samchain/econo-pairs-v1 huggingface dataset:
16 On the supply side, we too have seen healthy interest from Asia-Pacific issuers in the development of an APAC market for catastrophe bond issuances, due to the proximity to and better understanding of the underlying risks. 17 Given the above, the MAS has thus taken progressive strides towards developing the catastrophe bond market in Singapore. 18 As a first step, we have formed an alternative risk transfer work-group comprising industry experts in the ILS space. Chaired by Jon Paradine of Renaissance Re, the work-group advises the MAS on specific initiatives that will support the development of Singapore as an ILS hub. 19 Today, I am happy to announce one such initiative – the newly created ILS grant scheme. To catalyse the development of Singapore’s ILS market, the MAS will fund 100% of the upfront costs incurred in issuing catastrophe bonds out of Singapore. This grant will run from 1 January 2018 and will be applicable to ILS bonds covering all forms of risks beyond just natural catastrophe risks. 20 It is my hope that this grant scheme will encourage insurers and reinsurers to consider issuing a catastrophe bond here. In fact, MAS is already working with key industry players such as IAG Re Singapore with a view to issuing a catastrophe bond in Singapore. This is but the first step of a longer journey, as we look forward to working more closely with the industry to further deepen our ILS ecosystem here.

10 Today, let me focus on the first strategy of developing Singapore’s alternative risk transfer market through insurance-linked securities and public-private partnerships. Insurance-linked securities (ILS) 11 Let me begin with insurance-linked securities, or ILS. 12 We know that alternative capital has been growing more rapidly than traditional capacity over the years, a clear demonstration of greater acceptance of ILS instruments by both investors and issuers. In particular, issuance of catastrophe bonds have grown strongly and total catastrophe bonds outstanding reached a new high of almost USD 30 billion as at the third quarter of this year. This is despite the persistent reinsurance headwinds of excess capacity and depressed rates. 13 Catastrophe bonds present unique benefits to reinsurers: they provide multi-year capacity and pricing certainty; they are more secure due to their fully collateralised nature and ability to be rated; they are a good alternative to traditional reinsurance for risks that are hard to model; and they are capital-efficient. 14 To an investor, catastrophe bonds proffer strong benefits too: their low correlation with the 2/4  BIS central bankers' speeches  financial markets make them an effective asset diversification instrument; they have low volatility and stable returns; they provide liquidity; and they can be issued via private placements or as tradable securities. 15 We are therefore seeing a growing cluster of institutional investors and fund managers like Quantedge exploring allocation into catastrophe bonds, as they venture into niche and specialised strategies to extract better risk-adjusted returns.
David Miles: Leverage and monetary policy Speech by Mr David Miles, Member of the Monetary Policy Committee of the Bank of England, at The Economic and Social Research Institute/Foundation for Fiscal Studies (ESRI/FFS) conference, Dublin, 12 October 2010. *  *  *  I would like to thank Jing Yang and Gilberto Marcheggiano for research assistance and to colleagues at the Bank of England for helpful comments. The views expressed are my own and do not necessarily reflect those of other members of the Monetary Policy Committee. You do not need me to stand here in Dublin this morning and tell you what profoundly difficult economic times we are going through. As an elderly New York friend of mine enquired of me recently when I offered such a thought “for such pearls we need economists?” I feebly replied that knowing how much of a mess you were in was of some use and (with rather more confidence) that thinking how you get out of the mess was something economics could help with. Today I want to talk about setting monetary policy as we emerge from one mess and how we can reduce the chances of getting into another one. I am going to focus on the UK but I think much of what I say has relevance here in Ireland and beyond. That it has been a very bad mess is clear.

