samchain/econo-pairs-v1 huggingface dataset:
Importance of sound advice Access to sound financial advice has become even more important today as households face the challenges of managing heavier debt loads, higher costs of healthcare and education, effects of natural calamities that are occurring with greater frequency, and longer life spans. We believe that the responsibility to provide sound advice falls on all insurance intermediaries, whether you are an agent, an insurance broker, a bancassurer, or a financial adviser. This is clear in our Guidelines on Proper Advice which states among other things, that if an intermediary cannot match the needs and requirements of a customer with a life or takaful product within the intermediary’s offerings, the intermediary should not recommend any product to the consumer. However, we are also mindful that sound advice can have different shades which depend on many factors, including the competence of those providing the advice, the solutions that they are permitted or equipped to advise on, and incentive effects which may, either in perception or reality, colour that advice. Financial advisers provide an alternative channel through which consumers can obtain insurance advice, taking into account individual perspectives on these factors. The fundamental principle remains the same – that whichever the channel, and acknowledging the advantages and limitations of different channels, consumers should receive advice that is in their best interests.

Three issues around the communication of monetary strategy Against that background, how does the MPC’s constitution, and in particular our one person/one vote decision-making structure, affect our approach to some of the issues on your conference agenda? Communication of decisions: how individualistic should we be? The MPC has employed four main communication mechanisms: the announcement of our monthly decision on Bank Rate; the minutes of those meetings, including details of our individual votes; the quarterly Inflation Report, containing projections for output and inflation; and public testimony, to Parliament and via speeches, interviews etc. This differs in various respects from the practice of some other, more consensual central banks. 25 For example, we do not routinely include an explanatory statement in the notice of our monthly decision, preferring to do so only when Bank Rate changes or when we judge that the reasons for a “no change” decision cannot wait until the minutes are published a fortnight later. And when we do include an explanatory statement, it is kept as short and simple as possible. That is obviously different from the ECB and, in degree, from the FOMC. These choices reflect different circumstances and structures; in the MPC’s case, our “one person/one vote” governance. I can assure that members of the committee, including the chairman, do not know what we will decide until it is decided. Ours is not a system that lends itself to the tabling of a draft statement around which views will coalesce.
As a minimum, an economic model to be used as support for interest rate decisions should be based on the assumption that monetary policy can steer inflation. Economic agents can be expected to look ahead when making consumption and investment decisions. It is not only current economic policy that is likely to matter to them, but also what they expect it will be in the future. Expectations must therefore be incorporated and play a role in a monetary policy model. Furthermore, the functioning of monetary policy should be in line with theory and experience. For example, Norway’s recent history tells us that there is little likelihood that monetary policy will be able to influence the economy’s long-term growth potential. Chart: Growth and inflation Many economists previously argued that unemployment could be reduced by accepting slightly higher inflation over time. Monetary policy was oriented accordingly and inflation  2  Factor models, indicator models and VAR models. For a detailed discussion, see Aastveit, K.A, K. Gerdrup, A.S. Jore (2011) “Short-term forecasting of GDP and inflation in real time: Norges Bank’s system for averaging models”, Staff Memo 9/2011, Norges Bank. 2  BIS central bankers’ speeches  accelerated in many countries, without a sustained decline in unemployment. It turned out that bringing rising inflation under control involved substantial real economic costs. In the past 20 years, inflation has been consistently low and stable.

