samchain/econo-pairs-v1 huggingface dataset:
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.

The interest rate level which has now been established should, in addition to directly contributing to stabilising the krone exchange rate, dampen price expectations.”  32  Svein Gedrem (1999) “Utfordringer i pengepolitikken” [Monetary policy challenges], Aftenposten, 4 May. 33  Kydland, Finn E. and Prescott, Edward C. (1977): “Rules Rather than Discretion: The Inconsistency of Optimal Plans.” Journal of Political Economy No. 87, pp 473–492. 34  Barro, Robert J. and David B. Gordon (1983): “A Positive Theory of Monetary Policy in a Natural Rate Model”, Journal of Political Economy No. 12 pp. 101–121. BIS Review 154/2010  9  long-term cost can be considerable and the short-term gains limited. Norway and other countries learned this in the 1970s and 1980s. The British prime minister Harold Wilson once remarked, “A week is a long time in politics”. This attitude also influenced economic policy in our country. The result was economic instability, with both high inflation and high unemployment. Just as Ulysses had himself tied to the mast to resist the Sirens’ 35 temptations, the government authorities can prevent themselves from pursuing a policy that is harmful in the long run by setting objectives and delegating tasks. A central bank should be independent in its use of policy instruments, though the objective of monetary policy should naturally be set out by the government and the Storting. 36 The division of responsibility was clearly defined when the government presented its guidelines in 2001.
And as you know, the profit and loss account is the first line of defence when it comes to averting banking crises. Another criterion that has proven most useful relates to the substantial amount (up to € billion) authorised by Parliament to meet the recapitalisation needs that may arise during the crisis, but to contain in turn the budgetary impact of the restructuring process. The more than € billion that are to be lent to Spanish banks are no doubt a considerable sum. But it is actually a very small amount when compared with the outlay in other countries, which reacted by pumping towering amounts of public funds into private banks, leading to most serious increases in public debt that in some cases have ultimately caused problems for the country concerned. Where necessary, there are more than sufficient backstops to meet recapitalisation needs, but it is absurd to inject public funds unnecessarily. Let’s now turn to the role of financial markets in the second phase of the financial crisis, the so-called “sovereign debt crisis”, which erupted very recently, in spring this year. The behaviour of the sovereign bonds markets could be analysed from the standpoint of market failures or in how they are regulated. While this is an interesting perspective, proposals for reform on any major scale have not yet been set in train, unlike with banking regulation. The crisis has disclosed numerous shortcomings in the functioning of markets, and one frequent criticism is that these same markets influence the public policy agenda.

Few times ago, I have been informed about a new EU initiative, which requires to set up, within a certain period of time, among others a unified payment system within the euro area, including payments with cards. Presently, small and medium businesses in the euro area have not the same payment opportunities as they have in their respective countries on a national scale. Such a case includes credit cards, which cannot be employed equally across the borders. For this purpose I would suggest that respective experts from the Association and Bank of Albania be as soon as possible informed about this project, making the relevant suggestions in this direction. I personally remain consistent in my position that in Albania we have to adopt the most advanced solutions in all the infrastructure projects that we are going to implement. I believe that we do not need to examine old-fashioned models, which, in addition to the initial cost, will continuously require other funds for maintenance and modification. Besides the developments in the field of payments I would welcome from you a broader commitment even in other directions. I think that the system must further expand its geographical coverage, aiming at including also areas, which, though having at first sight the appearance of being inactive, have large financial potentials in the form of threasurised savings outside the system. Also, the service level should be further improved.
Improvements in the SDDS and more transparency regarding Article IV reports, letters of Intent and policy papers will certainly improve risk assessment. This could help prevent economic problems from turning into crises and to prevent contagion to other countries. Progress has to be made as regards incentives for sound management. The creation of the CCL is a step in this direction. Designing appropriate incentives is the more effective way to make Members adopt more prudent debt management, effective banking supervision… Given the large number of institutions and fora involved in the efforts aiming at a better global financial architecture, the creation of the Financial Stability Forum reflects an important effort to coordinate work in progress and identify issues not yet addressed. THE EUROPEAN MONETARY UNION WILL YIELD A SUBSTANTIAL CONTRIBUTION TO BETTER ECONOMIC AND MONETARY EQUILIBRIUM IN THE WORLD The introduction of the euro six months ago is the other major event I would like to deal with now. The irreversible nature of this change has convinced an increasing number of political and economic actors that the success of the euro is a necessity for Europe. It is a keystone of the single market. It is clear that, now and for the future, we have to face a number of challenges to make this success sustainable.