Role of technology in optimising potential of Islamic finance One final point before I conclude – technology makes the impossible possible. Recent financial technology advancements enable Islamic finance industry players to deliver practical yet value-adding solutions. For instance, application of blockchain6 to address challenges7 in managing endowment fund (waqf). Fintech is rapidly changing the facets of the global financial industry, reshaping expectations of consumers and businesses on financial services. There are untapped opportunities of fintech to develop financial solutions that can help drive Islamic finance to deliver even greater, wider and deeper positive impact – particularly in realising its promise in risk-sharing and providing support for genuine and productive economic activities. Technology can also widen access to and increase outreach of social finance instruments through digitisation of collection and disbursement of the proceeds. Fintech startups such as LaunchGood and SkolaFund are already making their name in social impact initiatives, which is a promising start. Conclusion Financial institutions need to look beyond short-term profitability. It is imperative for financial 2/3  BIS central bankers' speeches  intermediaries to be seen fulfilling the needs of the economy, society and environment at large. Moving forward, ‘change of mindset’ is eminent. While considering profit, financial institutions should not forgo the element of being socially and environmentally responsible. I believe setting the ‘Tone from the top’ is key in this process. The organisation of today’s roundtable forum is indeed very apt.
The comparatively large size of these two sectors made Irish public finances vulnerable to the bust of the cycle, leaving personal income tax as the shock absorber until the economy recovers. Interestingly, the fiscal package that is included in the Irish adjustment programme with the IMF is of a comparable magnitude to the pre-crisis fiscal expansion. Surveillance has clearly failed to understand this phenomenon. More attention needs to be paid to the overall size and interconnectedness of the financial sector as a whole in the various countries, and to the ability of these countries to absorb shocks affecting not only a single financial institution but the whole financial system. It is now fashionable to stress-test the banks. It would probably be appropriate to stress-test countries as well. BIS central bankers’ speeches  5  Conclusions Let me conclude by suggesting that surveillance of the world economy, in particular some of its systemically relevant members, has to focus more on the sustainability of their policies, in particular their fiscal and monetary policies. Some policies may appear to be sustainable on the basis of assumptions which may turn out to be simplistic, especially those relating to long-term trends of growth and inflation. In particular they may not take sufficiently into consideration the impact of broader developments under way in the global economy. As Keynes said, we may be “slaves of some defunct economist”.

No one doubts for a moment that the exchange rate of the króna is crucial for the economy, through its major effect on prices and profitability in the traded goods sector. There has been a great deal of discussion this year about the exchange rate and the Central Bank has frequently come under fire. A widespread misunderstanding seems to prevail that the Central Bank can control the exchange rate. People must realise that the Central Bank exerts a limited long-term impact on the exchange rate. The exchange rate depends on various economic factors, including foreign trade, foreign investment in Iceland and investment by Icelanders abroad, and last but not least expectations about future economic developments. For example, there is little doubt that expectations in connection with power-intensive industry have already influenced the exchange rate of the króna, which has certainly firmed as a result of decisions on large-scale investment in aluminium production. Interest rates definitely affect the exchange rate, but experience in Iceland and elsewhere shows that in the long run this impact tends to fade out if monetary policy aims for a rate of inflation close to the prevailing rate among trading partner countries. Likewise, the Central Bank’s foreign exchange market intervention tends to have only a short-lived effect. If the exchange rate is moving with a strong momentum in a certain direction, no central bank can resist this for long.
Fiscal policy and monetary policy’s manoeuvrability Let me begin with fiscal policy. Since the dramatic deterioration of government finance in the early 1990s there has been a remarkable recovery. From a deficit equivalent to over 12 per cent of GDP in 1993 the Government now counts on a deficit of 2 per cent for 1997. This consolidation, besides attracting praise from the European Union and international organisations, has earned the confidence of our creditors; since 1995 the interest rate differential between Swedish and German treasury bonds has narrowed from 3.5 to little more than 1 percentage point. Even with the SEK 16 billion for expansionary measures in fiscal 1998 that the Government proposed in the Spring Economic Bill, the Swedish budget trend looks favourable in a European context. Notwithstanding these successes, there is reason to comment briefly on how fiscal policy influences the conditions for monetary policy and thereby the future development of interest rates. This influence acts in two ways. Firstly, fiscal policy is an important consideration for monetary policy in that it affects the demand situation in the economy. An illustration of this is provided, for example, by the recent years’ changes in household disposable income. Although household wage income rose strongly from 1994 to 1997, the sector’s disposable income hardly changed. Household income has been held back by increased taxes and decreased transfers; but for the negative effects of changes in public systems, the annual level of household income would have been 3 to 4 per cent higher.

