samchain/econo-pairs-v1 huggingface dataset:
One motivation may be to pass on wealth to children, who otherwise may not inherit until well past the most expensive child-rearing years. Other motivations can include supplementing pension income, repaying debt and making home improvements. The risks in this market though are very different to those on insurer’s other assets. It is a retail product bringing conduct risks that fall under the FCA’s responsibilities. From a prudential perspective, the main risk is long-term stagnation in UK house prices. Economically, the no-negative-equity guarantee is a written option on house prices. Where insurers have recently entered the market and/or are growing their loanbooks rapidly, the average expected maturity of these options is likely to be some decades in the future. Low loan-to-value ratios mean the short-run risks to insurers are limited. They can ride out a property market crash as long as the market subsequently recovers. But loan-to-value ratios increase over time unless house price growth keeps pace with the rate at which interest is accruing. So what you have is a sort of race to the value of the property illustrated by Chart 3. The time it takes for the value of the loan to exceed the value of the property will be governed by: the interest rate charged (higher is more risky), the loan-to-value ratio (higher is more risky), house price inflation (lower is more risky) and the age of the borrowers (younger is more risky). Underwriting standards do appear to have weakened a little over recent years.

First, the experience of the Single Supervisory Mechanism shows the advantages of all the players being subject to one leading authority in an integrated banking space, with clearly defined responsibilities and coordination. This single supervision allows for comparisons across a vast sample of comparable institutions, and thematic campaigns of on-site missions. Second, our active supervision features regular and comprehensive stress testing including on interest rate risks, which is also applied to less significant institutions. The  2/3  BIS - Central bankers' speeches  European Banking Authority (EBA) conducts an EU-wide banking stress test every two years, taking into account the latest macro-financial developments: in 2023, stress test scenarios are typically based on a sharp rise in short-term and long-term interest rates. Moreover, following the EBA guidelines on Interest Rate Risk of the Banking Book (IRRBB) – as part of the rigorous application of the Pillar 2 process – , published in 2018 and enhanced in 2022, European banks are required to perform regular supervisory tests to measure the impact of interest rate movements on their interest margins and economic value of equity; US regional banks such as SVB are not. III. Resolution: how to make it work Now for our last blessing. Since the global financial crisis, banks and authorities have strengthened their ability to deal with crisis events by developing a resolution framework. However, in the case of Credit Suisse, the Swiss authorities chose the option of a merger.
Since speculative activities naturally fit into this risk-return temporal pattern, given that they usually yield substantial immediate profits at the outset at the expense of a possible once-for-all large loss at an uncertain future date, a more cautious credit strategy will tend to penalise the funding of self-fulfilling asset-revaluation processes. Forward-looking risk management that is aware of how risk-drivers change through the cycle and in stress conditions will tend to build shock absorbers to be used when difficult times arrive. I will return later to this idea and how Basel II encourages the appropriate use of capital buffers. Let me add now that the idea of building robustness in good times is not only a prudent policy, it is also theoretically consistent because we all have a tendency to think that risks increase in bad times. From my perspective, this is only true in part. A better description is to say that exposures and therefore risks increase in good times and that in bad times these risks materialise. On top of that, to the extent that risk assessment and control methods become more formalised and rigorous, this will lessen the likelihood of making bad decisions and will improve risk-adjusted pricing policies. It will also contribute to the prompt detection of errors and deviations from targets, allowing banks to implement corrective measures at an early stage.

Third, financial stability may be in danger when strong action by central banks during a crisis leads market participants to rely excessively on central banks as a backstop in case of negative shocks. This is the moral hazard problem.9 Taken together, these channels underline the risks the current “low-for-long”-situation presents for financial stability. These risks have to be acknowledged and acted upon. The fact that it is possible for these risks to exist while monetary policy is responding appropriately to the macroeconomic situation perfectly illustrates the Tinbergen principle – the number of instruments must equal the number of policy goals.10 In the current environment, the interest rate cannot be the instrument of choice for addressing financial stability risks. The answer is to give more weight to what are known as macroprudential instruments implemented as a complement to, and along-side a monetary policy that remains firmly focused on price stability. These instruments directly target the risk-taking behaviour underlying financial stability risks. This is exactly the approach chosen in Switzerland with the activation of the countercyclical capital buffer. By forcing banks to build up additional capital in the current phase of strong credit growth, the regulators aim at improving the capacity of the banking system to bear losses in the event that the identified risks materialise, while also limiting the further build-up of these risks. Outlook We are now in a position to derive the implications of our analysis for the interest rate outlook.
While I have my own views as to the application of United States banking and securities laws to this fact situation, I prefer not to spell those out in my prepared remarks. Instead, we all might prosper by sharing our views as to the proper application of our home country’s laws to individuals in our countries who might do business with IIB. I should note that this fact situation is a pure figment of my imagination. The cooperative efforts of bank supervisors over the world should be designed to ensure precisely against this sort of bank. In other words, like Atlantis, IIB should never surface above water. Our discussion should include responses to the following questions: (1) is IIB engaged in an impermissible activity in your home country; (2) if it is impermissible, what authority has responsibility for enforcing that law; (3) if impermissible, is that a civil or criminal violation; (4) if impermissible, is there any way for IIB to qualify to do business in your home country; and finally, (5) does your home-country court have jurisdiction to hear cases brought by a customer against IIB? Conclusion To conclude, I simply wish to commend the banking and legal communities for learning as much about electronic and Internet banking as they can, now, and for trying to stay ahead of the curve of ever evolving and improving technology. I fully agree with the philosophy of letting the markets decide what will work and what will not.

