samchain/econo-pairs-v1 huggingface dataset:
Veerathai Santiprabhob: Recent developments and the way forward for the Thai economy Speech by Dr Veerathai Santiprabhob, Governor of the Bank of Thailand, at the Japanese Chamber of Commerce (JCC) Dinner Talk, Bangkok, 8 March 2016. *  *  *  Mr. Akira Murakoshi, President of the Japanese Chamber of Commerce, Mr. Akihiro Uchikawa, Minister of the Embassy of Japan, Members of the JCC Board, Distinguished guests, ladies and gentlemen, A very good evening to you, I would like to thank the Japanese Chamber of Commerce for inviting me to address the prestigious group of audience at this special event. I assume that many of you had become quite acquainted with my predecessor, Governor Prasarn, as he had joined this annual dinner talk every year over the past five years. Although this is my first time speaking at this event, I would say I feel more like coming to meet my longtime friends, thanks to your warm welcoming and also to the longstanding ties between Thailand and Japan. With over 5,000 firms actively operating in Thailand, the coverage of Japanese businesses extends over more industries than that of any other countries investing in Thailand, both in the real and the financial sectors. As many of you know, just two weeks ago, I was speaking at the opening ceremony of the Sumitomo Mitsui Trust Bank in Thailand, which marks another milestone for a closer bond between the Japanese and Thai financial systems.

And third is the macroprudential oversight of which the key components should include a good process of macroprudential surveillance, an effective coordination between different supervisory agencies so that timely actions can be taken, and calibration of additional macroprudential overlays as needed, which can either take the form of measures implemented at an industry-wide level aimed at taming the credit cycle, or specific capital and liquidity buffers for selected systemically important institutions. And finally the fourth pillar is market development and central bank’s response to improve market efficiency, transparency, as well as the ability of central bank to response comprehensively to the emerging situations, especially liquidity provision and the supportive legal framework. These four pillars, in my view, are the key minimums for implementing an effective financial-stability orientation policy. Thank you. BIS Review 130/2009  5
Tharman Shanmugaratnam: Corporate governance developments in Singapore and the region Speech by Mr Tharman Shanmugaratnam, Deputy Chairman of the Monetary Authority of Singapore, Minister for Education and Second Minister for Finance, at The OECD Asian Corporate Governance Roundtable, Singapore, 27 June 2007. *  *  *  Introduction Good morning and a very warm welcome to Singapore. It gives me great pleasure to be here at the OECD Asian Corporate Governance Roundtable. The last time the Roundtable was held in Singapore was in 2001, and we are happy to be able to host this important international gathering once again. 10 years after the 1997 Asian Financial Crisis, this year’s Roundtable gives us a good opportunity to do a stock-take, to see where we are now and identify the areas where we must continue to move forward in the region. Avoiding complacency in a benign economic environment The macro picture amongst the Asian countries is vastly improved. The Asian economies are by and large showing strong growth, driven in large part by increased trade and investments both within Asia as well as with the rest of the world. Investor confidence is back. Capital inflows are back to the levels that existed before the Asian crisis. And strong inflows of portfolio capital and foreign direct investments have replaced bank lending as a dominant source of capital inflows. Last year, the ASEAN-5 countries, for example, attracted some $ billion of foreign direct investment, significantly greater than the $ billion seen in 1997.

8, 9 All else equal, the powerful strengthening of global linkages through steadily increasing trade has affected inflation dynamics in two ways (Chart 6). First, imports have become much more important components of costs. Unlike commodity shocks, changing cost pressures of intermediate goods take time to work through the supply chains into final goods prices. 10 This means that domestic monetary policy cannot focus exclusively on domestic marginal costs, since inflation at policy-relevant horizons is increasingly influenced by imported cost pressures. Second, there is the possibility that increased competition from overseas might have changed mark ups over costs and how they vary over the cycle. In other words, the slope of the Phillips Curve may have changed. The direction is unclear. Stronger competitive pressures might reduce the pricing power of domestic firms, limiting their ability to change prices over the cycle and so flatten the domestic Phillips Curve. Working in the other direction however, greater competition should raise firms’ willingness to re-set their prices, raising the slope. The balance of these effects is an open question. 11 Some prominent studies point to a flattening of Phillips curves across advanced economies. 12 For the UK, however, the evidence is less clear cut. When costs are measured  6  The average inflation expectations of professional forecasters at the two to three-year horizon is consistent with its historical average. And measures derived from financial market prices, such as from swaps, also remain close to historical averages.
In the area of the SSM, these restrictions are particularly significant at the moment since, given the variety of supervisory practices and cultures in place, only adequate codifying of rules and procedures can help to ensure that banks are treated equitably, even if this means that some of the benefits, in terms of supervisory effectiveness, that an appropriate amount of discretion involve, have to be sacrificed. Clearly, as the new European supervisory regime matures, we must strive to develop a specific action framework that incorporates the best practices and that is sufficiently robust to enable its application to be adapted appropriately to each specific circumstance. Thank you for your attention. 4  BIS central bankers’ speeches

