samchain/econo-pairs-v1 huggingface dataset:
Still, we have to reflect on the future role of central banks, both as stability guardians and crisis managers. This crisis has somewhat shaken up our pre-crisis understanding of the role central banks have for both monetary policy and financial stability. Central banks will not be able to just switch back to the status quo ante of before August 2007. I will therefore first take a step back and briefly review the pre-crisis consensus on the role of central banks. I will then discuss the ECB’s role as crisis manager and guarantor for stability in the current crisis, before reflecting, in the final part, on the future role of the ECB for both monetary and financial stability. BIS central bankers’ speeches  1  The pre-crisis consensus Before reflecting on where we have to go, let me start by reviewing where we stood ahead of the crisis regarding the role of central banks. By the 1980s, the global economy had experienced two oil price shocks and found itself in a stagflationary environment. The academic literature and policy watchers concluded that monetary policy could not contemporaneously control both, inflation and the level of unemployment. In this environment a consensus on the role of central banks emerged with two key elements. 1 The first element: central banks should focus on maintaining price stability. As you know, for the European Central Bank price stability over the medium term is the primary objective. Other central banks – though with differing emphasis in their mandate – clearly follow the same understanding.

These and many more questions need to be addressed in the months to come. Let me only mention the most obvious: •  A European banking supervisor only for the euro area or for the EU 27? A well-functioning financial market union is primarily in the interest of the monetary union. Nevertheless, non-euro area member states should be welcomed to put their institutions under the control of the European banking supervisor. •  A European banking supervisor for all banks or for the systemically important banks only? From my personal perspective, the European banking supervisor should only be entrusted with the supervision of the systemically important institutions on European or domestic level, at least at the beginning. Anything more is neither feasible nor desirable at the beginning of 2013. •  What shall be the division of labour between the ECB and the European Banking Authority (EBA)? From my perspective, EBA could be tasked with any future work on the Single Rulebook in the single market, ie for the EU 27. •  And finally, what shall be the division of labour between the ECB and the national supervisory authorities? It will be key to strike the right balance between relying on local know-how and expertise while safeguarding a single standard of supervision and a level playing field. The implementation of a European banking supervision is closely linked to the possibility of direct banking recapitalisation via the ESM in the future and should not least therefore be advanced without undue delay.
Discussions within the European Payments Council (EPC), the European self-regulatory body for retail payments, started as far back as 2002. Acting as a catalyst for change and supporting the work of the European Commission and the industry, the Eurosystem has helped to successfully remove all remaining obstacles for the launch of SDD in November 2009. BIS Review 151/2009  1  The SEPA project has made a lot of progress after clarity was provided on the Multilateral Interchange Fees. In particular, in March 2009, a Joint Statement of the European Commission and the Eurosystem has outlined the way forward on the future SDD business model.1 This was instrumental to a new Regulation which offers an interim arrangement for cross-border and domestic SDD interchange fees and, hence, was crucial for the EPC to conclude its work on the SDD.2 This new Regulation on cross-border payments also requires that all euro area banks that currently offer euro direct debits at national level must also be reachable for cross-border euro direct debits by 1 November 2010.3 By guaranteeing the reachability, we hope that this will provide a strong impetus to the market take-up of the SDD. The second achievement in 2009 in the migration process to SEPA has been the close stakeholder involvement. Here – I think – that the EPC has made considerable efforts to involve stakeholders in the further development process of the SEPA payment schemes.

Of this growth, card payments were the strongest driver.4 In the European Union, card payments reached a total of over 29 billion transactions in 2008, also growing at a rate of almost 9%.5 This shows the immense potential of this means of payment to generate revenue for the financial industry through growth, even at a time when interchange fees are under pressure. In my view, SEPA offers tremendous opportunities for further harmonisation of the use of cards, making them an even more attractive means of payment. But, besides the harmonization of card standards, more competition in the European cards market can bring additional benefits to consumers. Therefore, the Eurosystem remains convinced that an additional European card scheme is needed. Three initiatives are under way: PAYFAIR, EAPS and “Monnet”. The Eurosystem has maintained close contacts with all these initiatives to create an additional European card scheme. We are pleased to see that one of the initiatives has recently started a pilot with a large merchant, and that another initiative is operational among some of its constituent schemes, especially for ATM withdrawals. We are hopeful that these initiatives, whether separately or jointly, will come to fruition in the near future. In essence, for SEPA for Cards to become a success, card payments need to be positioned as a real alternative to cash: efficient, fast and guaranteed. This could and should be delivered by the already existing card schemes and the foreseen additional ones. However, this will not be enough.
Should the repo rate be used to slow down this development to try to prevent prices becoming so high that the fall, when it actually  BIS Review 37/2005  3  comes, will be too fast and too far? There are many examples of how the air has gone out of asset markets and thereby triggered or aggravated a downswing in economic activity. Or is it more reasonable to wait until the “bubble” has burst and then try to counteract the effects the best one can? This question is neither a simple one nor a new one. It is discussed by central banks around the world, whether or not they have specific inflation targets. And there is hardly a clear-cut answer. As I see it, the seriousness we in Sweden should attach to households' increased debt burden is closely connected with how we assess price trends in the housing market. Although there has so far been a large rise in prices, particularly in metropolitan areas, we have not seen the clearly speculative tendencies apparent in other markets, for instance Australia and the United Kingdom. In Sweden we still usually buy housing to live in it ourselves. In some other countries, where the tax legislation and housing loan markets are different from in Sweden, people buy one or more additional properties in the hope that they will rise in value, rather like buying equity or other financial assets.

