samchain/econo-pairs-v1 huggingface dataset:
Broad money also includes physical cash circulating outside the banking system but this is only a fraction (4%) of the total: the vast majority is accounted for by sterling deposits in commercial banks (the precise definition of M4 is here). Traditionally, narrow money has been defined as physical cash plus reserves (the deposits of commercial banks at the central bank). However, the nature of these reserves changed significantly in 2006, when the Bank of England began remunerating them, at Bank Rate (this was done to ensure short-term rates in interbank markets stayed close to the official interest rate – Clews (2005)). see and). It no longer made sense to group them with (non-interest-bearing) cash and at that point the Bank ceased publishing a combined series for “narrow money” (Janssen and Andrews (2005) ). This change explains the initial, pre-QE jump in reserves around that time (evident in Chart 1). As I try and explain in the body of the talk I think it also has some bearing on the impact of QE. 2. I’ll say a little more about this process later on, when discussing the contrasting patterns of “narrow” and “broad” money growth over the past. 3. Reflecting this point commercial bank deposits are sometimes referred to as “inside” money – they’re assets within the (private-sector) financial system, not for the system as a whole. By distinction, central bank reserves are sometimes called “outside” money. 4. Even a “helicopter drop” may not add to net wealth.

The expansion of the Zambia Sugar Plc operations and the anticipated opening of the Nickel Mine around Munali hills will all make a significant impact in boosting the living standards and job opportunities for the community of this town and the surrounding areas. Besides, Mazabuka is a successful and expanding farming district. I therefore wish to take this opportunity, to extend my congratulations and good wishes, to the Board, Management and Staff of Stanbic Bank for the excellent business foresight in having decided to make Mazabuka the new location of your latest branch. Mr. Chairman, Ladies and Gentlemen, the Bank of Zambia, has on a number of occasions indicated that the cost of banking services is relatively high in Zambia as compared to our neighbouring countries. This contention has been backed by studies conducted by the Bank of Zambia whose results have been communicated to commercial banks. As such, we take this opportunity to implore  BIS Review 99/2006  1  commercial banks to reduce their lending rates and service charges in order to encourage greater economic activity. With these few words, Ladies and Gentlemen, I declare Stanbic Bank Mazabuka Branch officially open. I thank you. 2  BIS Review 99/2006
To go back to my earlier imperfect metaphor, we want to test whether the track and the cars can cope with an unlikely but plausible combination of adverse circumstances. And you will note that a major part of the adverse scenario is a rise in unemployment and a crash in house prices. We want particularly to test this because housing mortgage debt is around two-thirds of UK banks’ domestic lending. And this brings me onto my second example. Last week, the Financial Policy Committee announced two important measures to address the risk that continued momentum in the housing market could pose to household indebtedness and thence to the economy and to financial stability. I think it is important to understand why the FPC is concerned about the housing market: what we are and are not responsible for and what we can and cannot do. We cannot address  4  BIS central bankers’ speeches  the imbalance between the supply and demand for houses in the UK. The Bank cannot build a single house. Nor should we take responsibility for house prices. It is the risks to financial stability and to the economy we must focus on. The main risk we see arising from the housing market is the risk that house prices continue to grow strongly and faster than earnings and – and this is an important “and” – this increase in prices leads to higher and more concentrated household indebtedness.

