samchain/econo-pairs-v1 huggingface dataset:
From mid-2010, 7 new private banks have been set up in Hong Kong, taking the total number of private banks to 39. Further, the HKMA is seeking to modify the licensing requirements for banks so as to facilitate a broader range of financial institutions, including those specialised in private banking, to establish an operation in Hong Kong. What kind of regulatory framework Hong Kong needs to support the sustainable development of private banking? While Hong Kong is fortunate enough to be endowed with many underlying competitive advantages, these advantages are not enough, in my view, to sustain the healthy development of our private banking industry in the long run. Hong Kong also needs a regulatory framework that is user friendly to private banking clients and yet sufficiently robust to provide appropriate investor protection. The regulatory framework in Hong Kong is basically a disclosure-based regime, supported by suitability assessment by intermediaries at the point of sale. In a nutshell, product issuers have to make adequate disclosure in product documents about the features and risks of investment products. Intermediaries, when making a recommendation or solicitation in respect of an investment product, must assess the product suitability for individual clients, and clearly explain to clients the key product features and risks. A proper suitability assessment starts with a robust Know-Your-Client (KYC) process and client risk profiling.

These processes not only help to fight money laundering and the financing of terrorism, but also enable private banks to obtain relevant information to better understand their clients, including their background and, most importantly, their risk appetite and investment needs. By doing so, private banks can agree on an investment strategy with clients and provide suitable products and services that fit their needs. 2  BIS central bankers’ speeches  As we all know, private banking clients cover a wide spectrum of individuals. At one end of the spectrum there are clients who are highly seasoned investors, at the other end there may be unsophisticated clients with only very basic investment knowledge, notwithstanding that they have substantial wealth. While our regulatory framework is aimed at providing appropriate investor protection to all clients, regardless of the size of their wealth, it does not mean all investors have to be treated in exactly the same way in the process of making investments. In other words, the HKMA agrees that private banking and retail banking clients can and should be treated differently in the investment process. This being the case, we need to have a clear and practical definition of “Private Banking Customer”. After consulting the industry and the SFC, the HKMA is minded to agree that a “Private Banking Customer” can be defined as a customer with either (a) at least $ million of assets under the management (AUM) with the bank concerned or (b) total investable assets of at least $ million.
Although in the recent period domestic savings has been picking up, still in most of the economies in the region it remains below the adequate levels needed to support stronger investments and increase the long-term potential of the economies. This is particularly relevant given the changing business models of the banks that imply a lower reliance on external sources of finance that may pose constraints for stronger credit support. Higher financial knowledge may also contribute to higher savings in capital market instruments and thus provide more balanced structure of corporate sector financing. Currently, the capital market depth in the region is hovering around 50% of GDP, being far below the EU average of around 200% of GDP. One of the Vienna Initiative reports highlights the importance of financial literacy for capital markets not just from the savings point of view (demand side), but also from the supply side. According to their estimates, financial literacy level is one of the three key factors that explain the lower use of alternative sources of financing in the region in comparison with the EU average. This once again proves that the need for financial education regionwide is indeed widespread, which means necessity of a larger scope of our activities, including the corporate sector, especially the small and medium-sized enterprises. Furthermore, the financial literacy supports the ongoing process of raising financial inclusion, which is deemed to be an important dimension for having stronger, sustainable and more inclusive growth where the benefits are shared by the wider community.