Agents attend the monthly briefing in Threadneedle Street ahead of each policy meeting, so information from their contacts is fed directly into the heart of the policy process. I know I speak for all of my colleagues on the MPC when I say that we really do find this a crucial barometer of current events, so I hope you will feel that a short while with our Agents once or twice a year is time well spent! Financial stability and Enron I now turn to my final subject tonight - that of the Bank's role in ensuring financial stability. Responsibility for the day-to-day supervision of banks passed from the Bank of England to the Financial Services Authority in 1997. But as the central bank we still have a key role in overseeing the stability of the system as a whole. In this guise we meet on a monthly basis with HM Treasury and the FSA in the so-called tripartite Standing Committee, to review the risks facing the UK financial system and take stock of any actions which may be required to address them. Keeping close to the FSA is particularly important. To this end, I sit on the FSA Board, and Howard Davies is a member of the Bank's Court. Of course, as I have no need to remind you here, with the border of the euro area just a few miles down the road, we cannot look at the UK system in isolation from the wider international financial markets.
In the early days many did not like the stress tests, but this has changed and today stress tests are an established part of the toolbox. While nobody could argue that FSAP assessments will identify all weaknesses, I have observed that in most of the assessments shortcomings and vulnerabilities show up quite clearly. While on this theme, I would also like to express my strong disagreement with the view expressed by some that “country circumstances are highly different so it is fully legitimate that they have very different legal and institutional underpinnings”. While I am not opposed to different approaches, as long as they do the job, my impression after having visited or analysed the majority of the IMF’s 184 member countries is that the circumstances are usually not all that different. My conclusion is that the necessary prerequisites for financial stability are much the same in all countries and this includes sound fiscal balances as well as macro economic structures and developments. Frankly, the talk about “special circumstances” could often be seen as an excuse for not being prepared to apply necessary but unpopular measures. In this, we Europeans are not better than anybody else. This brings me to another added value of the FSAP – the fact that the assessment is conducted by somebody outside your own country, such as the IMF or the World Bank.

In the area of Islamic banking, the requirement to manage the risks becomes more important because of the unique peculiarities in the contracts. Basel II has, to a certain extent, incorporated some aspects in the identification of risks, in particular the credit, market and operational risks that can be assimilated by the Islamic banks in terms of its product offering. However, further refinement will have to be done by the Islamic financial specialists to assess the appropriateness of the capital definition in particular as outlined by the Basel committee. One of the considerations that need to be addressed in assessing the risks associated with the Islamic bank is with regard to the capital charge on its investment accounts. Basel II does not address this unique feature in its framework. Assets that are funded by monies in the investment account may not require the capital charge for the purpose of capital adequacy measurement except in the case of misconduct and negligence. Similarly, if the Islamic banking institutions were to be more engaged in the profit-sharing arrangement in its balance-sheets, it will require the Islamic bank to have a more rigorous risk management assessment and monitoring mechanism. This is an area that is being addressed by the Islamic Financial Services Board in the drafting of the standard on the overall risk management framework for the Islamic financial community that takes into account this unique requirement of Islamic banking. While risk mitigation is desirable in Islamic finance, further improvements need to be made to the existing risk management framework.
This process will be based on the FOMC's "Principles for Reducing the Size of the Federal Reserve's Balance Sheet" released in January.6 A key principle is to reduce the balance sheet in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account. I expect that this process of reducing the size of the balance sheet can begin as soon as the May FOMC meeting. Our monetary policy actions, combined with those of other countries, will help bring demand for labor and products in closer alignment with available supply. As this reduction in demand-induced price pressures takes effect and supply constraints gradually ease, I anticipate inflation readings will begin to decline later this year, although this process will take time to fully play out. For 2022 as a whole, I expect PCE inflation to be around 4 percent, then decline to about 2½ percent in 2023, before returning close to our 2 percent longer-run goal in 2024. These actions should enable us to manage the proverbial soft landing in a way that maintains a sustained strong economy and labor market. Both are well positioned to withstand tighter monetary policy. In fact, I expect the economy to continue to grow this year and for the unemployment rate to remain close to its current level. Conclusion These are uncertain times, and the policy questions we face are challenging. But we have learned the lessons of high inflation from the past.

