samchain/econo-pairs-v1 huggingface dataset:
We view our policy as part of an overall economic policy aimed at creating conditions for sustainable long-term economic growth in our country. Thank you very much! 3/3  BIS central bankers' speeches

[4] The growing role of non-banks offers the benefit of diversifying sources of finance and can thereby help to ensure a smooth provision of funding to the real economy. [5] Evidence also suggests that a higher share of non-bank finance can help economies to recover faster from recessions,[6] when banks’ ability to lend may be impaired. [7] Crucially, however, the benefits of this diversification rely on making sure that the non-bank financial sector provides a stable source of funding, ensuring robust financing for companies in both normal and stressed market conditions. Liquidity and leverage – lessons from recent market events As the market footprint of non-bank financial institutions increases, new risks and vulnerabilities can arise. Let me discuss three in particular. First, the strong growth of the non-bank financial sector – especially the asset management industry – over the past 15 years has been accompanied by an increase in liquidity mismatches. A key contributing factor is that investors in open-ended funds – which account for the largest part of the investment fund sector – can typically redeem their shares on a daily basis without prior notice. This creates a liquidity mismatch especially in funds that invest in relatively illiquid assets, such as high-yield corporate bonds. Liquidity demand has become more procyclical as a result, especially during periods of financial market stress. During the pandemic, we saw how liquidity mismatches in open-ended funds increased demand for market liquidity, which amplified stress in financial markets.
Today, they have sufficient liquidity to function without having to finance themselves via the SNB. This situation of excess liquidity is of a permanent nature. The transition from a liquidity shortage to excess liquidity does not, however, change the SNB’s monetary policy strategy, which is still aimed at stabilising the three-month Libor within the target range set by the SNB. The implementation of this strategy has nevertheless been  2  BIS Review 85/2010  adjusted to reflect the new liquidity conditions. In times of a liquidity shortage, the SNB must supply the markets with liquidity to keep the Libor at the targeted level. If there is excess liquidity, it must drain liquidity from the market in order to keep the Libor at the same desired level (cf. chart 3). This situation can be compared with that of a driver going up a mountain pass. Driving up the hill, he pushes on the gas pedal in order keep the vehicle driving at a certain speed. On the way down, however, he must step on the brake continue to travel at the same pace. Monetary policy with SNB Bills and reverse repos The SNB is not the only central bank that finds itself in a situation of excess liquidity. The majority of central banks which have taken unconventional monetary policy measures are in the same position. Central banks have a range of measures at their disposal to reduce this excess liquidity.

These doubts are reflected in a significant increase in risk premia for sovereign debt in these countries, which has prompted them to establish major cost-cutting programmes. This situation is weighing on financial markets, despite the relatively favourable reports of economic recovery at the global level. Indeed, current market uncertainty has reached a high level, although it remains lower than that observed during the recent crisis. To give an example, the VIX index (which measures uncertainty on the equity market) and the CDX index (which measures credit risk) are both rising again. However, they are still significantly lower than at the end of 2008, i.e. at the peak of the subprime crisis (cf. chart 1). The uncertainty associated with the fiscal situation of certain European countries has also triggered another rise in tension on the interbank market for US dollars. To counter this, several central banks, including the SNB, have reactivated swap facilities in cooperation with the Federal Reserve in order to provide dollar liquidity that may be required for the smooth functioning of the markets. In Switzerland, the interbank market has remained calm. Indeed, the ample supply of liquidity has reduced Swiss franc interbank rates. As can be seen in chart 2, risk premia on the Swiss franc interbank market have also declined. They fell by more than a half in May while, during the same period, US dollar risk premia on the interbank market in the US rose again. Alongside the uncertainty, investor risk aversion has grown over the last few months.
The absence of a nominal anchor was one of the main reasons behind the pronounced swings in the real economy in the 1970s and 1980s. It was demonstrated that a long-run trade-off between inflation and unemployment does not exist. Today, monetary policy aimed at price stability is the norm, and in most countries monetary policy has been delegated to independent central banks. We have also learned that very high policy ambitions are not compatible with the way the economy really works. Attempts to control all the quirks of the economy will eventually undermine the intentions. In fact, by scaling back on overly high policy ambitions the overall outcome will be better. Today the beneficial effects of making full use of markets in resource allocation are again widely recognised. State ownership and “dirigisme” have been reduced. Competition has increased in most markets, though lapses do occur from time to time. Trade barriers have generally been lifted or reduced. Well developed financial markets help move capital across borders and between industries. Today’s economic environment has in many respects risen from the ashes of failed paradigms. In a sense, today’s regime resembles the one we had 100 years ago. From the mid-19th century until the outbreak of the First World War, capital markets were integrated across countries that had adopted the gold standard. Markets were largely deregulated. Cross-border financial capital movements were subject to little or no regulation. There was solid confidence in the gold standard as a nominal anchor. Inflation was low and stable, supporting economic growth.

