samchain/econo-pairs-v1 huggingface dataset:
Today, four out 5 2/7  BIS central bankers' speeches  of the top 10 global exchanges are in Asia 5 and Asia contributes nearly half of the total number of IPOs globally6. During the same period, Asia’s bond market has grown at an annualized growth rate of 24% to reach USD 4.7 trillion in 2015, accounting for 9% of global corporate bond market outstanding volumes7. Some analysts8 estimate that the size of the financial system in Asia could reach USD 200 trillion by 2030. This is four times its current size and more than double the projected size of the U.S. financial system. Developments in global markets will be increasingly driven by Asia’s growing economic and financing needs. This is well-evidenced in the wealth management9 space. In 2015, as global high networth individual (HNWI) wealth grew at a modest 4% globally and just 2% in North America, Asia-Pacific wealth expanded by 10%. 2015 also became the year that AsiaPacific overtook North America for the first time to become the region with the most HNWI wealth and population globally10. HNWI growth in Asia-Pacific has doubled over the decade and if the trend persists, Asia-Pacific will represent two-fifths of the world’s HNWI wealth by 2025. In infrastructure financing, Asian financial institutions will be well placed to meet the significant financing needs of around USD 8 trillion of infrastructure projects in Asia, as estimated by the Asian Development Bank (ADB). In commodity markets, Asia’s influence has also grown stronger.

The major dealers and their principal supervisors met at the Federal Reserve Bank of New York about two weeks ago to review progress and discuss next steps. The dealers are now in the process of reaching agreement on a new set of proposals designed to build on the progress to date and produce a more mature, efficient and operationally robust post trade processing infrastructure for the OTC derivatives market. I want to conclude with a few observations about the role of supervision in encouraging progress in both these areas of risk management and the infrastructure for these markets. We live in a system in which nonbank financial institutions play an increasingly important role in a wide range of financial markets, in which the differences between the activities of bank-centered financial institutions and nonbanks has substantially diminished, and in which the largest banks and investment banks in the world compete together in the U.S. market and in other major markets. These changes have many positive implications but they also mean that differences in the incentives faced by institutions with different supervisory and regulatory regimes can have larger competitive effects, and the effects of regulatory arbitrage can reduce the impact of changes applied only to regulated or supervised institutions. They suggest that adverse developments outside the banking system, such as the failure of a major nonbank financial intermediary, can potentially cause greater damage to the core of the financial system than might have been the case in the past.
The corresponding consultation for U.S. dollar and some other non-U.S. dollar derivatives contracts closed just last week, and I look forward to hearing the results and next steps. Universal changes to derivatives contracts will take out about 95 percent of the exposure—the $ trillion number. If the market signs up to the ISDA protocol when it’s published early next year, it will be a huge step in the right direction. In addition, the ARRC has released four sets of recommended fallback language for different types of cash products. This fallback language clearly stipulates trigger events, replacement rates, and spread adjustments, and the triggers are close to those that ISDA has consulted on for derivatives. 2/3  BIS central bankers' speeches  And on Friday, the Securities and Exchange Commission (SEC) staff issued a statement highlighting risks and disclosures for market participants to evaluate proactively as they transition away from LIBOR. While derivatives and institutional cash markets make up the bulk of LIBOR-based contracts, consumer products are a critical area where the industry needs to focus. Ensuring a fair transition away from LIBOR is going to be particularly challenging, and it’s important consumers understand what the changes being made mean in real terms. Last week the ARRC published potential paths forward for adjustable-rate mortgages (ARMs). These include a set of guiding principles for ARMs and other consumer products, draft fallback language for new ARMs referencing U.S. dollar LIBOR, and a framework for use of SOFR in new ARMs.

