samchain/econo-pairs-v1 huggingface dataset:
Putting on a new lens: Exploiting mainstream innovations with a financial inclusion focus Today, financial innovations have penetrated, and continue to permeate almost every aspect of financial activity. This has been driven by faster computing speed, lower cost of storage and faster problem-solving capabilities. BIS central bankers’ speeches  1  Technology is being used by financial institutions to improve operations – from improving customer experience to constructing better models to manage risks more efficiently and effectively. In many cases, strategic partnerships with fintech companies have been established to achieve similar outcomes. The advent of robo-advisers and algorithmic underwriting are some of the examples. These developments have largely evolved within the mainstream customer segments and have proven to be effective. Clearly, opportunities exist to leverage on capabilities that are already in place to create specific applications for financial inclusion. With proven application, the prospects for achieving greater scalability, faster time to market and increased take-up are correspondingly greater. For years, financial institutions have invested heavily in technology that has helped improve the collection and mining of financial and non-financial data to gain richer insights into customer preferences and behaviours. These same capabilities create immediate opportunities to identify specific barriers to financial inclusion for different target groups whose needs are shaped by very different priorities, experiences, values and norms. For example, cultural biases can be an important factor that is not fully appreciated and understood as a factor that limits higher levels of financial inclusion among women.

Figure 12 The effect of an amortisation requirement on household indebtedness according to current proposals Per cent 220  220 Scenario without measures Amortisation requirements  210  210  200  200  190  190  180  180  170  170  160  160  150  150  140  140  130  130 05  10  15  20  25  Note. Broken red line shows an estimate of developments over the next 10 years without further measures. Shaded area indicates a feasible lower limit for when the risks are elevated in the economy. Broken yellow line shows an estimate of the effect of an amortisation requirement according to current proposals. Sources: Statistics Sweden and the Riksbank. A change to tax relief on mortgage interest could lead to a faster and more direct effect on household indebtedness, as it affects all borrowers. However, as a reduction in tax relief initially raises mortgage costs, it is likely that existing mortgage borrowers do not pay down their loans immediately. The effect on the total debt-to-income ratio therefore occurs gradually, even in the case of changes to tax relief. According to these calculations, it is only  19  A borrower with medium indebtedness in Sweden taking out a new mortgage, or increasing existing loans, only amortises at a rate which leads to the new loan being repaid in 56 years.
In Sweden’s case this means that we have really caught up since the beginning of the millennium when we used cards only half as much as these Nordic neighbours. 1 Cards are still used to a greater extent in Norway than in the other Nordic countries. All-in-all, this development means that the use of cards has now reached such a level throughout the Nordic region that a serious disruption that affects the entire card system, or large parts of the system, would have serious consequences for the ability of people to make  1  Speech by Lars Nyberg (2008): “Paying is expensive – are we using too much cash?”. BIS Review 7/2010  1  payments. Cash could no longer replace cards if the card systems were to break down. If card payments do not work, then the entire payment system will not work satisfactorily either. The Riksbank’s responsibility for a safe and efficient payment system therefore means that we also have an interest in ensuring that card payments work safely and efficiently. To get more up-to-date information and to learn more about how the Swedes pay, the Riksbank conducted a survey towards the end of last year. The aim of the survey was to determine how people choose between different means of payment and the factors that affect these choices. As similar surveys were conducted in 2006, we also wanted to see whether the payment patterns had changed over the three years between the surveys.

