samchain/econo-pairs-v1 huggingface dataset:
In experts we trust? Speech given by Minouche Shafik, Deputy Governor for Markets and Banking  Oxford Union 22 February 2017  I am grateful for discussions with or comments received from Kristin Forbes, Anil Kashyap, Sujit Kapadia, William Moy, Onora O’Neil, Nick Stern, Martin Taylor and Sharon White. I would also like to thank Grellan McGrath, Dami Ayeko, Ankita Mehta and colleagues within the Bank for help in preparing this speech, though all views are my own. I would also like to thank Michelle Madden, Vicky Purkiss, Cheryl Gibb and Julie Welland for their excellent support during my time at the Bank of England. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction  Experts have come in for a great deal of criticism of late. The turning point was probably the 2008 financial crisis which was seen as a failure of mainstream economists as well as of the “establishment” more generally who had previously touted the benefits of a system that came crashing down on the heads of ordinary people. Another wave of expert skepticism followed the Eurozone crisis, perceived by some as an elite project that had painful consequences for the public at large, especially for countries in the southern periphery. This was compounded by a conduct crisis as scandals broke out over mis-selling, currency manipulation and LIBOR rigging in the financial sector which only strengthened the suspicion that the system is rigged in favour of the rich and powerful.

In fact, its capital, Prague, lies more than 90 miles west of Vienna. In the words of a famous Londoner – the actor Michael Caine – “Not a lot of people know that”. What is more, the Czech economy is further west than you might think not just geographically, but also economically. This brings me to shocking fact number two. Despite tepid real growth averaging 3%, the Czech economy has grown by 10% on average in recent years thanks to appreciation of its exchange rate. Therefore, the Czech economy has multiplied in size more than 4.5 times since 1993 in nominal terms in euros. Consequently, it could have bought on average more than 7% p.a. of the core European countries’ real GDP over the last 18 years. And now for shocking fact number three. Despite, or maybe thanks to, our first-hand experience with financial crisis (bad loans exceeded 40% of GDP in the late 1990s), no bailout has been needed and no taxpayers’ money has been used to save any Czech financial firm in the latest turmoil. Finally, and a good deal less shockingly I’m pleased to say, the Czech National Bank has been not only the central bank, but also the integrated supervisor of the Czech financial industry since 2006. This set-up gives us many advantages in terms of dealing with the financial crisis and maintaining financial stability at national level, and it hopefully also enhances our understanding of the current events in the eurozone.
Notably, the number of STRs disclosed in 2013 has also increased by three times as compared to the previous years. This is mainly contributed by disclosures relating to large network of subjects suspected to be involved in tax/duty evasion, scam/fraud activities and corruption. Proactive disclosures made to the LEAs had also recorded positive feedbacks. Based on the feedback that we received from the LEAs, the STRs submitted have provided leads to their investigation and have resulted in the number of joint initiatives. More than 70% of the STRs disclosed to the enforcement agencies have resulted in the opening-up of Enquiry Papers or Investigation Papers. The remaining of the information disclosed will be is used as part of the database for future investigation. Understanding of money laundering and terrorist financing risks is the foundation to which our legal framework, preventive measures, financial intelligence and enforcement, and cooperation will be based on. Since 2012, the National Coordination Committee to Counter  2  BIS central bankers’ speeches  Money Laundering (NCC) has given the mandate to its 16 members to carry out a comprehensive assessment of our money laundering and terrorist financing risks. Background on National Risk Assessment (NRA) The National Risk Assessment, which is conducted under the ambit of the NCC, seeks to enhance the country’s collective understanding of the money laundering and terrorist financing risks facing the country and draws upon principles set out under the FATF’s International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.