Like the MPC, it has external members, drawn from outside the Bank’s executive team, a published record of its meetings and a regular Financial Stability Report to explain how it is using its powers to achieve its statutory objectives. There is substantial cross-membership between these two Committees to ensure effective policy co-ordination. But though the institutional set up for the Financial Policy Committee mirrors that of the Monetary Policy Committee, the nature of its task is different. The Monetary Policy Committee is, in the main, engaged with guiding the economy towards the best achievable path for output consistent with keeping inflation at target – or with bringing it back to target. In the jargon – which some of you in the logistics field, for example, may be familiar with – the problem is one of “optimal control” or “dynamic programming”. What setting for interest rates is consistent, looking forward, with the best central outlook for the economy? The Financial Policy Committee’s job is really about identifying risks and preventing them from crystallising. This is not just about the most likely and visible risks. What we learned in the financial crisis was that the financial system, has a myriad of connections and actors and a phenomenal ability to change and adapt. It needs to be thought of as a complex “ecosystem”. At times of stress, it can behave in very extreme ways – or break down altogether. In such a world, it is not enough to know that every individual part is managing its own risk.
This refers to our organisation as well as to the main substantive issues in monetary policy, regulation and the supervision of financial stability. Prior to the crisis of the 1990s, Sveriges Riksbank was an organisation in which operational tasks, and to a certain extent regulation, predominated. The flagship of our organisation was the trading room, which had the task of maintaining a stable exchange rate, but most of our employees worked with the manufacture and distribution of cash. As long as the regulations governing the credit markets and currency flows remained in place, the Riksbank had scores of employees working with these regulations too. What are the tasks of the central bank? The crisis of the 1990s forced us to reconsider all this. The forced change of currency regime from fixed to floating implied a failure, although in reality the Riksbank could not have succeeded. We had two main goals, maintaining low interest rates but also the fixed exchange rate, but we had only one instrument, namely monetary policy. Instead we became an early adopter of what was then the relatively new concept of inflation targeting, at the same time as the exchange rate was allowed to float. Sweden had also been hit by a severe bank crisis and we saw that the central bank should play an important role in the effort to prevent anything like this happening again. These became our two main tasks, just as they have become in many other countries.

In this context, one possibility would be for the central bank to not only to determine the policy rate but also to determine the time-varying regulation, while the implementation of non-time variable regulation would be the responsibility of the supervisory authority. Does it make sense to merge the central bank with the supervisory agency? Obviously, the financial-stability analysis, and to some extent also the monetary-policy analysis, must be informed by the micro-prudential analysis, and vice versa. Countries have chosen different approaches to this, often based on country-specific characteristics such as legislation or even tradition. I am open and do not believe in a one-size-fits-all solution. The important aspects are that you ensure an open exchange of information and close cooperation between the functions, as well as adequate resources. On governance we must also take into account what is called “political economics”. The most efficient theoretical solution may not be achieved if it contradicts interests of power and influence. How should we structure the decision-making process in order to take account of the nexus between monetary policy and financial stability? Central banks have adopted different approaches: Some have a separate Board for monetary policy, others also have a separate Board for financial stability. Most central banks have the same Board for both, but may have separate Deputy Governors responsible for each of the two strands. What matters, as I see it, is that “the buck stops somewhere”.
Starting positions, in terms of equity and credit quality, were already divergent. Moreover, in a crisis such as the current one, in which the pandemic is affecting different regions and sectors of activity in different ways, the worsening of banks’ solvency will foreseeably hinge on their degree of exposure to such regions and sectors. The current situation: the importance of maintaining stimulus measures and targeting them more specifically The current macroeconomic setting is characterised by an incomplete, gradual and uncertain recovery. Indeed, as a result of the restrictions on mobility that had to be applied in the first quarter, a further decline in GDP in this period cannot be ruled out. This would mean that, at end-March, GDP would still be slightly over 9 pp below its pre-crisis level. In any event, we should acknowledge that the development of effective vaccines against the virus has contained some of the risks to the economy. And, in turn, this has equipped the authorities with what is, in fact, also the best economic policy tool available to usher in the recovery: the roll-out of vaccination programmes that allow for the progressive lifting of the restrictions on economic activity. In this situation, retaining the exceptional support measures for the economy is warranted until the recovery firms. This support is also crucial for preventing the crisis from being compounded by a financial component that would deepen and lengthen it.