Chart: Interest rate forecast with fan chart in the June 2011 Monetary Policy Report The interest rate forecast is shown in a fan chart. Our forecasts provide an expression of what we consider to be the baseline path. But the forecasts are uncertain, as illustrated by the fan chart. Our interest rate forecast is not an unconditional promise, but signals how we will set the interest rate if developments in the Norwegian economy are in line with our projections. The interest rate path presented in June indicated that the interest rate would gradually be raised towards a normal level in the next years. It followed that the interest rate would, with some degree of probability, be increased in August. This was conditional on the economic outlook we presented at that time. Chart: Interest rate forecast with fan chart and alternative scenarios in the June 2011 Monetary Policy Report The Bank’s Monetary Policy Report also presents alternative scenarios for the Norwegian economy. If developments are broadly in line with expectations, economic agents can expect that the interest rate will be set in line with that projected by Norges Bank. If conditions change, as was the case in August, Norges Bank will naturally adapt the monetary policy stance in the light of new economic prospects. Through our communication and the reports we publish, it is possible for an external observer to anticipate this reaction with a fair degree of accuracy.
Let me again make some observations from my home country:  Norway had a severe banking crisis around 1990. Three of the four largest banks failed and the direct capital injections required were alone more than 3½ per cent of GDP. Just to put this figure into perspective, the 106 billion euros the European banks need for recapitalisation now is less than 1 per cent of GDP in the euro area. Ever since the Norwegian banking crisis in the early 1990s, our banking industry has been regulated more strictly than banks in comparable countries.   For instance, bank capital definitions have been tighter and the financial supervisor has been more actively restricting banking activities.   Another example is that packaging loans into complex financial instruments was in practice not permitted until 2007 when new regulations provided for the issuance of covered bonds. The complex instruments central in the creation of the subprime crisis were never introduced, and Norwegian banks did not invest in them. Our GDP growth rates have still been high during the years up to 2008, also outside the petroleum sector. And the downturn we experienced in 2009 was modest in relation to comparable countries. At the early stage of the banking crisis in the1990s, the Norwegian central bank provided a large liquidity loan to a savings bank. It soon became clear that the loan would not be paid  2  BIS central bankers’ speeches  back. A liquidity problem turned into a problem of solvency.

2  Speech by Adair Turner on 18 February 2011, Reforming finance: are we being radical enough? 3  Speech by Paul Tucker on 23 May 2011, Building resilient financial systems: macroprudential regimes and securities market regulation  BIS central bankers’ speeches  5
Indeed, monitoring the robustness of the financial system requires the evaluation of various factors that threaten the financial system as a whole and create systemic risks. For this reason, the perspective of the Bank is a macro and risk-focused one, similar to the perspective used in the financial stability reports published by other central banks. The definition of objectives and functions of central banks are different from those of supervisory authorities. Though central banks increasingly tend not to deal directly with the monitoring and supervision of banks in recent times, they continue to monitor developments in the banking sector as well as the basic systemic risks. Today, 38 central banks around the world publish the Financial Stability Report. In a total of twenty countries, fourteen European and six non-European countries, supervisory authority is separate from the central bank. Especially in systems where the power to monitor is granted to autonomous institutions other than the central bank, the function of monitoring and supervising the financial system focuses on the issue of financial soundness and effectiveness of individual institutions. However, the monitoring of the financial system as a whole in terms of financial stability is carried out by central banks. In countries such as England, Australia, Norway, Finland and Sweden, where the supervisory authority is not the central bank, central banks, including that of Turkey, focus on the objective of price stability and carry out operations consistent with monetary policies by monitoring the developments in financial markets.

Therefore, these are important risk factors that should seriously be taken into account. Dear Guests, I would like to draw your attention to credit cards regarding the household indebtedness issue. As it is known, in general, the credit card is a payment instrument that enables its owner to purchase goods and services at member businesses without using cash. Moreover, if credit card users wish to withdraw cash or to delay their credit card payments for a determined period, the relevant amounts spent turn into credit and thus the credit card becomes a credit instrument. Institutions issuing credit cards incur POS (Point of Sale) machine investment and membership to national and international payment systems expenditures, and they are exposed to liquidity risk due to unforeseen cash withdrawals. Consequently, banks tend to determine higher credit card interest rates than those of consumer credits due to their higher risk exposures, namely the higher credit risk because of weak collateral structure and liquidity risk because of unforeseen cash withdrawals. A survey of country practices also reveals that credit card interest rates are determined higher than interest rates set for consumer credits. Therefore, it is in the interest of credit card users to meet their short-term credit needs via consumer credits rather than their credit cards. Moreover, the interest rates applicable to credit card transactions differ significantly from bank to bank.
The probability is thought to be low, but tangible. In other words, most likely the outlook is fine, but it might not be. A cut in rates might be warranted in order to guard against the consequences if the risk has, in fact, crystallised. The policymaker could wait for more evidence, but by waiting they risk being too late to avoid some deviation of output from ‘potential’ and of inflation from target. This is not a free lunch. In keeping with the insurance metaphor, a premium will have to be paid: in the form of accepting a slightly higher probability of inflation rising above target in the near term if the (insured-against) risk has not, in fact, crystallised. In other words, the policymaker faces a trade off, based on a judgment of probabilities and costs. But, in my view, there is more to it than that. Communication matters too. If the policymaker takes out the insurance, they need to be clear (with themselves) about the conditions under which it would be withdrawn, ie the cut reversed. And that state-contingent policy analysis needs to be communicated to the market too. Some economists do not like the idea of ‘insurance’ policy settings, and ask, reasonably, how they square with the type of objective (loss) function I set out at the beginning of my remarks.

