samchain/econo-pairs-v1 huggingface dataset:
Higher solvency risk also increases other risks at the macro level, such as the risk of “financial repression”. 5 As public debt rises to unsustainable levels, domestic financial institutions may be “encouraged”, if not forced, to hold domestic sovereign debt in their portfolios. This would lead to inefficient allocation of capital, high costs of financial intermediation and thus lower growth. 6 Finally, in the case of reserve currencies, higher solvency risk would potentially hamper the stability of the international financial system. These questions are just a few examples of the issues on which we need further work. To conclude, it is clear that current and increasing levels of public debt in advanced economies raise problems which are not only of a macroeconomic nature, but affect many other dimensions of the global economy. On the other hand, our ability to understand the complexity of the issue is still limited. This situation is worrying, to the extent that our societies may take decisions on the basis of imperfect models and wrong assumptions. Not everybody agrees with the concerns I have just raised, and many take the current very low yields on some government bonds as a comforting sign. My impression is that they may be confusing relative and absolute concepts of risk. And such a mistake could entail very high costs for our societies. Thank you for your attention. 2  Reinhart, C. and K. Rogoff, 2010, “From Financial Crash to Debt Crisis”, NBER Working Paper 15795.

It ultimately depends on the country’s ability to raise taxes and sustain a level of primary  BIS Review 126/2010  3  surplus that enables the debt to be stabilised and reduced over time. This depends both on economic and political factors that are not easy to summarise in the nice differential equations that economists like to work with. It is thus inevitable that simplifying assumptions are made, but it is often forgotten that excess simplicity may lead to partial or even wrong results. Let me briefly elaborate. The analysis of the sustainability of sovereign debt has largely been based on the experience of developing or emerging market countries. It is now applied to advanced economies, starting with Greece. How often do we hear that Europe should learn from the Brady bond experience to address the Greek debt problem? We should, however, examine the risks associated with reasoning by analogy in this way. The risk is that solutions devised for a particular case are not applicable to other cases. Let me give you some examples. First, in many debt crises of the past in emerging market economies, the fiscal problem was not necessarily the main cause of the crisis. More usually, the crisis originated in the combination of an unsustainable exchange rate peg and foreign denominated debt.
Responsive policymaking means that we respond swiftly and appropriately to issues, favouring flexibility over a ‘one size fits all’ approach. This will ensure our framework is appropriate in light of the risks, and it will benefit industry by being more tailored. Our policies will be implemented in a way that minimises frictions, recognising that the creation of new rules is only one option we can take. Setting expectations for firms and effecting change through our supervision are alternative tools in our toolkit, and new issues should start with an open conversation, for example through a Discussion Paper. Being responsive means that we are alive to new concerns as they arise – we need only look to the events of last year that highlight the importance of this. And our aim to be accessible reflects our goal of ensuring prudential regulation is as clear as possible through reform of the rulebook. We are well aware that the ‘patchwork’ of primary legislation, statutory instruments, on-shored binding technical standards, and PRA rules and guidance currently in force, is difficult to navigate – a rationalisation of this material will yield benefits for us as well as firms. The realisation of this vision will take years of coordinated work. Legislation will need to be passed that sets out the framework of our new responsibilities and our new powers. Thereafter, rules will need to be transferred in the correct way from the statute book to our rulebook.