It is against this background that financial sector supervision should also be directed at financial institutions that pose the greatest risks, such as, non-bank financial institutions. In this regard, the adoption of the risk-based approach allows the supervisor to devote more supervisory effort to those areas that have a high-risk profile. This therefore, entails that supervisory authorities should shift their focus from the traditional Capital, Assets, Management, Earnings, Liquidity, and interest rate Sensitivity (CAMELS) approach to a more risk-based approach. A risk-based supervisory approach would involve the identification of key risks, the level of these risks and the key risk areas. After identifying these risk factors, a comprehensive supervisory framework with appropriate resources is then assembled to mitigate the risks. The amount of resources required is dependent on the level and intensity of the perceived risk. However, suffice to mention that this does not mean that the risk-based supervisory approach ignores the strengths of the CAMELS approach, but rather addresses the weaknesses by putting more emphasis and resources on areas with potentially higher risk. Ladies and Gentlemen As many of us are aware, financial sector operations have become complex nowadays, as they entail, among others, managing financial, market and operational risks, which depend, to a large extent, on public confidence in the financial system. In this regard, proper supervision is critical to minimising risks as well as ensuring the stability of the financial sector and engendering public confidence.
It was the first time we had done so since the introduction of the repo as a monetary policy instrument. At the same time, we undertook a significant reduction in the repo rate used for our transactions. Our aim was to compensate the higher risk premiums through a lower repo rate, and to move the threemonth Libor back into the middle of the target range. The desired reaction ensued within a few days and the three-month Libor stabilised at 2.75%. We thereby neutralised the monetary policy impact of the higher risk premium. As announced a short while ago, we will also be supplying the market with ample liquidity as we approach the end of the year, and will be conducting longer term repo transactions with this in mind. At the operational level, steering the three-month Libor proved to be a challenge, due to the high and fluctuating level of the risk premium. Simultaneously, the benefits of our operational flexibility became very clear. Since we are generally present in the market on a daily basis with short-term repo transactions, we were in a position to adjust liquidity measures to individual market conditions. Over the past few months, we have made consistent use of this flexibility; first, by providing the banking system with generous amounts of seven-day money, gradually lowering the repo rates as we did so, and second, by absorbing liquidity that was no longer required as soon as the call money rate declined.

As to inflation, the latest data continue to evidence very moderate behaviour, with an increase in April, for the euro area as a whole, of 1.2%. The projected reduction in the degree of slack in the economy should enable inflation rates in the area to draw closer to levels compatible with the Eurosystem’s objective of price increases below, but close to, 2%. 3/9  Spanish economic developments and outlook Regarding the Spanish economy, the INE estimate for GDP growth in the first quarter of 2018 shows a rate of increase of 0.7%, in line with the two previous quarters. That said, there has been a slight decline of 0.2 pp in the year-on-year rate of change from 3.1%, at end-2017, to 2.9% in the first quarter of this year, which is consistent with the continuation of the current upturn, albeit at a somewhat lower rate of increase than that observed in the past three years. On the latest projections published by the Banco de España in late March, output is expected to expand by 2.7% in 2018, 2.3% in 2019 and 2.1% in 2020. The latest information would broadly confirm this scenario, albeit with a possible slight upward revision this year and next, as a result of the greater fiscal boost built into the draft State Budget for 2018 and in the recently published Stability Programme Update for the period 2018-2021, on which I shall comment later.
This not only has given a significant impetus to inflation through a combination of direct effects on household utility bills and indirect effects owing to the use of energy as an intermediate input to the production of other goods and services. It is also likely to have implications for price and wage setting dynamics. For energy importers like the countries of Western Europe including the UK, a rise in international energy prices represents a substantial adverse terms of trade shock. [7] Simply put, the price of what they are buying from the rest of the world has risen considerably relative to the price of what they are selling to the rest of the world. To the extent that any implied deterioration in the terms of trade is permanent, there will be a real hit to those countries real income, which must be absorbed by some domestic actor. In other words, in the end, someone in the UK will have to bear the cost of a higher aggregate UK energy bill. The important question for an inflation targeting central bank is how that happens; in  Page 8  particular, how pragmatic and realistic UK firms and households are in accepting the macroeconomic implications of the higher imported energy and goods prices.

One often sees forecasts as mean forecasts. This means in principle that the risk that the economy will develop less well is as great as the chance that it will develop better. A mean forecast for GDP growth abroad, for instance, balances everything that could give rise to lower growth against everything that could give rise to higher growth. Another way of expressing the same thing is that the forecast is a form of middle way of all the different roads the economy could take in the coming period. This way of working with forecasts means that one acts as though one has succeeded in quantifying the possibilities and effects of all of the different potential courses of events. A year or so ago there were frequent discussions of the risk of a split or disintegration of the euro system – what was the probability that this would happen and what effects would it have for Sweden? Today there may be reason to ask these questions with regard to an escalation of the Ukraine conflict or to a substantial fall in housing prices in Sweden. If one considers these difficulties in quantifying various possible sequences of events and probabilities that they will occur, it may not be as simple a matter to make decisions on monetary policy and make forecasts for future interest rates as it is sometimes made out to be.
The current set-up does also lead to some odd results, such as a group of assets sitting on insurers’ balance sheets today for which the capital banked up-front (in the form of MA) was in fact greater than the entire cost of the assets themselves. Further, data provided by firms suggests that over 20% of BBB exposures have an MA benefit that exceeds a reasonable estimate of a 1 in 200 year capital requirement, resulting in firms effectively creating capital by taking on more risk. [10] We need to learn from our experience over the last six years and make changes to get this part of the regime onto a firmer footing. We have also looked at this question top-down, by reviewing the literature on what portion of asset returns may be a “liquidity premium” that can be earned without risk by investors who are willing  Page 8  and able to tie up their funds for long periods, which is what insurers can do and what the MA attempts to identify. There is wide disagreement on this amongst academics, but if you plot the MA against the range of views we have seen then you find that the MA is either towards the most generous end of that range or well outside it. This is a topic on which reasonable people can differ, but given the very important role the MA plays it is concerning that the regime is not more consistently well within the range of views offered independently by others.

