samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: Conducting monetary policy in times of financial stress Speech by Mr Christian Noyer, Governor of the Bank of France, at the European Banking and Financial Forum, Prague, 1 April 2008. *  *  *  For more than two centuries, preserving the value of money and fostering the stability of payment systems and credit and financial markets have been the two main responsibilities of central banks around the world. Under normal circumstances, we tend to think of these tasks as relatively distinct. Furthermore, this practical dichotomy broadly reflects the academic state of the art: as Professor Goodhart recently stressed, the large consensus on the macroeconomic policy side of central banking that has emerged over the last two decades contrasts with the absence of consensus on the appropriate theoretical framework for analysing financial stability and the best ways of ensuring it or restoring it when it breaks down.1 However, in times of stress, some interactions inevitably emerge. For instance, the financial turmoil has a clear impact on the effectiveness of monetary policy transmission (see for example the unusually large spreads on the money markets since August 2007). Conversely, adequate monetary policy decisions and credible communication should contribute to the orderly unwinding of financial crises. Periods of turmoil, like the one we are now experiencing, are thus clearly challenging, since we have to rethink the way in which we can meet both of our responsibilities. I will first address the issue of the necessary separation of liquidity management and monetary policy decisions.

For the time being, they are not. My reasons for being relatively more optimist that our American colleagues are threefold:  3  The key idea of robust control is that policy-making should aim at minimizing the consequences of worst-case scenarios. Even if the required policy eventually appears sub-optimal considering ex post that the large-scale shocks have not materialized, a risk-management approach assesses that the associated cost of buying an insurance is small compared to the alternative. BIS Review 37/2008  3  -  First, a major financial disruption (involving the banking system) is less likely in the euro area than in the US. European banks are of course not immune from losses due to their exposure to the US subprime market or other markets that have frozen since the crisis burst out, but this exposure is on average significantly lower than that of their US counterparts and their model of universal banking allows them to mitigate the consequences of a crisis in one segment of their activity. -  Second, empirical evidence supports the view that the real macroeconomic consequences of protracted financial distress should be relatively less disruptive in the euro area. First of all, household indebtedness has remained relatively low by international standards in the euro area in general (and notably in France). Furthermore, available evidence points to a weak transmission of financial shocks to household consumption via the wealth channel. -  Finally, the short-term economic outlook is much more encouraging in the euro area than in the US.
We cannot rely exclusively on controls or process to achieve desired outcomes. Not every situation can be anticipated. Not every decision can be automated. Controls can be out-maneuvered—sometimes unwittingly, but other times on purpose. For all these reasons, good processes are necessary but not sufficient. There will be situations in which your employees have to make choices. Ignoring the moral dimension of choices carries significant risk.8 If you want your organization to be well controlled with regard to its risk, you have to consider the quality of choices, not just the reliability of processes.9 An organization should therefore develop the capacity of its employees to make good choices, not just permissible choices. So, how do you practice moral reasoning? Bill Dudley has offered what I thought was a good starting point. Get rid of the notion that a separate morality applies at work than at home.10 Bankers—and, for that matter, lawyers—cannot check their morals at the door when they step onto a trading floor or into a courtroom. Here are some other ideas, courtesy of a 2016 report by the Financial Conduct Authority entitled “Behaviour and Compliance in Organizations.”11 The report argues, among other things, that ethical considerations need to remain salient in order to promote good choices.

In closing, I want to reiterate that external auditors have truly been one of our key partners in the quest for greater financial stability. Thailand’s financial industry is currently in the midst of structural changes with the implementation of our Financial Sector Master Plan. One of the goals of the master plan is to promote greater competition, which in turn, may result in the evolution of bigger and more complex financial institutions. Against this background, our supervisors will need to fully embrace a risk-based supervisory philosophy and its focus on the quality of internal controls and risk management systems. Therefore, our relationship with external auditors will become even more important in the years ahead as we seek to strengthen banks’ risk management systems and enhance fnancial stability. Thank you. 2  BIS Review 55/2004
There is now a wide body of evidence, drawn from a wide variety of settings, on the benefits of combining the insights from expert and non-expert sources when making sense of a complex world, when forecasting an uncertain future. 3  Harvesting insights from a non-expert audience appears, in these uncertain settings, to be especially valuable by providing diverse perspectives and different insights. If we turn from understanding to trust, the picture has many similarities. Trust lies at the heart of the social contract between institutions and societies, between policymakers and citizens. But the very nature of trust appears to have changed rather fundamentally over the recent past. Societies and individuals have 4  undergone what Rachel Botsman in her recent book calls a “trust shift”. Where once trust was institutionalised and anonymised, today it is socialised and personalised. This shift in the gears of trust has had consequences. Public institutions of all stripes have been one of the 5  casualties, with measured trust having fallen steadily over the recent past. Most central banks have not escaped these shifting sands, in particular since the global financial crisis. For them and us, the age of innocence, or at least the era of taking public trust as given, may be over. That matters. Credibility and trust are the secret sauce of central banking. They are what enable them to shape expectations in ways which stabilise the economy and financial system. An economy or financial system without trust, history tells us, ceases to be a system.

