samchain/econo-pairs-v1 huggingface dataset:
Much of this borrowing was short-term, giving rise to a maturity as well as a foreign currency mismatch, either on the part of the banks or the companies to which they on lent. When the initial pressure on currencies emerged, domestic borrowers that had previously never had to think about hedging their foreign currency liabilities rushed to do so, turning a slide in the currency into an avalanche. Those who were too late were left with liabilities to the banks that were vastly inflated in terms of their domestic currency - and the banks were left with the resultant bad debts and a crippled ability to finance the routine needs of their customers. Captive banks 7. Why were banks not more discriminating in their credit choices and decisions? Part of the explanation is that in a number of economies banks were ordered or persuaded by the government to lend heavily to particular industries and companies. In other words, they were “captive banks”. This allowed the companies concerned to become over-leveraged (and thus vulnerable to economic downturn) and directed resources into unprofitable investments. The banks concerned had little incentive to develop proper lending skills. Concentration risks and connected lending 8. Moreover, banks in some economies were over-exposed to single borrowers, often those connected with the lending institution. Such lending is usually of poor quality, not having been made at arm’s length, and means that the shareholders have no real capital at stake in the bank (because it has effectively been lent back to them).

The inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. Households, businesses, public entities, employees and employers can base decisions on the assumption that inflation in Norway will be 2½ per cent over time. The inflation target is a vehicle for allowing monetary policy to stabilise developments in output and employment. This intention is also expressed in the Regulation on Monetary Policy. High demand for goods and services and labour shortages normally point to higher inflation. When interest rates are increased, demand falls and inflation is kept at bay. When demand is low and unemployment rises, inflation will tend to slow. Interest rates will then be reduced. The mandate implies that the interest rate must be adapted to the outlook for the Norwegian economy. If it appears that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. This orientation of monetary policy will normally also contribute to stabilising output and employment. The impact of monetary policy occurs with considerable and variable lags. The current inflation rate does not therefore provide sufficient information to determine the level at which interest rates should be set now. Our analyses indicate that a substantial share of the effects of an interest rate change will occur within two years. Two years is thus a reasonable time horizon for achieving the inflation target.
The problems with inflation were then accentuated when the financial markets were deregulated. Prices and wages rose steeply and Sweden was caught in wage-price spirals. The occurrence of price bubbles made investment decisions more hazardous and led to weak productivity. A high level of inflation became a permanent feature of our economy. As monetary policy at that time was focused on maintaining a fixed exchange rate, fiscal policy ought to have been tighter. Bit by bit, there was a growing awareness across party political lines that in the longer run this economic policy strategy was not viable, a perception that had already dawned on most countries in our part of the world in the early 1980s. It was now that low inflation in Sweden came to be seen as a necessary condition for achieving stable and sustained growth and thereby high employment. This was clearly expressed officially for the first time in the Budget Statement in January 1991. Combating inflation was given pride of place on the economic policy agenda. The final policy objectives were the same as before but the perception of the conditions that were needed to attain them had changed. This realignment of stabilisation policy occurred, however, at a time when the earlier policy’s negative consequences had begun to leave their mark. Due to the high level of costs in manufacturing, for example, economic growth in Sweden was weak. In addition, a rising real interest rate coincided with a period when the tax reform made savers and investors more sensitive to interest rates.

