samchain/econo-pairs-v1 huggingface dataset:
Denis Beau: Financial regulation and supervision issues raised by the impact of Tech firms on financial services Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the ESSEC – Centre d’excellence, Paris, 30 January 2019. * * * Ladies and Gentlemen, Dear students, It is a pleasure to be at the ESSEC Centre d’excellence today to discuss the financial regulation and supervision issues raised by the impact of Tech firms on financial services. To date, in Europe, we have been accustomed to a bank-centric intermediation model. However over the last decade we have witnessed the rise of Fintech start-ups and the entry of Bigtechs in the financial sphere. Do they bring anything new to the way financial systems operate? According to some commentators they should bring a structural shift and see the replacement of the “old world” of bank-centric financial intermediation with disintermediated peer-to-peer systems. Others consider that rather than eliminating intermediation, if left on their own these new comers will more likely bring new intermediation models, in which Fintechs and Bigtechs intermediate banks. Hence I would like to focus the first part of my remarks on the possible impact of these new competitors on the traditional bank-centric financial intermediation model (1). I will then highlight some of the risks that go hand-in-hand with the changes underway and the regulatory and supervisory challenges they raise (2).

1/6  BIS central bankers' speeches  Balance-sheet-light payment services have so far been the main gateway to the financial sector for Tech firms. From there, Tech firms have an avenue to expand their business further along the value chain, from payment to retail and commercial banking, wealth management and insurance. The Tech firms’ model is based on the unbundling of traditional universal banking into an array of distinct core functions (such as channelling payments, providing financing, sharing risk and allocating capital), which are reassembled in an online platform. In this model, the control of the platform is more strategic than the provision of financial services itself. (B) Among these Tech firms, the Fintech start-ups (also known as simply “Fintechs” with an “s”) and the Bigtechs are likely to have a different impact on financial intermediation. Fintech start-ups have already been a game changer in the financial sector. They have imported a customer-centric culture from the internet industry into the financial sector and they have targeted and called into question many of the long-standing financial rents. However, Fintech start-ups do not have the capital resources to disrupt incumbent banks and their future role is likely to be shaped by two main alternatives: to be acquired by an incumbent bank or to compete on niche segments such as equity crowdfunding or market place lending. It could be different with Bigtechs. The market capitalisation of the GAFA companies – Google, Amazon, Facebook and Apple – is 25 times higher than that of the whole Fintech universe.
This means that the Riksbank must make assessments of how the krona will develop in relation to other currencies during the forecast period, and assess what effect the development of the krona will have on demand for Swedish goods, as well as the impact the krona will have on consumer prices. None of these assessments is simple. Allow me first to point out the mechanisms that are important with regard to a direct impact on inflation via import prices. If the krona weakens and prices on the goods we import are determined in the exporter’s home country currency, the weaker krona will have a direct impact on import prices. For the weaker krona to have a full impact on prices of imported goods in the consumer channel, all domestic intermediaries must pass the price increases on to the end consumer. During the years with a floating exchange rate we have been able to note that the weakening of the krona has not had the impact on consumer prices that we had expected. One explanation could be that internationalisation and increased competition have first and foremost meant that the exporting companies endeavour to adapt their prices to developments on the markets where they sell, in order to retain their market share. It is reasonable to imagine that large corporations with sales and production spread around the world can act in this way without facing large fluctuations in profits.