As we move up the ladder, we increase the degree of citizen engagement in decisions that affect them. The RSA stop short of recommending the top rung, but do propose various initiatives to increase citizen involvement and collaboration. Armed with this framework, I have been thinking about how far the Bank of England has so far climbed the citizen engagement ladder. Truth be told, I suspect for the first 300 years of its life, the Bank of England scarcely had its foot on the first rung. It saw little need even to inform the wider public about the economy and policy. Trust among the public was anonymised, institutionalised and given. When tempted to step up a rung, the Bank quickly contracted an acute form of vertigo. Over the past 25 years the Bank has taken significant steps up the engagement ladder, in part in response to the public’s trust shift, in part reflecting the Bank’s wider policy responsibilities. These steps have 7  transformed how the Bank “informs” and “consults” the public on its views and policies. One simple diagnostic is the rise in the Bank’s publication count. Seventy years ago, the Bank published precisely one speech a year. Today, rarely a day passes without multiple publications. Then, the Bank uttered publically fewer than 5,000 words per year. Last year, it uttered in excess of 4 ½ million. Over the past two decades, it would not be an exaggeration to say there has been a genuine revolution in central bank communications.
3  FSA DP09/4: Turner Review Conference Discussion Paper, “A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact”. 4  BIS Review 144/2009  Second and beyond liquidity planning, recovery can involve derisking. This might mean laying off risk, shedding positions or even selling businesses. Once in distress, banks absolutely must be prepared to shrink their franchise in order to sustain themselves. That may entail having businesses set up within groups in a way that would facilitate sale, if necessary. Sometimes what a group regards as its core franchise will not map exactly into what the authorities think of as the essential economic services it provides. That is obviously for discussion between firms and their regulators, who need to be ready to exercise powers to force risk-reduction and recapitalisation where necessary to preserve the soundness of the enterprise and the stability of the system. “Derisking” is all about the capital resources of banks in the face of idiosyncratic or widespread stress. There is, therefore, a read across from the “Living Wills” exercise to the question of how much capital banks should hold. Almost no amount of capital is enough if things are bad enough. Which is why contingent capital might potentially be an important element in banks’ recovery plans, as the Governor set out recently in Edinburgh. 4 This would not be the kind of hybrid capital that mushroomed in the decade or so leading up to the crisis.

In big picture terms, the Bank of England’s programme of auctions to purchase small amounts of a fairly wide range of sterling corporate bonds can be viewed as one manifestation of that broad approach to MMLR. The aim has been to aid improvements in the liquidity of the market, including by reducing the inventory risk to “market makers”. But our community is some distance from thinking through the extent to which this kind of thing should feature as a permanent part of our armoury. While not an urgent issue, it is an important one given the increasing role of capital markets in our financial system. Recovery plans, and contingent capital Whether provided to individual firms or to markets, routine liquidity insurance will not always suffice. Sometimes a liquidity problem is triggered by fundamental problems. Sometimes a liquidity crisis creates credit problems through the effects of a fire sale of assets. Firms must plan for distress. Not only is that in the interests of the financial system and, indeed, of the economy more widely, it is in the interests of firms themselves. At not a few distressed firms around the world, at times over the past three years the leadership “lost it” under the pressure of events. Contingency planning is essential. Regulators must make firms do it – properly. And that means for really disagreeable scenarios. As the UK’s FSA has recently explained, 3 the clear recommendation of the G20-sponsored Financial Stability Board is that these contingency plans need two, distinct components.
New legal provisions and new institutions are needed to build the banking union or the fiscal union. For more than two decades I have been one of those who promoted democracy and market economy in Romania. Therefore I have to believe that Western civilization will continue to be democratic, applying the rule of law in market economies. With these institutions in place, we can look backwards to draw some lessons on the future of the banking sector. I will do this through the eyes of a central banker. A central banker is always interested in the way the banking system works. If the banking system moves away from being sound and shock-resilient, monetary policy becomes inefficient. When many changes are to be implemented, the risk of making mistakes cannot be ruled out. BIS central bankers’ speeches  1  One way to look at the banking system is to see its history as a succession of financial crises. In a nutshell, from the Great Depression to this day, the banking system faced two major financial crises: the one in the `30s and the current one. In between, there were some more or less mild financial crises. From this perspective, as a central banker, I see two trends. First, some financial crises, whether major or not, have led to in-depth reassessments of the regulation paradigm over time. Second, a cross-border approach to regulation policies has been developed gradually. However, it has recently accelerated as a prerequisite for the envisaged banking union. II.1.

