samchain/econo-pairs-v1 huggingface dataset:
In a more subtle way, there have also been changes in the culture of these institutions, with greater emphasis now being placed on good governance and on the “purpose” of certain activities or the “service” provided to clients. This strengthening of the financial system’s resilience is a major source of confidence at the start of 2019, in an environment marked by mounting geopolitical uncertainties and slowing economic growth. But it is not time for complacency. One of the core challenges we face, particularly in the euro area, is preventing and limiting the impact of new potential shocks. “Madame la Vice-Présidente”, you have invited me here today to share a central banker and supervisor’s perspective on the different options open to private and public agents for meeting these challenges. Rather than talking about options, I would like to emphasise two “burning obligations” that fall on all of us, namely: for financial intermediaries, micro and macroprudential supervisors, maintaining a strong vigilance (I. ); and for regulators and the private (financial) sector promoting a deeper financial integration of the euro area (II.). I. Continued strong vigilance is needed to navigate through an increasingly uncertain world a. Persistent threats Against a backdrop of intense geopolitical uncertainty and a less favourable macroeconomic environment than expected, the financial industry faces a combination of very “traditional” risks and some relatively new ones.

It also means making better use of the savings entrusted to insurers and pension funds, to ensure the long-term financing of the European economy. Which is why France supports an ambitious review of the regulation in the sector. These overall goals for mobilising savings are also why the European Commission’s 2015 project for a Capital Markets Union has garnered such a broad support. The Commission has already implemented a significant number of measures (revision of the Prospectus Directive, creation of European long-term venture capital funds – EuVECA and ELTIF), and discussions are well underway on other topics (pan-European personal pension 6/7  BIS central bankers' speeches  product or PEPP, plan for sustainable finance, plan for fintechs). It is clearly vital that the future European Commission, European Parliament and European Council all follow through on this action plan and complete the regulatory work. But financial integration also requires initiatives from economic and financial actors, who need to assimilate the regulatory framework and bring it to life: we cannot develop markets for green bonds, private debt and securitisation without the issuers, investors and arrangers that make them thrive. More importantly, a Capital Markets Union would be meaningless if, alongside the Banking Union and the Juncker Plan, it is not part of a longer-term project to create a Financing Union for Investment and Innovation. Financial integration is therefore essential for the euro area and must form a core part of all projects relating to the financing of European economies.
Dangerous bubbles are those in which a market experiences not only rising prices, but also the use of the underlying assets as collateral. This leads to the unsustainable long-term development of the price of these assets, parallel to unsustainable long-term credit growth. As these prices increase, so too does the value of the underlying assets, enabling them to be used as collateral for further loans. At the same time, increased credits provide increased purchasing power, allowing prices to rise even more. This can turn into a feedback loop that is hard to break. The development of housing markets in the United States and a number of other countries in the period leading up to the present crisis are examples of such bubbles. The Swedish commercial property market at the start of our crisis in the 1990s is another illustrative example. A current illustration was provided in last week’s Financial Times by the well-known economist Frederic Mishkin, who, among other research, carried out an assessment of Swedish monetary policy a couple of years ago. Mishkin emphasised the importance of making a distinction between different types of bubble. Bubbles are dangerous when the underlying assets are used as collateral and fuel an excessive credit boom. However, this is not the situation in the world today. On the contrary, the banks are shrinking their balance sheets and tightening their credit conditions. Thus the asset price increases that we are currently seeing in a number of countries hardly constitute a serious problem.

In an environment characterised by large losses, insufficient equity capital may force banks to curtail lending to households and enterprises, amplifying a downturn. Banks should therefore hold larger capital buffers when financial imbalances are building up or have built up. Financial imbalances, or systemic risk, are difficult to measure. However, there is both empirical and theoretical support for using the credit-to-GDP ratio as one indicator of risk in the financial system. In the first chart I showed today, we saw that financial crises have followed periods of strong credit growth. Chart: Key indicators Also indicators other than the credit-to-GDP ratio provide signals regarding systemic risk. We have emphasised in particular developments in house and commercial property prices and the share of banks’ wholesale funding. The chart shows the indicators along with both an estimated trend and a mean.1 The greater the positive gap above trend and historical mean, the stronger is the signal of vulnerability and imbalances. Text slide: Section 3 of the Regulation relating to a countercyclical capital buffer The countercyclical capital buffer is a part of the EU’s Capital Requirements Directive (CRD IV).
Because it is more economical for business transactions and liabilities to be denominated as far as possible in the same currency, a fundamental change in the position of the króna is unlikely, except directly by an act of government, or indirectly in the highly improbable event that economic policies were to collapse and erode all confidence in the króna, with accompanying hyperinflation, as has happened in some Latin American countries that have adopted the dollar or others that have been forced to adopt another currency. It has sometimes been claimed that the heavy level of external debt means that interest rate decisions by the European Central Bank possibly have even more impact in Iceland than domestic monetary policy. There is nothing new about the impact of foreign interest rate developments being felt in Iceland - and the same applies to other countries as well - although the scale of Iceland’s foreign debt leaves its economy more susceptible to foreign interest rate movements. It is worth remembering that while foreign interest rate developments mostly affect Iceland’s national income, economic cycle and current account balance, they can never have a crucial impact on the domestic rate of inflation. A heavy weight of foreign currency-denominated borrowing in domestic debt may complicate the transmission mechanism of monetary policy. In the long run, however, only domestic monetary policy measures can determine a deteriorating value of the domestic currency vis-à-vis goods and services or to put it plainly, inflation. Prospects Finally, I shall turn to economic and monetary prospects.