For example, recent work using the New York Fed’s Survey of Consumer Expectations shows a decline in longer-run inflation expectations by nearly half a percentage point over the last six years, to about 2-1/4 percent.7 This decline reflects both the low CPI inflation of recent years and demographic shifts, where members of older cohorts with high expectations (I’m afraid to say) die off. 2/4  BIS central bankers' speeches  If inflation continues to underrun target levels similar to the past six years, the downward trend in inflation expectations will likely continue. But there is still time to avert this fate—in this case, it’s fortunate that the young are impressionable. If inflation is sustained at target levels consistently, a further downward trend in expectations can be forestalled. But expectations depend on deeds, not just words, which brings me to the issue of accountability. One reason inflation targeting has been so successful at keeping inflation low and stable is that policymakers held themselves accountable for consistently delivering low inflation near the target. Finally, as well as holding ourselves accountable, policymakers need to be transparent and communicate their actions and the rationale behind them. Much has been made about whether central banks can credibly commit to future actions and outcomes, but the experience with inflation targeting gives me encouragement. Inflation-targeting central banks have proved beyond a doubt that they could bring inflation down and keep it low and stable. This was not a foregone conclusion, and initially there were doubts about whether inflation targeting would succeed.
4  For a review of current studies and an analysis of the effects in Sweden, see De Rezende, R. B., Kjellberg, D. and Tysklind, O., “Effects of the Riksbank’s government bond purchases on financial prices”, Economic Commentary no. 13, 2015, Sveriges Riksbank. BIS central bankers’ speeches  5  The bond purchases have had the intended effect on interest rates To get an idea of the effects of the bond purchases, staff at the Riksbank have studied the financial markets’ immediate reactions to the announcement of the decisions.5 On those occasions on which the decisions were deemed unexpected, yields fell over the days on which the decisions were announced. In addition, they fell in comparison to corresponding yields abroad, for example in Germany. It therefore seems reasonable to conclude that the bond purchases have pushed interest rates in the economy down – Swedish government bond yields are now probably lower than they would have been without the purchases. These effects are in line with those observed in studies of the Federal Reserve’s bond purchases in the United States. Our analyses of the financial market’s reactions to the monetary policy decisions have also concluded that the decisions have entailed a weakening of the krona exchange rate. It thus seems to be the case that the additional monetary policy measures that we introduced over the past year have given us lower interest rates and a weaker krona than we would otherwise have.

The risk otherwise is that we will create new problems that may lead to low growth further on and new difficulties for monetary policy to reach the inflation target. I am concerned about Sweden’s position as one of a handful of countries in Europe that has not succeeded in getting a functioning macroprudential policy into place. With such a large financial system and the obvious major vulnerabilities present in the Swedish economy, our focus should be on urgently adopting measures. Valuable evaluation of monetary policy We thus have an unusual time behind us that has required unusual measures over the past year. Under such circumstances, it is natural to wonder, for example, how well the inflation target is functioning and which areas monetary policy should be responsible for. It therefore seems appropriate that the Riksdag Committee on Finance has just published its latest assessment of monetary policy.6 First and foremost, I would like to say that it has been a privilege to have my work reviewed and assessed by people with such impressive academic and practical credentials in the area of monetary policy as those possessed by Messrs. Goodfriend and King. Assessments are a key ingredient in every kind of work to improve operations and this assessment contains many reasonable opinions and suggestions for discussion and further work. We will do this over the spring, before submitting our consultation response in April.
The European Central Bank, on the other hand, has followed a more hawkish attitude and focused on attaining its primary objective, which is price stability. The disparity between the consumption patterns is another factor causing divergence in monetary policies. In comparison to the industrialized world, food expenditures in developing countries constitute a larger share in the basket of consumer prices. That is why increases in food prices typically lead to higher increases in the inflation rates of developing countries. This is one of the reasons why central banks of developing countries focus more on price stability and display a tighter monetary policy stance in recent months. To put it in figures, since mid-2007, policy rates in sixteen major developing countries have increased by 110 basis points on average – in contrast to developed countries where policy rates have been cut by 98 basis points on average. The exchange rate regime also affects the conduct of monetary policy. As you may all know, many developing countries peg their currencies against the US dollar or the Euro. As the US dollar has lost value against many currencies in recent years, this has led to sharp increases in the inflation rates of those economies whose currencies are pegged to the US dollar. In the period of January 2006 to May 2008, inflation rates of countries whose currencies are pegged to the US dollar have increased three-fold to 15.1 percent from 3.9 percent.

