samchain/econo-pairs-v1 huggingface dataset:
Public authorities – at least in Europe – have tended to come to the aid of weak institutions, thus confirming the existence of an implicit guarantee for banks’ liabilities. This guarantee distorts the incentive system for the managers of banks and for their creditors, generating considerable costs for the public finances of the countries concerned. A key factor in encouraging the suitable risk perception of each liability instrument, and thus in minimising the cost for taxpayers, is bail-ins. These establish a clear order for the incurring of losses by shareholders and creditors, and provision is made for this arrangement to be activated prior to any injection of public funds. In Europe, given the political agreement reached on the Recovery and Resolution Directive, a set of common rules will be adopted in the near future establishing a clear and homogeneous order of seniority of liabilities in the event of bank resolution, and it will ensure the administrative power to impose losses on the holders of each instrument. That will notably minimise the cost to taxpayers of bank bail-outs. But common rules are not enough. The only way to ensure the possible homogeneous application of these rules is through the creation of a common resolution authority for all countries. BIS central bankers’ speeches  3  Similarly, it is important to have a common resolution fund in place which ensures, under similar conditions, that there is the necessary financial support for those institutions which might need it, irrespective of the budgetary situation of the State concerned.

Bruno Gehrig: Monetary policy in a changing world  Speech by Prof Dr Bruno Gehrig, Member of the Governing Board of the Swiss National Bank at the 3rd Conference of the Swiss Society for Financial Market Research (Schweizerische Gesellschaft für Finanzmarktforschung, SGF), held in Zurich on 7 April 2000. *  *  *  The title of my speech may sound somewhat ambitious. It signals all-encompassing breadth and profound depth. These are demands that I will hardly be able to meet. What follows are a few reflections on selected aspects of monetary policy by a practising economist. I should like to begin with a brief historical review leading to the 1990s, which have become known - and justly so - as the decade of successful disinflation. Then I will turn to the changes in monetary policy concepts. Following these rather retrospective remarks, I should like to deal with topics of broad general interest in today’s discussion - under the headings “independence”, “new economy” and “asset prices”. 1. A brief historical review  In a historical dimension, central banks are comparatively young institutions. While payment instruments can actually be traced back to prehistoric eras, central banks have emerged only very gradually over the last 300 years.1 When one considers that the Bank of England was founded when Johann Sebastian Bach was nine years old, one might even regard central banks as somewhat “baroque” institutions. Indeed, the original missions of central banks must strike us as highly bizarre. “A money-raising machine”!
Measured in conventional terms, the marked decline in house prices seen over the past two years has led to a pronounced deterioration in households’ balance sheets: house prices have declined by around 15% but the value of outstanding mortgage debt is largely unaffected. The lower level of house prices will eventually be reflected in a lower level of mortgage debt than otherwise as first-time buyers (and those trading up the housing ladder) enjoy the benefits of more affordable housing. But this effect will not fully materialise until the entire housing stock is turned over at the new lower price level, which may take a considerable time. In the meantime, not taking account of this missing liability exaggerates the deterioration in households’ underlying position. Moreover, by considering only the fall in prices of housing and financial assets, we could be exaggerating the extent to which people are actually less wealthy. For some households, these are their only form of assets. This is most obviously the case for the retired. But the largest asset owned by most people is not measured at all. It is the value of what they expect to earn in the future or, what economists refer to as “human capital”. Most estimates suggest the value of future earnings is significantly greater than the sum of net financial wealth and gross housing assets which typically forms the basis for balance sheet measures.