Second, are growing capital market activities involving credit risk, such as equity and corporate debt underwriting, foreign exchange and credit derivatives, and securitization creating new liquidity stresses, in particular, greater liquidity risk for financial institutions and their customers, when credit quality declines? Third, to what extent are markets signaling greater uncertainty about the nature and level of risks in the world economy given the tremendous structural change in the world financial system and the world economy over the last two decades? Fourth, what do recent market developments tell us about the capacity of financial firms to define and manage risk, or to fully understand their own risk profile? The question of what current market conditions may be signaling about confidence in prior credit judgments is especially important for supervisors. For example, do supervisors need to revise what they expect banks to know about their customers, their business strategies and the business purpose of their transactions? In the run-up to the recent market problems, we have seen customers make use of innovations in financial products and strategies developed since the mid1980s to a much greater extent than before. For example, banks, corporations and governments in the emerging markets world are far more involved in foreign currency funding, derivatives markets and use of the international capital markets for debt issuance than before. New groups of institutional customers, such as hedge funds, are devoted almost exclusively to developing and executing strategies based on innovative financial instruments and techniques.
Caleb M Fundanga: Local bond market developments in Zambia Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, on the occasion of the Listing of the Development Bank of Zambia Bond, Lusaka Stock Exchange, Lusaka, 4 April 2007. *  *  *  • The General Manager – Lusaka Stock Exchange • The Chairman, DBZ Board of Directors • The Chairman, Standard Chartered • The Secretary – Securities and Exchange Commission • Mr Ade Adebajo, Director, Standard Chartered Africa Debt Capital Markets • Member of the DBZ Board • All Senior Government Officials Present • Acting Managing Director, DBZ • Managing Director – Zambia State Insurance Corporation • Chief Executive Officer – Stock Brokers (Z) Limited • Representative of DBSA • Distinguished invited guests; and • Ladies and Gentleman Today marks another important milestone in financial sector development indicative of the coming of age of the Zambian financial system in general and local bond market in particular. The issue of the K68.620 billion senior unsecured floating rate note under the Development Bank of Zambia (DBZ) K150 billion Medium Term Note Programme and listing of the note on the Lusaka Stock Exchange (LuSE) is a landmark transaction for two key reasons. The first is that this is the first time in the history of the local bond market that a local currency medium term note programme has been established. The second is that this transaction marks the largest single issue ever offered to Zambian fixedincome institutional investors.

Ladies and Gentlemen, the development of the local bond market is central to Government’s strategy for diversification of the economy for one key reason. All businesses, including state owned enterprises, require finance, covering both equity and debt, and ranging from short-term to long-term. In the absence of a properly functioning local bond market, those in need of capital and qualified enough have had to turn to international financial markets to finance their local projects with the attendant exchange rate risk. Similarly, those seeking a competitive return on their investments that also meet their maturity preferences but are unable to find these features locally, have always sought out alternative avenues offshore in foreign currency, thereby creating pressures in the foreign exchange market. Therefore, Government’s involvement in improving the local bond market has been deliberate. Ladies and Gentlemen, Government’s participation in improving the functioning of the local bond markets has seen the establishment of appropriate market infrastructure that facilitates cost-effective and secure trading, and a transparent price discovery process. Further, Government’s decision to bring to market longer term bonds in 2005 have proved to be positive and catalytic for the local bond market as this has resulted in an extended yield curve that has provided a benchmark for pricing longer dated security issues by the private sector and banking industry.
Alongside reinforcement of the capital base, liquidity also needs to be strengthened to increase the resilience of banks. Consequently, a comprehensive revision of the liquidity regulations for big banks is currently underway. Nonetheless, better capital and liquidity requirements do not rule out the possibility that banks will again face existential difficulties in  2  BIS Review 77/2009  the future. The SNB therefore considers all of the efforts that are going into facilitating orderly wind-downs of large international institutions in future to be just as important. The lack of any clearly defined and internationally coordinated wind-down procedure contributes to a de facto obligation on the part of the state to provide assistance to these institutions. Any rescue of a large financial institution brings more than just high costs. The “too big to fail” issue also has a tendency to harbour incentives for banks to enter into excessive risks. In Switzerland, the “too big to fail” question is particularly relevant and, in many respects, unique, given the importance of the big banks for the country’s banking sector and its economy. A clearly defined and internationally coordinated wind-down procedure would help to ease this problem. The interplay between national jurisdictions is, however, extremely complex, and finding a solution for a predefined and internationally coordinated procedure of this kind is correspondingly challenging and time-consuming. The SNB therefore believes that careful consideration must also be given to alternative approaches. These include rules governing the organisational structure of large financial institutions.