We do not think, act or communicate in the same way today as we did when the inflation targeting regime was new. The driving force behind the changes has come partly from practical experiences, both in Sweden and other countries conducting inflation targeting. Academic research has also played an important role. Before I go into greater detail on how the Riksbank’s strategy has developed and how it looks today, let me begin by describing the background to the establishment of an inflation target in Sweden. Background to the introduction of an inflation target in Sweden On Sunday, 19 November, the Swedish krona will have been floating for exactly fourteen years. The date 19 November 1992 will always have a special significance for the Riksbank, as it was the day that we were forced to abandon the fixed exchange rate, under dramatic circumstances and following a dogged defence of the krona against speculation. This happened in the midst of the most serious economic crisis in Sweden since the 1930s – a crisis that can generally be described as a tragic climax to almost twenty years of stabilisation policy problems. The economic policy conducted during the 1970s and 1980s tended for various reasons to be overly expansionary and it proved difficult to maintain price rises and wage increases at a reasonable level.
5 Third, some of the assumptions on which financial activity has been predicated turn out to be (or are seen as being) invalidated; eg, in the current  5  Ingves S, “A Cure for Crises: Confidence, Confidence and Trust”, a speech at the Eurofi Forum, Gottenburg, September 2009. Akerlof, George A, 1970 “The market for ‘Lemons’ Quality Uncertainty and the Market Mechanism”, The Quarterly Journal of Economics, MIT Press, vol 84 (3), pp 488-500, August. BIS Review 134/2009  5  crisis, the reliability of ratings of ABS. Fourth, the demand for liquidity rises, and its supply falls back. Markets become less liquid. Rising liquidity premia and forced sales depress asset values. Credit supply is reined in. A vicious circle is threatened by the excess leverage and liquidity mismatch that have developed in the financial system during the upswing. During that upswing, important contributory factors will typically have included illusions about risk-adjusted returns; underestimating the extent to which buoyant conditions are being driven by falling liquidity premia; and a sense that, if the bubble bursts, the central bank will somehow be able to contain the spillovers. This amounts to “risk illusion”, which should probably be as much debated as “money illusion” is in monetary economics. Separately, there is a potent collective action problem in getting off the dance floor. Not a few senior market participants felt from at least 2006 that financial risk was underpriced, and that conditions in, for example, the leveraged loan market were silly.

