samchain/econo-pairs-v1 huggingface dataset:
Today I will discuss these structural developments, and evaluate the continued efficacy of the Federal Reserve’s policy implementation framework in light of their effects on money market competition and integration. I’ll briefly review the means by which we implement policy, and the reasons why we do so differently now from before the financial crisis. I’ll explain why changes in money market structure could conceivably impair the transmission of monetary policy. We will see that the impact of many of the recent structural developments were smoothed by the presence of the Federal Reserve’s overnight reverse repurchase facility. Then, I will take you through some data about money market dispersion to see what effect these developments had in practice. The takeaway from all this is clear: our framework remains highly effective, and has proved quite resilient, even to these significant shifts in market structure. It continues to provide the FOMC with excellent control over money market rates. Indeed, the effective federal funds rate remained within the FOMC’s target range 100 percent of the time in 2016 and this has continued so far this year, as shown in (Figure 1). Changes in the federal funds rate continue to transmit in a predictable way to other money market rates, thereby affecting, as intended, the broad financial conditions upon which the price and quantity of private sector credit depend. However, recent evidence on dispersion in overnight and term rates suggests that we should continue to monitor the transmission of the FOMC’s policy stance into money market rates carefully.

One factor that helps determine the surcharge level is based on a bank’s systemic footprint. 19 Suppose a securities dealer borrows $ and lends $ in repo. If a 5 percent leverage ratio requirement  were binding on this dealer, and that dealer planned its business around a 10 percent return on equity, it would require a 50 basis point interest rate spread to cover its capital cost. Such a cost would be quite substantial relative to typical money market spreads. Of course, this is a stylized example, and banks could well choose to 11 / 13  BIS central bankers' speeches  apply a lower cost of capital than used here for low-risk activities like money market intermediation. The mechanism by which banks determine their cost of capital for individual activities remains a topic of active research without a strong consensus. See Stiroh, “A Perspective on Supervisory Objectives and Trade-offs,” February 23, 2017. 20 See also Duffie, “Why the leverage ratio distorts market-making.” Risk, January 3, 2017. 21 There are likely other disincentives to dealers’ acting as intermediaries in money markets. For example, the  Dodd-Frank Act’s prohibition on proprietary trading may limit banks’ ability or willingness to engage in activity that is classified for regulatory purposes as arbitrage, such as in the foreign exchange swaps market. 22 This discussion is intended as a high-level summary, and omits a number of other technical requirements for  transactions to be eligible for netting.
The drafts having initially been approved by the Committee in October last year, they were then submitted for consultation to a limited audience comprising only other international standardsetting bodies and regional supervisors’ groups. In this regard, I would like to take this opportunity to acknowledge the important contribution made by ASBA, which, together with other regional groups,  2  BIS Review 45/2006  was responsible for numerous improvements to the documents that were finally issued for public consultation on 6 April. Finally, I wouldn’t want to move on to the next topic without first pointing out that the Core Principles revision is a fine example of how collaboration with the maximum number of supervisors and international regulatory bodies can be not only possible, but also clearly beneficial in terms of the quality and applicability of the resulting recommendations, and this is definitely a method that the Committee has earmarked for the future. Basel II implementation: cross-border cooperation between supervisors Another area in which collaboration between supervisors is absolutely vital, and which we will have the opportunity to discuss in depth today, is the implementation of Basel II in a cross-border context. In this respect, the banking sector has come up with a number of requests and proposals. We are aware of the importance of this topic as regards ensuring the consistent cross-border implementation of Basel II and reducing the burden of work on industry and supervisors alike.

