samchain/econo-pairs-v1 huggingface dataset:
Changes observed in the market features of the business in other countries also foreshadow what may in time characterise the mortgage market in Malaysia. In some markets, brokers of home loans are commonplace and a growing proportion of loans are protected by insurance. In an increasingly challenging environment, banks will need to demonstrate that they have sufficiently strong balance sheets, processes, and management plans in place to contain the risks, while providing continued support for portfolio expansion and product innovation in the mortgage financing segment. This will entail continuous assessments of the changing profile of risk and the appropriate consideration of new and alternative ways to manage risks. The board in particular is responsible to ensure that product innovation and the re-packaging of risks in the mortgage portfolio do not outstrip the bank’s capacity to manage the associated risks. Today, we are pleased to have three distinguished speakers address some of these issues and developments in greater depth. They are Dr. Yeah Kim Leng from RAM Holdings Berhad and Dr. John Lee from KPMG who will share an overview and their perspectives on risks in mortgage markets in Malaysia, as well as their experiences with approaches to managing these risks in the light of the many changes taking place in this area. We are also especially honoured to welcome Mr. Peter Pang, the Deputy Chief Executive of the Hong Kong Monetary Authority, who will speak on Hong Kong’s experience in the area of mortgage financing.

In many financial institutions, the rigor of board scrutiny and due diligence was replaced with an over-reliance on external ratings or complex internal models for credit evaluations. This was compounded by incentive structures that were not adequately risk-aligned and inconsistent with long-term value creation, eventually undermining the soundness of banks. These failures have extracted a high price on affected financial institutions, investors and national economies at large. Some of the large financial institutions that entered aggressively into the sub-prime market are now no longer around, while losses from the write-downs of loans and provisions have been staggering. Between the second quarters of 2007 and 2009, the global write-down of loan provisions had amounted to USD1.3 trillion. In October 2009, the International Monetary Fund indicated that the estimates could rise further to as much as USD2.8 trillion 1. The events which have since unfolded underscore the fact that effectively managing risks associated with mortgage financing encompasses a much broader set of considerations – including the consequences of an adverse and broad downturn in the housing market. The crisis has reinforced the need for banks to consider the cyclical developments in the mortgage financing market more explicitly in their risk assessments. Factors such as a sustained growth in house prices, low interest rates and modest equity commitment should inform banks of the risk outlook for the mortgage segment and corresponding risk mitigation actions that are needed to avert potential losses.
Responsibility would lie with the national supervisor to determine the approach most suitable for its banks. We expect that the new capital treatment will provide much better support for the healthy growth of equity financing and venture capital markets than the current Accord. 4  BIS Review 27/2001  Summary of changes and need for standards These important changes – modifying the capital charges, permitting greater recognition of collateral and trade receivables, and increasing the flexibility of the treatment of equity – should go a long way toward ensuring that banks that lend to small and medium-sized businesses are not disadvantaged under the internal ratings-based approach of the new Accord. I’d like to take a moment to speak more broadly about the internal ratings-based approach. I think it is a significant and innovative step for banks’ internal ratings to play a major role in their capital requirements – a step that plays very strongly into our goal of better aligning capital requirements and risks. To do this effectively, we need to ensure that a bank’s internal rating system enjoys an appropriate degree of credibility and consistency when used in determining regulatory capital. Accordingly, we are striving to develop a meaningful set of minimum standards. While I have focused on the first “pillar” of the new Accord, namely the minimum capital requirements, it’s important to remember that there are two other pillars vital to the new framework: supervisory review and market discipline.

