samchain/econo-pairs-v1 huggingface dataset:
Lim Hng Kiang: Sharpening risk management capabilities Keynote address by Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of the Monetary Authority of Singapore, at the 43rd Association of Banks in Singapore Annual Dinner, Singapore, 28 June 2016. *  *  *  Chairman and Council members of ABS, Ladies and Gentlemen, It is my pleasure to join you at the 43rd ABS Annual Dinner this evening. The global economy: slower for longer 2. Since I addressed the ABS in 2014, the global economy has continued to recover. But growth has been lacklustre and uneven. Risks remain, not least the prospect of political instability and the possibility of a rise in protectionist tendencies in the major economies. 3. In the near term, the unexpected results of the UK’s EU referendum or Brexit, would very likely continue to reverberate across financial markets around the world. It is a clear reminder of the risks that we face and how financial institutions and regulators must work together to ensure the continued resilience of our banking system and financial sector. •  MAS had been prepared for this possible outcome, and had taken precautionary measures, including keeping in close contact over the past weeks with banks in Singapore, foreign central banks and regulators. Our markets continue to function in an orderly manner and our financial system remains sound. 4. Beyond the immediate market turbulence, Brexit will also have wider economic implications for the region and Singapore.

While it is too early to make a firm call on the longer term consequences of the event, it will certainly weigh on both market confidence and on an already listless global recovery. •  Among the developed economies, the US has been most advanced in its recovery. This provided the impetus for the first interest rate hike in more than nine years in December 2015. However, the Federal Reserve has since held back from further rate increases amid a moderation of growth in the US and in many other parts of the world, as well as a rise in financial market volatility. •  Some central banks in Europe and Japan have adopted negative policy rates alongside other monetary easing measures to further support their economies, with mixed results. Central banks will have to be vigilant against undue financial market stresses arising from last Thursday’s referendum in the UK, and to be prepared for a period of heightened uncertainty that such an unprecedented event might entail. •  In Asia, China’s economic slowdown, softer commodities prices and weak demand in key export markets have been a drag on the region’s economies. Nonetheless, more resilient domestic demand conditions have continued to provide support to growth in many countries, including those in ASEAN. 5. The present low-growth, low-inflation environment, which in all likelihood will continue for some time, suggests that monetary policy settings in many parts of the world will remain accommodative, especially in advanced economies where inflation has been below target for a number of years.
Hence, temporary factors are becoming steady. When inflation expectations remain high, we need more time and a more significant tightening of monetary policy to be able to return inflation to the target. If we delay this, both inflation and inflation expectations will continue to go up. Of course, a very tight policy aggressively responding to transitory factors could bring inflation back to 4% more quickly. However, this would entail a slump in economic activity and a subsequent considerable deviation of inflation downwards from the target. The objective of a well-balanced monetary policy is to ensure price stability and limit sharp fluctuations in inflation, whether upwards or downwards. Our baseline forecast assumes that inflation will decrease to 4–4.5% by the end of 2022. It takes into account both a reduction in the steady component of inflation and the reverse — disinflationary — influence of a part of temporary factors. In other words, we assume that prices for certain products and services that have soared this year can adjust downwards next year. In some cases, this will be owing to the normalisation of the supply-side situation; in others — the downward trend may emerge as elevated demand diminishes. We have observed such processes this year already. For instance, if we talk about prices for pork and chicken bought most frequently, there were periods of price surges provoked by the worsening of the epizootic situation. Nonetheless, supply has rebounded by December and weekly statistics show that prices have declined, although only slightly.