BIS central bankers’ speeches  5  There are a couple of other difficulties related to the use of national policies. The shock absorbing capacity of fiscal policy is in too many instances limited by the narrow fiscal space existing before the crises. The recession has further eroded fiscal positions and fiscal rules have failed to tame unsustainable fiscal paths so that the ability of fiscal policies in the EU to deal with another blow of crises is quite limited. Also, a need for national macroprudential policy immediately opens the issues of harmonisation and coordination on the international level in order to avoid unintended consequences, which I will comment in more detail later on. Additionally, for macroprudential policy to be effective it must be intrusive, affecting the “normal behaviour” of agents and markets 19, yielding benefits in reducing long-term costs generated by the systemic risk that makes it hard to attenuate public interest thus creating a central bank’s legitimacy paradox 20. Unconventional expansionary monetary policy, which was pursued after reaching the zero lower bound, and out of the fear of “the risk of doing nothing” 21, may be risk-inducing by fuelling search for yield behaviour. Abundant liquidity and low borrowing costs have the capacity to generate bubbles, confirming a notion that rational individual decisions may lead to irrational social outcomes – albeit as a reaction to highly non-conventional policies.
The crisis and the period before the crisis clearly illustrate the tendencies towards exaggerated cyclical behaviour that often characterise the financial markets. In periods of strong growth, there is usually an increase in demand for loans for corporate investments and property purchases. It also seems to be common for awareness of risks to decrease during such an upturn. Lenders often relax requirements for creditworthiness at the same time as they often take on too much debt themselves. When problems subsequently arise as a result of some borrowers finding it difficult to repay their loans, there can be an overreaction in the other direction, with severe credit tightening as a consequence. But systemic risk is not just a matter of a tendency towards exaggerated cyclical behaviour in credit granting. It is also a matter of how the concentration of risk and the links between different parts of the financial system at any given time affect the risk of a crisis hitting the system as whole. For example, several banks can take the same kind of risk or be dependent on the same funding sources. The high degree of interconnectedness in the financial system – between different institutions and between different markets– increases the risk of contagion when financial problems arise. 5 Circumstances that need not constitute a risk on the micro level can thus become risks on the macro level. Not knowing which risks will trigger systemic crises is in the nature of things.

I would first like to accentuate the widespread and laborious work carried out for many years, on both a national and international basis, to promote stability and prevent crises from arising, but without impairing the functioning of the markets. Experience shows that a necessary condition for avoiding crises is to pursue a fiscal and monetary policy that is aimed at creating stability and that inspires confidence. The common denominator for countries that have experienced financial crises is that the problems were based on mistakes in economic policy and deficiencies in regulatory frameworks. The financial market is often merely the messenger illustrating the fundamental problems. It is important that the choice of exchange rate regime is in line with the economic policy pursued and with the capacity of the economy to adapt. Countries that have experienced currency crises during the 1990s have had fixed, but adjustable, exchange rates. Today, therefore, an increasing number of countries choose to have either floating exchange rates with inflation targets, or completely fixed exchange rate regimes, such as currency boards. Experience also shows that it is necessary to have a general regulatory framework that is applied properly, and that contains norms and institutions, in order for both national and international financial markets to function well. Countries therefore cooperate in international organisations, such as the BIS, the central banks' organisation in Basel, to work together on producing norms for suitable regulations and norms in various fields important to financial stability.
From the regulator’s perspective,  2  BIS central bankers’ speeches  risk culture could be inferred and gauged based on the effective implementation and level of compliance by the risk takers and the frontline staff. To improve risk culture, Board and management must review the incentives and penalties in place and ensure that it is effectively implemented. Among the key questions that Board and management should be asking are; Does the performance management and compensation system reward good behaviour and punish bad behaviour? And how are audit and supervisory issues handled? As you already know, a weak risk culture may lead to staff resorting to “check the box” compliance exercise whilst a strong risk culture will judge the wisdom and decision of looking beyond the profit number and be able to see the medium and long term sustainability. On this note, allow me to share some of the key observations made by Bank Negara Malaysia during the recently completed AML/CFT Thematic Reviews on Banks and Insurance Companies. First, the good news. In general, we observed that there was greater awareness among Board and senior management on ML/TF risks and its potential implication to their reputation. From the AML/CFT policies and framework implemented, there was also shift towards risk-based approach. In most of the institutions reviewed, the management of AML/CFT was no longer viewed solely as a “Compliance” job but more aligned and integrated with the bank’s overall risk management function.

