samchain/econo-pairs-v1 huggingface dataset:
For example, the five-year forward measure of breakeven inflation generated from differences in the nominal Treasury yield curve and the TIPS yield curve has shown a modest rise since mid-2010 back into the range that has generally been in place for the past decade (Chart 29). Second, the long-term inflation expectations of professional forecasters have been very stable. As shown in Chart 30, the median long-term inflation forecast in the Professional Forecasters’ survey remains around 2.1 percent for the PCE deflator. In terms of household expectations, there has been an increase in short-term expectations. This typically occurs when commodities such as gasoline go up sharply in price. However, even here longer-term expectations remain well-anchored. As shown in Chart 31, the University of Michigan median five-year inflation expectations measure remains around 2.9 percent – comfortably within its normal range and historically consistent with slightly lower realized inflation. To summarize the main points, we have a considerable amount of slack, little evidence of discontinuous speed limit effects, and little inflation pass-through from commodities into core inflation when inflation expectations are well-anchored, which is currently the case. This suggests that the biggest risk in terms of higher underlying inflation over the next year or two is that inflation expectations could become unanchored. This might occur, for example, if there were a loss of confidence in the ability and/or willingness of the Federal Reserve to tighten monetary policy in a timely way in order to keep inflation in check.

Recent evidence shows that the large amount of slack in the economy has contributed to disinflation over the past couple of years. This can be seen in the steady decline in core inflation between mid-2008 and the end of 2010. As shown in Chart 18, core PCE inflation in December had risen at just 0.7 percent on a year-over-year basis, down from 2.5 percent in mid-2008. Slack in our economy is still very large, and this will continue to be a factor that acts to dampen price pressures. Nevertheless, there are several reasons why we need to be careful about inflation even in an environment of ample spare capacity. First, commodity prices have been rising rapidly (Chart 19). This has already increased headline inflation relative to core inflation, and the commodity price changes that have already taken place will almost certainly continue to push the headline rate on year-over-year basis higher over the next few months. Second, some of this pressure could feed into core inflation. Third, medium-term inflation expectations have recently risen back to levels consistent with our dual mandate objectives (Chart 20). If medium-term inflation expectations were to move significantly higher from here on a  1  However, growth alone will not resolve the longer-term problem of the disparity between promises made to state and local workers in terms of their public employee pension and health benefits and the resources set aside to pay for those benefits.
It will better equip us to contribute to price stability while financial stability and a stable economic development are secured. At the same time, it should be emphasised that macroprudential policy does not resolve all the problems associated with the financial sector. Also, we do not know how efficient the new macroprudential tools will be; we will need to analyse and evaluate them afterwards. 12  BIS central bankers’ speeches

As a national agenda, I would like to propose that this forum debates and considers the feasibility of setting a realistic target date, perhaps by the year 2010, for a full implementation of a national e-payment roadmap that specifically outlines the strategies and realignments of the business processes and operating practices, for the nation to be fully engaged in making the migration a success. Ladies and Gentlemen, Let me now move on to the third key point mentioned earlier on the commercial interfaces, whereby the underlying business models and pricing mechanisms for electronic payments, should take into account the need for an incentive structure that promotes the increased use of e-payments. In recent years, several notable developments in e-payments in Malaysia have taken place. Following its introduction in 2000, the Inter-Bank GIRO system, an electronic credit transfer system, had recorded on annual average increase in transactions of 160% in terms of volume and nearly 200% in terms of value between 2003 and 2004. The credit card is also becoming a popular means of payment card, with the total value and volume of increasing annually by 15 and 20 percent respectively. The growing acceptance of Internet banking as a convenient delivery channel for accessing banking services has translated into a significant growth of Internet banking subscribers, which today comprise two thirds of the total internet subscribers.
Through the Accelerator and the Bank’s broader Fintech work, we have made valuable connections with important parts of the financial and technology sector beyond the regulatory perimeter – relationships that could matter greatly in the years to come. And those engagements with FinTech firms have also exposed central bankers to some very different ways of working and thinking: more agile, more willing to experiment, less bound by convention. Internal ‘hackathons’ run by our Technology department along similar lines, and aimed at identifying innovative solutions to Bank-specific problems, have been extraordinarily popular and have shown central banking officials to be capable of much more radical thinking than is sometimes supposed. The firms we have worked with have also valued the experience, giving them insights on the wider application of their technologies, and the needs and thought patterns of regulators and policymakers. Our feedback has been honest: positive where that is due, but also highlighting challenges or gaps where they are evident. And our work has in turn been part of the broader effort by the UK authorities to support and guide the sector. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  The latest wave of innovation in financial technology has shaken up traditional thinking about how to deliver financial services, defining the pace and shape of innovation in what has sometimes been quite a slow-moving industry technologically-speaking.

