samchain/econo-pairs-v1 huggingface dataset:
9 It is therefore important that supervision and regulation keep up with and are adapted to developments and structural changes that occur in the financial sector. Central banks may also from time to time review their guidelines and arrangements for liquidity assistance so that they are sufficiently flexible in order to meet new requirements. There may, for example, be reason to consider the forms in which types of companies other than banks might also be eligible for liquidity support. One such type of player is so-called central counterparties. A central counterparty (CCP) acts as a counterparty to the buyer and seller in a security transaction, thereby assuming all counterparty risk. In order to reduce systemic risks globally, authorities around the world have encouraged the use of central counterparties in transactions with standardised OTC derivatives – such as interest rate swaps. The idea is that this will increase resilience in the  8  An LCR amounting to 100 per cent means that the banks have assets that can be quickly and safely used for payments – in order to cover their cash outflows during a 30-day-long stress scenario. 9  For an early study of the emergence of the unregulated credit market, see Ingves (1982). BIS central bankers’ speeches  5  financial system in the event of a bank failing.

But even for exports of processed metal goods and machinery does Switzerland have higher export unit values than, for instance, the EU. 15  Looking at developments over the last 20 years, it is primarily the prices of watch exports that have risen considerably. 16  Ireland also exports a lot of chemical and pharmaceutical products. Besides, the unit values of its exports of electronic products are also very high. 6  BIS Review 157/2010  Chart 3  Source: Eurostat. Overall, the results from a unit value analysis support the assessment that Switzerland is specialised in the production of high quality products. This is in line with previous studies. These show that Swiss export products largely compete on quality, rather than on price. 17 Given the level of know-how in Switzerland, this ought to be the case in the future as well, assuming that Swiss products can continue to fulfil the ever-growing demands on quality. To what extent could this have had a positive influence on the way in which exports developed in the most recent crisis? For the short term, at least, it can be assumed that higher quality products are more difficult to substitute than relatively homogenous goods. This applies not only to pharmaceuticals, but also to highly specialised products such as precision instruments. And this was indeed the case during the most recent crisis – Swiss exports of precision instruments receded only slightly, and have since risen to such an extent that they now already exceed their pre-crisis level.
The global financial and economic crises thus negatively impacted on economies around the world by adversely affecting trade and investment flows and the price of key export commodities. To respond to this crisis, several actions are being taken at global level by the major economies to address the root causes and the effects of the global financial and economic crises. These are fiscal and monetary policy stimulus measures aimed at boosting global consumption and investment demand in an effort to avoid a significantly sharper global contraction than that which has already occurred. Measures typically entailed reduction of interest rates, tax cuts and increased Government spending in form of bail-outs of strategic institutions and in some cases virtual nationalisation. Concrete steps are also now being taken to reform the regulatory and supervisory frameworks governing the financial sector. Further, increased resources have been provided to key multi-lateral institutions such as the IMF and the World Bank. These institutions have also been mandated to play a central role in leading the global response to the crisis and evaluating the efficacy of the various measures that are being implemented. Impact of the global economic crisis on Zambia The Zambian financial sector has so far not been directly adversely affected by the credit crunch as reflected in the continued stability of the banking sector with most banks being adequately capitalized and the inter-bank market operating as before. This is mainly due to the sector’s limited integration into the international financial markets.

A slide in both copper and cobalt export earnings owing to lower prices accounted for this outturn. Nonetheless, it should be noted that commodity prices on the international markets recently have been edging upwards. If this trend is sustained, Zambia’s external position may improve accordingly. Foreign capital inflow Your Excellencies, the global financial crisis has led to the decline in the foreign portfolio investment inflows as investors reduced their exposure to emerging market instruments. The risk aversion towards emerging markets has led to a reduction in foreign portfolio inflows and  2  BIS Review 86/2009  holdings in Zambia’s Government securities. This has resulted in a net outflow of foreign portfolio investment since funds that mature are not being rolled over and funds coming in have be en scaled down. For example, the foreign investor’s total holding of Government securities has reduced from K1,054.7 billion in the third quarter of 2008 to K446.2 billion by the second quarter of 2009. Similarly, the flow of foreign investments at the Lusaka Stock Exchange has switched from a net inflow of $ million during the period January to May 2008 to a net outflow of $ million in the same period this year. Exchange rate volatility and domestic inflation The global financial meltdown has caused a contagion effect to our foreign exchange market and has led to volatility in the exchange rate of the Kwacha against major currencies.
Link to the monetary policy strategy  The first cornerstone of the our exit strategy is the link to our primary objective and thus to our monetary policy strategy. Evidently, the crisis has not changed the ECB’s primary objective. Our actions have resolutely been taken with this primary objective in mind: to maintain price stability in the euro area over the medium and longer term. By implication, any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally. At the same time, if no such risk existed, a non-standard measure could be maintained in case we continue to see significantly abnormal tensions, credit dislocations and impairment of the monetary policy transmission mechanism. But financial institutions ultimately need to stand on their own two feet. Central banks can and have provided support to market functioning. But ultimately market activity relies on the confidence and trust of market participants themselves. 2. The design of the ECB’s measures  The ECB’s non-standard measures were designed with exit considerations in mind. There was a strong consensus to embark on such policies that would prove unproblematic to unwind at a later stage. In this sense, the design of the non-standard measures was chosen to facilitate a smooth exit, representing the second cornerstone to be kept in mind.