Despite significant downward corrections, it is still possible for the economy to perform below expectations, particularly towards 2021 and 2022. This could be the case if the control of the sanitary emergency and containment measures around the world need to be kept in place longer than anticipated. This could also happen if the significant financial needs of businesses and households fail to be met by the supply of credit. Such scenarios would entail solvency problems and bankruptcies of companies in the most affected sectors, with a greater loss of jobs and a slower speed of recovery for the next two years. In such case, convergence to the inflation target may require keeping the MPR at its technical minimum for a longer 6  period of time. This is reflected in the monetary policy trajectory that describes the lower part of the MPR corridor (Figure 12). Another possible scenario is that the sanitary crisis is resolved faster, and the economy restarts its normal activities sooner than expected, lending support to inflation towards late 2020 and the turn of 2021. In such a case, monetary policy could begin normalizing gradually some quarters before, i.e. consistently with the upper bound of the MPR corridor (Figure 12). Inflation could also rise if the companies’ downtime results in a large drop in the available supply of goods and services, pushing up prices. In that case, it is not evident that the MPR path has to be changed, in particular if medium-term inflation expectations continue to be aligned with the target.
William C Dudley: The US economic outlook and implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Leadership Forum, Somerset, New Jersey, 15 January 2016. *  *  *  It is a pleasure to have the opportunity to join you again at the Economic Leadership Forum. I would like to thank John McWeeney of the New Jersey Bankers Association and Rutgers University for the invitation to be here today. Northern New Jersey is a vital part of the New York Fed’s district, and I don’t just say that because I live here. My staff and I actively maintain ties with local community, business and banking leaders, and we always benefit from opportunities to hear about what is on your mind. I am particularly delighted to see that community banks are well represented here today. The Federal Reserve understands the importance of a vibrant community banking sector and the crucial role community banks play in supporting the activities of local businesses and households. While protecting the safety and soundness of the financial system is an important part of the Federal Reserve’s mandate, I believe that the regulation of community banks should be appropriately calibrated to reflect the lower degree of risk they pose to the financial system relative to larger banks. In other words, community banks should not be subject to the same set of regulations that are applied to the most systemically important banking organizations.

But that is the reality of development – we will continuously be called upon to respond to new and unfamiliar challenges and to effectuate changes wherever we can. I am optimistic that we can all contribute to do our part to make the change that is required. Global awareness on climate change and its risks being showcased today and during this Climate Week is reflective of a world that is determined to rise to the immense challenges before us. Thank you again to the organiser of this event and to all participants. I look forward to more meaningful engagements on this issue as we continue this onward march for a better life and a better future for our children and for mankind. Thank you. 3/3  BIS central bankers' speeches
Consequently, it is not “the tenths” themselves that are important – and they are of course even less important under more normal circumstances. But when confidence in the inflation target is at stake, even tenths can send signals and this is something I think one is well advised to consider. Let me stress that I of course believe that my colleagues on the Executive Board also take arguments like these into consideration. However, it can certainly be the case that we make different assessments of how important they are. This is natural and in a way the whole point of an executive board. What I am presenting here is my way of looking at things and my personal assessments. A necessary condition for maintaining confidence in the inflation target is, as I see it, that the monetary policy we conduct and plan to conduct means that we anticipate inflation being 2 per cent at least at the end of the forecast period we are considering. If the inflation forecast is not 2 per cent even in this time perspective, the monetary policy, on which our inflation forecast is based, is wrong and we must adjust it. But as I was just discussing, this is not always enough – it is not a sufficient condition.

Development of the krona has been weak for a few years and there is no doubt that one reason for this is indeed the exchange-rate channel and the expansionary policy to maintain confidence in the inflation target. It would be strange if this were not the case as this is partly how monetary policy works. But, and this is an important ‘but’, it is far from the whole picture. It is obvious that another part of the explanation is that currencies in small, open economies tend to depreciate when there is turbulence in the world. For example the Norwegian krone and the New Zealand dollar have experienced a very similar development as the Swedish krona in recent years, despite the policy rate in Norway and New Zealand being 1.50 and 1 per cent respectively, that is to say significantly higher than in Sweden (Figure 3). This is a very important observation to consider when criticism is being levelled at the Swedish inflation-targeting regime. It gives some perspective to, among other aspects, the “krona collapse” that is often highlighted in the debate. 12 [17]  But if one holds the view that the movements in the krona are not acceptable, one can of course argue for a return to a fixed exchange rate. This would, however, be a political decision and nothing the Riksbank can decide on. Under the Currency Rate Act, the government takes decisions on the exchange-rate system that is to be applied.
This could mean that the central bank chooses a repo rate path that, while it does not give the lowest squared deviations over the three-year forecast period, is nevertheless judged preferable from a longer-term perspective. For instance, the bank may hold the policy rate higher to try to prevent a credit boom that is feared would cause problems – with large squared deviations – beyond the forecast horizon. A closely-related reason is that the central bank under certain circumstances gives consideration to specific risks when setting interest rates. This is something I personally find to be one of the most important factors missing in the simple analytical framework. This could also be expressed as the central bank holding the policy rate at a higher level to reduce the risk – within or beyond the forecast horizon – that, for instance, a credit boom would continue too long and cause problems. The central bank might also wish to hold the policy rate at a higher level to reduce the risk of inflation expectations rising too high, which could also be problematic. The higher policy rate could give larger deviations during the forecast period, but may nevertheless be preferable as it reduces the risk of a really poor outcome. Framework more difficult to apply with an Executive Board Another circumstance that I perceive as complicating matters with regard to putting the theoretical approach into practice is the fact that there are six of us making the monetary policy decisions.

