samchain/econo-pairs-v1 huggingface dataset:
Jaime Caruana: Chairman of the Basel Committee discusses Basel II Reuters interview with Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, Basel, 8 September 2003. Interviewed by Stella Dawson and Thomas Atkins. *  *  *  New bank rules to smooth economic swings - Caruana New capital rules for banks worldwide should smooth economic swings and strengthen the financial system, making it easier for central bankers to set interest rates, the new head of the Basel Committee said on Monday. In his first major interview since taking over the mammoth job of pushing through the “Basel II” bank capital accord, Jaime Caruana told Reuters that he doubts the complex risk-based capital requirements will worsen business cycles. Instead, he said inserting more regulatory oversight into assessing how much capital a bank sets aside against possible loan losses, and increasing the amount of information banks must make public, should make banks much safer and better prepared for economic downturns. “It is a completely new approach. In that sense it is a kind of revolution,” said Caruana, who is also governor of the Bank of Spain. Some bankers and politicians have criticised the reforms, which aim to lessen the risk of banking crises and are scheduled to take effect at the end of 2006.

The agreement being drafted by global regulators is now under fire from banks who say it is convoluted, expensive, heavy-handed and poorly tested, and who now seek to stall or derail it. Not devoid of a dry sense of humour and with a shy smile, Caruana is known as a diligent and rigorous technocrat, a fan of teamwork who avoids showiness. “The core of the issue is whether Caruana will be able to demonstrate his leadership in the next couple of months,” said one committee member who works directly with Caruana, who spoke under the condition of anonymity. “It's not easy to guide such a group of self-confident people,” the committee member said. “He's just trying to fight his way.” Part of the problem is that Caruana's predecessor, New York Federal Reserve Chairman William McDonough, left large shoes to fill. McDonough's unexpected retirement in June left critics wondering whether his successor would be able to hold together a global project. “There were definitely advantages in having a superpower in charge of this committee,” said the Basel Committee member. Karel Lannoo, head of the Brussels-based think tank Center for European Policy Studies, said Caruana is a strong player with anti-establishment nuances who should be able to push through the  4  BIS Review 39/2003  accord and even impart some Spanish character to it. “Caruana is, in the Spanish context, very well regarded,” said Lannoo, a frequent adviser to the European Commission and a member of the academic European Shadow Regulatory Commission. “He was a broker.
Kerstin af Jochnick: Monetary policy and the current economic situation Speech by Ms Kerstin af Jochnick, First Deputy Governor of the Sveriges Riksbank, to the County Administrative Board, Kalmar, 22 August 2013. *  *  *  It has become something of a tradition for a member of the Executive Board of the Riksbank to hold a speech on the current economic situation at the end of August. I think this is a good idea; starting off the new term by summarising what has happened during the summer. I appreciate being given the opportunity to come here to Kalmar to talk about the economic situation. Kalmar is part of a region where economic developments are greatly affected by cyclical fluctuations. Kalmar and Kronoberg, together with Blekinge, are the counties that have experienced the largest fluctuations in growth since the early 1980s. One reason for this, of course, is that a large share of the companies in the region comprises subcontractors to the cyclically-sensitive manufacturing industry. Today I intend to start off with the economic assessment we made in July and in particular to describe my view of developments at that time and of the monetary policy we have decided on. The main message in July was that the Swedish economy is heading for a recovery. But we decided to hold the repo rate at a low, unchanged level to help the economy along.

