samchain/econo-pairs-v1 huggingface dataset:
2  BIS central bankers’ speeches  •  Fourth, the range of instruments that allow long-term investment is limited: in many countries, bond, equity and securitisation markets that provide alternative avenues for long-term finance are underdeveloped. If finance is to play its role as an enabler of economic growth, it will be important to develop new avenues for long-term funding. Singapore’s value proposition as a financial centre MAS has been closely studying these trends in global finance and finetuning its strategies to develop Singapore as a premier financial centre. The emerging financial landscape plays to Singapore’s strengths. Singapore’s value proposition in this new landscape rests on four pillars: •  smart regulation;  •  diverse ecosystem;  •  pan-Asian focus; and  •  deep talent pool. I will take stock of Singapore’s strengths in each of these four areas and outline how we have refreshed our strategies and approaches. Smart regulation First, smart regulation. Since the global financial crisis, a higher premium has been placed on well-regulated financial centres like Singapore, which set high standards but implement them in a way that makes business sense. MAS has always required banks to meet high prudential standards, exceeding international norms in several areas. During the global financial crisis, this ensured that adequate safeguards were in place and confidence sustained. Post-crisis, our banks are well-placed to meet the new global capital and liquidity standards. Maintaining high standards is compatible with fostering a vibrant financial centre.

They provide confidence for financial institutions and customers to do business here. MAS pays close attention to the design of financial regulation to ensure that they are risk-based and not more burdensome than necessary to meet regulatory objectives. •  An example is the Financial Holding Companies (FHCs) Bill that is currently before Parliament. •  MAS will not regulate all FHCs. The Bill will give MAS the flexibility on whether or not to regulate a particular FHC, taking into consideration, for instance, whether the FHC’s subsidiaries are important to Singapore’s financial system. MAS consults the industry and other stakeholders when introducing significant new regulation. The exception of course is where the issue is market sensitive. We consult at an early stage on the broad policy proposals as well as in the later stages of detailed rule-making. We carefully consider all feedback on the impact of new regulation and implementation issues, and adjust the proposals where appropriate. This helps MAS to calibrate the rules in a way that is appropriate for our market. •  Take for example, the recent proposed changes to the regulatory capital framework for holders of capital markets services licenses. MAS briefed the industry, consulted extensively, and conducted quantitative impact studies. •  In response to feedback, MAS has decided to provide a longer transition period of two years for industry to comply with the new rules. BIS central bankers’ speeches  3  •  MAS will also revise its calibration of the operational risk capital charge.
The securities and capital markets are another important source of capital for enterprises. During an upturn, many enterprises find that capital is "cheap", because the outlook for the future is regarded as very bright. There is a risk of over-investment. Optimism may rapidly give way to pessimism if investments fall short of expectations and negative news starts to spread. As a result, the risk that has accumulated during the upturn period may materialise. The financial sector may choose to interpret developments as a sign that the risk associated with new projects has also increased, with the result that this risk may be overestimated. A drying up of credit and capital may trigger or amplify a crisis. The costs of financial instability may be very substantial. Therefore, it is necessary to dampen financial cycles. The outlook for financial stability The outlook for the global economy is now weak. The terrorist attacks on the US on 11 September have increased uncertainty. We have witnessed a bubble in technology shares. From 1998, the price of technology shares rose substantially more than earnings, and since March 2000, there has been a sharp correction in prices. Life insurance companies and pension funds, both at home and abroad, have lost a substantial portion of their buffers due to the decline in share prices. Telecommunications companies have been through a phase marked by substantial borrowing. Credit rating companies have downgraded many telelcoms due to high debt levels in relation to future prospects. This has increased funding costs.