Adherence to this requirement will inject transparency, accountability and ensure the integrity of the financial system. It will prevent criminals from hiding their ownership of companies and assets through complex methods and vehicles. I last spoke at this conference in 2011. The theme of the 2011 conference was “Raising the bar in enforcement and compliance”. Looking back and taking stock of the present state, I am glad to see that the whole industry has matured and progressed in such a significant way. This is validated by the NCC report that the sector’s control measures for both money laundering and terrorism financing are strong. Further, fines imposed by the Bank on financial institutions has decreased over the past few years, reflecting the progress made by institutions in ensuring adequate controls. I hope the industry continues to strengthen its capability to fight crime. Another area in which progress has been made is the priority accorded within each institution to compliance. The focus of the compliance function has developed to become more comprehensive as financial institutions have a better understanding of the threats and risks involved. With increasing awareness of the direct and indirect costs of non-compliance, the compliance function is no longer viewed only as adherence to rules set by regulators, but is instead, an integral part of the organisation’s culture. The very fact that the theme of this 4/5  BIS central bankers' speeches  conference is on reshaping the future, governance and transparency is a testament to this.
This will in turn ultimately bring benefits to the consumers and the economy at large. Implementation challenges and considerations Ladies and Gentlemen, Given the complexity of Basel II, the ability to comply appears to be the main concern within the banking community. This is truly a major undertaking with respect to the IRB approaches or the internal rating based systems. The resources involved and data constraints are often cited as the two main challenges in implementing the IRB approach, particularly for banks in the emerging markets. At this stage, data on default and credit migration for certain market segments is too limited to facilitate any meaningful analysis. It is therefore recognized that some lead time would be needed for banking institutions to produce a robust and meaningful validation of internal estimates of probabilities of default and loss given default. However, this does not mean that banks should wait until all the requisite data is in place. Banks can initiate work to establish the framework for analytical functions. While the industry survey conducted by Bank Negara Malaysia revealed a strong preference among Malaysian banking institutions to adopt the IRB approach, many had indicated the need to further strengthen their business case and undertake more comprehensive gap and impact analysis. This is indeed a critical process. Of importance is to be able to extract the benefits out of the new accord. This would however, take time even for large and internationally active banking institutions that have made substantial enhancements over the years.

Capital regulations will have to be complemented with prudent banking that includes enhanced underwriting standards, effective internal controls and risk management, as well as strong corporate governance. In achieving your future goals and aspirations, significant benefits can be derived from Basel II provided that your institutions undertake the necessary efforts to align your strategy and business orientation with the new standards. Your interest, participation and decisive actions on the new accord are therefore important in positioning your institution in this increasingly competitive and more dynamic environment. Thank you. BIS Review 21/2004  5
(2007): “Alternative measures of inflation for monetary policy analysis”, Economic Review no. 3, 2007, Sveriges Riksbank. Lagervall, B. and Nessén M. (2009), “The long-term development of the krona”, Economic commentaries no. 6, Sveriges Riksbank. Lothian J.R. and Taylor M.P. (2008): “Real Exchange Rates Over the Past Two Centuries: How Important is the Harrod-Balassa-Samuelson Effect?” Economic Journal 118. McCarthy, J. (2000), “Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrial Economies”, Federal Reserve Bank of New York Staff Report 3. Meese, R. and Rogoff, K. (1983), “Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?” Journal of International Economics 14 , 3–24. Rogoff K. (1996), “The Purchasing Power Parity Puzzle”, Journal of Economic Perspectives, p. 647–668. 14  BIS Review 3/2010  Parsley, D.C. and Wei, S-J. (2007): “A Prism into the PPP Puzzles: The Micro-foundations of Big Mac Real Exchange Rates” Economic Journal 117, 1336–1356. Rose, A.K. and Yellen, J.L. (1989), “Is There a J-curve?” Journal of Monetary Economics 24, 53–68. Taylor, M. P. (2002): “A Century of Purchasing Power Parity”, Review of Economics and Statistics 84, 139–150. BIS Review 3/2010  15

If the substantial optimism regarding the future that is reflected, for instance, in the development in savings proves partially unwarranted, the problems may become even more difficult to handle at a later stage. Although the focus is on the USA at the moment, concern over developments in Japan has increased recently. Here there appear to be both severe problems in the real economy and in the finance sector, as well as political difficulties in dealing with these problems. In the insurance sector there are a number of major life insurance companies that are insolvent in the technical sense, as they have promised pensioners a return that they are unable to deliver. A large part of the insurance companies' assets are of course traditionally invested in low-yield treasury bonds. The Japanese 10-year bond rate is currently around one and one-third per cent. The Bank of Japan has declared that it intends to continue with its zero interest rate policy for the foreseeable future and the market expects to see prices falling rather than otherwise during the coming year. If interest rates and inflation were to gradually rise, which at the moment does not appear likely, this would of course further erode the value of Japanese pension money, as the bonds stock in the insurance companies would fall in value.
I did subsequently enter reservations in favour of an increase in the repo rate several times in 2007 when the majority on the Executive Board decided not to increase it.9 The second thing is that I accepted such a low repo-rate path the first time we presented our own path in February 2007. This was just before the completion of wage negotiations for large parts of the labour market and it sent the wrong signal to the social partners; that is that wages could be significantly increased without consequences in the form of too high inflation. Wage expectations had then risen to the highest level since the mid-1990s. But we were too focused on all the work that was required to produce and decide on the repo-rate path for the first time for me to adequately realise the consequences of the decision. When visiting different venues to speak about monetary policy, I have often been asked why we raised the repo rate from 4.50 to 4.75 per cent in September 2008, just before the financial crisis hit Sweden with full force. The members of the Executive Board were divided on the issue, with three for (including me) and three against and Stefan Ingves had to use his deciding vote to push the decision through. I usually say that with the information we had at the time I would have made the same decision again.