Being a modern bank, it conducts business principally on the Internet. IIB has a series of quite attractive Internet pages where its products are offered. These pages spell out the products, deposit terms and interest rates, and loan terms and interest rates. All agreements are governed by the law of Atlantis. All deposits are deemed received over IIB’s “counters” in Atlantis, and all loans are paid out of Atlantis. Atlantis has an enjoyable ambiance even exceeding that of Nice and Saint Paul de Vence; therefore, I see no need to leave the island. I do receive and entertain customers when they visit Atlantis. I do place telephone calls to customers who have responded to my Internet page, but I do not make cold calls to customers. Communications with customers over the Internet are state-of-the-art secure. Customers receive account statements over the Internet, issue payment instruments to IIB over the Internet, and request loans over the Internet. All payments to and from accounts are made by wire transfer to IIB’s correspondent account maintained on the books of Atlantis Bank, the only bank chartered under Atlantis law authorized to engage in banking transactions with Atlantis residents. Customers may instruct IIB to make payments for their account. These too are consummated by means of payments out of IIB’s account at Atlantis Bank. Loans are disbursed and paid the same way. The question presented is whether IIB is violating the law of the countries in which its customers are located.
Given the importance of enterprise risk management, efforts need to be directed to give prominence to this function. It is time for the stature of risk functions to be elevated. Professional bodies like the IERP play a crucial role in stewarding this transformation by equipping risk management experts and raising their credibility through branding and professional qualifications. Events like this conference can help propel the risk management agenda forward. However, beyond technical competency, risk managers increasingly require confidence and communication skills to be the resounding voice in promoting risk culture. Risk managers need to have a seat at the executive table and play a role in shaping the risk profile and risk culture of your organisations. A study conducted by Harvard Business School highlights how leadership and communication by risk managers can influence the significance of their role within organisations. As expected, the study found that risk managers that proactively sought opportunities to raise their visibility were able to assert risk management perspectives and were better able to position themselves as critical voices within organisations. Ladies and gentlemen The task of a risk manager in an organisation is like that of a ship navigator. As you work closely 4/5  BIS central bankers' speeches  with your captain to navigate your ship across unknown waters, your job is to ensure you get your ship to its destination in one piece. You never know what hazards may lie ahead but whether it be foul weather, rough seas or hostile forces, you stand ever ready to face them.

With a couple of taps I can hail a cab, and monitor my home CCTV, or buy any number of goods from across the world, which might, in the not too distant future, be delivered to my doorstep by a flying drone. Given how extensively technology has altered our world today, being technology savvy has become a crucial requirement for risk managers today. In what seems like a blink of an eye, companies like Uber, Waze and Airbnb which barely existed a decade ago have become household names. Now valued in the billions, they are a source of income for thousands of people across the globe, and are shaping our modern economy in a myriad of ways. Technological savviness is crucial for two reasons. First, technology can be harnessed to improve business operations and enhance risk management. Secondly, it allows us to quickly identify and respond to new sources of risks emanating from technological developments. The potential of technology in risk management is vast, not only for the automation of tasks, but increasingly as a tool for making business decisions as well. The application of big data analytics and artificial intelligence to assess and predict human behaviour, for instance, can provide great value to businesses in terms of reducing risks. In the motor insurance sector for example, General Motors Assurance in the US has been utilising mileage and driving behaviours captured through in-vehicle telecommunication devices.
Mr King speaks about interest rates, policy and the UK economy  Speech given by Mr Mervyn King, Deputy Governor of the Bank of England, to the Scottish Council Development and Industry, held in Edinburgh on 11 October 1999. * 1. *  *  Introduction  Twelve months or so ago, interest rates were 7½%; now they are 5¼%. Twelve weeks ago they were only 5%. So why do interest rates sometimes go down and sometimes go up? And why, in particular, did interest rates rise in September? At one level, the answer to these questions is straightforward: interest rates move – whether up or down – in order to keep inflation on track to hit the target of 2½%. But, at a deeper level, why should monetary policy aim at a target for inflation rather than at growth and employment? Most people in this audience today belong to the “inflation generation”. You will have lived through a time in which inflation was a fact of life. For much of UK history prices were relatively stable. But during the 1960s inflation started to rise. In the 1970s inflation averaged no less than 13% a year with a peak of over 27% in August 1975. During the following decade inflation averaged 7% a year, and it has fallen to around 4% in the 1990s. Between June 1997 – when the Monetary Policy Committee met for the first time – and August 1999 RPIX inflation averaged 2.6%.