Although many ECB watchers at the time favoured holding or reducing rates, on the basis of subsequent events it is widely recognised that this decision was appropriate and served to anchor longer-term private inflation expectations securely. A second example that underscores the ability to take decisions in difficult circumstances is the rise in interest rates in July 2008. It is now often put aside because subsequent developments were overtaken by the eruption of the crisis, but there is no doubt that inflation expectations were rising noticeably at the time. The decision of the Governing Council at the time demonstrated its determination to continue solidly anchoring inflation expectations including in difficult circumstances. At the height of the financial crisis, this reputation has helped to stabilise inflation expectations, including contributing to guard the euro area against the materialisation of the risk of deflation. BIS Review 103/2009  7  IV. Concluding remarks  Allow me to conclude. This morning, I have outlined four main cornerstones of the exit strategy from our nonstandard monetary policy measures. They reflect: our reputation for swift and decisive action when it is required; our technical and institutional ability to act; the forward-looking initial design of the measures; and, above all, the link to our monetary policy strategy and the primary objective of securing price stability in the euro area over the medium and longer term. Stressing the importance of the exit strategy should not be confused with its implementation.
In other words, in the absence of strong governance, managers have strong incentives to exploit accounting latitude in order to achieve certain short-run performance goals that are linked to rewards. This raises a number of important issues for governance. For one, insurers will need to consider the adequacy of existing internal controls and accountability frameworks to ensure the integrity of financial reporting. For example, where actuarial models are used, to what extent are these models and the assumptions underpinning them subject to sufficiently robust validations? Insurers will also need to consider the depth of knowledge and expertise required at the audit committee level to enable the effective oversight and monitoring of management discretion. Part of this oversight includes the rigor applied by boards and audit committees in the appointment of external auditors to ensure their ability to act as an independent check on management discretion. It is also essential for insurers to develop strategies for improving communications with users of financial statements. A key risk will be that users fail to make sense of reported results which can lead to irrational behavior and unintended consequences. Equipping board members and senior management to communicate results effectively will be particularly important. These are also the issues that supervisors will be concerned with. Given the potential for heightened risks and uncertainty, the Bank will examine the need for regulatory prescriptions or 3/5  BIS central bankers' speeches  guidance – particularly in the early phases of implementation.

Over time, we expect stronger governance within insurers to reinforce associations between financial reporting and fundamental economic factors, as intended by IFRS. In Malaysia, the finalisation of IFRS 17 is indeed timely in the light of current reforms being undertaken by Bank Negara Malaysia to further develop the domestic insurance market. This will see greater competition and complexity in the insurance sector, alongside a renewed impetus for growth through channel diversification and digitalisation. In this environment, the implementation of IFRS 17 will have an important role in improving the quality of information provided to the market on how these developments impact the performance of insurers, and in strengthening foundations for sound governance and risk management. This in turn will promote the effective functioning of insurance markets to serve the economy. Early preparation is key So then, where do we stand today? With less than two and a half years before the implementation date sets in, how prepared are insurers to implement IFRS 17? The answer is not encouraging. A recent survey published in January this year by a software firm covering some 240 insurance companies spread around the world, found that a startling 92% of insurers had yet to start putting solutions in place. Among those that have started, a vast majority are still only in the initial stages of planning.
This advises studying the possibility, depending on how economic activity evolves, of extending the public guarantee mechanisms. In re-designing the latter, priority of access to such resources should be for firms with sound viability prospects. The crisis will significantly impact banks’ credit portfolios. The declines in GDP projected for 2020 under the scenarios previously outlined exceed those of any stress test in the past; yet it is true that, if the rebound in activity forecast for 2021 and 2022 were to materialise, this severity would be significantly mitigated. Moreover, the crisis will affect banks differently in terms of their business model and of the distribution of their exposures to the sectors and regions most affected by the pandemic. Overall, then, we must remain vigilant to stave off the risks to financial stability derived from this crisis, and be ready to respond forcefully at the European level if these risks materialise. Second, in the domestic arena, some of the measures already applied should be temporarily extended and recalibrated. It seems right to retain some of the income support instruments for the most vulnerable households, though it is essential they remain focused and designed so as not to distort, for example, labour market participation decisions. It would also be wise to extend furlough-like schemes in certain sectors and firms that will continue to be very affected by social distancing measures.

