samchain/econo-pairs-v1 huggingface dataset:
In the meantime, we don’t think firms should have to wait before we provide more accessible rules. That’s why have already launched a new Policy Index. [18] It is an online resource that divides policies into sectors and topic areas. For each topic area, a dedicated webpage lists relevant policy material and provides quick access links, allowing firms to find applicable policies more easily. Conclusion I’m going to conclude by reminding you that while these are our ideas about how the PRA should make policy, we really want to hear your views. That is why we have published our discussion paper on our approach to policy making. I encourage you to submit responses. If Parliament approves the changes that make up the FRF, we will consult on proposals for how we make policy. Responses to this discussion paper will help us shape those proposals. I would like to thank Austen Saunders for helping me write this speech. I would also like to thank Andrew Bailey, Charlotte Gerken, Hannah Schraer, Gareth Truran and Sam Woods for their helpful comments. Any errors are my own. 1. PRA Discussion Paper 4/22 ‘The Prudential Regulation Authority’s future approach to policy’, September 2022 2. ‘Our responses to coronavirus (Covid): regulatory measures for PRA firms’  Page 8 3. PRA Dear CEO Letter ‘Existing or planned exposure to cryptoassets’, March 2020 4. PRA Discussion Paper 3/22 ‘Operational resilience: Critical third parties to the UK financial sector’, July 2022 5.

We will have many opportunities to review areas of policy that have been fixed in legislation up to now. It will allow us to be proactive about finding opportunities to support competitiveness and growth without undermining our primary objectives. We will work hard to identify and act on them. Many factors underpin the international competitiveness of the UK as a financial centre. Most importantly, financial services are something the UK is very good at. The UK is one of the best places in the world to come if you’re looking for highly skilled people, deep and specialised financial markets, a robust legal system, and trusted institutions. It is also home to an incredibly innovative financial sector. Those are the foundations upon which the UK’s comparative advantage in financial services is built. [11] As a very large global financial centre, the UK benefits from so-called ‘agglomeration effects’. These are self-reinforcing effects which emerge when businesses cluster together in the same place. In the UK’s case, the advantages that attract firms to come to do business here – deep and varied markets and a huge supply of talented financial professionals – get stronger the more firms come. This is because such clustering leads to economies of scale and scope and positive spillovers which further entrench the UK’s advantages. The agglomeration effects the UK enjoys as a financial centre are well established and underpin its international competitiveness.
Beyond this, the Bank has limited responsibility and room for determining the overriding investment strategy, especially in comparison with other large public investment funds. An example is the Singapore Government Investment Corporation (GIC), where the country’s finance ministry also formulates a mandate with a benchmark portfolio and investment limits, but the board of the GIC has greater responsibility for actual asset allocation than Norges Bank’s Executive Board. Another example is the Canada Pension Plan Investment Board. The governance structure of this fund differs even more from our own in that the board itself draws up the investment strategy pursuant to a statutory objective. Chart: Asset allocation in the GPFG, GIC and CPPIB. At the same time, there are considerable differences between the asset allocation in the GPFG and that in the Canadian and Singaporean funds. This probably reflects the differences in governance structure as governance structure and organisation set a framework for the investment strategy to be pursued. In the consultation response to the Central Bank Law Commission’s recommendations, we place emphasis on the relationship between governance, organisation and strategy. I shall return to this shortly. First, however, remember that in addition to defining the investment strategy, the mandate from the Ministry of Finance contains specific reporting requirements. Thanks to its extensive reporting, the GPFG enjoys a reputation of being one of the world’s most transparent sovereign wealth funds. For a fund with the entire population as actual owners, transparency is vital for ensuring democratic control and confidence in investment management.

