samchain/econo-pairs-v1 huggingface dataset:
G7 2019 Conference – Banque de France, 10 May 2019 Cybersecurity: Coordinating efforts to protect the financial sector in the global economy Conclusion by François Villeroy de Galhau Governor, Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 sur 6 Ladies and Gentlemen, First, I would like to thank the moderators and the panelists for their very rich comments and the very useful ideas. We are all convinced that cybersecurity of the financial sector will remain on our agenda for a long time. The challenge is no longer about gaining awareness anymore, but to find ways to intensify and rationalise our action. Based on the discussions today, let me start with one pre-requisite – coordination - and then propose concrete steps and tangible actions to improve our coordination in three areas: I. Regulation and supervision; II. Information; III. Preparation. A. Global threats, coordinated action Panel 1 questioned the importance of cyber threats for the financial sector. There is a consensus that the level of cyber threats has never been so high, but at the same time, we must acknowledge that the capacity to anticipate attacks needs to be reinforced. Following an attack, we need to address the potential contagion issues to the entire financial system or the entire economy. This is why coordination is a pre-requisite, not an easy one but a necessary one. While remaining realistic, there will not be a “world organization for cybersecurity” for obvious reasons, including trust. Hence, coordination should be cross-jurisdictional.

Bandid Nijathaworn: Some thoughts on IMF reform on crisis prevention and crisis resolution Speech by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, presented to the G-20 Workshop on Reform of Bretton Woods Institutions, Tokyo, 28 February 2006. *  *  *  Thank you Chairman, First, let me thank the Ministry of Finance of Japan for inviting me to this workshop on the reform of the Bretton Woods Institutions. This workshop is another reminder that the work on IMF reform is still ongoing. Next year will be a full ten years since the height of the Asian financial crisis. Over the past decade, many important ideas on the reform of the IMF have been advanced, but still there is no consensus on how the reform should move forward. I see today’s workshop as another opportunity to contribute to this ongoing debate. And whatever the outcome may be, the reform will certainly mark a critical turning point for the global economy, as the Bretton Woods Institutions attempt to adapt their roles and responsibilities to the forces of globalization. Today, I have been asked to speak on IMF crisis prevention and crisis resolution. Given the limitation of time, and the fact that the recommendations on these two issues have been many and are well-known, I thought the best way for me to add value to today’s discussion is to share with you our thoughts on the subject, as well as to make three specific points.
In November 2011, the Riksbank, the Ministry of Finance and Finansinspektionen announced that the four major Swedish banks would meet the capital adequacy requirements of 10 per cent of the risk-weighted assets from 1 January this year and of 12 per cent from 1 January 2015. All of the four major banks now have CET 1 ratios that are higher than 10 per cent according to the definition in Basel III. Three of the banks are also above 12 per cent. The Swedish authorities have also said that the banks should meet the short-term liquidity measure in Basel III (the LCR) both in total and separately for the euro and the US dollar. This requirement has been compulsory for the eight largest Swedish banks since 1 January this year.3 The Riksbank has also recommended the banks to improve their public information on liquidity risks and the degree of encumbered assets. This is because greater transparency increases both confidence and market discipline. I am pleased to say that the banks’ public  3  These are Nordea, Swedbank, Handelsbanken, SEB, SBAB, Svensk Exportkredit, Kommuninvest and Länsförsäkringar Bank. 8  BIS central bankers’ speeches  reporting has improved in line with the Riksbank's recommendations, although some work still remains to be done (see Table 1). Table 1 The banks’ public information on liquidity risks  These measures have contributed to the relative stability of the Swedish banks. But I don’t think we have finished yet.