And, as my colleague Sarah Breeden explained last July, the PRA attaches great importance to making sure that the way we regulate and supervise these firms isn’t an unnecessary barrier to them realising their ambitions.10 That is why the PRA consulted last year on how we should regulate new and growing banks and has this month published a Supervisory Statement outlining our approach.11 What we need to make sure of now is that growing banks don’t face unnecessary costs from having to move from a simpler regime to more complex requirements once they reach a certain size. If simpler requirements are very different from the requirements for larger banks and building societies, a growing firm would have to make a substantial investment to adjust to the more complex rules it was growing into. If this was prohibitively expensive, it would become difficult for small firms to grow. That would work against what the PRA is doing to support effective competition in the banking system. That is what we want to avoid. We don’t want to trap small firms within a walled garden. Now, to some extent this could be achieved by giving small firms the option to stick to the full set of requirements if they know they 9  See https://www.bis.org/publ/bcbs129.htm. ‘Climbing mountains safely’, speech by Sarah Breeden, Executive Director, UK Deposit Takers Supervisions, building on marks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020.
One of the most relevant areas of work under way seeks to correct the excessive variability of risk-weighted assets (the denominator of the capital ratio) prompted by the use of insufficiently homogeneous internal models. Such heterogeneity leads to inadequate risk measurement and generates competitive distortions, harming those institutions subject to more demanding regimes of model supervision. The current challenge is to come up with a parameterisation of the new requirements that enables risk measurement to be enhanced without significantly increasing capital requirements for the system as a whole, as this is one of the commitments announced by  4  BIS central bankers’ speeches  global supervisory authorities, in order to hold prudential requirements at levels compatible with the pursuit of banking activity on a proper footing. Banks must also meet the requirements stemming from the new resolution regulations, which seek to minimise the need to use public funds to manage bank crises. In particular, under the Bank Recovery and Resolution Directive (BRRD), significant institutions shall, in addition to meeting the established capital requirements, have a minimum volume of liabilities enabling losses to be absorbed should it be necessary. That is to say, they shall have debt instruments at hand that may be converted into capital if they experience problems of viability. These requirements will likely prove a binding restriction for some financial institutions. The issuance of these instruments may pose a challenge, especially for unlisted banks with little experience in the issuance of convertible instruments or of subordinated debt.

BIS central bankers’ speeches  5  the SMU Centre for Silver Security and EDHEC Risk Institute-Asia. The SMU Centre for Silver Security for instance, is conducting applied research on financial products and markets for the silver industry, which would allow insurers to develop and commercialise products for the at-retirement market. Conclusion 27. Let me conclude. The insurance industry will encounter significant headwinds in the years ahead. I understand that the conference speakers will be touching on many pertinent topics, including the macroeconomic outlook and investment implications, asset allocation strategies in a world of low bond yields, and whether there is a right level of asset risks that insurers should assume. 28. The inaugural Asia Investment Management Summit for insurers, organized by Asia Insurance Review here in Singapore, is very timely. It will be an extremely useful platform for all stakeholders to engage in constructive dialogue on how we can navigate the current environment successfully. On this note, I wish all of you a rewarding and fruitful conference. Thank you. 6  BIS central bankers’ speeches
Developments after the end of large capital inflow episodes – stylised facts  It goes without saying that each country has its own particular features and this is why each current account reversal, each episode of massive capital inflows, each sudden stop in capital inflows and each financial crisis has particular features. However, they do have some things in common, irrespective of the country or the period of occurrence. We show particular interest in such common features in terms of the dynamics of selected indicators, such as GDP, real exchange rate, inflation and current account both before and after the end of an episode of large capital inflows. Certain patterns relating to the dynamics of the aforementioned indicators can be identified based on the results described in the literature, the latest ones belonging to Reinhart and Reinhart (2008). Since the pattern of these dynamics during the episode of heavy capital inflows has been described both in general and in the particular case of Romania, the focus will be on a matter of utmost interest these days, namely the likely trajectory of the abovementioned indicators after the cycle of large capital inflows ends. Following the methodology of various other works, Figure I sets out the developments in current account, GDP, exchange rate and inflation in a stylised manner four years ahead and four years after the end of the episode of large capital inflows.

2/3  BIS - Central bankers' speeches  One area of promise is the voluntary carbon credit market. It is expected to play an increasingly important role, especially in Asia. The demand for credits will come from sectors where it is quite difficult to reduce emissions due to prohibitively high costs or the lack of proven technology. At the same time, activities like reforestation, mangrove restoration, and the early retirement of coal-fired power plants can potentially generate good carbon credits. We will showcase efforts by Singapore to work with global stakeholders to foster a sound and vibrant voluntary carbon credit market in Asia. This Pavilion is a result of the close partnerships among Singapore businesses, NGOs, academics, civil society groups, and the government. Please also join me in expressing appreciation to the organising team. I wish you a fruitful time at the Singapore Pavilion and at COP27. 3/3  BIS - Central bankers' speeches
Unfortunately, the Bank has not been able to follow up sufficiently with presentations and discussions, but the aim is to do that in the near future, including with the establishment of a so-called Payment Council, a forum for dissemination of information and exchange of opinions among key stakeholders. The Council’s first meeting is planned for next month. In many respects, electronic retail payment intermediation has been effective and secure in Iceland, in part because it has been based largely on Icelandic core infrastructure and real-time settlement. Internationally, real-time settlement is a widespread goal, and it is therefore important that we do not backtrack on that point. One of the factors that was of vital importance for domestic retail payment intermediation during the financial crisis in autumn 2008 was that the Icelandic authorities could take control of domestic payment intermediation and guarantee continued functioning without external involvement. In view of the changes currently taking place in domestic retail payment intermediation, it is no longer a given that the authorities will be able to respond in the same way. It is therefore appropriate to ponder how best to ensure continued functioning of electronic payment intermediation if an unexpected incident or shock should occur. To an increasing degree, domestic electronic payment intermediation is viewed as an 7  element in national security — that the authorities must guarantee, directly or indirectly, that there will always be a domestic payment channel independent of foreign entities.