They are evolving rapidly, they are highly automated in key market segments, and information on trading activity is not widely available. As a result, it is challenging for the official sector, market participants, and members of the public to effectively analyze these markets, understand the sources and risks of flash events, and evaluate how liquidity is changing. Given the role of the Treasury market as the deepest and most liquid fixed income market in the world, it is clear that both the official sector and the public need improved access to transactionlevel data, and I am pleased that we are making real progress on this front. Greater transparency into Treasury market activity is necessary in maintaining the market’s many important roles: as a risk-free benchmark for financial instruments; as a liquid investment and source of safe collateral; as a channel for the implementation of monetary policy; and, of course, as a tool to help finance U.S. government activities. As the Treasury market continues to evolve, several complex questions lie ahead. How should data reporting gaps be closed to ensure that as many relevant Treasury transactions as possible are collected? What is the proper scope and best process for sharing Treasury market data with the public? How can the Joint Member Agencies and private stakeholders best collaborate to ensure Treasury market stability and efficient market function, even as market structure evolves and new technologies emerge?
However, the compound annual rate of growth over that period has only been around 2 ¼ percent, close to prevailing estimates of the economy’s potential growth rate. Thus, we have made limited progress in closing the substantial output gap that was created during the recession. A similar conclusion is drawn from an assessment of labor market conditions. Although the unemployment rate has declined by about 2 ¾ percentage points since peaking at 10 percent in October of 2009, a significant portion of that decline reflects the substantial decline of the labor force participation rate over that period. It should also be noted that since the previous business cycle peak at the end of 2007, the decline of the labor force participation rate has been more than accounted for by a decline in participation of people in the prime working age of 25 to 54. The inflation data are also consistent with this overall picture of an economy operating well below its full potential. Total inflation, as measured by the personal consumption expenditures (PCE) deflator, has been quite volatile in recent years due to sharp fluctuations in energy prices. Core inflation, which excludes the volatile food and energy components and thereby may be a better guide as to underlying inflation, slowed from around 2 percent in early 2012 to just above 1 percent in mid-2013. In recent months it has shown signs of stabilizing, but remains well below the FOMC’s expressed goal of 2 percent for total inflation.

BIS central bankers’ speeches  3  The fact that the U.S. economy has continued to grow at around a 2 percent pace in 2013 despite this quite intense fiscal restraint provides evidence to the second key point, which is that the private sector of the economy has largely completed its healing process and is now poised to ramp up its level of activity. Key measures of household leverage have declined and are now near the lowest levels they have been in well over a decade. Household net worth, expressed as a percent of disposable income, has increased back to its average of the previous decade, reflecting rising equity and home prices and declining debt. Recently, banks have eased credit standards somewhat after a prolonged period of tightness. As a result, we are now experiencing a fairly typical cyclical recovery of consumer spending on durable goods. For example, sales of light-weight motor vehicles have increased steadily over the past four years, reaching an annual rate of 15.7 million in the third quarter of 2013, though sales in September and October have been somewhat below that average. Similarly, after five years in which housing production was well below what is consistent with underlying demographic trends and the replacement demand for houses, it now appears that we have worked off the excess supply of housing built up during the boom years of the last decade.
Its recommendations have been approved by the IMF and the G8 and include a range of measures to fill particular gaps or put right particular faults in the regulatory system by: •  strengthening prudential oversight of capital, liquidity and risk management; implementing Basle II and requiring more capital against, for example, off-balancesheet vehicles, securitisations and tail risk;  •  enhancing transparency and valuation particularly for complex structured financial products and off-balance sheet vehicles;  •  changing the role and uses of rating agencies, including by distinguishing ratings of corporates and structured products;  •  strengthening the authorities’ responsiveness to risk; and  •  increasing the robustness of arrangements for dealing with financial stress; ensuring central banks’ operational frameworks are flexible enough to deal with extraordinary situations in money markets and mechanisms for dealing with weak or failing banks are put in place. More generally we are discussing in the FSF how the authorities can go further in moderating the financial cycle. Of course monetary policy can play a role in this. One goal of monetary policy is to stabilise the economy in the face of shocks and central banks have always looked at credit and money growth as important indicators of the state of the economy. The rapid growth of credit in 2006 for example was one factor leading the MPC to start raising interest rates. However central banks have been wary of putting a lot of weight on disciplining financial markets by changing interest rates.