In the first place, a domestic authority increasing capital or liquidity requirements due to on lending by its banks to a particular sector could act as a signal to the home authorities of other, overseas banks. Plainly, it would be important to share analysis with international peers, even if things went no further than that. Transparency to the market would aid that dialogue. But it might be worth exploring whether there could feasibly be some kind of more or less co-ordinated or co-operative macroprudential response in some instances. This would entail risk weights being varied on  10  For a description of how banks used structured finance to try and transfer risk see, Tucker PMWT (2007a), “A Perspective on Recent Monetary and Financial System Developments”, a speech at the Merrill Lynch Conference for hedge funds, April 2007, (pp.8-10). 10  BIS Review 134/2009  the basis of both the economy of the borrowers and conditions in the home financial system of the lenders, with the aim of at least avoiding conflicting policy responses. As such, it would be a novel overlay on the Basel Concordat agreed thirty years ago for the division of labour between home and host supervisors. This might usefully form part of the international discussion on possible macroprudential instruments. (e)  The cross-sectional dimension: interconnectedness  Finally, to round up, just a few thoughts on the other dimension to the macroprudential challenge: the “cross-sectional” issue of interconnectedness.
Source: Bank of England  Chart 7: Spread of effective mortgage and personal loan rates (new business) to Bank Rate P ersonal loans  30  50  5  PNFCs  100  Chart 8: UK corporate bond spreads  Per cent 6  Basis P oint s 1200 Non-invest ment grade  5  M ortgages  1000  4  800  3  600  2  400 Invest ment grade  1  200  0 2001  2002  2003  2004  2005  2006  2007  0 1998  Source: Bank of England  2000  2002  2004  2006  Source: Bloomberg, Bank of England  Chart 9: Decomposition of UK noninvestment grade corporate bond spreads  Chart 10: Issuance of UK residential mortgage-backed securities  Basis point s  Residual including liquidit y Uncert aint y about default loss Expect ed default loss  £ blns 60  1000 Actu al  50  800  40 600  30 400  `  20 200  10  0  0 2000 2001 2002 2003 2004 2005 2006 2007  -200 1998  2000  2002  2004  2006  Source: Dealogic  Source: Bloomberg, Bank of England  12  BIS Review 149/2007  Chart 11: Gross corporate bond issuance by UK private non-financial companies (all currencies)  Chart 12: Basis between credit spreads on bonds and credit default swaps  £ billions 12  basis point s 150  10  100 Europe  8  50  6  0  4  -50 -100  2  US -150  0 2003  2004  2005  2006  -200  2007  -250  Source: Bank of England Jan.  Apr.

In a similar vein, on the whole, research does better at identifying these “credit channel” mechanisms in the context of particular stressed episodes than in longer-run averages. 11 Be that as it may, it is beyond doubt that there has recently been an adverse shock to bank balance sheets – involving capital, liquidity, and a potent “asymmetric” information mechanism affecting a wide range of banks. I will pick out four elements in the story, involving liquidity, counterparty-credit risk and capital. First, near closure of the capital markets for leveraged loans, conduit and SIV commercial paper, and RMBS has left banks whose business model is “originate and distribute” unexpectedly holding on to loans and, in addition, facing the prospect of having to take assets back on to their balance sheets. The consequent reintermediation is a hit to both capital ratios and liquidity, as the banks have bigger books to fund. For these reasons alone, big picture, banks responded from August onwards by tightening loan terms and hoarding liquidity. But the story does not end there. The second element is that access to resources (uninsured deposits) from outside the banking sector has become more restricted since the summer. While the new risk-transfer instruments have plainly dispersed risks, lack of ex ante disclosure left market participants highly uncertain about the scale and distribution of losses across the banking sector itself. On top of that, open-ended investment vehicles that have (or may have) themselves invested in structured-finance paper have felt compelled to preserve liquidity, to guard against redemption risk.
“Rising Above Disruptions: A Call for Action” Keynote Remark by Dr. Veerathai Santiprabhob Governor of the Bank of Thailand National Directors Conference 2018 Thai Institute of Directors 21 June 2018, Plaza Athenee Hotel, Bangkok Thailand Dr. Bandid Nijathaworn, Mr. Andrew Sheng, Secretary General Rapee Sucharitakul, Chief executives, Directors, Distinguished guests, Ladies and gentlemen. A very good morning to you all. First of all, I would like to express my sincere thanks to the Thai Institute of Directors (IOD) for inviting me to be a part of this exciting and important event. I have always had strong appreciation for IOD’s mission and work to improve director professionalism and corporate governance in Thailand. I would also like to commend the IOD on organizing this year’s conference with a proactive and forward looking agenda that goes well beyond its focus on corporate governance. This year’s conference program concentrates on areas that we need to collaborate to ensure the future success of our country. It is therefore such an honor to be here today to share my thoughts with distinguished directors and key leaders who play an integral role in driving Thailand forward. Ladies and gentlemen,  We are living in an unprecedented period of profound changes where exponential advancement in technologies is transforming everything we know. The speed, scope and impact of this technological change are unlike anything we have experienced before. It is disrupting and transforming the whole value chains, across all sectors in all corners of the globe, at an extremely fast pace.