Such framework needs to be accompanied by adequate accounting, auditing and disclosure standards, to improve market transparency and enhance supervisory effectiveness. Turning to Mainland China's experience, the liberalisation of capital account has been selective. Inflows of foreign direct investment have long been encouraged, which has contributed significantly to China's robust economic growth. In more recent years, steps have been taken by the authorities to allow greater portfolio flows. In particular, the Qualified Foreign Institutional Investors (QFII) schemes have enabled foreign investors to access the domestic financial market, while under the Qualified Domestic Institutional Investors (QDII) schemes, financial institutions can, upon approval, invest overseas on behalf of domestic investors. Reflecting the limited channels of outward investment and market conditions, however, capital flows have been overwhelmingly inward bound in recent years, and China has experienced a rapid accumulation of foreign exchange reserves. This had fed into pressures on the exchange rate and inflation which were only eased somewhat by the global economic slowdown in more recent months. The People's Bank of China has employed sterilisation through open market operations, reserve requirements and credit quota in order to offset the impact of capital inflows on domestic monetary conditions. Such measures, however, have incurred costs to the central bank and the banking sector. Thus it would be useful to consider ways in which outflows of capital can be liberalised in an orderly and regulated manner to alleviate the BOP pressures in the near term.
Seeing the large gap between the demand and supply of infrastructure investment, the ADB and Islamic Development Bank (IDB) have jointly set up a $ Islamic Infrastructure Fund in 2009. Several ASEAN countries such as Malaysia and Indonesia have also outlined plans to tap global Islamic funding for their infrastructure projects. 8. Thirdly, given the many ambitious initiatives and plans in the GCC for new industrial developments and infrastructure projects, the Middle East remains a high-potential market for Asian companies. ASEAN-based companies should therefore invest more time and resources to evaluate these opportunities and assess the risks, so as to help fill this demand. In Singapore, International Enterprise Singapore and the Singapore Business Federation (SBF) have been playing a vital role in helping our local companies to understand and differentiate Middle East markets better and to expand their regional footprint. 9. Lastly, many leading Middle East financial institutions have established a presence in Singapore to offer financial services such as wholesale banking, treasury services, trade finance, and wealth management. These institutions play an important bridging role by guiding companies in the region to expand into the Middle East and vice versa. Bank Muscat, the largest bank in Oman, is the latest player to set up in Singapore. Sustaining the growth of Islamic finance 10. As investors and businesses in the Middle East and Asia seek a wider range and diversity of financing options from banks and capital markets, Islamic finance will have to respond to meet their rising needs.

Mr Chairman, it is clear from the definition that money laundering is a tool that is used by people involved in illegal activities, such as drug trafficking, organised crime, tax-evading, political bribery and th above all, corruption. In addition, the events of September 11 have added another dimension to the problem of money laundering and brought to light the synonymity between money laundering and terrorism. What then are the stages in money laundering? Though the money laundering process seems so complicated, it usually follows a traceable pattern and three distinct stages can be identified. These are: •  Placement Stage. This it involves the disposal of cash proceeds of the illegal activity. It is at this stage that the proceeds are introduced into the financial system in a manner that avoids detection by the banks and the authorities. At this stage criminals use techniques like depositing large amounts of money in several smaller batches so as to avoid suspicion and detection. BIS Review 6/2003  1  •  Layering Stage. This is when the true character of the cash proceeds of the illegal activities is hidden through a series of transactions in order to erase the audit trail. This is done by transferring this money to off-shore banking centres with strict secrecy laws, or to bearer bonds, and/or shell holding companies and accounts held in the name of nominees. •  The last stage is the Integration Stage where the successfully laundered money is integrated into the financial system.
And it means that the major international financial institutions face a substantially greater diversity of exposures, given the multiple systems in which they operate. •  Payments activity has become more concentrated in a smaller number of global financial institutions; fewer major participants in payments systems now account for a larger share of volume and exposures in those systems. This has important implications for how we think about the vulnerability of the system to a financial or operational failure and about the financial resources that system operators need to maintain. •  The growth in the over-the-counter derivatives market has advanced much more rapidly than the speed of improvement of important parts of the infrastructure that support the market, including contract documentation and post-trade processing, and the certainty of the legal arrangements for cross-product netting. This introduces a potential source of uncertainty that can complicate how counterparties and markets respond in conditions of stress. •  The increased risk of terrorist attacks and increased sophistication of cyber attacks on electronic networks have added new dimensions to the traditional concerns of safety and soundness and operational resilience. These broad forces present significant challenges for payments participants, system operators, and central banks. Deciding how we meet these challenges raises the classic tension about how to balance the public benefits of greater stability and the increased costs that are the price of the additional margin of safety.

