samchain/econo-pairs-v1 huggingface dataset:
Monetary  4  BIS central bankers’ speeches  An unemployment rate of 7% is not our intended destination. Nor even is it necessarily the first turning on the way to our final destination. Rather, it is a conveniently located layby at which we can pull over, study our economic map in detail, and work out whether we are anywhere close to our first turning. Why unemployment? There are two other challenges facing the UK economy and the MPC which the Committee’s guidance also helps to address: the uncertainty as to why productivity has been so weak and the extent it will rebound as demand increases; and the need to clarify how monetary policy is likely to respond as the economy recovers. Defining our guidance in terms of a threshold for unemployment is helpful in both cases. Giving supply a chance When considering the appropriate trade-off between bringing inflation back to target quickly and supporting the recovery, by far and away the biggest judgement facing the Committee is the extent to which productivity is likely to recover as demand increases. If you speak to some economists they are quite optimistic and suggest that productivity growth is likely to rebound relatively robustly as growth picks up. They note that productivity is strongly pro-cyclical. They also point to evidence that some companies have retained employees in anticipation of the recovery, while others have had to use resources more intensely to generate the same level of orders given the weakness of demand.3 But other economists are less upbeat.

We collaborated successfully in several areas over the years, particularly in promoting the greater use of RMB in the region. PBoC’s decision in 2013, under Dr Zhou’s leadership, to appoint the Industrial and Commercial Bank of China as Singapore’s RMB clearing bank was a significant milestone and spurred the growth of Singapore as a key RMB offshore centre. In 2016, MAS announced that RMB assets would be included as part of our Official Foreign Reserves, three years ahead of the inclusion of Chinese bonds in key global bond indices. At the personal level, I have had the pleasure and privilege to interact with Xiaochuan at many international and bilateral meetings. I have always found his views insightful. At our bi-monthly meetings of central bank governors in Basel at the Bank for International Settlements, I would sometimes ask Xiaochuan some rather inconvenient questions – about risks related to shadow banking or industrial overcapacity in China. Xiaochuan would always answer these questions, as well as those from other governors, with a disarming candour and clarity, never avoiding the hard issues. This not only helped to build trust among his counterparts in the international community but also endeared Xiaochuan to many of us as someone we could count on for insights into the complexities of the Chinese economy and financial system. Today, Dr Zhou will speak on “The Rise of Technology in Finance – Opportunities and Challenges for Central Banking”. Many of us are familiar with Dr Zhou’s views on financial and economic reforms.
This means that monetary policy bears the primary responsibility for price stability, whereas fiscal policy is to a greater extent oriented towards long-term stability in government finances. In Norway, the Government Petroleum Fund acts as a buffer against fluctuations in petroleum revenues. This makes the Norwegian economy more robust and in the short term less dependent on oil, at least as long as the government budget is running a substantial surplus. The Government Petroleum Fund is Norway’s most important shock absorber against shifts in the terms of trade. This explains why we have had far greater exchange rate stability than New Zealand or Australia. For the past 15 years, cyclical trends in Norway have been desynchronised in relation to other European countries. Because of the stagnation in the 1990s, inflation has been particularly low in Europe in recent years. Norway, on the other hand, experienced a long period of economic expansion in the 1990s. Since 1997, price inflation in Norway has been higher than in the euro area countries. This is reflected in the higher level of interest rates in Norway compared with the euro area. Even if instruments are oriented with a view to stability in the krone exchange rate against the euro, cyclical differences will result in inflation differentials between Norway and euro area countries. This year we have seen a tendency for the krone exchange rate against the euro to be strong at times.