There is a case that we should take some notice of this in the way the regime operates, rather than just ignore it. In summary, our experience of operating the MA suggests to us that the broad mechanism works but that the EU design makes insufficient allowance for uncertainty, the difference in riskiness between assets, and signals from the market. As a result of this, we are concerned that it overestimates the portion of future returns which can confidently be assumed to be free of risk for insurance companies and therefore safely banked as capital up-front. Some might suggest that this is fine, because insurance capital requirements are set to cover a 1in-200 year stress. [6] But that mixes up capital requirements and capital resources. The risk of a weak MA is that capital resources could be over-stated, and strong capital requirements are no defence if the capital being used to meet those requirements is not sufficiently solid. [7] The system as currently set up provides a particularly strong incentive for insurers to hunt out assets which happen to have a high return relative to their credit rating. Here is an intuitive way to think about the risk in this if taken too far, which our team calls the “high-spread-for-rating assets” – or more colloquially the “too-good-to-be-true assets” – issue. Imagine you have two bonds. [8] Both mature at the same time, both are in sterling and both have the same credit rating.
Through VBI, Islamic financial institutions adopt a highly structured framework to assess how they create value and impact, for example, from economic, social and environmental perspectives. VBI accords equal emphasis to economic value creation and upholding of ethical values, and strengthens Islamic finance as a “uniting force for good”. The VBI initiative is currently bringing together the banking groups through a pioneering Community of Practitioners (CoP) to advance the sustainability agenda in a collaborative, concerted and synergistic approach. This includes forming close engagement with organisations that share similar sustainability aspirations. Through VBI, Islamic banks are taking the lead in advancing finance for the good. While these banks are still at early stages in their journeys, there are already concrete examples of VBI being put into action today as we see progress in embedding its elements in their financial products, practices and operations. Though VBI has a far wider scope, these early applications capitalise on contemporary sustainability themes. These include preferential financing rates for hybrid vehicles and green buildings, specialised financing scheme for women entrepreneurs and issuance of the world’s first Sustainable Development Goals (SDG) sukuk. Where VBI goes beyond are in provision of non-financial services bundled in financial solutions such as advisory, business network and relevant infrastructures to groom small clients with business potentials such as SMEs and micro finance. Alongside this move towards responsible financing, the CoP members are actively reviewing their business portfolios, identifying and prioritising VBI issues within their institutions and building the required capacity.

Adnan Zaylani Mohamad Zahid: Leadership, values, ethics and Islamic finance - the next generation of Islamic financial institutions Keynote address by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the IFN Asia Forum 2019, Kuala Lumpur, 23 April 2019. * * * Allow me to first begin by thanking the organiser for inviting me to deliver the keynote address at this annual IFN Asia Forum. It is a pleasure to be here this morning in the company of such a diverse gathering of Islamic finance professionals and weigh in on an important subject of which the organiser had kindly assigned me; “Leadership, Values, Ethics and Islamic Finance: The Next Generation of Islamic Financial Institutions". For many of us, the 2008 global financial crisis will be one of the major events that stays with us throughout our careers. In Asia, we had the Asian Financial Crisis in 1998 which was momentous but given the scale and its far reaching impact, the 2008 crisis has left far larger imprints. More than a decade has passed, yet we continue to live under its shadows. A world that has grown at a slower pace, in a low inflation, bordering on deflationary risk environment for the better part of a decade. Banking and financial regulations that undoubtedly have strengthened the resilience of the system, but could have had unintended consequences on growth.