samchain/econo-pairs-v1 huggingface dataset:
Finansinspektionen (Swedish FSA) recently announced that the major Swedish banks should prepare for their capital requirements to rise to the levels proposed in Basel III within the next few years, ahead of the international schedule for implementing Basel III. And I think that we should consider going further than Basel III in other ways in order to reflect the specific vulnerabilities and risks that exist in Sweden, for example by introducing liquidity requirements with specific rules for matching maturities per currency. This also seems to be the Swedish Government’s view. According to the Fiscal Spring Policy Bill of 2011, the government’s intention is – while the  2  For a more detailed discussion of the lessons of the Swedish crisis, see Stefan Ingves and Göran Lind (2008), “Stockholm’s solutions”, Finance & Development, IMF, December 2008. 4  BIS central bankers’ speeches  transition rules for Basel II still applies – to try different ways of strengthening the capital adequacy rules for systemically important banks beyond what will be required when Basel III is implemented. In addition, the Swedish government recently established a Financial Crisis Committee to review the current regulatory framework and the handling of the recent crisis. It will also propose changes that would reduce the likelihood of future financial crises, by using preventive measures, and allow them to be resolved in an efficient manner. This will be a wide-ranging review that will consider the issues I have briefly mentioned in this speech, as well as many other issues.

Macro-prudential policy needs to be operational soon, but some difficult hurdles remain to be overcome. 2  BIS central bankers’ speeches  An important challenge for the design of a new regulatory framework will lie in finding an appropriate balance: on the one hand, the regulations will need to be sufficient to effectively reduce the risk of financial crisis; on the other hand they should not be so stringent as to impose unnecessary costs on the financial sector. It is a matter of finding just the right level of regulation. Handling the interactions between monetary policy and macro-prudential policy poses further challenges. During the recent financial crisis, we observed the difficulties of conducting monetary policy in a non-stable financial environment. Interest rate signals from the central banks were sometimes dwarfed by contradictory events in the markets. Conversely, financial stability is dependent on smooth and predictable monetary policy. Thus, policy makers must always keep in mind that the increased use of regulatory tools will inevitably affect monetary policy in different ways. Regulations will affect the interest rates that firms and households meet and this is something that the central bank needs to take into consideration when setting the policy rate – in much the same way as monetary policy has to take into account changes in interest-rate spreads due to changes in financial conditions. A key element in handling the interactions between monetary policy and macro-prudential policy will be putting an appropriate governance structure in place.
There are two possible explanations and equivalent interpretations of the main scenario. One is that the main scenario in reality assumes higher long interest rate abroad than current market rates. As the exchange rate is affected by the difference between long domestic and foreign market rates, that is, the difference between domestic and foreign market yield curves, the main scenario thus underestimates the appreciation in the krona. In Figure 7 the grey curve shows TCW-weighted implied forward rates according to market rates abroad. In Figure 8 the grey curve shows the corresponding TCW-weighted yield curve. The difference between the blue and grey curves in Figure 8 for a 5-year maturity shows that the current difference between a Swedish and a foreign five-year rate is around 70 points. If the repo rate path becomes credible, the difference between the red and grey curves in Figure 8 shows that the difference between a Swedish and a TCW-weighted foreign five-year rate would rise to around 160 points. This large interest differential in the main scenario should lead to a large krona appreciation. Such an appreciation of the krona would in turn contribute to significant tightening over and above the increase in long interest rates, which would have a particularly severe impact on exports and inflation. The reason why this does not occur in the main scenario is that the main scenario assumes higher long-term market rates abroad than the actually prevailing market rates.

