samchain/econo-pairs-v1 huggingface dataset:
That means that a successful industry needs to be both dynamic and robust. Uncertainty generates challenges but also represents opportunity. I want to discuss these risk/reward trade-offs and the importance of understanding the potential for new exposures that changing risk profiles can bring. Insurance fulfils important social functions: the provision of income security in retirement; income protection whilst in work; funding for health care services and preserving the continuity of businesses subject to unexpected shocks. Indeed, in some areas, insurance is compulsory such as with motor insurance and employers’ liability. Disruption to these functions is unlikely to be tolerated by wider society, not only because of the social benefits, but because risk transfer and pooling are crucial for sustainable economic growth and development. It is for this reason that the need to protect the interests of policy holders and to preserve long-term critical cover is so important. Although one cannot be sure what the future may bring, we can learn from past mistakes to avoid their repetition. That is particularly apposite given that the residual effects of the great financial crisis are still being felt across the global economy. One of the things we appreciate very well at the PRA is that insurance business is very different to banking, and I have seen that at first hand over the past six months or so. I have also seen that there are lessons to be learnt from the banking crisis that can directly read across to the world of insurance.

This is because Solvency II caps the amount of transitional benefit a firm may derive. Bearing in mind this cap, and the benefits to be gained from a smooth transition, the take-up of transitional measures should be seen as a viable option for firms to take to assist with their capital planning, and are a feature that the UK authorities strongly supported during the development of Solvency II. They are there to be used where appropriate. As we shift to a Solvency II world, I think it is worth bearing in mind that, like a smartphone, regulation tends to get new “updates” and “apps” in response to changes in the external environment. Indeed, the path of the future is in global policy development, including the insurance capital standard (ICS) under the aegis of the International Association of Insurance Supervisors (IAIS) which will look to develop risk-based global standards. Insurance business is fast becoming globalised and interlinked. It naturally follows that so too should regulation. Introducing global capital standards would enhance global cooperation, ensure a level playing field and limit regulatory arbitrage. For this reason, the PRA supports the development of global capital standards and the establishment of a long term vision in order to achieve a single insurance capital standard predicated on a single valuation basis which is genuinely comparable across jurisdictions. Concluding remarks Insurance sits at frontline of innovation and, as seen with climate change and digitisation, insurers can be directly exposed to changes in regulation, public policy and other shifts in society.
Resilience and innovation in post-trade Speech given by Dave Ramsden, Deputy Governor for Markets & Banking  The Association for Financial Markets in Europe 12th Annual European Post Trade Conference, London 8 May 2019  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  Introduction I’d like to start by paying tribute to Simon Lewis and his nine years of tireless service as CEO of AFME, which he has announced will be ending this autumn. I’d like to wish him every success for the future. I’m delighted to be here at today at the AFME post-trade conference. This is my first AFME European Post Trade conference, but I believe it’s your 12th. There has been a lot of change in the European post-trade1 space over those 12 years. Post-trade has traditionally been a little in the background – a part of the financial system we might refer to as plumbing – sometimes out of view, but absolutely critical for functioning. Today, various developments have brought post trade to the fore, and made it an increasingly exciting space to be involved in. I’m going to focus on technological developments and also resilience, two themes which resonate with my responsibilities at the Bank and my priorities for 2019. The Bank’s involvement here spans two levels – of soft and hard infrastructure. On soft infrastructure we can think of the Bank’s regulatory approach, led by our policy committees – FPC and PRC, and the Financial Market Infrastructure Board, and the rules it makes and standards it sets.