Svein Gjedrem: Interest rate developments Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the annual conference hosted by the Norwegian Federation of State Employees’ Unions, Oslo, 28 November 2007. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 31 October and in Monetary Policy Report 3/07. *  *  *  Introduction Good morning. First of all, I would like to thank you for inviting me to this conference. As the title suggests, my speech today will focus on the interest rate and monetary policy. What is monetary policy’s role? Over the past 100 years, there have been four periods of very high inflation in Norway: during the two World Wars, during the Korean War and in a 15-year period from the first half of the 1970s to the second half of the 1980s. The last of these three periods was different from the preceding periods. In the 1970s and 1980s, inflation accelerated gradually. Inflation did not reach the same level as it did during the two world wars, but it took longer to fall. Substantial economic losses and financial instability followed in the wake of high inflation. Inflation was very costly. History shows that there is no long-term trade-off between lower unemployment or stronger economic growth and higher inflation.
I think that infrastructure is also a crucial factor. Last year we had to react quickly to changes in external conditions. Meanwhile, we did not abandon our strategic objectives, we still adhere to inflation targeting that allows us to control inflation and ensure its gradual reduction. Early last year, the Central Bank actively intervened in the FX market to ease the market response to the Crimea developments and to support the ruble exchange rate. In 2014, we implement interventions in the amount of about $ billion. At the same time, we were preparing for a floating exchange rate regime. We planned to have completed the transition by late 2014. During the year, the Bank of Russia took consecutive decisions thus gradually moving to the floating exchange rate. The policy to support the ruble through interventions was sound until two important events took place last autumn. The first one was the issuance of large-scale financial sanctions, and the second one was the decline in oil prices that began in summer and accelerated dramatically following the November decision of OPEC to maintain the volumes of oil production. Then we decided to accelerate the transition to the floating exchange rate. Looking behind, I would like to confirm once again that our country needed the transition to the floating exchange rate and it was a timely decision. It was the introduction of the floating exchange rate that quickly normalised the financial situation and saved us gold and foreign currency reserves. Different solutions were unlikely to stabilise the financial system.

Against this backdrop the ruble started to appreciate and the situation even allowed us to start replenishing our gold and foreign currency reserves. Now I will give you the details of our monetary policy in 2014. We have decided to grant the access to the main refinancing instruments to a wider range of banks (the so-called 3rd tier banks) and promptly extend the Lombard List. In making the Lombard List we abandoned the exclusive reliance on the international ratings agencies in order to reduce the dependence on them and make our own asset estimation. We are developing special purpose instruments to compensate for the so-called market failures and support lending in certain areas amid low availability of loans, high interest rates, and lack of long-term money. I am talking about four instruments – support of investment projects, small and medium-sized enterprises, military mortgages and non-commodity exports. The total of 290 billion rubles is currently allocated for these instruments. The special purpose instruments will be limited in volume in order to avoid distortions in monetary policy mechanisms. However, since we have introduced these instruments, they must prove effective. Currently, our main objective is to increase their efficiency. To summarise the results of the monetary policy we implemented last year, I would like to emphasise that, first, we acted in strict compliance with the functions assigned by the Constitution and the Central Bank Law, second, in the challenging conditions we tried to be flexible and to apply non-standard approaches, yet using only market mechanisms.
To most people, $ million may sound like a lot, but given that $ trillion of financial contracts reference U.S. dollar LIBOR, it’s really a drop in the ocean.1 As a result, submissions are largely based on judgment, as opposed to real numbers. When the LIBOR scandal erupted, it became clear that there had been fraud and collusion, both within and across financial services firms, in the pursuit of profit. The reliance on expert judgment, rather than actual data, makes the rate too vulnerable to manipulation. It’s readily apparent to all those in the industry—both firms and regulators—that LIBOR is fundamentally broken. Consequently, banks are increasingly reluctant to provide LIBOR submissions, adding to the level of risk around using the rate. The U.K. Financial Conduct Authority (FCA) has reached an agreement with banks to keep submitting rates through the end of 2021, but in 2022 the existence of LIBOR will no longer be guaranteed. In other words, LIBOR’s survival is assured for only another 901 days. Those in the market know the full scale of the risks this creates for the financial system. LIBOR isn’t just the rate that banks use to borrow from one another—it’s also the underlying rate on numerous derivatives and loan contracts. The $ trillion figure I mentioned earlier is the approximate total exposure to U.S. dollar LIBOR. That’s about 10 times U.S. gross domestic product.

