samchain/econo-pairs-v1 huggingface dataset:
24.11.2020  Closing address. 1st Mapfre Sustainable Finances Observatory Forum Margarita Delgado Deputy Governor  *English translation of the original speech in Spanish  Good morning. I much appreciate this invitation to close this first Mapfre Sustainable Finances Observatory Forum. Allow me to congratulate Mapfre on this initiative and, naturally, Iberdrola and the Valladolid San Juan de Dios centre too for this well-deserved award. As many of you will know, I have now been Deputy Governor of the Banco de España for a little more than two years. A glance at my public agenda over this period will show that a significant number of my public interventions address what has come to be known as “green or sustainable finances”. Yet among the public addresses by my predecessors in the post, you will find none on this subject. Nor do I think you will find many speeches on sustainability on other central bank websites that are more than two years old. Along with my personal interest in the goals of combating climate change, I believe this shows two things: first, how novel this topic is for supervisors and central banks; and second, the great interest it arouses in public opinion. Looking through the newspapers we see every day countless initiatives for action and communication in the most diverse sectors relating to sustainability. Undoubtedly, the first edition of this forum and of these awards are one such initiative. They are a magnificent opportunity to acknowledge efforts made in the area of responsible investment.

In corporate and labour market circles it is becoming commonplace to consider what the value or social impact of a specific activity is, and to attempt to evaluate the economic and labour consequences of regulatory changes. One good example of regulatory impact is the Ecological Transition Bill that is currently pending parliamentary approval. The aim, as you know, is to switch our economy towards an environmentally more sustainable model. This aim is very broadly shared in our society, but its achievement will have large-scale implications for our productive model that may also entail undesirable social consequences. The Banco de España is working with the Ministry of Ecological Transition to assess the economic and employment implications of the law. I can assure you that measuring these consequences is not proving easy, but also that their measurement is crucial. Why is this? Measuring the consequences is essential in order for there to be genuine transparency. There has to be information; without measurements there is only noise. 2  In the absence of information, we cannot make comparisons between alternative investments, or between consumption, economic activity or funding options. Without data, we are in the hands of image campaigns and good intentions. Responsible investment has an ambitious goal: no less than to transform the economic, environmental and social reality, or at least to contribute to this transformation. So how can this ambitious goal be achieved? The answer is simple: through the behaviour of economic agents, be they households, firms or investors.
Internet compared with railways Simplifying somewhat, the advent of the Internet can be compared with the era of railroad construction in Sweden in the second half of the nineteenth century. In the initial phase there was a boom for those who constructed the railways and manufactured rolling stock. In the closing decade of the century Swedish firms began to produce locomotives; previously BIS Review 118/1999  2  that had been the preserve of British manufacturers. The Swedish firms took over the domestic market and were even able to export their products. Much the same happened with the manufacture of passenger carriages and goods wagons. Today we can see similar developments in the IT industry. Besides the giant, Ericsson, Sweden has many different IT enterprises. But growth is still being driven not so much by users of the new communication facilities as by the production of new possibilities. To continue with the comparison, in the next phase people started to travel by rail. A journey from Stockholm to Gothenburg admittedly took 11 hours and 45 minutes in 1865, but that was nothing compared with a horse-drawn carriage. Travelling became quicker and more efficient; people gained new impressions and learned new things. Sweden became smaller. Today we travel on the Internet by gathering information simply and efficiently from all over the world, largely for the price of a local telephone call. Millions of people in all parts of the world are indeed using this facility and in that sense the world has now become smaller.