1 But what are we to expect from the Riksbank’s balance sheet in the future? This is the question I would like to discuss today. My discussion will be based on a monetary policy perspective, which means that the focus is on the holdings of Swedish government bonds built up by the Riksbank in recent years and on the monetary base and the liquidity surplus that is now on the liability side of the balance sheet. There are other components that also have a major impact on the Riksbank’s balance sheet but I will not discuss these in any particular detail. Here, I am thinking mainly about the foreign exchange reserve. I will also refer to the international discussion, in which arguments have been put forward both for and against “large” central bank balance sheets. The arguments  I thank Henrik Erikson, Jesper Hansson, Björn Lagerwall, Marianne Sterner, and Anders Vredin for discussions and comments on previous versions of the text. *  1 [16]  concern two related questions: Should the purchase and sale of bonds be an active monetary policy tool even in the future? Do large bond holdings strengthen the transmission of central bank policy rates to market rates? Before I analyse these questions in more detail, I would like provide some background by describing both what central bank balance sheets looked like before the crisis and how they have developed since, and how the design of monetary policy interacts with the balance sheet.
Let me attempt to illustrate the gains of committing to a response pattern rather than pursuing a purely discretionary policy. We have developed tools that allows us to find interest rate paths that minimise the loss function, given a model of the economy’s functioning and given economic shocks. Within the framework of a small macroeconomic model, we have estimated the magnitude of the shocks to which the Norwegian economy has been exposed over the past 10-15 years. Under the two assumptions about monetary policy, discretion and commitment, we have estimated how large the variance of output and inflation will be over time. We have assumed that the economy is exposed to the same shocks as in history. Let me emphasise that this exercise is only meant as an illustration based on a stylised economic model. 10  BIS Review 10/2007  The chart shows the variance of inflation on the vertical axis and variance of the output gap on the horizontal axis. By minimising the loss function that I presented above under discretion and commitment respectively, we obtain different combinations of the variance of inflation and the variance of the output gap. By varying the weight on the output gap, lambda, in the loss function, we obtain a line for each strategy. The lines represent the minimum loss that can be achieved under commitment and under discretion.

BIS Review 10/2007  3  Long-term bond yields have been at historically low levels in recent years. From lying in a broad range around 10 per cent at the end of the 1980s, they have fallen to around 4 per cent in the past few years. Developments in nominal interest rates must be seen in the light of inflation developments. High and variable inflation pushed up nominal interest rates earlier, both directly and via an inflation risk premium. Future inflation uncertainty generates uncertainty as to the real value of investments and investors may require an extra compensation – a risk premium – for this. Low and stable inflation over the past 10-15 years has probably led to a decline in the normal interest rate level. Nevertheless, it would appear that long-term interest rates have been lower in recent years than one would believe to be a sustainable level, at least in the very long run. 4  BIS Review 10/2007  According to economic theory, in the long term the real interest rate is determined by structural fundamentals such as productivity and population growth and households’ long-term saving preferences.2 It seems reasonable that there is a long-term relationship between an economy’s potential growth and the real interest rate. If potential growth is higher than the real interest rate, the return on fixed investment will be higher than the cost of investing. This provides an incentive to increase fixed investment. Higher demand for fixed investment normally leads to higher real interest rates.
I want to take this opportunity to commend our banks, particularly those participating in the Comprehensive Assessment, as this was a very challenging year. The changes I just mentioned coincided with the new requirements and rules under the Comprehensive Assessment. I recognize that these changes may impact profitability in the short-term, but sound governance sets the stage for sustainably higher returns in the longer term. Banks are now subject to the single rule book and this calls for increased awareness and focus to meet these new challenges. This will reduce the overall risk in the financial system both in Malta and elsewhere. Going forward, there are other challenges that will need to be addressed by our financial system in order to further mitigate certain risks. In the aftermath of the sovereign debt crisis there is a heightened recognition that a more diversified investment portfolio would reduce the risk exposure related to the bank-sovereign nexus. Looking into the future, further diversification of our sovereign debt market may be warranted. It would be advisable if, going forward, stable alternative options are identified to complement current practice. Long-term placements with certain international wealth funds, for example, would ensure that government securities can have a more diversified investor base and possibly reduce the government’s borrowing costs at the same time.

