samchain/econo-pairs-v1 huggingface dataset:
Out of this came the three European Supervisory Authorities (ESAs), namely the European Banking Authority (EBA) in London, the European Insurance and Occupational Pensions Authority (EIOPA) in Frankfurt and the European Securities and Markets Authority (ESMA) in Paris. We discussed whether these three authorities could be merged into one, but that was considered premature. Suggesting such a merger might have delayed the whole political process (Figure 5). Trying to move the three to the same city was considered equally impossible. Figure 5 The EU’s new supervisory structure European Banking Authority (EBA) European Systemic Risk Board (ESRB)  European Securities and Markets Authority (ESMA) European Insurance and Occupational Pensions Authority (EIOPA)  The second pillar was the European Systemic Risk Board, the ESRB. The main idea with the ESRB was to look beyond the supervision of individual institutions and focus on the risks relevant to the financial system as a whole. There was a widespread feeling that supervisors in many countries could not see the wood for the trees – and certainly not any woods in any other countries. So the new body should work with issues systemic to parts or to the whole of Europe. As time has passed, this task has become known as “macro-prudential supervision”. The institutional set-up of the ESRB Legally, the ESRB is an independent EU body located in Frankfurt and with a Secretariat provided by the European Central Bank. The President of the ECB is also the Chair of the ESRB. The ESRB has no binding powers.

  Firstly, there is the federal approach, where you allow for a full delegation of powers to the EU level, including regulation, supervision and crisis management (Figure 2).   Secondly, you can abandon the idea of the internal market and return to a system with full national control of domestic financial systems (Figure 3). Figure 2  Figure 3  The de Laroisière group opted for a third way – the middle way – to reform the EU financial system. In terms of the financial trilemma, this means keeping financial integration and, at the same time, trying to find a reasonable compromise between financial stability and national sovereignty (Figure 4). Somewhat stronger cooperation, but still resting on national sovereignty. Figure 4 Financial stability  Financial integration  National sovereignty  Given the present European crisis, you may well ask whether this is a possible compromise or whether it will be just another damp squib. Only time will tell. But within this concept, there is room to move towards stronger European cooperation. The EU’s new supervisory structure The de Laroisière proposal rested on two major institutional pillars. The first related to the previous “level 3” committees, which were to be strengthened, transformed into authorities,  2  BIS central bankers’ speeches  and given as much power as possible without having to change the European Treaty.
In line with my earlier views on a flexible financial system my opinion is that such structures should be allowed, provided of course that your laws and regulations allow for effective consolidated supervision of the whole financial conglomerate. The present development toward a blurring of the boundaries between the activities of different financial institutions makes it reasonable to allow financial conglomerates. Broad groups conducting different activities may also be better able to diversify their risks and could thus be more resilient against financial shocks. Are there reasons for retaining state-owned banks? An argument sometimes voiced is that they promote competition and provide services for certain parts of the population which are of little commercial interest to the other banks. The Basel Committee’s core principles accept state-owned banks as long as they are run and regulated on equal terms with other banks. But my own view is that you should avoid having state-owned banks. Simply put: The government is not a good owner and manager of banks since the bank will come “too close to the politicians”. There is always a temptation for the government and parliament to use state-owned banks to provide what mistakenly looks like cheap services to the people. But there will be hidden costs for such services, not least in the form of disrupting competition in the banking sector. The government could certainly provide certain subsidized services if it so wishes, but the costs should be transparent.

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And retail spending may be slackening, though heavy discounting has clouded the underlying picture. There are clearer signs that the slowdown in the housing market is gathering pace. But the impact of this on consumer spending and ultimately on inflation is highly uncertain. And that is what matters for monetary policy. So growth does now seem to be slowing. But what is less clear is whether the scale of this easing is likely to be broadly what we need to keep inflation on target in the medium term – neither too much nor too little. That’s not just because we don’t know how much slowing is in the pipeline. There are a couple of other important uncertainties too. First, it’s hard to judge the underlying strength of inflationary pressures. When inflation picked up quite sharply last winter, there was a lively debate about how far this reflected strong monetary growth, and how far it was due to the temporary effect of a very big jump in gas and electricity prices. Although inflation has now come down sharply, there is still room for debate about the margin of spare capacity in the economy. Various indicators seem to be telling slightly different stories. On the one hand, overall wage growth seems to have been moderate, by past standards. On the other hand, business surveys of capacity pressures and price expectations remain above average. Second, there is a lot of uncertainty about the risks to inflation, if oil prices do continue at their present levels.

