samchain/econo-pairs-v1 huggingface dataset:
Luis M Linde: The changing role of central banks Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the 4th Future of Banking Summit, organised by Economist Conferences, Paris, 26 February 2013. *  *  *  Ladies and Gentlemen, It is an honour, and a pleasure, to address such a distinguished audience as is gathering today in this conference. I would like to thank The Economist for giving me the opportunity to analyse some of the changes affecting central banks policies. I will organize my talk around the two main areas of Central Banking: monetary policy and banking regulation. Firstly, I will address the changing role of central banks in monetary policy, before the crisis and after the crisis. Up until August 2007 – before the global financial crisis –, the general mood prevailing among academics and policymakers was that there existed a well-defined, so to say, “science or model of monetary policy”. There was a kind of consensus among central bankers about most elements of monetary policy strategy; and monetary policy was perceived as being highly successful in developed countries, with low inflation and low variability of inflation and output. According to this consensus, macroeconomic stability was achieved through rule-based monetary policy, delegated to an independent central bank with an implicit or explicit inflation target and with very little role for discretionary fiscal policy.

The provision of liquidity had the desired effect of reducing strains in markets, narrowing the dispersion of rates, and keeping the federal funds rate within the target range.5 Moving to more recent events, in March of this year the global spread of the pandemic led to a rapid and massive movement of funds around the world as investors sought to protect themselves from the highly uncertain and darkening economic outlook. These flows threatened to overwhelm the financial system and resulted in intense strain and disruption in short-term funding markets and markets for Treasury securities and agency mortgage-backed securities.6 Measures of market functioning deteriorated to levels near, or in some cases worse than, those we saw at the peak of the 2008 global financial crisis.7 In response to the extraordinary volatility and signs of market disruption caused by the pandemic, the Federal Reserve greatly expanded its repo operations and decisively and immediately began purchasing enormous quantities of U.S. Treasury securities and agency mortgage-backed securities. Our approach was to deliver a rapid and overwhelming response that would give assurance to market participants that liquidity would be there in the coming days and months. These actions, combined with the introduction of emergency lending facilities to provide liquidity to funding and credit markets, proved successful.
Currently, we have a semi-automated real-time delivery versus payment (DVP) system in place. It is a stop-gap measure but it serves as an important infrastructure in the settlement of the scripless government bonds. The system, when fully developed, will be supplemented by the intraday liquidity facilities and queuing mechanism, employing the latest digital signature technology to ensure secured and smooth real-time delivery and payment transactions. We are entering an era when capital flow across borders can only become more volatile than in the past. And we still have fresh memories of how disruptive it was before the crisis. In fact, it was a major cause of the crisis. How do we go forward? How do we guard against this? The work on the new International Financial Architecture seems to be very much lacking in the area of the behavior of key players, especially the highly leveraged institutions. In the eyes of the large  3  BIS Review 30/2000  Western countries, such issues have somewhat lost their urgency since the event surrounding the Long-Term Capital Management (LTCM) left the headlines. In the absence of such rules, it appeared that emerging markets can only look to our own selves for protection. We have to help ourselves. A well functioning bond market is an important tool in this respect. It will act as a reservoir that absorbs capital inflow, and channel it to good use.

