samchain/econo-pairs-v1 huggingface dataset:
A second factor that suggests Basel II will be an effective standard relates to the process that the Committee used to develop the new framework. The new capital framework emerged from a process involving intense public scrutiny. We conducted three major public global consultations on the new framework and several impact studies. Over nearly six years, the Committee received hundreds of formal comment letters from bankers, supervisors, central bankers, academics, politicians and many other industry observers. We heard countless more informal views in meetings and discussions. Many of you and your institutions participated quite actively in those exchanges. Likewise, the Banker magazine, the Financial Times, and other industry journals plus the mainstream media contributed greatly to this dialogue by publishing thoughtful articles and opinion pieces on the issues that arose in these discussions. The members of the Committee are deeply grateful to all who participated in our discussions, who aired views on the proposals, and who contributed data to help assess their likely impact. In total, the consultations on Basel II represented what might have been an unprecedented degree of public scrutiny for such a technical global agreement. This made the review of the proposals more comprehensive, but also more arduous for everyone involved. Yet steel is forged only at high temperatures. Because of your comments and suggestions, the Committee was able to clarify many of the rules to achieve a better balance between complexity and risk sensitivity.

On top of that, and to ensure that banks are evaluating all of the risks they face, the Basel Committee has incorporated two other reality checks into the new framework, namely Pillars 2 and 3. Pillar 2, supervisory review, requires each bank to apply its best human judgement to capital planning. Every bank is responsible for assessing its own capital needs, including whether any activities or exposures may incorporate more risk - and hence may require more capital - than is assumed in Pillar 1. Supervisors, in turn, must evaluate the bank’s judgement and processes; moreover, they must respond if any bank’s capital planning seems unrealistic. Similarly, Pillar 3 - market discipline - provides another external check by offering greater insight into a bank’s risk profile to investors, counterparties, rating agencies, and others. Marketplace participants are then better able to assess whether a bank’s management is engaging in the reasonable and responsible pursuit of opportunity and profit. They are better able to reward companies that are well managed and to penalise those that are not. That, in turn, encourages all banks to consider their current risk exposures carefully and to make appropriate plans for risks that may be on the horizon. Let me also briefly take this opportunity to recall that the new framework also imposes principles of transparency on supervisors as well as on banks.
Euroland officials should perhaps consider how much a problem there is of substance and how much of perception, and address each as appropriate. Another factor that may contribute to scepticism over the euro concerns monetary policy. But there is not a lot that I would wish to say on the subject. You will appreciate that central bankers are not anyway the sort of people to make public assessments of one another! On the whole, I sense a feeling of some sympathy for the European Central Bank. In the technical sense it appears to have done most things right, in terms of keeping inflation under wraps and so preserving the internal purchasing power of the euro, but it has nevertheless had to preside over a substantial decline in the euro’s external value. Given that Euroland as a whole is a relatively closed economy, the decline of the euro may have caused more concern to outsiders than to insiders. It has certainly influenced international investor perceptions. My own observation, perhaps slightly cynical, of businessmen and investors is that they are less concerned about the technical content of monetary policy - provided that it is seen to be reasonably disciplined - than they are about the conviction with which it is delivered. Thus, the so-called “strong dollar” stance of the United States is clearly stated. It is not contradicted from anywhere within the administration.

Plainly, the sooner the euro is in physical circulation the better, and I personally feel that the plan of a three-year wait was a trifle generous. I should add an associated observation concerning pride in one’s currency. A currency is unlikely to win the widespread confidence of international financiers if nationals of the currency zone themselves lack pride or confidence in it. It is fully understandable, though nevertheless unhelpful, that people whom I meet here in Germany, for example, seem to have moved from pride in the Deutsche mark to nostalgia for the Deutsche mark, rather than from pride in the Deutsche mark to pride in the euro. So much for possible sources of negative perceptions. At the same time there are positive aspects about the emergence of the euro, although not all of them are necessarily clearly visible from Asia. A notable achievement has been the establishment of the euro as a major force in the international foreign exchange and bond markets. High degrees of liquidity are being enjoyed, and in the bond market issuance in euro quickly overtook the combined issuance levels of the former component currencies. In this sense the euro has already proved that it is greater than the sum of its parts, and has succeeded in reaping those economies of scale which were advertised as one of the several benefits of the single currency.
Moreover, the NBR Museum has on display valuable exhibits testifying to a “culture of money” dating back to ancient times in our region. The NBR Museum has made substantial efforts to raise awareness about the history of the national currency, the features of banknotes and coins, as well as the role of money in the economy. For instance, in 2005–2006, the National Bank of Romania conducted an extensive communication campaign on the leu’s redenomination, and in view of the prime function of a central bank, namely currency issue, keeps the public informed about the leu’s security features. At the same time, apart from these efforts, our central bank often includes among its strivings to increase financial education, themes related to the history of the  BIS central bankers’ speeches  1  European single currency. It is only natural that Romanians be well aware of the currency of the club that we aim to be part of. Keeping the public informed is an ongoing process, prepared and unfolded long before Romania’s euro adoption. This is why we appreciate and support the ECB’s effort to showcase this travelling exhibition to the EU Member States to the benefit of all European citizens. I therefore totally agree with Mr. Jean-Claude Trichet, the ECB’s President, who said precisely one year ago (on 10 March 2010, when this exhibition was inaugurated in Frankfurt) that “the euro should speak both of Europe’s diversity and its common culture, its history and its future”.