When liquidity was abundant, asset values were high and marked-to-market profits were high. Now that liquidity is scarce and asset values lower, mark-to-market losses and write-downs are high. The widespread use of credit ratings in valuing assets and managing counterparty credit risk has also had an impact. Credit rating agencies try to rate through the cycle. And for corporate ratings they may well succeed. But for some structured finance products, such as re-securitisations of sub-prime backed securities they (like many others) misjudged the impact of a downturn in the cycle and the non linearity of returns. As a result, there have been wholesale downgrades of the credit ratings of structured securities over the past 12 months. The problem for the financial system is that these ratings are often hard-wired into decision making. Certain classes of investors are forced to sell assets when they lose a AAA or investment grade rating. Remuneration structures have also amplified risk taking in the upswing. Two features of remuneration in the financial industry are that they are asymmetric (there is unlimited upside for high performance but a floor on the downside) and tend to be based on short-term targets. The asymmetry in reward creates an incentive to gamble and short-term performance targets encourage traders to follow rather than counter a deviation from longrun fundamentals. Even where the incentives were paid in options linked to the medium-term performance of the employer, the apparent rewards have been highly cyclical.
2  BIS central bankers’ speeches

We do see increased interest in cross border investments from within our region, particularly in the financial sector. With respect to the need to mobilize domestic savings, Africa certainly needs to expand the reach of the financial sector and to make the financial sector more efficient. In Zambia, the majority of the population does not have access to financial products. The Bank of Zambia has therefore made advancing financial inclusion as one of its strategic objectives. Zambia has a very low population density and there are many areas that are currently not served by any financial institution. Reaching these areas will require the application of technology and the concept of branchless banking. To facilitate such innovation, a robust regulatory regime governing the payment system has been implemented with the enactment of the National Payment Systems Act in 2007. In this regard, Zambia is learning a lot from the advances made in countries such as Uganda and Kenya, where cell phone technology has expanded the reach of financial services and products. On its part the Zambian Government is also taking concrete steps to enhance the application of Information and Communication Technology across the broad spread of Government services and the private sector. How can we build better and more resilient institutions that boost confidence in the benefits of a market economy and can act as strong anchors of inflation expectations?
The support from all relevant stakeholders is needed to ensure that such objective becomes a reality. As the catalyst for e-payment growth, the banking and payments industry should explore the possibility of forming strategic alliances with non-traditional partners. The recent partnerships between banks and telcos in the roll-out of mPOS are a good example of such new partnership. Let me outline the key priorities for the banking and payments industry in the upcoming year of 2016. I would like to raise 6 points. i. First, as a group, we need to ensure there is no delay in the key payment card infrastructure projects such as migration to cardholder verification by PIN and the migration to contactless debit cards under the Chip and PIN and the MCCS initiatives. Coordinated constant and effective communication strategies must be undertaken to ensure an effective and seamless migration;  ii. Second, the payments industry must collaborate towards the achievement of an additional 50,000 payment card terminals and 137 million debit card transactions under the Payment Card Reform Framework. In this regard, the industry should devise creative measures to facilitate behavioural change. This may include offering incentives and educating merchants and cashiers to motivate customers to use debit cards instead of cash;  iii. Third, MyClear together with the banking industry should expand the biller base for JomPAY, a payment system launched in April 2015, to further enhance the efficiency and convenience of making and accepting online bill payments;  iv.

Migration path, five years after In 2011 Bank Negara Malaysia had developed a comprehensive roadmap in its Financial Sector Blueprint to drive the migration to e-payments with measurable targets to be achieved by 2020. Over the last 5 years, Bank Negara has worked with the payments industry to put in place conducive regulatory frameworks, agree on market incentive structures and build enhancements to e-payment infrastructure and services. Our aim is to provide an enabling environment for individuals and businesses to migrate away from paper based payment methods and adopt e-payments instruments. The results have been encouraging. Since the implementation of the Pricing Reform Framework in May 2013 and the e-Payment Incentive Fund (ePIF) Framework in January 2015, cheques which had only declined at a marginal rate of 2% on average from 2011 to 2013, had declined at a higher rate of 10% in 2014. The decline in cheque usage had accelerated to 16% for the first 9 months of this year. Consequently, the number of cheques cleared is projected to fall from about 207 million in 2010 to 149 million by the end of 2015. If such decline rate is sustained, the target of reducing cheques to 100 million per year by 2020 would be achieved. The reduction of about 100 million cheques above saves a minimum of RM300m not taking into account other savings in terms of efficiency and security. Similar trend was observed in the number of electronic fund transfer transactions.
The second key question is whether Basel II is even appropriate for banking systems in emerging markets, which I would like to address now. In my view, the principles and vision of supervision in Basel II are valuable for supervisors and banks in all markets. I must acknowledge that its advanced approaches to risk measurement are mainly intended for those internationally active banks that have the greatest potential to increase systemic risk, and are very demanding in terms of the investments that they pre-suppose in the banks’ own systems, and the qualitative requirements that they set. The 1988 Accord itself was created initially to apply a more consistent set of rules to globally competitive banks, and the shortcomings of the existing rules today are especially evident in the context of these highly sophisticated organisations. However, many supervisors apply the 1988 Accord to less complex organisations that may be active mainly or even only in domestic markets. Is Basel II appropriate for those banks as well? I think that the great level of diversity in markets and in financial systems worldwide makes it difficult – and perhaps even counterproductive – to try to specify a single rule that could be applied to all banks in all countries. Fortunately, Basel II is moving away from a “one-size-fits-all” rule. In fact, Basel II’s menu approach provides supervisors and banks with a range of options that make its basic standards more readily available to many kinds of organisations in countries that face different economic circumstances.

