samchain/econo-pairs-v1 huggingface dataset:
Being prepared for this type of risk will make it easier for us, as a society, to maintain the GPFG’s long-term investment strategy in a future downturn. Today, I am going to focus on some of the most turbulent periods in global equity markets – and on the lessons to be learned. 1/6  BIS central bankers' speeches  Owning shares in a large number of companies also exposes the GPFG to another type of risk. Answers and action may be demanded from shareholders in response to an incident in a company for reasons other than the incident’s effect on expected return. This type of exposure must also be managed, and the Bank’s work on responsible investment is important in this context. I will come back to this at the end of my speech. Financial risk Chart 3: High volatility driven by equities Chart 3 shows the real return on a hypothetical portfolio since 1900, invested worldwide and comprising 70 percent equities and 30 percent fixed income instruments. The return is measured in USD. As illustrated in the chart, the return has varied widely from one year to the next. The fixed income investments cushion the largest falls in value, but as shown in the chart, the return on the portfolio largely tracks equity market returns. With 70 percent of the GPFG allocated to equities, changes in the fund’s value ahead will be driven by equity market developments. Let us therefore focus on equity market risk.

Descending safely: Life after Libor - speech by Andrew Bailey i  Given at Alternative Reference Rates Committee – the SOFR symposium: The final year  Descending safely: Life after Libor ‐ speech by Andrew Bailey | Bank of England  Page 1  Published on 11 May 2021  Andrew Bailey talks about the move away from the use of Libor. He says using robust overnight risk-free rates will help to create a more resilient and transparent financial system. Speech Many thanks to Tom [Wipf] and the Alternative Reference Rates Committee (ARRC) for the invitation to join today’s SOFR symposium and to John [Williams] for his remarks. Introduction I have spoken on the transition from Libor each year since 2017 when we set out that despite the significant improvements in its governance and oversight, there were increasing challenges in anchoring the submissions on which those rates were based, to the greatest extent possible, in actual transactions. The underlying market that Libor seeks to measure – the market for unsecured wholesale term lending between banks – is no longer sufficiently active to support such a widely used reference rate. This has not changed in the last four years. At that time we highlighted the market disruption that could stem from an unplanned disappearance of Libor. Working together with the panel banks and the wider market, it was in the interest of all involved that we stabilised those rates until such times as transition arrangements were sufficiently well advanced.
Monetary policy cannot alone prevent financial imbalances or secure the competitiveness of the Norwegian business sector. The objective of monetary policy is low and stable inflation and the Bank only has one instrument – the interest rate. Inflation expectations are now firmly anchored, which means that Norges Bank can give weight to stabilising economic developments in interest rate setting. But monetary policy cannot be overburdened. When assessing the various considerations, monetary policy must pursue its primary objective – low and stable inflation. Other economic objectives must be pursued using policy tools such as financial regulation, the tax system and fiscal policy. Thank you for your attention. 8  BIS central bankers’ speeches

Philipp Hildebrand: Financial stability Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Institut des Hautes Etudes Commerciales de Lausanne, Lausanne, 16 September 2008. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  During the period of financial market turbulence, central banks have gone far with their interventions to stabilize the financial system, taking into account the high costs that can be imposed by a banking crisis onto the real economy. Central banks by themselves, however, cannot guarantee financial stability in the long term. In particular, we cannot exclude that their interventions create incentives for banks to be less cautious in the future. The first line of defence therefore consists of banks having sound risk management practices and holding appropriate levels of capital and liquidity. The Financial Stability Forum has made a series of recommendations in this respect. Given the size of the big Swiss banks in relation to our national economy, we should be especially prudent. For this reason, the Swiss National Bank supports the project undertaken by the Swiss Federal Banking Commission (SFBC) to strengthen capital adequacy requirements and to revise the liquidity requirements for the big banks. As the SFBC has pointed out on several occasions, these measures have to be implemented gradually – to ensure that banks have sufficient time to adapt. These measures will contribute to the solidity and credibility of the Swiss financial centre.
If the function adds value even under such a scenario, then it will be retained, but if not, then the house concerned sees no long-term future for it. I think the challenge facing financial markets and market participants is to identify where they can add value and which services the consumer will continue to pay for: not all will pass the test and survive. My third theme combines both my earlier ones, and concerns the role of market intermediaries. Disintermediation is an ugly word, but it is a trend that exists today and will I am sure continue to grow in importance. Electronic secondary trading of securities is becoming more common, and we have also begun to see electronic primary distribution - the issuance of securities on the Internet, and, in some cases, without the involvement of an issuing house. Now some people see in this a threat to markets themselves: everything, they fear, will migrate to the web and fragment, with a loss of the BIS Review 15/2000  2  transparency and regulatory framework that organised and official markets provide. I do not share this view, nor do I think that there is no future role for markets and market intermediaries. But I do think that the marketplace of 10 years hence will be very different from the one we have now - just as the screen-based markets of today are very different from the physical market floors of the past. Earlier I offered you a possible motto for central bankers.