They will become genuine stations of information gathering about the economic and financial activity of the region, being preceded by further analyses and studies. This research work will serve not only to a more explicit monetary programming but also to the modernization of transmission elements of this policy from the higher authority to the lower authority and vice versa. I estimate that this initiative of the Bank of Albania to monitor the economic activity not only in the metropolis but also in other regions of the country would be of particular interest for all the interested groups. Further, I would like to add some other comments on the latest developments of the banking system, which I deem have created good premises for a real expansion of this business, an expansion that will positively impact on the performance of business activities. After completion of the Real Time Gross Settlement (RTGS) system, the Bank of Albania inaugurated some times ago the initiation of a very important project on the Automated Electronic Clearing House (AECH). The operation of this new system will considerably increase the payment speed for the customers, knowing that the lack of this element has maintained businesses far from banks. I take this opportunity to make businesses aware of the advantages of the operation of this system, as both systems together will help reach the international standards of ATM and AIPS (automatic and electronic payment equipments), per population number.
Moreover, we must do so even while there is continued rapid evolution of financial markets, products and strategies and the constant challenge that evolution poses to our existing supervisory policies and techniques. While the challenge of evolutionary financial markets is clear in countries with financial institutions which are actively involved in the international marketplace, it is no less important for emerging market countries, which increasingly feel the influence of international financial competition. Thus, it is appropriate that we are devoting a day to questions of operational risk, an area of rapid evolution in risk management concepts and practice. The most important current operational risk problem, that of preparing for the century date change in the Year 2000, has a prominent place on the program and in our national supervisory agendas. I congratulate our hosts, the Reserve Bank of Australia, working in cooperation with the Australian Prudential Regulatory Authority, for putting together this program and I thank them for hosting the ICBS this year. I would like to focus on the dual role of supervisors in preventing banking problems and in providing the necessary support when there are systemic problems. When the Basle Committee, in concert with banking supervisors from around the globe, developed and in 1997 finalized the Core Principles for Effective Banking Supervision, it was with this dual role of supervisors in mind.

This transformation was particularly reflected in the massive use of smartphones and social networks, the emergence of digital finance and Big Data, the development of online platforms as well as in the uberization of services. With its frantic pace of evolution and its emergence as a new must, this revolution is now influencing the way we produce, share, consume and interact, and its impact is felt on all sectors, including of course the financial one. 3  Despite the multiple studies and evaluations carried out, the impact of this revolution is not yet well identified. However, its impact will probably be felt negatively in the labor market. In fact, one of the most important studies, conducted in 2013 by two Oxford researchers on the case of the United States, revealed that 47 percent of jobs are at risk of extinction. In emerging and developing countries, this proportion would be higher. According to the same researchers estimates in 2016, it reaches 69 percent in India, 77 percent in China and 85 percent in Ethiopia. As for growth, the effects of this transformation have not been clearly demonstrated, and economists even talk of a “productivity paradox”, to refer to the relative slowdown of productivity observed in some advanced countries since the mid-2000s, despite the technological innovations. Even more, GDP measurement is also affected, and statistical institutes find it challenging to take into account certain technology-driven activities such as self-services made through online platforms.
The rise of the RMB will not entirely solve that, but hopefully, it will lead to a world where the global monetary system is less distorted, with less of the friction that we see now, and a greater sharing of the burden and benefits of serving as the world’s currency. Malaysia and the global RMB Finally, how would the globalisation of RMB affect Malaysia? For Malaysia, there is no downside to the RMB becoming an international currency. China is one of our largest trading partners and anything that facilitates the growth of trade and investment flows between the two economies is good. We understand some of the policy challenges China faces and is likely to face as it internationalises its currency. We understand the need for it to adopt a gradual approach and providing itself the space to address any vulnerability that may emerge as a consequence of internationalizing the RMB. But, we also know that as China develops its financial markets and its policy frameworks, greater openness would by synergetic in promoting the further development of its financial system and its economy, and of course the international role of the RMB. Policymakers in Malaysia are fully committed to strengthening our economic and financial ties with China. As far as using RMB for international trade and investment is concerned, we have worked to put the necessary infrastructure in place and continue to improve on it to make it cheaper and more convenient.