Let me stress a few recent and important steps forward in Europe and in France. The Eurosystem is now incorporating climate change into the ECB's monetary policy operations, as announced by President Christine Lagarde in early July. When it comes to its non-monetary policy portfolios, after achieving the 2°C objective, the Banque de France will now align them with the 1.5°C objective, starting with European equities by end-2023, and completely by end-2025. As supervisors, the French ACPR conducted the first pilot stress tests dedicated to climate risks in 2021, followed by the ECB in 2022. Many jurisdictions (36 at this stage, including Japan) have followed, or are following the same road. The release last summer of six updated NGFS(v) macrofinancial scenarios will allow for enhanced assessments. This network, based in the Banque de France with an Asian chair, Ravi Menon of MAS, now has more than 120 members. We are very happy to count the Bank of Japan and the Japanese FSA among them. C. Raising stakes for standard setting and supervisory requirements Appropriate disclosure is obviously of the essence to foster sound and trustworthy green finance. Europe has been a pioneer in drafting standards. Since then, the newly born ISSB(vi) has published two draft standards on general disclosure requirements and climate-related disclosures, and the US SEC(vii) has published a proposal on climaterelated requirements, which would – if adopted – gradually come into force between 2024 and 2026. These initiatives are obviously welcome: climate change is a global topic.
An additional concern is that many of the transactions suffering from this risk may have been entered into for portfolio management reasons (such as the pension fund example) or regulatory capital relief and other “window dressing” purposes rather than genuinely to protect against default. Net exposure numbers quoted on earnings calls, or stress losses reported to regulators, can all be made to look more palatable if the insurance is apparently in place, while the true risks in the event of default may not have changed much. These issues raise general questions for market structure with tradeoffs that are far from trivial. Is it beneficial for, say, banks to lay off sovereign risk with other banks and other leveraged financial institutions such as hedge funds, or does the ensuing web of contingent exposures across leveraged institutions increase the systemic risks? It seems that many of these arrangements increase diversification in the case of small and medium size stress scenarios, but may actually exacerbate the systemic implications in the case of very large shocks7. These arrangements also highlight the delicacy of the appropriate regulatory structure. In many instances, subject to sufficient diversification, these tail risks might be better borne by so-called “real money” investors, i.e. insurance companies, pension funds and traditional long-only bond and equity funds, as these investor categories operate with little or no leverage.

The key difference from SIVs was that the underlying assets were largely purchased from third-parties and not necessarily in securities form. 6  BIS central bankers’ speeches  We now want to turn to an example of a structure that did at least partially survive the crisis: UK RMBS master trusts. These are versatile structures that allow an issuer to transform a portfolio of assets into a very different investment product. In principle, the master trust purchases mortgages from the bank and issues tailored bullet-maturity securities. The assets and the liabilities can be very different, e.g. the demand for the securities may be stronger in US dollars than in sterling, so an FX swap converts the cash-flows into dollars. Or most of the mortgages may be floating rate, whereas investor demand is stronger for fixed-rate product, and an interest rate swap(s) converts the cash flows accordingly. Mortgages typically pay down somewhat randomly and relatively quickly, whereas investors prefer straight-bullet maturities. The master trust can accommodate this by allowing on-going reinvestments of the pay downs and conversely allowing the trust to put assets back to the bank if the cash-flows are not sufficient to make a particular principal repayment. The downside is clearly that the on-going linkages between the issuer and the trust remain very strong, and it is thus hard to identify where economic risks ultimately reside. RMBS master trust securitisations are designed to be called on their bullet maturity date and that is how they were priced and traded.
The reason is that the aggregate and per-counterparty caps were sufficiently high that market participants were confident that they would not bind, and also because we conducted the term operations without any interest rate premium relative to the overnight operations. At prior quarter-ends, term RRPs were typically offered with maximum bid rates a few basis points above the ON RRP rate. The year-end experience suggests that market participants generally prefer overnight RRPs to term RRPs if they offer the same rate, and that, if desired, adequate control over money market rates can be attained without term RRPs, as long as there is adequate ON RRP capacity. Finally, I’ll offer a few observations on a daily repo operation I haven’t yet mentioned. As a long-standing service to foreign central banks, foreign governments, and international official institutions, the New York Fed runs an overnight investment facility known as the foreign repo pool.45 In this operation, at the end of each business day, account holders’ cash balances are invested in an overnight reverse repo secured by the Federal Reserve’s securities holdings.46 The foreign pool is an autonomous factor affecting reserves and, as a result, in the pre-crisis operating framework, the Desk would have to essentially sterilize variations in the pool's size with repo operations.