For the ringgit exchange rate market, the past two years have been uniquely challenging. At the end of 2014, the situation appeared rather benign. The ringgit was stable, market liquidity was good, trading activity was healthy with market volumes averaging USD11.8 billion daily while the volume for USD/MYR pair averaged USD8.3 billion in 2014. The subsequent period however, precipitated by the weakening external conditions, falling oil prices and domestic uncertainties have laid bare these notions. Volume and liquidity declined, bid-offer spreads widened and at times, there were one-way markets which exacerbated any movements. Given these developments, 2015 was a year where our actions were primarily geared towards stabilizing the markets. While this was clearly achieved, it was not without cost; a reduction in foreign exchange reserves, a markedly less liquid and volatile foreign exchange market, and a weaker currency. In the midst of this, an important observation that became increasingly evident is the continued vulnerability of our markets to the arbitrary and unpredictable devices of the offshore markets. Adverse conditions brought on by the NDF market Activities in the offshore market, in particular the ringgit non-deliverable forward (NDF) market, had brought on observable adverse impacts to the onshore market. To our disappointment, onshore players had become followers rather than leaders in determining domestic market rates. Consequently, taking the lead from the NDF market, the ringgit exchange rate has been quite volatile since last year, peaking at 23.1% for its 1-month historical volatility and is the highest among regional currencies for this year.
Households and firms optimise – they are forward-looking and they use available information efficiently. Unlike our previous model, things add up: flows add to stocks, profits are allocated, and so on. There is a high degree of simultaneity in the way the model is solved. It no longer makes sense, nor is it at all easy, to consider the model equation by equation. This provides a greater degree of discipline on Committee members and staff, who are now forced to confront the full implications of their judgements more explicitly. If someone wants to change one of the economic relationships, they need to say why, and acknowledge the possible implications for other behavioural relationships. If, for example, we want to assume that the trend rate of labour productivity growth has changed, the model requires us to recognise that there are implications for both demand and supply. Faster productivity growth will increase productive capacity, but income will also grow faster. So what might that mean for demand now? This is a definite advance – providing the general equilibrium mechanisms in the new model do in fact reflect our ideas about how the world works. But it also makes for a more demanding discussion. There are no easy fixes, and it can be difficult to accommodate views that differ from the model’s paradigm. As an example, the model is firmly rooted in the rational expectations tradition. And we have assumed that monetary policy is credible. Both are perfectly reasonable, arguably essential, modelling assumptions.

The fact that the new model makes them explicit can be intellectually helpful. But it doesn’t make it any easier to provide answers to questions about expectations and credibility. What if some agents base their decisions on simple rules of thumb? BEQM has features that allow us to accommodate such questions when we are forecasting – but in a more ad-hoc way that requires a substantial degree of judgement. We are still learning how to exploit all BEQM’s possibilities. But it clearly represents a move towards the ‘Pagan frontier’, offering a higher degree of theoretical coherence without losing empirical performance. A number of other central banks are working on similar models – the ECB, Bank of Canada, FRB, Norges Bank and Bank of Finland – as well as the IMF. The international modelling community is an exemplary forum for the exchange of ideas and experiences, and we have learnt – and will continue to learn – a lot from the experience of others. No model can do everything. All models oversimplify drastically. The trick is to identify an appropriate degree of simplification for the task in hand. So the Committee has never been prepared to rely on one model. This has led to attempts to develop a suite of models. 4  Harrison, R, Nikolov, K, Quinn, M, Ramsay, G, Scott, A and Thomas, R (2005) The Bank of England Quarterly Model. 5  For a description of the previous model, see Economic Models at the Bank of England (1999).
My colleagues and I will return to how this will ultimately affect monetary policy in the coming period in a couple of weeks’ time when our decision has been made. Moreover, we are constantly monitoring developments in the financial markets. BIS central bankers’ speeches  7  Figures  1. World GDP growth Annual percentage change, calendar-adjusted data 6  6  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1 80  85  90  95  00  05  10  Sources: The IMF and the Riksbank  2. Commodity prices Index 2005 = 100, USD 350  350 Metals Other agricultural products  300  300  Food  250  250  Crude oil  200  200  150  150  100  100  50  50  0  0 00  01  02  03  04  05  06  07  08  09  10  11  Note. Data are updated with new outcomes after the publication of the July Monetary Policy Report. Sources: The Economist and Intercontinental Exchange. 8  BIS central bankers’ speeches  3.

We will equally have the opportunity to listen today to Mr. Roberto Peccei’s “The Significance of Limits to Growth for the Work of the Club of Rome”, as well as to the co-authors of the first Report, Dennis Meadows and Jorgen Randers, who will look at the lessons of the first Report nowadays. In the new Report, “2052 – A Global Forecast for the Next Forty Years”, Jorgen Randers underlines the need to use the values or the lessons of the first Report for the future. And actually looking back 40 years, he will look to the next 40 years. We are eager to listen to him to see what the prospects are for the next 40 years. Looking at today’s agenda, I would like to mention the relationship between humankind and nature. We’ll have a special session, where Ernst Ulrich von Weizsäcker will discuss  BIS central bankers’ speeches  1  about “Factor Five: Transforming the Global Economy” and Anders Wijkman about “Bankrupting Nature”. I will also address the topic of transforming the financial and monetary system. I am sure that today’s debate will bring light to our faces and we will find together the best answers to the future of the humankind. I invite the panellists to start the first session. Thank you very much! 2  BIS central bankers’ speeches
Reducing unemployment, which is at a very high rate despite the favourable developments in Social Security registrations and the reduction in registered unemployment, remains our major economic policy task. In this connection, wage bargaining must allow for the different situation of different firms and sectors to be taken into account, avoiding as far as possible the return to now-superseded wage indexation practices. Considerable progress has been made in correcting the fiscal imbalance, without forgetting the constraints that such a high level of public debt imposes. In the short and medium run,  6  BIS central bankers’ speeches  perseverance with fiscal consolidation on the basis of a growth-conducive revenue and spending mix that ensures compliance with the Budgetary Stability Law will be unavoidable. I should like to conclude with some thoughts on the challenges posed by long-term growth for the Spanish economy. In Spain, as in most of the countries affected, the crisis has had a large-scale impact on the level of output, as a result of sizeable capital and job destruction. The future growth of the Spanish economy will be influenced by how we manage to overcome these effects, but also by the capacity to raise productivity, whose low pace of growth has continuously affected us. Against this background, it is vital to continue with and deepen reforms that boost investment, lower the obstacles to competition and remove the barriers preventing a suitable reallocation of productive resources towards the firms and sectors with the highest growth potential.

