samchain/econo-pairs-v1 huggingface dataset:
Apart from the developments in the nature of financial risk due to globalization and regional integration, the ramifications of the Basle II capital accord, and the potential for developments in Islamic derivative instruments, I am aware that there are many other highly technical matters that need to be appreciated and understood. I will leave this to the experts who have given their valuable time to share their knowledge with us today at this banking and law school event. I wish you an engaging learning experience. This is also a rare opportunity to develop your networks, share your knowledge with your peers and reflect upon how this learning experience will make a difference in your professional career. 4  BIS Review 11/2004

Needless to say, I am talking about client data, which is the basic commodity of this fourth industrial revolution. Importantly, client data is currently controlled by banks, though some recent developments, such as the PSD2 in the EU, might alter this situation. Accordingly, institutions should strive to make the best out of their current dominant position. Banks should be capable of extracting, exploiting and analysing their customers’ data. Management must fully consider this information to take decisions. Otherwise, reevaluation and transformation of the business model will not be possible. Therefore, a clear conclusion would be that the business criticality of IT and cyber resilience has also soared, compared to the situation 20 years ago. This makes the investments and controls in this area a key element of the future. Let me refer briefly to business conduct. The crisis has reminded us, rather painfully, that conduct is another key factor to consider in any sustainable business model. I would like to point out that conduct change is the only means of responding to the challenge the sector faces to restore its image and reputation. Society has changed in terms of its demands of the financial sector, including also higher standards for AML-CFT. The rules governing customer-bank relations have likewise changed. Banks should, therefore, move to respond to the new social and regulatory reality. It is worth recalling that a very positive consequence of this policy is that it increases legal certainty, significantly reducing potential litigation costs. In many cases, implementing these policies involves a top-down cultural change.
Subject to data availability, the sample is 1997–2007. The lead of monetary policy varies. Source: ECB Staff calculations. BIS central bankers’ speeches  11  Chart 11: Monetary policy accommodation and price of risk  Note: Monetary policy accommodation is proxied by the residual of an estimated monetary policy reaction function (with inverted sign). For the US it is based on G. Rudebusch (2009), “The Fed’s Monetary Policy Response to the Current Crisis”, San Francisco Fed Economic Letter. For the euro area it is based on an update of the reaction function estimated in L. Christiano, R. Motto and M. Rostagno (2010), “Financial Factors in Economic Fluctuations”, ECB WP No. 1192. The price of risk of equity is derived from the VIX-index following Bekaert et al. (2010), “Risk, uncertainty and monetary policy”, NBER Working Paper Series No. 16397. The charts are based on the historical decomposition derived from their multivariate model, extended also to the euro area. Subject to data availability, the sample is 1997–2007. Source: ECB staff calculations. 12  BIS central bankers’ speeches  Chart 12: Monetary policy accommodation and leverage  Note: Monetary policy accommodation is proxied by the residual of an estimated monetary policy reaction function (with inverted sign). For the US it is based on G. Rudebusch (2009), “The Fed’s Monetary Policy Response to the Current Crisis”, San Francisco Fed Economic Letter.