This is in line with international developments in recent years, resulting in Central Banks being entrusted with a single main objective, i.e. to promote price stability. Price stability was set as the primary objective of monetary policy because inflation is above all a monetary phenomenon. There is little point in setting objectives for monetary policy which it cannot achieve. Applying monetary policy to achieve price stability also contributes to economic stability. This, in turn, is a prerequisite for future growth in the economy and making the most efficient use of its scarce resources. Other public authorities, industry and interest groups also need to adapt their decisions to accord with this inflation targeting.
Commodity prices USD, Index 2000 = 100 240  240  Food Other agricultural products Metals Total  220 200  220 200  180  180  160  160  140  140  120  120  100  100  80  80  60  60 00  01  02  03  04  05  06  07  08  09  10  Source: The Economist  10  BIS Review 98/2009  7. Consumer prices USA Annual percentage change 6  6 CPI  5  CPI excluding energy and food  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2 -3  -3 00  01  02  03  04  05  06  07  08  09  10  Source: Bureau of Labor Statistics and the OECD  8. Real house prices, USA Index 1950 = 100 200  200  180  180  160  160  140  140  120  120  100  100  80  80  60  60  40  40  20  20 0  0 50  55  60  65  70  75  Note. Outcome up to end of Q1 2009.

In view of the incompatibility of monetary policy autonomy, full capital account liberalisation and a fixed exchange rate, EMU participants have given up independent national monetary polices in favour of the  BIS Review 70/2002  1  free movement of capital and the adoption of a single currency. The main driving force behind this decision was the desire to overcome the obstacles to the completion of the Single Market and to progress towards monetary and, eventually, economic union. A single currency was a logical step in this regard. Given the constraints which the adoption of the single currency entails, the emphasis which the Treaty puts on containing fiscal deficits and on labour mobility is understandable. In this set-up, in fact, the adjustment to asymmetric shocks has to take place through fiscal policy and the labour market. Since labour mobility within the Union is still weak, however, in practice this means that the onus of adjustment falls on fiscal policy. Fiscal consolidation thus remains a necessary precondition for the success of EMU. Indeed, whereas it could be argued that the Stability and Growth Pact precludes fiscal policy from responding to short-term domestic needs, it is equally true that the constraints arising from that Pact are meant to ensure that governments in the euro area have the necessary room for manoeuvre over the medium-term. The presumption here is that by achieving close to balance or surplus positions, governments would be in a better position to deal with normal cyclical fluctuations.
For the moment, however, we have to work on the basis of the published statistics and our experience, which tells us that good macroeconomic data should not provide a basis for complacency. The importance of humility is emphasised by the recent experiences several countries have had in Asia. For instance, the experience of Japan at the end of the 1980s and Korea in the mid-1990s, when traditional macroeconomic measures, such as consumer price inflation and public finances long indicated a favourable development. What was not so evident were the imbalances built up through stock exchange and property valuations and through low-yield investments. What is the reason behind the positive developments? Is the positive development in Sweden due to computers and the Internet? It is of course possible that information technology has made a contribution, but is it a central part of the explanation? The new information technology is not very good at explaining what has happened so far in the Swedish economy. The path of inflation is not determined by technological or organisational developments. There have been periods of technological development with rising, falling and constant price levels. In Sweden, the shift in monetary and fiscal policy towards macroeconomic stability is an important part of the explanation for the improved economic developments. Moreover, we have moved away from a tax system that severely restrained the economy (Stig Malm called it perverse), to a system that is less restrictive.

Short-term fluctuations in the krone tend to have very limited effects on economic developments, while long-lasting changes may have an impact. Norges Bank has mainly based projections in the baseline scenario in its inflation reports on a constant exchange rate equal to the average for the previous three months, and in some cases the average for the previous month. Using these averages, very short-term variations in the krone exchange rate will have less effect on the exchange rate assumption. A more long-lasting change in the krone exchange rate will, on the other hand, be taken into account over time and will gradually have an effect on the inflation projection and on interest rate setting. Norges Bank’s Executive Board sets the interest rate with a view to achieving the inflation target of 2½ per cent. The inflation target also provides a framework for stabilising output and employment. When setting the interest rate, the Executive Board seeks to strike a balance. On the one hand is the consideration of bringing inflation up to target and stimulating growth in the Norwegian economy. On the other hand, we must consider the risk of new pressures in the Norwegian economy when looking further ahead. Since December 2002, we have found it appropriate to reduce the interest rate to a low level. At the last monetary policy meeting on 17 September, it was decided to reduce the interest rate to 2.5 per cent.
Together with the Secretary of State for Economic Affairs, I am participating in Financial Security Board (FSB) discussions to radically reform the financial systems of all countries. Both of us have had the privilege to witness how Spanish banking regulation and supervision is being carefully appraised and, insofar as is possible, it is intended to take advantage of the good work done in the past in Spain. We in Spain should take this same attitude to learning. We should recognise that we have failed in labour regulation since, for the third time in recent decades, unemployment has approached the unacceptable figure of 20%. We should therefore find out what other countries are doing with their labour institutions and try to incorporate into Spanish legislation whatever seems most reasonable to achieve their low unemployment rates and their high labour productivity levels. Unfortunately, we are at a historic crossroads. If we do not undertake ambitious labour reform, the Spanish economy will enter a tough and complicated period, in which not only will growth be lower than it would be with extensive reform, but, moreover, its impact on public finances will be extremely negative, making it difficult to achieve the targets set in the Stability Plan.