The crucial factor to succeed in the global knowledge economy is the country’s ability to develop intellectual capital. Only those who understand the importance of innovations for growth will thrive and prosper in the coming decades. Unfortunately, CEE region lags badly behind the leaders in terms of its current and future ability to generate innovation. One of indicators measuring current ability to innovate is the number of researchers. In the mid-1990s CEE-4 (the Czech Republic, Hungary, Poland and Slovakia) and Asian NIEs had similar number of researchers per million people, while two years ago NIEs had almost twice as many persons employed in R&D per million people in comparison with CEE-4. Future knowledge potential of particular country or region can be measured by tertiary enrolment ratio. Tertiary enrolment ratio in the CEE-4 countries improved to 50 percent in 2004, but still remains well below 62 percent in the EU-15 and 82 percent in the United States.. Because of a relatively small population and a number of structural deficiencies it is very unlikely, that increase in the number of students in CEE-4 that have occurred in recent decade will translate into higher innovation potential in the coming years, unless a dramatic change in policies in CEE-4 is made. This is also confirmed by a dramatically low number of patents registered in the CEE countries and extremely low number of scientific publications.
Ladies and Gentlemen, in recognition of the need to provide a conducive regulatory environment which promotes sustainability, accountability and transparency in the conduct of micro finance business, the Bank of Zambia, in consultation with other key stakeholders in the microfinance sector, introduced the Banking and Financial Services (Microfinance Regulations) of 2006 which came into force on 31 January 2006. While the Regulations may be focusing on deposit taking microfinance institutions and relatively large non-deposit taking microfinance institutions, it is envisaged that several other smaller players in the industry will continue to be regulated under the Cooperative Societies Act and the Money Lenders Act. The Bank of Zambia will be holding a workshop for microfinance institutions and other stakeholders during the second half of 2006 to highlight the salient features of these Regulations and the importance of operating microfinance institutions to properly register their businesses. Ladies and Gentlemen, we are aware that lending of small sums of money to a large number of individuals maybe costly, and this may compel microfinance institutions to charge high lending interest rates than commercial banks and other financial institutions. However, it is also important to note that high lending interest rates can lead to high levels of delinquency. It is in this regard that the Bank of Zambia is concerned about the levels of lending interest rates charged by most financial institutions in Zambia, microfinance institutions included.

It is in fact a synergistic and holistic approach to develop Singapore as an innovative and responsible global digital asset hub.
Germany thus has a domestic demand problem, which it is trying to solve through supply side reforms, while fiscal and monetary policy are tied by the EU and ECB. All this appears to have contributed to further prolonging the  BIS Review 41/2005  3  economic downswing in Germany and if the recovery in the euro area were to be delayed further, it would have an effect on Swedish export demand. If these negative risks are realised in full, it could be more difficult for domestic demand to relieve the export-driven growth of recent years. This could break the present recovery impetus, which would lead to a need for further stimulus of the economy from monetary policy. Conclusion All in all, we should continue to be vigilant of risks and possible changes in the direction of business tendencies. However, it is important to hold on to a stable analytical framework and a consistent forecast assessment. The underlying factors still indicate a rise in resource utilisation and thereby a rise in inflation. 4  BIS Review 41/2005