Paul Samuelson, however, has pointed out the restrictiveness of assumptions which are required to obtain the above-mentioned result.2 He draws attention to the fact that the long-term impact of innovation abroad in a world of free trade and mobile capital is not  2  P. Samuelson (2004), “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization”, Journal of Economic Perspectives, 18, 3, pp. 135–146. 2  BIS central bankers’ speeches  unconditionally welfare-enhancing. His observations have not given rise to much debate. Maybe it’s time to revive such a debate. There are several ways in which faster growth in EMEs may have a negative impact on advanced economies and dampen their production potential, at least for some time. One way is through the classical side-effect of comparative advantage. If the dislocation phenomenon is long and sizeable enough, the transition to the new steady state is bound to take a long time, during which growth will be subdued.3 There may be reasons for believing that the adjustment process we are currently experiencing, with hundreds of millions of people gaining access in a very short time to the market economy, is not necessarily consistent with the simplified trade models that we used in order to analyse changes in comparative advantage. Some of these issues linked to globalisation have been considered from the perspective of technological change.
As the natural rate falls, so does the rate that stimulates the economy. With the natural rate now lower in the euro area, and the significant downward shock to output and inflation from the crisis, negative rates, and our other policy measures, have been necessary to stimulate demand and drive inflation towards our objective. There is a limit to how low short-term rates can go. Since the return on cash is zero, at some point the public will switch to using cash and disintermediate the banking sector. Of course, there are costs involved in holding large quantities in cash, so the crossover point lies a little way below zero. Given that there is a limit to how low interest rates can go, other unconventional measures have to come into play. There is not just one short-term interest rate that matters for saving and borrowing decisions. Our asset purchase and targeted long-term repo programmes seek to influence the entire constellation of rates that affect economic conditions. We have provided guidance that we will not withdraw stimulus until output and inflation are on sustainable paths. But let me emphasise once more, these measures were necessary given the size of the crisis and the already low natural rate. Effectiveness of the unconventional measures That brings me to my second question, have the unconventional measures been successful? The short answer is yes. The euro area economy is recovering steadily. Unemployment is falling, reaching 10% in the third quarter.

At the same time, a number of jurisdictions are marked by overcapacity in banking and have average cost to income ratios markedly above those seen elsewhere in Europe and other advanced economies. Finally, banks are under increasing competition from non-banks and the FinTech sector. It is certainly a challenging time on many fronts for euro area banks, and many will have to consider carefully their business models. Such efforts need to go hand-in-hand with further steps towards closer cross-border integration: completing banking union is crucial to allow banks to compete internationally as euro area banks and not only as national champions. We need a single euro area regulatory approach that will facilitate cross-border mergers, acquisitions and investment, thereby enhancing diversification, risk-sharing and efficiency. Only by completing what we started can we reap the full benefits of banking union. Changes are also likely needed from savings products frequently used in the past. I believe that the really important question to debate tonight is not quite the published title, but instead: what are the challenges for long-term saving products in the presence of a low natural rate. Conclusion Let me sum up. The ECB’s unconventional policy measures over recent years have been necessary to react to the severe negative shock arising from the crisis. They differ from conventional policy measures taken before the crisis in part because of impairments to the transmission mechanism caused by the crisis.
We do understand that it is rather difficult for small businesses to receive financing even in normal conditions, and in challenging times small and medium-sized enterprises are those who are affected the most. It is hard for small businesses to achieve favourable terms and protect their interests in the course of negotiations with banks. In addition, small, just as medium-sized enterprises are certainly on a budget and they need to have access to both loans and daily financial transactions. Normally, we closely monitor SME lending trends. This year, we also put a special focus on loan restructuring since it became highly requested when many companies really lost their revenues and customers. Not all companies had safety cushions; and even large corporates do not always have them. Moreover, it is rather hard for small and medium-sized businesses to maintain safety cushions for challenging times. I should stress that this period still differs from the 2014–2015 crisis, for instance. SME lending plummeted in 2014–2015, while this year the trend is generally positive. Of course, it may not fully offset all the hardships small and medium-sized enterprises have to face. Nonetheless, the loan portfolio has expanded by nearly 15%, specifically 14.7%, since the beginning of the year. The number of borrowers has increased by 63.6% since early 2020, to exceed 450,000 companies.