Following quarter-on-quarter growth in GDP of 0.9% in the first quarter, the latest information indicates that activity is expected to maintain a strong rate of expansion, whereby a further slight quickening in output is estimated in the second quarter, to 1% in quarterly terms. Average growth in the first half of the year, in annualised terms, is thus expected to be around 4%. The projections for the rest of 2015 and for next year point to continuing dynamism, with Spain clearly outpacing most of its euro area partners. However, this momentum might be slightly contained by the weakening of some of the expansionary impulses, such as the fall in oil prices and the depreciation of the euro. For 2016, the projections estimate average growth of 2.7%, with greater uncertainty naturally accompanying the longer time ahead involved. In terms of the composition of spending, the most recent phase of the recovery has been marked by the growing weight of national demand, which has replaced external demand as the main net contributor to growth. Foreseeably, in the near future, this pattern will continue, with a contribution by the external sector to the increase in GDP that is practically neutral in net terms. Exports, particularly to the euro area, are expected to post higher growth, while the tempo of imports will slacken somewhat.
Lower inflation rates would not only favour the competitiveness of our economy, which is so vital at a time when national spending is slowing, but would also improve household purchasing power against a background of declining household income on account of the oil price shock and the slowdown in employment. There are many other fields (such as the postal service, railway transport, ports, airports, energy, etc.) in which structural reforms giving a greater role to the private sector and competition need to be adopted as soon as possible. As I have already mentioned, the residential sector clearly needs to slim down and it has been doing so quite rapidly in recent months. The rise in uncertainty regarding both the economic outlook and house prices is inhibiting residential demand, even though household creation, due to the increase in the population and the observed tendency for average household size to decline, is still growing at significant rates. Improving the regulation of rented housing, to make it more flexible, profitable and attractive, would enable the demand for residential services from those who do not wish (or are unable) to buy to be met and would reactivate that part of the demand to purchase housing that basically stems from the investment motive, thus reducing the current excess supply in the market. In particular, providing legal certainty to home owners and deregulating the rental periods that may be agreed by tenants and landlords would boost the rental market.

Zeti Akhtar Aziz: New platform to serve the Islamic financial industry Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of Bloomberg’s Enhanced Islamic Finance Platform, Kuala Lumpur, 21 February 2011. *  *  *  It is my pleasure to join you this morning at this Launch of the Bloomberg Enhanced Islamic finance platform. This development is timely as Islamic finance is envisioned to continue to make great strides in this new decade. Such an information platform is an important element for the more efficient functioning of the Islamic financial markets in the international financial system. In this recent ten years we have seen significant developments in Islamic finance in both our domestic and the international financial system. In this more challenging and uncertain environment, Islamic finance has demonstrated its resilience and viability and has sustained its growth momentum. Today, with the increasing internationalisation of Islamic finance, its continued growth and expansion will very much depend on extensive information which can be efficiently accessed. Bloomberg has for two decades been serving the Islamic financial community providing access to news offerings and timely data and information. The initiative today to enhance its Islamic finance platform is thus a highly welcomed development. The seamless flow of information in the Islamic financial markets is integral to facilitate the efficient price discovery process and maintain the vibrancy of the Islamic financial industry.
It just happened to be the prevailing capital ratio among US banks at the time the first Basel capital accord was struck. More recently, the Basel Committee has explored the costs and benefits of higher capital ratios (Basel Committee (2010a)). Using conservative estimates of the benefits, that study suggests an optimal capital ratio in the region of 13–14%. One area of conspicuous conservatism is the study’s assumption that higher capital will not lower banks’ equity and debt-servicing costs. Reworking the arithmetic to include these and other effects, Miles et al (2011) calculate an optimal capital ratio closer to 20%. These studies are technically complex. A simpler way of posing the question is to ask what it might take to avoid a repeat crisis performance under the new rules. The average risk weight for a global bank is 40%. This means that a 10% capital ratio in risk-weighted terms translates into bank leverage of 25 times equity. So even once Basel III is in place, an unexpected loss in the value of a bank’s assets of 4% will be sufficient to render it insolvent; much less than that to render it illiquid. For me, that argues for bolstering further banks’ capital defences over the medium term. Basel III is a good starting point, but may not be the right finishing line. Leaning against that are those arguing “equity is expensive”. They seem to me to have two unassailable arguments on their side. One is tax. The other is state subsidies.