However, we do have problems with high housing prices that lead to high household indebtedness and risks associated with this. But it is difficult to use monetary policy to influence household indebtedness without this having very negative consequences in the form of poorer target attainment for inflation and poorer stability in the real economy in the coming years. Poorer target attainment over a long period of time also entails costs and risks in itself which must be taken into account. The framework in which monetary policy is conducted in Sweden and in many other countries is based on the mandate of maintaining price stability, often specified as a target for inflation, as we have in Sweden. And it is this mandate that is the reason why central banks in general have been allocated a greater degree of independence than other public  BIS central bankers’ speeches  1  authorities. Over the past two decades, the clear objectives for monetary policy and the independent work by central banks to attain them, have proved effective in anchoring inflation expectations and creating stability in the economy. However, the framework is based on the central bank actually delivering. If inflation is allowed to deviate from an established target over a long period of time it can affect the general public’s understanding of the policy conducted and their confidence in the inflation target. The more the central bank stretches its task of delivering the set objective, the more difficult it will be to understand and evaluate the policy conducted.
Donald Joshua Jaganathan: Nailing down the winning strategies in bancassurance Keynote address by Mr Donald Joshua Jaganathan, Assistant Governor of the Central Bank of Malaysia, at the 15th Asia Conference on Bancassurance & Alternative Distribution Channels: “Nailing Down the Winning Strategies in Bancassurance”, Kuala Lumpur, 6 May 2014. *  *  *  It gives me great pleasure to be here at the 15th Asia Conference on Bancassurance & Alternative Distribution Channels. This conference takes place at an exciting time for the insurance industry in Asia. After decades of strong growth and modernisation, Asia has achieved remarkable standards of living, with hundreds of millions lifted out of poverty and a middle-class population of over half a billion. Structural reforms following the Asian financial crisis have enabled the region to remain resilient throughout the global financial crisis of 2008/2009. Post-crisis, the vibrant economies in Asia have continued to be a pillar for global recovery, with this year’s GDP for developing Asia projected by the IMF to grow 6.7% 1. Insurance markets have also grown in tandem with the economy. Over the past decade, total premium in emerging Asia 2 increased by 10% per annum for life business and 13% per annum for non-life business on average 3 and is projected to grow 11% this year and 10% 4 in the next. The insurance industry, however, cannot be complacent and take this story for granted.

By leveraging on banks’ existing branch network and customer base, which are well established throughout most markets in Asia, insurers are able to scale up very quickly into geographical areas and customer segments that might not be accessible by existing channels. It is therefore not surprising that bancassurance is the fastest growing global channel for insurance. In China, bancassurance sales increased by 415% within 5 years from 2004 to 2009 11. In Malaysia, bancassurance accounted for 36% 12 of new life insurance business premium and 39% 13 of gross contributions for Takaful business in 2013. At the current penetration level of 5% of the banking population, there remains significant room for growth. Under the LIFE Framework, the Bank has envisaged a bancassurance penetration target of 10% 14 as part of the move towards diversification of insurance distribution channels in Malaysia. Rationalization of incentive structures proposed under the framework are aimed at improving persistency through more widespread adoption of needs-based selling, product strategy reviews and quality post-sales service. These measures are also expected to shift the mix towards protection and savings products from credit-related insurance that currently dominates this channel in particular for bancatakaful 15. Financial advisers on the other hand have the advantage of providing advice to consumers on overall financial planning by growing, managing and protecting personal wealth to meet specific financial goals. With increasing affluence, a growing segment of consumers with more complex financial needs and goals will require the sort of comprehensive service that is delivered by financial advisers.
From the Eurosystem's perspective, there are five economic issues that appear to be of greater relevance at the current juncture: real convergence, inflation developments in the accession countries, monetary policy and exchange rate strategies, capital account liberalisation, and the structure and functioning of the financial sector. Let me elaborate briefly on each of these. BIS Review 92/2001  1  1. Real convergence  Sustainable rates of GDP growth will be a key challenge for accession countries in the years, and even decades, to come. 2000 was the first year since the beginning of the transition process in which all accession countries experienced positive growth. The degree of real convergence with the euro area, that is, the catching-up of the per capita income and price levels of accession countries with those of the euro area, has remained limited. Looking ahead, it appears unlikely that the overall growth differential between the accession countries and the euro area will be significantly higher than a few percentage points. Overall, the gap between the average GDP per capita of the accession countries and that of the euro area remains large. On average, GDP per capita in the accession countries is, in terms of purchasing power parity, around 44% of that of the euro area, and this figure is even lower when current exchange rates are taken into account.