Swiss Re reported that in Asia3: (a) more than half of non-buyers dropped out of insurance purchase after conducting initial research or after making their first enquiry; and (b) another one-third dropped out after receiving specific pricing and product details. (4) There is also the view that insurance processes and services, say medical underwriting and claims processing, are non-transparent, onerous and time-consuming. FinTech and InsurTech This brings me to the potential for FinTech, or more specifically InsurTech, to help reduce the protection gap. Technology solutions offer exciting possibilities to alleviate many pain-points associated with the understanding, buying and servicing of life insurance products. To be sure, the insurance sector has always employed technology tools and is a large user of data. This is also part of the problem. A recent McKinsey report stated that 90% of insurers identified complex legacy systems as the key barrier to digitisation. It is only in the more recent one to two years that InsurTech has been recognised as a change driver. Let me cite a few examples of transformations. The move to automation can potentially replace a number of repetitive human processes in the insurance sector. Robotic process automation (or RPA) will enable quick, automatic and 24/7 gathering and processing of data. There will be other technologies that both collude and collide with how things are currently done. Consider the pricing of life insurance premiums.
This is still a somewhat high number, given the country’s population, and above all, the similarity of products banks are offering. Further mergers and acquisitions may have a positive impact on cost management, which will in turn make it easier for economies of scale to be achieved. On the other hand, domestic mergers and acquisitions are unlikely to involve a cutback in foreign ownership. Enhanced cooperation amongst regulators and supervisors from home and host supervisors is thus essential to the continuing stability of the system. BIS central bankers’ speeches  1  Yet there exists no precise definition what international regulatory cooperation is. Most of the time, it brings to mind the system of committees and working groups meeting in Basel, at the Bank for International Settlements. The international regulations which are the outcome of the Basel system, comprise among other documents, Basel III, the bold new guidelines at the core of which is the concept of risk-weight; some assets are riskier than others and this should be reflected in the percentage of capital that should be held against them. For credit risk, this riskiness is taken to depend on the obligor, i.e. it is taken that savers and investors are almost inherently more averse to obligations of some entities than to obligations of other entities. This approach is not new, but an enhancement of the existing Basel I and Basel II infrastructure.

Most of the criticism directed at Basel III is that higher capital ratios will have an adverse impact on lending because of the high opportunity cost of holding capital. In the economies of emerging Europe, including South East Europe, this criticism is heard less often, given that foreign ownership implies that decisions on capital increases are made at the group or parent level. More generally, the proposition that an increase in capital leads to a reduction in lending is often not validated by the facts. The cost of bank equity, the compensation an investor requires for a bank, falls as the bank’s safety and soundness improve. As equity investors are last in the priority structure in case of a possible bankruptcy, higher capital allocation is likely to increase the confidence in the whole banking sector, which is also an aim of the Basel system. To conclude, the Basel III document is an important milestone in development of international financial regulation. It has both a regulatory and constitutive dimension: on the one hand, it operates as a further development requiring central banks and other regulators to behave in accordance with its principles in order to strengthen financial stability; on the other hand it establishes even firmer the Basel Committee on Bank Supervision as the pivot of international regulatory cooperation centred on the concept of risk-weight. But Basel III also invites the question of a perhaps different representation of entities taking part in its consultative phases.
Pros and cons of different institutional alternatives: banking supervision and macroprudential authority – inside or outside the central bank; 6. A historical perspective on the experience of becoming a modern central bank, a process undergone not only by the NBR. 1. Defining the objectives – the starting point in designing central bank governance It goes without saying that ground zero in building the central bank governance framework is clarifying the objectives it has to pursue. For quite a long time, at least in Europe, “price stability” enjoyed the position of overriding objective, but since the outbreak of the crisis it became obvious that the “inflation first” approach may turn counterproductive in an environment of financial instability. Therefore, financial stability concerns made their way up on central bankers’ agenda. Is that really a novelty? As the representative of an emerging economy central bank that never had the luxury of being concerned exclusively with price stability, I dare say it is not. Actually, central banking has always been about the preservation of, to quote Charles Goodhart, “the three aspects of stability”, namely price stability, (external) currency stability and financial stability. Moreover, the fact that these aspects of stability do condition each other was not discovered in the aftermath of the crisis – central bankers, maybe even more so emergingmarket central bankers, have long been keenly aware that failure to ensure one kind of stability is bound to jeopardise the achievement of the others.