But others might argue that the structural changes of the eighties and nineties which were consistent with an appreciating real rate because of much more rapid productivity gains in the tradable than in the non-tradable sectors, cannot be repeated, so that the assumption of a continuing secular uptrend is invalid. On that view, the net appreciation over the past couple of years may be deemed to have dragged us away from our preferred path. It is hard to judge where the proper balance of these views lies. I recall how, 15-20 years ago, the doom merchants were prophesying the end of Hong Kong’s long run of growth because we were rapidly losing competitiveness in much of manufacturing. Presumably they did not 1  Slides are not included in this text document. 1  BIS Review 54/1999  foresee the remarkable extent to which the service sector would develop as an alternative wealth-generating lynchpin of the economy. Now, the next generation of doom merchants is prophesying imminent disaster as competitiveness in certain parts of the service sector appears to have been eroded. Will they be wrong again? Have they failed to appreciate the true workings of the market economy and comparative advantage? Do they not realise how difficult it is to foretell exactly how an economy will evolve, even though the evolution is taking place right under our noses?
Indeed, from 2008 to 2014 the Banco de España prepared a considerable number of releases, articles and reports on the crisis and the measures adopted, which were available in print or on our website no sooner were they drafted. That is to say, the Bank had already prepared and published extensive information on and various analyses of the crisis; but what was missing was an orderly overview, in terms of both the timeline and the different themes, addressing the key macroeconomic, financial, regulatory and supervisory aspects. The imbalances built up in the Spanish economy in the expansion prior to 2008 Allow me first to refer to the build-up of macroeconomic and financial imbalances in the expansion years prior to the crisis, linked most significantly to private-sector debt. In its opening chapter, the Report indicates that an intense process of indebtedness unfolded in Spain from 2001 up to 2007, as reflected in Table 1.1 (p. 66). The figures for the period 2001-2007 are as follows: set against nominal GDP growth of 67%, credit to the private sector increased by 221%, concentrated especially in the real estate sector, where growth of 250% in house purchase loans and of 513% in the case of credit to construction and real estate services companies was recorded. Peak growth in credit was in 2005 and 2006. In those two years, credit to the private sector grew by 60%, that earmarked for house purchases by 65% and that to construction and real estate services firms by almost 100%, i.e.

IS Schedule Interest rate sensitive sectors need to respond sufficiently to the tightening of policy in order to moderate demand, without tipping the economy into a sharp or broader downturn. Tighter financial conditions can restrain demand via transmission channels working through higher mortgage rates, more selective credit underwriting and wealth effects from lower equity prices. If these channels begin to restrain growth in 2022 at a time when corporate and household balance sheets are still strong, they contribute to achieving a soft landing. Phillips Curve Combined with labour supply improvements, employment needs to moderate sufficiently to cool wage growth without eliciting a sharp rise in the unemployment rate. Some relief could come from a rise in the LFPR. Post-Covid normalisations could see the return of some of the “missing” 1-1.5 million workers that have exited the labour force because of the pandemic. The present strength in labour demand is reflected in an unusually high ratio of two vacancies for each unemployed person. Some reduction in vacancies will not generate negative income effects in the same way that outright layoffs would. For a “soft landing”, the Non-Accelerating Inflation Rate of Unemployment (NAIRU) would have to converge to its lower pre-Covid level at a faster pace than actual unemployment rises. A return of the NAIRU to its value before 2020 would verify the absence of labour market scarring. Soft Landings A recent Bank for International Settlements (BIS) study [1] usefully identified some stylised facts on hard versus soft landings in the global economy.
That marks a 50% reduction from the 2011 peak. Against this backdrop, banks should persist in their management efforts to enhance the quality of their balance sheets, which is a fundamental factor for the recovery of profitability in the medium term. The other lever in banks’ hands is to improve their efficiency, through a more appropriate management of their costs that does not limit their capacity to adapt to an increasingly more technified environment. In this respect, we should note that, in business in Spain, the 4/10  efficiency ratio at the individual level, without taking into account severance payments, has increased (worsened) by somewhat over 9 pp since 2014, to 58.8%. As to the composition of operating expenses, the weight of personnel costs has diminished, and that of IT and communications, outsourced services and amortisation has increased, reflecting to some extent the ongoing digitalisation and technological change at banks. It should be borne in mind that operating expenses are one of the most significant levers over which banks have direct control to increase the profitability of their business. In any event, it should also be stressed that Spanish banks’ efficiency ratio at the consolidated level, calculated as the ratio of operating expenses to gross income, is one of the lowest (best) in Europe. The actual and projected reduction in the euro area economy’s rate of nominal growth and, as a consequence, the fact that interest rates are going to be at lower or even negative levels for longer, may ultimately affect financial institutions’ profitability.