To do this the MPC has to assess the prospective balance between demand and supply in the economy as a whole. That requires an analysis of both demand and supply developments. The interesting feature of recent quarters has been the combination of strong demand growth and a tight labour market, on the one hand, with weak wage and price pressures, on the other. So the MPC monitors monetary data as well as signs of tightness in both labour and product markets in order to detect early warning signs of inflationary pressures. The MPC needs as much timely and accurate information as possible. Official statistics and surveys provide an excellent starting point. But they often need to be complemented by more timely and focussed information on particular aspects of the economy. So the Bank has a network of twelve Agencies, which gather economic intelligence from all parts of the United Kingdom – from Cornwall to the Highlands, and from County Tyrone to the Norfolk Broads. The task of these Agencies is to provide information on the state of the local economy. In total, the Agents have around 7,000 business contacts covering all sectors of the economy from farming to finance and textiles to tourism. Our Scottish Agent, Janet Bulloch, who is with us tonight, is well known to many of you. I would like to thank those of you who give your valuable time to see Janet and her team.
The economics of securitisation: benefits and some drawbacks  The role of securitisation in the financial markets of developed economies has expanded dramatically in recent years. Following a relatively slow start compared with the US market, the European market for asset-backed securities grew very rapidly in the past few years as entrepreneurs, bankers and investors increasingly warmed up to the advantages of instruments that allowed them to issue bonds backed by the cash flows from pools of asset classes as diverse as music royalties from rock stars, rental income from pubs, and soccer 2 club ticket sales, as well as more boring stuff such as credit card debt and mortgage loans. Also some European governments were quick to spot the attractiveness from new financial instruments that enabled them to raise funds from the securitisation of future government revenues – whether from the expected sales of real estate holdings and lottery tickets or from pension contribution claims – rather than from more traditional mechanisms of financing public spending that are usually not very popular with voters. There is no sector though more closely involved in securitisation than the banking sector. In fact, asset securitisation was introduced in the 1970s in the US precisely for the purpose to allow depository institutions to sell their pools of mortgage loans before maturity, thereby acquiring an additional source of funding.

First, being capital costly, the ability to sustain a given level of credit supply with a lower volume of capital enables the banking sector to reduce the costs of financing for borrowers and favours financial development, which is ultimately associated with economic growth. Moreover, securitisation may be seen as representing a step towards more complete credit markets, thereby contributing to enhancing the efficiency of the economic system. 3  See ECB (2007), Structural Issues Report on “Corporate finance in the euro area”, May. 4  Funding liquidity refers to the ability of a bank to: (1) convert its assets into cash by disposing of them or borrowing against their value in order to meet expected and unexpected obligations, or (2) to issue liabilities in order to raise funds. 5  According to some tentative empirical evidence, increasing securitisation may diminish the impact of monetary policy impulses on banks’ loans supply via the so-called “bank lending channel”, although the effect of securitisation seems to depend on the economic cycle and bank risk (see Altunbas, Y., Gambacorta, L. and D. Marqués Ibáñez (2007), “Securitisation and the bank lending channel”, ECB Working Paper 838. 2  BIS Review 68/2008  In addition, the securitisation of loans in principle could reduce a secular source of vulnerability of the economies, by taking risk concentrations associated with loan portfolios away from the balance sheets of the banking sector and spreading them more broadly across other sectors.
The much higher default rates on cohorts of US sub-prime loans originated in 2006 and 2007 compared with earlier years is indicative of the consequences of this lack of incentive (see  BIS Review 101/2009  7  Fig. 10). The originator needs to have enough “skin in the game” if he is going to exercise due diligence in loan origination – and having a reputation at stake may not always suffice. Second, the crisis revealed that many of the risks that securitisation was supposed to distribute more widely had in fact remained either within the banking system, or else could be re-intermediated back into it. Thus, the debt securities issued by one bank were not sold on to investors outside the banking system, but were instead bought by the proprietary trading desks of other banks, leading to a network of cross-holdings of the underlying loans. That may make sense when the main risks are idiosyncratic to the loans originated by particular banks, but looks rather foolish when the risks are macroeconomic in nature and the returns on all such securities are correlated. Moreover, a considerable amount of the remaining risk was contained in institutions which, while not formally recognised as banks, engaged in exactly the same sort of maturity transformation, financing long-term assets by short-term debt instruments. These included entities such as conduits, which housed the securitised loans and then financed them by selling short-term paper.