This will come to the fore over the course of the next five years. Creating conditions for development involves: introducing a system of individual pension capital – essentially a voluntary system for individuals; developing non-bank financing and the bond market; developing the capital market – in essence, creating long-term money for the country. At the moment we don’t have long-term money, and so we must and will be doing everything we can to create it. Further development of the payment system will involve a smooth transfer of the salaries of public sector employees and social payments on to a card system called “Mir". To make this transfer smooth and orderly is our task for the near future. We will also be aiming to expand the acceptance of the Mir card outside of Russia. We have already begun plans and arrangements with other countries on this front. Finally, I will return to the topic of financial technology development – I have also spoken about 2/3  BIS central bankers' speeches  this previously. The development of financial technologies will in large part determine the specific actions to be taken by us in the coming years. This will involve active joint efforts with businesses. Legislative support is also important here, particularly in terms of remote authentication, which will make new technologies and digital technologies possible. This implies a transition to electronic document workflow in the financial market.
One of the aims of the merger is to be better positioned to compete with global companies. New market entrants and lower entry barriers promote competition, but there are other mechanisms that could weaken competition in the longer term. One example is if one or a small number of multinationals become dominant payment service providers at the global level. The key words are digital platforms and network effects. Marketplaces such as stock exchanges and shopping centres have existed for a long time. But digital marketplaces, known as platforms, are far more scalable. Well-known examples of digital platforms are Google, Facebook and the classified ad portal Finn.no. These platforms achieve competitive advantage by gathering information about customers, eliminating time-consuming tasks and simplifying users’ everyday lives. Platforms have network effects. Competition can be impaired if platform companies exploit their market power. A large user base makes it profitable for other service providers to develop complementary services. Because of network effects, dominant platforms can achieve a nearmonopoly position. Operators that control parts of the payment infrastructure can shut out competitors. For instance, Apple Pay is the only option for contactless payments based on near-field communication (NFC), using Apple’s iPhones. A number of countries are considering whether this constitutes abuse of a dominant market position. In Norway, this would be a matter for the competition authorities. 1/5  BIS central bankers' speeches  Payment solutions should build on a common underlying infrastructure that enables payments to be carried out swiftly, safely and at low cost.

BIS central bankers’ speeches  3  A more expansionary monetary policy gives better target fulfilment My view of monetary policy implies that at each monetary policy meeting one should choose the repo-rate path that with the corresponding forecasts for inflation and unemployment best stabilises inflation around the target and unemployment around a long-run sustainable rate. It should not be the case that a lower or higher repo-rate path leads to better target fulfilment for both inflation and unemployment. In other words, it should not be the case that inflation and the inflation forecast are below the target while unemployment and the unemployment forecast are above a long-run sustainable rate. Based on Norwegian central bank deputy governor Qvigstad’s (2005) criteria for a good repo-rate path, this can be worded as: For monetary policy to be well-balanced, the inflation gap (the gap between inflation and the target) and the unemployment gap (the gap between the unemployment rate and the longrun sustainable unemployment rate) should have the same sign. My view is also that the target fulfilment for inflation and unemployment during the entire forecast period is what is important, not just the target fulfilment at the end of the forecast period. For an unemployed person there is a major difference between getting a job in one or two years’ time and getting one in three years’ time.
By 1982, the city’s inflation-adjusted wage bill had fallen by almost 30 percent, and real investment in the city’s infrastructure fell by more than three-quarters and didn’t reach its 1974 levels until the early 1990s. The city gave up a significant amount of its autonomy in exchange for the relief it received. Ultimately, however, the reforms that were forced on the city created a responsible and transparent budgeting process that has served the city well to this day. By early 1976, the U.S. economy was recovering from a deep recession, and employment in New York City’s financial sector was once again on the rise. Overall employment in New York City began to recover by 1977, and unemployment began to decline. By the end of the decade, there were signs of hope, but it wasn’t at all clear yet whether the city was back on solid footing. While employment did rebound modestly, the city’s population was still declining, crime was still rising and the city was still having trouble borrowing. It would be 10 years after the initial crisis before the city was able to borrow again on its own in the public markets. By the mid-1980s, the resiliency of the city’s economy was becoming more apparent. City-wide employment barely declined during the wrenching recessions of the early 1980s—the first time in a long while that the city’s economy had out-performed the nation’s.

Each year, tens of thousands of low-to-moderate-income New Yorkers—many of them immigrants—send their children to one of the city’s specialized high schools. When it comes time for college, many of these same students have access to universities in the CUNY and SUNY systems. A recent highly regarded study assessed how much of an opportunity kids born to less advantaged families in different parts of the United States have of moving up in the world. New York City ranked 10th out of the 50 largest U.S. metro areas.2 The Big Apple should strive to be number one in this ranking by continuing to improve access to quality and affordable education and to job training. We should all do our part to help make this happen. Also, it is important to remember that the measure of a city’s well-being is much broader than 4/5  BIS central bankers' speeches  how many are employed and the level of economic activity. As Paul Allen, co-founder of Microsoft, explained: In my own philanthropy and business endeavors, I have seen the critical role that the arts play in stimulating creativity and in developing vital communities…the arts have a crucial impact on our economy and are an important catalyst for learning, discovery, and achievement in our country. Through the fiscal crisis, into the 1980s and to the present day, the city maintained its status as a center of culture and the arts.
Needless to say, we must accept the reality that different national resolution regimes will continue to coexist. Let me be very clear on this: A full-fledged global resolution regime is a noble but seemingly unrealistic goal. We should not conclude from that, however, that the framework for cooperation across countries cannot be improved. One possibility is to work towards mutual recognition arrangements of compatible national resolution regimes. Recognising other resolution regimes helps each nation to adapt its own structures and processes in order to reduce frictions in crisis episodes. We should require that firms more clearly delineate different functions within their internal structures and simplify those structures. This will help facilitate an orderly wind down in the event of a severe crisis. It will probably also enhance effective management and risk management in these firms. This is an important point. As the crisis has demonstrated, in a  BIS Review 145/2009  5  number of cases it can be argued that firms were not only too big, but also too complex to be managed effectively. Furthermore, we need a financial market infrastructure which – to the extent that this is possible – minimises the destabilising effects of a failure on the rest of the financial sector. A key element that cannot be emphasised enough is the ongoing effort to centralise the clearing and settlement processes in the derivative market. This enhances transparency and reduces counterparty risk.