The introduction of the euro has been a strong catalyst for mergers and acquisitions in the euro area. The European M & A market seems to be amongst the most dynamic in the world: with operations totalling over 1,000 billion euros in 1999, it is now catching up on the American market. The euro has brought about significant changes for participants in financial markets and has fostered structural developments in the financial industry. This is true both on euro-area money markets and on capital markets. From the beginning of Stage Three of EMU, cross-border transactions in the money market increased so as to represent more than 50% of the total activity in all segments of the money market. The unsecured deposit interbank market—which is mostly concentrated on shorter maturities—exhibits a  4  BIS Review 11/2001  very high degree of integration. The integration of interest-rate markets within the euro area is a key achievement which deserves to be underscored. EONIA and EURIBOR have provided the market with uniform benchmarks fully accepted by all market participants. The diagnosis is the same in the shortterm derivatives market, whose integration, standardisation and depth have increased. This is reflected, for instance, in the scale of daily transactions and the huge expansion of the euro interestrate swap market. These structural changes in the euro area money market have generated significant moves by market participants, who have concentrated their euro cash management activity and have benefited from better liquidity on the secondary market.
The Bank of Thailand is rolling out a new measure in the second half of this year with a view to giving banks a nudge to deal with NPLs head on. For NPLs that have long been pending without proper restructuring or legal actions, financial institutions will be required to set aside provisions for the collateral at an increasing rate, depending on the overdue period. Essentially, banks will be required to  2  BIS Review 43/2004  make provision in full, regardless of the collateral value, for loans that have been non-performing for over four years. Also, the Asset Management Corporation, set up exclusively to buy NPLs from the finance companies that were closed down during the crisis, will be enabled to buy NPLs of banks. We are now in the process of amending the Corporation’s charter. On risk-based supervision, the Bank of Thailand has issued a Market Risk Supervision Policy framework at the end of last year - a timely move given a possible upward trend of interest rates. This measure will ensure that financial institutions instill mechanism to manage market risk commensurate with their risk-taking activities, especially in the trading book. Recognizing the need for financial institutions to adjust, the Bank of Thailand will implement the measure in transitional phases. By June 2005, banks will be required, for the first time, to maintain capital fund against market risk.

Prior to that, they will have to comply with guidelines on internal control and trading book policy, as well as submit call reports on the calculation of the volume of trading book transactions and the calculation of the capital charge against market risk. Ladies and Gentlemen, Another factor which will have crucial implications for the banking sector is the Basel II implementation. With the recent release of the Basel II framework, it is inevitable that we get ourselves ready for this international standard of capital adequacy. We all would agree that the New Capital Accord is for the betterment of banking system soundness for it signifies a move away from the one-size-fits-all approach to credit risk assessment in accommodation of evolving more sophisticated risk management of modern banking. Specifically, under the New Accord, it provides more comprehensive and risk sensitive approach to calculate regulatory capital, augmented by supervisory review process of Pillar II and market discipline enforcement of Pillar III. Despite the novel complexity of capital calculation under Pillar I, if a bank adopts the standardized approach, its calculated regulatory capital is only a proxy of the actual risks. I suspect that standardized approach is the one that most banks in emerging markets will adopt before they can meet the preconditions of IRB, or the internal-rating-based approach, especially in the areas of data quality and risk management practices.
They will not be solved with miracle cures or ill-advised changes to individual aspects of monetary policy conduct. Monetary policy works. However, it needs support, along with necessary reforms to strengthen its effectiveness. There are no alternatives. But under today’s conditions, where developments in global markets have more direct impact on the Icelandic economy, it is vital for all economic policy measures to have a coordinated focus on restoring macroeconomic stability. This must be the priority. The same principle applies in all countries in a similar position, not least in relatively small and open economies. Relaxing the stance of monetary policy is by no means the answer and it is important not to undermine its credibility. On September 6 this year, the Board of Governors of the Central Bank of Iceland decided to leave the policy interest rate unchanged at 13.3%, as it has been since December 2006. The Board of Governors considered that the short-term inflation outlook had deteriorated somewhat since the previous interest rate decision in July, but long-term prospects were unchanged. Exchange rate developments were highly uncertain and would largely be determined by developments in global financial markets. The Board of Governors concluded its announcement by reiterating its commitment to attaining the inflation target within an acceptable timeframe. The next interest rate decision by the Board of Governors will be announced on November 1, 2007, coinciding with the publication of Monetary Bulletin and the Bank’s new macroeconomic and inflation forecasts. The twelve-month rise in the CPI in September measured 4.2%.

