samchain/econo-pairs-v1 huggingface dataset:
•  Introduce products/supply chain focused credit facilities and payment instruments: Introduction of appropriate credit facilities as well as payment systems and instruments in commodity markets and production chains/supply chains seems to be new entry points to improve access to finance and financial inclusion. Women  8  BIS Review 40/2008  in agriculture can be driven towards a debt trap when prices collapse at the time of harvesting. Although it is common to both men and women in agriculture, losing regular incomes would be a bigger blow to women than men. There can be inland bills, goods receipt vouchers and other instruments that are discountable during such periods. This is a responsibility for banks and financial institutions. Let me sum up the substance in a few sentences. More than anything, there is an urgency on the part of CENWOR or Marga or any other institution to conduct research, surveys and statistical analyses to assess the status of enhancement of access to credit and financial inclusion among women in Sri Lanka. It is hard to come to conclusions without adequate and reliable statistics or even to initiate policy action to fill in gaps that exist in this area. It is equally important for the relevant Ministry or Ministries and other public and private organizations to coordinate and prepare a strategic plan to spearhead the campaign of financial inclusion for women and suggest policy and operational measures as they deem fit. This initiative too should be supported by well-recognized research institutions like CENWOR.

I view these two strands as complements rather than substitutes, with more work necessary on both. Turning first to the issue of reducing the consequences of failure, there are numerous elements of this effort underway. Some are focused on making the financial market infrastructure more robust so that when a failure occurs the shock is dampened, not amplified and propagated throughout the financial system. For example, considerable effort has been made to create incentives for firms to standardize over-the-counter derivative trades and to clear those trades through central counterparties. Similarly, extensive work has been undertaken by the Federal Reserve and the major clearing banks to make the tri-party repo system more stable. Money market mutual fund reform is also part of this ongoing effort. Other initiatives are focused on reducing the financial stability consequences from the failure of a systemically important financial firm. The major initiative here is the single point of entry framework for resolution proposed by the Federal Deposit Insurance Corporation. Under this framework, if a financial firm is to be resolved under Title II of the Dodd-Frank Act, the FDIC will place the top tier bank holding company into receivership and its assets will be transferred to a bridge holding company. The equity holders will be wiped out and sufficient long-term unsecured debt will be converted into equity in the new bridge company to cover any remaining losses and to ensure that the new entity is well capitalized and deemed creditworthy.
This would certainly lead to distortions. Nor would I condone the practice of  BIS Review 104/2006  1  requiring licenses for opening a branch in another area of the country. The banks must decide this for themselves. The content of the license application procedure is very important. Here the authorities have an opportunity to prevent bad apples from entering the barrel. The authorities must check that both owners and managers are “fit and proper”, which means competent and not criminal. The requirement regarding skills is of course higher if they want to run complex banking activities. It is not necessary that each Board member knows every bank activity himself but between them the Board should be competent on all issues. Remember that Nick Leeson at Barings Bank easily convinced his Board that he could run a highly profitable derivatives trading operation without any risk to the bank! The license application also includes the organisation and structure of the bank group. You should demand that this does not hinder the effective supervision of the group. Do you remember the BCCI bank which collapsed in the early 1990s? The bank’s owners had created a structure for their group with the clear intention of making full insight by the supervisors more difficult. For instance, the main activities and risk-taking did not take place where the main office and thus the main supervisor was located.

However, this should not stop an action started by the supervisor to deal with a presumed problem in the bank. The supervisory management and staff must also have reasonable protection should they be sued for their bona fide decisions taken as supervisors. In some countries the supervisors are harassed by frivolous lawsuits by bank owners, managers or other parties. Even if the supervisor is in the end acquitted from any guilt, the process may take years. During this time the supervisor will be severely hampered in performing her job having to concentrate on her defence. Such lawsuits will also reduce the willingness of other supervisors to take necessary supervisory decisions, since they are themselves afraid of being sued. A first line of defence is to take all major supervisory decisions in a collegiate fashion at the top level. Thus only the agency such can be sued as an institution. Nevertheless, should individual supervisors be sued, they must be provided assistance in the court proceedings, such as legal counsel and protection against any costs. Of course, if the supervisor is finally found guilty and have not acted in good faith, the supervisory agency could reclaim any outlays. The second issue is that the supervisors must have a sufficiently large and skilled staff with satisfactory resources. With too few, or not adequately skilled supervisors, bank problems may not be detected early enough which may lead to major crises. With too many supervisors interventions in the banks might become excessive, thus interfering in banks’ daily business.
Among these initiatives, we are joining with the Consumer Council in their consumer awareness campaigns. Another very important initiative I’d like to highlight, is our work with the Securities and Futures Commission to establish an Investor Education Centre (IEC). The HKMA will supplement this with additional consumer education independent of the IEC, focusing on areas such as banking products and services, as well as other investment products that may not be covered by the IEC. “The role of the consumer” So, as well as good practice among financial institutions, financial authorities also have an important role to play in enhancing consumer protection and education. But focusing on just those two groups leaves out possibly the most important group of all – the consumers themselves, to whom I will devote my remaining remarks. One of the things on which the global financial crisis cast a cold light was the implicit cost to households – and indeed to society and financial markets – of low levels of financial literacy. Financial literacy is increasingly recognised as an important individual life skill that people need to thrive in a modern economy like Hong Kong. Without it, consumers can be at risk of mis-buying and bank employees are themselves at a higher risk of mis-selling. For example, one of the hallmarks of our financial sector in this city is the universal banking regime that allows banks to offer basic services as well as a wide range of financial products.