In particular, BELab has been created with the aim of providing the research community with greater access to high-quality microdata, in a controlled environment that ensures data confidentiality, through on-site or remote means depending on the sensitivity of the data. The microdata available at BELab include the Survey of Household Finances, the Survey of  1  Financial Competences, the balance sheet data of non-financial corporations and microdata on loans to legal persons. I would strongly encourage all of you to have a look at these data, because I honestly believe that allowing independent researchers to access high-quality data is a necessary step to enhance our knowledge of the Spanish economy. And this annual conference specifically should be seen as another step in furthering our commitment to research as an indispensable tool for improving economic policymaking, in this case with the focus on understanding and monitoring developments in the Spanish economy as a basis for promoting well founded economic policy decisions. We wish to strengthen our interaction with the research community in this field as a way of better discharging our legal responsibility to provide advice to the Spanish governments on economic policy matters. And related to this responsibility, the annual report of the Bank, that it´s regularly presented to Parliament, offers an analysis of recent developments in the Spanish economy within the global setting, as well as how it is likely to perform in the future and the challenges it faces.
Incidentally, the immediate tests we face are normalising fiscal policies once the recent improvement in the economic outlook proves to be sufficiently sustainable and adjusting the extraordinary monetary policy measures we introduced once the ECB’s medium-term inflation target is considered to be sustainably achieved. Going forward, the challenge is how to enshrine this success story in a stable and predictable framework, while also taking into account a number of additional challenges that lay ahead. As I said earlier, to ensure a proper operation of the policy mix in the euro area a number of reforms are needed in several areas. First, a meaningful revision of the European fiscal framework entailing a paradigm shift that incorporates supranational elements of fiscal burden-sharing, while at the same time guaranteeing full national responsibility. Second, a European, medium-term, economic growth-enhancing agenda promoting the development of a flexible, thriving economy, while pursuing deep reforms in all 10  corners of the euro area, and the EU in general. Third, the completion of the banking and capital markets unions, to cement a framework that genuinely cushions macro-financial shocks and provide an optimal environment to channel private investment for the climate and digital transitions. 11

Eventually, they raised the credit rating of the Kingdom to advanced grades. This environment promoted the interest of foreign investors to participate in and benefit from the various investment opportunities available in the Saudi economy. The Saudi banking system has played a vital role in the enhancement of the national economy. Thanks to its use of the latest technologies and various banking products, the banking system has witnessed good development under a supervisory system which is very keen to meet domestic requirements and legislation and to comply with international standards, including Basel Capital Adequacy Standard. The banks operating in the Kingdom are very serious in the application of this standard. As a result, the Kingdom's banking system has become one of the advanced systems, not only at the regional level but also at the international one. Dear Audience, Basel II Standards are the most important supervisory initiatives of this decade, and they will have a considerable impact on changing the conduct of risk management at all banks regardless of their size and location. The Standards aim at achieving a number of objectives, including ensuring the capital adequacy of the banking sector to encounter any latent risks and the assessment of banks' risk management systems so that the supervisory authorities could ensure that they are appropriate, in line with the risks that banks might encounter, and up to the best banking practices in the area of effective banking supervision.
Immediately after each meeting, the Bank issues a press release and holds a press conference. The key interest rate is set on the basis of an overall assessment of the inflation outlook two years ahead. Our inflation projections and our views on the balance of risks associated with these projections provide a summary of these assessments. Norges Bank’s inflation projection is our assessment of the most probable outcome of the rise in CPI two years ahead. In setting interest rates we also place emphasis on the probability distribution – or the balance of risks – surrounding the projection. Therefore, we also publish our judgement of the risk associated with our own projections. The phasing in of petroleum revenues has to be counteracted by a tighter monetary policy than would otherwise be the case. This may be accomplished through an adjustment of the interest rate, an appreciation of the krone or both. Small countries have experienced fairly wide exchange rate fluctuations. The Swedish krona has depreciated by more than 10 per cent since summer 2000. The Australian dollar has weakened by  BIS Review 18/2002  1  over 30 per cent since spring 1997. The UK, Canada and New Zealand have also experienced wide exchange rate fluctuations. The Norwegian krone, on the other hand, has been relatively stable. A monetary policy that is oriented towards low and stable inflation will contribute to stabilising aggregate demand and output. As a result, the central government budget will not normally have to be used actively to stabilise the economy.