The decisions, which usually pass through internal professional filtrations,  BIS central bankers’ speeches  1  and are made by the Governor and the NBRM Council, are within exclusive responsibility of those two bodies, and since the Governor is also a President (with the new law, a Chairperson) of the Council, I also consider these decisions, particularly if there were bad ones, as my personal responsibility. I actually want to say that the statutory independence of the NBRM over the last seven years was completely preserved. This should remain in the future. The central bank independence is crucial to the macroeconomic stability and very important to the financial system stability. With such position, I consider that we successfully pursued all assignments entrusted by the law: (1) We preserved low and stable inflation as a primary objective of the central bank. The seven-year average (2004–2011, April) equals 2.2%. I know what some may think of the so called “tolerant” or “useful” level of inflation. I leave it to them to “reconcile” their “tolerant” level of inflation and de facto fixed rate. In case they again oppose to the existing regime of exchange rate, to have even higher inflation, we will be decent enough to seek for an elementary analysis of its usefulness, i.e. of the advantages of such alternative. (2) We maintained a stable exchange rate level, without registering misalignment between its level and the economic fundaments.
Strong economic fundamentals alone proved to be insufficient in containing instability in the domestic economy and financial system. Many of us still vividly recall the Asian financial crisis of 1997-98 that significantly affected several of the countries in the region. What started as a currency crisis turned into a financial and economic crisis. During this period, the ringgit exchange rate depreciated by about 40% at the peak of the crisis; the stock market declined by almost 80%. While the Malaysian economy continued to expand in 1997, by 1998, conditions deteriorated significantly and the economy contracted by 7.5%. An extensive set of measures were implemented. This included a comprehensive restructuring programme for the financial and corporate sectors. While still at the early stage of the crisis, an asset management company was established to acquire and manage the non-performing loans of banking institutions. A special purpose vehicle to recapitalise the banking system and a Corporate Debt Restructuring Committee were also established to provide avenues for voluntary debt restructuring for businesses. Within six months of the implementation of these measures, the problems in the financial sector were addressed. This led to resumption in lending activities and the economy expanded by 6.1% in 1999. Notably, the stakes taken in the financial institutions were disposed back to the private sector with the costs of the exercise being more than covered. The Bank's efforts to sustain stability did not end when the Asian financial crisis abated and economic recovery was firmly in place.