To achieve these objectives, there has been insistence both in the Banco de España’s reports and in my regular appearances before Parliament on the need to undertake wideranging reforms. The list is an extensive one and includes areas such as education, the knowledge economy, the liberalisation of goods and services markets, the boosting of competition in the network industries and the introduction of further improvements in the house rental market. However, I would like to stress two reforms which I consider most pressing and necessary: budgetary consolidation policy and labour reform. The government has in recent weeks  BIS Review 27/2010  1  tabled some proposals for reform which, in my view, are in the right direction. In respect of public finances, a cut of € billion in overall general government spending has been announced in the period up to 2013 and, within the framework of the so-called Toledo Pact, an increase in the retirement age has been proposed that would contribute significantly to the financial balance of the public pensions system. The budgetary measures proposed are a significant public commitment by the government to fiscal consolidation. For that very reason, it is now essential that these commitments should be actually met, since otherwise Spain’s credibility might be most adversely affected. As regards the labour market, the social agents have reached a wage agreement and the government has set out proposals for labour reform.
So you’ve turned the world upside down topsy-turvy and today we are seeing India along with other big emerging markets who are effectively lending money to the United States of America by buying their Treasuries and funding their development. So these three stands I think have to be taken into account because they are really new elements of the international financial architecture which have a bearing on how the global economy is going to perform. So what do we see today in the global economy that is different apart from what I just mentioned. First of all you have a liquidity trap. Keynes’s classic liquidity trap is alive and kicking around us. Whatever you do with interest rates it doesn’t care at all for production or for consumption because we have too much liquidity, the 8 trillion that I talked about. In that context how do governments stimulate their economies given that monetary policy has done the heavy lifting, it created this excess liquidity but now going forward there is a need for a new element, the Xfactor, which has to then propel the growth forward. You have very influential commentators like Larry Summers of United States who is calling for another round of quantitative easing in the US because he feels that the long term growth path of the United States economy is still not well embedded and the reason for that is partly due to the demographics.

This a peculiarity of Sri Lanka that we resemble countries like Phillipines and Mexico, in a sense that we have large diasporas living overseas who are fairly high income earners relative to our levels of income in this country and I just asked Dr. Weerasinghe, our national savings rate is about 25 percent, and of that perhaps 6 to 7 percent is accounted for by international savings component of our diaspora. That is a significant number; it means that we can afford investment rates of 26 to 28 percent perhaps even 30 percent in the medium term if we marshal these resources effectively and then create our own growth impetus which will engender a sustainable growth path and at the same time integrate ourselves with this global value chain that the Chinese have constructed very effectively over the last few decades. But there are several challenges that face us in the near term. First of all we have to watch what the American monetary policy makers will do in the next few weeks.
Jörg Asmussen: Exchange of views with the Economic and Monetary Affairs Committee of the European Parliament on financial assistance to Cyprus Introductory statement by Mr Jörg Asmussen, Member of the Executive Board of the European Central Bank, at the European Parliament, Brussels, 8 May 2013. *  *  *  Dear Madam Chair, Honourable Members of Parliament, Thank you for inviting me to this exchange of views on financial assistance to Cyprus. The substance of the decisions, and process of how they were taken, have been debated controversially – also in this House. I am therefore pleased to be given the opportunity to provide the ECB’s views and to participate in a public debate on this matter. Initial conditions in Cyprus  Before discussing the key elements of the EU/IMF adjustment programme, it is very important to understand how Cyprus got itself into such difficult situation in the first place. Why were imbalances of such magnitude allowed to develop? What made the nature of the challenges faced by Cyprus so exceptional? I find these essential questions that I hope we can address during our exchange of views today. Let me focus here on the banking sector. In the 2000s, the Cypriot economy evolved towards a rather unbalanced business model with an inordinate weight for the financial industry. The country aimed to become leading provider of international banking services. Cypriot banks attracted large inflows of foreign deposits. They expanded their balance sheets dramatically over recent years, both domestically and externally.