Ladies and Gentlemen,  BIS Review 13/2005  1  On this occasion of the official launch of RHB Islamic Bank Berhad, it is with pleasure that I congratulate the RHB Group. With this structure, the management team of RHB Islamic Bank will now have the potential to maximise the full advantage of the universal Islamic banking licence issued, which allows a wide range of business to be undertaken ranging from retail and corporate banking to investment banking and fund management. Such Islamic subsidiaries are expected to exploit new growth areas such as wealth management and profit and risk sharing ventures, which are newly emerging as rewarding banking activities. In this connection, it is vital that, at the onset, the business strategies are aligned with the right people by developing a pool of the required skills and talent, and putting in place the proper risk management systems and good corporate governance practices. I welcome the initiative to establish the Islamic subsidiary by the RHB Group and look forward to the contributions of RHB Islamic Bank to the growth of the Islamic banking industry. This advance forward is the first step that brings us to the third strategic phase of the institutional development of Islamic banking and finance in the country. I wish RHB Islamic Bank every success in this endeavour. I trust that the Islamic financial community would look forward to benefit from this new development. Ladies and Gentlemen, Dengan lafaz Bismillahirrahmanirrahim, saya dengan sukacitanya merasmikan pelancaran RHB Islamic Bank. Sekian, terima kasih.
In Sweden, strong productivity growth and an increased share of imports from low-cost countries in recent years have contributed to low inflation (see Figure 1). This made it possible for the Riksbank to cut its interest rate and hold it down in a situation where the economy was expanding rapidly. Now these factors are pushing in the other direction. Rising global demand is pushing up prices on energy, commodities and grain. This has forced up world market prices. The strong economic activity in recent years has meant that resource utilisation in the Swedish economy is now at a high level and that cost pressures have therefore risen. Judging by the wage statistics, wages so far have increased at a moderate rate, but the earlier strong productivity growth has ground to a halt and productivity even declined last year. In the same way as the strength in the rate of productivity surprised the Riksbank and many other forecasters earlier, last year we were surprised by the strength of the downturn. An important task for forecasters will be to estimate to what extent the most recent decline is temporary or to what extent it involves more of a trend decline in growth. Let me clarify a little before I continue. When I talk about productivity today I mean productivity measured as production per hour worked, that is, labour productivity. Upswing in productivity growth since the beginning of the 1990s How has productivity developed in recent decades?

The need to find a buyer to replace a seller can be expressed in the equivalent statement that the maturity of the liability is extremely long, in this case indefinite. The real problems stem from liabilities with very short maturities. These occur with debt finance, whether in terms of bank deposits payable on demand or longer-term debt finance which has almost run to maturity. In these cases, depositors who wish to withdraw their funds do not have to find replacement depositors. They simply take their funds out. The result is that, if this rush to the exit is on a sufficiently large scale, banks find themselves on the receiving end of a liquidity run. Such runs can occur even if the fundamentals are sound, although they are more likely when the fundamentals are weak. And the banking systems of some emerging markets compounded the problem by borrowing in foreign currency at short maturities and investing the proceeds in domestic currency assets at longer maturities. This was indeed a recipe for instability. The importance of short-term debt finance in the reversal of capital flows in recent years is clear. Virtually the whole of the $ billion reversal of flows to the five Asian crisis countries was accounted for by swings in short-term debt finance. And 80% of this swing resulted from changes in the net flow of finance from commercial banks.
If shareholders know that they have to absorb potential  2  Barry Eichengreen and Michael D. Bordo: “Crises now and then: What lessons from the last era of financial globalization?”, NBER working paper 8715, January 2002. 3  “Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience”, April 2008, and the recommendations and principles to strengthen financial systems that the FSB published on 2 April 2009. 2  BIS Review 115/2009  future losses rather than passing them on to taxpayers, they will likely become less willing to let management engage in excessively risky activities. Ultimately, this incentive effect can help make future crises less likely. Strengthening capital requirements The crisis has nakedly exposed the dangers of excessive leverage. It also revealed a number of fundamental weaknesses of existing capital requirements. While model-driven risk-weighted capital requirements are sensible and should be maintained, they are not perfect and very likely never will be. Most of us have had to learn the hard way that the modeling of risk involves substantial risks itself. Despite risk-weighted capital ratios that in most cases exceeded the regulatory minima, leverage was a key source of vulnerability going into the crisis. Excessive leverage not only intensified the impact of mistakes on the financial situation of individual banks. It also amplified the crisis as ongoing deleveraging in the industry inevitably put downward pressure on financial markets and on the real economy. It is now also clear that banks were undercapitalized at the start of the crisis.