The prolonged period of unusually low inflation during past decades allowed central banks to conduct extremely accommodative monetary policies for a very long time. This has contributed to a significant buildup of global financial vulnerabilities, including stretched valuations of risk assets, high house prices, and record high private and public debt.1  •  For small open economies, especially those from emerging markets, the challenge is to maintain stability in the face of more volatile capital flows, large swings in exchange rates, and tighter global financial conditions. The steep appreciation of the US dollar poses significant risks, particularly for those countries with high external vulnerability. Many have had to follow the aggressive tightening of policy by the Fed. •  That said, the overall repercussions of advanced economy policy tightening on global financial markets have--thus far--been remarkably orderly. There have been no major dislocations in emerging market capital flows and there has been clear differentiation based on country-specific fundamentals. Asian economies overall have exhibited resilience. Capital outflows have been less  1 In Q1/2022, global house prices, in nominal terms, are rising at a rate of 10.2%, in real terms (once adjusted for inflation) is closer to  3.3%. The rate of real house price growth has now declined for two consecutive quarters (Figure 2).
House prices, after several years of increasingly more moderate rises, began to post small declines in some market indicators as from the second quarter of this year, while housing starts fell by almost half. This abrupt change in scenario, together with the tightening of financing conditions, which I shall address in greater detail later, meant that real estate companies had to restructure, with some of them even going bankrupt. This series of factors compounded the correction of the residential sector with adverse consequences for employment, which is acting as the main channel through which the adjustment of the sector is spreading to the rest of the economy. Household consumption is rapidly reflecting the deterioration in confidence, against a backdrop of considerable financial tensions, and the abrupt turnaround in the employment situation. As a result, a certain rise in the saving rate consistent with the current scenario of greater uncertainty and financing difficulties might be taking place. I should stress that this far-reaching slowdown in private consumption is the factor that is most contributing to the loss of dynamism in the economy. Business investment also slowed rapidly, in line with the changing financial conditions, the profile of domestic demand and the deterioration in business confidence. Nonetheless, exports are sustaining a relatively high growth rate, despite worsening world trade so far this year, and they are providing some support to investment in equipment.

This weakness is consistent with survey indicators of 9  For example, Guiso, L, Sapienza, P and Zingales, L (2013), 'Time Varying Risk', NBER Working Paper 19284. Guiso et al use a survey of Italian investors and find that the proportion of individuals unwilling to take any financial risk had increased from 18% in 2007 to 42% in 2009 and put this down to emotional response (fear) triggered by a scary experience. 10 See Nagel, S and Malmendier, U (2011) ' Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?, Quarterly Journal of Economics, Vol126(1), pp373-416. Kunreuther, H., R. Ginsberg, L. Miller, P. Sagi, P. Slovic, B. Borkan, and N. Katz (1978). Disaster Insurance Protection: Public Policy Lessons. Wiley Interscience. Bernile, G., Bhagwat, V., & Rau, P. R. (2017) 'What doesn’t kill you will only make you more risk-loving: Early-life disasters and CEO behavior', The Journal of Finance, Vol.72(1), pp167-206. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  investment intentions which remain subdued and elevated uncertainty, as detailed in the February 2017 Inflation Report. 11  By the end of the forecast, the level of business investment is around 20% lower than in the Monetary Policy Committee's May 2016 forecast. Our latest estimate of year-on-year business investment growth in the fourth quarter of 2016 is already around six percentage points weaker than our projection in May.
In a different situation such a policy could have undermined confidence, leading to a depreciation of the krone and higher interest rates. Owing to high oil prices, however, the krone was very strong in 1996 and 1997. It may be that the foreign exchange market accepted that Norway was in a situation – with large government budget and current account surpluses – where the country both could and should have transferred resources from the business sector to the public sector. It could be that market participants believed that this transfer of resources would occur with the help of a strong krone exchange rate, which reduces profitability in the business sector. Appreciation pressures mounted and culminated in a reduction in interest rates by Norges Bank in January 1997 in order to counter the sharp strengthening of the krone. If the central bank had not acted, the krone might have appreciated by an even greater margin. This could have given a strong signal to the business sector to move out of Norway. However, in a situation where fiscal policy was not sufficiently tight, the reduction in interest rates increased the risk of an acceleration in price and cost inflation. Then came the fall in oil prices, with an associated erosion of the external account. Income growth for liberal professions had been substantial, wage growth for salaried employees accelerated and the wage and income settlement in 1998 was very generous. This eliminated the basis for the strong krone.