There are economies of scale in the beta function. We see commercial managers that are providers of beta-exposure that are up to 15 times the size of the Government Pension Fund. Yet we are able to perform these tasks more cost-efficiently in-house. Hence we believe we now are sufficiently large so as to harvest most of the benefits of scale. Economies of scale are more elusive when it comes to active management. On the one hand the excess return potential is reduced because there will be a higher degree of market impact. On the other hand, size can be an advantage in obtaining access to information and in active positions where the objective is to reap the benefits of being a liquidity provider. The setting for the Government Pension Fund with its long investment horizon is well suited for such an objective. All of the passive investment (enhanced indexing) is done internally both for equities and fixed income. On the active side however, we use a large number of external managers. The split differs between equities and fixed income. On the fixed income side, most of the active risk is taken internally while the opposite is the case for equities. In total, about 60 per cent of the active risk stems from external managers. The guiding principle behind this choice is an assessment of expected returns after costs, and a strong belief in diversification among managers. There is no favouring of internal (or external) managers.
Otherwise, it will threaten people’s well-being. Last year, we cut the key rate — at the outbreak of the pandemic, inflation was low in Russia, and the key rate helped us support lending and demand. As we all know, companies tend to welcome a policy of low interest rates, which makes borrowings cheaper and thus helps them develop their business. Conversely, it reduces households’ demand for deposits. If this is also coupled with inflation, households’ real incomes decline and savings depreciate. Figuratively speaking, we can say that monetary policy is like seasonal clothing: we wear jackets when it is cold and hang up our dresses in the wardrobe until the next warm season. The same is true for monetary policy: it significantly influences the situation in the economy and current 3/5  BIS central bankers' speeches  developments and helps promote stability, just like adequate clothing keeps us warm without being too hot. Accordingly, now is the right moment to raise the key rate in response to the changed environment and higher inflation. We had been keeping the key rate at a low level for quite a long period in order to make sure we do not clip the wings of the recovering economy. However, now we have no doubt that our decisions have not hindered growth. The economy has bounced back to its pre-crisis level, even surpassing it in many industries, and continues to expand.

To answer these questions I will organise my talk in three parts. First, I will briefly recall how the imbalances and structural problems came about and how deep they were before the steps towards reform were taken. This is critical to understand the subsequent adjustment process, the costs involved and the way forward. I will then describe the progress to date. The adjustment process is not yet complete but it has already been significant, and some countries, including Portugal, have taken important steps towards sustainability. Second, I will reflect on the factors that have made the adjustment more painful than it would have been otherwise. My main point will be that a number of rigidities have been preventing a more significant and swift downward nominal adjustment, thereby causing a sharp fall in production and employment. On top of these rigidities, the interplay of an impaired credit channel, fiscal consolidation and falling confidence has deepened the recession. Third, I will argue that there are good reasons to be cautiously optimistic, if reforms continue as planned. European solidarity has helped to smooth the adjustment and prevented sudden-stop scenarios. It is also giving national governments an opportunity to strengthen the conditions for growth, productivity and employment and reap the full benefits of the monetary union. Let me now turn to the first part of the talk. (1)  Tangible progress on correcting imbalances  Since the start of Economic and Monetary Union, the key macro and structural variables of euro area countries have diverged greatly.
Nevertheless, there is much that the government can do to facilitate financial-market development by clearing the way, particularly where this involves markets of a regional nature. Three areas of work in which the HKMA – with various partners – is taking an active role are worth citing here. The first involves the gradual introduction and expansion of renminbi business within Hong Kong, which requires primarily co-operation between the Mainland and Hong Kong authorities at various levels, including both political and technical. The second example is our collaboration with other central banks in the region, under the auspices of EMEAP, on the Asian Bond Fund, which is intended not just to encourage business in the debt market, but also to stimulate regulatory reforms in economies in the region. The third example is our work in encouraging the development of Islamic finance in Hong Kong, through ensuring a level playing field, stimulating interest in Hong Kong among Islamic countries, encouraging product development, and raising market awareness within Hong Kong, particularly through the educational work of the Treasury Markets Association. All of this work looks both to the past and to the future for inspiration. Looking to the past, we have the still-recent experience of the Asian financial crisis, one element of which was the undeveloped state of some of our financial markets, in particular the debt market. Many of the market-development initiatives on which we have been working have been intended to address these deficiencies.