This has evolved a high rate of participation in the financial system with deposits now accounting for 160% of GDP. This has allowed for the efficient functioning of the intermediation process to effectively mobilise and channel savings to productive activity thereby supporting the overall growth and development process. BIS Review 130/2007  5  Conclusion Ladies and gentlemen Essential to a progressive financial system is prudential safety and soundness, competition and consumer protection which needs to co-exist to effectively serve the interests of various stakeholders. As regulators we need to adopt the right balance between providing adequate protection for consumers while promoting competition and financial innovation in the financial system. But it is the combined efforts of regulators, the industry, and consumers that ultimately maintain market confidence and ensures the effective and efficient functioning of the financial system. The recognition of, and commitment to this shared responsibility will not only contribute to the evolution of the financial landscape and preserving financial stability, but will enhance its overall contribution to the overall functioning of the economy and securing its full potential. 6  BIS Review 130/2007
For example, we see increased capacity in writing specialised risks like aviation, energy, marine and political risks. For the life insurance industry, we have also seen greater product innovation as well as increased interest from insurers offering more sophisticated products catering to the needs of the high net-worth and mass affluent segments. BIS Review 163/2010  1  Future challenges and opportunities 7. But greater challenges and opportunities lie ahead. Enhancing risk management capabilities 8. The recent global financial crisis has underscored the importance for financial institutions to have strong risk management capabilities. The use of risk management tools such as stress testing, for example, helps identify potential risks, and allows countermeasures to be instituted early. Insurers in Singapore would have to keep abreast of developments internationally, and should continually look for ways to deepen their risk management tools and capabilities. INCOME is no exception. But unlike some of the other insurers that are part of larger global financial institutions and can therefore leverage on their parents’ risk management expertise, INCOME does not have such an advantage. These global financial institutions have widely-tested risk management practices and more established risk management cultures, given their richer experience. INCOME would have to grow its risk management expertise internally, but it would do well to learn from these global players’ recent experiences. Strengthening governance 9. However, having risk management tools and capabilities alone will not be enough. The challenge is often in successfully integrating enterprise risk management into the insurer’s business, and this would require effective governance.

I congratulate the Board, Senior Management team and the staff of INCOME, both past and present, for bringing INCOME to where it is today. 20. I wish you continued success in the years to come. BIS Review 163/2010  3
In particular, the ECB expanded scope for central bank intermediation of transactions between banks, thereby offering an alternative to the malfunctioning private inter-bank money market. At the same time, the measures supported financial stability objectives by containing and mitigating the systemic consequences of liquidity tensions in the money market. To conclude, let me say a few words on the recent decisions of the Governing Council taken on 9 May and announced on 10 May. As I already said publicly, I will sum up in five points the Governing Council’s position. 1. The ECB is fiercely independent and takes all its decisions independently of governments, social partners and pressure groups of any nature. BIS Review 70/2010  3  2. We are inflexibly attached to price stability, our primary mandate. Our successful track record since the inception of the euro is remarkable. 3. Our present monetary policy stance is appropriate. Our decisions taken on 9 May have confirmed it. We are not engaging in any form of “quantitative easing”. 4. The “Securities Markets Programme” is designed to ensure an effective functioning of the monetary policy transmission mechanism by helping to resolve a malfunctioning of some segments of the euro area debt securities markets. 5. The liquidity provided through this programme is withdrawn in its entirety through tenders of term deposits.

Although the structural balance policy was launched in this decade, fiscal efforts to smooth the copper price fluctuations began in the 1980s, with the copper stabilization fund. In fact, throughout most of the 1990s, the structural balance was near 1%. This countercyclical fiscal policy makes the effective fiscal balance highly correlated with the price of copper. Thus, our fiscal policy has been contributing for more than 20 years to stabilizing the Chilean economic cycle. As a result of the application of the rule, a large amount of resources has been saved in sovereign funds when the price of copper has been high. 4 In the period 2007-2008, 22 billion US dollars were placed in these funds, of which 20 billion – the equivalent to 12% of GDP – came from the accumulation of new funds, and the difference was the funds’ net financial gain. This has had significant implications in the current economic scenario. Since last year, particularly as from September, the world has been enduring the worst recession in the last 60 years and our country, despite being in an excellent position to address these shocks, has not been spared its consequences. But today, our fiscal policy has been able to make an important reactivation effort, thanks to the prudence with which the years of high copper prices were managed. The other critical elements in our macroeconomic policies that favor stabilization are monetary and foreign exchange policies. Although they play a somewhat more subtle role than fiscal policy, they are no less important.