samchain/econo-pairs-v1 huggingface dataset:
The legal terms and conditions of these collateral arrangements are increasingly nonstandardised and opaque, resulting in collateral recapture processes which remain inherently untestable until the event of an actual stress. 3. Funded reinsurance also introduces material wrong-way risk, in that the performance of the counterparty and the collateral posted are likely to be positively correlated. Page 5  In an increasingly competitive market place, with limited capital to support a rising volume of new Bulk Purchase Annuity (BPA) transactions, we are alive to the potential for growth in the use of funded reinsurance. This may result in a greater concentration to a limited number of lessdiversified, asset-intensive reinsurers. Moreover, indirect exposure to foreign credit markets also adds to cross-jurisdiction complexities and introduces contagion risk. This is a developing part of the market with each incremental change bringing more complex valuation, operational and legal risks that need to be carefully assessed and managed. Funded reinsurance is small at present, but it could pose a risk to our objectives if it were to become routine. High levels of funded reinsurance would render the payment of a significant value of UK pensions dependent upon the strength of a concentrated and correlated group of reinsurers. These reinsurers are held to standards set outside the UK. Given our own ongoing efforts to tailor prudential standards for annuity business, standards elsewhere may well not have been designed with UK annuity risks in mind – and so may not yet handle them as effectively.

Through the transfer of the risk, the insurer reduces its longevity capital and risk margin[1], but takes on an exposure to the failure of its reinsurance counterparty. Chart 1 [see Annex] illustrates the impact of the transfer on the insurer’s capital position. The combination of adequate collateral, a high credit rating, and sufficient capital resources from the reinsurer means that the resulting counterparty risk capital charge for the insurer is typically low – an attractive arrangement. Reinsurance is an important component of well-functioning insurance markets, where reinsurers themselves have the financial strength to absorb the risks they are taking on. From a risk management perspective, it allows insurers to achieve the balance of underwriting and credit risk in line with their risk appetite while continuing to deliver for their clients. It allows reinsurers to gain indirect access to diversification or natural hedges that might not arise on their own balance sheet. For example, a reinsurer with large books of protection business featuring mortality or morbidity risk might welcome longevity risk as a natural (albeit not perfect) hedge[2]. Diversification of different[3] sources of callable capital also enhances the efficiency of insurance markets. All of these factors could help to improve the pricing that insurers can offer. However, in recent years, the UK life market has become reliant on this method of freeing up capital to improve pricing. We estimate that over 80% of new business since 2016 has been reinsured at industry-level.
It must be clearly shown which principles we have based our monetary policy decisions on and what information our conclusions are based on. As monetary policy affects the economy with some time lag, the monetary policy decisions must be based on forecasts, as I mentioned at the start. Good bases for decisions in the form of accurate forecasts are thus an important factor in the success of monetary policy. But future developments in inflation and other variables are uncertain. For one thing, there is the uncertainty linked to the statistical methods and models, as certain fundamental parameters vary over time. For another thing, there are a number of other factors that can affect inflation  BIS Review 138/2007  1  in a way that is very difficult to predict. For instance, increased geopolitical unease can push up the oil prices, or an unexpected outbreak of a disease among animals can lead to a rapid rise in food prices. When central banks make forecasts, it is therefore increasingly common that they put a band around the forecasts that measures their uncertainty. These bands help provide information about the uncertainty in the forecasts and also make it easier to communicate the monetary policy alternatives that may arise in the future. But what do we know about the forecasting performance of the Riksbank? Forecasting performance is evaluated both internally and externally Forecasting performance can be evaluated in many different ways. There are a number of statistical methods that can be used to analyse how accurate the forecasts are.