We must not forget, either, that financial crises of the magnitude of the one in Iceland cast long shadows, and many have faced hardship for a long time afterwards. This underscores the necessity of safeguarding financial stability. The Central Bank’s contribution to this successful outcome is threefold: formulation and implementation of monetary policy; participation in the resurrection of the financial system and the formulation and implementation of financial stability policy; and participation in the development of the capital account liberalisation strategy and the execution of the strategy. I will now turn to these three factors and, as I do so, move to the present day. Inflation subsided in 2009 and 2010 as the inflationary impact of the steep drop in the exchange rate in 2008 tapered off and the exchange rate stabilised in H2/2009 and then began to rise in 2010. Inflation declined steadily until it fell to target in late 2010. As inflation eased, Central Bank interest rates were cut, reaching a low of 3½% early in 2011. Inflation expectations remained above the target, however. In H2/2011 and 2012, inflation rose again following the depreciation of the króna and large contractual wage increases. We know now that monetary policy achieved good results in its response to this situation. The response consisted of interest rate hikes and signalling of further ones to come, but also of more active use of other policy instruments such as foreign exchange market intervention and, later, the special reserve requirement on capital inflows into the bond market and high-yielding deposits.
The scandal at the energy company Enron and the recently disclosed fraudulent accounting practices at several US companies have eroded confidence in securities markets and the financial system. One role of securities markets is to ensure that the risk linked to various investments is reflected in borrowing costs and expected returns, which are adjusted continuously through market price mechanisms. For price mechanisms to function effectively, it is essential that there is confidence in the information and results published. The US authorities have already taken measures to prevent further accounting and audit scandals. Several initiatives are also expected to be taken internationally. Smoothly functioning securities markets make an important contribution to a stable and efficient financial system. Without securities markets’ contribution to risk diversification, it is highly unlikely that the financial system could have coped as well as it did with the shocks of recent years. Norway has a well developed financial system. Financial institutions such as banks, mortgage companies and insurance companies channel assets and debt between economic agents. In the securities market, capital is channelled directly from lender to borrower through the use of standardised debt and equity instruments in the primary market. Securities can also be traded in the secondary market. Substantial volumes of debt and equity instruments are traded daily among operators. The debt market consists of bonds and short-term debt instruments, while the equity market is essentially made up of stocks.

More fund-based schemes will generate a positive stimulus to the Norwegian securities market, even if an appropriate risk diversification would imply that a large portion of the capital in pension funds is  8  BIS Review 48/2002  invested abroad. A rising share of fund-based schemes in other countries will also increase investment in Norway. The statutory regulation of pension fund investment will also be of importance. For example, today most countries have relatively stringent restrictions on the equity portion in pension funds’ portfolios. However, a proposed new EU directive would make it possible to increase this portion, which may have an impact on demand for securities. Recent developments in financial markets have shown that a substantial measure of uncertainty is associated with the return on such investments. This uncertainty is related to future economic developments, which will also apply to the pay-as-you-go system. It is true that Government can influence this through tax changes. Adverse economic developments will, however, put the ability and willingness to increase taxes in order to honour pension obligations to the test. This uncertainty will be even greater in a country like Norway that is highly reliant on one or a small number of industries. Government finances are, for example, still vulnerable in the face of a sustained decline in oil prices. The uncertainty about future developments is continuously reflected in a fund-based system. An essential question associated with a fund-based system is who is to bear the risk related to returns.
And we are discussing incremental enhancements to Wealth Management Connect with Mainland authorities, such as improving sales arrangements, expanding product scope, and allowing more financial institutions to participate. We will also focus on developing the offshore RMB derivatives market by introducing risk-management products to meet global investors’ hedging needs and develop Hong Kong as a risk-management centre. Swap Connect and the introduction of Mainland government bond futures in Hong Kong are important steps to allow global investors to conduct hedging for their bond investments in the Mainland. We will continue to explore the provision of more diversified riskmanagement tools to drive further allocation into Mainland bonds and openingup of the Mainland bond market. ETF Connect will give global investors direct access to the rapidly developing ETF markets on both sides, and enrich the product range under Stock Connect. The inclusion of foreign companies in Southbound Trading will make our stock exchange even more attractive as a leading fund-raising destination for international companies. Another vital step is to expand the use of RMB in equity market trading in Hong Kong. The Working Group formed by the SFC, the HKEx and the HKMA have studied the feasibility of allowing stocks eligible for Southbound Trading of Stock Connect to be denominated in RMB, and are moving ahead with the necessary preparations and discussions with Mainland authorities and agencies. We also need to promote our markets to attract more Mainland and international institutions to issue RMB bonds in Hong Kong.