Two weeks ago, the HKMA issued a circular to banks providing guidance on the importance of sound governance and good corporate culture and what they should do to promote them. I won’t go into the details now as the main themes of these new guidance circulars will be covered in the Conference later today. 8. Today is going to be a long day for you because the Conference won’t end until 5:45 pm. However, I sincerely hope that by the end of the Conference there will be some takeaways that you will find helpful in your capacity as INEDs of banks. 9. Fellow INEDs, I have talked long enough and now is the time for me to introduce to you our keynote speaker for this Conference. We are honoured and highly privileged to have Mr Andrew Bailey, Chief Executive Officer of the UK Financial Conduct Authority, to fly all the way from London to join us today. Andrew needs no introduction. Before he joined the FCA last year, he was the Deputy Governor in the Bank of England and Chief Executive Officer of the Prudential Regulation Authority from April 2013 until June last year. So Andrew is truly exceptional in the sense that he has been in charge of both the prudential and conduct sides of banking supervision, and is very well-respected internationally. He is therefore uniquely well placed to share with us his experience and insights. Mr Bailey, please. 2/2  BIS central bankers' speeches
First: there are now a larger number of financial groups, which comprise banks, insurance and mortgage companies, etc. The size of these entities has increased the risk of negative systemic effects if problems should occur in one of them. On the other hand, size increases the scope for spreading risk. Second: the number of foreign financial institutions in Norway has increased. They will normally operate in several markets and engage in a broader range of activities. They may thus be more resilient to a recession or a crisis situation in Norway than banks whose activity is confined solely to Norway. The risk of contagion to other institutions is thereby reduced. Third: globalisation of financial markets means that events outside Norway feed through to the Norwegian economy faster and with greater force. Payment system As mentioned, several measures have been introduced to strengthen the payment and settlement system. At the same time, the volume of payments has increased sharply. The risk of problems in the banking sector spreading through the payment system has not been eliminated. A high-priority task of Norges Bank is to identify risks and, together with the industry, contribute to more secure and effective systems. It has also become increasingly important for our settlement systems to have good international links. Interdependence of financial and monetary stability The objective of monetary stability - which in Norway means exchange rate stability and low inflation - and the objective of financial stability are interdependent.

For better or for worse, we are increasingly exposed to developments in other countries. The banking crisis taught us how costly financial crises can be. We brought the crisis on ourselves. Many other countries have experienced similar problems. The root of the crises can be traced back to overly zealous financial market participants with reduced risk awareness. The authorities’ role is to prevent crises in the financial system and - if they still occur - handle them with a view to reducing the adverse effects and the likelihood of their recurring. In view of the globalisation of financial markets, international cooperation in this area is crucial. The financial system is also important with regard to Norges Bank’s conduct of monetary policy. By setting the terms for banks’ deposits/loans in the central bank, Norges Bank influences the level of interest rates. Monetary policy is also dependent on financial stability. However, monetary policy is not the topic today. I will focus on the issue of financial stability. 2. What is financial stability? Financial stability is the absence of financial crises. The root of a crisis is that exuberance, optimism and greed take precedence over risk and return considerations when investment decisions are taken. The price of financial assets and property rises. Bank loans and household and corporate debt increase. As a result, all agents become more vulnerable if the situation is perceived as taking a turn for the worse. This may in turn trigger a plunge in property and equity prices.
But in some circumstances one can do better to approach things the other way round, starting with general credit conditions, examining the interactions of non-bank and bank lending, and then broad money as a (partial) counterpart to M4L. My remarks today will follow that structure, which will provide a framework for some observations about the current tightening in credit conditions, as well as about the preceding expansion. 1  “The transmission mechanism of monetary policy”, a paper by the Monetary Policy Committee at the Bank of England, April 1999 and Harrison R., K. Nikolov, M. Quinn, G. Ramsay, A Scott and R. Thomas, “The Bank of England Quarterly Model”, Bank of England 2005. The Bank’s wider “suite of models” does include richer asset price channels. BIS Review 149/2007  1  Credit Credit is, of course, vital to any economy, enabling households and firms to make choices about whether to bring forward or defer spending from income. There are conditions in which it would play no active role, passively reflecting cyclical fluctuations in output, employment and inflation. In a world of more or less complete transparency between borrowers and lenders, very low transactions costs, and very low risk aversion, access to credit would not be rationed; and ex ante yields on financial assets, including loans and bonds, would not embody risk premia. So if households and firms wanted to bring forward spending in the face of shocks to the economy, they would be able to do so restricted only by their need to remain solvent.