The Rt Hon Sir Edward George: A brief review of economic and financial developments in the UK Speech by The Rt Hon Sir Edward George, Governor of the Bank of England, at the Finance and Leasing Association Annual Dinner, London, 24 March 2003. *  *  *  Mr Chairman, my Lords, Ladies and Gentlemen, I must confess that I was surprised when I discovered that it was seven years since I last spoke at this Finance and Leasing Association Annual Dinner. I'm delighted to be with you here this evening. On that earlier occasion - in 1996 - I emphasised the corrosive and debilitating effect of high and variable inflation that we had experienced in this country over much of the previous 50 years. I stressed the damage that this had done to our economy - the pervasive uncertainty and unpredictability, and the short-termism that it induced, in personal and business as well as financial behaviour, the incentive to borrow and spend rather than save and invest, the masking of real price signals as the guide to efficient resource allocation, and the masking, too, of productive inefficiency that was too easily covered up by generally rising prices and earnings. But I suggested that the tide had already then finally begun to turn. I drew attention to the growing constituency in support of stability in this country - as a necessary condition for sustainable growth after our particularly bitter experience of boom and bust in the late 1980's and early 1990's.
•  We evaluate the processes in place to ensure that clients and customers are offered products and services that suit their needs. •  We monitor the volume of customer complaints of mis-selling and examine how complaints are dealt with. What can industry do? But even the most intrusive supervision can only go so far in promoting a culture of ethics. The industry must itself take collective responsibility to promote higher ethical standards. It is better that industry develops codes of good conduct that take into account operational realities that they know best and that holds firms accountable to their peers, than wait for the regulator to set rules that may be impractical or too onerous. The industry has already begun to do so. •  In the UK, high street banks have set up the Banking Standards Review Council (BSRC), which aims to work with the industry to improve banking practices in three broad areas: culture, competence and customer outcomes. Participating banks will be required to commit to a programme of improvement and report to the BSRC on their performance every year. •  In the Netherlands, the Dutch Banking Association is exploring plans for a disciplinary system for ethics violations, similar to what the medical profession is subject to. I am pleased to note that in Singapore, our industry associations have not lagged behind. The Association of Banks in Singapore (ABS) has published guidance for its member banks and minimum service standards that customers can expect from their banks.

The Executive Board described the background for the decision as follows: •  Underlying inflation has been lower than projected in recent months. Nevertheless, several factors point to higher inflation ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy. Employment is rapidly rising and unemployment has exhibited a marked decline. There are signs of higher wage growth and expectations of rising inflation. At the same time, the krone exchange rate has depreciated from strong values. •  The interest rate path presented in Inflation Report 3/06 will provide a reasonable balance between the objective of bringing up inflation towards target and the objective of stabilising developments in output and employment, conditional on the information currently available to Norges Bank. •  Monetary policy influences the economy with a lag. Over several years, interest rates have been considerably lower than what Norges Bank considers to be a neutral level. The interest rate may gradually be raised to a more normal level at a somewhat faster pace than envisaged earlier, although it is unlikely that rates will be raised at every monetary policy meeting. Based on Norges Bank’s current assessment, the interest rate will thus continue to be raised in small, not too frequent steps if economic developments are broadly in line with projections.
And even those who look mainly to the United States - where both the market and the currency relationship have been more stable - faced intensified competition from the rest of the world. BIS Review 5/2000  2  These effects were not, of course, peculiar to Scottish businesses. They applied equally to all similarly internationally-exposed businesses throughout the UK. Each region has its own particular business characteristics so that some were affected more than others - with some English regions worse affected than the overall economy here in Scotland. But the effects were just as damaging to similar businesses wherever they were located, so that the differential impact was felt within regions throughout the UK not just between them. These cries of pain from the most severely affected businesses and sectors right across the UK I really do understand. The question is what can we do about it through the operation of monetary policy? The problems - as I have explained - derive essentially from developments abroad, and there is not much that we can do directly about them, although both the Bank and the Government are very actively involved in the wider international debate on how to bring about greater stability and better balance in the global economy. Of course we take full account, in our forecasts and in our policy judgements, of the implications of the international environment for our own economy. That is why we moved aggressively to cut interest rates from the autumn of 1998 and early last year.