Once the testing system is fully operational and we are convinced of its efficiency, these restrictions will be gradually lifted. We believe that at this juncture it is our responsibility to protect our investors. We might as well move forward some of the law regulations — those making customers’ qualification tests mandatory — from April 2022 to at least 1 October 2021. At the time, we went along with market players and provided for a fairly comfortable and soft transition period in the law. We had an extensive discussion with Federation Council members. It stands to reason however that the major shift in the situation calls on us to take meaningful action to protect consumer rights. I admit that financial institutions themselves are unlikely to welcome this proposal, and their feedback will be negative. This is where we count on you to help, just as we have always counted on your support of our initiatives related to efficient consumer right protection in the financial market. The key reason for this is the nature of financial institutions: they are financial intermediaries which should operate in the interest of businesses and consumers, just like the Speaker said. We therefore believe that now is the time for prompt and serious discussion of this matter to make a decision. I am now handing over the floor to Sergey Shvetsov, who will enlarge on these and other initiatives I have presented.
Rather, the New York Fed's actions have consistently been directed at securing its objectives as lender. As any lender in our position would do, the New York Fed has put into place a loan agreement that contains covenants designed to help ensure ultimate repayment of the loan – but these creditor's rights do not create an ability to manage AIG. Responsibility for AIG's day-to-day affairs continues to rest with AIG's chief executive officer, Edward Liddy, under the oversight of AIG's board of directors. Mr. Liddy, who has only become involved with AIG in a public-spirited attempt to resolve its troubled affairs, has  BIS Review 35/2009  1  made strides in dealing with AIG's opaque corporate structure, lack of centralized controls and complex risk exposures, but much remains to be done. In light of the inherent conflicts that would arise from either the U.S. government or the Federal Reserve exerting ownership control over the world's largest insurer, the Federal Reserve, with the support of the Treasury Department, directed in the loan agreement that an approximately 77.9 percent equity interest in AIG be issued to an independent trust established for the sole benefit of the United States Treasury. The trust, which now holds that controlling equity interest, is overseen by three independent trustees who are of the highest integrity and who have considerable experience leading major companies.

Notably, we have recently agreed in principle to accept preferred interests in two of AIG's large foreign life insurance subsidiaries, AIA and ALICO, in order to make repayment of our loan less dependent on forced divestitures into a depressed acquisition market. Although it will take time, we still expect that the proceeds from asset sales should enable AIG to repay the New York Fed in full. In all that we have done, we have been motivated by two goals: to preserve the stability of the U.S. economy and to protect the U.S. taxpayer. The threat of a major systemic risk event has been averted by honoring all of AIG's contractual obligations around the globe – from insurance policy obligations owed to individuals, municipalities and businesses across the U.S., to the posting of collateral under credit default swap arrangements with the full range of counterparties recently disclosed. As unattractive as certain aspects of this treatment may be, these negative aspects have followed unavoidably from the decision to avert a systemically destructive bankruptcy. I look forward to your questions today and, in the longer term, to working with you and your staffs on the broader public policy questions – such as formulation of a resolution regime for institutions like AIG and consideration of the appropriate supervisory structure for OTC derivatives – that are posed by the events at AIG. Thank you. BIS Review 35/2009  3
One of the first tasks of the Steering Group is to develop a local green taxonomy that would incorporate the harmonisation work currently being done by the Mainland and EU authorities and take into account local circumstances. The aim is simple: there should only be one local taxonomy for use by all financial regulators in Hong Kong. 26. At the global level, the HKMA is an active member of international and regional networks devoted to addressing climate risk. Through our participation in these networks we are able to contribute to international efforts and to draw on some of the best expertise in these fields. We will do our best to align practices in Hong Kong with international developments. 27. When considering international experience, we have to accept that there is no one-size-fitsall solution. This is something we are keenly aware of as we develop our regulatory approach on green and sustainable banking. While we base this approach on international best practices, we also take into account local conditions, recognising that banks in Hong Kong come in many shapes and sizes, and that their progress in green and sustainable banking varies considerably. We will be flexible, proportionate and inclusive in developing and applying regulatory requirements. It will take time for the less prepared banks to build capacity to address climate-related issues; we are ready to work with them to help them catch up. At the same time, the fast-movers or market leaders are encouraged to make the most of the work they have already done.