In response to the changing landscape following the collapse of Lehman Brothers, the HKMA expanded its efforts to protect and educate consumers, and this change resulted in the creation in April 2010 of our Banking Conduct Department. I will focus first on our work to strengthen consumer protection before going on to saying something about our work on consumer education. HKMA & consumer protection In terms of consumer protection, first, the HKMA has introduced new requirements on banks and issued guidelines on the selling of investment products. These include (a) requiring audio-recording the customer risk profile assessment and sales process to provide audit trails for reviews by banks and the regulators; (b) implementing a pre-investment cooling-off period in the sale of unlisted structured products to less sophisticated customers (such as the elderly or first-time buyer); and (c) requiring banks to carry out continuous reviews of product risk and inform investors of any upward changes to the risk ratings of the products they have purchased. These requirements were in addition to existing measures introduced by the Hong Kong Securities and Futures Commission (SFC) on the supervision of securities companies’ selling activities. Second, the HKMA is active in monitoring banks’ compliance with these and other regulatory requirements through thematic on-site examinations. Banks are expected to have control processes and procedures in place to ensure adherence to the conduct regulations. In addition, to monitor compliance levels among banking staff, the HKMA conducts mystery shopping trips. Third, the HKMA has strengthened consumer protection by working with partners.
These two objectives contain the same “subject to that” language used in 1997 in the Monetary Policy Committee’s objectives. It means that there is a hierarchy of objectives which the FPC must observe. But, two further points are relevant here. First, resilience and economic growth interact, so they are not fully independent. An economy that displays stable growth is more likely to have a stable financial system, and vice versa. Second, policy is necessarily forward-looking, in that we are concerned with stability and growth in the future, since today’s outcomes are so to speak, “baked in”. This means that, in thinking about the hierarchy of objectives, in my view we have to take a forward-looking assessment of the probability of success, rather than saying we should complete one and then do the other. Financial stability is more complicated than monetary policy in at least one respect, namely that it does not reduce to a single target expressed as a number. Rather, it comes in the form of recommendations, in the plural, expressed as words. You would think that as central bankers and public officials we should love that, spending our time crafting language in a form that only we really understand. Let’s not get carried away here – there is a danger that  BIS central bankers’ speeches  1  by doing so we create uncertainty about our intentions. This danger of creating uncertainty exists because we are finding our way in a new and difficult area of policy.

