samchain/econo-pairs-v1 huggingface dataset:
These are just some of the examples of our work on market development. Although there is one other important initiative I would like to mention here – our recent work to establish IFFO, or to give its title in full, the Infrastructure Financing Facilitation Office. As you are no doubt aware, the need for infrastructure financing is huge. The Asian Development Bank puts the overall infrastructure investment needs of Asia at $ trillion over the 2010–2020 period. And, with the Mainland authorities implementing the “Belt and Road” strategy to enhance connectivity within the region through increased infrastructure investments, there is likely to be an even greater financing requirement. As such, Hong Kong is well positioned to develop into a major financing hub for investments in this field. 8. Indeed, the establishment of IFFO has three main objectives:  •  building a cluster of key stakeholders in infrastructure financing, including equity and debt investors, project sponsors and developers, professional advisors, and relevant agencies from the “Belt and Road” countries;  •  providing a platform for information exchange, experience sharing and capacity building on infrastructure financing among the cluster members; and  •  promoting Hong Kong as a major platform for Belt and Road infrastructure project sourcing, financing and fund management, leveraging on our role as an international financial centre. 9. The HKMA is now in the process of setting up IFFO and the response, to date, has been most encouraging.

Zeti Akhtar Aziz: Knowing Nusantara – money that made the region Opening speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the launch of “Knowing Nusantara: Money That Made the Region”, Bank Negara Malaysia Museum and Art Gallery, Sasana Kijang, Kuala Lumpur, 26 August 2014. *  *  *  The Numismatic heritage of the Malay Archipelago is as rich as the region itself. There were few other regions that had such a level of trade that has existed in this part of Southeast Asia. Every type of seafarer had been here over the centuries, bringing with them a wide range of currencies. From Chinese copper cash to South American “pieces of eight”, Nusantara has been a magnet for money of all shapes, sizes and materials. When these are combined with the indigenous currency minted in the Archipelago, the legacy is immense. “Knowing Nusantara: Money that Made the Region” explores the coins and banknotes that have circulated in the Malay Archipelago, telling a story that goes back 2,000 years and that continues to evolve. By telling this story, the objective is to create a deeper understanding of the region. The history of the archipelago is largely about contact and the interconnectivity that existed in the region even during that period. Movement between islands and the mainland are mirrored by the encounters between the indigenous and foreign peoples.
As regards the solvency support measures for firms, according to Banco de España estimates, the funding approved could cover all the capital shortfalls of firms generated in 2020 as a result of the crisis. Nevertheless, the use of such funding so far is estimated to have contributed to reducing only a part of the SME solvency problems that arose as a result of the pandemic.16 This could owe to the fund allocation criteria not including any requirement relating to firms’ financial position, among other reasons. On the whole, the evidence available suggests that the public policy response has helped reduce the long-term consequences of the pandemic-induced crisis. Specifically, the measures implemented have managed to preserve most of the pre-pandemic employment and avoided an increase in the rate of firm closure. In particular, our latest Financial Stability Report highlights that, in the case of non-financial corporations, although the recovery in sales and the more moderate debt growth in 2021 have prompted an improvement in businesses’ financial situation, on average this continues to be more vulnerable than before the pandemic. For example, the average debt and debt burden ratios began to fall in 2021, and the percentage of firms with high debt decreased across the board, standing close to pre-pandemic levels in the moderately affected and largely unaffected sectors. In the severely affected sectors, however, it remained 7 pp higher than in 2019.