Josef Bonnici: Enhancing competitiveness Address by Professor Josef Bonnici, Governor of the Central Bank of Malta, at the ifs Malta Annual Dinner of the Institute of Financial Services, Saint Julian’s, 15 December 2014. *  *  *  Accompanying charts can be found at the end of the speech. Hon. Minister, Members of the Institute, Distinguished Guests, I would like to thank the President and Committee of IFS-Malta for once again organising this Annual Dinner and giving me the opportunity to share my thoughts with such a distinguished audience. I would like to take this opportunity to welcome Ms Pelin Berkmen, Head of an IMF delegation, and members of her team, who are with us tonight and who have just concluded the annual Article IV Mission. A warm welcome also to Mr Antonio Bassanetti, from the IMF’s Executive Director’s office. I trust you will find this evening of relevance. Mr President, I was pleased to hear about the achievements of the Institute over the past year. Education and training are fundamental components of a successful and sustainable financial services sector. The endeavours of the Institute deserve due recognition. Well done to all of you and I wish every success for the future. Introduction The aftermath of the crisis provides an important starting point for the discussion of competitiveness, which will be the main theme of my remarks tonight. I will commence by focussing on Chart 1, which compares the performance of various economies since the onset of the crisis.
One view is that it is neither possible nor desirable to counter financial imbalances with an active monetary policy. According to this view, it is impossible to determine precisely the level of debt, asset prices and investments that constitutes an unacceptable risk for the financial system. Both an increase and the level of these variables may be important, but also the situation in the rest of economy. In addition, it is very difficult to determine the timing for a monetary policy response since monetary policy often functions with a lag. Third, the change in the interest rate that is necessary to reduce financial imbalances may be so large that it results in a sharp downturn. It is also conceivable that such an active policy may lead to moral hazard. Investors may undervalue risk if they expect the central bank to intervene when financial imbalances build up. The result may be that economic agents take more risk than is desirable. 9  See Rogoff, K. (2003), “Globalization and global disinflation”, in Monetary policy and uncertainty: Adapting to a change in economy, Federal Reserve Bank of Kansas City. 10 In the UK, developments have been similar. See King, Mervyn (2005), “Monetary Policy: Practice Ahead of Theory, Mais Lecture 2005“, lecture at the Cass Business School, City University, London, 17 May. BIS Review 43/2005  7  Central banks will, nevertheless, place emphasis on the effects of developments in asset prices, the money supply and credit on future inflation and output. The grounds are somewhat different.

A high standard of professionalism, laced with strong ethical values and integrity also form the prerequisites to create a new cadre of Islamic finance scholars. The pursuit for intellectual diversity and professionalism among scholars is best demonstrated through Shariah interpretations and lines of reasoning that evolve with peculiarity of circumstances, demonstrating a high degree of tolerance and respect of other Shariah school of thoughts. It is only by having talents with these ingrained ethics and characteristics that we could elevate Islamic finance to greater heights in our endeavour to improve the wellbeing of the ummah. Tonight, as we commemorate this prestigious award, let us celebrate this year’s and past years’ winners for their contributions to drive the Islamic finance agenda forward. It is not just their academic and working credentials that merit them this award, but it is also their relentless pursuit of al-falah (success) through their drive, knowledge and wisdom. I believe that this year’s RAIF winner and past winners have paved the path for future talents of 2/3  BIS central bankers' speeches  Islamic finance to embark on breakthrough ideas and thinking. It is for this very reason, that this year’s award is conferred to the visionary talents that had made impactful and significant contributions to Islamic finance.
BIS central bankers’ speeches  and consider “undeveloped” is now more fiscally responsible and is growing faster than the United States. What does that say about the fiscal rectitude of the U.S. Congress? Here is the point: As demonstrated by the relative and continued, inexorable outperformance by Texas – which is affected by the same monetary policy as are all of the other 49 states – the key to harnessing the monetary accommodation provided by the Fed lies in the hands of our fiscal and regulatory authorities, the Congress working with the executive branch. As demonstrated by the fiscal posture of Mexico, a nation can effect budgetary discipline and still have growth. One might draw two lessons here. The first comes from Germany’s finance minister, Wolfgang Schäuble, who from my perspective was spot on when he said, “If you want more private demand, you have to take people’s angst away” by having responsible and disciplined fiscal and regulatory policy.7 Clearly, there is less angst involved in conducting business in Texas. The second is a broader, macroeconomic truism: that fiscal and regulatory policy either complements monetary policy or retards its utility as a propellant for job creation. Mexico is proof positive that good fiscal policy enhances the effectiveness of thoughtfully conducted monetary policy, which is what the Banco de México – whose independence, incidentally, was enshrined by a constitutional amendment in 1994 – has delivered under its single mandate of inflation control and by applying the tool of inflation targeting.