For instance, the downswing in inflation in 2003 was captured to a greater extent than the upswing at the beginning of 2001. The inflation forecasts are on the whole more accurate than the time series models. The forecasting memory for the CPIX extends eight quarters ahead (Figure 8). The correlation between forecasts and outcome is almost 0.8 one year ahead and just over 0.5 two years ahead (see Figure 9). None of the other variables has as high a correlation two  7  We have earlier analysed this in the context of a structural model, Ramses. The evaluation appendix to Inflation Monetary Policy Report 2007:1 contains an analysis of, for instance, the effects of productivity shocks on the economy. 4  BIS Review 138/2007  years ahead. The fact that the correlation wanes in time is natural as the uncertainty in the forecasts increases. Is there any bias one or two years ahead in the forecasts? Let us now look at whether there is any bias, that is, systematic over-estimation or underestimation in the forecasts one and two years ahead. The smaller the bias a forecast has, the better it is. One year ahead the bias for annual GDP growth is very small. However, two years ahead the forecasts have been almost been four tenths too high on average, compared with the outcomes, which is not negligible (Figure 10). With regard to the annual development in employment, the bias is just under three tenths one year ahead and two tenths two years ahead.
BIS central bankers’ speeches  3  •  In the future, we may not have to remember complex passwords or worry about password compromise. •  Fingerprint, iris, facial and voice recognition, and even palm vein and heartbeat recognition systems are being explored for authentication purposes. •  Biometric ATMs have been deployed in several parts of the world, including the UK, Japan, China, Brazil, and Poland. •  Banks in Singapore have launched mobile applications that utilise the TouchID function of the iPhone for fingerprint authentication. •  Some have also been exploring the use of voice biometrics in their phone banking and call centre services. For users who are concerned about their privacy or have physical challenges, token-based authentication offers an alternative means of security: •  Tokens embedded within mobile devices, or perhaps on wearable technology, are viable options. •  And where stronger security is required, these could be used together with biometrics to provide multi-factor authentication. Third, block chains and distributed ledgers. Digital currencies – like Bitcoins – have attracted much interest. •  Payments using Bitcoins are much faster and potentially cheaper than conventional bank transfers and, its advocates argue, just as safe. •  Whether digital currencies will take off in a big way remains to be seen. •  But it is a phenomenon that many central banks are watching closely, including MAS. •  And if they do take off, one cannot rule out central banks themselves issuing digital currencies some day!

The absence of any particular component could reduce the effectiveness and efficiency and thus affect the viability and sustainability of the system. While the Islamic banking system has an important role in mobilizing deposits and providing financing, the Islamic capital market has an equally important role in providing a stable source of long-term funds for financing large investments and development projects as well as for capital and business expansion. The development of the Islamic capital market not only allows for a more balanced allocation of financial and economic resources within an economy but more importantly, ensures greater diversification of risks within the Islamic financial system. This enhances the resilience and robustness of the Islamic financial system to withstand financial shocks and contributes to the overall stability of the Islamic financial system. BIS Review 47/2004  1  In terms of the development of our Islamic financial system, as at June 2004, the assets mobilized by the Islamic banking sector have increased to RM89.1 billion, accounting for a market share of about 10% of the banking system. At the same time, deposits have also increased to RM64 billion, constituting a market share of 10.4% while financing mobilized amounted to RM54 billion to garner 11% of the market share. Product offerings have also increased in sophistication from the deposit products to hybrid products that are able to enhance returns to depositors. A further advancement was made with the introduction of the Islamic variable rate financing mechanism that provides an alternative to the fixed-rate financing.
Trade liberalisation, in its most far-reaching manifestation – China’s prospective entry into the WTO, brings enormous opportunity for Hong Kong to enlarge and deepen its intermediary role. Globalisation is transforming the way in which government and business relate to each other, and Hong Kong is in an excellent position as an open, lightly governed city to take advantage of the process. Technological advance offers new tools to realise the practical benefits of globalisation, particularly in the field of financial services, and Hong Kong is in the vanguard of the innovative work that is going on. 28. But these processes also carry risks and uncertainties, which can be reduced, through hard work and vigilance, but never eradicated. How much business will be diverted from Hong Kong to other cities after China enters the WTO? How should small, open markets like Hong Kong safeguard themselves against the shocks and threats which are transmitted more quickly, more sharply and more forcefully through globalisation? And how, when we frankly have very little idea of where innovation is taking us or of where the dead ends may be, do we cope with the volatilities and unknowns – not least in the financial projections of technology-led companies – of a white hot technological revolution? These are among the many challenges of living in a logistics, financial and digital hub. As one of the world’s most open and connected of cities, Hong Kong is better placed than most to respond to these challenges and to deepen further its role as a global city.