42  A small number of financial market commentators had opined that use of the tri-party repo infrastructure for the ON RRP facility would make it harder for market participants to borrow the Federal Reserve’s Treasuries in securities lending to facilitate settlement, and therefore result in less liquid Treasury markets. However, use of the Federal Reserve’s securities lending program has been stable since liftoff, suggesting that the design of the ON RRP facility has thus far not contributed to any increase in the scarcity of specific Treasury collateral. 43  If the total amount of propositions received is less than or equal to the amount of available securities, awards are made at the specified offering rate to all counterparties that submit propositions. In the event that the value of propositions received exceeds the ON RRP’s capacity, awards are made at the rate at which the capacity was achieved (the stop-out rate), with all propositions below this rate awarded in full and all propositions equal to this rate awarded on a pro rata basis. The stop-out rate, which can be any value at or below the specified offering rate (including a negative rate), is determined by evaluating all propositions in ascending order by submitted rate up to the point at which the total quantity of propositions equals the overall size limit. The ON RRP FAQs provide more information on the auction mechanism.
But the large volume of other Solvency II work is certainly not being ignored. Part of the purpose of this conference is to draw attention to the requirements in relation to the standard formula, other approvals and reporting requirements; which affect both internal model and standard formula firms. The title of today’s conference is “countdown to implementation” and in the sessions that follow we will: •  Set out, as far as policy certainty allows, some of the key requirements and deadlines for firms between now and 1/1/16;  •  Provide you with the information you need to be ready for transposition and implementation;  •  And provide an opportunity for you to ask questions and discuss key topics with representatives from the Bank. On the internal model approval process (IMAP), good progress is now being made by some firms on their models; however many of you are behind and timelines look very tight for remedial action. In order for the PRA to review models, we must receive all necessary documentation and evidence of compliance in good time and produced to a sufficient standard. The deadline for pre-application submissions is March 2015; although firms should be striving to submit as soon as they are ready to give themselves more time to respond to PRA feedback on their models.

Solvency II is a one-time opportunity for us to embed policyholder protection and put in place the foundations required for the UK insurance industry to remain profitable, resilient and a key part of the UK’s economy. BIS central bankers’ speeches  3
Economic distortion and instability – Criminal money responds not to economic or financial signals but to opportunities for further crime and the threat of being caught. Therefore money launderers will not generally invest funds in activities that are economically beneficial to the country. iv. Loss of revenue – Money laundering makes governments’ tax collection efforts difficult and diminishes tax revenues. v.  Reputation risk – In today’s global economy, nations can not afford to have their reputations eroded by association with money laundering. Legitimate businesses will not want to deal with a bank or financial institution suspected to handle criminal funds. vi. Undermines the financial sector – The unchecked use of the financial system by criminal organisations risks undermining individual institutions and ultimately entire financial systems. When banks or financial institutions become part of a criminal network, they lay themselves open to loss from fraud if they do not screen out undesirable customers or if their own officers are compromised. In the face of the above economic, financial and political threats, the international financial community has recognised that public confidence in such institutions, and hence their stability, could be undermined if they became associated, even inadvertently, with criminals. In order to prevent the escalation of money laundering, the following measures have been undertaken: i. The Government has enacted the Prohibition and Prevention of Money Laundering (PPML) Act 2001 which has criminalized money laundering and provides for the forfeiture of property by offenders;  ii.

Emerging market economies are very vulnerable to the reputational risk of non-compliance. Therefore we must take one step at a time. The infrastructure for compliance - legal, accounting and market - must be established and is an essential pre-requisite which underlies the success of these initiatives. BIS Review 84/2005  1  The implications on the several sub sectors of our economy from Basle II will have to be examined carefully with regard to access to finance and the pricing of risk. Uneven playing fields may arise as a result of the internationally active foreign banks adopting more advanced approaches, thereby improving their competitiveness over their local counterparts. Will the models developed by the foreign banks be relevant for the risks in our markets? These are the regulatory challenges which have to be addressed by the regulators. In meeting these challenges, the local banks must make best use of the existing resources to minimize the cost of full compliance. They can build on their existing data bases and leverage on the default data available in institutions such as the Credit Information Bureau. They can benefit from data pooling within the industry. All these resources must be harnessed. It is important that the banks do not lose sight of the long term benefits of Basle II of better capital allocation and consequently, better pricing, because they are embroiled in the details necessary to meet the deadline. The ultimate objective is financial stability.
In addition, through the supervisory process, we will continue to look for weaknesses in our supervised institutions that expose them to potential fraud. While the Bank of Thailand is here to support institutions in this manner, please keep in mind that the primary responsibility for fraud prevention remains with the board of directors and management. I would be remiss in not addressing the upcoming launch of the revised Basel Capital Accord. Basel II, as it is more commonly known, establishes expectations for financial institutions’ risk management processes. In addition to requiring an explicit calculation of capital requirements for credit and operational risk, Basel II requires institutions to have robust consolidated risk management processes. Institutions are expected to ensure that they have adequate capital for all other risks as well. Through the supervisory process, regulators may also require additional capital for institutions whose risk management processes are not fully compliant. Institutions can best address the expectations of Basel II by maintaining or establishing sound risk management processes. In Thailand, the implementation of Basel II will start at the end of this year, and the preparation for its implementation is progressing on schedule. As our institutions complete  2  BIS Review 52/2008  the implementation of Basel II, I firmly believe that we will see a commensurate improvement in the quality of risk management among our banks, particularly in the operational risk area.