To meet the challenge of ensuring that this global network of individual payments systems is reliable, resilient and efficient requires a more integrated and comprehensive approach. This is true for the participants that are most exposed to the diversity of risks in this network of systems. And it is true for the official entities as well, because the growing number of cross-border payments systems require an effective framework of cooperation if we are to provide effective oversight. One important challenge faced by banks that operate across many different financial centers is how to meet their global liquidity needs. To meet the rising expectations of their customers, and simultaneously fulfill their own internal needs, the largest and most active banks in the payments business would prefer to mobilize their liquidity globally. But the reality is that the total liquidity available to a global bank is fragmented. Surplus liquidity in one currency at one location cannot always be readily converted into liquidity in another currency or in another market. An institution’s liquidity at a specific location is dependent, to a  4  BIS Review 59/2004  large extent, on the size of its payment flows, its capital, and the volume of marketable securities and other eligible collateral that is housed in that location. These factors often determine what is available either to gain access to daylight liquidity from a central bank, or to meet a clearinghouse’s margin or collateral requirements, or to borrow overnight in an emergency.
While there are around 15 million unemployed workers, there are also around 9 million workers who are working part time for economic reasons (as opposed to their own choice), and around 1.3 million “discouraged” workers who want a job but who are not currently actively looking for work – and therefore are not counted as unemployed. As firms decide to increase their total hours, some of this additional labor demand will take the form of firms restoring part-time workers to full-time status – an action that does not reduce the unemployment rate. In addition, as conditions begin to improve in the labor market, discouraged workers may decide to reenter the labor force and to renew their search for a job. This reentry pushes up the measured unemployment rate until these reentrants find new employment. As the recession ended, consumption growth returned to positive, supported by improvement in disposable income growth and a leveling off of the household saving rate (Chart 20). Household wealth began to recover as equity markets improved and the deterioration in house prices abated, supported in part by demand created by the housing tax credit programs (Chart 21). As conditions in financial markets improved, banks ceased tightening their lending standards (Chart 22). Lending activity stopped contracting, and credit became more readily available for large firms that had access to the credit markets (Chart 23). Midway through 2010, however, questions started to arise as to whether the economy was entering a “soft-patch” or heading toward a “double-dip” recession.

This is largely due to the scarcity of the instruments in the market. In Malaysia, the growing ringgit sukuk market has resulted in an active secondary market. This is largely due to the regular and varied issuances throughout the year. This is supported by the investment in research and development and in talent development to ensure the availability of expertise in the structuring of sukuk instruments and in sukuk documentation. Having the potential to innovate new instruments will depend on having the necessary talent. This is an area of focus in Malaysia to develop the skills, expertise and capability. The Islamic financial system in Malaysia now offers a wide range of financial products and services that are competitive and able to meet the changing requirements of the domestic and global economy. Way forward for the global Islamic financial system As we advance forward, we need to recognise the forces of change and the transformation taking place in the international financial system and global economy. Relentless efforts have been initiated to reform the international financial system by the international community to address the weaknesses that have contributed to the recent crisis. In this environment, Islamic finance needs to continue to evolve to remain effective and competitive. The Islamic financial system does not exist in isolation and will continue to develop as an integral part of the global financial system.
The Albanian system’s immunity to this crisis arises from certain factors, namely: •  The relatively low exposure of the Albanian financial system to international financial institutions;  •  The low integration level in general; and  •  The well-capitalized activity of European banking groups and their branches operating in Albania. BIS Review 120/2008  1  In general, we consider that no risks that may be materialized or which may harm abruptly and severely the activity of the financial system are identified. However, I would like to dwell on the risk analysis of the banking sector. Scenario-based risk analyses confirm that the banking sector has the capacity to cope with the various risks that may arise as a result of the unwelcome shifts in the exchange rates and interest rates. Prudent monitoring of assets’ quality is required and time is ripe to pay greater attention to the performance of liquidity indicators. With respect to the latter, the following aspects are crucial to keep under consideration: First, the absence of a developed money and securities trading market curtails the financial institutions’ capacities to meet the unexpected liquidity needs through the sale of assets considered as “liquid”.