Although the short-term interbank interest rates have come down to low levels very quickly, the interest rates for the 1-month maturity and beyond had stayed above 10% for a longer while. However, since mid-November the term interest rates have also eased steadily, with one month rate falling to 7.5% early this week. While some may regard the present levels of interest rates as too high and the correction in the stock market and property market too painful, they have missed a vital point when they put all the blame on the linked exchange rate system. This is because they have assumed, quite wrongly, that under a floating rate system, Hong Kong interest rates can stay constant or low compared with what they are under the linked exchange rate system. Moreover, they assume that the asset markets would have avoided the kind of sharp falls that we have experienced. This is an unrealistic assumption because the financial turmoil in our neighboring economies is a regional or even global problem from which Hong Kong cannot be immune. 4. It may be easier to explain my point by comparing Hong Kong with our neighboring economies. You are of course aware that the regional stock markets, including Hong Kong, have seen major corrections recently.
However, the announcement in the past week by a few jurisdictions in our region of blanket government guarantees on all bank deposits could potentially have a more direct impact on Singapore. Last Thursday the Singapore Government announced a guarantee on deposits of individuals and non-bank customers with banks, finance companies and merchant banks in Singapore until 31 December 2010. We have decided that such a guarantee is necessary for the following reasons. First, the guarantee ensures a level international playing field for banks in Singapore. The recent announcements in the region of blanket government guarantees on deposits set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors. If Singapore had not introduced a similar guarantee, there was a real risk that depositors would have shifted some of their deposits out of Singapore banks, to banks in other jurisdictions which guarantee deposits. This would have weakened financial institutions here. The Government has therefore taken a precautionary step to pre-empt and avert any such possibility. Second, the guarantee bolsters the confidence that the public has in Singapore’s financial system. It provides certainty to Singaporeans during such challenging and uncertain times in the international environment, notwithstanding that in Singapore our institutions are fundamentally sound. Third, financial services are an important pillar of Singapore’s economy, accounting for 12% of GDP and 5% of Singapore's employment.

To give another example, under the transposition of the second European Payment Services Directive (PSD2) in 2018, third-party payment service providers – which do not hold client funds – are subject to reduced annual reporting requirements. However, this proportionality does not mean being less demanding, especially with regard to the fight against money laundering. The general principle of “same activity, same rule” must apply. Indeed, it is in the Fintechs’ own interest that we should help them to apply the regulatory framework. We also want to help them when new rules are put in place. Under the PSD2 framework, the ACPR was the first European authority to grant authorisations for payment initiation and aggregation services. In total, it has authorised more than 20 actors to offer these new services since 2018. It has also worked to promote the development of open banking, by making sure that all actors can work together on the deployment of APIs. The eight workshops this afternoon, led by experts from nearly all of the ACPR’s directorates, are testament to the focus we place on teaching and informing. But if we can do even better, even more, tell us today. I shall finish by focusing on the ACPR-AMF Fintech Forum which is what brings us here today. Created in 2016, it is a forum for exchange which we try to make as efficient as possible by setting up, where needed, targeted working groups to make concrete progress on key topics.
This of course did not mean that we ceased to concern ourselves with the problems associated with debt and housing prices. Throughout this entire period, we have highlighted this development in our communication as a significant risk in the Swedish economy that needs to be dealt with but that we do not have the scope to address under the prevailing circumstances. I would say that it is largely differences in confidence in the inflation target that explain why Norway, for example, has been able to conduct a different monetary policy to the one pursued in Sweden after the financial crisis. Confidence in the target does not seem to have been threatened in the same way in Norway as in Sweden. But when it is threatened, I think it is very difficult to refrain from redirecting the policy and prioritising the inflation target. Naturally to prioritise the inflation target when confidence in it is threatened As far as I am aware, this confidence effect has so far not been considered very much in the research, if at all. The costs of “leaning against the wind” are typically assumed to arise in the short term, in the form of lower inflation and growth. But  the sense that we did not take rates down as quickly as we could have done considering the outlook for inflation alone.”  5 [21]  it might also be the case that confidence in the inflation target risks being lost in special circumstances.