N. Tarashev, C. Borio, and K. Tsatsaronis, “The systemic importance of financial institutions”, BIS Quarterly Review, September 2009, pp. 75-87. 6  BIS Review 145/2009  The inconvenient truth is that effective regulatory reform inevitably imposes some costs on banks. In the words of the late Milton Friedman, “there is no such thing as a free lunch”. The current crisis of the global financial system was not an accident. It was the result of optimising behaviour on the part of market participants. Given the rules of the game, they were maximising short-term profit. It is therefore too simplistic to vilify bank managers. With respect to regulation, however, this implies that if we do not change the rules of the game, which guide this optimising behaviour, we will sooner or later end up in a similar situation again. Costs are only one determinant of banks’ competitiveness. Safety, soundness, and trustworthiness are other important factors. Hence, if we view competitiveness from a broader perspective, strengthening financial regulation ultimately has some benefits for banks, too. While some business areas may become less attractive, others will gain. In Switzerland, for instance, where wealth management forms the backbone of the banking industry, financial stability is a crucial factor for success. In this context, it is interesting and certainly promising to note that the two big Swiss banks now emphasise their strong capital position as an important competitive advantage. Nevertheless, to be on the safe side regarding a level playing field, ideally all regulatory reform should be internationally coordinated.
The costs of issuing these liabilities are higher than those for senior debt and other secured instruments and, in fact, rise as they become more similar to capital in terms of seniority. But their cost also decreases as the solvency of the issuing bank increases. 12/17  Compared with other European countries, Spanish banks have lower solvency levels almost irrespectively of what definition of capital is used. It is true that they comfortably exceed minimum regulatory requirements, that stress test results suggest they are more resilient to the risks now facing them, that is there is a certain dispersion among banks and that, in terms of leverage ratio, they exceed the European average. However, in a highly integrated world of competition for global financial resources, solvency is a key signal. Moreover, as I mentioned earlier, capital is the first line of defence against unexpected losses and therefore a means of reducing the likelihood of a systemic crisis. In this respect, over the last two years the phase-in top-quality capital (CET1) ratio has decreased by nearly one percentage point. This indicates that banks as a whole have not replaced to a sufficient extent the lower quality capital elements temporarily included in this category by others with a higher loss-absorbing capacity. This has not been an across-theboard phenomenon (many banks have raised their solvency ratios), but some have been guilty in this respect. Main macro-financial risks Apart from these challenges, what are the macro-financial risks confronting the Spanish financial system?

This obviously had an impact on bank solvency, giving rise to significant capital requirements for some banks, which needed public support to cover the capital shortfalls identified. Since then, the situation has improved considerably, with the help of the monetary policy measures implemented by the European Central Bank to ensure that solvent banks had sufficient funding. Against a background of significant decline in banking activity, banks have managed to reduce the weight of troubled assets in their balance sheets very significantly. Specifically, 7/17  the NPL ratio has fallen by more than eight percentage points to stand at 5.8% of total lending. Foreclosed assets, meanwhile, are only 50% of the level recorded in 2014, so that their weight has been reduced to 3.6% of assets, vis-à-vis the resident private sector. Active management of these assets by banks, under supervisory pressure, has played a very important role in this process. In any event, there is still significant room for improvement; before the international financial crisis, the NPL ratio was below 1% and foreclosed assets were practically non-existent. The restructuring of credit institutions is also reflected in the reduction in the weight of the real estate sector (broadly defined),2 which stood at 52% of GDP in 2018, as compared with 99% in 2008. 2  Loans for house purchase, plus loans to businesses in the construction industry and related areas.
But it must be recognised that these interventions are not to manage the level of exchange rate, as the ringgit remains a floating currency. Demand and supply forces must be allowed to determine the level of the exchange rate. But at the same time, we cannot be oblivious to the aberrations in demand and supply, originating from large speculative positions. Large swings in the exchange rate are detrimental to our country. It is highly risky for an open economy like Malaysia that relies on international trade activities and exchange rate as a price mechanism. Through experience and practice, we have generally accepted that in a floating rate regime, the market should be left to its devices in determining exchange rate levels. However, empirical evidence suggests that markets mechanisms often go through bouts of distortion. This is not at all surprising. It is proven time and again. The latest Nobel Prize recipient for economics, Professor Richard Thaler’s work have centred on the essence that economic agents are humans. And humans are irrational. This is the opposite of conventional economics that rely on the central assumption that all economic agents behave rationally. This irrationality is the main catalyst for speculative activities in the FX market. When speculative activities are large, they can swing towards extremes. Under these situations, and from the central bank’s perspective, intervention is then necessary to rebalance the supply and demand forces, and to manage the volatility caused by violent swings in the exchange rate. Intervention in a floating rate regime is not new.