On the other hand, price pressures could become more persistent if supply bottlenecks last longer or wages rise more than is currently anticipated. So far, there is no evidence of significant second-round effects through wages and inflation expectations in the euro area remain anchored, but we continue to monitor risks to the inflation outlook carefully. Monetary policy The ECB’s Governing Council concluded its review of our monetary policy strategy in July. As part of the review, a symmetric 2% inflation target over the medium term was adopted. Our new strategy also recognises the importance of taking into account the effective lower bound on nominal interest rates, which can require especially forceful or persistent monetary policy 1/4  BIS central bankers' speeches  measures. In support of this inflation target and in line with our monetary policy strategy, the Governing Council revised its forward guidance on the key ECB interest rates. We expect them to remain at their present or lower levels until we see inflation reaching 2% well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term. Preserving favourable financing conditions over the pandemic period is essential to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.
Introducing – or rather re-introducing – financial considerations to the analysis of macroeconomic fluctuations would also be returning the study of the business cycle to its historical roots. This task is already well under way in academia and I suspect the field of macroeconomics will look very different in a decade or so. We are, though, still in the foothills. But to give a broad-brush flavour of how financial intermediaries might affect things, we can look to the graphical extension of the New Keynesian model offered by Woodford (2010). The left-hand panel of Chart 6 shows the demand for funds from ultimate borrowers, LB, together with the total supply of loanable funds from savers, LS. The former is a decreasing function of the cost of borrowing, RB, while the latter is an increasing function of the return on savings, R. For simplicity, I shall take this to be the return on deposits and the same as the central bank’s policy rate. The marginal source of funds to intermediaries, however, is likely to be in the wholesale markets and, if unsecured, these will need to offer a higher return to compensate for the associated default risk. 4  BIS central bankers’ speeches  In the standard model with costless financial intermediation, the loanable funds market clears at A and the borrowing and saving rates are equal.

In 2016, Shariah-compliant trade finance accounted for 24.1% of total trade finance provided by the Malaysian banking sector. However, our Islamic finance industry only financed about 5% of total exports in Malaysia, again, signifying an untapped growth area with large potential. Increasing bank financing for SMEs would also encourage more market based solutions to meet the funding needs of the halal sector participants, which are now largely reliant on government initiatives. There are however a number of challenges that may impede trade finance facilitation by Islamic finance players. I would like to highlight two. First is – “process inefficiencies” – that can contribute to higher operational risks such as fraud. This can be mitigated through use of technology that reduces reliance on traditionally document-intensive and multi-tiered manual processes. In Malaysia, I am happy to note that six Islamic banks have embarked on digitalisation of trade finance processes – through an integrated web-based platform that offers trade finance and working capital management solutions. The second challenge is, – the need to improve connectivity between the Islamic finance industry and the international trade community – to facilitate effective intermediation of trade finance needs. Again, the use of technology can ease the application and submission of trade-related information and documents which can expedite the whole process. If these challenges are not addressed, industry players are at risk of becoming irrelevant in the trade finance space.
This forms a natural part of our work in the financial stability field, which also encompasses other countries where the Swedish banks have a significant presence. We analyse statistics and other information from these countries and we discuss developments with management and employees at  2  BIS Review 11/2010  their central banks, governments and financial supervisory authorities. We also follow the reports on these countries from other sources such as the IMF, the EU/ECB and market data. Representatives of the Riksbank have accompanied the IMF on several of their visits to the Baltic countries and have taken part in the discussions with governments and public authorities there. The purpose of this participation, which has been at the invitation of the countries concerned and of the IMF on each individual occasion, has been to acquire up-todate knowledge of the situation in the country and of the negotiations, so that the Riksbank could, if necessary, provide financial support at very short notice. The Riksbank’s Financial Stability Report, which is published twice a year, sounded a warning as early as 2005 regarding economic developments in the Baltic region and the tone has gradually sharpened in the reports published since then. The Financial Stability Report also publishes the results of stress tests, in which the banks’ resilience is tested in the light of improbable but nevertheless possible scenarios. Examples of some of the scenarios tested include the effects on the banks of various crisis situations in the Baltic region.

