samchain/econo-pairs-v1 huggingface dataset:
Prasarn Trairatvorakul: Thai monetary policy in the environment of excess global liquidity Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Thailand Focus 2011 – Enhancing Thailand’s Competitiveness over the Next Decades, Bangkok, 28 March 2011. *  *  *  Ladies and Gentlemen, It’s an honor to speak before you today at the Thailand Focus conference. Early this morning you heard Prime Minister Abhisit Vejjajiva speak on Thailand’s competitiveness; and later Finance Minister Korn Chatikavanij on fiscal policy. To close the circle, I will speak on monetary policy to complete your view on the investment opportunities and prospects of the Thai economy. As international investors, I believe, you want to have a firm understanding of the country’s policy environment. This is what I will discuss today – the monetary policy options going forward in light of my assessment of the global economy and the Thai economy. The assigned title of my talk today is “Thai Monetary Policy in the Environment of Excess Global Liquidity”. Let me stress that I have a different opinion on the issue of excess global liquidity than most. Global liquidity is currently problematic in the sense that it is fluid, rather than excessive. Let me discuss why. First, let me give you my assessment of the global economy. The global economy has entered a phase of fluid global liquidity amid uneven recovery and shifting risk appetite.

This is the domain of the authorities. All taxes in Norway must be paid in Norwegian kroner. The governments of most countries have defined the country’s banknotes and coins as legal tender. This means that a buyer is entitled to make a payment in the country’s currency, and a seller can require payment in this currency. Legal tender cannot be refused as payment by either party. 4 Buyer and seller can of course agree on a different method of payment if they so wish. Second, trust is related to the role of the central bank. In most countries, it is taken as a matter of course that the central bank guarantees the value of the currency. The central bank is subject to democratic control. In Norway, Article 75 of the Constitution states that “It devolves upon the Storting [Norwegian parliament]… to supervise the monetary system of the realm”. At the same time, the people’s elected representatives have conferred independence on the central bank in the use of its instruments by means of the Norges Bank Act. This underpins trust in the central bank and ensures the democratic legitimacy of the system. For Norway’s founding fathers, another important objective was to ensure that the king and his government did not have direct access to the banknote printing press. Past experience had 2/9  BIS central bankers' speeches  shown that kings were not immune to temptation. The stability of the value of the currency in Norway is guaranteed by Norges Bank, and ultimately by the Norwegian government.
But a more conservative monetary policy in expansionary phases would not only have favourable effects on tempering the amount of credit, it would also improve credit quality. Monetary policy also affects how banks assume risks. Researchers at the Bank of Spain have shown that a long period of low interest rates contributes to relaxing banks' credit granting standards. The market pressure to maintain high returns in a setting of low interest rates and, therefore, of lending offering very tight income margins, leads some banks to extend credit to individuals and firms with a greater risk profile. Also, the expansionary monetary policy stance means this greater risk takes longer to materialize, which in turn stimulates ever greater increases in this type of risky investment. Banks thus increase their risk profile by financing individuals and companies with a history of default, or by increasing the credit extended to new borrowers who, lacking a credit record, entail a greater level of uncertainty and, therefore, of potential risk to the bank. Finally, in an environment marked by low interest rates and the search by banks for yield, the general conditions of risk acceptance and selection are substantially relaxed, which translates into the riskier granting of credit that will materialise once the cycle turns down.

If we add to the foregoing ingredients a strong increase in banking competition, both among deposit institutions and between these and other less regulated non-bank competitors, the pressure to increase the risk profile in order to maintain past profit levels simply heightens banks' incentives to take on more risk in upturns. Having commented on the problems of excessive credit growth and how a more conservative monetary policy can mitigate them, I would like to move forward to the second part of my speech, and concentrate on the resilience of the banking system and the role of supervisors. We should acknowledge that the resilience of the financial system in general, and of credit institutions in particular, plays a key role in softening cyclical downturns. Evident in this crisis has been the notable weakness with which many banks have faced the downswing. To increase their resilience, banking regulation policy can perform a pivotal function by curbing  2  BIS Review 149/2008  the countercyclical behaviour of capital, so that it protects banks and prepares them for the crisis. And to discuss this, I am bound in this second part of my speech to refer to Rojo (the Spanish for red, and “Rot” in German). Again, this is not only a type of wine but the name of the former governor of the Bank of Spain entrusted with steering and successfully ensuring the Spanish economy’s entry into the euro area.
The evolving cyber threat landscape in Europe Besides the undeniable advantages of information and communication technology, the increase in users and data on digital platforms, in cloud computing and across networks has also created greater opportunities for cybercrime. There are a variety of agents involved: criminals, hacktivists or nation states. They may have different motives: financial gain, espionage, disruption and destabilisation. But what they all have in common is that they are steadily increasing their level of sophistication and exploring ways of attacking. A sound operational risk management and IT security framework are the first line of defence. But resilience to cyberattacks means more than that. Unlike critical failures, the likelihood of cyberattacks cannot be mitigated. A paradigm shift is necessary. We have to accept that cyberattacks are inevitable and that attackers are persistent. Consequently, we have to establish how – in case of persistent attacks – we prioritise our operations and resources, protect our key assets and restore functionalities. Cyber resilience goes beyond technology, it also encompasses governance, company culture and business processes. Given the extensive interlinkages and interdependencies in the financial system, it is obvious that 1/2  BIS central bankers' speeches  markets’ overall cyber resilience depends not only on the resilience of each individual market actor but also on that of interconnected market infrastructures, participants and service providers.