The liberalisation of the capital controls is a collaborative project undertaken by the Central Bank and the Government, which actually means that elected representatives have the last word on the actions taken – particularly if and when tools are used that are not in the Bank’s toolbox. Honoured guests: I have spoken at some length on monetary policy and the labour market, on the one hand, and the capital controls, on the other. But I have done so with a purpose, as these are by far the greatest economic challenges facing us at the moment. Yet the Central Bank’s sphere of activity includes many other functions as well, not least those centring on the structure and stability of the financial system. Let us hope that, when we convene a year from now for the Central Bank of Iceland’s 55th Annual General Meeting, we will have resolved successfully the urgent issues now facing us and can turn our attentions to these other areas of activity. In the field of financial stability, emphasis has been on the risks related to the capital controls and on the formulation and implementation of the prudential rules that, in our opinion, must be in place once the controls are lifted. That work is well underway. And as regards risk assessment and contingency planning, the Systemic Risk Committee and the Financial Stability Council will be meeting next month, and the Central Bank’s Financial Stability report is scheduled for publication on 22 April.
It may take longer for households to work out the  10  BIS Review 68/2002  impact of low inflation on real interest rates than to realise that the rate of increase of prices of everyday purchases has fallen. Learning takes time. Chart 7 One-year ahead inflation expectations and inflation outturns in the UK, 1988-2002  Note: Inflation is the four quarter change in the RPI. Expected inflation is based on the quarterly Barclays Basix survey of inflation one year ahead. It is the weighted average across all surveyed sub-groups, excluding the general public. Expected inflation is lagged on year in the chart, so that expectations and outturns for the same period can be compared. Source: ONS and Basix. One possible consequence of a slow adjustment to low inflation is that households may mistake too much of the reduction in nominal interest rates for a permanent fall in the real rate. As a result, asset prices are bid up to levels that prove unsustainable when learning finally occurs - and at the LSE you know that in time we do learn. How far this theoretical argument applies to the British housing market at present is difficult to say, but it demonstrates the risks from current house price to earnings ratios that are close to the peaks reached in the late 1980s. *** So much for the costs of unanticipated inflation. What are the costs of anticipated inflation? Time permits me to comment only briefly on the four costs of anticipated inflation noted by Lord Kingsdown.

In trade-weighted terms, the Swiss franc is currently almost unchanged from January. Structural changes in the foreign exchange and money markets As you will know, the Swiss National Bank (SNB) implements its monetary policy via the money and foreign exchange markets. Consequently, structural changes in these markets are particularly important to us. I would now like to talk briefly about the major changes and their significance for our work. On the foreign exchange market, we are seeing a substantial decline in turnover in the primary interbank market. Meanwhile, the size of the market as a whole has decreased only slightly. This means that the interbank market has lost market share. The primary interbank market covers trading via the electronic communication networks. Between 2010 and 2013, turnover through these networks fell by almost 40% overall. In chart 3 you can see an example of this decline in turnover for the EURCHF and USDCHF currency pairs. In 2013, this was already below the previous levels, and a further decline in turnover is becoming evident for the current year. This development is attributable, in essence, to three factors. First, there is an increasing tendency for large merchant banks to use internal clearing for customer transactions. This means that the need for hedging transactions on the interbank market has declined. Second, to an increasing extent, merchant banks are offering liquidity via other electronic distribution channels such as their own trading platforms or multibank platforms. This enables them to attract more business and to benefit from the additional internalisation.
The intimate and warm relationship between customer and shopkeeper, and sense of community has also disappeared with this new phenomenon. In its place are brightly-lit neon hyper stores, which while luxurious and comfortable, lack the human touch of familiar faced shop-owners. Throughout the nation, the livelihood of the owners of these family-run stores has been taken away, and profits accumulated with a few large chains and franchises. Shop owners who previously ran their own businesses have no option but to become employees of these large corporations instead. This situation has arisen because we have opened our society to Western culture and influence. We have stood by and watched small, family-run shops fight a battle against the large chain stores with incomparable financial standing – a battle they are sure to lose. If authorities recognize the importance of the distribution of income as well as the distribution of opportunities, these family-run businesses would be able to continue with their livelihoods, and large multinational corporations could be prevented from overwhelming these small businesses. The process of globalization will bring about access to new technologies, which will help improve the efficiency of our various economic sectors. But in the meantime, the process of globalization opens our economy to the possibility of large multinational corporations taking over local businesses. We should welcome globalization in as much as it helps us enhance efficiency, reduce costs, and improve competitiveness, in the business which has to compete in the international arena.