Much will depend on developments in the rest of the world; on whether the slump in the US housing market causes a sharp slowing in the wider US economy: and on how far this acts as a brake on demand – and inflationary pressures – in the rest of the world, especially Asia and the euro area. The projections we published in last week’s Inflation Report were centred around a relatively mild slowdown, by historical standards – on the same scale as we experienced in 2005 – based on the assumption of a gradual and modest easing in interest rates over the next two years. But those projections are subject to a very wide margin of error – in both directions. The MPC’s monthly decisions are always grounded in a careful analysis of all the evidence. Given the uncertainties we face, now is a time to pay extra attention to the emerging data. We can, and should, respond quickly and flexibly to early signs of the changing economic weather. According to most recent official economic statistics, the weather is still set fair. But we know fouler weather is brewing off shore. What is still far from clear is whether we are in for a force 6 strong breeze, or a full force 8 gale. We will need to deploy all our meteorological skills. In the Inflation Report we highlighted a number of early warning indicators on both output and inflation, which will help us judge the strength of the wind.
Legal independence is represented in the institution’s own legal personality, which is different from that any other State or General Government agency may have. As a result of this personality, the Banco de España has the autonomy to assume contractual rights and obligations with third parties and to take decisions under its remit, which are legally binding for those concerned. Functional independence means that, under the principles of observance of the law and the general interest that govern its conduct, the Banco de España has the instruments needed to perform its function and the autonomy to decide on the internal resources and processes it deploys to fulfil the objectives assigned to it. This autonomy extends to its internal organisation (divisions, departments and posts, with their tasks and procedures). As an exception, a matter to which I shall return, there is currently the possibility of government review of some of its decisions in the supervisory sphere. Personal independence means that senior management, the Council members and employees of the Banco de España can do their work “independently” in the exercise of the functions entrusted to the institution. Here, independence means that in the decisions taken and in the attendant actions, members of the institution must be free from external interference and be guided exclusively by rigour and professional competence.

A key moment, which some of you will recall first-hand, came in 2003 when our then Governor, the late Sir Edward George, delivered a speech in which he talked about being touched by the plight of Muslim neighbours who had had to use a conventional interest-bearing mortgage to purchase their home, reluctantly and against their principles. He reflected on how sad and unnecessary this seemed, given the UK financial system’s capacity for innovation in meeting the needs of different parts of society.7 To put that right, the Bank asked a senior working group drawn from the public and the private sectors to identify the changes needed to legal, tax and regulatory arrangements. Those changes formed the foundations of the system we have today. They were subsequently reinforced by a 2007 FSA paper articulating how Islamic finance could be fairly and consistently supervised within a secular regulatory framework.8 Thirteen years later, one of the co-authors of that paper – Arshadur (‘Ash’) Rahman, known to many attending Islamic Finance Week – is the driving force behind our new facility. The regulatory approach set out by Ash and his co-authors still applies today. A preference for principles over excessively rigid rules, able to respond to diverse and evolving markets, and reduce the scope for regulatory arbitrage. Avoiding unnecessary regulatory obstacles to Islamic finance, while giving no special favours.
But, let me be clear what it does not mean: it does not mean that the ring fenced bank can set its own strategy and thereby ignore the group to which it belongs; it does not mean that it can set its risk appetite in isolation of the group to which is belongs; it does not mean that it can refuse to pay a dividend to its parent if it is adequately capitalised both now and looking forwards using stress tests (in other words, it does not have a reason to trap excess capital); and it does not mean that its CEO can ignore the Group CEO. But, and this is crucial, the group cannot require the ring fenced bank to break the rules of ring fencing. I hope this is clear. If you think we have watered down the regime, please let me know. Competition I want to finish on an equally important subject, namely competition in the banking industry, which is of course topical today in view of the CMA’s report. The PRA has been given by Parliament a so-called secondary objective which I think is best described as requiring us to act in respect of the competitive implications of our own actions and inactions but only to the extent that we are not undermining our primary objective for banks of safety and soundness. We have been working to embed the secondary objective in the PRA, and to date our most publicised actions have been in the area of new bank authorisations.