These institutions have been hit in particular by the closure of various wholesale funding markets which they had turned to in previous years to finance part of the growth of their lending activity. The ability of Spanish institutions to step up deposit-taking, as an alternative source of financing to wholesale funding markets, and the ECB and governments’ measures have alleviated the liquidity shortage. However, time deposits cannot grow indefinitely at rates of above 20% and, in fact, this source of funding will foreseeably peter out. Similarly, it cannot be assumed either that the measures adopted to facilitate liquidity in the system and the structural characteristics of the Spanish banking system, which I referred to before, are a foolproof guarantee that there will not be any problems. 2  BIS Review 52/2009  In fact, the turmoil generated by the international crisis has fed through to the Spanish economy and impacted it at a time when it was beginning to adjust the imbalances which had built up during fifteen years of continuous high economic growth. All these factors led Spain into an economic recession which is reflected most significantly in the sharp rise in unemployment. This, together with high corporate and household debt, in the framework of what had been excessively lax financing conditions, has now resulted in a weakening of households’ and firms’ spending capacity and of their financial position. And the consequence has been a rise in bad debts in the Spanish banking system.
Svein Gjedrem: The inflation target and the floating krone: the interplay between fiscal policy, the interest rate and competitiveness Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to the Executive Board of the Federation of Norwegian Manufacturing Industries, Oslo, 20 March 2002. This speech is based on information provided in Norges Bank’s Inflation Report 1/2002, earlier speeches and the Governor’s Annual Address on 14 February 2002. Accompanying charts can be found on the Norges Bank’s website (www.norges-bank.no). *  *  *  Norway’s economic policy is based on the guidelines for fiscal and monetary policy. The guidelines for fiscal policy state that the use of petroleum revenues over the central government budget shall be equivalent to the expected real return on the Government Petroleum Fund. Monetary policy is oriented towards low and stable inflation. Historically, periods of high inflation have always been followed by a downturn. Low and stable inflation fosters stability and growth in the economy. Establishing guidelines for economic policy is not new. Both fiscal and monetary policy have been based on such rules throughout the post-war period, with the exception of the last half of the 1970s and the first half of the 1980s. Monetary policy has had a clear anchor since 1986. The inflation target provides an anchor for expectations concerning future inflation and interest rates. The inflation target is set at 2½ per cent.

Industrial production has declined markedly in all major regions of the world economy. In Norway, manufacturing output has been more stable. Norges Bank presented its last Inflation Report on 27 February. We expect price inflation to be about 2½ per cent in two years, if growth in the global economy picks up as assumed. The tight labour market will probably continue to result in fairly strong growth in labour costs and rather sharply rising prices for domestically produced goods and services. Annual wage growth is projected at 5 per cent in the period ahead. A subdued rise in prices for imported goods is pushing down overall price inflation. The projections are based on the technical assumption that the krone exchange rate will remain stable. On the whole, the risk associated with the inflation projection is regarded as balanced. Exchange rates between the major currencies fluctuate widely. The effective exchange rate on the US dollar has risen by more than 30 per cent since 1995. The German mark (later euro) has depreciated by about the same amount. The effective exchange rate for the Japanese yen has fluctuated sharply. Small countries have also experienced wide exchange rate fluctuations. The Swedish krona has changed considerable in the last 10 years and is now 10 per cent weaker than in the summer of 2000. The Australian dollar has depreciated by more than 30 per cent since the spring of 1997. Countries whose exports include a large component of raw materials tend to experience considerable volatility in their exchange rate.
A strong takaful market in Malaysia, supported by the experience and expertise of several niche players in retakaful operation during the last two decades, would provide a strong base for a global retakaful operation to flourish. Under this initiative, qualified local and foreign applicants will be allowed to conduct both Malaysian and international currencies retakaful business. Flexibility is accorded to the retakaful operators to conduct its retakaful business in Malaysia by way of an incorporated either entity or a branch. Foreign applicants are also welcomed to conduct retakaful business in Malaysia through a joint-venture with Malaysian companies. It is anticipated that this measure would serve as a catalyst in our efforts for Malaysia to become the centre for takaful and retakaful business through the establishment of a significant number of strong and reputable retakaful operators. For the potential investors in these ventures, I wish to highlight that Malaysia maintains a liberal foreign exchange administration regime where investors are freely able to obtain ringgit and foreign currencies to fund their investments in Malaysia. Please do forget the foreign exchange administration rules introduced during the 1997/1998 Asian financial crisis. BIS Review 129/2007  3  We have even further relaxed the foreign exchange administration rules to allow resident and foreign issuers to raise foreign currency-denominated bonds, including Islamic bonds or sukuks.

