the senior officials of supervisory bodies take part. In this respect, the term of office of the Governor (and of the Deputy Governor and Council Members) of the Banco de España – currently six years, nonrenewable in the case of the Governor and the Deputy Governor – although longer than a Parliamentary term, is relatively short by international standards (see Annex 4).8 A good benchmark for the future could be the term of office of the members of the ECB’s Executive Board which is set at eight years and is non-renewable (as is the case at the Bank of England). The explicit prohibition of renewable terms of office is, in my opinion, a key element that should be preserved. While few of our central bank peers share this characteristic, non-renewable terms of office are warranted because they nullify the incentives for the incumbents in the highest positions of authority at those institutions to ingratiate themselves with those who decide on their possible re-election. In the case of the Banco de España, as I have mentioned already, the Governor and the Deputy Governor have non-renewable terms, but the members of the Governing Council do not, since their term is renewable once. Non-renewable terms could therefore also be considered for members of the Governing Council.

The arrival of the euro also had a positive effect on growth, in spite of the serious difficulties during the crisis. Since 1999, GDP per capita has been growing at 1.2%, which is 0.1% higher than in the other euro area countries and much higher than during the early years of our democracy. Recently, some people have tried to blame the euro for the length of the financial crisis in Spain and have advocated control over monetary policy interest rates and exchange rates. What they 1/2  BIS central bankers' speeches  often forget is that being a member of the euro area enables Spanish households and businesses to benefit from lower real interest rates, lower inflation rates and reduced macroeconomic volatility, all of which boost productive investments and make a vital contribution to the sustainability of public finances. Furthermore, it is not true that structural currency devaluations solve economic crises. Devaluations are short-term measures. In the long term, the competitive boost they provide is eroded by the higher inflation they cause. And, in a complex system of global production chains like the one we have today, devaluations can make it harder for businesses to plan. The euro is also the second-most important currency in the international monetary system3, which strengthens Spain’s credibility in a global context. It’s true that the crisis revealed significant institutional shortcomings in the structure of the monetary union, but it’s equally true that European countries have taken this on board and carried out substantial reforms.
4  As the complex chains in shadow banking unravelled, a spiral of asset fire sales and liquidity strikes followed, threatening the stability of the entire system and withdrawing access to credit from millions of households and businesses. In response, the FSB set out a comprehensive framework – the Shadow Banking Road Map – to strengthen oversight and regulation of shadow banking. A decade on from the ABCP crisis, the toxic forms of shadow banking at the heart of the crisis – with their large funding mismatches, high leverage and opaque, off-balance-sheet arrangements – no longer represent a global stability risk. 5  And other, more constructive, forms of shadow banking, including money market funds and repo markets, are now subject to policy measures that reduce their risks and reinforce their benefits. In tandem, global assets under management have grown rapidly from around $ trillion a decade ago to $ trillion in 2015, equivalent to 40% of total financial system assets. 6  This growth creates new sources of funding and investment, promotes international capital flows, reduces reliance on bank funding, and brings welcome diversity to the financial system. 4  Broker dealers were involved in market intermediation with short-term funding, opacity in securitisation gave rise to imperfect credit risk transfer, and money market funds were major purchasers of risky bank certificates of deposit and of asset backed commercial paper. 5 These risks have been addressed through reforms to money market funds in the US, broker dealer regulation and securitisation reforms.

For institutions that are legally or contractually obliged to attain specific returns it is difficult to comply with these requirements at the moment. The current low interest rate environment is a temporary phenomenon attributable to the severe economic turmoil resulting from the financial crisis. We expect that the economy will continue to recover, and that interest rates worldwide will increase again. The first signs of this are evident in the US. However, looking at the international situation, it is also clear that the interest rate in Switzerland cannot be higher than in the rest of the world, because otherwise we would be threatened with major inflows into the Swiss franc. Some claim that negative interest goes against human nature and deprives the economy of an important yardstick. However, that is not the case. The interest rate is the reward for forgoing consumption. The resources saved in this manner are basically available for investment. Investment, in turn, must generate a return that allows the interest to be paid. When uncertainty is high, savings increase, on the one hand. On the other hand, however, the increased uncertainty or the lower potential for returns causes businesses to postpone investment. Under these conditions, therefore, the interest rate falls; in extreme circumstances, it may even move into negative territory. Low or negative interest rates are an expression of the fact that, in the current situation, there is a very high supply of savings capital worldwide and a relatively low demand for investment.
In short, it looks as if events in financial markets are beginning to affect the terms offered to retail borrowers. This should act as a brake on consumer spending and investment. But the size of this effect is highly uncertain, partly because so far it seems to be focussed on certain groups. Much may depend on whether recent developments shake consumers’ confidence in future income growth and employment – and so far that does not seem to have happened. What about possible longer term effects on the price and availability of credit? Over the past three years, competition and financial innovation have put steady downward pressure on the rates at which banks have been prepared to lend, at any given level of Bank Rate. Between 2003 and the beginning of this year, 2-year-fixed mortgage rates fell by around 50bps relative to the wholesale interest rates they are usually priced off. This is one reason why credit has gone on rising so strongly, despite increases in official interest rates. At this stage, we can only speculate about what will happen next. My guess is that over the next 3-5 years, we will see a sustained – though not necessarily complete – reversal in these trends, as banks re-appraise the risks around certain business models and complex financial instruments. This would increase the cost of credit to final borrowers, for any given policy rate.

A more automatic system of activation could solve many of these problems, while at the same time introducing an additional automatic stabiliser for the lending and/or the business cycle. However, given that we do not have much experience to date with the working of this tool, the calibration of an explicit policy rule would be premature and the principle of “guided discretion” seems a second-best option. Assesing how to use the different macroprudential tools Let me now turn to the second issue I wanted to tackle. Systemic risk, unlike inflation or the public deficit, is multidimensional and this is why having different macroprudential tools at the disposal of the macroprudential authority is crucial. However, it is not always obvious how to discriminate among the different macroprudential tools, in particular given the potential interactions between them. A first example is the decision to activate the CCyB as opposed to activating a sectoral CCyB. It is perfectly feasible that some credit segments show exhuberant behaviour in the economy without any evidence of the credit cycle being in an expansionary phase. The activation of the countercyclical capital buffer to address a situation of this type does not seem advisable. If this particular activity is sufficiently profitable (at least in the short term) and that is why it is gaining weight in the overall credit portfolio, the increase in the aggregate cost of financing derived from the activation of the CCyB could be counterproductive.