With a promising recovery prospect, minding the future risks to financial stability and being equipped with stability tools tested and refined over time, the monetary policy committee will carefully weigh the tradeoff between short-term gains and longer-term risks and ensure that the economy will be provided with enough financial ease to recover sustainably to its potential. Ladies and Gentlemen, Apart from the deviation from potential I mentioned earlier, the current economy shows symptoms that potential growth, which depends on labor, productivity and infrastructure development, may have reached its limit. At this stage of our discussion, let me refer to some prominent symptoms. Thai labor supply has started to gradually decrease due to the trend of aging society. Research has shown that increasing labor supply by increasing retirement age and reliance on foreign labor will not be sufficient. Since we must accept the aging workforce trend, we must rely on increasing productivity and efficiency through structural changes to lift growth potential, a task which requires supply-side policies. Thailand’s productivity growth has declined since the Asian Financial Crisis due to the misallocation of labor, government policy, and low capital investment, leading to supply constraints. Productivity can be increased by matching labor to valuable production. Labor in Thailand still has potential to move from the current concentration in agriculture, which was distorted by government policy, to more productive sectors like electrical appliance and capital machinery.
This both can and must conceal considerable differences between sectors and regions. The wage formation system must achieve something better than a result for the economy as a whole which is commensurate with average inflation and productivity. If we want low unemployment and price stability, wage outcomes must be adjusted to productivity in different sectors of the economy, indeed to the situation in individual enterprises and to different individuals. The design of pay systems and pay determination is also crucial to the distribution of resources and thus productivity and economic growth. In other words, higher productivity can create more scope for wage increases, but a functioning wage formation system can also help to improve productivity. Sweden’s success in this area in the next few years will depend both on the measures taken by Parliament and the Government and on management and labour. Parliament and the Government establish the framework for the functioning of the labour market and wage formation. A more expansive financial policy would make the task of management and labour and of monetary policy more difficult in the next few years. The legal framework, for example the rules on industrial disputes, is another factor. Tax and benefit systems are important and affect both wage formation and the behaviour of private individuals, ie their willingness to find work, move, etc.

Nominal wage increases of over 9% resulted in real wage increases of only 0.7% between 1971 and 1989, while nominal wage increases of less than 4% yielded real wage increases of over 2% between 1993 and 1999. Diagram 5. Nominal and real wage increases  Nominal and real wages 10  Nominal wage  9  Real wage  10 9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0 1971-1989  1993-1999  Sources: National Institute of Economic Research and Statistics Sweden  BIS Review 39/2000  4  The general picture is thus encouraging. All in all, the policy has yielded satisfactory results. Naturally, it is too early to draw any definite conclusions from this. Many external factors have also had a favourable effect on developments in recent years. The later period also started with very low capacity utilization. But despite these reservations the situation certainly looks promising. The current situation The question today is: will this favourable development continue? This depends not least on the development of wage formation. Before I go into detail on this subject, however, I would like to say a few words about the Riksbank’s appraisal of the situation at the moment. The Swedish economy is currently making a strong recovery.
The issue is all the more difficult since the host authorities of the bank branch or subsidiary may have a different view. For them, the bank may have an important role in the market, whereas the bank group is fairly insignificant in the home country. Sweden and other EU member states grapple with these issues. Some steps have been taken, for instance to sign Memoranda of Understanding so that central banks and supervisors in different countries undertake to inform one another and cooperate in problem bank situations. But talking and sharing information is not enough to solve the problems. This is, of course, not only an issue for Europe and I believe that the issue of solving crises in cross-border financial groups should be discussed more on the global level, such as in the Financial Stability Forum. Before concluding this part, I wish to say a few words on deposit guarantee systems. This topic is relevant both for domestic banks and for cross-border banks. For a long time there was no unanimous view on the benefit of such systems. Those who argued against them said that depositors might become lazy in their screening of banks and would put their money only in the banks which offered the highest returns, even if these banks took excessive risks in their activities. There would be a lack of discipline on the banks from the depositors. Also the bank owners and managers might venture into excessive risk-taking knowing that the depositors would be taken care of under a guarantee system.