In the case of Lehman, some of the most severe repercussions related to the difficulties in coordinating cross-border insolvency regimes and in coordinating the insolvency regimes among different types of institutions within the organization's corporate structure. In light of AIG's unparalleled global footprint – operating in more than 130 countries around the globe – and the multiplicity of different types of financial services entities within its structure – including insurance providers, foreign banks, consumer lending companies and OTC derivatives affiliates – the factors that proved unmanageable in the Lehman insolvency threatened to be much more severe in AIG's case. The fact that no effective emergency resolution procedures exist under U.S. law to reconcile these difficulties heightened the need for quick, effective action by the Federal Reserve, in consultation with and supported by the U.S. Treasury. From the outset, the New York Fed has been sharply focused on addressing two overarching goals with respect to AIG: (1) the stabilization of the company so that it no longer poses a disruptive threat to our financial system and economy and (2) obtaining full repayment of the government funds that have been extended to AIG. In light of the exceptional size and scope of AIG's operations, with over 110,000 employees in more than 130 countries, spanning hundreds of legal entities, it was clear from the beginning that the New York Fed – which had never been engaged in any regulatory oversight of the company – was not in a position to exert day-to-day management control over the company.
However, later research has shown that in the longer term there is no connection between inflation and unemployment. At the same time, I believe that the problems in the 1970s and 1980s could partly be explained by the Swedish economy being unable to manage the low unemployment we had then without excessive price and wage increases ensuing. For me, one of the most important tasks of economic policy over the coming years is to bring down unemployment. However, the Riksbank is unable to do very much about this. The Riksbank’s contribution is to safeguard the inflation target and in this way create favourable conditions for growth and employment. All in all, my picture is still that the Swedish economy has functioned much better over the past ten years than in the 1970s and 1980s. Things are better now. Current monetary policy The other part of my presentation is concerned with economic developments and current monetary policy and the reasons why the Executive Board of the Riksbank decided at its most recent monetary policy meeting on 22 February 2006 to raise the repo rate by 0.25 percentage points to 2 per cent. The Riksbank’s view of economic developments over the coming years is presented in the Inflation Report, which was published at the same time as the interest rate decision. This part of my presentation does not contain any new information or new assessments in relation to the February Inflation Report and the separate minutes of the Executive Board meeting.

We can test how the system is likely to behave under stress. But we have until recently been in a very muted phase of the credit cycle. We are now, I hope, entering a more normal phase of the cycle, and approaching the point at which, from a macroprudential stand point, the Financial Policy Committee (FPC) will have to spend less of its time on the design of the regulatory framework and a lot more of its time on whether and when it needs to address the build-up of cyclical risk in the financial system. And, as we learn how the financial system behaves in first the more normal and then the more challenging parts of the credit cycle, we will also learn more about how the new regulatory framework functions as a whole. There will, as I and others have said, be areas where we find the reforms do not work as intended and that it is necessary to adjust them. It would be surprising if this were not the case. In response to the biggest global financial crisis since the 1930s the international regulatory community has agreed and is carrying through the biggest, most complex and most comprehensive programme ever of interlocking regulatory reform. There will be elements that need to be adjusted – indeed this process has already started with the reforms to securitisation now underway in the EU motivated in no small part by the joint work of the Bank of England and the European Central Bank.
When equity prices increase rapidly, the equity allocation will exceed the strategic weight of 60 per cent. Rebalancing rules are then applied to bring the equity allocation back to 60 per cent. These rules are more important than many perhaps believe. Many investors waited for a long time, probably too long, to rebalance their portfolios during and after the crisis, when equity allocations fell sharply. It should also be considered whether the rules should be designed to provide for a greater degree of automaticity, less judgement and probably also greater transparency. It is important to take into account the Fund’s particular features, that is to say a long-term, large investor without short-term liquidity needs, when evaluating which investment strategy is most appropriate. In the spring 2010 Report to the Storting on the Fund, the Ministry of Finance suggested that the level of less liquid assets should be increased: “Further development (of the strategy) will seek to diversify the risk further and increase the weight of investments that benefit from the Fund’s size, long-term perspective and ability to hold less liquid assets.” Today the Fund’s assets are divided into two classes: equities and bonds. Going forward, a division into three asset classes may better enable the Fund to achieve its long-term objectives. The first asset class is equities. This class features the highest risk exposure and the highest expected return. It accounts for 60 per cent of the Fund, which reflects the risk willingness of the Fund’s owner.