One is an apparent reluctance on the part of banks to raise fresh capital except where the market thinks that it is beyond doubt that they need to do so. Given the feedback from credit conditions to asset prices and the real economy and so potentially to banks’ future earnings, it might seem slightly odd for banks internationally to be maintaining distributions to shareholders but tightening credit availability in order to preserve resources. This has to be seen in the wider context. One possible explanation for banks holding back from raising fresh capital is that they may want to avoid giving an adverse signal about themselves. If there is a co-ordination problem, the regulatory authorities internationally should be able to tackle it, allied to ensuring prudent valuations of legacy portfolios. But another possible explanation is that, like some other market participants, bankers may believe that many legacy assets are fundamentally undervalued at present and that the markets for securitised assets will, with time, recover and reopen. On that view, banks are avoiding becoming overcapitalised on a fundamentals (or forward looking) basis, and so setting off another expansionary phase in the credit cycle, a little further down the road. The serious puzzle which that underlines is why there is a dearth of buyers for the supposedly undervalued paper. With the terms and availability of financing from banks and dealers having tightened, levered funds are hardly likely to be the US Cavalry.
In particular, the delayed downward adjustment of prices and nominal wages has sharply increased the real cost of adjustment and the burden borne by the more vulnerable members of society. Private sector wage costs saw barely any downward correction in some countries, even when unemployment was starting to rise substantially (especially in Spain, but initially in Greece as well). Among the programme countries, Ireland is the only one where the downward adjustment of relative prices has been sizeable, a factor which has helped it to avoid an even stronger decline in output and employment. The disconnect between the adjustment in unit labour costs and the adjustment in the harmonised index of consumer prices (HICP) reflects the lack of competition in the domestic economy. It also reflects other cost factors affecting the evolution of prices, including fiscal consolidation being partly achieved through higher indirect taxes and administrative prices.5 It calls for great determination in reducing the excessive profit margins that result from monopolistic competition, in particular in sectors sheltered from international competition.6 Reducing rents is not only a matter of efficiency in the adjustment process: it is also a matter of equity in sharing the burden of adjustment. And this point leads me to the second part of my talk. (2)  The aggravating factors  [Slide 7] The adjustment has been costly, in some cases very costly. Some of the costs in terms of falling output and employment were, unfortunately, unavoidable.

6  The higher profit margins of the past two years need to be interpreted carefully as they in part represent a rebound after the contraction in 2008-09, and are related to composition effects and capital deepening via labour shedding. 7  See ECB Structural Issues Report (2012), Euro area labour markets and the crisis, ECB Occasional Paper No 138, October 2012. 8  On average in the three Baltic states compensation per employee fell by 10.4 pp cumulatively between 2009 and 2010. 4  BIS central bankers’ speeches  [Slide 8] What about output? Per capita GDP has been falling steeply in Greece. In Ireland the turning point was reached in 2011; in Spain, Portugal and Greece that point is expected to come in 2013 or early 2014. Is this expectation credible? Controlling for exogenous variables, such as world demand, term-of-trade or oil shocks, the expectation depends on a resolute pursuit of the reform and consolidation policies as well as on three key interrelated aspects: the impact of fiscal consolidation; the access to finance for corporates and households; and the restoration of confidence. Let me consider these in turn. Since the sovereign debt crisis escalated in mid-2010, in the stressed countries the fiscal stance has become very restrictive, access to finance has become very limited and confidence very low. In such an environment it is not possible to isolate the short-term impact of these three elements while private and public sector balance-sheet adjustment is under way.
On the one hand, the central bank’s legitimacy among the general public could suffer if short-term interest rates have to move sharply, causing output to fluctuate widely while inflation is held stable and exactly on the target. Maximum stability in output could, on the other hand, result in sharp fluctuations in the rate of inflation and erode the credibility of the monetary regime. A point somewhere midway between the two extremes must therefore be found. Let me also stress the importance of central bank independence. In order to be successful with the implementation of an inflation target approach, the central bank must be able to act independently of day-to-day party politics and to set interest rates continuously according to the specified inflation target. Otherwise a credibility problem arises because it will be hard for policymakers to convince the general public of monetary policy’s long-term nature. Lack of credibility, in turn, means that the central bank has to set its interest rates higher than otherwise would have been the case. Looking ahead, I believe there are at least two major questions that central banks have to address more thoroughly. First, how should monetary policy react to asset prices, such as equity and/or real estate prices? We know from history that the development of asset prices can have a significant impact on both inflation and real economic activity.