We have to ask whether today’s blanket approach to welfare, higher education and health is promoting a culture of reliance on the State rather than the encouragement of private initiative. Our system does not focus exclusively on those who are truly in need, but also provides a cushion for higher income earners, at the cost, however, of a heavier fiscal burden. 2  Swedish Ministry of Finance and H. M. Treasury Social Bridges: Meeting the Challenges of Globalisation, London and Stockholm, April 2006. BIS Review 113/2006  3  Social programmes must be sustainable The time has, therefore, come for a radical reform that reconciles the objective of social cohesion with financial sustainability. Non-essential transfer payments should be reduced, especially those that are of a universal nature and do not address a proven need. The introduction of means testing must be seriously considered, accompanied by continued efforts to reduce tax evasion. The criteria for the granting of certain benefits should be tightened further. The underlying objective should be to promote a culture of self-help and efficiency. In the field of higher education, for example, since an academic qualification enhances the student’s income-earning potential, I believe a strong case can be made for at least the partial replacement of grants with loans for students from a better-off financial background, with a repayment schedule that provides for moratoria to suit the post-graduation realities of the particular student.
For example, in Germany, the institution that became the highly independent Bundesbank was established as part of the country’s reconstruction after WWII and so before its new democracy was embedded. It had “goal independence”. And in the US, while there is hesitation over giving the Federal Reserve an inflation target, as great weight is placed by Congress on the “dual mandate”, there is not concern about the scope or mechanics of the FOMC’s accountability to Congress. Every member of the executive arm of the government is unelected except the President. The central bank is no outlier. 18 But in the UK it really was a novelty – in a way, a constitutional departure, foreshadowed perhaps only by the judiciary 19 – to give such a politically sensitive lever to a body of unelected technicians. The institutional obstacles to Bank of England “independence” therefore needed institutional solutions. Responsibility for bank regulation was transferred from the Bank in 1997. The pathway to resolution of the “democratic deficit” problem had potentially been opened up in the 1980s by the St John Stevas reforms of Parliamentary Committees which led, over time, to a Treasury Committee with a high reputation and standing, supported by access to expert advice. In the 1997 reforms, the sphere of politics was carefully delineated. The goal of price stability is set by Parliament in legislation; and, within that framework, the Chancellor of the day sets the Bank its target for inflation.

My reluctance to go down that route stems from a concern that we would slip towards a degree of individualism where members were no longer listening to each other. It would not be possible for members to polish their statements after the meeting, as they would then be able to tweak their text, ever so slightly of course, in the light of the market reaction to our decision and so on. So highly polished statements would be brought to the meeting, with perhaps even a degree of competition in the depth of the analysis or the beauty of the prose. But the very point of a committee is that we 26 should listen to each other, and then make up our own minds. That includes trying to persuade one’s  unexpired parts of the terms of existing Committee members, but do not include the terms of Howard Davies and David Walton. 25  For example, Weber, A., 2007, “Monetary policy strategy and communication”, speech at the Deutsche Bundesbank/Federal Reserve Bank of Cleveland conference on “Monetary policy strategy: old issues and new challenges”, Frankfurt, May 2007. 26  See section on “Does discussion help?” in Lombardelli, Proudman and Talbot, op. cit., page 199. 6  BIS Review 66/2007  colleagues. Over the years, 27 I have definitely seen occasions where individual members have altered their position during the course of a meeting.
Institutions are better able to aggregate and assess their risk exposures within short time periods and stress testing means that there is a better understanding of how these exposures might perform in adverse environments. But our task remains unfinished. While progress on reforming compensation practices is welcome, I recognize that there is still much to be done before we can truly say that incentives are lined up in a way that fully supports financial stability objectives. We have work to do on the information front too. Consider the issue of international regulatory access to data. Currently U.S. bank regulators do not have access to the consolidated global balance-sheet information of the foreign banks that operate in the United States (or vice versa for that matter). Our examiners see data associated with the foreign firms’ U.S. operations, but not how that fits in with their operations abroad. Without certain specific types of consolidated global information, it is difficult to place the U.S. operations of a foreign firm in their global context, and make informed judgments about the adequacy of such firms’ capital and liquidity buffers. For example, liquidity is often managed on a global basis, and key business lines are frequently managed globally, even if they reside in multiple legal entities located in different jurisdictions. Making progress in establishing protocols that would enable bank regulators to share more relevant confidential supervisory information on a cross-border basis would be a significant advancement.