If the issuance of private electronic money grows to a significant level in the real economy, and if much of that growth is provided by nonbank issuers of electronic money, there could be a similar request for nonbank issuers to provide information about the volume of their issuance and their outstanding electronic money liabilities, to the extent these liabilities are not recorded on the books of a bank every time they are circulated in the general economy. A Bank Supervisor’s View From this perspective, combining banking and the Internet offers both great opportunity and great potential risk. First, the good news -- it is primarily cost-related. It has been reported by several banking studies that the cost of a typical transaction at a bank branch is now over $ the cost of an ATM transaction is approximately $ The cost of an Internet transaction, however, has been estimated at about a penny. I do not vouch for this statistic, but the difference is substantial. Such figures make a compelling argument for banks to get on the Internet sooner rather than later, and to move as many of their customers on to electronic or Internet banking as soon as they possibly can. Indeed, some banks offer low-fee accounts where the customer is not expected to enter an office physically -- mail, phone, and ATM are sufficient. As stated by Board of Governors Chairman Alan Greenspan: “it is useful...to begin by reminding ourselves just why there is bank supervision and regulation.
The US Federal Reserve estimates that the rate of increase in industrial production has been held back a couple of percentage points in August and September overall. However, preliminary National Accounts data for the third quarter point to continued firm growth. Households and companies have continued to boost their consumption and investment at a fairly stable rate. The purchasing managers index for both the manufacturing sector and the services sectors in October indicate relatively firm developments at the beginning of the fourth quarter as well. Elsewhere in the world, too, there have been a number of positive economic signals. In October, the purchasing managers index rose in several European countries and in Japan. The German IFO index also showed a positive trend in October. In the UK, however, the recent economic slowdown has continued, as shown, among other things, by preliminary GDP data for the third quarter. Inflation abroad has turned out somewhat higher recently than we anticipated in the latest Inflation Report. In the US, inflation rose sharply in September, to almost five per cent. Excluding energy prices, though, it is still at roughly two per cent. The US Federal Reserve again raised the federal funds rate at its latest monetary policy meeting, bringing it up to 4 per cent, i.e. 3 percentage points higher than when the monetary tightening cycle was begun in June 2004. In the euro area and some other countries, too, inflation has picked up more than anticipated recently.

But in typical Singapore fashion, we kept our cool to battle the crises and, at the same time, strategise to meet the larger challenges posed by globalisation. We formed the Economic Review Committee (ERC). The ERC came up with a comprehensive strategy to restructure, upgrade and transform our economy. The government accepted most of the ERC’s recommendations. We have since cut corporate and personal income taxes, reduced business costs, made wages more flexible, restructured the manufacturing sector, invested more in R & D (Research and Development) and revamped our education system. Our economy is now stronger and more broad-based than ever before. In 2006, our GDP was $ billion, 55% bigger than in 1998. Annual growth rate over the past 3 years averaged 8%, double the figure for the period between 1997 and 2002. This year, jobs are chasing after people. Two weeks ago, I attended the Gala Dinner for Merrill Lynch’s inaugural “Pan Asia Rising Stars Conference”. Several foreign bankers and business executives I met – some had not visited Singapore for many years and a few were here for the first time – told me that they were surprised and excited by the “buzz” in Singapore. It is not just the business buzz of the financial industry, the Integrated Resorts, the sizzling property market, and so on. It is also the glitz of our nightlife and our arts, culture and restaurant scene. How have we managed this quick and dramatic rebound?