The features of the new logo, which are orange - representing passion for people and the drive for excellence, white - representing commitment to integrity and professionalism, and the squares - representing stability and dependability, are all symbols of the bank’s commitment to growth, prudent and efficient service delivery to our country, as well as customer care. Mr Chairman, since the Guaranty Trust Bank (SL) Limited commenced operations in January 2002 after the successful take over of the First Merchant Bank PLC Nigeria, it has consistently improved its performance and expanded its operations in the country; notably with the establishment of three branches. As at 31st May 2006, Guaranty Trust Bank’s total assets amounted to Le47.05 billion and shareholders’ funds stood at Le5.84 billion. Loans granted to various sectors of the economy have also gone up to Le9.16 billion. All of these are significant and commendable achievements in a short time. Distinguished Ladies and Gentlemen, over the last couple of years, the bank has committed itself to the provision of efficient banking services to the people of Sierra Leone. It has introduced among other things, money gram money transfer, which is one of the fastest means of transferring money into and out of Sierra Leone, and has also introduced mobile banking services. This last development has given its customers the opportunity to access and initiate transactions on their accounts from anywhere and at any time of the day.
Equities however have remained robust with some indices reaching  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  record highs last week, a trend which the Bank’s Financial Policy Committee drew attention to in its July Financial Stability Report. In the UK, the GDP releases for March and April revealed notably stronger growth than we had expected in May, with monthly growth rates of 2.1% and 2.3%. At the time of our June meeting Bank staff had revised up their expectations for 2021 Q2 GDP growth to 5½% on the previous quarter, from 4¼% at the time of the May Report. That would be consistent with output in Q2 being less than 4% below its 2019 Q4 level. The monthly figure of 0.8% growth for May, released last Friday, contained some offsetting downside news. Within that however consumer-facing services continued to grow, with the drag coming from sectors like cars and construction where demand was constrained by supply shortages – a theme I will come back to. The UK labour market has also outperformed our May expectations, with unemployment falling to 4.7% and employment growing 0.3% in the three months to April. That continues a trend of downside surprises to our unemployment forecasts over the past year, even after allowing for the extensions to the furlough schemes. The falls in unemployment have however been accompanied by higher inactivity.

It is now conceivable that the pre-Covid peak in output in 2019Q4 will be restored in the course of the current quarter, and quite possible that unemployment could peak lower than our May MPR forecast. And inflation now looks likely to peak well above 3% and maybe nearer to 4% – the biggest news to our earlier inflation projections is yet to come. Reflecting all this I am somewhat less confident than I was that there remains a margin of spare capacity in the economy. Looking further ahead there are three key considerations which are shaping my assessment of the outlook and the risks around it:  1. Are developments temporary or more persistent? 2. Are they economy-wide or sectoral? 3. What they mean for the balance of supply and demand in the economy? As set out in the MPC’s June minutes, the Committee’s expectation was that “the direct impact of commodity prices on CPI inflation would be transitory”. Their central expectation was for “a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation would fall back”. I agree with that initial assessment – though it’s important to stress here that ‘transitory” does not mean ‘here today, gone tomorrow’. I learnt recently for instance that some businesses are bringing forwards their shipping arrangements for Christmas stock.