Not surprisingly, the “save now, pay later” culture has been reversed. In the United States, the “pay now, save later” culture has worked for the US economy, as people have better job opportunities. We should not promote such culture in our economy because generally people, especially those in the provinces, cannot easily earn extra income to pay for their increased debt burdens. This is why I try to tell people that we should not adopt the Western way of “pay now, save later” mentality too rapidly, or allow this mentality to become a norm in our society; otherwise a host of problems would arise. Credit card and personal loan business still have benefits for consumers in terms of their convenience, particularly for those customers who have financial literacy and self-control. However, there is a need to control and supervise this business to prevent retail customers from overspending and, at the same time, prevent the operators from overcharging interest rates and fees. Ladies and Gentlemen, Let me bring you to the second issue that concerns me even more than the change in value placed on our saving culture. Recently I notice that business and economy are putting greater emphasis on size and growth. People get excited with large investment projects; such as the newly opened 12 billion baht shopping complex. People admire big businesses with large earnings and profits, and businesses that achieve high rates of growth and expansion.
These adjustments have allowed us to learn how ON RRPs might be used to support the monetary policy objectives of the FOMC. Our testing has demonstrated that ON RRP operations can set a soft floor on short-term interest rates. That is, while some trades may occur below the ON RRP offering rate, the volume-weighted averages of most money market rates have been above the ON RRP rate on nearly all days (Figure 2). Data across a range of money markets provide evidence that changes in the ON RRP rate affected pricing for both unsecured and secured instruments and that the operations successfully set a floor on short-term interest rates. While market participants are aware of the success in producing a floor from such volume-weighted rates as the fed funds effective rate and GCF Repo Index®, the Desk has been also examining detailed transaction-level data for evidence that the ON RRP sets a floor on nearly all overnight money market transactions. 12  The payment of interest on reserves has been in place since October 2008, although the Federal Reserve Board recently requested public comment on proposed technical changes to the methodology for calculating IOER. The proposal intends to enhance the effectiveness of changes in the IOER rate in moving the federal funds rate into the target range when changes in those rates do not coincide with the beginning of a reserve maintenance period. Further information is available at http://www.federalreserve.gov/newsevents/press/ bcreg/20150413a.htm.

There is, therefore, a natural “glide path” for the ON RRP facility to be phased out over time as the SOMA securities portfolio runs off and the size of the balance sheet is reduced to the smallest size needed for effective and efficient monetary policy implementation. The pace at which the portfolio runs off will be influenced by a wide range of variables, including the FOMC’s decisions about its securities portfolio, the future path of interest rates (which will affect the prepayment speed of the Fed’s agency mortgage-backed securities portfolio), and currency growth. Under a set of baseline assumptions from the end of 2014, the level of reserves is projected to fall below $ trillion in early 2019 and to reach its steady state in late 2020 (Figure 1). 11 In the meantime, we can introduce features into the facility’s design that would limit its size even as it supports interest rate control. Examples include managing the spread between the IOER rate and the ON RRP rate to influence demand for the facility, setting a cap on the facility’s size through individual or aggregate limits, and establishing an auction mechanism to allocate usage. If needed, the Committee can adjust these levers to discourage usage and shrink the footprint of the facility. The Committee has already directed the Desk to include some of these features in its testing. Finally: The FOMC noted that it is prepared to adjust the details of its approach to policy normalization in light of economic and financial developments.
In the UK, the Independent Commission on Banking suggested a capital surcharge of 3% of risk-weighted assets (RWA) for banks that could not be resolved. In its 2015 assessment of capital adequacy, the Financial Policy Committee estimated that capital would need to be around five percentage points higher if there was no resolution regime in place. It is also argued that resolution will not work; that while it may be a way of dealing with idiosyncratic failures, in a systemic crisis authorities will be reluctant to bail in shareholders and bank creditors. This binary distinction between idiosyncratic failure and fully blown systemic crisis seems to me oversimplistic. For sure, if we were suddenly to find ourselves pitched back into the middle of a systemic crisis, with a number of major institutions having failed or on the point of failure and a complete breakdown of trust and confidence, orderly resolution of individual banks in itself is unlikely to be able to stabilise the system as a whole. But we did not suddenly arrive in late 2008 in the midst of full blown financial crisis. Had the authorities had better, less disruptive options available over the previous 18 months to deal with a series of failing institutions, the disruptive, explosive nature of the crisis might well have been minimised. There would still have been very major losses and failures. But we would, in my view, have had a much better chance of a more orderly, less damaging correction of an overleveraged banking system.