Each will have tended to boost bank risk appetite above its socially optimal level. While satisfying the short-term demands of shareholders and managers, this structure has left many others short-changed. These distortions make a case for policy intervention. These interventions are best directed at incentives themselves. Otherwise risk-taking is likely to be simply displaced, rather than curbed, by reform efforts. (a) Higher equity capital Perhaps the most obvious means of tackling equity-led incentive problems would be simply to augment banks’ equity base. This would act on at least three of the underlying incentive frictions (Hellwig (2010), Admati et al (2010)). It would put more skin in the game for equityholders, thereby reducing their incentives to extract option value. It would reduce leverage directly, thereby reducing banks’ capacity to risk-up. And it would increase banks’ capacity to absorb loss, thereby reducing the probability of official intervention. Over the past few years, regulatory reform internationally has responded to those messages. Under so-called Basel III, the minimum equity capital ratio will quintuple over the next decade, rising from 2% to close to 10% of banks’ risk-weighted assets for the largest global banks. That is a material shift. The policy question is whether, while necessary, it is likely to prove sufficient. There is a genuine debate underway here. It is long overdue. For the better part of thirty years, the international regulatory community stuck, limpet-like, to a target bank capital ratio  10  BIS central bankers’ speeches  of 8%. That had no scientific basis whatsoever (Goodhart (2011)).
For instance, landmark judgments may not only re-shape policies, but also lead to improvements in risk management practices or fairer outcomes to the customers. The series of legal cases involving the sale and purchase contract (Bai` Inah) highlight several important lessons in this regard. For Islamic banking institutions, the decisions have led to further enhancements to the legal documentations for Bai` Inah contracts itself. In the context of Islamic finance, the task of upholding legal certainty is even more complex, for two reasons. First, Shariah principles and requirements must be infused into the law of the land from the religious sources. Secondly, these prescriptions – written many centuries ago – must be applied to the context of modern finance. For brevity, I will refer to these two aspects of legal certainty as Shariah certainty. 1/4  BIS central bankers' speeches  My remarks today will focus on the importance of legal certainty in the development of Malaysia’s Islamic finance industry – with a particular emphasis on Shariah certainty. I will begin by reflecting on the past, before sharing some thoughts about some considerations for the present as well as future. Looking at the past, Islamic finance has developed rapidly in Malaysia over the recent decades. To a large extent, this progress is attributable to the certainty provided by the legal framework for Islamic finance in Malaysia.

[9] Tentative evidence of the sharp sell-off in March corroborates the view that leverage has probably also been a source of procyclicality during the pandemic. Investment strategies reliant on low market volatility have possibly played a significant role in this. [10] These strategies have grown rapidly in recent years. Globally, there may be funds with assets under management worth around $ billion invested in some 100 risk parity funds, a well-known hedge fund strategy for multi-asset funds. These volatility-targeting funds typically use leverage when market volatility is below target, as it was before the pandemic, and they have to liquidate leveraged positions when market volatility surges. This probably amplified selling pressures in March. ECB simulations demonstrate that a strict risk parity rule would have called for a large unwinding of leveraged investments when cross-asset correlations surged earlier this year (see left chart slide 8). As volatility spiked and diversification benefits from cross-asset exposures vanished, volatility-targeting investors were prompted to sell assets and reduce leverage (see right chart slide 8). [11] The new portfolio would have had a cash share of nearly 25% as a result. Notably, asset sales would have extended to all asset classes in the portfolio, including the supposedly safer ones, in line with what we observed in the spring. Margin calls and demand for liquidity The third factor relates to margin calls. Margining requirements are an important safeguard to reduce counterparty credit risk. But they also increase liquidity risk, particularly when liquid asset holdings are inadequate.