When international investors lost confidence in the ability of governments to defend the fixed exchange rate, the countries encountered difficulties. Sharp currency depreciations and major readjustments followed in many countries. Even though economies in this region have fared well in recent years, the experience may have left its mark. A number of Asian countries, China in particular, have chosen to keep their currencies pegged to the US dollar. As long as the Chinese authorities are successful in keeping the exchange rate fairly fixed, competitiveness and a trade surplus will be maintained. However,  3  2  US Bureau of Labor Statistics. International Labor Comparisons. Manufacturing in China. http://www.bls.gov/fls/china.htm  BIS central bankers’ speeches  such a policy is at the expense of deficit countries, which would have preferred to see an adjustment in the yuan exchange rate. China’s exchange rate policy is therefore under strong pressure, especially from the US. But China’s economic strategy is based on its own experience and the experience of others. First, China has chosen to focus on the export of finished manufactured goods rather than domestic consumption as the basis for growth. So far, this has resulted in dynamic developments where growth has been kept high owing to increasing opportunities for people in rural areas to move to new jobs in towns and cities. A stable exchange rate has contributed to predictable operating parameters for a rapidly growing export industry and has held up competitiveness.
Suffice to say that in the last two years in which I have been involved with insurance supervision, some of the most difficult issues that I have faced have been in the area of With Profits. For that reason, I think it is appropriate that the PRA should have a policyholder protection objective because I think we have to recognise explicitly the contractual complexity that we inherit and the solvency risks this can generate. I should also add finally that it is not a coincidence that we have found this area to be the most challenging in terms of creating the “twin peaks” model in which the FCA will have responsibility for reaching judgements, through a formal determination process on fairness to policyholders and the PRA will be responsible for ensuring that those judgements are compatible with the prudential soundness of firms. We have reached a satisfactory conclusion, with specific language in the legislation, and a special With Profits MoU between the FCA and PRA; but it has required very careful consideration to ensure that each regulator’s role and responsibilities has been appropriately defined to avoid any “under-laps” and that the correct balance has been struck between them. Let me now move on to the second subject – what style of supervision will the PRA adopt and how will it affect insurers? Let me start by drawing the distinction between regulation and supervision in our world. Regulation is about the framework of rules and policies against which we operate.

We are focussed on the impact of very low interest rates staying with us for a protracted time, and when I say this I am offering no view whatsoever on the likely course of monetary policy. Likewise, we want to know that the prudential position of firms also captures the possible impact of an unexpected upward shift in the slope of the yield curve, and again I am offering no view on monetary policy. My third example is different: we are watching the range of possible outcomes on flood insurance in this country for their prudential implications. Judgment in supervision is not, however, without its challenges when it comes to the practice of supervision. There are two large challenges I see. First, we have to balance the use of  4  BIS central bankers’ speeches  sensible judgement against the risk of creating undue uncertainty in our behaviour which damages your ability to do business. This is not easy I accept. It requires us almost constantly to check and test our judgements against a framework of reasonable predictability. Also, it requires a greater degree of transparency from us to you, and I think from both of us to the public and investors. This is important to ensure that we can both be held to account for applying judgement in a way that is consistent with the pursuit of our objectives. I am conscious that achieving accountability in insurance supervision in the current environment is challenging because all the focus is on the banks.
Some people who basically recognise this concern are inclined to argue that if a europarticipating country were to find itself in this situation - and given that it would have no macroeconomic way out, for example, through exchange rate adjustment, or monetary relaxation, or fiscal stimulus beyond the limits of the Stability and Growth Pact - then it would have an overwhelming incentive to take the sort of supply-side measures which have proved so difficult to implement hitherto. As one of my colleagues once put it to me “when we have exhausted all other possible policy options, we will finally be forced to do what we know to be the right thing!” And the populations in those countries would it is true have a similar incentive to accept structural change. I am not sure how far one can rely upon that. But it does in any event serve to emphasise that supply-side flexibility will be more crucially important than ever in the context of monetary union. I should emphasise at this point, Mr. Chairman, that I am not predicting that there will necessarily be serious tensions within the single currency area. There will no doubt be policy challenges - there always are, with or without monetary union. But it is difficult for anyone to predict how serious the problems will in fact turn out to be.

The Bank of England has been working intensively with the City for the past few years to ensure that it is as thoroughly prepared for the start of the euro next year as the financial centres in any of the participating countries. We will be ready to provide financial services denominated in euro to all those that want them from day one. And we are already taking the initiative with our European partners in creating regional market structures, as you see, for example, in the talks between the London Stock Exchange and the Deutsche Börse, which are designed to lay the foundations for an inclusive, pan-European, equity market. You will be able to account, trade and settle in euro-denominated assets in London just as you can now in Deutsche Mark or French francs or dollars or yen. The financial markets of the City are our wedding present to the euro marriage partners. They are not just a national - but a European - asset. There are, of course, some here on the Continent who regard this role of the City as something of a mixed blessing - perhaps even a threat rather than a promise. There is a view that the euro should somehow ‘belong’ exclusively to the participating countries and that its introduction should be used as an opportunity to confer competitive advantage on national financial centres within the euro area.