Ian Plenderleith: Current issues in UK monetary policy  Speech by Mr Ian Plenderleith, an Executive Director of the Bank of England, to the Aberdeen Chamber of Commerce on 26 July 2000. *  *  *  If you look at the performance of the UK economy as a whole, there is a great deal from which we can draw encouragement. Since the early 1990s, we have enjoyed what by any standards has been an impressive period of continued growth in output, employment and living standards. The sustained growth in output has been achieved despite the downturn in Asia in 1997-98, which, accentuated by the crisis in Russia, spread to the emerging market economies as a whole and produced a sharp weakening in external demand felt by all the industrialised countries. With the help of the rapid steps we took then to cut interest rates, we have seen a strong recovery in activity in the UK economy last year and continuing growth this year. Equally, we can draw encouragement from the steady rise in employment that has accompanied this sustained growth in output. The improvement has been shared right across the UK: rates of employment vary from region to region, but all regions have shared a rise in employment rates. What is particularly encouraging is that this substantial rise in employment rates has been achieved in the face of considerable changes in the business environment - for example, shifts in demand and in consumer taste, advances in technology and intensified competition.
I have to say that this is not an undisputed statement, because I told this story at a general business event and someone took me to task that every member of an insurance board should be fluent in the theory of a Copula. To be clear, we do not expect Copula fluency for all. But the moral of the story is that there is not a strong consensus on how to set the expectations of Boards so that they can perform their role. We may at times have gone too far in the direction of individual technical knowledge, and by the way it was the Copula story and others that convinced me to stop interviewing people taking up standard NED positions. The PRA has close contact with many Boards, so as supervisors what do we expect of Boards? Three things stand out for me:1.  we expect Boards to exercise good judgment in overseeing the running of the firm and to do so on a forward-looking basis;  2.  that judgement is improved by good constructive challenge from Non-Executives. A firm’s culture should promote discussion, debate and honest challenge.

Both this year and next, growth will be considerably slower than we predicted only a short time ago. We expect the economy to go into virtual stagnation in the second half of 2001. Overall, the economy will presumably grow by about 1.5% in 2001. In line with the development in the major economic blocs, notably exports and capital spending have shrunk drastically, putting a major break on economic growth. Although consumer confidence has been dented, consumption has so far turned out to be a cornerstone of growth. The decline in construction investment is also clearly more moderate than the fall in capital spending. We expect the economy to follow a path of muted growth and to perform below its potential until the middle of next year. Only the second half of 2002 should see the economy expanding in line with the development abroad. We project average growth of approximately 1.0% for 2002. Unemployment is likely to climb in the months ahead. We consider the current interest rate level and the existing monetary conditions to be adequate to enable the economy to return to sustainable, non-inflationary growth. Our forecasts, however, are fraught with uncertainties. In the aftermath of the terror attacks in the United States, these uncertainties are now particularly substantial. Investment and consumption depend on whether market participants have confidence in the quality and stability of the basic conditions.
To me, this seemingly euphoric approach to growth was in fact driving their countries into a “debt abyss”. That was clearly unsustainable. Indeed it presented great risks to global financial and economic stability. For too long a time, the “deep abyss” – a danger masked by financial innovation and market failure – has gone largely unnoticed. In a convoluted twist of logic, some even commended debt-for-prosperity as being one of modern finance’s greatest contributions to the well-being of mankind. Then the crisis hit in 2008. Only then did the millennia-old wisdom of “Don’t Spend Beyond Your Means” suddenly dawn on the folks. Meanwhile, as the financial markets acted to correct their excessive tolerance for over-borrowing by households, businesses and governments, market failure began to be rectified. I explained last year how excessive leveraging became the root cause of the global financial crisis and the turmoil that followed, and the only solution was to deleverage or cut debt. Deleveraging is an extremely difficult and painful process, resulting in job losses, pay cuts, bankruptcies, and reduced public  BIS central bankers’ speeches  1  services and social welfare. The standard of living stalls if not declines. My view is that for all the suffering and pain necessitated by the process, this is the only way to put global finance and growth on its right track. There is no alternative cure, unfortunately. My theory of excessive leveraging being the main culprit of the financial crisis may not be shared by everyone.