In fact, this is one of the key innovations of Basel II compared to Basel I. Basel II is about much more than just setting quantitative minimum capital requirements. It is about establishing incentive-based approaches to risk and capital adequacy management, within a framework of three mutually-supporting pillars: minimum capital requirements, supervisory review and transparency. I think that Basel II represents an unparalleled opportunity for banks to improve their business strategies and risk management systems. In my view, the combination of better risk management, a stronger capital structure and improved transparency standards in the banking system could significantly improve the access of emerging economies to financial markets. This raises two additional groups of relevant questions that I will also address later in my presentation: the first group relates to the transition by different jurisdictions to the new framework, and the second to the necessary cooperation between home and host countries to make its implementation more effective and consistent. BIS Review 33/2004  1  Our discussions on all of these topics will bear on the very well chosen title for this event: “the international banking system at the crossroads.” That wonderful image of a “crossroads” suggests two metaphors that we should keep in mind. The most immediate image that the term “crossroads” calls to mind is, of course, a place where four roads meet. It is where a traveller, having followed one road to this point, must reflect to select one of the next three roads to continue a journey.
In a situation with a high level of activity in the Norwegian economy, petroleum revenue spending in the period ahead will be consistent with the fiscal rule if it increases at a slower pace than the expected real return on the Fund. In the next few years, growth in the structural, non-oil budget deficit is assumed to be somewhat lower than implied by the 4 per cent rule. However, public sector demand is still expected to make a positive contribution to total demand and production. The enterprises in the regional network report continued growth in demand and production. Growth picked up towards the end of 2006 and has remained stable into 2007. Suppliers to the petroleum industry report the strongest growth, but there is also strong growth in manufacturing and the service sector. The market outlook for the next six months is favourable, even though enterprises as a whole expect growth to slacken. A lack of spare capacity is an important factor behind expectations of slower growth. Enterprises in both Hordaland and Rogaland report that the cyclical upturn is continuing. However, many industries still reported slightly slower growth than in the previous round. This is true of manufacturing supplying the domestic market and the petroleum sector, the export industry and suppliers of services to the household and business sector. Retail trade, on the other hand, stands out with very high growth rates. Growth in building and construction is on a par with that prevailing toward the end of 2006.

That being said all central banks, in periods like this where you have inflationary threats that are coming from commodities, have to go through the hump and be very careful that there are no second-round effects. This is what we are doing. WSJ: When you hiked rates in 2008 there were signs of those second-round effects. Do you see evidence they are starting to take hold in Germany or elsewhere? TRICHET: At this stage, we do not see this. And everybody knows we would not let secondround effects materialize. We will continue to deliver price stability. WSJ: Could the ECB raise interest rates while still maintaining nonstandard measures including unlimited loans to banks? TRICHET: It is our doctrine since the beginning of the turbulence that interest rates on the one hand and non-standard measures on the other hand are decoupled. We design the monetary policy stance; we decide interest rates to deliver price stability in the medium term. Non-standard measures are there to help restoring a better functioning of monetary policy transmission. We are disconnecting both measures. We can move interest rates on the one hand, and we can move non-standard measures on the other hand independently. WSJ: Euro member states are working on comprehensive measures to address the debt crisis. What elements should be in that package? TRICHET: These decisions are the responsibility of governments. We have in particular a very strong message, which is that we need a “quantum leap” in the strengthening of governance of economic and fiscal policies.