The tendency to leak will of course be higher the greater the tension is between the policy rate and the shadow interest rate that ensues from the regulations and the longer the interest rate differential lasts. 3 [21]  economy and how great the cost is of the crisis that is possibly avoided or mitigated. To investigate this, theoretical models and simulations in quantified models have been used. 8 It is perhaps not particularly surprising that whether it is considered a good or a bad idea to use monetary policy to counteract financial imbalances largely depends on the assumptions made and how the model is designed. My interpretation of the literature is that it is not leaning clearly in either direction. 9 Taking a step away from the research literature, what does it look like in practice? As academic research has not come to any clear conclusion, it is perhaps not so surprising that central banks have slightly different opinions. Many central banks, for example the US Federal Reserve, seem sceptical to using the policy rate to counteract financial imbalances, other than possibly as an absolutely last resort, if nothing else proves effective. 10 But there are also central banks that have made a “leaning against the wind” policy into an integrated part of the monetary policy set-up. Perhaps the clearest current example is Norges Bank. Norges Bank’s remit refers, on the one hand, to regulations and the supervision of financial institutions being the most important means of preventing shocks in the financial system.
The officers responsible for supervision will naturally be more conservative than those promoting the financial sector. Managed well, this tension is constructive. Officers must continue to speak up and express their views, even though they may sometimes be overruled. With this approach to regulation, it is imperative for MAS to foster closer cooperation with the industry. We have made a serious effort to build a constructive exchange and dialogue with the private sector. We must continue to strengthen this culture of openness. Central bankers must treat some matters with the utmost discretion, to be discussed only in hushed tones among a select priesthood. But we cannot do all our business this way. In our day-to-day dealings with the financial institutions, we have to be constantly willing to explain the rationale for decisions and policies. At the same time, we must listen to proposals and ideas from the industry and feedback. As we continue to liberalise, we will need inputs from industry participants on many issues. We have to understand the industry’s point of view, and yet not be captured by the industry we are regulating. This mindset must permeate the whole of MAS, to every staff member. 5. Industry specific issues  Banks The first priority for banks is to upgrade their capabilities and strengthen their management teams. This is the only way for them to hold their own in the new environment, either by themselves or linked up with others in a strategic alliance or merger.

In Asia, this will pose a strong challenge to Singapore, because it will strengthen the tendency for a single major hub to emerge, rather than several smaller ones. Tokyo will perforce be the biggest financial centre in our time zone, because of the sheer size of Japan’s investment funds and its economy. But Tokyo has significant limitations - a high cost structure, domestically oriented financial markets, consensus-based decision making, and not least, a lack of English speakers. This creates room for at least one other major financial hub in Asia. Singapore enjoys good economic cooperation with our Asian partners. We are well-placed to service the region, whether it is PSA, Changi Airport, or financial services. As the region recovers and grows, we hope to prosper together with Malaysia, Indonesia and Thailand. But our relationship with them is qualitatively different from Hong Kong’s vis-à-vis China. Besides, Southeast Asia is a smaller hinterland than China. Therefore for Singapore to grow as a hub, we must extend our catchment area beyond Southeast Asia. Our orientation must be international, and not just regional. We have done this before. This is how we became the fourth largest forex centre globally and the leading centre for global derivatives trading in the Asian time zone. The challenge is to repeat this feat in new areas of competence. Developed markets and global players are already our customers. Singapore can be a portal, an intermediary or a market for them. Finding the right partners in strategic alliances will be critical.
A summary of the information gathered from these talks has been published in a quarterly report for some time now. We have redesigned this report to coincide with today’s monetary policy assessment. The aim of the new design is to allow readers to interpret the results of the talks at a glance. In addition, the text is supplemented by charts to enable comparisons over time. A structured approach, both with regard to conducting the surveys and to selecting the companies, forms the basis for the compilation of such time series. In redesigning the report, we also changed the title from ‘Business cycle trends’ to ‘Business cycle signals’. I am pleased to be able to present you with the delegates’ new ‘Business cycle signals’ report today. It will continue to be published as part of the SNB’s Quarterly Bulletin. Ladies and gentlemen, thank you for your attention. It is now my pleasure to give the floor to Fritz Zurbrügg, who will present this year’s Financial Stability Report. Page 4/4

This conference will provide an opportunity to reassess our traditional views on many of the issues before us. On this note, I wish you a very engaging and substantive conference. 2  BIS Review 20/2009