If I had to choose a motto for a central banker, I think “better safe than sorry” would be very high on the list! More importantly we collectively showed that the London markets were equal to the challenge - even a once-in-a-millennium challenge - and were determined to make sure that come the first day of the new year London would be “open for business as usual”. What of the coming year? Well, I can predict that, after two years of new year working, we will all be able to enjoy our New Year’s Day bank holiday for a change next year! But beyond that, my crystal ball is no better than yours, and I am afraid that if you are looking for me to predict the course of exchange rates or interest rates over the next 12 months I am going to disappoint you. I would like instead to pick out a few themes which I think will be of increasing importance as the year unfolds. Firstly, I think we will increasingly see a fall in the absolute size of government bond markets, although once again Japan remains the exception. This is already happening here in the UK and in the US, as fiscal surpluses reduce bond issuance, and as the recovery in the rest of Europe continues budgets will increasingly move towards balance there too.
And, to the extent conflicts occur, they are likely to best be resolved within a single institution through shared analysis and mutual understanding of reaction functions.15 Our strategy will be to conduct supervision as an integrated part of the central bank and not as a standalone supervisory agency that happens to be attached to a central bank. The benefits that close cooperation can bring were demonstrated in 2013 as the PRA and the FPC worked closely together to bring clarity both to banks’ existing capital positions, and the standards expected of them. The FPC mandated the exercise with a view to establishing a system-wide, transparent standard of resilience that would boost confidence and allow the banking system to contribute to economic recovery. The PRA – under Andrew Bailey’s leadership – delivered the recommendation for each of the major institutions. The resulting increase in capital ensured the core of the financial system was on a sound footing and made an important contribution to securing economic recovery. There were clearly lessons to learn from that exercise, most notably the importance of clarity of early communication by the Bank to financial institutions about the standards to which they would be held. Those lessons are being applied now in the first of the Bank’s annual stresstesting exercises, which will bring together the microprudential standards for banks with a macroprudential assessment of the risks to which they must be resilient. As with monetary policy, expectations matter and the system will be more resilient if the Bank’s moves can be anticipated.

The model used for monetary policy of decisions being made by a committee made up of both Bank of England executives and independent experts has been expanded to financial stability with the creation of both a Financial Policy Committee and a Board of Prudential Regulation. As I have argued, those policy committees will be more effective if they have access to the broadest range of the Bank’s analysis and information and are as well informed as possible about each other’s reaction function. The now very wide range of the Bank’s responsibilities also creates a need to strengthen the oversight arrangements for the Bank as a whole. For delivery of our statutory objectives, the Bank is accountable to the public, through Parliament’s Treasury Committee. That accountability is being reinforced. Parliament has created an Oversight Committee of 8 non-executives who are in the Bank but not of the Bank. The Government has today announced the appointment of Anthony Habgood to lead the Bank’s Court of Directors and the Oversight Committee. I welcome the appointment of someone of his depth and breadth of corporate experience. Independent oversight by the committee he will chair can strengthen the Bank’s legitimacy and effectiveness. The Oversight Committee has access to internal papers, is able to observe meetings of policy committees, and is responsible for reviewing all aspects of the conduct of the Executive of the Bank, including the delivery of policy, the design of and adherence to rigorous processes and procedures, and the monitoring of our transparency and openness.
First, given the unpredictable and dynamic nature of the financial market, there is urgency for us to keep our fingers on the pulse of the market and have access to real time information. 2  BIS central bankers’ speeches  There is much scope for cooperation between the central bank and industry players in this area. In addition to being familiar and observance of the rules and regulations of the financial market, we expect market participants to know the details of their clients’ transactions to aid us in understanding the nature of the market conditions. Everyone has an important role to play in maintaining the stability of the market and remain vigilant on all financial market activities. This is necessary to prevent activities that could threaten financial stability and create unnecessary volatility, or incidents that could damage the integrity of our domestic financial market. Secondly, while I’m on the topic of enhancement of market stability and integrity, I should stress on the importance of upholding individual ethics and professional conduct. The market is made up of individuals including institutions. The glue that binds individuals and institutions that constitute the market is TRUST. A case in point, on rate rigging, several global banks paid hefty fines to regulatory authorities because of individuals rogue traders. Many dealers were convicted of wrong doings, and investors are still taking lawsuits against the banks. TRUST was violated. While no Malaysian dealers were caught red handed in market misconduct, we should not be complacent.

