samchain/econo-pairs-v1 huggingface dataset:
The latest figure for the three-month moving average of M3 growth, covering the first quarter of 1999, was 5.2%. This was 0.2 percentage point higher than in the previous three-month period, covering the period December 1998 to February 1999. The Governing Council also noted that the annual rate of growth of total credit was broadly stable at 7.5% in March 1999. In line with the assessment it had made on the occasion of its previous meetings, the Governing Council took the view that recent monetary trends should not be seen as a warning signal with regard to the future evolution of inflation. As we have emphasised in the past, the monetary data in early 1999 may be affected by the special circumstances related to the changeover to Stage Three of EMU. In addition, the three-month moving average of M3 growth remains relatively close to the reference value of 4½%. As regards financial indicators, I should like to stress that recent developments in bond yields in the euro area were accompanied by some decoupling of yields from those in the United States, as differentials between euro area long-term interest rates and comparable rates in the United States have widened. As regards the evolution of the world economy, recent developments tend to confirm the picture of a mild overall improvement in the external environment beyond the euro area. As before, however, the main features range from continuously strong growth of the US economy to continuously weak output in Japan.

Mr Duisenberg reports on the outcome of the latest meeting of the ECB Governing Council Introductory statement by the President of the European Central Bank, Dr W F Duisenberg at the press conference held in Frankfurt on 6 May 1999. Ladies and gentlemen, the Vice-President and I are here today to report on the outcome of today’s meeting of the Governing Council of the ECB. The Governing Council reviewed, as usual, the main monetary, financial and other economic indicators in line with its monetary policy strategy. Following this discussion it decided to keep the ECB’s interest rates unchanged. The interest rate on the main refinancing operations will thus remain 2.5%. In addition, the interest rate on the marginal lending facility will continue to be 3.5% and that on the deposit facility will remain 1.5%. Let me give you some details about our latest assessment of the monetary policy stance and thereby provide explanations for the decisions taken today. Overall, monetary developments and our broadly based assessment of future price developments do not signal dangers to price stability over the short and medium term. With regard to monetary developments in the euro area, in March 1999 the 12-month rate of growth of M3 remained constant at 5.1%. While the pace of increase in overnight deposits reduced further, signalling the waning influence of the uncertainties surrounding the launch of the euro, deposits with an agreed maturity of up to two years grew at a stronger pace in March than in February 1999.
In principle, the National Bank does not invest in Swiss equities and corporate bonds, thus avoiding, from the outset, any potential conflicts of interest which could jeopardise the SNB’s independence. As a shareholder in Swiss companies, the Bank would risk being confronted with structural issues. It could also lead to a conflict between its monetary policy and investment policy goals if an interest rate hike by the SNB were to erode the domestic companies’ profits. Furthermore, such a move could have an adverse effect on prices should the SNB have to liquidate securities of Swiss businesses at short notice. And finally, it is conceivable that the National Bank could gain access to privileged financial market information through its activity in the area of system stability. This would make investing in the Swiss financial sector even more problematic. The influence of equity portfolios and corporate bonds on the National Bank’s risk profile is only moderate. The overall risk attached to assets – as measured by value-at-risk – has not changed greatly since the introduction of these investment options. Gold and exchange rates are still the biggest factors contributing to overall risk. Equities account for less than 5% of the total risk, while corporate bonds contribute only a negligible proportion. The current investment structure and the performance of the SNB’s assets are published online on a quarterly basis in an updated appendix to the Investment Policy Guidelines of the Swiss National Bank. 3.