Main macroeconomic indicators1 2000  2001  2002  2003  2004  Real economy indicators (in point percentage) GDP growth  7.8  6.5  4.5 - 5  6.0  6.0  Annual CPI (average)  0.0  3.1  5.2  2.3  3.0  Nominal GDP (Lek billion)  539.2  590.2  678  745  823  -8.2  -6.9  -5.8  -4.8  10.6  Fiscal indicators (in percentage versus the GDP) Fiscal deficit  -8.9  Monetary indicators (in percentage point) M 3 Growth  12  19.9  7.0  9.5  3m TB Interest rate  7.8  8.0  10.6  7.6  2.1  Inflation and monetary policy in 2004  The monetary policy of the Bank of Albania during 2003 was characterized by easing trends of the monetary conditions, in compliance with the lessening the inflationary pressures and improving the monetary indicators. The Bank of Albania took up the implementation of an easing monetary policy since April 2003 reducing the core interest rate by 0.5 percentage point. In July and October 2003, there were two other reductions by 0.5 percentage point each, bringing the core interest rate at the level it was at the beginning of the previous year. At the end of November 2003, the core interest rate was 7.0 percent; the annual inflation rate for that month was 3.4 percent, whereas the average annual inflation by the end of October was just 2.24 percent.
The response so far includes an aggressive easing of monetary policy, ensuring adequate liquidity to the financial markets and the banking sector, helping banks to better manage the increased risk in lending by introducing a government-sponsored credit guarantee scheme for SMEs, and encouraging banks to act early in assisting customers with debt rescheduling or debt restructuring so as to ward off the pressure on asset quality and on the non-performing loans. These are the direction and the measures we have taken in our response to the crisis, and more will be done if needed to ensure a smooth adjustment in the economy and the financial sector. Judging from what we are seeing in terms of the recent broad global developments, I am confident that the combined effects of the fiscal stimulus by the Government and the financial measures that the Bank of Thailand has put in place, should provide the essential cushion for the economy to adjust to shock, and keep the impact of the global financial crisis on the economy manageable. As for the near-term outlook, latest monthly data still show signs of sharp corrections in the domestic economy. Exports and tourism fell by 11 percent and 23 percent, respectively, in February from a year earlier. Imports, on the other hand, fell by more than 40 percent, indicating a sharp deterioration in the domestic demand and supply conditions, and this is reflected by the continued declines in manufacturing production, capacity utilization, private consumption and investment.

This should help reduce any fear that you may have about policy tightening in this area, and the current policy stance should help foreign-owned Thai resident companies to adjust well to the impact of the crisis. Ladies and Gentlemen, I hope my brief remark today has been useful in updating you on the current situations, and that it adds to the confidence that you already have in Thailand, and in the ability of our economy and the banking sector to weather the current global downturn. We are now living in an exceptional time, but our caution and right action, together with a good collaboration between private businesses and the authorities, will help see us through. Thank you for your attention and again thank you for the invitation. BIS Review 45/2009  3
And so, when the downturn came along, it was turned into disaster as the financial system collapsed. A taxpayer bailout and a million more people unemployed up and down the country. Financial instability is something for which everyone, and especially the most vulnerable, pays the price. An independent committee to take the long view  Against that backdrop, few would disagree with an intention to build a stable, resilient, financial system. But the road to disaster is paved with good intentions. There will always be pressure to live for the moment. A little loosening of standards can bring many years of small gains before the big price is paid. So in the aftermath of the crisis, Parliament did not just declare its intention to build a stable financial system. It chose also to commit to sticking to that intention. And there was, of course, a model for how to commit not to live for the moment in economic policy. In 1997, the Monetary Policy Committee of the Bank of England was established to deliver the clear intent of sustained low inflation. Successive governments had lived for the moment by pushing the economy to expand beyond its potential. Each time, that worked in the short term. But ultimately it brought no benefit and only a price: inflation and recession to get inflation back down again. Recognising that the pressure to live for the moment had resulted in serious costs, government and Parliament sought to entrench the long view in economic management. The results have been impressive.