The whole region is going through a political, economic and social consolidation process. The policy-makers, the decision-makers, the examiners and almost everybody declare that their priority is the adherence to the European Union. The question to ask is if:   we have either to converge towards the European economic zone with small and fragmented economic structures competing with each other for European markets and opportunities,    or embrace a model:   gaining from the economies of scale,    encouraging and exploiting the advantages of the current competitive positions;    that grows the economic prosperity of the whole region and of each individual economy? Personally I think that the second alternative is the contemporary approach that our region should embrace with no hesitation. The success of this process shall depend on all our attempts and devotion to see which our competitive advantages are and to build up the right  2  BIS Review 117/2010  economic, financial, legal and physical infrastructure to use and increase these advantages to become competitive in the global economy. Therefore, its is significantly important that the study of the growth model takes place not only from a regional point of view, but to be an approach directed deeply towards the future.
Growth of Islamic finance The growth of Islamic finance as an ethical means of investing wealth arose because Muslims wanted to invest their monies to get good returns, but in accordance with Islamic principles. While the proportion of Islamic banking assets as a percentage of total banking assets remain small – at about less than 20%, – this has risen over the years. We are seeing more examples of successful and viable Islamic financing products in the international marketplace. Islamic banking is getting more widespread in Muslim and non-Muslim countries alike. Takaful insurance and Islamic mutual funds are becoming commonplace. In fact, these products have become so popular, even non-Muslims are investing in them. We can expect to see Islamic finance develop further globally, eventually becoming an integral component of the international financial system. Singapore wants to develop Islamic finance as well. This will make our international financial centre more complete. The development of Islamic finance here can take advantage of our capabilities in wealth management, project financing and trade financing. We have been working in close partnership  2  BIS Review 21/2007  with the industry to review our regulatory framework, and support and facilitate financial institutions to provide a wide suite of Islamic financial services and products. More Middle Eastern banks are setting up offices in Singapore. At the end of 2005, we had six Middle Eastern banks. In 2006, two more came. Since the beginning of this year, three banks have applied to set up representative offices here.

But this is not to say that history is not instructive and no useful lessons can be drawn from it. To understand how to face the challenges ahead of us, it may be useful to understand how similar challenges were faced and overcome in the past, and particularly how some were able to make progress while others lost ground at times when the pace of globalisation accelerated. Much has been written recently on this subject. Niall Ferguson and Ian Morris, for instance, examine the reasons why the West has “ruled” the world – at least until now.1 In essence, they assert that civilizations developed and rose to dominance when they were open to innovations from abroad and were able to develop and use them to their advantage. This applies to both migratory flows and imports of agricultural or manufactured goods, ideas and scientific innovations, in a context of competition. Those who were closed to globalisation declined, even if they had achieved a leading position in economic, technological or military matters. That is the reason why, according to Jared Diamond, a European, rather than a Chinese explorer, discovered America at the end of the fifteenth century, even though China’s economic development was much more advanced and had a much greater army and navy.2 I would like to quote briefly Diamond: “Christopher Columbus, an Italian by birth, switched his allegiance to the duke of Anjou in France, then to the king of Portugal.
In particular, although high uncertainty surrounds this area, new technologies clearly pose the most significant challenge (and opportunity) for banks in the medium and long term. These technologies may rapidly alter the competition framework, increasing competition in some segments and changing both the demand for banking services and the way in which they are provided. This means that banks will have to respond by anticipating and adjusting to the new environment, even though this may entail higher costs in the short term. The current degree of penetration of new technologies is comparatively low in Spain, as shown in Chart 20. This, together with Spain’s extensive bank branch network, leads one to believe that there is considerable room for growth in digital banking and for efficiency gains, providing a growth opportunity for Spanish banking institutions. Growing financial disintermediation is yet another challenge for the banking sector. Its intensity will depend on short-term and structural factors relating to monetary policy developments, the emergence of new competitors, progress in the capital markets union and long-term saving trends. Challenges facing the euro area Lastly, let me now turn to the challenges facing the euro area, since the outlook for the Spanish economy also relies to a crucial extent on these challenges being adequately met. In this respect, despite the improvements made in the European architecture in recent years, more progress is needed to enhance euro area stability, requiring further steps to reduce risks and also to share them between the Member States.

At the same time, we must avoid  BIS Review 10/1999  – 10 –  a situation whereby interest rates are so high that monetary policy contributes to a downturn that undermines confidence in the krone. Interest rates are set based on these considerations. *  BIS Review 10/1999  *  *
Jarle Bergo: Cyclical developments and monetary policy Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at Regional network, Region East, Oslo, 10 November 2004. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 3 November, Inflation Report 3/04 and on previous speeches. The references and the  Charts in pdf-format can also be found on the website of the Norges Bank. * * * Price stability, in the sense of low and stable inflation, is the objective of monetary policy in a number of countries. Historically, the experience of Norway and other countries is that high inflation has resulted in unstable output and employment. In addition, a fall in the price level will often occur in tandem with a downturn. The first inflation target was introduced in New Zealand in 1990. Canada followed in 1991, the UK in 1992, and Sweden and Australia in 1993. A number of other countries have followed suit. In Norway, the Government issued a regulation introducing an inflation target in 2001. Monetary policy in euro area countries and Switzerland is also aimed at price stability, even though this is not referred to as inflation targeting in these countries. Inflation targeting has proved to be particularly appropriate in very open, small and medium-sized economies.