Although the US may fare better than Europe, its economy is heading towards the “fiscal cliff”. Similar to Europe, it is also necessary for the US to make significant cut in expenditures in the medium to long term in order to regain fiscal balance and discipline. The situation in Japan is even more worrying. Public debt in Japan has now exceeded 200% of GDP, excluding civil service pension and other contingent liabilities. Currently, the market is not concerned about Japan’s repayment ability as it is believed that the Japanese government will continue to address the ever-increasing deficits by maintaining an exceptionally low interest rate environment. However, it is worth noting that the market was treating the European countries in the same way until recently. Once market sentiment changes, the situation can take a sharp turn and it would be very difficult to arrest a deteriorating trend. In addition to the pain brought about by deleveraging, I would also like to talk about the different forms of “quantitative easing” implemented by the various central banks. Why did these economies implement “quantitative easing”? If we agree that the root cause of the global financial crisis is excessive leveraging, then the only solution would be deleveraging. However, in reality, the process of deleveraging is just too painful.
And the larger aim of this co-operation should be not just to draw up defensive measures, but to create positive opportunities for building a new global financial order appropriate to the needs of the twenty-first century. BIS Review 98/1998

In strengthening the resilience of our economy and promoting the sustainability of growth, the role of policymakers go beyond managing short-term fluctuations in business and financial cycles. Equally important are structural reforms and institutional building that would increase the capacity and flexibility of the economy to absorb shocks and to improve the competitiveness and inclusiveness of the economy. The resilient and ability of an economy to face a crisis depends as much on  BIS central bankers’ speeches  1  what has been done throughout the years to strengthen the economic fundamentals and the financial system. However, the implementation of structural reforms is not without risks. In this regard, reforms that are undertaken in an environment of growth and stability would have a higher chance of success, as it would cushion the potential disruptions to economic activity and dislocations to vulnerable segments of society. The formulation of appropriate and consistent short-term and long-term policies, in turn, requires policymakers to have a holistic understanding of the domestic economy and financial system. From experience, a broad macro-level understanding of issues alone may not be sufficient, as issues at the sectoral level may be obscured at the aggregate level. This highlights the importance of having a firm understanding of micro-level behaviour and reaction patterns of households and businesses, which would reinforce the design of macrobased policy strategies. In this regard, the World Development Report 2014 is useful in facilitating policymakers in making more informed policy decisions.
Jarle Bergo: Monetary policy and the outlook for the Norwegian economy Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank, at the Capital markets seminar, hosted by Terra-Gruppen AS, Gardermoen, 31 January 2002. The address is based on the assessments presented at the press conference following the monetary policy meeting of Norges Bank’s Executive Board on 23 January 2002. *  *  *  On 29 March 2001, the Stoltenberg Government issued new guidelines for monetary policy and presented guidelines for fiscal policy. The guidelines for fiscal policy imply that the central government budget deficit shall be equivalent over time to the expected real return on the Government Petroleum Fund. The changes in the guidelines for economic policy received broad support in the Storting. The budget for 2002 adhered to these guidelines. Monetary policy is to be oriented towards low and stable inflation. The inflation target was set at 2½ per cent. In general, direct effects on consumer prices resulting from changes in interest rates, taxes, excise duties and extraordinary temporary disturbances shall not be taken into account. Low and stable inflation is the best contribution monetary policy can make to growth and prosperity. In the long term, monetary policy has little effect on employment and output. Inflation is a monetary phenomenon. In the last hundred years, we have had three extended periods of inflation - during World War I, during World War II and after the oil price shocks in the 1970s and 1980s, which triggered wage-price spirals.