In particular, the FPC is charged with ‘the identification of, monitoring of, and taking of action to remove or reduce, systemic risks with a view to protecting and enhancing the resilience of the UK financial system’, but this does not ‘require or authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term’. 7 This approach, of proposing and testing, is similar to the notion of ‘discursive governance’ proposed for independent regulatory agencies by Gehring (2004) and discussed in the financial stability context by Demekas (2019). 6  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Together, these three ingredients mean we have a clear mandate to follow but, at the same time, we have the flexibility that’s needed to manage financial stability efficiently and effectively. An example – resilience of major banks Our approach to how resilient major banks should be to economic shocks captures all of these ingredients. We started with Parliament’s preferences: resilience but not at the expense of growth over the medium to long term. Using all the evidence available, we’ve balanced the benefits and costs. On the benefit side of the ledger: the fact that the system will not magnify severe downturns.
6  ANNEX 2 - Functions of the governing bodies of the Banco de España In accordance with the provisions of Articles 17 to 23 of Law 13/1994 of 1 June 1994 of Autonomy of the Banco de España, and of its Internal Rules, the functions of the governing bodies of the Banco de España are, essentially, the following: 1 Powers of the Governor               Run the institution and preside over the Governing Council and the Executive Commission. Act as the Bank's legal representative to all effects and purposes, especially in the Courts of Justice. Authorise contracts and documents and perform all other activities necessary for the conduct of the functions conferred on the Banco de España. Represent the Banco de España at those institutions and international organisations in which its participation may be envisaged. Sit on the Governing Council and the General Council of the European Central Bank (ECB). Represent the Banco de España before the Spanish Parliament, acting as the channel for providing parliamentary access to Banco de España information that falls under the secrecy obligation, and attending the sessions of the parliamentary committees at which his/her presence is required under parliamentary regulations or national law Manage, at the highest level, all the services of the Banco de España, and sign any documents, such as minutes and circulars that he/she is required to formalise. Propose to the Government the appointment of the Deputy Governor.

A comparison with similar investments – for example, with the average yield on Swiss investment trusts and investment funds for foreign currency bonds – shows that this is a remarkable result. Gold holdings (Sfr 21 billion) and Swiss franc assets (Sfr 5 billion in securities, Sfr 16 billion in repos) also contribute to the earnings from monetary assets. The overall yield is largely determined by gold price and exchange rate fluctuations, while interest rate and credit risks play a lesser role. In the past year, overall aggregate income on monetary assets amounted to approximately 4.5%. Other than in earlier years, the price of gold contributed to a positive yield. Still, the gold price is subject to strong fluctuations and its development is difficult to foresee. Moreover, as in the past, unfavourable currency movements are to be expected. These influences were clearly at work during the past year. The appreciation of the Swiss franc has had a noticeable adverse effect on yields. In the first quarter, the soaring gold price led to a yield of approximately 3% on monetary assets. In the second quarter, considerable losses resulted on the currencies; these losses have already cancelled out a part of the positive overall yield from the first quarter. This illustrates the strong yield fluctuations to which our assets are exposed. With the current composition of monetary assets, average returns of close to 3% per annum are to be expected in the long term, however accompanied by high annual fluctuations.
However, more discerning lending policies have been pursued in the last few years, and this should reduce the chance of a sudden reduction in credit during any future economic slowdown. BIS Review 39/2000  2  Another feature of our work over the last seven years has been to emphasise the importance for small businesses of using the most appropriate forms of finance - the second “A”. Many improvements have been observed. There have been important changes in the provision of bank finance and the use of non-bank finance has increased. It is now more widely accepted that a small business may not meet all its needs from any one source and so may require a ‘package’ of finance, tailored to its individual requirements. This is particularly true for high growth firms. The characteristics of bank finance in the United Kingdom have changed considerably during the 1990s, most notably the decline in the net bank indebtedness of the small firms sector and the continued growth of term lending at the expense of overdrafts. The ratio of overdrafts to term lending has fallen significantly and now stands at 28:72, compared with early 1992 where it stood at 49:51. Notwithstanding the recent rise in bank borrowing by SMEs, the net bank indebtedness of the SME sector has continued to fall. The ratio of deposits to lending was 96% in December 1999, compared with 56% in December 1992. Small businesses have also, since the mid-1990s, gradually increased their use of fixed rate loans.