Another explanation some have offered is that there is a measurement problem – we are understating output growth and overstating price inflation. This type of issue, long flagged as a hedonic adjustment, seems most credible in particular market segments, such as in healthcare. Alan Blinder has posed this question: Would you rather have 1970 healthcare at 1970 prices or 2016 healthcare at 2016 prices? Based on the measurement of prices, 1970 healthcare is a much better deal. Yet, when offered this choice, almost all choose 2016 healthcare. Why? The reason is that people highly value the advances in healthcare technology, such as in cardiac care, or in the procedures that are practical today, such as hip and knee replacement, that simply weren’t available 50 years ago. BIS central bankers’ speeches  1  U.S. economic performance has also been held back by developments in the rest of the world. Growth outside of the United States has slowed. In the euro area, comparing the period from 2003 to 2008 to the period from 2010 to 2015, annual real GDP growth slowed from 1.9 percent to 0.8 percent. Japanese growth has remained muted over these periods at 0.1 percent and 1.0 percent respectively. In China, reported growth rates over these two periods slowed from 11.3 percent to 8.3 percent. These developments, along with policy and risk events that have increased demand for U.S. assets, have contributed to significant U.S. dollar appreciation over the last two years.
A series of measures are eliminating toxic forms of shadow banking like these ‘constant net asset value’ money market funds.18  As a result, markets are safer to navigate. Shadow banking of old is transforming to more resilient market-based finance of today. So what need is there to dive into liquidity mismatch in investment funds? It’s certainly the case that any remaining risks are much smaller and more subtle than those around money market funds. Since the crisis, funds have flowed into open-ended investment funds that make no promise of redemption value: the investor bears the risk from the outset. They have few of the problems of the crisis money market funds. But these funds are increasingly invested in less liquid assets while continuing to offer next day redemption to investors. The share of corporate bonds held in open-ended funds in the UK and the Euro Area has increased by 70% since the crisis (slide 13). And their structure may create incentives for their investors to redeem in a stress, forcing fire sales of illiquid assets. I emphasise ‘may’ because we have not seen this on large scale in the past. Nevertheless, our duty is to ask whether we could see it in the future. The possibility at least arises because the price offered to redeeming investors is the ‘net asset value’ of the fund, calculated from quoted market prices of the assets they hold. Such quotes normally reflect standard trade sizes and prevailing market conditions.

12 9  See paragraph 17 of ‘Record of the Financial Policy Committee Meeting on 12 March 2018’, available here. The test included a sharp adjustment in corporate credit markets and commercial property markets. Sterling investment grade corporate bond yields were assumed to snap up almost 800bps as long-term gilt yields rose by over 500bps and credit spreads blew out. 11 International Monetary Fund (2018), ‘Global Financial Stability Report’ (April). 10  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  So let’s look at some of the icebergs present in 2008, what’s been done to deal with them, and where dives into the deep are now warranted – by investors and policymakers – to assess whether new – albeit smaller – bergs may be lurking. The first of these icebergs is leverage. Specifically, leverage arising from use of derivatives. Cast your minds back to 2008 and AIG (see slide 10). It had written $ of credit default swaps on mortgage-backed securities. It had in effect taken its insurance business to mortgage bonds. Because of its triple-A credit rating, few of those buying the insurance asked AIG for any collateral. 13  That had two consequences. First, as its prospective losses on mortgage bond insurance increased and its own credit downgraded, AIG was suddenly required to put up $ of collateral. As it scrambled to find that collateral, it was forced into firesales of assets.
I say once a month, but we meet more frequently than that when needed, as we have done for example over the past few weeks. What are some of those threats as I speak here today? We are, of course, still working our way through the implications of the dreadful events in the United States last month. Uncertainty about the near-term outlook increased quite markedly following the attack, and this - together with the  BIS Review 83/2001  1  possibilities of supply-chain and market disruption, particularly in the US - contributed to some sharp adjustments in equity values. A number of sectors most closely affected by the terrorist attacks - in particular air travel and insurance - were badly hit. More recently, equities have rallied somewhat, suggesting that some of the earlier concerns may have been overdone. But the market is still clearly lower than it was at the start of September. These factors have potentially important implications for the inflationary outlook, and therefore for monetary policy. The Bank of England's Monetary Policy Committee - in common with a number of other central banks around the world - reduced interest rates last month, citing in our press release the increased risks of a further slowdown in world growth. Interest rates were cut by a further quarter of a per cent following our meeting last week, and you will be able to read about our reasoning for this decision when the minutes are published on 17 October.