First, in contrast to the textbook account of shocks to the Money supply via the proverbial helicopter drop of base money (pound notes), firms and households are not caught in a bind where, in aggregate, they are forced to hold the increased supply of broad money, even if it exceeds demand. Following a shock to the supply of credit, in which some people or companies become less credit constrained, it will be open to others to reduce their existing borrowing as the extra money circulates around the economy via the purchase of goods, services and financial assets. Second, and more important, the shocks to credit supply are, in themselves, real not nominal shocks. And like other real shocks, causing changes in the balance of Aggregate Demand and Aggregate Supply, there is a nominal effect only if monetary policy does not respond via alterations to the path of short-term interest rates to keep the economy on a stable path and in line with the inflation target. Absent an appropriate policy response, the easing in monetary conditions would in time feed into inflation through an expansion of nominal spending. In the first instance, the expansion of “liquidity” represented by faster money growth may sometimes work through asset prices. That is because with imperfect substitution between different kinds of financial assets, relative risk premia may be altered, which in turn may affect borrowing conditions in capital markets.
To overcome the damaging fragmentation, Europe needs to advance its institutional framework towards – among other things – a true banking union with single supervisory and resolution mechanisms. The set-up of euro area wide supervision under the auspices of the ECB is a prerequisite for breaking the vicious circle of sovereign and banking risks. Moreover, it will reinforce financial integration, mitigate macroeconomic imbalances, and – last but not least – unburden monetary policy. BIS central bankers’ speeches  7

Manuela Pfrunder, the graphic artist, has further developed her drafts and completed the design for the CHF 50 note, taking the technical aspects of banknote production into account. At its meeting of 29 August 2008, the SNB Bank Council approved the design of the new CHF 50 banknote and gave the go-ahead for the further work that is to be done. Preparations for the technical aspects of implementation of banknote production are now in full swing. A particular challenge is posed by the security features that will be used in the new banknote series for the first time. Based on the progress of work to date, the SNB is confident that the first banknote in the new series will be ready for production within the planned time period. The CHF 50 banknote will mark the beginning of the new series of banknotes and is scheduled to be issued in autumn 2010. The appearance of the new banknote and the security details for the entire series will be presented shortly before the scheduled issue date. 1  Nout Wellink, The Importance of Banking Supervision in Financial Stability, High Level Meeting, 17 November 2008, Beijing  BIS Review 157/2008  3
The third imbalance is the one that results from globalisation and from the escape from poverty of hundreds of millions of people, notably in China, India and elsewhere in Asia as well as in Africa, a change which is putting pressure on energy and agricultural commodity prices. The imbalance between growth in global demand and rigidity of supply points to scarcities that are reflected in prices. The uncertainties of the financial markets have in the end contributed to price tensions. Also in this instance, the alarm was raised some time ago, although little notice was taken. The price of oil, for example, was around USD 20 a barrel in 1999 and in the eight years thereafter it rose fivefold (tripled when priced in euro). Fortunately, European countries have resisted the temptation to reduce energy taxes, which would have led to an increase in demand and therefore ultimately raise the rich countries’ oil bill. On the other hand, other industrial countries have continued to keep energy taxation at very low levels, in order to support consumption. In some cases production of “bio-fuels” has been encouraged, which has led to further distortions in energy and food prices. The main oil and energy companies until two years ago have continued to price oil at USD 40 a barrel in their industrial plans, thus underestimating the need – and the opportunity – for investment in order to increase supply.

Time will also be needed before the supply of commodities can react to demand in such a way as to keep prices down. As for agricultural commodities, the use of new productive land implies long-term investments and implementation times. Climate change could increase the variability of supply. The same applies to energy commodities. Without a stronger policy of  2  BIS Review 61/2008  energy saving, in particular in the US, the equilibrium between demand and supply cannot be ensured at moderate price levels. In brief, there are, above all, structural factors at the heart of the current crisis which will take time to recover. This suggests that to accelerate the adjustment economic policies of a structural rather than cyclical nature are necessary. Let's turn to those economic policies. What are the do’s and don’ts in the light of both economic analysis and of past experience? Let’s start with the don’ts. What do the errors of the past teach us and, in particular, what was done in earlier crises, in 1929, 1974-75, 1992-93 and in 2001-2002? There are at least four errors that should not be repeated. The first error that should be avoided is to allow that some exogenous price increases lead to a generalised higher inflation on a permanent basis. The rise in headline inflation must remain temporary and limited to food and energy prices, and not spill over other sectors of the economy.