•  In 1996, the Bank of Zambia attempted to jumpstart secondary market trading in Government securities by restricting the primary issues of Government securities to commercial banks. It was expected that commercial banks would take up the role of market-making. This did not materialize with most commercial banks preferring to buy and hold the securities until maturity. Consequently, authorities were obliged to re-open the primary market to other non-bank investors. •  Further, since 1998, Government bonds have been listed for trading at the Lusaka Stock Exchange. The benefits have not been realised despite the fact that all banks are registered as brokers in this respect. I am sure the LUSE will provide you with more detail on this as you deliberate. •  More recently, the Government and the Bank of Zambia in 2006, with the support of DIFID and the World Bank undertook a study tour of selected emerging markets in Africa and Asia. The aim of this tour was to learn the actual workings of well functioning government securities markets. Technical information was collected and a report prepared. Once the recommendations in that report have been adopted, I expect that these will complement your own efforts to activate secondary market trading. I am aware that the successful development of a secondary market needs a reliable and efficient settlement infrastructure. This is important for it addresses the concern that is normally raised on the possibilities of settlement risk.
Following the financial crisis, the model for prudential regulation in the UK has been further developed by the establishment of the Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA). The mandates for both the FPC and PRA are set out in primary legislation: the FPC is responsible for protecting and enhancing the overall stability of the UK financial system; and the PRA’s primary objectives are to promote the safety and soundness of regulated firms and to contribute to the securing of an appropriate degree of protection for policyholders. But importantly, the mandates for the FPC and PRA ensure that other factors such as long-term productivity and economic growth are taken into account when setting policy. The FPC must pursue its financial stability objective without causing serious harm to the wider economy in the medium or I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 6  long term. In other words, the FPC must avoid the ‘stability of the graveyard’. 6 And, the FPC also has a secondary objective, subject to its pursuit of its primary objective: that of supporting the economic policy of the government. The PRA also has an important secondary objective to facilitate effective competition, and must have regard to a set of regulatory principles, including the desirability of sustainable economic growth.

Chart 1: Regulatory-Supervisory Independence and central bank independence, 1999-2019 (a)  (a) The data on central bank independence is drawn from Bodea and Hicks (2015) and Garriga (2016). Weighted versions of the indices are used to aid comparison. The weighting is based on Cukierman et al (1992). The second step in the analysis was to examine whether there is an association between the Regulatory-Supervisory Independence index and financial stability. Defining an ex ante quantitative indicator of the success or otherwise of prudential regulation is hard, unlike with monetary policy where such measures are easier to arrive at. But fortunately, this is less of a problem for this analysis because we have ex post observations of distress in the banking system. The authors used rates of non-performing loans at banks as a measure of financial (in)stability.9  They analyse whether reforms that increased regulatory-supervisory independence were associated with subsequent a reduction in the rates of non-performing loans. Panel data regression show a 9  That is, non-performing loans as a proportion of total gross loans. I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 9  negative and statistically significant association between independence-increasing reforms and rates of non-performing loans – see Table 3.
François Villeroy de Galhau: Financial supervision and the role of national authorities in Europe Opening address by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Autorité de contrôle prudentiel et de resolution (ACPR) Conference on Financial Supervision, Paris, 18 September 2018. * * * Mr. President [M. Draghi], Ms. Chair [D. Nouy], Mesdames, Messieurs,  Bonjour et bienvenue à Paris, It is a particular pleasure to welcome you to this conference on financial supervision and the role of national authorities in Europe. What better way to inaugurate the new headquarters of the ACPR – France’s supervision authority – than to bring in colleagues and experts from across the continent. I urge you to look at a few street names in the neighbourhood: this borough is called in Paris “quartier de l’Europe” – very much in the spirit of what we are doing together at the SSM. I warmly thank President Mario Draghi for being here. Before giving him the floor, let me stress that we all have reasons to be proud of what has been achieved for Banking Union in the past few years. But we must not be complacent. There are two priorities: one in substance, and one in method. **  I. Our priority in substance: strengthening the second pillar on resolution Now that we’ve had the Single Supervisory Mechanism up and running for four years, it’s easy to forget that there were many sceptics who were sure that such a union could not be achieved.