Sukhdave Singh: Global RMB – challenges and implications Keynote speech by Dr Sukhdave Singh, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the HSBC Forum: China Globalising: RMB Rising (Malaysia) – “Global RMB: Challenges and Implications”, Kuala Lumpur, 12 August 2014. *  *  *  It is an honour and pleasure to be here with you this morning to talk about what is likely to be the most important development affecting the global monetary system since the introduction of euro. Should the RMB become a global currency, it will transform the global financial landscape. In fact, the RMB could potentially define this century, in the same manner that the US dollar dominated the previous century. In my remarks today, I would like to share some thoughts on the potential for the RMB to achieve the status of a global currency. Where it to do so, what will the potential impact be on the global monetary system? Finally, I will touch on the implications for Malaysia. The world is ready, is China ready? From where we stand today, the world is clearly ready for a global RMB. The question is whether China itself is ready. There is no question that the RMB would become an international currency. The only question is how big of an international currency. Will the RMB’s role in the international trade and finance reflect the status of China as the second largest, and soon to be the largest, economy in the world?
Even more importantly, longer-term real rates are also below or around these levels, reflecting that the market considers that monetary policy not only is expansionary now, but is expected to remain so for some time, in line with the communications of the Bank itself. The lower interest rates are reflected not only in the record-low level of risk-free rates, but also in that borrowing costs are now very low by historic standards. This applies both to mortgage loans and to commercial and consumer loans. The exchange rate has also reacted. In nominal terms, the peso is now about 35% below its levels of mid-2013. Compared with other countries, however, the behavior of our currency has been similar, so that multilateral and real depreciation have been less. Finally, from the perspective of other countries that have had cycles similar to ours, monetary policy rates in Chile are among the lowest in real terms. Nonetheless, we must recognize that, even in normal situations, the effectiveness of monetary policy is not guaranteed, but depends on its correct implementation. This means respecting certain basic principles. Monetary policy, first and foremost, must be coherent with its policy framework and the situation of the country. This implies refraining from favoring short-term objectives, but rather calibrate the monetary impulse in such a way that projected inflation stands at 3% over a two-year horizon. Consistency is especially important to avoid unnecessary ups and downs in the economy causing market confusion.

Macroeconomic scenario In February, annual CPI inflation was 2.7%, while core inflation—CPIEFE; CPI excluding energy and foodstuffs—was 2.2%, driven mainly by its goods component, whose annual growth fell to 0.4% in February, in line with the nominal exchange rate,  which is now below its year-ago level. The services component of the CPIEFE posted an annual change of 3.4% in February, a quite milder fall than its goods component, reflecting its greater inertia (figure 1). About this, it is worth noting that one feature of the CPI services basket is that 75% of its prices are either managed or linked to another indicator or to past inflation, meaning that they are indexed. This fact in practice augments their inertia and causes the effect of any change in the activity gap to take longer to show up. Of course, this is not the case for every service price, as non-indexed or non-managed prices tend to show a more visible effect from changes in the gap. One of the boxes in the Report is devoted to this, showing how the differences in the recent evolution of services inflation appear when these recently mentioned price groups are taken separately. In this Report’s baseline scenario we foresee that headline inflation will continue to decline for some months, to return to 3% by year’s end and hover around that mark until the first quarter of 2019, when the current projection horizon ends.
Over the last few decades, it has been widely recognised that the maximum degree of independence for central banks, together with a clearly defined mandate, is the best way to ensure time consistency in the implementation of monetary policy and therefore to guarantee stable prices. Consequently, the Maastricht Treaty has granted the ECB full independence in the pursuit of its mandate. In a democracy, transparency and accountability are the quid pro quo for that independence. In other words, it is the duty of independent central banks to be transparent and to communicate. We help to make the ECB accountable by explaining our objectives and decisions to the general public, to the people of Europe, its elected representatives - namely the European Parliament - and to the professionals in the financial markets. But transparency is not only a duty for a central bank. It is clearly also in the bank’s own interest to embark on an effective communication as it contributes considerably to the efficiency of its policies. This helps to anchor the inflation expectations of the financial markets and the public. Through efficient communication we can reduce inflation uncertainty and the costs associated with such uncertainty for consumers and investors. Therefore it has immediate economic benefits for society. We achieve this by being clear about our strategy, clear about our definition of price stability and by being transparent in our actions.