Encik Abu Hassan Alshari Yahaya: Financial crime and terrorism financing Keynote address by Mr Encik Abu Hassan Alshari Yahaya, Assistant Governor of the Central Bank of Malaysia, at the 5th International Conference on Financial Crime and Terrorism Financing (IFCTF 2013), Kuala Lumpur, 23 October 2013. *  *  *  It is a great pleasure for me to be here today and I would like to thank the Conference Organiser, the Asian Institute of Finance in collaboration with the Malaysia’s Compliance Officers’ Networking Group, for the invitation to deliver the keynote address at this 5th International Conference on Financial Crime and Terrorism Financing. I am happy to note that this annual conference has received strong response and continued to provide industry players with the developments in the area of financial crimes and terrorism financing and how financial service providers and relevant businesses and professions could continuously strengthen the capacity and capabilities in addressing these risks. I am glad to note that there has been an increased participation from the designated nonfinancial businesses and professions (DNFBPs) in this year’s conference. This reflects heightened awareness and seriousness by the DNFBPs to improve their compliance and understanding of their roles in combating money laundering and terrorism financing. I am also informed by the organisers that the Malaysian Bar Council, the Malaysian Institute of Accountants and the Association of Money Services Business have also reached out to their members to attend this and by accrediting this program as part of the continuous professional development.
To this end, we now release copious amounts of information, including the forecasts of economic activity and the year-end level at which we see the rate on overnight money trading, as foreseen by each individual FOMC participant under his or her assessment of appropriate monetary policy. We call this exercise the Summary of Economic Projections, or SEP for short. We release it quarterly. I draw your attention to it because it has become something of a phenomenon among analysts preoccupied with the entrails of policymaking and has taken on a life of its own. You read about it in the papers and get analysis of it from market soothsayers. Yet, I want to caution you against becoming overly preoccupied with the FOMC’s SEP. In my less than humble opinion, it is a flawed tool. Let me explain why. Here is what the last SEP release for the fed funds rate looked like. It provided the FOMC participants’ projections for the overnight rate at year-end for the next three years and beyond to the “longer run,” as foreseen from March 19:  1  4  See “Forward Guidance,” by Richard W. Fisher, remarks before the Asia Society Hong Kong Center, Hong Kong, April 4, 2014, www.dallasfed.org/news/speeches/fisher/2014/fs140404.cfm.

If the dot chart creates confusion, one option would be to dispense with the exercise altogether. Having evoked Dr. Seuss earlier, I can imagine his bidding the dots farewell with some ditty like this:  2  “Standard Deviation of the Dots in the Dot Chart,” by Torsten Slok, Deutsche Bank Research, April 23, 2014. BIS central bankers’ speeches  7  Yet expressing the FOMC participants’ perceptions of, and possible reactions to, an assortment of future scenarios – however often the committee’s composition may change – does strike me as having some merit, if only to give markets insight into how the central bank might react under different circumstances. In the parlance of the trade, this is called “state-based” guidance. Yet here, too, we have struggled. For example, until two meetings ago, we used an unemployment figure of 6½ percent as a point sometime after which we would begin to consider pulling back on monetary accommodation, then decided this wasn’t quite the ticket. This may be a little more inside baseball than you expected to hear today, but here’s the point: Expect the Fed to continue refining its communications. We are getting better at it. But to invoke the immortal words from the chain gang captain portrayed by Strother Martin in the 1967 movie Cool Hand Luke: “What we’ve got here is failure to communicate.” We are working on it so that you and other bankers, market operators, businesses and consumers will develop the best possible insight into how your monetary authority will behave.
A higher policy rate may also contribute to strengthening the krone exchange rate, which may curb imported goods inflation further out. Chart 3 Substantial labour shortages, but signs of cooling Activity in the Norwegian economy is high. Employment has risen over the past year, and labour shortages have become pronounced. Unemployment is at historically low levels. We are now seeing clear signs of a slowdown in the Norwegian economy. High inflation and rising interest rates have led to a fall in household consumption. Labour shortages appear to have eased somewhat. High electricity prices are also reducing profits for many firms. We projected a cooling of the economy in the course of autumn this year, but it now appears that the economy has passed a cyclical peak and that the slowdown may prove to be more pronounced. We have revised down our projections for economic activity ahead on the back of higher inflation in Norway and a weaker outlook for our trading partners. As things stand, prices will rise at a notably faster pace than wages this year. Many households will face a squeeze on their finances. Some people will find it difficult to cope with higher borrowing costs on top of the broad rise in prices. But most households have the finances to cover increased expenses. Next year we expect wages to rise at about the same pace as prices. Our projections for wage growth are in line with the expectations of the social partners according to Norges Bank’s Expectations Survey.