Because this would call for greater variation in employment and growth, an outside observer would, all else equal, infer a lower value for lambda. This is when different views regarding the transmission mechanism of monetary policy become relevant. Those who regard the impact of monetary policy on the economy as relatively rapid may be more inclined to 22  See e.g. Blanchard, O, Cerutti, E and Summers, L (2015), “Inflation and activity – two explorations and their monetary policy implications”, NBER working paper No. 21726. 23 At root this is because, in aggregate, retailers whose costs rise adjust their prices only gradually, perhaps reflecting strategic, competitive concerns, or because many importers, over the short term at least, hedge their foreign exchange exposure. See Box on page 28 of the November 2015 Inflation Report for a review. 12  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  12  act in response to shocks whose effects are relatively short-lived. All else equal this would tend to produce a shallower observed relationship between inflationary shocks and output gaps – a lower lambda. If, on the other hand, monetary policy is viewed as operating with a substantial lag, it may be that the more enduring influences on inflation are the ones that weigh most heavily in the monetary policy decision. In this case, this would tend to produce a steeper observed relationship between inflationary shocks and output gaps – a higher lambda.
In the recent period of expansion, inflation rose to 3 per cent in 2008, but was restrained without raising the key rate to a high level. 5 The advantages of economic agents anticipating low and stable inflation are now clearly evident. They can be quite sure that inflation over time will be close to 2.5 per cent. This enables interest rate setting to be more effective. When the nominal interest rate is reduced, the real interest rate falls accordingly, and it is this rate that influences decisions made by households and enterprises. Interest rate setting still provides some scope for stimulus. When inflation is anchored, economic agents do not expect inflation to accelerate over a period in Norway even if the krone depreciates. The krone can then decrease in value without monetary policy having to be tightened. This will curb the decline in our export industry. In bad times, a marked krone depreciation might even be necessary to hold up inflation close to 2.5 per cent. In the downturns in 1990 and 1998, the opposite action was taken: the interest rate had to be increased in order to stabilise the krone and keep inflation in check. Even though fiscal policy and monetary policy have had the intended effect, there have been fluctuations in output and employment. We have experienced a period of strong credit growth. During the upturn, the housing market was increasingly marked by the belief that house prices would always rise.

Owner-occupiers can thereby deduct expenses in connection with earning income but are not taxed on the benefit. With this tax wedge, the interest rate level that is right for households is too high for firms. It shields borrowers from a higher interest rate in upturns and thus has a stronger impact on house prices. It would not be appropriate to increase housing taxation now, but a reform is to be recommended when the turnaround occurs. 5  Different indicators of underlying inflation were close to 3 per cent in 2008, while the rise in total consumer prices was 3.8 per cent. BIS Review 16/2009  15  Economic agents can be myopic. It is short-sighted to base assessments of sustainable levels of debt on today’s variable interest rates. Long-term, fixed interest rates provide a far better guideline in this context. Homebuyers, and the banks providing their mortgages, must take into account that variable rates over time will be around 6 per cent, sometimes higher. There are also other sources of fluctuations in credit and property prices. Banking is procyclical. In upturns, loan losses are low, increasing banks’ profits. Access to equity capital is ample, providing the basis for strong lending growth. Losses increase in downturns, and the supply of equity capital can dry up, compelling banks to restrict their lending. The impact is stronger since the value of property used as collateral fluctuates in step with cyclical developments. At the same time, counterparties and rating agencies may require higher capital levels.