Fortunately, the gap between perceived and actual price developments is narrowing down again significantly. We are responsible for ensuring price stability for 306 million people in the euro area, who use the euro and make economic decisions every day. So it is essential, absolutely essential, that we preserve and enhance their trust in our single currency. They know they can rely on us to preserve their purchasing power over time. We are an anchor of stability created by the Treaty to ensure low inflation, in line with our definition of price stability. Let me conclude on a more personal note. 4  BIS Review 5/2005  The times when central banks were rather reclusive and closed institutions administering interest rates with some dedication to surprise observers and markets have gone. One of the main goal of a responsible central bank now is to have a reliable communication guiding expectations in a rapidly changing environment. In this respect one has to fully realize that the ECB has unique challenges to cope with. First, when we start the press conference the Vice-President and I know that we are speaking in quasi real time, through all of you, not only to European market participants, investors, savers, economic agents, entrepreneurs but also to all our European fellow citizens to whom we are accountable as a last resort. This is already a demanding and exciting task taking into account the fact that we are the only major central bank embarking on a press conference immediately after the monetary policy meeting.
There is a reasonable debate about what is culture, but that is not a debate about whether it is important. In my view, culture is a product of a wide range of contributory forces: the stance and effectiveness of management and governance, including that well used phrase “the tone from the top”; the structure of remuneration and the incentives it creates; the quality and effectiveness of risk management; and as important as tone from the top, the willingness of people throughout the organisation to enthusiastically adopt and adhere to that tone. Out of this comes an overall culture. It is not something that has a tangible form. As supervisors, we cannot go into a firm and say “show us your culture”. But we can, and do, tackle firms on all the elements that contribute to defining culture, and from that we build a picture of the culture and its determinants. Culture has a major influence on the outcomes that matter to us as regulators. My assessment of recent history is that there has not been a case of a major prudential or conduct failing in a firm which did not have among its root causes a failure of culture as manifested in governance, remuneration, risk management or tone from the top. Culture has thus laid the ground for bad outcomes, for instance where management are so convinced of their rightness that they hurtle for the cliff without questioning the direction of travel.

These two notions are different. I have said many times, but will keep doing so, that senior managers cannot delegate responsibility. To be fair, many have said to me over the last few years that this change does not make a difference for them as they always thought they were responsible. Good. But, set this against other conversations I have had which have doubted the enforceability of this notion of responsibility. This has concerned, but not distracted me. So, to be clear, responsibility is the central plank of the new Senior Managers Regime. We do want senior managers to feel this responsibility in all that they do and that includes a responsibility for forming and implementing a positive culture throughout the organisation. In this respect culture is no different to strategy; where are we today, where do we aspire to be tomorrow, how will we get there and what risks must we mitigate along the way. Responsibility, as embedded in the Senior Managers Regime, is therefore an important hook to assist in firms’ shaping their own culture, and also to provide regulators with the powers to conduct supervisory oversight and to act when needed. But, let me reiterate that it is not the job of regulators to enforce culture and to change culture. If we have to step in, and occasionally we do, the overriding conclusion is that management has failed. The common theme there is that the incentives facing a firm will determine its culture and will determine its success in terms of outcomes.
2 A recovery has also started at an earlier stage in the cycle than in the early 1990s, when the economy “bumped along the bottom” for a number of quarters before growth became firmly established. It is particularly encouraging that manufacturing output has been growing particularly strongly, up by 5.3% on a year ago in the third quarter. This is the strongest year-on-year manufacturing growth we have seen since the end of 1994, sixteen years ago. The latest business surveys are generally positive about the continuation of the growth of manufacturing output. And the CBI’s latest quarterly Industrial Trends Survey, released last month, shows the strongest investment intentions in manufacturing since 1997 and the most significant employment growth since 1989. These are all encouraging signs for the rebalancing of the UK economy – towards manufacturing and away from services – which most economic analysts have suggested is likely to be needed over the course of this recovery. These rates of growth – across the UK economy as a whole and in manufacturing – would not be possible unless the demand climate had changed very significantly over the course of the last 12–18 months. The global economy has bounced back strongly, with the IMF now projecting world growth of 4.8% this year and 4.2% next year. Asia and a number of other emerging market economies are providing a powerful engine of growth to the world economy at present. Though the news is more mixed from the US and Europe, their economies are still on a recovery track.

The private sector and a business recovery supported the growth of the UK economy following the early 1990s recession. And economic conditions we currently face are not that dissimilar from the world of the mid-1990s. If anything, the external stimulus to growth is stronger – the global economy has bounced back more strongly from the recent downturn and the sterling exchange has depreciated more sharply and at an earlier stage of the cycle than in the early 1990s. There is a worry that domestic demand could be held back by the legacy of the financial crisis and public sector deficit reduction. But that does not appear to be reflected in the most recent data for domestic demand and from the evidence on business investment intentions. And while we should expect a relatively muted recovery in consumer spending, the impact of high household debt levels should not be overstated. This was a  10  Public sector net borrowing was 7.7% of GDP in 1993/4, moving towards a surplus of 0.5% in 1998/9, a swing of 8.2% in the public sector financial balance as a share of GDP. The Budget plans show a 9 percentage point swing – from borrowing of 10.1% in the current financial year to 1.1% in 2015/6. 8  BIS Review 158/2010  major concern in the early 1990s too, when repossessions and mortgage arrears were higher than we have seen through this recession.