This was evident in several periods, the early nineties, the mid-nineties, and the outflows during 1997-1998, and in the current period following the de-leveraging by financial institutions in the advanced economies. In the early days of the Bank, policy actions were focused on the management of liquidity in the financial system through the imposition of statutory and liquidity reserve requirements,  BIS Review 12/2009  1  and through prescription of interest rates and portfolio restrictions, including ceilings on lending. Further progress and sophistication in the financial sector, the deepening of the financial markets and the growing influence of capital flows, resulted in the reliance on interest rate and other market-based instruments for monetary policy. Further, with the increased role of expectations, greater clarity in policy signals became desirable. Thus in 2004, the New Interest Rate Framework was implemented, in which the Overnight Policy Rate became the new policy rate, thereby enhancing the efficiency of the monetary transmission mechanism. The new framework has also served as a catalyst for efficient pricing of financial products and services by banking institutions. A key issue for monetary policy in an open economy like Malaysia has been in maintaining a flexible exchange rate and monetary independence in the face of increasingly large capital flows. To better manage surges in capital flows which have become more prevalent, the range of market-based instruments for monetary policy operations has been widened.
Muhammad Al-Jasser: Saudi Arabia’s economic developments in 2010/11 Speech by His Excellency Dr Muhammad Al-Jasser, Governor of the Saudi Arabian Monetary Agency (SAMA), to the Custodian of the Two Holy Mosques, on the occasion of presenting the Forty-Seventh Annual Report of the Saudi Arabian Monetary Agency, Riyadh, 12 December 2011. *  *  *  Custodian of the Two Holy Mosques, It is of great pleasure that the meeting with you is renewed while you enjoy, thanks to Allah, good health. Our country is continuing, under your wise leadership, the march of development and prosperity in an extraordinary solidarity between leadership and citizens. I am pleased to submit the forty-seventh annual report of the Saudi Arabian Monetary Agency, which deals with economic developments in 2010 and the first quarter of 2011. Custodian of the Two Holy Mosques, The global economy is still suffering from the weakness caused by the global financial crisis and the resulting problems of sovereign debts of a number of states in the industrialized world. However, our domestic economy, thanks to Allah, has avoided the pitfalls of public and private debt which had strained the economies of many industrialized countries. Therefore, our national economy in 2010 continued its growth for the eleventh year in a row, growing by 4.1 percent, and the non-oil sector by 4.9 percent.

On top of that, the OTC derivative contracts had a daily turnover of $ trillion in 1998, and the notional amounts outstanding at end-June 1998 came to $ trillion. There is no doubt that the growth of foreign exchange and OTC markets, together with advances in information technology, has contributed to cross-border capital flows and enhanced risk management standards. It is, however, legitimate to ask what lies behind these vast numbers. What does it mean for the underlying markets if the financial derivatives trading continues to multiply? Do we understand exactly what these $ trillion worth of derivative positions represent? Do we really understand the nature of the fund flows generated from the financial derivative trading in the OTC markets? The problem is that we do not have the answers to most of these questions. To start with, there is not even an adequate statistical framework to capture capital flow data. The current data on balance of payments, international investment position, or flow of funds accounts have two major short-comings: (a) low frequency of quarterly data; and (b) limited breakdown of data by currency, sector, instrument, etc. The BIS, IMF and OECD are examples of institutions which have made some attempts to collate relevant statistics but they are far from complete or timely. This is not just a statistical issue for the data compilers but a major policy issue for the authorities and other users. The compilation of high-frequency and detailed data is going to be resource-intensive and there is keen competition for statistical resources.
Thomas Jordan: Financial stability developments of relevance Introductory remarks by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Berne, 15 December 2011. *  *  *  In my introductory remarks today, I would like to look at the most important developments in the area of financial stability that have taken place since the publication of our most recent Financial Stability Report in June of this year. Our latest analysis reaffirms the need for action which we had already identified back then. Firstly, in view of the high level of risk associated with the current global economic environment, the big banks must – to the extent possible – push quickly ahead with the expansion of their loss-absorbing capital base. Secondly, given the medium-term risks in the real estate market, which are particularly affecting domestically focused banks, it is vital that an effective macroprudential policy framework be developed. International developments of relevance for financial stability The global economic and financial conditions which affect the stability of the Swiss financial system worsened in the second half of 2011. As my colleague, Philipp Hildebrand, has already mentioned, the outlook for global growth is currently subdued. A major reason for this is the sovereign debt crisis which has been building up in peripheral euro area countries for the last two years or so and is now threatening to spill over into the core countries of the euro area.