I can assure you that we are not doing so, and we should not because that would go against the will of Parliament. But, sensibly, the regime sensibly allows for a degree of flexibility in how the requirements are implemented, recognising the differences in business models, legal structure and strategy of various firms. That was essential and sensible because a rigid definition of the fence would not work well for all firms. To ensure balance, I should say that I also get the opposite commentary, that the implementation is too rigid. One particular form of this commentary is that our rules on the governance of the ring fenced bank within a group mean that it will be independent in all respects, and that, proverbially, it will be able to stick two fingers up at its parent. No. The ring 4  BIS central bankers’ speeches  fenced bank will have to observe the law in respect of the requirements of ring fencing, not more than that. This is not really different from the position for banks that have subsidiaries operating in other countries, they have to respect the laws of the country in which they operate.
The purpose of these meetings is to enable the HKMA to get to know the future directors and chief executives better and to make clear the HKMA’s expectations of the roles and responsibilities their appointments will entail. It is important for all of us to appreciate that the ultimate responsibility for ensuring the safety and proper functioning of a financial institution rests with the institution itself. Regulation and supervision can only supplement or reinforce the process and cannot replace sound control and governance within the institution. (c)  Culture: the latest Global Financial Crisis and the subsequent developments have exposed clearly the fact that uncontrolled greed can and did generate highly undesirable outcomes. Not only were financial firms badly hit by these outcomes, but in some instances the reputation or brand of well-established financial centres has also been tarnished by these events. Of course, after the events many people sought to apportion blame. Obviously, the institutions concerned must take the bulk of the blame. Inadequate regulation and poor supervision were also culprits. But to me there is a much more fundamental issue that needs to be tackled if we wish to reduce the risk of similar events recurring. That is the culture and values of the financial firms and the market practitioners.

While such ambitions are quite legitimate, most of them would find achieving this goal very challenging. Why? Because an IFC, by definition, serves not only domestic customers on its own turf, it also captures financial businesses and money-flows either from a large hinterland or the neighbouring areas or both. This is a big challenge because it entails serving customers from the other jurisdictions or cross border transactions. It also entails the need to deliver consistent and efficient financial services in order to be competitive in international financial business. The truth of the matter is that only a small number of cities can successfully become international financial centres because IFCs need a critical mass and market depth. It should be noted that international financial transactions and money tend to migrate towards those centres that provide the most efficient and competitive services to customers. In other words, domestic financial centres will need to go through very fierce competition before a few of them can emerge as successful IFCs. Given Hong Kong’s accomplishment as one of the region’s premier IFCs, there are many study groups from abroad coming here to learn the tricks that have helped achieve what we have today.
Denis Beau: The current macroeconomic situation in the euro area and monetary policy issues Keynote address by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Official Monetary and Financial Institutions Forum (OMFIF) Conference "The Future of the Euro Area: Navigating Uncertainty", Paris, 5 October 2022. *** Ladies and Gentlemen, I am delighted to be talking to you today at this OMFIF Conference. I would like to express my warmest thanks to David Marsh for organising this event and for the invitation. We are here today to discuss and think about the future of the euro area. But, as Machiavelli once wrote: "to predict the future, one needs to know the past, because the events of this world have at all times links to the times that preceded them". In this respect, reflecting on the history of the euro, it stands out as a remarkable success: More than two decades after its inception, the euro is recognised and used globally, including outside its own borders as a means of payment, a store of value and a means of trade. The internal value of the single currency has been remarkably stable, with inflation averaging 1.7% between its inception in 1999 and 2021, compared with 4.9% during the two decades before 1999. The euro has helped to better protect the purchasing power of European citizens which has increased by 15% since 1999. The euro is also a great success in the area of payments.