Nevertheless, several risks should be highlighted: that of a sudden drop in US consumption in the wake of the problems in the property market; that of a sharp increase in commodity prices; that of a return to volatility on financial markets, after several exceptionally calm years; and, linked to the latter, that of a disorderly adjustment of exchange rates triggered by the build-up of international imbalances. The second concern relates to the extremely rapid growth of monetary and credit aggregates in the euro area. The annual growth rate of M3, which was below 6% in 2004, gradually accelerated and currently exceeds 10%. Loans to the private sector also continue to expand by more than 10%. Structural changes in money and credit demand – linked to financial  BIS Review 92/2007  1  innovation – may partly account for this acceleration. However, these developments must be closely monitored in view of their implications for monetary stability and that of financial systems. During 2004 and 2005, household borrowing was the primary source of credit growth; in 2006, this was replaced by lending to enterprises, in line with the economic recovery and the rise in – often highly leveraged – company buyouts. The strong profits and financial soundness of firms facilitate and sometimes encourage increased borrowing, which is then presented as “optimising” their liability structure. But balance sheets are weakening and difficulties could appear in the event of a turnaround in the business cycle.
At the same time, the SNB has been active in the foreign exchange market in order to react to increased demand for Swiss francs and prevent a renewed appreciation. This suggests that only a relatively modest portion of the newly acquired currency was invested in Swiss franc  5  Here, we are dealing with the inverse of the effect described in the previous footnote. Seite 5/7  securities. 6 The question therefore arises: in what form were the additional Swiss franc positions built up and held? Swiss franc positions increasingly built up through derivatives Forward foreign exchange contracts have become more and more important in recent years. In principle, investors have two options if they wish to build up Swiss franc positions and thereby reduce their foreign currency risk: either they can sell existing foreign currency assets and acquire assets in Swiss francs instead, or they can continue holding their existing foreign currency assets but hedge the associated currency risk through forward foreign exchange transactions (derivatives). Although both strategies are deployed in practice, the development of customer deposits suggests greater use of hedging transactions. This observation appears to be borne out by the rise in the share of hedged foreign currency assets held by Swiss pension funds. If the SNB increases liquidity in the banking system by purchasing foreign currency against new Swiss francs, this can lead to a rise in customer deposits at commercial banks. From mid2011 to mid-2013, investors increased their Swiss franc positions by forming Swiss franc deposits.

Despite very high demand for Swiss francs, the percentage fell from 21% to 15% between 2008 and 2014; since negative interest was introduced, it has fallen further and now stands at only about 11% (cf. chart 7). Conversely, the share of domestic investors has risen. This group often favours domestic bonds for their long-term investments, or is obliged to hold a given percentage of such bonds for regulatory reasons. Nonetheless, demand from foreign investors remains strong in some segments of the Swiss franc bond market, notably that for money market debt register claims. How do we explain this apparent paradox? One contributory factor is the distortions on the FX swap market mentioned before. While they make borrowing more expensive for foreign issuers, they have the opposite effect for foreign investors and offer special arbitrage opportunities. This allows investors from the US dollar or euro areas to achieve higher returns on a hedged basis. 5 The weekly auctions have been clearly oversubscribed, as can be seen from chart 8. Although the average yield to maturity is very low, bids have been significantly higher than actual allocation (blue), with some 60% of outstanding money market debt register claims currently in the hands of foreign investors. All in all, we can say that, despite strong demand for Swiss francs and low interest rates in Switzerland, the outstanding volume of the Swiss franc bond market has barely changed.
As part of the FSB-led and co-ordinated effort, the central bank Committee on Payment and Settlement Systems and IOSCO are beginning to work on this area of resolution. They must make a clear distinction between measures to procure, on the one hand, Recovery from distress and, on the other hand, Resolution. Orderly resolution is what is needed when a CCP is bankrupt, when we all need somehow to avoid the chaos that follows a standard liquidation of assets and closing out of positions. The issue, always, is where do the losses go? The answer cannot be the taxpayer. In the banking sphere, the answer, broadly, is bond holders and other unsecured, uninsured creditors. In the CCP sphere, it is probably the clearing members, as they would be the principal creditors in an insolvent liquidation. The technical issue is how to achieve that in a way that minimises disruption and value destruction and enables essential CCP services to be maintained. This is a key agenda item going forward. It will involve achieving greater clarity in the related area of the optimal “waterfall” of margin, default fund and CCP owncapital resources in absorbing losses. 4. Margin requirements and macroprudential policy  Earlier this year, US Treasury Secretary Geithner called for the world’s major financial authorities to agree minimum initial margin requirements for uncleared OTC derivative contracts, on the grounds that we must avoid a race to the bottom and incentives that make it attractive to clear bilaterally rather than via a CCP. I agree.