Zamani Abdul Ghani: Malaysia’s role as an international Islamic financial centre Keynote address by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the International Takaful Summit 2007 "Mainstreaming Islamic Finance: Malaysia as International Islamic Financial Centre", London, 1 November 2007. * I. *  *  Introduction  I am indeed pleased to be invited to this International Takaful Summit 2007 hosted by the Islamic Banking and Finance Institute of Malaysia (IBFIM). The occasion of this forum is indeed an excellent opportunity for the regulators, industry practitioners and investors to discuss recent developments and key issues in Islamic finance, particularly on takaful. It would also serve as an excellent platform in providing greater awareness on the innovative products and services available in the takaful and retakaful market. IBFIM has certainly played an important role in harnessing the critical talent needs of the Islamic financial industry, not only in Malaysia, but has extended its role internationally as evidenced by this inaugural Summit in Europe. This Summit also signifies an important strategic shift in our promotional approach for the takaful and retakaful industry. This shift is towards a more active initiative to heighten competitive elements and to draw greater foreign participation in this industry where Malaysia has a strong edge, and we are positive that this industry will grow stronger with a win-win partnership with the right partners. My remarks today will dwell on three areas.
Taking a more personal point of view, there are several reasons why I support our new form of communication introduced in June. My underlying antipathy towards (capital F, capital G) forward guidance has not diminished with the first-hand experience of it in this role. In particular, the ‘further tightening’ language previously employed could not be maintain indefinitely, at least not without taking the (ultimately indefensible) view that the level of rates does not matter. More generally, such guidance is a trap: attractive at the outset but difficult to exit from gracefully. Moving to new language – without the capital F, capital G forward guidance – reflects that reality. Whatever our initial intentions, markets and the media assign their own meanings to specific  Page 10  forward guidance language, which may mislead and/or undesirably constrain policy makers’ freedom of manoeuvre. On my reading, the ‘further tightening’ language came to be understood as suggesting rates would keep on rising at a pre-defined modest pace, largely independently of events and data. Not only did this give a false – and thus misleading – impression that Bank Rate was set to move mechanically and unconditionally upward over the coming months, but it also discouraged markets from pricing the macroeconomic risks to the interest rate outlook. That mispricing is ultimately costly for the efficiency of capital allocation. [16] Our new statement[17] has the form: The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit.

The mean squared gap for inflation is calculated as   [ (t   , t )   *] / (T  1) , where π(t+τ,t) denotes the forecast in quarter t of inflation in quarter t +  and T  2  0  *  denotes  the  inflation  target.  0 [ y(t   , t )  y *(t   , t )]2 / (T  1)  The  mean  squared  gap  for  output  is  calculated  as  T  , where y(t+τ,t) denotes the forecast in quarter t of output in quarter t + τ and y*(t+τ,t) denotes the forecast in quarter t of potential output in quarter t + τ, and T is the forecast horizon (normally 12 quarters). 4  BIS central bankers’ speeches  inflation target of 2.5 percent but resource utilization worse (better). The Qvigstad (2005) necessary (but not sufficient) condition for optimal policy is satisfied, namely that the inflation gap and the output gap should be of opposite signs. The bottom left panel, with the mean squared gap for inflation plotted along the horizontal axis and the mean squared gap for output plotted along the vertical axis, has been added by me. The closer the mean squared gap for inflation and output is to zero, the better inflation or the output gap is stabilized.
When the interbank rates are to be determined, the panel banks report submissions. If there are no actual transactions in the interbank market, the submissions are instead based on the banks' judgements of what the interest rate for an interbank loan would be. 2 [8]  Over time, the number of transactions on which to base the bids has declined, as interbank loans are not currently the banks’ primary source of funding. During the period January-August, there was not a single unsecured transaction at the maturity tomorrow-next in Swedish kronor between STIBOR panel banks!1 So during that period no such transactions were carried out which the daily values of STIBOR’s shortest maturity are to reflect. The submissions are therefore now based almost exclusively on the banks' judgements. And this means that the reference rate is becoming increasingly vulnerable. Interbank markets have also become less important in other countries following the global financial crisis, and therefore international interbank rates are also based to a lesser and lesser extent on actual transactions. As a result, global confidence in these interest rates has decreased rapidly. One event that further weakened confidence in interbank rates is the so-called LIBOR scandal in 2012, when it was discovered that several panel banks had manipulated submissions for their own gain, not least during the global financial crisis in 2007-2008. It was simply a question of reporting false submissions for the calculation of LIBOR with a view to benefiting their own business transactions.