Abdulrahman A Al-Hamidy: Risk strategies for Basel III compliance and beyond – extracting business value from regulatory change Speech by His Excellency Dr Abdulrahman A Al-Hamidy, Vice Governor of the Saudi Arabian Monetary Agency (SAMA), at The Institute of Banking/Moody’s Analytics Symposium, Riyadh, 30 November 2011. *  *  *  Distinguished Participants, I am pleased to be here today to share my thoughts on “Risk Strategies for Basel III Compliance and Beyond”. Given the lingering global financial crisis with ongoing impact on a number of economies and financial markets, this is a relevant and timely subject to deliberate upon. I appreciate the efforts of the Institute of Banking and the Moody’s Analytics to organize this Symposium for the benefit of the bankers and supervisors in the Kingdom. I have seen the list of topics to be covered today and the impressive list of speakers and I am confident that all of you would greatly benefit from the discussions. The world today has not yet recovered from the global financial crisis that started in 2007. While the governments, central banks, supervisory authorities and international organizations have been working hard to revive and revitalize financial markets and financial institutions in many advanced markets, the recovery has been slow. Following the financial crisis the lessons learned exercise had attributed the main causes to include a long period of easy monetary policy that fueled accelerated economic growth accompanied by lax and light supervision in a number of advanced markets.
Pharmaceutical companies and merchanting For some time now, the Swiss current account surplus has primarily been driven by two industries: pharmaceuticals and merchanting. 8 It is notable that net exports for these two industries have increased strongly over the last ten years despite the appreciation of the Swiss franc. This stands in contrast to many industries (e.g. machinery and tourism), which are exchange rate-sensitive and have suffered noticeably as a result of the strong franc. The decline in net exports for these industries has been largely offset by the positive developments in pharmaceuticals and merchanting. Chart 7 presents the nominal change in net exports in selected manufacturing and services industries as well as merchanting from 2007 to 2016. The net exports of goods and of services are represented by the red bars at the bottom of the chart. Net exports of goods went up by CHF 23 billion from 2007 to 2016. As already stated, this increase can mainly be attributed to pharmaceuticals and merchanting. Despite the strong appreciation of the Swiss franc, net exports in both of these industries rose sharply during this period. Why is this? In recent years, the pharmaceutical industry has profited from a growing demand for healthcare products from all over the world. The demand for these products is only slightly impacted by the price and/or exchange rate. At the same time, Switzerland has developed into a leading hub in the global commodities trade. Merchanting is also much more dependent on global economic trends than on the exchange rate.

For that reason, our approach to liquidity insurance continues to evolve: •  In November 2014 we extended eligibility for membership of the Sterling Monetary Framework to include broker-dealers and Central Clearing Counterparties (CCPs), giving non-banks access to our permanent liquidity insurance facilities for the first time. •  The range of acceptable collateral continues to extend: we have started to approve pools of auto loans and invoice finance receivables as eligible collateral for the first time. And we have started work to ensure there are no technical obstacles to our ability to accept equities as collateral should the need arise. 4  The Bank introduced US Dollar repo operations in September 2008, and their usage peaked at the equivalent of $ in October 2008. The Bank also provided a peak of $ to RBS via Emergency Liquidity Assistance. 5  The Bank’s commercial paper purchase schemes opened in February 2009 with a peak usage of £ The corporate bond purchase scheme opened in March 2009, with a peak usage of £  6  Plenderleith (2012) and Winters (2012). 7  http://www.bankofengland.co.uk/markets/Pages/sterlingoperations/redbook.aspx. 4  BIS central bankers’ speeches  •  The Bank will commence work in the second half of 2015 to assess the feasibility of establishing a Shari’ah compliant facility. By providing an additional highly liquid asset for Islamic banks, such a facility would be a significant step forward in their liquidity management capabilities. •  We are continuing to develop our capacity to lend in currencies other than sterling.
Már Guðmundsson: The financial crisis in Iceland and the fault lines in cross-border banking Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at FIBE, Bergen, 7 January 2010. *  *  *  It gives me great pleasure to be here in Bergen this morning to give an address on the financial crisis in Iceland, and I would like to take this opportunity to thank the organisers for inviting me to do so. You call this session Icelandic mysteries. At this juncture, this is a more apt phrase than you might think. We are currently waiting for the findings of a parliamentappointed committee that has been working hard for over a year, collecting evidence and analysing the causes of the financial crisis in Iceland. The committee is due to release its report in early February, and we hear the report and supporting material will be well in excess of a thousand pages. We know how the Icelandic banks failed in the autumn of 2008 and can identify some of the key vulnerabilities that led to their demise. However, some important pieces of the puzzle are still missing, in particular regarding the governance and risk management of the banks, on the one hand, and the Icelandic authorities’ crisis management and interaction with their counterparts in other countries, on the other. So what I will present here today is unavoidably a partial picture. 1 You could say that it is just as well, for this is a complex saga with many twists.