Banks, their managers and owners, which are affected by supervisory measures must be able to appeal the decisions, although in some circumstances the measure must remain in force while the judicial process is underway. We should not forget the importance of the so called preconditions, the major external factors which fundamentally affect the supervisors’ ability to conduct efficient supervision. The preconditions are, for example, a stable and sustainable macro economic environment; adequate laws and a good judicial system; good accounting and auditing rules; and an adequate system to deal with problem banks and other institutions. In the Swedish pre-crisis situation there was macro-economic instability with excessive price volatility. Inflation had been high and fluctuating, and current account and fiscal deficits had remained high for many years. This made it difficult for the authorities to assess the underlying financial stability of banks and other institutions. Recent important regulatory issues for the financial institutions As you are aware, countries around the world are presently preparing their banks and authorities for the implementation of the Basel II capital requirements. It implies huge financial costs and workloads, but is expected to provide benefits in the form of better managed banks, lower losses and more precise capital requirements. Swedish banks will start implementing the Basel II from 1 January 2007 so their preparations are now at full steam.
I would hope that the insurance industry, and the liquidity and investment funds you run, might be investors in such paper, whose liquidity would receive some underpinning. Certainly you will  1  For example, see Buiter W (2009), “Central banks and financial crises”, paper presented at the Federal Reserve Bank of Kansas City’s symposium at Jackson Hole, Wyoming and Tucker (2009), “The repertoire of official sector interventions in the financial system: Last resort lending, market-making and capital” paper presented at the 2009 International Conference: Financial System and Monetary Policy Implementation, Bank of Japan. 2  BIS Review 71/2009  be an important part of the Bank’s consultative process led by my colleagues Paul Fisher and Sarah Breeden. Addressing trade and working capital finance has become all the more important given the reduction in the availability of trade-credit insurance, which our regional Agents hear quite a lot about. We therefore welcomed the initiative of that relatively concentrated industry to release a code of conduct, supported by the ABI, for handling difficult cases where unnecessary firm distress could be avoided. The Bank has followed this carefully given our role as midwife for the London Approach designed to help facilitate the orderly resolution of creditor/debtor problems. In a few cases over recent months, as well as over the trade-creditinsurance code, my colleague Andrew Bailey has played a behind-the-scenes role – the traditional role of providing the Bank’s good offices where (and only where) we can help, and where help is desired by those involved.

Authorities everywhere are having to innovate to help get us through this crisis. And we will need to innovate to build a better system for tomorrow. Our dialogue with you can only help that. We are very grateful for it. 4  BIS Review 71/2009
And although it moved on a rising trend during the precrisis years as a result of the increase in wholesale financial integration, it subsequently fell, remaining at levels well below those observed in the United States. Limited development of equity markets in Europe, prevailing national investment bias in the Euro area relative to that in the United States, and a greater concentration of cross-border investment in a small number of Member States in Europe are some of the reasons explaining such divergent reactions between these two financial areas. The budgetary channel is practically non-existent in the euro area. By contrast, in the United States, estimates show that the public channel helps soften between 10% and 20% of adverse shocks in a particular State. As a result, the credit channel is ultimately the sole means for cushioning shocks across Euro Area countries. However, the credit channel is not enough to compensate for the weakness of the other channels. This means that, on average, between 40% and 60% of an adverse shock impacting a Euro Area country translates directly into a decline in that country’s consumption. These figures are double the impact calculated for the United States. Besides the need to strength risk-sharing mechanisms to address macroeconomic shocks, achieving key targets such as controlling the levels of public debt and reducing the sovereign risk nexus (often cited as the most fundamental original flaws of the euro design) do not only depend on introducing policies of pure fiscal discipline.

If such an instrument had been in place since 10/11  the inception of the Euro, most countries (and not only the usual suspects) would have benefited from the scheme at one point, without permanent redistribution across countries. Finally, the creation of a common safe asset for the euro area should be explored further. The normal operations of markets and financial intermediaries require a broad spectrum of assets with sufficient liquidity and minimum counterparty risk. This situation is amplified in turbulent times, as investors react to increases in uncertainty by accumulating assets with a low level of perceived risk. Within the EMU, the volume of such assets is insufficient, as only the debt of a small group of countries is perceived as riskless, thereby giving rise to scarcity and financial fragmentation. An improvement in the fiscal position of countries might help expand the number of available safe assets. But a common safe asset will have additional benefits, by contributing to reducing the link between national governments and banks; preventing destabilising cross-border flights to safety in the event of difficulties; and, more generally, promoting a more stable and equitable provision of safe assets for the EMU as a whole. In sum, there is a pressing need to improve the functioning of the EMU before the next crisis hits. Increasing financial integration and introducing fiscal instruments to improve macroeconomic stabilisation are of the utmost importance in achieving this goal. Thank you for your attention. 11/11