With low unemployment, solid wage growth, and ample job openings, all indicators show that the strength of the labor market is at a level consistent with my view of maximum employment. Inflationary Pressures The other side of our mandate is price stability, and this is where our greatest challenge now lies. Inflation is far too high. In February, inflation-as measured by the personal consumption expenditures (PCE) price index-was nearly 6½ percent. And high inflation is a key concern in many countries around the world. Even before Russia's invasion of Ukraine, the rapid global economic rebound had driven up prices for oil and many other commodities. Higher inflation is especially detrimental for those who are least able to meet the growing cost of essentials like food, housing, and transportation. The war in Ukraine and the global response present even greater challenges and uncertainty. For example, Russia and Ukraine are large exporters of key materials, including neon, palladium, and platinum. Those materials are used in the production of a wide array of products, from auto parts to computer chips. Even before the war,  2/5  BIS - Central bankers' speeches  manufacturers were confronting shortages of important inputs. Further disruptions to these key products could create spillovers to economies across the globe. But there are differences in the ways in which countries are experiencing inflation. In the United States, we are now seeing elevated inflation across many categories of goods and services.
So while there is certainly still a risk that productivity will disappoint again – even conditional on a smooth transition to an average of possible Brexit outcomes, as in our central forecast – and that wages will again turn out weaker, even in that case it seems likely to me that, given the gradual move into excess demand that we expect, unit labour costs and inflationary pressure would still pick up as in our August forecast. 27  That said, a range of outcomes for Brexit are clearly still possible, not all of which are captured in our central forecast. Consistent with that it is noteworthy that option pricing implies that market participants are insuring to a greater degree against tail outcomes: FX implied volatilities have increased in recent months, implying 26  Other forecasters were similarly surprised – for instance the OBR were predicting 3.7% cumulative real wage growth over the same period in the March 2016 Economic and Fiscal Outlook (available at http://obr.uk/efo/economic-fiscal-outlook-march-2016/). 27 I set out my views on the economic outlook and the labour market in detail in a speech in June: Ramsden, D. (2018), “What’s Going On?”, speech at the Barclays Inflation Conference, available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/whatsgoing-on-speech-by-dave-ramsden.pdf. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  greater weight on the tails of the distribution, while risks reversals have fallen to their lowest levels in over a year, suggesting a greater increase in relative weight on downside outcomes.

The Scheme was designed to reinforce the transmission of the August 2016 cut in Bank Rate to 0.25%, thereby helping to lower the effective lower bound from 0.5% to close to 0%. It also led to a significant increase in the size of the Bank’s balance sheet, again via the APF, peaking at £  Acting in support of liquidity  While operations to meet our monetary policy remit might take the biggest share of our balance sheet, they are by no means the full extent of it. The Bank is the sole provider of sterling central bank money – the most liquid sterling asset. Because of this, our balance sheet has an important role to play in financial policy, through the provision of liquidity insurance. The core business of a commercial bank is to lend money by making loans to households and firms; to facilitate this it often needs to borrow money, by taking in retail deposits or by seeking funding from investors  7  There were also some smaller-scale initial purchases of private sector assets, partly financed by Treasury bill issuance; in August 2016 the MPC also voted to purchase £ of corporate bonds. 8 The APF itself currently holds £ of gilts and £ of corporate bonds, as well as the loans created via the TFS. For an overview of the estimated effects of QE and the mechanisms through which it works, see Haldane, A. G., Roberts-Sklar, M., Wieladek, T. and Young, C. (2016), “QE: The story so far”.
A weaker exchange rate than we assume or a stronger increase in consumption could result in higher inflation. The opposite effect could come from, for example, better productivity growth or a different picture of resource utilisation. For the Riksbank it is therefore important continuously to assess new information that may provide guidance about the path of inflation. 3. Two questions The picture of Sweden’s economy I have painted thus far is relatively bright. This is warranted. The economy has gone through a deep recession after the policy realignment in the BIS Review 68/1997  -5-  early 1990s. Difficult adjustments have been made and we are now beginning to see the results. There are many resemblances with Denmark and other countries that have experienced similar processes of adjustment earlier. In every case it has taken time for the situation to become more stable and for households and firms to recover confidence. However, the bright picture must not blind us to the continued presence of serious challenges for economic policy. For one thing there is the importance of securing sound government finance in the long run. For another there is the situation in the labour market. I choose to raise these two questions because what happens with fiscal policy and in the labour market is of great consequence for the Riksbank’s ability to safeguard the value of money. It would therefore be almost a dereliction of duty not to place these matters on the agenda as clearly and distinctly as we are able.