The crisis in Asia spread to Russia, where the decline in commodity prices led to an even further deterioration in government finances. The announcement that Russia could no longer service its debt was met with strong reactions in global financial markets in August and September. There were growing fears that the world economy would be caught in a financial crash. Many investors withdrew from small and risky markets, particularly in Latin America. The Brazilian currency came under pressure. It was difficult to raise loan capital even in the most advanced markets. As financial institutions throughout the world experienced growing losses, fears of a world economic depression intensified. Reductions in interest rates in the US and Europe facilitated access to credit and prevented a market collapse. Measures perceived as credible were finally implemented to resolve the Japanese banking crisis. Additional capital was allocated to the International Monetary Fund. There are still many challenges ahead. Brazil and Russia are running government budget deficits and are having problems establishing a credible monetary policy. China is bearing substantial costs as a result of the crisis in surrounding countries and may experience difficulties of its own. Other countries may also feel the contagion effect. However, even though the outlook points to lower growth in the global economy this year than forecast earlier, fears of a worldwide depression have receded. This is by no means the first time we have experienced an international financial crisis.
However, my main point is that, given all the moving parts, even the marginal impact of EU withdrawal on the appropriate level of UK interest rates is ambiguous. As the MPC said ahead of the referendum, in May 2016, the impact of a leave vote on monetary policy would depend on what it did to “demand, supply and the exchange rate”. These pull in different directions: holding fixed the other two, weaker demand tends to depress inflation and interest rates, declines in productivity and the exchange rate do the opposite. There are feasible combinations of the three that might require looser policy, others that lead to tighter policy. You might say this is true at any time. “Demand, supply and the exchange rate” can always move around and it’s not as if monetary policy makers can ever afford to ignore any of them. The MPC is always having to think very carefully about the forces on aggregate spending; it generally has to form some sort of view about underlying supply growth; it must always take into account the latest moves in exchange rates and other asset prices. Furthermore, in the normal course of events these three things do not move independently of each other. It’s usually not valid to vary only one and imagine the others will stay constant. Exchange rates are volatile but, over time, they often move because of news about domestic demand (Chart 2 plots smoothed series for sterling’s real exchange rate and the growth of domestic demand).

Combining the three core businesses of retail banking, specialised financial services and corporate and investment banking helps to open up opportunities for cross-selling, and reduces banks’ sensitivity to the interest rate cycle by giving them access to more diverse sources of financing. Even in retail banking, profitability has been better preserved thanks to the increase in fees on activities that are not linked to interest rates: payment services, asset management and insurance investments. For the six largest French banks, net interest margin thus accounts for 44% of net income compared with 57% for their euro area peers. The challenge of bank profitability also raises another imperative: cross-border consolidation, which would allow genuine pan-European banking groups to carry out their activities more efficiently and better withstand the international competition. Compared with the US market, the European banking sector remains fragmented: the 5 main European banks have a market share of just 20% compared with more than 40% for their US peers. Meeting this target is in part the responsibility of public authorities: concrete progress finally needs to be made on the Capital Markets Union, and the Banking Union needs to be completed in a true single banking market. It is particularly important to prevent geographical ring-fencing practices, which stop groups from managing liquidity and capital on a consolidated basis. These policies could prove dangerous in the event of a crisis as they would make it harder for entities within cross-border groups to support each other.
In any case, economists have good arguments to demonstrate, for instance, that subject to the turmoil of an international financial crisis, nations outside the euro, like the UK, Denmark or Norway did worse than the average euro area and many of its members in terms of GDP growth per aging population, since the beginning of the crisis18. Other studies, which build a counterfactual world by comparing the euro area countries with synchronised non-euro area countries in past periods, indicate that in terms of GDP and productivity growth, all countries (except Greece), did better as part of the euro area than they would have done outside the currency uniom.19 We know nevertheless that times of crisis are not favourable to rational arguments and Goya famously illustrated how the sleep of reason engenders monsters. The same reasoning underlines the renowned Vienna Lecture of May 1935 by the German philosopher Edmund Husserl20 as he characterised the European crisis of that time as “a collapse of rationalism”. In those more ominous times his conclusion was: “The existential crisis of Europe has only two outcomes: either Europe will disappear in becoming ever more distant from its own rational signification, that is its vital sense, and will sink in the hatred of the spirit and in barbarity; or Europe will be reborn from the philosophical spirit as a result of a heroism of reason that will overcome naturalism. … Europe’s greatest danger is weariness.

Compare the worldwide costs for taxpayers stemming from the absence of public intervention to rescue Lehman Brothers, with the zero cost for taxpayers following the US TARP 700 billion dollars injection into US banks in 2008 which have by now been totally repaid by the banks. In other words, financial instability can have a meaningful cost to taxpayers even if it is not visible in the very short term – a notion that all policy makers should keep in mind. The new European legislation does allow, as a last resort, for interventions that can safeguard financial stability in a Member State or in the area as a whole. I trust that this legislation will be applied by the competent authorities with rigour, wisdom and a sense of proportion in the aftermath of our Comprehensive Assessment. BIS central bankers’ speeches  5  SRM as a necessary complement to the SSM My remarks about the SRM – as a mechanism less relevant than the BRRD rules for the severing of the bank-sovereign nexus – do not aim to belittle the crucial importance of the SRM for Banking Union. To begin with, the implementation of the BRRD bail-in rules will be done by the SRM at the European level. The credibility of the SSM as supervisor is also dependent on the existence of a credible mechanism to proceed swiftly, orderly and efficiently in the resolution of banks that have attained the point of non-viability.