In addition to this, they have further expanded their loss-absorbing capital base. The Swiss National Bank welcomes these measures and sees them as further steps towards achieving a sounder capital situation. Additional efforts are necessary, however, because the loss-absorbing capital of big banks is still low, given their risk profile and the considerable uncertainty in the international environment. In order for them to be better equipped to deal  BIS central bankers’ speeches  1  with a possible worsening of current economic conditions, the big banks must further improve their capital situation. They can achieve this by retaining earnings. Another measure would be to issue contingent convertible bonds or contingent capital instruments with write-off features, an essential element of the “too big to fail” regulations. They can also strengthen their capital base by accelerating the announced reduction of their risk exposure. By making use of these options, the big banks could quickly and substantially improve their capital situation. Situation of domestically focused banks Allow me now to move on to the situation of banks with a domestic focus. The capitalisation of most domestically focused banks remains good. Profitability – as measured by the ratio of gross profits to assets – dropped slightly, however; not least because of the low interest rate margins. At the same time, domestically focused banks are having to contend with two significant risk factors, namely interest rate risk, which has remained unchanged at a high level, and credit risk, which has risen further.
Friedman, at least at the time he wrote, trusted neither of the two and advocated a constitutional rule for constant money growth as his preferred solution of the long-standing debate on “Rules versus authorities in monetary policy” (which is the title of the classic paper by Henry Simons from 1936). His concerns reflect what I would regard as a healthy distrust of the unfettered “rule of men” as opposed to the “rule of law” which he much prefers - in line with the long and venerable tradition of British liberal thinking. Friedman, at the time, was quite sceptical on central bank independence and asked whether it was “really tolerable in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control?” This is why I believe it is important to stress that, if an independent central bank is assigned a clear and limited mandate, this represents a constraint on the discretionary exercise of power by the government but also by the central bank itself. In the absence of a complete and universally applicable rule for monetary policy an independent central bank which focuses firmly on the single overriding goal of price stability is the closest realistic and credible substitute for a literal “rule of law”. In particular such a central bank does not have the discretion to pick and choose at will among several objectives. A clear commitment to a single overriding objective is the key to credibility and it is also the key for accountability, i.e.

The Treaty was ratified by the parliaments and governments of all Member States of the European Union and in some cases endorsed by referendum. Thus the delegation of European monetary policy to the ECB is endowed with full democratic legitimacy. This bond of legitimacy is a crucial aspect of sound institutional foundations for monetary policy. There is no doubt that in order to be successful over the longer term, the ECB as the guardian of price stability - like any institution in a democracy will have to win and maintain the trust and support of the European public. It can and should be held accountable for fulfilling its mandate. This mandate is clear, but it is also limited. It needs to be understood what monetary policy can be expected to deliver, but also what it cannot be expected to achieve. This is particular important in the case of the European Monetary Union, which not only delegates the authority for monetary policy to an independent central bank but which also severs the traditionally close link between the currency and the nation state. Historically, currency jurisdictions and national borders have tended to coincide, at least in more recent times. This reflects the fact that the right to issue money has been seen as a key attribute of national sovereignty. Thus monetary union cannot be regarded as just a small and innocuous step of a primarily technical nature.
Indeed if you were to plot inflation against unemployment on a chart - described by economists as the Phillips’ curve - you would see not a downward-sloping line of the conventional wisdom but a completely flat line. Over the nice decade, the unemployment rate fell from nearly 9% to below 3% on the claimant count measure. Yet over the same period, inflation was broadly constant and never deviated from its target rate by more than 1 percentage point. Not only was there no longrun trade-off between inflation and unemployment, there was no short-run tradeoff either. As a result, both inflation and unemployment were lower than the Monetary Policy Committee had expected. And the inflation figures released this morning, with CPI inflation at only 1.1%, show that inflation has remained low - below the 2% target - despite a tight labour market. The position was very different in the 1980s. Unemployment then fell by a similar amount, from around 11% in 1985 to just over 5% in 1990. But inflation rose from 5 to 9.5%. How should we interpret this reduced sensitivity of inflation to changes in unemployment? Does it mean that the economy can grow faster than before without leading to a pickup of inflation? Or is there a risk that the apparent insensitivity of inflation to movements in the economy is only temporary, and might lead to mistakes in monetary policy if low inflation were taken for granted?

Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at the Eden Project, Cornwall, 12 October 2004. *  *  *  A year ago I described the period since the early 1990s as a non-inflationary consistently expansionary - or “nice” - decade; a period in which growth was above trend, unemployment fell steadily, and inflation remained low and stable. The ups and downs of the economy were much smaller in the nice decade than in any previous historical period. Will this stability last? To answer that question it is necessary to understand the causes of our new-found stability and, in particular, the link between growth and inflation. In the long run there is no trade-off between the two. Monetary policy determines inflation and the supply capacity of the economy determines the rate of growth. In the short run, however, it is reasonable to suppose that when the economy is running at above-normal levels of capacity utilisation there is upward pressure on inflation, and the opposite to hold when the economy is running below capacity. Such, at least, is the conventional wisdom. But over the nice decade inflation was much less sensitive to movements in output and employment than in the earlier inflation-prone 1970s and 1980s. Inflation barely moved despite substantial falls in unemployment.