This restricts the future freedom of action in economic policy and means that there is a risk of fiscal policy in practice having a destabilising effect. This is particularly the case in that, with high revenue and spending ratios, the Swedish budget is sensitive to cyclical factors. Seen from this angle the Government’s target of a 2 per cent budget surplus over the economic cycle appears reasonable, though there is no academic foundation for a quantified level of ambition. There may be grounds for strategic tax cuts to improve the long-term growth potential. But in the light of the experience with government finance in recent decades a warning should be issued against tax cuts without parallel cuts in spending. Weak employment The labour market trends in recent years have been bleak. Although annual economic growth since 1993 has averaged 2.7 per cent, employment has not risen. This indicates that a considerable proportion of unemployment is structural in the sense that the level is liable to remain high even if activity continues to improve. The difficulty in generating new jobs is not confined to Sweden; it is a problem we have in common with much of Europe. But there are countries in Europe that have succeeded in turning the employment curve upwards since the mid 1980s. I am thinking in particular of the Netherlands, where employment, after a long period of stagnation, has been increased by 20 to 25 per cent since the mid 1980s.
We do not know yet how the initiative will be implemented and what effect it will have on our relationship to the EU. Consequently, the economic impact of the popular decision cannot really be properly quantified at the moment, and this is why it has not been included in our forecast. For 2014, we continue to expect economic growth of around 2%. Inflation in Switzerland and the SNB’s monetary policy The greater economic momentum which we are forecasting will gradually lead to a better utilisation of production capacity. The underutilisation which still prevails continues to restrain consumer prices in Switzerland. Declining inflation abroad and the slightly stronger Swiss franc are having a similar impact by dampening imported inflation. Thus the SNB’s inflation forecast shows that there is no risk of inflation in the foreseeable future. In 2014, inflation in Switzerland is likely to amount to only 0%. In addition, the international environment is still giving rise to high levels of uncertainty. Consequently, the danger that the Swiss franc, as a safe haven, might suddenly be subject to further upward pressure has not been averted. Short-term interest rates are practically zero. For this reason, the minimum exchange rate is the right tool to avoid an undesirable tightening of monetary conditions, since an appreciation of the Swiss franc would lead to a further decline in import prices and a renewed threat of deflation. Given this situation, the SNB is maintaining the minimum exchange rate of CHF 1.20 per euro.

By contrast, interest rate increases could become necessary again in a number of emerging economies, to prevent further depreciation of their currencies and counter high inflation. As you can see from this list of items, unfortunately the risks for economic growth have not diminished. The European crisis may have become somewhat less virulent, but it has not been overcome. Moreover, additional uncertainties have emerged and the Swiss franc is still high. Overall, the environment remains extremely challenging for both the Swiss economy and our monetary policy. Outlook for Switzerland in 2014 I will now look at developments in Switzerland. In 2013, our economy did quite well, primarily as a result of stable domestic demand. This year we are expecting the economy to maintain a similar momentum, driven by domestic demand as well as, increasingly, by foreign demand. Thus the global economy will supply positive growth impetus, which will assist export industries, in particular. Accordingly, production capacity utilisation is expected to be higher and companies should see further improvement in their financial situation. Given this situation, investment looks set to regain momentum. During the months ahead, unemployment is likely to decline slightly. However, this essentially positive scenario is associated with external risks which I have already outlined. Furthermore, the popular federal initiative approved in February to curb 2  BIS central bankers’ speeches  immigration represents an additional element of uncertainty as far as the economy is concerned.