Initial examples are the work on the introduction of a leverage ratio and on the reform of liquidity regulations, which FINMA and the SNB have been driving forward together. This development does not essentially call into question the division of responsibilities between the supervisory authority and the central bank. However, because of the importance of the big banks for our financial system and our economy, greater weight must be given to the macroprudential perspective, both in the oversight of the financial system and in its regulation. 4  BIS Review 77/2009
Should this happen, the MAS will take tough enforcement actions for breaches of our regulatory requirements. Where laws are broken, we will also not hesitate to refer these to the law enforcement agencies for investigation and prosecution. 23. Last year, we announced the centralization of our enforcement function into a single department. The team in our Enforcement Department will deepen our capabilities in investigative work that were previously undertaken by prudential supervisors. A centralised enforcement function in MAS will also allow us to take a holistic approach to “follow the funds” should these cut across different types of entities in our financial sector. 24. Let me now highlight the fourth key element of our AML/CFT framework: International Cooperation and Partnerships. 25. I have mentioned Singapore’s commitment to the international efforts to combat ML/TF risks. We fully support the important work of various international organisations including the FATF. In addition, it is important to have close supervisory co-operation between financial regulators and we hope to expand on our supervisory cooperation network. Another area which we will strengthen is our partnership with the financial industry. 26. While law enforcement and regulatory authorities have wide powers, the financial industry has an “on the ground” vantage point with front-line knowledge of business and clients. It is hence advantageous to adopt a collaborative “eco-system” approach to holistically deal with 3/5  BIS central bankers' speeches  ML/TF risks. Such a partnership should be as inclusive as practicable – involving law enforcement agencies, regulator and the industry.

Inflation forecast I shall now turn to the course of inflation and our new inflation forecast. Our inflation forecast of June 2002 (the green dash-dotted curve in the graph) shows that at that time we assumed, based on a stable three-month Libor rate of 1.25%, that inflation would gradually rise to 1.9% in the first quarter 2005. Year-on-year inflation, as measured by the national consumer price index, dropped to 0.3% in the third quarter 2002 from 0.7% in the second quarter. In October and November it rose to approximately 1%. These fluctuations are due mainly to changes in the exact points in time when data on clearance sales prices are collected. This is also the main reason why our forecast of June 2002 over-estimated the development of inflation in the third quarter 2002. Our new inflation forecast (red dashed curve) is based on the assumption that growth in the US will pick up again from the second quarter 2003 onward. The US economy is likely to achieve its growth potential stepwise until the beginning of 2004. In the EU, the upswing will take a little longer. We are not expecting a significant acceleration of growth before the end of 2003. We assume that the  BIS Review 73/2002  1  dollar/euro rate will remain at about the current level and that the oil price will be around $ per barrel.
We could afford to accommodate these upside pressures on inflation last year when there were worries that a broader deflationary trend could emerge and the recession was threatening to deepen further. But the serious downside risks to the economic outlook we saw then have since receded. The UK economy has actually bounced back more strongly than in previous recoveries, supported by both domestic and overseas demand. 11  According to data from the Council for Mortgage Lenders, both house repossessions and arrears peaked in the recent recession at lower levels than in the early 1990s, and the numbers have been falling since early 2009. BIS Review 158/2010  9  These upside pressures on inflation from import prices and VAT have been one reason that inflation has not fallen back in the way we expected in the aftermath of recession. The other significant factor is that spare capacity has not exerted as much downside pressure on cost and price increases as expected. That is partly because the margin of spare capacity appears to be less than we have seen in previous economic cycles. In the labour market, this is the flip-side of the resilience of employment and a lower level of unemployment relative to the early stages of previous recoveries. But survey evidence also suggests that there is limited spare capacity within firms to take up the slack as demand recovers.

The CBI Industrial Trends Survey shows that in manufacturing industry investment intentions are the strongest recorded since 1997. BIS Review 158/2010  7  making tax payments to ease cash flow constraints. And a further supporting influence has been the relative strength of company cash flows I commented on earlier. The flip side of the fact that more companies have survived the recent recession is that there has been a fall-off in measured productivity. Instead of slack being created in the labour market through company failures and job losses, there is the possibility that more spare capacity has been retained within companies which have survived the recession – particularly in the services sector, which accounts for the bulk of business activity in the UK. However, the extent of this margin of spare capacity and the way it will impact on the performance of the economy going forward is a big uncertainty at present, as I will discuss later. The 1990s recovery A third reason for optimism about the private sector and business activity to drive the UK economy forward in the current recovery is the experience of the previous recovery from the early 1990s recession. Through the mid-90s, the UK economy grew healthily – with annual GDP growth averaging close to 3.5% while the public sector deficit was being brought down in a broadly similar way to the reduction planned by the current government.
Large shares of the sizeable oil revenues were transferred to our sovereign wealth fund, the Government Pension Fund Global (GPFG). GPFG assets are now more than double the GDP of Norway’s mainland economy. High oil prices and a profitable petroleum production industry have been accompanied by record-high oil investment in recent years (see Chart 4). The level in 2014 was equivalent to overall investment in domestic non-oil industries. The positive spillovers to the oil service industry and other private operators have been substantial. Employment has remained high and unemployment low, even when the financial crisis hit in 2008. The Norwegian economy has made use of favourable winds and seized the opportunities offered. The other side of the coin is an economy that has become increasingly dependent on oil, and thereby more vulnerable to changes in oil prices and petroleum revenues. The vulnerability manifests itself in several ways. 2  BIS central bankers’ speeches  A large share of the business sector and the labour market is now linked to the oil industry. A relatively small share is directly employed in the oil and gas production industry. But if account is taken of all the suppliers to the petroleum sector, about 1 in 9 jobs in Norway, a total of 300 000, are linked to the oil industry.2 Exports from Norway to the oil industry in other countries account for a growing share of this activity, and this may be a path forward in the face of a decline in petroleum investment in Norway.