[3] Chart: Regulation on Monetary Policy So there are good reasons that low and stable inflation is a monetary policy objective. The operational target of monetary policy in Norway is consumer price inflation of close to 2 percent over time. We measure consumer prices using the consumer price index (CPI). The CPI seeks to measure the rise in prices facing households. The index is widely used and well known. Virtually all inflationtargeting countries have chosen to stabilise CPI inflation. The CPI is associated with considerable short-term volatility. In practice, we therefore use different underlying inflation indicators, for example the CPI adjusted for tax changes and excluding energy products (CPI-ATE). [4] Chart: Both domestic and imported inflation sources of inflation The extent to which monetary policy should respond to changes in individual prices does not depend on its ability to influence the source of the price change. The response depends on how long the disturbances are expected to last and the extent to which they fuel inflation via spillover effects on other prices and wages. The recent surge in inflation is to a large extent ascribable to factors beyond Norges Bank’s control. There is not much we can do to reduce energy and commodity prices, or to relieve bottlenecks in global markets. But by dampening the level of economic activity, we can help to counter spillover effects of increases in individual prices on other prices and wages. Furthermore, even though Norges Bank cannot influence global prices in foreign currency, we can influence the krone exchange rate.
In order to avoid having crisis management being held up by conflicts of interests more than necessary, I am personally inclined to believe that a general key that is fixed once and for all is the preferred choice. Possible ways forward The title of this speech is a question: “Are we ready to deal with a cross-border banking crisis in Europe?” Regrettably, the answer is no! Before we can say we are anywhere near “ready”, we must deal with some serious challenges. In particular, we need to solve the problem of how to organise supervision, crisis management and crisis resolution for cross-border banks. Given the great complexity of the issue, achieving a practical solution will not be an easy task, and there is no altogether ideal solution. The amount of work that has already been set up for us on the European regulatory agenda is already quite staggering, which suggests that everything may not be achieved in the next few years. But we must not use this as an excuse for not starting to deal with these important issues. We can at least start the analytical process, take stock of the problems and examine the pros and cons of different solutions. The longer we wait to get this process started, the greater the risk that we’ll end up in a very serious mess. I, for one, certainly hope that we manage to have some solution in place before the next major financial disaster in Europe occurs.

The first dimension of these challenges concerns efficiency. So  2  BIS Review 39/2006  far, much has been done in order to create a harmonised regulatory framework that provides a more level playing field and reducing the regulatory burden on financial institutions by creating European passports for financial services, improving supervisory cooperation and convergence, etc. The second dimension, which I will concentrate on today, concerns financial stability. More specifically, I will focus on the challenges pertaining to our ability to manage financial crises in Europe. The increased risk of cross-border contagion means that it seems less likely that the next financial crisis in Europe will be contained within national borders, and much more likely that it will have far-reaching consequences in a number of countries. This basically means a greater need for coordination of information and decision-making between authorities in different countries. In a crisis situation it is important to know who will do what and when. Things can be seriously complicated by the existence of a number of potential conflicts of interest between the different countries involved. Moreover, as the actions of one authority could have effects on other countries’ financial systems, there are some obvious accountability concerns. The national authorities are only accountable to their respective national governments and ultimately their constituencies. The fact that integration of the banking sector started relatively early in the Nordic and Baltic countries means that we have encountered some of these challenges perhaps a little earlier than many other European countries.