With the support of the G20 leaders, the Financial Stability Board (FSB) has initiated an impressive number of reform projects. 3 Good progress has been made on many measures. In some important areas, however, decisions have yet to be taken. In line with proposals by the FSB, I believe we need to pursue a dual-track approach to reforming the global financial system, combining preventive measures with measures facilitating the orderly resolution of large international banks in the event of a future crisis. An ounce of prevention We have all been told that an ounce of prevention is worth a pound of cure. Considering the enormous costs associated with the cure of the current crisis, this holds especially true when it comes to financial stability. Most importantly, we need to strengthen the shock absorbers of the financial system. In the context of banks this means that they have to hold more capital and more liquidity. Strengthened shock absorbers in the form of higher capital and liquidity buffers have several beneficial effects. Bigger buffers enable banks to absorb larger negative shocks without triggering an idiosyncratic, let alone a systemic crisis. Furthermore, bigger buffers ensure that banks themselves bear a larger share of their downside risks. Not only does this reduce the potential burden for taxpayers, but it also creates stronger incentives for the banks themselves to operate prudently.
The practical question is how far systemic surcharges take us in tackling the systemic risk externality. In other words, at current levels by how much have systemic surcharges reduced  BIS central bankers’ speeches  3  expected losses for the financial system? That is an empirical question. To assess it, consider the impact of capital surcharges on the expected losses facing the 29 institutions identified by the FSB. Using each of these banks’ balance sheets, we generate a measure of default probability using the Merton (1974) contingent claims model. We assume that the base level of equity for these banks is 7% (the new Basel III minimum) and that, in the event of default, they suffer losses on their assets of around 30%.4 To keep things simple, banks’ assets are assumed to be (log-)normally distributed, in line with Merton (1974), and default occurs only when a bank’s capital is fully exhausted. Assume initially that default risks across banks are independent. This is a highly conservative assumption, as in practice bank default probabilities are highly correlated at times of stress. Indeed, bank correlation coefficients in crisis often head towards one. For that reason, this thought-experiment provides a lower bound on expected losses across the financial system. Chart 5 shows expected losses across the 29 banks at different levels of the systemic surcharge. In the absence of any surcharge, expected losses across the system are just less than $ billion per year.

(2008), “Optimal industrial structure in banking,” in Handbook of Financial Intermediation, Arnoud Boot and Anjan Thakor, eds. Amsterdam: North-Holland, 133–162. Miles D, Yang J and Marcheggiano, G (2012), “Optimal Bank Capital”, Economic Journal. Noss, J and Sowerbutts, R (2012), “The Implicit Subsidy of banks” Bank of England FS Papers Series, FS Paper No 15. Panizza, U and Arcand, J-L and Berkes, E (2012), “Too Much Finance?,” IMF Working Papers 12/161, International Monetary Fund. Philippon, T and Reshef, A, (2009), “Wages and Human Capital in the U.S. Financial Industry: 1909–2006,” NBER Working Papers 14644, National Bureau of Economic Research, Inc. Pulley, L. B. and Y. M. Braunstein (1992), “A composite cost function for multiproduct firms with an application to economies of scope in banking”, Review of Economics and Statistics, 74(2), 221–30. Reinhart, C and Rogoff, K, (2010), “Growth in a Time of Debt,” American Economic Review, American Economic Association, vol. 100(2), pages 573–78, May. Segoviano, M and Goodhart, C (2009), “Banking Stability Measures,” IMF Working Paper 09/04 (Washington: International Monetary Fund). Schanz, J, Aikman, D, Collazos, P, Farag, M, Gregory, D and Kapadia, S (2011), “The long-term economic impact of higher capital levels”, Bank of England, Mimeo Tarullo, D (2012), “Financial Stability Regulation”, Speech At the Distinguished Jurist Lecture, University of Pennsylvania Law School, Philadelphia, Pennsylvania. Wagner, W (2009), “In the Quest of Systemic Externalities: A Review of the Literature”, mimeo Wheelock, D.C., and Wilson P.W. (2012), “Do Large Banks have Lower Costs?