23.06.2020  The main post-pandemic challenges for the Spanish economy Appearance before the Parliamentary Committee for the Economic and Social Reconstruction of Spain after COVID-19 – Congress of Deputies Pablo Hernández de Cos Governor  1. Introduction Ladies and gentlemen, I appear before this Committee to set out what should be the guiding principles, in the opinion of the Banco de España, of Spain’s economic policy strategic priorities at present. Before elaborating on these priorities, allow me to convey my praise and gratitude to Spanish citizens for their exemplary behaviour in the especially difficult circumstances we have faced in recent months. Naturally, my support also goes out to all those who have lost loved ones as a result of the pandemic. The crisis has disrupted economic activity on a massive scale. To such an extent that, on all available forecasts, this year will see the biggest declines in GDP recorded in peacetime. As I argued in my appearance last May before the Parliamentary Economic Committee, the severity, temporariness and global nature of this shock initially warrants forceful economic policy measures that are time-limited and internationally coordinated. The goals of this shock therapy should be to lessen the effects of the pandemic in the short term and provide for an exit from the lockdown of the past few months with the least economic harm possible. Broadly, the response of the authorities - with measures I described and assessed in the aforementioned appearance - has been significant.
There are obviously many, but I will focus on four main categories, namely: global integration of financial markets; financial liberalization and increased competition; maintenance of asset quality; innovation and technological change. Global integration of financial markets 13. The trend of global integration of financial markets is clear. The increase in capital flows into the emerging markets has been one of the dominant features of the 1990s. During the period 1990-95, inflows into the Asian economies amounted to $ 360 billion4. The effect of this has been to bind individual economies even more tightly into the global market place. While this has brought major benefits to the recipient economies in terms of encouraging increased investment and development of capital markets, it has also left them more exposed to external shocks and loss of confidence. The macroeconomic instability caused by large-scale inflows and by their subsequent reversal will clearly have an adverse impact on the banking system. The risk of this is less if inflows take the form of more stable longer-term direct investment. To a significant extent, this has been the case for the Asian economies. But for some economies short-term inflows have been relatively large, and there are doubts about their sustainability. 14. Inflows of hot money also create more direct problems for the banks as well as affecting the macroeconomic environment. In particular, they will tend to add to the liquidity of the banking system and encourage expansion of lending.

Mr. Yam looks at Asian banking in a regional and global context Address by the Chief Executive of the Hong Kong Monetary Authority, Mr. Joseph C.K. Yam, at the ADB-IIF Forum on Developing Asian Financial Markets held in Fukuoka, Japan, on 10/5/97. I am pleased to be here this morning to address you on the subject of Asian banking in a regional and global context. I will be speaking particularly about banks in the East Asia region. The importance of banking stability 2. There is increasing international recognition of the importance of a sound banking system in promoting macroeconomic stability, sustainable economic growth and the efficient intermediation between savings and investment. The last few months have seen a series of initiatives by international financial institutions and groupings to devise principles, standards and strategies for the promotion of financial stability. While these initiatives have been directed principally at emerging markets, they also have application to the more developed markets which have been by no means immune from banking problems in recent years. A number of Asian economies, including Hong Kong, have participated in this work. This is a practical recognition that the setting of international regulatory standards must be a broadly-based process, in keeping with the global nature of today’s financial markets. 3. I do not need to belabour the point about the debilitating and disruptive effects which banking problems can have on economic and monetary management. The need to restore the capital of failed banks can impose a heavy fiscal burden.
In 2014, payment cards were used for more than 47 billion transactions in the European Union, that is to say a level almost identical to the overall combined number of transactions involving credit transfers and direct debits, respectively the second and third most used payment instruments. In France, payment cards were used in more than 50% of all non-cash payments transactions, amounting to nearly 9.5 billion operations in 2014, compared to only 3 billion transactions in 2001. The specificity of card payments is that they occur for transactions of a relatively small amount € in average in France), making it the strongest alternative to cash for proximity payments. This situation is the result of years of efforts made by market stakeholders to build a secure, efficient and convenient payment instrument. The French community was at the forefront of such evolution with the early adoption in 1992 of chip for payment cards, which has been followed by the introduction and the subsequent widespread adoption of the EMV standard. This latter evolution has been the cornerstone of the uptake of payment cards by allowing fast and secure transactions through Europe. This predominance of payment cards may nonetheless be at stake nowadays, with the conjunction of three main trends that have a disruptive effect on the market: new solutions, new behaviors and players, new regulations. First, innovative payment solutions based on SEPA schemes are very likely to emerge.