In fact, infrastructure (b) loans tend to be “unique” rather than “common”, and each can have its own risks and corresponding mitigation structures, which would pose challenges to the 2/3  BIS central bankers' speeches  structuring, rating and assessment processes; given such unique nature of infrastructure loans, originating and managing an (c) infrastructure loan portfolio require the asset manager to possess highly specialized skillsets and experience, and the track record of the asset manager is a key assessment criterion of rating agencies as well as prospective investors; the risk appetite of many long-term investors may need to adjust over time. Over the past few years, we have seen an increasing interest among conventional long-term investors like pension funds and insurance companies in infrastructure-related (d) assets, possibly because the conventional fixed income instruments have failed to provide a decent return amidst the long-depressed yield environment. However, the appetite of such investors tended to focus on the small set of prime quality, investment grade-tranche of infrastructure loan assets, whereas many infrastructure loans may fall in the sub-investment grade domain. 8. Ladies and gentlemen, the reputation of financial derivatives was badly damaged during the Global Financial Crisis. The mortgage-backed securities, CDO, CDO2 and CDO3, etc. all got a bad name, for good reasons.
Innovation in the financial services industry has enabled financial institutions to obtain better insight into customer needs and correspondingly, develop new and better products to match their diverse needs, make significant improvements in operational efficiency by improving processes and business models as well as ensure more effective risk management. It has facilitated greater financial inclusion by allowing broader access to financial services in many emerging and developing countries. But the abilities to innovate will very much depend on the ability to get the necessary talent: the creativity to develop new ideas, the capacity to absorb knowledge and the capacity to acquire the new skill to turn ideas into results. This requires a talented workforce as the driving force of innovation. Building such a workforce would thus become a constant challenge for the Islamic financial services industry. In the context of Islamic finance, human capital development is all the more important given that the Islamic finance industry is still relatively in a nascent development phase. There is no doubt that the Islamic financial services industry in Malaysia has experienced an exciting and phenomenal growth. The proliferation of competitively priced Islamic financial products to match the diverse and discerning needs of customers particularly in this recent decade is quite evident. But we cannot be complacent. What has served us well in the past is unlikely to serve us well into the future. We must be mindful that being innovative in this environment of constant change and heightened complexity in itself is a challenge.

Government has also set a financial access target of 50 percent by the end of 2009 under the Performance Assessment Framework (PAF). The holding of this Conference is therefore, consistent with our aspirations to increase levels of financial access in the country. As earlier alluded, the aim of this Forum was to bring together practitioners and regulators of microfinance to learn from each other in order deepen and broaden financial services provision. In this regard, the forum has a number of eminent persons who will share with us their unique experiences. 2  BIS Review 46/2009  Ladies and Gentlemen: This FIA programme is customized and among the issues that will be addressed include the following: 1. Emerging best practice in microfinance;  2. Self-help group models for microfinance, which may be viable for countries in our region;  3. Microfinance product development knowledge and risk management strategies; and  4. Specific micro-credit practices for agricultural-related businesses, which is relevant for most our countries’ strategies to diversify into agriculture. Distinguished Participants: We consider the timing of this workshop appropriate given the impact of the on-going global financial crises. I therefore, call upon all of you to take advantage of this unique opportunity to learn and share experiences, so that we can come up with efficient and effective ways of advancing financial inclusion in our respective countries.
The disadvantage of a gradual transition for Sweden is that, as euro banknotes and coins already exist in the euro area, it may seem strange to the general public that they cannot count on being able to use them completely in all transactions in Sweden right from the start. The advantages of a gradual transition are that the major technical and practical adaptations to the euro can be made gradually, while Sweden can participate fully in all forums for co-operation and decision-making within the monetary union as soon as Sweden joins, without having to wait until the practical work is complete. With a gradual transition process, the financial and central government sector would require 1-1.5 years to prepare from the time that it is clear that Sweden will apply for membership until the krona exchange rate is irrevocably fixed on membership. After this, the financial sector requires a further year and the public sector requires approximately two years before euro banknotes and coins can replace krona banknotes and coins. This would in total involve a period of between two and three years from a referendum until the introduction of the euro is complete. However, I believe that this period can be shortened somewhat, assuming that the political process openly and clearly chooses a transition process and establishes a timetable for the different stages.

The adoption of Islamic financial principles encourages financing to be primarily adopted as a means to facilitate real underlying economic transactions and not for speculative purposes. There are also clear value propositions in Islamic finance for both investors and issuers from both regions. For investors, Islamic financial products offer portfolio diversification and new investment opportunities as they avail themselves to a new asset class. They also encourage risk management and provides confidence through explicit disclosure and transparency of the roles and responsibilities defined in the contract. For issuers, Islamic finance allows access to a new source of funds and liquidity besides providing, new risk management options and new mechanisms for price discovery. Islamic finance is well positioned to be a vehicle on the New Silk Road, as the enabling supporting infrastructure is already in place. The required regulatory and legal frameworks for Islamic finance have been established, not only in a growing number of countries in both regions but also at the international level through standard-setting bodies such as the International Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Efforts towards the harmonisation of Shariah interpretations and issues concerning mutual recognition are at an advanced stage. The platforms for extending regional linkages and cross-border initiatives, including to the Middle East, are already in place within Asia, where there has been a significant degree of regional financial and economic integration.
This must be viewed in the context of persistently low policy rates among Norway’s trading partners. Weighting our trading partners together, we find an expected policy rate of close to zero at the end of 2022. Among some of Norway’s main trading 1/9  BIS central bankers' speeches  partners, market rates are negative for maturities as long as ten years. Despite persistently low interest rates, there are few signs of pressures in our trading partners’ economies. Although unemployment in the US, euro area and the UK has fallen steadily for several years, and to somewhat below pre-crisis levels, wage growth remains moderate and inflation is below target for a number of our neighbours. Chart: Unemployment and inflation in selected countries The combination of persistently low interest rates, moderate economic growth and low inflation suggests that headwinds have dampened the effect of the monetary policy measures. These conditions can be purely temporary, such as high uncertainty contributing to increased saving and low willingness to invest. But the forces at work are also of a more structural kind, rooted in demographic trends, wider income gaps and global downward pressure on wages for large groups of workers. Regardless, the consequence seems to be that the interest rate level that is consistent with normal growth and inflation, ie what we refer to as the neutral interest rate, has fallen to a low level. How long this will persist is difficult to predict.