Not only are populations growing older. People are also living for longer. All of these considerations have led to greater attention to retirement planning and to an increase in the size of the pension fund portfolio. Although Asia as a whole lags behind the rest of the world in the development of pension schemes, the numerous pension reforms undertaken to facilitate pension and other retirement schemes have stimulated considerable growth in the size of funds. In some economies, such as Malaysia and Singapore, the pension asset-to-GDP ratio is as high as 50 to 60%. For a number of good reasons, pension funds tend to involve large bond allocations. This has already added to the demand for bonds, and, as with public sector funds, this demand is likely to grow in the future. But, as we are all aware, there is lack of a deep bond market in the emerging Asian economies and therefore much of the increased demand, from both the public and private sectors, has been satisfied by investments in bonds denominated in the major foreign currencies. Indeed the net portfolio outflows from nine emerging markets in Asia (including both public and private sectors) have increased sharply over the past five years - from $ billion in 1998 to $ billion in 2003. Emerging Asia as a whole is now a large net exporter of portfolio capital. The growth in demand for bonds arises from what is surely a positive process - the increase in public and private wealth in our region.
The report discusses three models for improving the efficiency of the ECB Councils' decision making in an enlargement of the number of participants in the monetary union: rotation, representation and delegation. That is to say, a rotating voting right between a number of central bank heads, similar to the Federal Open Markets Committee in the USA, the formation of constituencies of central bank heads with joint representatives on the ECB Council, rather like at the Bundesbank following the German reunification, and finally delegation to a small group of experts, roughly like the Monetary Policy Committee in the UK. The CEPR report then gives an account of the advantages and disadvantages of the three models. The discussion will probably intensify when the Nice Treaty comes into force. The roles played by Sweden and the Riksbank Sweden as a country plays an important role in the whole of this enlargement process, because of the support from both politicians and the general public for our neighbouring countries in the east. The Riksbank tries to contribute where we can. We share our experiences regarding monetary policy and financial stability, particularly with the three countries that, like Sweden, have inflation targets; Poland, the Czech Republic and Hungary, as well as, of course, Estonia, Latvia and Lithuania. The latter are particularly important, bearing in mind Swedish banks' large ownership in the Baltic banking system. Economists from the Baltic and central European central banks visit the Riksbank regularly and we visit them.

An even greater risk for both candidate countries and the EU could be to try to transfer the entire system of subsidies and taxes applying in several richer EU countries to central and eastern Europe. Most of the candidate countries already have higher tax levels and a greater degree of state influence in the economy than the majority of countries in the world at their welfare level, and much more so than in countries such as Taiwan and South Korea, which have succeeded in rapidly attaining a higher standard of living. To further increase the tax pressure and subsidy levels would risk subduing growth. 4  BIS Review 9/2002  Here I should like to highlight a warning example and a good example. The warning example is the former East Germany. It is often said that it was the fact that the East German mark was replaced at parity by the West German mark that led to the economic difficulties in the former GDR. This perhaps was not the decisive factor; rather it was the fact that wages and subsidy levels, together with the rest of the West German system, were transferred to a much poorer economy, which needed much greater room for manoeuvre. Despite massive investments, the new eastern länder suffered a recession and mass unemployment.
This effort should be expedited to provide issuance flexibilities and accelerate intra-regional cross border issuance. Much has been discussed and deliberated on this subject matter. It is timely to put idea into action. The benefits are significant, as ASEAN issuers will be able to raise long-term domestic currency funding not only from their onshore investors but across the region. Issuers would have access to a wider base of investors. A wider source of funding would also potentially enable them to better match funding and investment needs. Such a framework would also expedite the issuers’ compliance with regulatory process, leading to a shorter time to market, which would result in more reasonable cost issuance. Another bold step is to recognize the credit rating given by the domestic credit rating agency for domestic currency bond or sukuk issuance. Such recognition ought to be given should the rating agency had long enough credit cycle to prove its rating reliance. Domestic rating agencies have better local knowledge and insights. The rating methodologies are similar, technical model-driven and back tested. In addition, most domestic rating agencies have international partners for technical assistance, standard and quality assurance. Before I conclude, there are some ideas that could contribute to the further integration of our fixed income markets. Firstly, a crucial driver for greater financial integration is the availability of efficient and effective financial intermediaries. We should look to enhance and better connect the network of intermediaries in the region as it would support the development of a strong and integrated market.

Therefore, in the second part of my intervention, I would like to explore in more detail some of the most important recent trends and developments in risk management theory and practices, and also the impact that these developments can have both on individual firms and on the economy as a whole. I will cover three trends in particular: firm-wide assessment of risk, risk aggregation and risk transfer. This will lead me to the third part of my intervention: the challenge of devising a supervisory response which harnesses these developments for the benefit of financial stability. As I will argue, it is critical to ensure that our supervisory and regulatory structures are compatible with the best practices in risk management today. But I believe that our structures must go beyond that and actually encourage firms to continue to improve their measures of risk exposures and their approaches to mitigating them in the future. This forward-looking approach forms the basis of Basel II. In the final part of my intervention, I will explore some of the implications of Basel II that received some attention in recent times: namely, the potential impact of the new framework, both on capital flows and on global competition. My purpose today is not to describe Basel II in detail, but rather to highlight the dynamic processes that it stimulates.