Miguel Fernández Ordóñez: Weiß und Rot – the cycle, central bankers and supervisors Address by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the “World Currency Regime – to Float or not to Float” session, 18th Frankfurt European Banking Congress, Frankfurt am Main, 20 November 2008. *  *  *  Let me begin by thanking the organisers of this edition of the Annual European Banking Congress for the opportunity to address such a distinguished audience on the subject of the cycle, central bankers and supervisors. I will be talking about “Weiβ und Rot” and not exactly about wines. *** Numerous factors have played an important role in triggering the current crisis: the subprime mortgages, the highly complex securitisation structures, the originate-to-distribute model, the over-reliance on rating agencies, risk valuation models that few could understand, etc. Many of these mistakes have been identified over the past 15 months by the authorities and by financial institutions themselves. Some regulatory reforms are already under way in the EU and overseas, while the financial entities themselves are reviewing their risk management. We can be sure that the next crisis will not be like the current one. But it is naive to believe there will be no further expansions and slowdowns. For 5,000 years now, since the Pharaoh asked Joseph about the meaning of a dream in which he saw seven fat and seven lean cows, we have known that the economy is unequivocally cyclical.
Available at: http://www.bankofengland.co.uk/publications/speeches/2010/speech455.pdf Kiyotaki, N and Moore, J (1997), “Credit Cycles”, Journal of Political Economy 105(2). Kotlikoff, L J (2010), Jimmy Stewart is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking, John Wiley and Sons. 34  BIS Review 168/2010  Lopez-Salido, D. and Nelson, E. (2010), “Postwar Financial Crises and Economic Recoveries in the United States”, mimeo. Mele, A (2007), “Asymmetric stock market volatility and the cyclical behaviour of expected returns”, Journal of Financial Economics, 446–478. Minsky, H P (1986), Stabilizing an Unstable Economy, Yale University Press. Morris, S and Shin, H S (2000), “Rethinking Multiple Equilibria in Macroeconomic Modelling”, NBER Macroeconomics Annual, Vol. 15, 139–161. Morris, S and Shin, H S (2002), “Social Value of Public Information”, American Economic Review 92(5), pp 1521–1534. Morris, S, and Shin, H S (2003), “Global Games: Theory and Applications”, Advances in Economics and Econometrics (Proceedings of the Eighth World Congress of the Econometric Society), Cambridge University Press. Perez-Quiros, G and Timmerman, A (2001), “Business cycle asymmetries in stock returns: Evidence from higher order moments and conditional densities”, Journal of Econometrics, 259–306. Rajan, R G (1994), “Why Bank Credit Policies Fluctuate: A Theory and Some Evidence”, Quarterly Journal of Economics 109(2), pp 399–441. Reinhart, C M and Rogoff, K S (2009), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press. Rochet, J C, and Vives, X (2004), “Coordination Failures and The Lender of Last Resort: Was Bagehot Right After All?”, Journal of the European Economic Association, Vol 2. No. 6.

A risky policy dominates a tight policy, even when no other banks set risky policies ( ), when where  A tight policy dominates a risky policy, even when other banks set risky policies ( when  ),  where  In the intermediate range , there are multiple equilibria, with risky (tight) credit policies optimal when others adopt risky (tight) policies too. 7  is defined analogously to  BIS Review 168/2010  , but is conditioned on tight rather than risky policies. 5  2.2  The model in a “global game”  Next, we apply the technology of Morris and Shin (2003) to define a unique equilibrium from this game. Assume that banks observe fundamentals with some small amount of noise, with bank receiving signal  where the noise terms are distributed in the population with continuous density with support on the real line. Our model satisfies the conditions set out in Morris and Shin (2003) for there to exist a unique equilibrium in this game. In particular, each bank’s strategy when in receipt of a low signal falling short conditional on its signal satisfies when in receipt of a high signal of some critical level , and adopting strategy exceeding some critical level . The condition determining this threshold is (see Appendix)  (1) Condition (1) allows us to perform comparative statics on the unique coordination equilibrium.