This has complicated the Bank in its efforts to constrain inflation in recent times. One factor has been the changes that took place in the mortgage loan market in autumn 2004 when the commercial and savings banks began competing with the Housing Financing Fund (HFF). The Central Bank’s policy rate hikes impact the interest rates of non-indexed lending by commercial banks and savings banks and the non-indexed end of the domestic bond market. However, for a long time they had little impact on long-term interest rates. Some critics cite this as proof that the Central Bank of Iceland’s measures do not have the same effect as those of other central banks. Yet the development in Iceland is by no means an isolated occurrence. The US experience offers an immediate example. The Federal Reserve began raising its federal funds rate early in 2005 in progressive steps until early this year, from 1% to 5.25%. These hikes had no effect on long-term interest rates in the US, which have been broadly steady since 2005 apart with only minor fluctuations in either direction. US monetary authorities were puzzled by this development. I cite this example because it has been claimed that, unlike the Central Bank of Iceland’s decisions, the impact of changes in the Federal Reserve’s rates is immediately transmitted in full to long-term interest rates.
Within minutes, the exchange rate exceeded the CHF 1.20 mark. Seen from the outside, this may have created the impression that a minimum exchange rate can simply be generated by pressing a button and that such an exchange rate is a normal monetary policy measure which is straightforward to implement. That is far from being the case. A minimum exchange rate is an extreme measure, only to be introduced in a situation of massive overvaluation, with the aim of averting the worst developments. It is neither a panacea capable of solving all the problems facing the Swiss economy, nor can it simply be implemented for any desired level, free of any risk. On the contrary. A minimum exchange rate can only be successfully implemented if there is a clear economic justification for its introduction, such as a massive overvaluation resulting from adverse developments on the foreign exchange market. Within the framework of a system of flexible exchange rates, it is also important that it be internationally accepted, and that it is not seen as a competitive depreciation. Finally, a vital element in the successful implementation of such an exchange rate is the central bank’s credibility, in other words, the belief that the central bank will indeed defend the minimum exchange rate, if need be. Financial markets are constantly changing their assessment of risks. A situation may also occur in which the market decides to test the defence of the minimum exchange rate.

The explanatory power of fundamental factors in explaining the developments in residential real estate prices is decreasing steadily, while the volume of mortgage loans in comparison to GDP has never been so high. Should these imbalances increase further, considerable risks to financial stability could emerge. Given this situation, the SNB has strongly advocated the introduction of a countercyclical capital buffer in Switzerland. This buffer would not be a permanent increase in equity requirements for banks. It is only to be activated temporarily in the event of excessive growth in domestic mortgage lending. As soon as lending growth weakens again, the buffer can be deactivated. An instrument of this kind was examined in detail last year by a working group headed by the Federal Department of Finance, to which both FINMA and the SNB also belonged. The group proposed that the buffer be introduced rapidly so that a suitable instrument would be in place, in case the imbalances in the Swiss mortgage and real estate market increased further. Concluding remarks Ladies and Gentlemen, as you will have gathered from my remarks today, the challenges facing the SNB have not diminished. Consequently, it is all the more important that we are able to devote our complete attention to our tasks, now and in the future. The SNB’s monetary policy decisions are directed purely and solely at fulfilling its statutory mandate. It is our responsibility to ensure price stability.
Another example is that the Riksbank has entered into what are known as swap agreements with the Fed and the ECB, which means that if necessary we can borrow dollars or euro in exchange for Swedish kronor. This type of swap agreement is, put simply, an agreement to buy a currency at a particular time and to sell it back at a later date. A further measure is that we accept more types of security as collateral when the banks borrow money from the Riksbank. Moreover, the Riksbank has in different contexts extended the list of eligible counterparties so that more financial agents will have the chance of easier management of liquidity and funding. Need to coordinate? “Exit strategy” is a buzzword that has been used for a while now. There is currently much discussion on how and when the measures taken around the world during the financial crisis are to be phased out. One question that is highlighted is that international coordination might be necessary for some of these processes. Some of the discussion concerns timing and how “aggressive” one can be when slowing down the powerful stimulation from fiscal and monetary policy. If one eases up on the stimulation too soon and too hard, it may jeopardise the economic recovery. If one instead eases up too late and too little, there is a risk that inflationary pressures will be too strong. Here I believe that every country must make its own assessment, as conditions differ in different countries.

BIS Review 138/2009  5  Figure 6. GDP with uncertainty bands, annual percentage change, seasonally-adjusted data 6  6  4  4  2  2  0  0  -2  -2 90%  -4  -4  75% 50% O utcome  -6  -6  Forecast  -8  -8 04  05  06  07  08  09  10  11  12  Sources: Statistics Sweden and the Riksbank  I and my colleagues on the Executive Board want the growth curve to look like a “v” when the economy recovers after the recession, as in the figure with our forecast for GDP growth, and not a “w” (see Figure 6). Having said that, let me just briefly comment on my own view of monetary policy as expressed in the minutes of our most recent monetary policy meeting. As I see the situation with regard to the Swedish economy, it is more important to allow some safety margin for a weaker outcome than for a stronger outcome. In my opinion, it would be more problematic if the recovery ground to a halt because we had provided too little stimulation than if we were later forced to put the brakes on a little harder than expected. So where do we stand with regard to the financial system? Where we stand in terms of the economic cycle is to some extent connected to developments in the financial markets.