The US had a trusted process through the Federal Deposit Insurance Corporation, backed by a credit line from the US Treasury. By contrast, prior to the crisis many member states of the euro area did not even have a national resolution framework. Since 2008, the FDIC has resolved over 500, mostly smaller banks in the United States. While determining the exact definition is tricky in the euro area, the number appears less than a hundred.1 All this explains why the recovery of the banking sector took longer in the euro area, which our monetary policy had to work to mitigate. And what is more, when public authorities in the euro area did intervene to backstop their national banking sectors, the fiscal implications naturally differed: the onus fell entirely on national budgets. This in turn contributed to the second area where the euro area and the US diverged: the emergence of the so-called “vicious loop” between banks and sovereigns, which further delayed the financial repair process. Importantly, this vicious loop not only further impaired monetary transmission, but it also had implications for the stance of monetary policy. The need for accelerated fiscal consolidation to quell the sovereign debt crisis constrained the ability of fiscal to carry out macroeconomic stabilisation in the euro area and hence the overall policy-mix. Whereas the US could consolidate its budget against the backdrop of a firming recovery, some euro area governments were forced into a pro-cyclical fiscal stance. That in turn worsened the macroeconomic environment in which monetary policy had to operate.
As far as Sweden is concerned, it is quite clear that the inflation target has helped provide greater orderliness by playing this role, and this has probably been an important explanation for the Swedish economy having developed so favourably since the crisis at the beginning of the 1990s. … but these benefits seem to have begun to fall into oblivion As I noted earlier, there is broad support for the inflation target. But as regards wage formation, there is currently an opinion, at least in some quarters, that the inflation target has played its part and become irrelevant: It was important when bringing down wage inflation from its high levels of the 1970s and 1980s, but once this has been achieved, the target no longer fulfils any function and might as well be abolished. For several reasons, I see this as a historically questionable and myopic argument, and it would be unfortunate if this view were to gain a firmer foothold. First, it is always sensible to not let oneself be influenced too much by the prevailing situation when discussing the design of frameworks that are expected to be stable and be in place for a long time. It is of course true that the kind of inflation  9 [17]  and wage surge seen during the 1970s and 1980s does not seem likely in the foreseeable future. But at the end of the day, what do we really know about how the situation will be a few years in the future?

The final brushstrokes entail developing tools that will, if applied, restrict the benefits accruing to nonresidents as a result of our having higher interest rates than our trading partners. The precise structure of this will come clear in the next few months, but possibilities include some form of taxation or a special reserve requirement. 2  Central Bank of Iceland Special Publication no. 4: Monetary policy after capital controls, December 2010 and Central Bank of Iceland Special Publication no. 6: Prudential rules following capital controls, August 2012. http://www.cb.is/publications/publications/special-publications/  BIS central bankers’ speeches  5  I have now reviewed the multiple crossroads that I mentioned at the outset. Each one of them poses a challenge for monetary policy. But it is not least the interactions among them and the timing that make monetary policy so unusually complicated at present. For instance, it would be much easier to cope with capital inflows if domestic economic developments did not call for a tighter monetary stance at this juncture. The oft-quoted Chinese blessing – or curse – “May you live in interesting times” – continues to follow us. Thank you. 6  BIS central bankers’ speeches
[4] Faberman, R J, Mueller A I and Sahin, A (2022), “Has the Willingness to Work Fallen during the Covid  Pandemic?”, NBER Working Paper, 29784. [5] IMF (2023), “Staff Discussion Notes: Geoeconomic Fragmentation and the Future of Multilateralism”,  The International Monetary Fund, January 15. [6] Goes, Carlos., and Eddy Bekkers (2022), “The Impact of Geopolitical Conflicts on Trade, Growth, and  Innovation”, World Trade Organisation, July 4. [7] Source: Bain and Temasek, with contributions from Microsoft, Southeast Asia’s Green Economy 2022  Report: Investing behind new realities

Should a crash occur, however, risk-taking incentives go into reverse gear. Their closeness to a disaster event causes drivers to move more slowly than might be justified by the underlying risk. The experience heuristic leads to an over-weighting of recent, severe, personal events. Risk appetite then switches from too high to too low relative to the true risk. The result is traffic congestion. Financial crashes and car crashes have common psychological roots. One of the causes of the crisis was an under-pricing of risk. That was rooted in disaster myopia – an under-estimation of risk during the so-called Great Moderation. Memories of financial disaster had faded, with the Great Depression in almost no-one’s experience sample. The upshot was an over-healthy appetite for risk-taking. The subsequent crash has turned these behaviours on their head. Memories of financial disaster are now fresh, as after the Great Depression, causing an over-estimation of the probability of a repeat disaster. In these situations, psychological scarring is likely to result in risk appetite and risk-taking being lower than reality might suggest. Risk will be over-priced. Today, the very disaster myopia that caused the crisis may be retarding the recovery. Disaster myopia may be more potent in the markets than on the motorways. Asset prices are guesses about the future. Faced with uncertainty about the future, market participants form these guesses using their own heuristics. One such heuristic is the “popular narrative” – a simple story that aims to make sense of reality.