In December 1999 fixed rate loans accounted for 34% of term lending compared with just 28% in December 1996. Fixed rate loans provide SMEs with greater certainty of expenditure streams, assisting business planning and enabling businesses to operate in a more certain financial environment. UK small businesses have also increased their use of non-bank forms of finance, such as factoring, leasing and, more recently, equity finance. A recent survey showed that a higher proportion of SMEs used asset based finance in the UK than in any other EU country except Ireland. This trend, to move away from the reliance on short-term overdraft financing that prevailed in the early 1990s, towards a wider variety of types and sources of finance, is to be especially welcomed. It is widely acknowledged, however, that rapidly growing businesses require equity as well as debt finance. The formal venture capital industry often finds it difficult to help at the very small end. That makes it all the more important to develop the informal venture capital market, including the considerable potential contribution of business angels. In addition to their ability to inject smaller amounts than are viable for formal venture capital firms, business angels are also able to provide considerable technical expertise and general management advice. Estimates from Mason and Harrison suggest that business angels already invest £ million per year: true, it’s a long way below the US but it’s a significant contribution and one that should be encouraged.
In this context, it is vital to prevent these near-term inflationary pressures from passing through to the medium-term through second-round effects and, in particular, through an inflationary wage-price spiral. Avoiding this spiral is not in the least bit easy; nor, of course, is it rewarding in the shortterm. An incomes agreement is needed between workers and employers that will ensure gains for everyone in the medium-term, although in the near term everyone will have to 10  assume a loss. As in similar situations on previous occasions, I would like to emphasise the need for consensus to confront the scenario before us effectively. Employment in Spain and the competitiveness of the economy over the coming years will largely depend on our ability to reach these difficult compromises. In the past we have reached agreements of this importance and they have borne fruit. Given this evidence, and the magnitude of the current challenge, I am optimistic that we will manage to do so once again. 11

But the Bill, taken together with the MOU which I have described, sets out those wider functions much more clearly than ever before, defining our responsibilities, our powers to exercise those responsibilities, and our lines of accountability to the Government, to Parliament and to the public at large. This is a much more precise framework for the Bank’s operations, but one which I am convinced is more appropriate to our modern times. I was delighted to learn last week that I am to be allowed to continue, for the next five years, to walk out with this attractive New Lady of Threadneedle Street, and I look forward to the challenge of carrying through the very positive changes now being made to the role and structure of the Bank. BIS Review 18/1998
And even if the flows were to be so large as to influence the krona’s rate, there is no reason to suppose that they would have a permanent effect on the krona’s exchange rate against the euro. These flows would be accompanied by many other types of currency transaction. The krona’s long-term level will depend instead on Sweden’s economic policy. When economic policy is credible and focused on low inflation, there are no grounds for believing that the krona would go on weakening continuously or that it would relinquish its position in Sweden’s economy. 4. Concluding remarks To round off what I have been saying, the development of a currency - be it the euro relative to the US dollar or the Swedish krona relative to the euro, for example - is dependent on the direction and results of economic policy. If the policies in the countries and  BIS Review 68/1998  -7-  regions we have been discussing are credible, focused on low inflation and successful, in the longer run the exchange rates ought not to diverge. The legal framework for economic policy in EMU provides a good foundation for a credible low-inflation policy. But it is still important that all the components of economic policy back up the objective of price stability right from the introduction of the single currency. The ECB can do this by conducting a credible monetary policy and explaining it clearly.

Much will therefore be required initially of the ECB in explaining its policy, presenting the analyses behind its decisions in an understandable way and creating a broad understanding of the monetary policy in every part of the union. This understanding may be tested particularly severely if price pressure in a particular country deviates from the average so that the repo rate is not perceived as appropriate to the national situation. The national central banks in the euro area should be able to lend a hand here, both in communications with the public and by providing sound analyses of tendencies in their home country. This brings me to the discussion about the ECB Governing Council. Concern has been voiced in the debate because the composition of the Council, the ECB’s supreme decision-making body, might lead to policy being influenced by strong national interests at the expense of the total picture. One source of this concern is that so many of the Council’s decision makers are national central bank governors, who might allow for national interests. Comparisons are made with the US Federal Reserve, whose decision-making body has a smaller proportion of regional governors. Another cause of this concern is that political accountability in the European Community is essentially exacted at the national level; it is largely in the national arena that economic policy is discussed. While these problems cannot be dismissed out of hand, I believe they have been exaggerated.