However, this provision does not prohibit Norges Bank from purchasing government bonds in the secondary market. Nevertheless, there is much to suggest that the purchase of government bonds is not an option as a policy instrument for Norges Bank. There a number of reasons for this. As I mentioned previously, floating-rate loans dominate the Norwegian credit market. Unlike other countries, the level of long-term interest rates in itself has little effect on credit demand in Norway. If government bond purchases do not affect future short-term interest rate expectations either, the effect on Norway’s wider economy will be limited. Studies in other countries do not provide an unequivocal answer as to whether the bond purchases have had the strongest impact through a fall in the expected policy rate or through lower term premiums on long-term 4/9  BIS central bankers' speeches  government bonds. We have seen in earlier periods that fluctuations in Norwegian government bond yields do not necessarily influence other interest rates. There were signs of strong demand for Norwegian government bonds during the euro crisis between 2011 and 2012. Government bond yields fell fairly sharply in this period, primarily as a result of lower term premiums, but did not feed through to any great extent to the interest rates that are important for banks’ funding costs. Chart: Yields on government bonds, swaps and covered bonds Other countries’ government bond yields play an important role as a reference for other interest rates, which is not the case for Norway.
Nevertheless, the majority of transactions are between banks and not between banks and insurance companies. In terms of financial stability, there are both advantages and disadvantages to these new instruments. Among other things, they allow the transfer of risk to market participants that are willing to bear it. Such participants are often specialised and well equipped to bear the risk. If the credit risk is spread to market participants outside the banking sector, banks’ risk exposure is reduced. Disadvantages arise if there is a concentration rather than a diversification of risk on the buyer side. If individual market participants take on too much risk, their counterparties (such as banks) may be exposed to losses. There is always a risk that buyers lack sufficient knowledge of new products. Another problem has been that the new markets’ infrastructure has not kept pace with turnover so that operational risk in the system has increased. Risk management implies that investors take into account how risk and return are correlated for different investments. Normally, such assessments are based on correlations under normal circumstances, and the challenge lies in dealing with a completely different correlation during a crisis. New instruments can make such risk management more demanding. There may be poor liquidity in these markets and this can increase price fluctuations during a crisis and spread turbulence from one market to another. In general, the new instruments for risk management and diversification have probably contributed to stronger and more stable economic growth. As a result, economies have become more efficient.

What influences developments in the housing market? Norges Bank’s calculations show that high wage income has pushed up house prices. The contribution from interest rate changes has also been high in the past two years but has diminished somewhat recently. Interest rate changes have a strong and rapid impact. From 2004, housing starts were substantially as a result of high house prices, low interest rates and a favourable economic outlook. In Oslo in particular, housing starts have been high. A higher supply of dwellings will reduce pressures in the housing market. 4/6  When we increase the interest rate, we expect house prices to rise at a slower pace. Norges Bank increased the interest rate by ¼ percentage point last summer. Before this increase, banks’ mortgage rates fell, even though Norges Bank’s sight deposit rate remained unchanged. Stiff competition for mortgage loans and lower capital requirements for mortgage loans when the Basel II Accord comes into force may have contributed to this. In recent years, nominal long-term interest rates have fallen more than inflation. The real interest rate has declined. This may not only be an expression of economic conditions, but may also reflect a lower normal level for real interest rates. A lower normal real interest rate level will result in higher equilibrium prices for all capital goods, including houses, because the present value of future returns increases.
Gathering market intelligence in a more complex and transparent world  Given its responsibilities for monetary policy, macro-prudential regulation and microprudential supervision, it is quite rightly expected that the Bank’s policy decisions are taken with a detailed understanding of the financial market context in which the Bank operates. Since its inception, the Bank’s market operations have long provided a key input to this understanding, by providing first-hand information from financial institutions. Between the years 1786 and 1989, this was epitomised by the “Senior Broker to the Commissioners for the Reduction of the National Debt.” Clad in a top hat, and invariably with a tightly rolled umbrella (see Figure 4 for an example), the holder of that position was responsible for announcing (in person) changes in the Bank’s minimum lending rate, and at the same time gathering opinion on the state of the gilt market. He was expected to report to the Gilt Edged Division three times a day, providing information about market activity, the quantity of buying and selling, and the gilt maturities and coupons that were in particular demand. He was also responsible for reporting on the mood of investors and advised the Bank on the appetite for stock, institutional cash positions and expectations. 9, 10 Even if top hats are a thing of the past, the essence of Market Intelligence (MI) gathering remains the same today: our staff maintain a regular dialogue with financial market participants to draw on their expert knowledge and perspective of the markets in which they operate.