But in many cases these entities had back-up credit lines to the supporting bank, so that when funding difficulties arose, the securitised loans in effect came back onto the bank’s balance sheet. And even where there was no formal obligation to act as a lender of last resort, originators often chose to provide back-up finance in order to protect their name in funding markets. The motive for setting up these off-balance-sheet entities was entirely one of regulatory arbitrage. Off-balance-sheet vehicles were not required to hold capital in the same way as a bank would if the loans were on their balance sheet. So it appeared to be a neat way to boost profits without having to raise more capital. The Banco d’España, the Spanish banking supervisor, insisted that Spanish banks would have to treat conduits and the like as on balance sheet for capital purposes. As a result, Spain did not see the mushrooming of these off-balance-sheet vehicles. A third distortion lies in the nature of remuneration contracts. Incentive contracts that offer potentially unlimited upside rewards, but cap the downside losses, encourage traders to take on excessive risk. One unintended consequence of financial innovation was that it enabled clever traders to create positions with considerable embedded leverage – that is, portfolios requiring little payment up front, but whose returns amplified changes in the value of the underlying assets. Traders then had a natural incentive to gravitate towards these types of highly risky instruments.
Inflation expectations themselves have been remarkably stable, including during the recent period when oil prices jumped to levels no one could have expected only a year ago. This, by itself, illustrates the credibility achieved by the Eurosystem of Central Banks, after eight years of existence. Second, European households and companies are reaping the benefits of that credibility. Long term interest rates stand at a low level, 40 to 50 basis points below the level in the United States. So, even after the recent increases in short term rates, monetary and financial conditions remain extremely favourable for investment and growth. And indeed, we might be witnessing in Europe a period of sustained and stable growth, at least if current projections and surveys are proven to be right in the coming months. A third benefit of the Euro is the boost it gives to financial integration in Europe. In many segments, European financial markets have reached the depth and liquidity which, up to now, were the preserve of dollar markets. This stimulates productive investment, helps in restructuring (as witnessed by the current wave of M&As) and, more generally, allows a better allocation of savings and sharing of risks. As a consequence, the euro is becoming extremely attractive, as a vehicle, a transaction, an investment and a reserve currency. As you may know, as central bankers, we remain neutral as far as the internationalisation of the euro is concerned. We are neither encouraging, nor discouraging the process.

The key elements are the National Reform Programs which cover, for each country, the commitments taken over a 3-years cycle as regards structural reforms. EMU, with a single monetary policy and 13 governments responsible for budgetary policies, requires an institutional fiscal framework. It has to be simple, easy to implement, and able to ensure that fiscal policies are sound and sustainable, to avoid free-riding behaviours as well as neo-ricardian effects. The most widely-discussed surveillance process, because it is the most binding one, is the Stability and Growth Pact (SGP). The Pact may be defined as the “users instructions” for the obligation, defined in the Treaty, for EU Member States, to achieve a medium-term budgetary position of close to balance or in surplus, while maintaining the ratio of the annual government deficit to gross domestic product (GDP) at within 3 % and the ratio of gross government debt to GDP at within 60 %. Member States which do not respect these ratios face an “excessive deficit” procedure which may lead the Ecofin Council to take a series of measures which range from simple recommendations to financial sanctions. In 2005, the European Council agreed to reform the SGP. The important role of the SGP in terms of budgetary discipline is confirmed. The reform sets out the criteria for the implementation of the excessive deficit procedure and allows for more leeway in the timeframe for correcting excessive deficits. It does not, however, diminish the binding nature or the efficiency of the Pact.