Ten years on: Lessons from Northern Rock  Speech given by Sir Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Committee  Single Resolution Board Annual Conference, Brussels Friday 29 September 2017  1  All speeches are available online at www.bankofengland.co.uk/speeches  th  This month marks the 10 anniversary of the failure of Northern Rock. The failure of a middle size British mortgage bank was followed by the collapse of much bigger and globally systemic banks. But the picture of the queues forming outside the branches of Northern Rock remains for many the picture of the start of the financial crisis. Prior to September 2007, I knew of the existence of bank runs from economic history books, the experience of developing and emerging economies and the film of Mary Poppins. Seeing one happen in London brought home that it is never different “this time”. The fundamental basis of the financial system is trust. And trust, if not properly managed and protected, can disappear instantaneously. And once that happened, the UK had no effective way of managing the failure of a bank. And no way to avoid the taxpayer having to step in to stop such a failure leading to the loss of critical services to the economy and contagion to other banks.
Some representatives have questioned why they need to pass these new exams when all they sell are simple products. MAS takes the view that a good financial adviser should be able to explain the advantages and disadvantages and the risks of competing products – both simple and complex. The reality is that consumers today are faced with a wide range of choices. For example, a consumer wishing to invest and buy insurance protection has a few options. He may consider a participating policy or a regular premium investment-linked policy or simply purchase an insurance term policy and invest separately. He could build a portfolio of just plain vanilla stocks and bonds or include ETFs and futures or simply buy unit trusts. Each option has its own set of risk-return and cost considerations. The increasingly educated consumer will expect his representative to help him make sense of the complexity of the products and their suitability, even if he eventually settles on simple life insurance and investment products. Some other FA representatives feel that their academic qualifications are sufficient and should allow them an exemption from the exams. But consumers should have some assurance that the qualifications of the FA representatives meet a common standard. The examinations are industry-certified, and set a common standard and benchmark for FA representatives. It is important that all representatives, even those who have been in the industry for many years, stay abreast of latest market developments and products.

Ravi Menon: Financial advisory services – putting the customer first Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Life Insurance Association 50th Anniversary Gala Dinner, Singapore, 26 March 2012. *  *  *  LIA President, Mr Tan Hak Leh Distinguished guests, ladies and gentlemen, good evening. Role of life insurance and financial advisory services Saving for the future, investing for returns, and protecting against risk – these are the fundamentals of managing our finances. Yet so few of us do it well. We are far better at earning an income than investing it and protecting against risk. To make matters worse, many life insurance and investment products are often not easy to understand. Many people are not financially savvy. And many of those who are, do not have the time to review the range of insurance and investment products available, and understand what is best suited for their needs. This is where financial advisory service comes in. Financial advisers can help people identify their insurance and financial planning needs and recommend suitable products. The roles of insurers and financial advisers are intimately intertwined. It must be so. Insurance protects dependants. Investments grow savings and wealth. How can we buy insurance without regard to our broader investment portfolio? Likewise, how can we invest without considering how well we are protected against death or disease? Life insurance and financial advisory services go hand in hand.
By promoting a more consistent approach to supervisory review, we intend to strengthen the quality of supervision across countries. We recognise as well the special function the Committee can offer in strengthening the ability of host supervisors – particularly those in emerging market economies – to regulate the local operations of foreign banks. Harmonisation of accounting standards and the New Basel Accord  Supervisory review helps to create very direct incentives for banks to evaluate and manage their risks carefully. Transparency can supplement that incentive by leveraging the power of financial markets to encourage prudent risk-taking, and I would like now to address the third pillar of the New Accord, namely market discipline. Even just over the past few months, the popular press has reported on several examples of corporations that failed to disclose adequately the kinds of activities in which they were involved and the degree to which they bore risk. Both inside and outside the banking industry, the renewed focus on sound corporate governance practices has highlighted the importance of appropriate disclosure to the market – and the dangers that ensue when companies fail to disclose their risks adequately. These failures in disclosure have added fuel to the drive to harmonise accounting and disclosure practices worldwide. With reference to the New Accord, many respondents quite correctly noted the need to align the supervisory framework more closely with the converging accounting practices worldwide.

We have received similar concerns about conservatism in the securitisation proposals and in the treatment of “double default” risk, which is the risk that both a borrower and a guarantor would default on the same obligation. Other questions have been raised on the incentive structure and on the recognition of insurance within the operational risk proposals. It is perhaps natural that the majority of comments address the minimum capital requirements, or pillar 1. This section of the New Accord defines the capital charges in monetary terms for banks’ exposures and activities. But one should not forget that the New Accord is premised on three pillars, not just one. So I would like now to turn to the other two pillars, beginning with the importance – and benefits – of the proposals for the supervisory review of capital and home/host issues. Afterwards, I would like to spend a moment on another topic which has been raised in the comments, namely the New Accord and harmonisation of accounting standards. Finally, I will conclude my presentation with some remarks about the current status of our discussions and our future work. Supervisory review & home/host issues  As you know, under the New Accord the Basel Committee will recognise formally the role that supervisors play in ensuring that banks manage their risks and their capital needs appropriately. In the past, supervisors in each jurisdiction found their own ways to evaluate capital.