In other ways, though, the aftermath of the attacks on the US has highlighted the robustness of the international financial system. Although several firms suffered grievous losses of staff and destruction of equipment, overall the market place was back up and functioning remarkably quickly. I think there were a number of reasons for this. In the first place the Federal Reserve System did an excellent job in making the necessary liquidity available to markets, both in the United States and in other financial centres through swap arrangements with the ECB, the Bank of England and other central banks. Second, the authorities and systems providers were able to keep the main payment systems (Fedwire and Chips) open during and after the evening of September 11th itself. This was a significant achievement, enabling the huge daily volume of dollar payments to be made, including of course substantial dollar flows from the foreign exchange and other dollar markets based in London. Equally impressive was that most of the big firms affected were using their back-up contingency sites very quickly, allowing them to continue in business with a minimum of obvious disruption. Some of those contingency sites were in New Jersey, others put increased volumes through their London office. In New York itself, connectivity of telephone traffic was initially badly affected because of the routing of so much traffic through connections located downtown. But this problem was short lived.
Jan F Qvigstad: Could the financial crisis have been avoided? Challenges to international cooperation and conflict Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at a seminar on the financial crisis arranged by Prio, Oslo, 8 December 2009. *  *  *  What happened? Confidence between financial market participants collapsed in September last year following the Lehman Brothers bankruptcy. The price of credit jumped up both in money and bond markets. Equity prices declined, increasing the cost of raising new equity capital. The authorities worldwide responded by supplying substantial liquidity to banks and central bank key rates were reduced. In many countries, the authorities provided extraordinary loans or took over banks to maintain confidence in institutions and market activity. In some countries, the authorities have purchased securities to bring down long-term interest rates. Stimulus has also been provided through increased public sector demand and government budget deficits have grown to unprecedented levels in some countries. The reaction of households and businesses was to increase saving and private sector demand declined. Credit standards were tightened and risk premiums soared. The drop in demand rapidly translated into a contraction in trade and output. In spring 2009, world trade was around 20 per cent below the level prevailing one year earlier. In many countries, the total value of goods and services production (GDP) declined over several consecutive quarters. Countries that were heavily reliant on exports of manufactured goods were particularly hard hit.

Unemployment has increased sharply in countries not far from our own. Given the high levels of available resources, there are prospects of lower than normal interest rates among our main trading partners for some time ahead. There are now signs that the stimulus measures are reviving growth, but production is still lower than it was prior to the crisis. The challenge going forward will be to address the problem of rising unemployment and high government debt in many countries. Why did it happen? When the Queen of England visited the London School of Economics in November last year, she asked her host why no one had foreseen the financial crisis. In July this year, her question was answered by a panel of 33 prominent economists from British universities, government institutions and the business sector. The panel did not cite only a single cause, but a web of causation. An important factor behind the crisis can be found in global macroeconomic developments in the years preceding the crisis. In the 2000s, China made its grand entry into global trade with an attendant surge in production and income. This led to higher demand for inputs, and the prices of oil and other raw materials increased. On the other hand, global consumer price growth was pulled down by exports of cheap goods from China and other countries with low production costs. Interest rates were lowered in many countries to prevent very low inflation or deflation.
But over the counter (OTC) trading is vulnerable to many operational risks. In particular, investors are exposed to the default of the major broker-dealer counterparties. This was a significant concern to counterparties of Bear Stearns when it was in distress before being taken over by JP Morgan. To moderate such concerns in the future, private sector initiatives are being developed to introduce a central clearer to the CDS market. Such initiatives are very welcome. Although the net positions of CDS dealers generally represent only a very small fraction of their gross positions, because these gross positions have grown so rapidly in recent years, inter-dealer positions can sometimes be very significant – even after netting. A central clearer that would offset any long bilateral positions that one bank had with another with any short positions that the same bank had with a third bank, could significantly reduce the counterparty risk in the CDS market. A leading proposal at present is centred on the Clearing Corporation, which is jointly owned by eleven major banks and other trading platforms. 34 Counterparty risk, as described above, is particularly corrosive for liquidity in financial markets. Investors become concerned not only with the soundness of their immediate counterparties but their counterparties’ counterparties, and so on. When risk crystallises it can be unclear which financial institutions have been adversely affected. As a result of limited disclosure and transparency, investors may limit the supply of funds to a much broader array of counterparties than necessary.

Hence, it is clear that not only are the present day poor nations struggling in the emerging, highly complex and controlled economic environment, they are also facing reduced resource transfers, and not being accorded special treatment they should be afforded in order to propel them out of poverty. Some may however argue that the tremendous benefits of globalization has levelled the playing field and that advantages are available to any and all who care to access, and it is just unfortunate if some persons are unable to take advantage of these conditions. Nevertheless, I believe we are all aware that weaker communities have lesser chances of access and that situation leads to widening even further, the ever-widening gap. Therefore, it is timely and appropriate that this forum addresses the need to impress upon the more wealthy nations to increase aid flows, open out greater trading opportunities, and move towards higher investment and resource build-up in the lower income countries. Lest I be misunderstood, let me add that, not for a moment am I suggesting that the progressive steps the world and the international community have taken over the past few decades in developing new standards and norms are in any way, inappropriate or unwelcome. Those initiatives were certainly necessary and have been beneficial for the overall advancement of society.