The number of individuals affected by short-time working was rising fast at the beginning of the year, and unemployment is increasing at a regular pace. This trend is likely to persist in the next few months since the leading indicators of labour demand are falling sharply. Nevertheless, it is to be hoped that the signs of improvement observed abroad will be gradually transmitted to the Swiss economy. From the second quarter, the decline in exports is likely to slow down. However, growth figures will probably remain negative over the next few quarters due to the weakening in domestic demand as well as the reduction of inventory levels. For 2009 as a whole, the Swiss National Bank (SNB) continues to forecast a reduction in GDP of between 2.5% and 3%. These figures are still relatively moderate by comparison with other countries since Switzerland benefits from the broad diversification and relative flexibility of its economy. Even so, I wish to stress that the risks attached to our forecast are clearly skewed to the downside. Changes in monetary and financial conditions How have monetary and financial conditions developed since our last assessment in March? Let us begin by looking at movements in interest rates on the money and capital markets as well as currency movements on the foreign exchange markets. On the money market, three-month Libor moved down, but not as far as we would have liked. Its decline was checked by the level of risk premia, and it currently stands at around 40 basis points.
18  2.4 2.5 3.2 2.9 3.3 2.7 0.9 1.1 -8.7 17.7 25.6  -1.5 / -0.5 -4.7 -4.6 -4.7 -4.6 -5.7 5.5 -5.5 -3.6 20.0 22.2  -1.75 / -0.75 -5.3 -4.6 -5.0 -4.5 -5.9 6.0 -5.4 -4.9 20.2 24.3  2.25-3.25 2.2 2.6 2.9 2.4 2.5 3.0 1.2 -3.3 19.9 22.2  2.0-3.0 1.7 1.9 -0.2 2.5 2.5 3.2 0.9 -4.1 19.8 23.8

Both will be inaccurate to some degree but in opposite directions – the amortised cost measure suggesting valuations which are “too high”, while fair value will suggest valuations which are “too low”. The greater the initial  10  BIS Review 28/2010  misalignment in asset prices, and the smaller their subsequent overshoot, the greater the likelihood of fair values being preferred over amortised cost and vice-versa. Ultimately, however, this is an empirical question. In general terms, however, the point is clear: efficient markets are not necessary but may be sufficient to justify the use of fair value principles.   Better accounting for expected losses  What is clear from these examples is that there is a potential trade-off in the use of amortised cost versus fair value measures when market prices deviate from EMH. Both might give misleading signals, but in opposite directions. Recognising the problems with either, is there a way of doing better than both? Perhaps the simplest way of doing so would be to use both valuation metrics. There have already been suggestions that “dual” accounts could be drawn up. 24 The upside of this approach is that it would give regulators and investors more information on which to base assessments. It releases stakeholders from the need to pick a winner. The downside is that both valuations may be inaccurate, with a lack of clarity about which ought to be used, for example, to judge bank solvency. Or in the words of Macbeth’s three witches, “double, double, toil and trouble”.
Today, in the aftermath of global financial crisis, the key focus of central banks is both the successful conduct of monetary policy and macroprudential policy, in order to reinforce each other to stabilize economies. In Sri Lanka too, monetary policy formulation, operational framework and strategies adopted, have all evolved in line with the changing structure of the economy, developments in the financial markets, and the availability of data and communication strategies. I do not intend to discuss  BIS central bankers’ speeches  5  these changes in detail here, but would like to highlight that a greater coordination of monetary and fiscal policies would become even more crucial in the implementation of monetary policy and achieving macroeconomic stability, in the future than in the past. Another position that should be clear to us is that the need for harmonization between the Central Bank and the Ministry of Finance, is not a virtue that has been suggested recently, but a vital ingredient that had been provided for, since the establishment of the Central Bank, in order to ensure the sound economic management of the country. The recent evolution of our economy Armed with that background, I would now like to proceed to share with you, some instances of harmonization that has taken place in the recent past in our country. However, before I do that, I think it is necessary to first touch upon the recent evolution of our economy in order to set the stage for what would follow.

While such action can be tremendously effective under certain conditions, its limitations should be frankly recognized. Thus, through its control of money the Central Bank can assist, but by no means ensure, the achievement of the above objects. A monetary system that is stable and at the same time responsive to the needs of a growing country is a necessary, but not a sufficient condition of orderly economic development.” Sixth: Exter reports on the vital importance of harmonizing between the Government policies and the Central Bank policies. Here, Exter’s comments are unambiguous and far reaching. I quote: “There are, however, many important problems of monetary policy, especially those relating to fiscal policy, on which a central bank must necessarily work in close harmony with the government. On such problems, experience in many countries has shown that a central bank, with a degree of independence of the government proper, can make economic analyses and hold views which are more detached and objective than those of a government department. Many governments have learned to value and to use the sort of independent and objective advice on monetary and other aspects of economic policy which central banks have been able to give. On matters of vital interest to the state, however, it must be recognized that… it would be impossible for the Central Bank to adopt a policy or pursue a course of action contrary to the policy of the Government of the day.
This judgment is supported by the fact that financial conditions have eased, rather than tightened, even as the Fed has raised its short-term interest rate target range by 75 basis points since last December. For example, equity prices have risen, credit spreads have narrowed modestly, longer-term interest rates have declined, and the dollar has weakened. On balance, these movements have been large relative to the upward drift in short-term interest rates. The easing in financial conditions is important because monetary policy does not directly influence the trajectory of economic growth and inflation. Instead, as I have noted in previous remarks, shortterm interest rate changes are an important factor that affects broad financial market conditions.2 Financial conditions, in turn, influence the demand for goods and services by households and businesses. But, if financial conditions ease even as we are removing monetary policy accommodation, this may have implications for further policy adjustments. All else equal, an easing of financial conditions may warrant a somewhat steeper policy rate path. Conversely, if financial conditions were to tighten unduly, then this might necessitate a shallower rate path to temper that tightening. To be clear, this does not mean that the Fed should mechanically target a particular set of financial conditions. That is because the set of financial conditions appropriate to achieving the Fed’s statutory objectives of maximum employment and price stability will evolve over time as the economic outlook changes. Financial conditions are just a means to an end—the achievement of the Fed’s employment and inflation objectives.