The Bank of Albania, through its Supervision Department, has prudently and constantly monitored the developments’ dynamics in the banking sector, part of which are also the  2  BIS Review 120/2008  recent developments related to interest rates on market products. We consider these interest rates as aggressive, providing their impact on the profit margin and representing a potential risk to the structure of balance sheet. As you are aware, we have required from you information related to the strategy and procedures followed by your bank with respect to the application of these terms and interest rates, the purpose and grounding basis for the decision-making process and the structures involved. It is essential for the Bank of Albania that any decision made is a product of deep and comprehensive analyses from the most junior expert to the decision-making structures, placing in addition special emphasis on the impact on the financial result. The entire process should be transparent, understandable and absorbing by the public at large. Otherwise, it will provide opposite effects. This summer provided evidence for the fact that competition in terms of gaining market shares is a determinant element of the Albanian banking system’s behaviour. It also holds true that we are dealing with one of the core principles in the functioning of free market economy: COMPETITION. However, given the fact that the other market principles, namely profit maximization, are not on the same wavelength, the balances between them may be distorted and consequently, different risk elements may be present.
The expected rewards include any financial and psychic benefits to the individual from the behavior if undetected. Improved culture helps to tip the balance in the favor of better behaviors by increasing the likelihood that an individual will both feel an obligation to behave properly, and be prevented by others from carrying out bad behavior. In addition, a strong culture can also reduce the rewards some employees may hope to enjoy. In its simplest form, a strong culture means that individuals who get away with unethical or illegal activities will not have the satisfaction of “bragging rights” about their actions because there are no congratulations for breaking the law or outwitting compliance. A strong culture will reinforce the simple reward of having done the right thing. A clear conscience can be a powerful reward. A well-designed compensation structure can also help favorably tip the balance by effectively extending the time horizon of senior management and material risk-takers, and by forcing them to more fully internalize the consequences of their actions. There are two important dimensions of the structure of compensation – first, how much compensation is paid out  4  BIS central bankers’ speeches  immediately versus deferred into the future, and second, the form of the compensation that is deferred – cash, equity, equity options or debt. For deferred compensation, the rules for how it vests and under what conditions it can be forfeited are important. Getting the balance right is critical.

Given recent experience, a decade would seem to be a reasonable timeframe to provide sufficient time and space for any illegal actions or violations of the firm’s culture to materialize and fines and legal penalties realized. As I will argue below, I also believe that this longer vesting portion of the deferred compensation should be debt as opposed to equity. 6 I noted earlier that improving a financial firm’s culture will take sustained determination and commitment from its senior leaders. Deferred compensation can play a useful role in reinforcing buy-in of senior leadership to this endeavor. As I discussed last November, an important element of a Title II resolution under Dodd-Frank is that there is sufficient long-term unsecured debt at the holding company level to recapitalize a failing bank. I indicated in my remarks that it would be useful if a meaningful component of this debt was contributed by the senior management and the firm’s material risk-takers. That is, if a bank ran into solvency problems, this component of deferred compensation would be used to recapitalize the restructured bank. The goal is to incent senior management and the material risk-takers to focus on maximizing the long-term “enterprise” value of the firm, not just the short-term share price. In this framework, I would expect the relative size of the debt component of deferred compensation to increase as one moved up the management ranks to the senior managers of the firm.