We start from a position in which inflation is in fact running - and has been running for some months slightly below the Government’s 2½% target. The November figure was 2.2% and within this goods price inflation was running at around only ½%, while retail services price inflation was running at nearly 4%. On Europe’s HICP measure, inflation in November was running at 1.3%. In part this out-turn reflects the abnormal international developments I have already discussed. The slowdown in the world economy reduced external demand in the UK. Weak world demand was 3  BIS Review 5/2000  accompanied initially, too, by falling commodity and manufacturing input prices. And sterling’s strong exchange rate had a direct, dampening, impact on our domestic price level. It is clear that world demand has now started to strengthen and commodity prices generally have stopped falling. And the oil price has already recovered strongly - which may benefit the Scottish economy but puts upward pressure on inflation. But sterling’s exchange rate remains uncomfortably strong. Looking ahead, there are a number of unusual factors that might help to hold the rate of inflation down, at least in the short term. Some of these are one-off administrative measures rather than broader economic influences: they include the unusually large price reductions imposed by utilities regulators to come into effect in the spring as well as the Chancellor’s decision to end automatic over-indexation of excise duties on fuel and tobacco.
At the current juncture, the longer-term risks associated with a massive, uncontrollable expansion of the SNB balance sheet would have been out of proportion to the benefits of continuing to enforce the minimum exchange rate. This does not mean that the SNB will refrain from expanding its balance sheet further, should it prove necessary. Rather, it clarifies that this policy option should be used only when the benefits clearly outweigh the costs. Fiction III: The SNB has unlimited power The drastic actions taken by central banks since the financial crisis – flooding financial markets with liquidity on an unprecedented scale, injecting billions to save banks from failing, or, in the case of Switzerland, intervening heavily in the foreign exchange markets – have led to the widespread perception that central banks have unlimited power. On the one hand, this perception is based on the fact that central banks are entrusted with the note-issuing privilege, i.e. they can “print money”. In view of the current difficult debates about austerity and deleveraging, the tendency to overrate the power associated with this privilege is probably natural. Yet this view overestimates its actual power, for printing money  4  BIS central bankers’ speeches  can only resolve short-term liquidity issues. In the long term, it creates no value and merely generates nominal price increases. On the other hand, the perception that central banks are all-powerful is also based on the fiction that their independence renders them immune to democratic controls.

A case in point is the SNB’s decision to introduce the minimum exchange rate of CHF 1.20 per euro in September 2011, and then discontinue it earlier this year. As mentioned, in enforcing the minimum exchange rate, the SNB intervened heavily in the foreign exchange markets, and did not refrain from taking on significant balance sheet risks, particularly in 2012. At the time, interventions were necessary to counteract upward pressure on the Swiss franc resulting from substantial capital inflows and a lack of outflows due to flare-ups in the European debt crisis. Towards the end of 2014, the minimum exchange rate again came under increasing market pressure, requiring renewed interventions by the SNB. This time, however, the international environment was very different. While expectations of an interest rate rise in the United States were mounting and the dollar was appreciating, from mid-year onwards there were signs in the euro area of further monetary policy easing, and the euro started to weaken across the board, pushing the EUR/CHF exchange rate close to the CHF 1.20 per euro floor. On the back of these developments – also reflecting the collapsing interest rate differential – Swiss franc investments again became relatively more attractive. Given these circumstances, and in view of quantitative easing in the euro area, the continuation of the minimum exchange rate policy would have meant a permanent, potentially uncontrollable expansion of the SNB balance sheet.