For that reason, our approach to liquidity insurance continues to evolve: •  In November 2014 we extended eligibility for membership of the Sterling Monetary Framework to include broker-dealers and Central Clearing Counterparties (CCPs), giving non-banks access to our permanent liquidity insurance facilities for the first time. •  The range of acceptable collateral continues to extend: we have started to approve pools of auto loans and invoice finance receivables as eligible collateral for the first time. And we have started work to ensure there are no technical obstacles to our ability to accept equities as collateral should the need arise. 4  The Bank introduced US Dollar repo operations in September 2008, and their usage peaked at the equivalent of $ in October 2008. The Bank also provided a peak of $ to RBS via Emergency Liquidity Assistance. 5  The Bank’s commercial paper purchase schemes opened in February 2009 with a peak usage of £ The corporate bond purchase scheme opened in March 2009, with a peak usage of £  6  Plenderleith (2012) and Winters (2012). 7  http://www.bankofengland.co.uk/markets/Pages/sterlingoperations/redbook.aspx. 4  BIS central bankers’ speeches  •  The Bank will commence work in the second half of 2015 to assess the feasibility of establishing a Shari’ah compliant facility. By providing an additional highly liquid asset for Islamic banks, such a facility would be a significant step forward in their liquidity management capabilities. •  We are continuing to develop our capacity to lend in currencies other than sterling.
Indeed, all countries have homework to do: there is much scope for improvement even in the strongest countries if the benefits of price stability are to be fully reaped by the people of Europe. The responsibility for fiscal and structural policies remains at national level. But we may need to consider some policy areas where, in order to ensure the stability of Monetary Union and the euro, more responsibilities should be assumed at area-wide level. The financial crisis has demonstrated that a lack of financial integration can complicate the implementation, and threaten the effectiveness, of the single monetary policy. Policy interest rates can only guarantee price stability when their transmission to the economy is effective and reasonably uniform. To ensure such transmission, we need greater harmonisation in financial supervision and regulation. These are tasks that should be performed at euro area level. Harmonised financial supervision and regulation will also support deeper financial integration within the euro area. In turn, such integration will foster risk-sharing and improve the shockabsorbing capacity of Monetary Union. Some of the vulnerabilities of the euro area we have seen in recent years stem – at least in part – from the fragmented nature of the European financial sector and the supervisory regime that supports it. What we have witnessed over the past few years in financial markets represent the growing pains of the euro, not its death throes. With the necessary actions taken at national and areawide level, I am confident the euro will go from strength to strength.

A pre-programmed allocation of losses would be akin to the old “Down To The Last Drop” rule that used to be employed by a Chicago clearing house, under which surviving clearing members ultimately had collectively to absorb all losses: mutualisation. (It was dropped because, as banks became futures-exchange clearing members, bank supervisors didn’t like the unlimited exposure of CMs who were banks. An example of unjoined-up thinking.) That’s the option around propping up the clearing house to keep it going. The other option is some kind of wind down of the Clearing House’s book. That involves a combination of closing out part of the book in the market, and doing something with any residue that can’t be dealt in the market. One obvious thing to do with the residue is to put it back, pro rata, to the surviving (and fit) clearing members. But that is also a variant of the DTTLD rule, but “in kind” rather than cash. BIS central bankers’ speeches  3  Maybe I’ve got this wrong but, in summary, it seems to me that questions about orderly resolution of a failed CCP have to involve clarity around the extent to which surviving clearing members pick up the pieces. Summary The design, management and oversight of CCPs is something that we are going to come back to again and again in the years ahead.