As a result, total outstanding ringgit bonds increased by 10.7% to RM363 billion, which is equivalent to 81% of the gross domestic product. The general market conditions have also remained favourable for both issuance and trading activities, given the low inflation and interest rate environment and the strengthening of economic fundamentals. The Islamic bond market has also experienced exceptional growth. In 2004 the market expanded by 13.4%. To further enhance market turnover, Bank Negara Malaysia announced in January this year the usage of repurchase agreements as a monetary policy instrument, introduced the Institutional Custodian Programme to enable borrowing and lending of securities, and provided a securities lending facility for principal dealers. The implementation of these measures are aimed at improving the price discovery process and increasing the efficiency of capital allocation within the financial system. To facilitate the further development of the Islamic bond market, the Government has also imposed tax neutrality between the treatment on Islamic and conventional capital market products. BIS Review 29/2005  1  It has been just one year since we allowed Multilateral Development Banks and Multinational Corporations to issue Ringgit denominated bonds in Malaysia, and we are now witnessing the third issuance of such bonds by a supranational. In that, I am pleased to welcome the IBRD's issuance of its 760 million Ringgit Wawasan Bonds in Malaysia. We are pleased to note that the World Bank has decided to make its inaugural issuance structured in compliance with the Shariah.
Protectionism is the polar opposite of free trade, the negative impact of the former mirroring the positive effects of the latter. Tariffs make imports more expensive, thereby increasing domestic production costs and reducing consumers’ purchasing power. Tariffs imposed by trading partners restrict exports. Trade barriers impact on the division of labour worldwide, productivity declines, growth and progress are curbed. Although it is difficult to estimate the negative impact of a worldwide trade dispute on global GDP, there can be no question that a full-scale trade war would weigh heavily on the world economy. Not least because it would be likely to entail a slump in confidence among economic actors and upheaval on the financial markets. 5 All countries would feel the detrimental effect of a global trade war, but small open economies such as Switzerland would be among those hardest hit. 5  A range of authors have recently published estimates of the effects of a global trade war on the real economy. In their study, Berthou et al. (2018) simulate a 10 percentage point increase in tariffs worldwide, and found that this could reduce global GDP by around 1% after two years, taking only the direct trading effects into account. Other studies, such as that published by the OECD (2016), show similar results. If the indirect effects on confidence and the financial markets are considered in addition to the direct impact, the decrease in global GDP could be three times greater (Berthou et al., 2018).

The specific monetary policy response adopted depends on a number of factors, some being immediately relevant for monetary policy, others only in the long term. As soon as new tariffs are announced, the question arises as to whether they are temporary or permanent, or whether they could even lead to a raft of protectionist measures. One-off increases in duties that are merely temporary in nature will similarly take only a temporary toll on the economy, and thus do not necessarily require any monetary policy reaction. What is significant in this context is the expectations of producers and consumers. Longerterm inflation expectations in particular are of pivotal importance for the monetary policy stance. Central banks have to respond differently depending on how economic actors adjust their expectations to take account of the higher tariffs. If inflation expectations are well anchored, that is to say very stable, central banks can choose to ignore temporarily higher inflation, and can thus concentrate fully on the negative growth effects triggered by protectionism. After all, if inflation expectations are well anchored, higher prices should not lead to a damaging wage-price spiral. Inflation would come back down again sooner or later. However, if consumers and producers expect the trade war to result in steadily rising prices, this would fuel upward inflationary pressure over the long term. In this case, monetary policy would have to be tightened to address the higher inflation expectations. The way in which exchange rates react to higher tariffs worldwide is also highly dependent on the expectations of economic actors.
On the other hand, equity prices can go up as a result of real changes, eg due to achieved or expected productivity improvements. Such supply-side driven equity price increases signal a higher productivity potential and would - if anything - be a reason for an expansive but certainly not a restrictive monetary policy correction. This example illustrates the central banks’ scepticism against the suggested changes. From the Swiss vantage point, there is well-founded additional scepticism. Our stock market is dominated by companies whose activities are concentrated abroad and thus have little direct connection with our economy. It is possible that new insights will lead to different conclusions. For the time being, however, it seems advisable to stay with the generally accepted “consensus view”, but to do that job as well as possible. Conclusion I am about to come to the end of my reflections, fully aware that my journey through a changing world is far from complete. I did not mention payment transactions, for example, even though this is an area undergoing various changes with potentially far-reaching consequences. In reflecting on change, however, we must not forget that the basic mandate of central banks remains unchanged: to secure stable monetary conditions for the economies they serve - both today and in the future. Literature: King, Mervin, Challenges for Monetary Policy: New and Old, Paper prepared for the Symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole, Wyoming, 27 August 1999. (King 1999).

Davis, Gavyn, the “New” Global Economy, Goldman Sachs, Global Economics Weekly, 2 February 2000, pp 3 (Davies 2000). IMF World Economic Outlook, October 1999 (IMF 2000). 4  Cf IMF 1999, p 124. BIS Review 35/2000  8