Vítor Constâncio: We need a coordinated European NPL strategy. How to deal with Europe’s market for lemons? Opinion piece by Mr Vítor Constâncio, Vice-President of the European Central Bank, 5 July 2017. * * * One of the most pressing issues for euro area banks is the nearly € trillion of non-performing loans (NPLs) on their balance sheets. While the average euro area NPL ratio has declined gradually from a peak of 8% in 2013, it still remains at 6% and differences across countries are marked: six countries still have NPL ratios of more than 10%, significantly more in some cases. This is not just a problem for banks. The flip side of NPLs is over-indebtedness among households and firms, and this poses a macroeconomic challenge – banks restrict credit supply and distressed firms curtail investment, which in turn hampers economic growth. Asset quality issues were exacerbated by the global financial crisis. When the crisis hit, the surge in NPLs blocked the ability of many banks to deal with distressed debt. NPL resolution, though not a panacea for all banking problems, could bring significant benefits. It is not easy to estimate the effects of resolving NPLs. However, scenario-based analysis indicates that replacing NPLs with performing assets could increase the aggregate return on equity of euro area banks by more than 1 percentage point, with some countries’ banking sectors gaining up to 5 percentage points.
Among the major non-bank financial institutions, the most important part of the financial system today where we need a stronger capital regime relates to the GSEs. Even with the improvements in risk management at these institutions over the last few years, we are some distance from the point where their regulatory capital requirements appropriately reflect their risk. While critically important, capital alone does not define an institution’s strength. It is vitally important for firms to continue to invest in strong internal controls and to make sure that advances in the operational infrastructure keep pace with rapid growth, particularly in complex transactions. Strong operational controls can help ensure smooth market functioning in times of stress, and when they are weak they can exacerbate adverse market dynamics. An important element of a sound operational control environment is timely and accurate information for senior managers, especially when it is most critical for them to have a clear picture of the firm’s exposure. As such, strong operational controls can help reduce some dimensions of uncertainty and therefore help markets function better in conditions of stress. The challenge of ensuring that operational controls keep up with front office advances in the complexity and volume of transactions is particularly evident today in the area of credit derivatives.

European Central Bank: Press conference - introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank, and Mr Lucas Papademos, Vice-President of the European Central Bank, at the press conference held in Frankfurt, 1 April 2004. *  *  *  Ladies and gentlemen, welcome again to our press conference. Before I proceed, I would like to remind you that I have conveyed the Governing Council’s sincere condolences to Jaime Caruana, Governor of the Banco de España, following the terrorist attacks in Madrid on 11 March 2004. I assured him of the Governing Council’s total solidarity with the Spanish people and the Banco de España. The Vice-President and I will now report on the outcome of today’s meeting of the Governing Council of the ECB. On the basis of our regular economic and monetary analysis, we have not changed our assessment that the current stance of monetary policy remains in line with the maintenance of price stability over the medium term. Accordingly, the key ECB interest rates have been left unchanged. The low level of interest rates also provides ongoing support to the economic recovery in the euro area. We will continue to monitor carefully all developments that could affect our assessment of risks to price stability over the medium term. Let me now provide a more detailed explanation of our decision, turning first to the economic analysis.