Since the number of transactions in Swedish kronor between panel banks has decreased, the STIBOR framework states that the banks' submissions can be based on judgements of their borrowing costs in foreign currency. The Riksbank considers this unfortunate and that a reference rate in Swedish kronor should be anchored in transactions in Swedish kronor only. The definition of SWESTR is similar to those in euro, British pounds and Danish kronor. Like the ECB, the Bank of England and Nationalbanken in Denmark, the Riksbank has chosen to use deposit transactions with overnight maturity, and with a counterparty group that is wider than just the panel banks. The main reason is that this part of the money market tends to exhibit good and relatively stable transaction volumes, even in difficult times. The transition to SWESTR should begin now – it is a process that will take several years and some adjustments are required As SWESTR is now available, there is an alternative to STIBOR. We therefore call on market participants to step up their efforts for a transition to SWESTR. 5 [8]  However, in order for us to reach a point where transaction-based reference rates dominate in the market in Sweden and internationally, certain adjustments are required in the financial markets. This process needs to run over several years. The greatest need for adjustment probably concerns maturities. The traditional interbank rates are available at several different maturities, for example three and six months. However, SWESTR and its international equivalents are only calculated at the shortest maturity, overnight.
The downward revision for the coming year is not due to any change in the assessment of economic prospects, but rather to a number of specific factors that have resulted in higher competition in the world market and in Sweden. But as the cyclical upswing continues and firms’ costs increase, there is still assumed to be a gradual rise in inflation. In the main scenario, which is based on an unchanged repo rate in the coming two years, both CPI and UND1X inflation is expected to be on target two years ahead. The annual averages for inflation will be low throughout the forecast period, however. Allow me in this context to briefly say something about the fact that the weak price developments in the recent period have caused the word ”deflation” to reappear in the media, often in the form of an eye-catching headline. There is always reason to keep the risk of deflation in mind, since falls in the general price level are sometimes associated with considerable problems in the economy. It is important, however, to ascertain whether the subdued price developments are a result of weak demand or due to positive changes on the supply side of the economy. At the moment there is no doubt that the latter is the dominant factor.

As usual there is reason to underline that even though this is our assessment today conditions can of course change in the period ahead. A lot can happen: the imbalances in the United States could result in financial unease that sharply curtails the international economic upswing, or the credit and debt developments in Sweden may prove considerably more worrisome than foreseen today. We may also find that we have overestimated or underestimated the impact on inflation of changes in competitive pressures. So, claims in the media that the Riksbank has closed the door on a particular course of action in the future are misleading as usual. Concluding remarks Allow me to conclude with a few general reflections on the conditions under which monetary policy operates and regarding the expectations one can have on it. Even though developments since the shift in policy regime in the early 1990s have been remarkably good this has, as we now know, neither stopped inflation from occasionally deviating sharply from target nor prevented output and employment from fluctuating somewhat. What is important to realise is that there are always going to be fast changes in the economy and inflation that cannot be foreseen nor fully offset in the short run. No central bank can therefore have full control over inflation and economic activity over time. What monetary policy should normally be able to achieve is to ensure that inflation over a number of years is fairly well in line with the inflation target.
In the treasury market, we have maintained our position as the world’s fourth largest forex trading hub after London, New York and Tokyo. We continue to rank as the second largest over-the-counter (OTC) derivatives hub in Asia after Japan. We will build on these strengths and deepen our markets by developing the structured finance market. The asset securitisation market has already taken off, with structured products accounting for more than half of the Singapore dollar debt market. This will be further boosted when Singapore’s first loan securitisation programme for Small and Medium Enterprises is launched. ASEAN will continue to be an important market. We should build closer ties with some of the fast emerging ASEAN economies. For example, we have made a proposal to Vietnam to connect our two economies, including our financial markets, so as to reap the benefits of synergy. Vietnam is receptive. We are approaching this at a pace which Vietnam is comfortable with. Besides ASEAN, we should also position ourselves to play a bigger role in other growing regions. I am pleased to note that our local players have embraced globalisation to capitalise on opportunities in the region and beyond. In response to increased competition, our local banks have consolidated and expanded abroad. They remain profitable, sound and well-capitalised, and are becoming regionally competitive. China, India and the Middle East offer rich opportunities for both wealth management and capital markets activities. Singapore can play a useful intermediary role to serve the needs of Chinese companies seeking funding and expansion overseas.

that a significant proportion of these payments should be deferred over time, allowing for possible reductions in case losses materialize. This is an area, more than in any other where “business as usual” cannot apply anymore. Considering, especially, recent profits, it is clear that they would not have been possible without the wide array of public support and guarantees which have benefited the financial industry. It is only legitimate to ask that those profits should primarily be used to bolster capital and allow banks to focus on their core task of financing the economy. Tomorrow’s meeting will be an opportunity to ascertain that we have made a lot of progress but that much work remains to be done. It is an ongoing process, best described as “rebuilding the plane as we fly it", clearly a very challenging and perilous task. 2  BIS Review 104/2009