This implies that Norges Bank maintains the key interest rate at the current level in the period to summer 2005, with a gradual increase thereafter. It is the Executive Board’s assessment that the projections seem to provide a reasonable balance between the objective of increasing inflation and at the same time avoiding excessive growth in output and employment. The projections imply a sight deposit rate in the interval 1¼ - 2¼ per cent in mid-March 2005. Uncertainty as to the effects of previous monetary policy easing and the unusually low interest rate level imply, on the one hand, that we should exercise caution with regard to further interest rate reductions. On the other hand, the prospect of continued low inflation for a period ahead implies that wide deviations from projected economic developments would be required before interest rates should be increased. The prospect of continued low inflation in Norway also implies that we should lag behind other countries in setting interest rates at a more normal level. At its monetary policy meeting on 3 November, the Executive Board decided to leave the sight deposit rate unchanged at 1.75 per cent. At this meeting, the Executive Board did not see any clear alternatives to leaving the interest rate unchanged. In reaching its decision, the Executive Board has weighed the objective of bringing inflation back to target against the risk that output growth may eventually be too high. BIS Review 66/2004  5
How a neutral monetary stance translates into the short real rate is difficult to determine precisely but it can be said that the current rate is comparatively low, with an impact on total demand that should be stimulatory. In addition, the level of the real exchange rate is weak in relation to a reasonable long-term equilibrium. This means that its effect is stimulatory, too. The combined effect of the short interest rate and the exchange rate is therefore tending to support the economic upswing. All else equal, an expansionary monetary stance leads to a successive acceleration of demand. In time, this may generate a growth rate that exceeds the economy’s long-term potential. The ability of the economy to cope with a high demand trend is not unlimited. As unutilised resources are activated and the output gap closes, bottlenecks of various kinds arise in the labour market or in real capital. It is in such a situation that inflation may accelerate. In order to avoid the occurrence of shortages and accelerating inflation, the monetary stance must not remain too expansive for too long in an upward phase. Instead, a timely adjustment -- bearing in mind the lag associated with monetary policy -- must be made to a more neutral position before the output gap closes. This promotes a continued growth of demand at a rate the economy can absorb -- for instance with the help of new investment, improved efficiency and labour supply -- without generating inflationary bottlenecks.

Initially, about three-quarters of the GDP’s increase came from manufacturing, which represents only about 20 per cent of Sweden’s economy. This meant that bottlenecks occurred fairly quickly, accompanied by various types of inflationary impulses. Our relatively small industrial sector cannot be expected to sustain a growth rate that is higher than the total economy achieved in the 1970s and 1980s. The problem with the dual economy -- a flourishing export-related industrial sector and a rather weak recovery in sectors with a more domestic orientation -- stemmed in part from low confidence in economic policy’s determination and ability to keep inflation low in the longer run. This in turn was a consequence of Sweden’s poor record in this respect, coupled with serious problems with government finances. Long bond rates fluctuated widely and in 1994 and 1995 they actually climbed to the levels of the years of high inflation. The exchange rate continued along its depreciating path from the 1970s and 1980s. For the Riksbank, the lack of confidence in the direction of economic policy left little room for manoeuvre. Although the instrumental rate was lowered during the spring of 1994, virtually all the market rates and particularly those for longer maturities rose. Sweden was approaching a point where economic policy had to demonstrate that the focus on stability was a firm commitment. The monetary tightening and, perhaps to an even greater extent, the fiscal consolidation gradually generated increased confidence in Sweden’s readiness and ability to achieve low long-term inflation.