Swedish banks’ commitments in the Baltic The Swedish banks’ total lending to the Baltic countries currently amounts to around SEK 400 billion. There are mainly two Swedish banks that have had a large presence in this region; SEB and Swedbank. These banks, their subsidiaries and branches dominate the markets in the Baltic and comprise 80 per cent of the Estonian market, 55 per cent of the Lithuanian market and 60 per cent of the Latvian market. Around 16 per cent of Swedbank’s total lending is to the Baltic countries. The corresponding figure for SEB is 13 per cent and the figure for Nordea is 3 per cent. Swedbank’s loan losses for the three first quarters of 2009 total SEK 19 billion, and 60 per cent of this stems from the Baltic countries. SEB’s loan losses total SEK 9 billion, with 75 per cent stemming from the Baltic region. According to the Riksbank’s own estimates, the three banks’ total loan losses in the Baltic region will be SEK 27 billion for the whole year 2009, and roughly the same in 2010, with around 80 per cent, or SEK 50 billion, falling to the lot of Swedbank and SEB. This figure of SEK 50 billion should be regarded in the light of the two bank groups’ total primary capital, which is SEK 185 billion, or the capital held in their Baltic subsidiaries which amounts to SEK 27 billion. It will be necessary for the parent banks to continue transferring capital to their subsidiaries to maintain their creditworthiness.
The FSB report10 was released in July and Governor Powell11 has recently described the Federal Reserve’s plans to support the two primary components of the reform of LIBOR. First, we are considering, in cooperation with the LIBOR administrator and other members of the official sector, ways to broaden the definition of LIBOR to more adequately represent current patterns of bank funding and to anchor it more firmly in observable transactions. Second, we believe it is important for market participants to have access to a range of appropriately created and governed reference rates that best suit their particular business needs. For example, some activities such as interest rate derivatives might be better served with a risk-free or near risk-free reference rate, rather than one that embeds a bank credit risk component. I would like to emphasize three points in support of the FSB recommendations and our own efforts. First, the FSB recommendations make clear that there is not one single path for all jurisdictions to achieve the common objective of more robust and resilient reference rates. Rather, each jurisdiction must take into account its own specific institutional, legal and market practices and arrive at its own best solution. In the U.S., I believe it is important to identify alternative reference rates that are grounded in a strong governance framework as laid out in the IOSCO principles and that are supported by market transactions.

The second view is to “lean–against–the–wind”, i.e. that as price stability may not be sufficient for financial stability, central banks should lean against the emergence of financial imbalances by tightening the monetary policy stance over and above the level necessary to bring inflation back to target over a policy horizon that is generally understood to be around two years. The third view is that “financial stability is price stability”. Proponents of this view advocate a more radical change in the objective of monetary policy, arguing that financial stability and price stability are so intertwined that one cannot distinguish between the two.3 Under this view, both standard and non-standard monetary policies are in the first place attempts at stabilizing the financial system, addressing malfunctioning financial markets and smoothing the monetary transmission process. While all these viewpoints recognise the important interplay between financial stability and monetary policy in pursuit of price stability, their relevance ultimately depends on (i) the weight to be attached to the “risk-taking” channel of monetary policy, (ii) the strength of the macroprudential framework and (iii) the policy strategy of the monetary authority, especially as regards its policy horizon. The risk-taking channel Monetary policy contributes to financial stability by smoothing business cycles and anchoring inflation expectations. Monetary policy works through its effects on intertemporal substitution and risk appetite. By lowering risk-free rates, monetary policy increases the attractiveness of investments projects which would not have been profitable under tighter financing conditions.
Within the industry, revenues and growth must be driven by strong value propositions to your customers and not by sheer aggressive recruitment and sales tactics. More fundamentally, an insurance company’s long-term success must be built upon a strong risk culture and good corporate governance. An emphasis on ethical behaviour must permeate dayto-day practices. Boards and Management should set the appropriate tone from the top, and demonstrate a collective determination to walk that talk. Recognition and reward systems should match the espoused values of the firm. Conclusion Let me conclude. The insurance sector will not be immune to the innovations and disruptions around us. At the World Economic Forum, present times have been described as the Fourth Industrial Revolution. This will bring both opportunities and challenges. I have described some of these in my remarks. I know that all your firms are putting in place IT and business strategies to ride the technology wave including those aimed at up-skilling your people. In progressing, we must be reminded that insurance is a social good and not a mere financial or economic activity. Apart from the imperative for doing well, it is important for the industry to be guided by a moral compass pointing firmly to doing right and doing good. May I wish one and all a belated Happy New Year of the Dog.

Mr. Carse speaks on banking supervision in Hong Kong and the lessons learned from the financial crisis in Asia Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the Asian Investment Conference “Asia: Meeting the Challenge” held in Hong Kong on 27/3/98. 1. I am pleased to be here this morning to speak to you on the topic of the supervisory lessons which Hong Kong can learn from the region and specifically from the crisis which has engulfed Asia since July of last year. This is a drama that is still being played out and we have not yet reached the final act. But I do not think that it is too early to make some kind of judgment about what went wrong and the lessons that can be drawn for the future. The Asian Crisis 2. I think that it is fair to say that the Asian crisis has surprised almost everyone by its speed and intensity and the ease with which it spread from country to country. Even those who were sceptical about the Asian miracle did not really expect anything like this. Of course, there were warning signs such as the current account deficits in a number of countries such as Thailand. But these could be regarded as the natural consequence of the heavy demand for investment in growing economies.