This was due, on the one hand, to measures taken by the ECB, and on the other, to the fact that, in the US, the ‘fiscal cliff’ was averted. As recent weeks have shown, conditions on the financial markets can change again swiftly. In Japan, there has been a sharp correction on the stock market and the yen has again gained somewhat in value. Meanwhile, in the euro area, there is a discrepancy between the generally favourable trend on the financial markets and the disappointing economic data. Finally, in the US, a certain degree of uncertainty about the future monetary policy direction of the Federal Reserve (Fed) has gained ground. Overall, the market  BIS central bankers’ speeches  1  environment continues to be dominated by high levels of uncertainty, thereby remaining susceptible to sudden shifts in mood. Management of currency reserves The easing of tensions on the financial markets also affected the Swiss National Bank’s (SNB) currency reserves. These are mainly composed of foreign currency investments and gold. At the end of May, the SNB held foreign currency investments of just over CHF 440 billion (cf. chart 1). Due to our liquidity and security requirements, a large portion of our foreign exchange holdings are in government bonds and deposits with other central banks. This portion amounted to 78% at the end of the first quarter of 2013. To further diversify investment risk and increase investment in real assets, we raised our proportion of equities from 12% to 15% in the first quarter.
We expect to finalise these proposals by the end of September so that firms can start applying the Test on their base balance sheets from the end of this year. Firms will need longer to review their internal model methodologies and make any necessary changes. We have proposed that this should take place by the end of 2021 at the latest. A key point to draw out is that lenders of equity release mortgages are exposed to the risk of individual property prices. This is because insurers provide a no-negative-equity guarantee to every borrower. Modelling approaches focused on house price indices do not capture all the risks – a portfolio of options is a very different thing to an option on a diversified index. Indeed UK insurers have experienced a number of these guarantees crystallising in recent years despite the rapid rise in UK house price indices over the past decades. One reason is that different localities of the United Kingdom have seen widely varying house price inflation – a national index masks the range of outcomes (Chart 7). Another is that some properties may become dilapidated if elderly borrowers are unable to maintain the property. Willingness to maintain may be lower where borrowers have limited or no equity remaining in their properties. Equity release contracts generally require properties to be maintained. But, in practice, losses do occur and cannot necessarily be recovered.

Unscrupulous owners and managers might therefore have an opportunity to take excessive risks or misuse policyholder funds: for example, by using them to finance their other business ventures. They might also seek to mask the true financial position of an insurer using opaque models, optimistic assumptions and impenetrable mumbo jumbo. The misalignment of incentives might be particularly extreme when an insurer is close to insolvency, with owners and managers tempted to take more risk in a ‘gamble for resurrection’. In my view, these risks are common to any profit-seeking financial institution in the business of investment in order to pay annuities. That is why, for example, our response to the recent Department of Work and Pensions consultation on superfunds said: “The risks faced by DB consolidators are similar to those managed by insurance companies providing annuities. And insurance companies may want to enter the defined benefit consolidation market. There may be unintended consequences if the two types of business are regulated differently.”4 4  https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/publication/pra-response-to-dwp-consultation-paper-definedbenefit-pension-scheme-consolidation  3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  Overall, I think the PRA’s implementation of the Solvency II regime addresses these risks well. I would emphasise in particular the following features of the regime: 1. It strongly encourages UK insurers to invest in assets with fixed cashflows that closely match those of their annuity liabilities. This limits exposure to market risk. 2.