Jean-Pierre Danthine: Does cash have a future? Summary of a speech by Mr Jean-Pierre Danthine, Vice Chairman of the Governing Board of the Swiss National Bank, at the Assemblée Générale de l’Association des Alumni HEC, Lausanne, 8 May 2014. *  *  *  The complete speech can be found in German on the Swiss National Bank’s website: www.snb.ch. One of the traditional tasks of the Swiss National Bank (SNB) is to provide the economy with banknotes and coins. Since the establishment of the SNB, banknotes have constituted the most visible link to the population. As an everyday article of use, but also symbolically, banknotes embody the quality, security and stability of the SNB, and of Switzerland in general, not least of all also for the rest of the world. It is therefore of key importance that the SNB undertake the task of cash supply and distribution conscientiously. The role that banknotes play in the public’s trust in the institution and its decisions is not to be underestimated. In turn, this trust is an important prerequisite for the SNB to be able to fulfil its core monetary policy mandate, and thereby ensure price stability. Due to technological developments in the post-war period, the significance of cash declined, as measured in terms of economic performance. Since the beginning of the 1990s, however, the demand for cash has hovered at a stable level, and since 2008, in the wake of the financial crisis, there has even been a marked increase.
This implies an expanded programme generally for young families, young specialists, as well as rural mortgage — these are the preferential programmes that may be implemented on an ongoing basis. Of course, we will be discussing all these issues with the Government and the banking community and we also encourage you to express your opinion. For many banks, mortgage lending is a key component of their business models. Now, I would like to speak on regulation. While the focus is mostly put on the regulatory easing, 3/7  BIS central bankers' speeches  including temporary relaxations to be curtailed, the decisions we made in 2020 also covered systemic regulatory changes. These systemic regulatory changes have also largely helped banks to release capital. First and foremost, I am talking of the new approaches implemented that have enabled us to reduce the load on capital for low-risk loans, that is, for investment-grade borrowers when new standardised approaches are in place, mortgage loans with sufficiently large down payments, consumer loans to borrowers with low payment-to-income ratios, as well as in high-priority areas, such as lending to small and medium-sized businesses and project finance. According to our estimate, the overall capital released owing to these decisions last year amounted to one trillion rubles, which is actually equivalent to a potential lending expansion by ten trillion rubles. These systemic measures will not be terminated and will remain effective in the future as well.

This implies not only that the banking system itself has remained robust, but also that it has fulfilled its mission, providing significant support to the economy, restructuring loans and granting new ones. Specific figures are well known, but still I would like to repeat these data again. Last year, corporate lending expanded by 10%, which is nearly two times more than in 2019 before the pandemic. Lending to small businesses increased by 20%. Disbursements peaked in spring when businesses desperately needed financial resources and their revenues plummeted. Lending was largely a way to support wages and repay loans, and so on. The banking system was thus capable to address this challenge in spring. Of course, the Government’s preferential lending programmes were also of major importance. We can see that mortgage lending surged last year by over 20%, but I will dwell on this topic later. Both preferential mortgage lending programmes and interest rate decreases in the economy in general played a significant role in this respect. Consumer lending used to be a matter of our concern before the pandemic, but last year it was growing moderately, in our opinion, adding about 9%. In this regard, banks were reasonable and conservative in their assessments of borrowers’ risks. Moreover, borrowers themselves preferred not to increase their liabilities in such an uncertain environment. Loan restructuring has become one of the main channels for the financial system to support the economy.