One prime example of this possible groundswell is the preparation, under the impulse of the Euro Retail payments Board (ERPB), of a pan-European instant payments scheme by the European Payments Council (EPC), based on the existing SEPA Credit transfer scheme. This new scheme, which should be finalized by the end of 2016 and operational before the end of 2017, will serve the development of further innovative products, especially via smart devices, for proximity and mobile payments. This is a relevant example of how the harmonisation and standardization work done in the context of the so-called “SEPA 1.0.” for legacy payment instruments (direct debit and credit transfer) may serve as a basis for market players to develop new innovative real time and paperless payment solutions, what I would call “SEPA 2.0.”. Secondly, we observe the emergence of new payment behaviors and new market players, in relation with further technological innovations. This is mostly led by the rising prominence of e-commerce, which has fundamentally changed payment usages in the last few years. The  BIS central bankers’ speeches  1  search for a payment instrument adapted to these evolutions has first led to a wider usage of payment cards, beyond proximity transactions. These Card-not-present payments over the internet now account in France for nearly 7.5% of all card based-transactions in volume, and for 11.6% of the overall value of these transactions.
That said, many countries within the zone also have had to make sharp fiscal adjustments and implement significant structural reforms. Unfortunately, many of these structural reforms may have a transitory deflationary impact. This is the case of product market reforms, which directly target lower prices, but also of reforms fostering supply if demand is depressed. Enhanced competition in telecom led to an impressive decrease in prices: in France, the entrance of a fourth mobile phone operator led to a decrease in mobile costs by a quarter and a negative impact on the average CPI of 0.3 point in 2012. There have been similar disinflationary effects in many of the so-called stressed jurisdictions of the euro-zone. However, at the current juncture, structural reforms are badly needed due to the productivity slowdown and larger product and labour market reforms should be envisaged in highly regulated countries. 13 In that case, it is crucial for the central bank to anchor inflation expectations, through a clear commitment to its inflation objective. The Governing Council has been clear that it is willing to do everything within its mandate to deliver on this objective which is headline inflation close to, but below, 2% over the medium term. Structural reforms can also have a short-term negative impact on employment and growth, especially in a depressed environment 14. In that respect, monetary policy can provide an offsetting support to growth, along with fiscal policy.

To counteract this impairment of the credit channel, the Governing Council has, alongside other non-conventional measures which don’t need repeating, also launched two targeted lending programmes. These so-called TLTROs I and II allow banks to borrow up to a fixed fraction of their loan portfolio at an interest rate linked to the ECB official rates. Banks that make new loans in excess of their benchmarks receive a lower average cost of funding. This provides a powerful incentive to expand lending and goes some way towards alleviating funding risks when nominal interest rates are negative. In a further step to alleviate the credit channel, the Governing Council decided to include corporate bonds in its asset purchase programme in March 2016. This should directly reduce the cost of corporate borrowing in capital markets. Overall, these measures have been quite effective in easing credit conditions in the Euroarea. The volume of bank lending to non-financial corporations has begun to grow again and bank lending rates have fallen across the Euro-area but most noticeably in those countries where that had tightened the most. 2. Monetary policy can foster long-term growth by supporting structural reforms  The financial crisis in some ways revealed some structural weaknesses in many economies. In some cases there were excessive levels of public debt. 10 In others it were structural  6  R. Riley, C. Rosazza-Bondibene and G. Young, 2015. “The UK productivity puzzle 2008–13: evidence from British businesses,” Bank of England working papers 531, Bank of England.