Capital adequacy ratio  Capital adequacy and funding duration for some selected banks in March 2008 12 Kaupthing  11,5 11  Glitnir  10,5  Landsbanki Handelsbanken  10 DnB NOR 9,5 Intesa Sanpaolo  Swedbank 9 8,5 1  2  3  4  5 6 7 8 9 Remaining time to maturity of issued securities  Sources: Bloomberg, Riksbank. BIS Review 9/2010  9  A great deal of value is lost at the very moment when banks stop being going concerns. However, low estimated recovery rates after the banks’ collapse seem to indicate the existence of an underlying solvency problem. It also raises questions about the quality of accounting. This is one of the mysteries that still wait to be solved. My list of causes for the collapse of the Icelandic banks is the following: •  Large foreign-currency balance sheets with significant maturity mismatches but without a LOLR. •  Size relative to the home base (country and currency). •  Fatal flaws in the EU financial architecture. •  Bad and non-cooperative crisis management across interested jurisdictions. But there were also triggers and contributing factors: •  The international financial crisis and all the usual suspects that have been named in relation to it, including incentive systems, regulation and supervision. •  Flaws in business models and risk management. •  Iceland’s large macroeconomic imbalances. •  Domino vulnerabilities in Iceland’s financial sector (e.g., cross-ownership, connected lending, large exposures across institutions). •  Bad governance and accounting?
We were just sitting there passively, on settlement day, waiting for the banks to give us the Hong Kong dollars that they had sold to us - Hong Kong dollars that they did not have. 22. In the circumstances, the banks had only two alternatives. First is for them to borrow Hong Kong dollars from the HKMA at the end of the settlement day, through the Liquidity Adjustment Facility (LAF), Hong Kong’s version of a discount window. This would obviously not be cheap, particularly for repeated borrowers, as the HKMA is not in the business of providing cheap Hong Kong dollar funding to those shorting the Hong Kong dollar. And this would only be for overnight money. Second is for the banks to obtain Hong Kong dollars more permanently from the HKMA by selling US dollars back to the HKMA, which the HKMA again takes passively in accordance with the discipline of the currency board system. This is exactly what happened on 23 October 1997 and the speculative capital outflow then was as quickly reversed as it had started, in a matter of only two days, with the system operating very much on auto-pilot. Interest Rates 23.

And indeed, the demand for M3 in the euro area has shown clear signs of instability since 2001 and a break in the income velocity of M3 occurred at the same time. Most remarkably, instead of delivering some erratic pattern, a new velocity trend seemed to emerge with liquidity expanding much more rapidly 6 . It is fair to say that the precise role of financial innovation in this regard is still unknown but we have all the reasons to believe that, taking it into account should help explain this change in money demand, and better gauge its consequences for future inflationary pressures. Let me elaborate further. First of all, the introduction of the euro in itself a major financial innovation, had many effects on the financial behaviour of economic agents. The introduction of the euro immediately resulted in: •  the removal of any exchange rate risk between participating countries;  •  the introduction of a new system of remunerated reserve requirements;  •  and the creation of an integrated money market – thanks in particular to the setting up of a new large-value payment system (TARGET). Furthermore, thanks to the introduction of the euro and to the successful monetary policy conducted by the ECB, all member countries now benefit from an environment of well-anchored inflation expectations and, as a result, low interest rates.