However, flexibility can be made fully operational only on the basis of strong fundamentals. In fact, exchange rate flexibility implies taxing the capacity of the financial system to adapt, as well as that of private enterprise to adjust. Moving towards exchange rate flexibility implies a structural change, as the costs of exchange rate risk coverage fall upon the private sector, rather than the Central Bank or the government. To be successful, a change of this magnitude requires strong fundamentals. The role of fiscal policy must be emphasized in this context. Predictability of public sector reactions to shocks is a must for the appropriate functioning of all markets. Chile has recently moved to a fiscal policy guided by rules. The budget is planned in such a way that, under conditions of a long-term rate of growth of the economy and long-term prices for copper, a surplus of 1% of GDP is achieved. The level of expenditures is maintained through the cycle while government reserve moves with it, generating larger surpluses during booms and smaller surpluses, or deficits, in a slowdown. Today, Chilean macroeconomic policy is defined by a monetary policy based on inflation targeting, the free float of the Chilean peso and a fiscal policy guided by rules. We expect that this policy set-up, together with well-established strong institutions in all areas will help us ride the waves of a rapidly changing world.
Determining the economic value of the institution is thus being done with the utmost care since, as the FROB indicated in its methodological note, this is of paramount importance from three standpoints: from that of Community competition rules, to ensure that public aid is granted on an arm’s length basis; from that of the proper use of public funds, so that they are disbursed in accordance with rigorously set subscription prices; and from that of the institution itself and of the “interested parties”, because the market value will also determine the FROB’s actual stake and, consequently, that of the former stakeholders in the resulting capital and in the institution’s governing bodies. On conclusion of this process, before 30 September 2011, the FROB will have taken a stake in the capital of these institutions and will vote on the decisions of their boards of directors on a scale proportionate to the economic valuation. Thereafter, the FROB will participate directly in their management with the mission to monitor fulfilment of their business plans. It shall remain in the institutions only temporarily, and never any longer than the maximum term of five years in which the shares it holds must be disposed of to third parties through a competitive procedure. *  *  *  In sum, we are at the last stage of savings bank restructuring. The aim is that by 30 September the various steps outstanding should have been completed.

At the same time, the monetary policy stance of the ECB, while fully oriented towards the price stability objective, does influence the exchange rate. From a theoretical viewpoint, one can argue that the member countries of the euro area have chosen to go beyond a fixed exchange rate by adopting a single currency. The adoption of the euro implies the irreversible abolition of national currencies and, hence, of national exchange rates themselves. This choice involves a trade-off. On one hand, a single currency, as we have seen, eliminates the volatility of exchange rates within the monetary union. The euro, as a freely-floating currency, helps protect the economies of its member countries from external shocks. The single currency also facilitates trade between them, deepening economic integration. However, the elimination of national currencies implies that market signals regarding domestic economic imbalances are lost, allowing such imbalances to build up. More importantly, the absence of national currencies also implies that a valuable tool for stabilising the economy in the short term in the face of asymmetric shocks is no longer available. The sovereign debt crisis in the euro area has brought home the implications, both positive and negative, of membership of a single currency area. It remains my firm opinion, however, that the gains outweigh the losses. It is also my firm opinion that greater efforts need to be made to reduce and eventually eliminate internal imbalances within the monetary union in order to protect its sustainability.