Dear participants The productivity and the quality of work are major determinants of life quality, affecting nutrition, health and education, social protection, and fair treatment. Jobs are particularly important for the poor, whose labour is often their only asset and a primary route to poverty eradication. It is for this reason, that we at the central bank recognise skills development as an economic imperative. This is because it increases productivity of economic agents. Chairperson In the aftermath of the recent global financial crisis of 2008, employment has re-emerged as a top priority area across the world. A large and growing young population can be a driver for economic growth and social progress provided they access quality education and health, and are engaged in decent employment, without which, many young people will not be able to escape negative social vices and poverty. In recognition, of the foregoing, the National Budget for 2013 whose theme is; “Delivering Inclusive Development and Social Justice” has for the first time put job creation at the centre of its development agenda by explicitly targeting the creation of 200,000 jobs in 2013. BIS central bankers’ speeches  1  Sectors targeted for these jobs are agriculture, tourism, manufacturing and construction (including infrastructure). Ladies and gentlemen Sustained efforts to bring in private investment coupled with supportive public policies and investment, would contribute to enhancing productive capacities and generating the much needed jobs in our country.
I have therefore recently suggested to the Hong Kong Association of Banks that it would be timely to review the manner in which workouts operate in Hong Kong. I will close by pulling together some of lessons that can be drawn from our experience during this difficult period. The Asian crisis has demonstrated weaknesses in banks’ credit controls and even Hong Kong has not been immune from these. Improvements need to be made to deal  5  BIS Review 53/1999  with the aftermath of the crisis and to reduce the chances of similar problems in the future. The key points I would recommend to the banks are as follows: •  Be clear about your lending strategy, including how much risk, and what types of risk, you are prepared to undertake. •  Know your customer, his business and, to the extent possible, his other financial commitments. •  Keep track of what your lending is actually being used for. •  Lend on the basis of cash flow rather than collateral. •  Maintain an effective early warning system for problem loans and make sure that the loan portfolio is properly graded. •  Devote sufficient resources to debt recovery and make sure that your workout staff are properly trained. •  Approach debt workouts in the right spirit of compromise and consensus. These are very basic messages that should be familiar to any prudent lending banker.

But the experience of credit risk during the Asian crisis shows that they are all too easily forgotten. Thank you for giving me the opportunity to issue this reminder. BIS Review 53/1999  6
Emerging markets, in particular in Asia, are learning to live with heightened uncertainty in the world where the extent and the whereabouts of benefits from financial globalization to promote growth and development while ensuring our economic and financial stability. This, of course, necessitates that we have to be very focused on risk management. Ladies and Gentlemen, Asian economies have come a long way since 1997 in promoting economic and financial resiliency. We see a region-wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. As for the financial sector, the framework of policy has moved toward risk-based supervision, to an adherence to international standards, and to the undertakings of formal financial sector assessments under Financial Sector Assessment Program of FSAP. The macroeconomic policies also become more flexible, yet proactive, in dealing with changes in the market conditions and practices. When necessary, a tradition fiscal-monetary policy mix has been augmented by appropriate prudential measures of financial institutions. More importantly, legal and information infrastructure, including credit bureaus, has also been put in place to strengthen the foundation for financial system capacity for crisis prevention and resolution. These intensive reforms and institution building during the past decade may make it less likely that financial turbulence will trigger a sharp and broad-based dent to real economic outcomes, especially, since there is no significant build-up of sectoral imbalances in the region.

But, challenges remain as we have learnt that the key pressure points that can lead to difficulties for small-open economies can be externally-induced, particularly when we do  BIS Review 163/2008  1  not know if we are still caught in the eye of the financial storm or whether the turbulence has ceased. Let me now turn the focus of my discussion to the need for closer cooperation as we all face challenges on how to combat the global financial crisis. The ongoing global financial crisis is not dissimilar to other crises as it is and will be followed by intensive reforms at international level. It also highlights that international cooperation remains important and necessary in maintaining global financial stability. In fact, it has become more and more important given globalization process, which makes us better interconnected. However, we might have taken it for granted that international cooperation is the first best solution and could solve global crisis. We have all learnt that in a number of occasions, when a solution is needed, good implementation comes too little too late. Taking the International Monetary Fund’s or the (IMF) Short-term Liquidity Facility as an example, this new facility is somewhat similar to the swap lines extended among central banks to fellow members that do not call for typical IMF-supported adjustment programs. Emerging markets have been proponents of this facility for several years, but the IMF has previously been reluctant to endorse it due to fear of moral hazard.
Priority should be given to use up-to-date technology for transactions routing mechanisms, security systems and codes for inter bank clearing and settlement mechanisms. ii. Efficiency and risk control: Many developing countries, in general, and South Asia in particular, are characterized by a heavy use of cheques, which indicates that the retail sector is far from being optimal from the point of view of efficiency and risk control. Central banks and all stakeholders in the retail payments arena need to take early action to reduce the cheques and design a strategy to incentivise users to move towards other electronic payment instruments. It is also important to correct the wrong impression that cheque processing through Automated Clearing Houses (ACH) is cheaper than investment in electronic payment systems and on line processing. The view that outstation and rural customers are reluctant to use electronic cheques or credit and debit cards is no longer true. iii. Involve governments: Government involvement in the development of retail payment system is a key, although it has become one of the difficult tasks. Many government transactions are in cash or by cheque, and governments are not keen to acquire modern payment infrastructure or recognize the benefits of using newer payment instruments. One obvious reason for this is the ready access governments have to state banks’ cash items in process of collection, which enables immediate credit to governments.