TRICHET: I will not say that I was myself surprised because I have been deeply involved in the negotiation of the Maastricht Treaty and the setting up of the euro. But I guess that a number of external observers are very positively surprised to see that price stability with the euro has been, over 12 years, better than with the previous national currencies and that as many as 17 countries and 331 million peoples are in the euro area since the beginning of 2011. But this is not time for complacency. As all of the advanced economies we have to draw – without any complacency – all the lessons from the present global crisis, in particular in terms of governance. WSJ: The Fed is doing more quantitative easing, while the ECB warns of inflation risks even though both regions are recovering in a broadly similar fashion. Are Fed and ECB policies diverging, and does it pose a risk to global financial stability? TRICHET: On both sides of the Atlantic we have each of us our responsibilities that are very important. We are placed in different economies, particularly in terms of the financing of the economy, and of the nature of the shocks we have to cope with. But we are united in purpose: to deliver price stability in medium term and to solidly anchor inflation expectations. 4  BIS central bankers’ speeches
One of the explanations for these insufficient holdings of liquidity was that the stress scenarios considered by banks were far too optimistic. While secured funding remained the most stable source of refinancing, it was much less stable than banks and regulators had assumed. 11 Liquidity problems at individual banks have imposed considerable stress on the entire international system. To prevent a destabilization, central banks had to provide massive liquidity support. In some countries, this support has been provided against collateral of poor quality and even on an unsecured basis. As in the area of capital, the Basel Committee is moving rapidly towards an international liquidity standard for banks. This standard should incorporate the following basic features to be effective: The standard should reflect an adverse scenario, including a significant loss of confidence from depositors and a severe disruption of secured funding. Moreover, the standard should require banks to hold a buffer consisting of assets whose liquidity and value is robust to massive disruptions in the financial markets. Overall, the standard should materially improve banks’ liquidity positions and make their funding more robust. In Switzerland, liquidity requirements for the big banks are in the process of being comprehensively revised. In line with the features I have just outlined, the new regime will ensure that the big banks are able to cover their potential liquidity needs in the event of a widespread loss of market confidence. The new regulation will enter into force in spring 2010.

For how can we justify the costs of these efforts, which will have to be borne for at least a generation, without fundamentally addressing the flaws that got us into this terrible crisis in the first place? Ladies and Gentlemen, there are many areas in financial regulation that can and should be improved. Given what is at stake, there is a need to prioritise. I have attempted to lay out to you today where the SNB puts those priorities and where it will focus its greatest efforts in the months and years to come. Together with FINMA, it is our duty to provide robust analysis and to issue sound recommendations that will help put our financial system on a more sustainable foundation. In certain areas, like capital requirements, regulators can issue – and have issued – decrees intended to strengthen the resilience of the financial system. With respect to the “too big to fail” problem, political decisions are required. The topic is crucial. The consequences of not addressing it adequately could be severe in the event of a future crisis. Politicians need to become acquainted with and get involved in this matter. The sooner, the better! 17  17  The Swiss government has recently mandated a group of experts to make proposals to limit the risk associated with large firms. 8  BIS Review 145/2009
I will therefore discuss in some detail why regulating banks’ capital is necessary and why it promotes financial stability. 2. High leverage as a main cause of financial fragility  The Swiss economy is far from the epicentre of the current financial crisis. Yet, the two big Swiss banks have been hit particularly hard by recent events. This is to a large extent the consequence of their extraordinarily high leverage. For some years now, we have argued that their high leverage makes them particularly vulnerable to extreme financial shocks. 1 Looking at risk-based capital measures, the two large Swiss banks were among the bestcapitalised large international banks in the world. Looking at simple leverage, however, these institutions were among the worst-capitalised banks. With the benefit of hindsight, we clearly should have put even greater emphasis on the risks of excessive leverage. Excessive leverage is by no means a problem uniquely associated with the two big Swiss banks. There is increasing international recognition that excessive leverage has been a crucial contributing factor to the current crisis.

I find this neither upsetting nor surprising. If regulation is to be effective, we must expect it to impact on behaviour and restrict action. This will solicit complaints. If it doesn’t, regulation would, by definition, be superfluous. 4. From Basel I to Basel II  For all these reasons, I strongly support bank capital regulation that puts a meaningful limit on banks’ leverage. But what is the best way to restrict leverage? In an ideal world, we would, of course, also want to take into account the riskiness of banks’ assets. 12 As you know, banks can increase their risk not only by increasing their leverage but also by increasing the riskiness of their assets. To compensate for differences in banks’ assets, we would ideally require banks with riskier assets to hold more capital. The Basel Committee on Banking Supervision has embraced precisely such a risk-weighted approach. More risk, more capital. If we lived in an ideal world, this simple principle would work well. By “ideal”, I mean a world in which risks can be observed by everybody and assessed precisely. What has become abundantly clear in recent months is that we do not live in an ideal world. Banks and the risks they incur are far from transparent. In fact, banks exist because of asymmetries of information. 13 A core function of banks is to “produce information”. For instance, banks screen potential borrowers. Furthermore, banks monitor ongoing lending relationships.