In addition, the EU/IMF programme foresees a rapid and substantial downsizing of the domestic banking sector, from about 550% to about 350% of GDP at the beginning of the programme. This is indispensable to reduce future contingent liabilities from the banks to the sovereign. The EU/IMF programme also foresees the full protection of deposits below 100,000 euros which will not suffer any loss from the resolution strategy. Despite the unprecedented steps taken so far, the banking sector has not yet been stabilised. The burden sharing arrangement negatively affected depositor confidence and required the introduction of temporary and proportionate capital controls and restrictions on deposit withdrawals. Short term risks are high, as the deep recession is expected to take a toll on banks’ balance sheets. The reliance of the largest bank on ELA continues to be exceptionally high. Hence, firm steps are needed to complete the financial sector reform so as to rebuild confidence in the viability of the banking system. 2  BIS central bankers’ speeches  Let me now turn to the lessons which we can draw from the experience in Cyprus. Lessons from the Cypriot experience  The Cypriot case has been a salutary reminder of the importance of establishing banking union as swiftly as possible. Only then we will be able to break the negative interaction between sovereigns and their banking systems. First, it has shown that the speedy entry into force and implementation of the single supervisory mechanism (SSM) is essential.
While the issues would not be exhaustion but I will attempt to give a different dimension on the matters raised. Development of Islamic finance Islamic finance is now the fastest growing segment in the global financial industry. Notwithstanding the global financial crisis, Islamic finance has shown strong growth. The size of assets under management may very well exceeded USD1 trillion. Islamic finance has maintained an average growth rate of 15–20% per annum. New areas of business continue to show encouraging progress. Islamic Mutual Funds is growing at average of 23% per annum. The Takaful industry is growing at 13% per annum. Islamic finance has attracted a lot of attention. It is no more peripheral to the conventional banking system but has grown from being a novelty to be a viable and attractive alternative to the conventional banking system. Giant banking and insurance groups are now very much interested in Islamic finance as a way to growth their business. Five years from now, the data that I am showing you could very well change in terms of numbers and structures. Interest in Islamic finance is no longer limited to Muslim nations and Muslim communities. The world realizes the economic clout of 1.5 billion people is a market that cannot be ignored. The Islamic finance market offers an enormous potential for future growth. Long established financial centers such as London, Hong Kong, Tokyo and Singapore have already begun the first steps to enhance their respective centers into vibrant Islamic financial centers.

Strong sustainable growth requires not only a strong and vibrant financial system; it requires the controls and safety buffers to ensure that the  3  For more information on UK-owned banks’ overseas exposures see Broadbent, B (2012) ‘Deleveraging’, speech at Market News International, 15 March. 4  The Chancellor has recently asked the Governor of the Bank of England, working with HM Treasury, to initiate research to create better measurement of ‘finance for productive investment’ covering all asset classes and all stages of finance, with a view to publishing the data on a regular basis. See “Fixing the foundations: creating a more prosperous nation”, HM Treasury, July 2015. 8  BIS central bankers’ speeches  dynamics of the system do not generate periods of illusory growth and prosperity followed by periods of destruction of the same. The financial system has come a long way since the time of Emperor Tiberius. While we have relearned some familiar lessons in recent years, we have also learned some new ones. We have had to develop a new regulatory framework, macroprudential institutions like the FPC and new policy approaches. Over the next few years we will certainly need to refine all of these. The implementation of the detailed reforms will inevitably throw up unforeseen effects in particular places and where it is justified we will need to revisit issues. But we should be careful about talking about turning back the overall regulatory dial or trying to trade off the risk of financial instability for short term growth.