Although the gradual move out of cash has made paper-based instruments such as money orders, postal orders, bank drafts etc., popular for several decades, their market sizes have continued to decline, largely due to inherited inefficiencies and cumbersome processes in effecting and settling payments. Some of these retail payment instruments and systems have now been replaced by electronic payment instruments and cards, and the tendency is to move towards electronic credit and debit transfers. According to the statistical reports of the Bank for International Settlements, some interesting movements in the use of retail payments in selected countries can be seen. In volume terms, France, Germany, Italy and the UK have reduced cheque use from a range of 3-38 percent of total non-cash payments, respectively, in 2000 to a range of 1-26 percent in 2006, while there are no cheques at all in the Netherlands. In Brazil too, cheques have decreased from 57 to 25 percent or less in the same period. Credit and debit transfers and cards, on the other hand, have risen significantly in these countries. This picture is different to that of India, where cheque use has reduced at a slow pace from 84% in 2004 to 73% in 2007 and in Sri Lanka from 75% to 65% in the same period, indicating the dominance of cheques. I believe the situation is the same for other countries in the SAARC region.
For instance, if there existed a global financial market, capital should flow from the developed countries to the developing ones. This is, however, not the case, as noted by Robert Lucas 19 , and the “Lucas puzzle” named after the author was formulated. There have been numerous works that attempted to resolve this puzzle. One of the most recent works, which presents a panel analysis of nearly a hundred countries in the period 1970-2000, has shown that the prevailing reason for the lack of capital flow from wealthy to poor countries are institutional factors. 20 or instance, improving the quality of operation of institutions in Peru to catch up with Australia would mean a four-fold increase in foreign investment, and improving the quality of operation of institutions in Turkey to catch up with the UK would increase foreign investment by 60%. Another puzzle, which over some time made challenging the fact that globalization of financial markets was actually taking place possible, was the “Feldstein-Horioka puzzle.” 21 Both authors in their famous  17  Too big to fail, too complex to fail. 18  “Rozwój systemu finansowego w Polsce w 2004 r.”,NBP Warsaw 2005, pp. 275- 286, 303-314. 19  Lucas R. “Why doesn’t Capital Flow from Rich to Poor Countries”, American Economic Review 80, 1990. 20  Alfaro L., Kalemni-Ozcan S., Volosovych V. “Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation”, University of Houston Working Paper, November 2005.

In one of them, described as the  35  R. Husmann, F. Sturzenegger “Global imbalances or bad accounting? The missing dark matter in the wealth of nations”, Harvard University working paper, December 2005. 36  Examples of such estimations can be found in: S. Edwards “Is the U.S. Current Account Deficit Sustainable? And if not, How Costly Is Adjustment Likely to Be?”, NBER working paper 11541, 2005; Orderly or Disorderly Rebalancing?”, New York University Working Paper; M. Obstfeld, K. Rogoff “The Unsustainable US Current Account Deficit Position Revisited”, prepared for 12-13 July 2004 NBER conference on G-7 Current Account Imbalances: Sustainability and Adjustment; H. Faruqee et al. “Smooth Landing or Crash? Model Based Scenarios of Global Current Account Rebalancing”, NBER Working Paper 11583; O. Blanchard et al. „The U.S. Current Account and the Dollar”, NBER Working Paper 11137 and many others. 37  Roubini N. “Why Central Banks Should Burst Bubbles”, mimeo, Stern School of Business and Roubini Global Economics, January 2006. 38 Posen A. “Why Central Banks Should Not Burst Bubbles”, Institute for International Economics, Working Paper WP 06-1, January 2006. 39 Kohn D. “Remarks by Donald Kohn at Monetary Policy: A Journey from Theory to Practice, An ECB Colloquium held in honor of Otmar Issing”, 16 March, 2006. 14  BIS Review 60/2006  conventional monetary policy, the central bank focuses on stabilising the inflation, treats changes in asset prices as an exogenous process, and does not attempt to influence asset prices whatsoever.