samchain/econo-pairs-v1 huggingface dataset:
First, the nature of the business for which it is primarily used: pensions provided by insurance companies. When an individual puts their life savings into an insurance company in return for a promise that the company will pay their pension right up until their death (potentially decades later), we need to be very confident that the company is going to be able to make good on that promise. The same is true when companies of all sorts pass their pension liabilities over to an insurance company, which is happening in very high volumes – for those pensioners too we need take care that the foundations of that insurer are robust. We estimate that over 8 million policyholders are served by this sector. [3] And second, the MA is a vital part of those foundations simply because it is so large – on the most recent figures, the total assets in MA portfolios amount to around £ billion, and the MA confers a capital benefit on insurers of around £ billion – up from around £ billion when the regime was introduced. To put that £ billion figure in context, the entire capital base of the life insurance industry is around £ billion, and for a number of insurers the MA by itself makes up the bulk of their capital. In short, millions of pensioners rely on their insurer for their livelihood, and in turn those insurers rely very heavily on the MA.

The word “expect” is doing more work in this sentence than you might have appreciated. In working out what returns firms should expect to receive from their assets, it is necessary to make assumptions about how many of those assets will go bad – for instance, how likely is it that a company in whose bonds an insurer has invested will go bust and stop paying interest? Or how likely is it that an insurer will get into trouble, be forced to sell its asset for less than it originally paid and recognise a loss? Due to these possibilities it would obviously be wrong to recognise all the returns on assets upfront, because some of them will not materialise – at the very least these need to be deducted. Under the MA this is done in a mechanical way, based on returns and losses experienced in the past. The problem with this approach is simply that expected losses based on averaging the past may or may not be a good guide to the future. [4] There are plenty of examples in finance and elsewhere where the past has not proved a good guide to the future – recent moves in some commodity markets is a topical example, and the performance of subprime US mortgages in the financial crisis is another which illustrates the serious costs that can be incurred when we get this wrong.
Second, I will assess how the negative interest rate as a policy instrument has been transmitted to different segments of the financial markets. Finally, I shall discuss the outlook for economic growth and inflation in Switzerland. Following my speech, my colleague Dewet Moser will take a closer look at the many operational aspects involved in the implementation of our monetary policy. Monetary policy environment: breaking new ground On 15 January, the SNB discontinued its minimum exchange rate of CHF 1.20 to the euro, and announced a further cut in the interest rate on sight deposits to –0.75%. These decisions were the response to international developments. Over the course of 2014, market participants began to expect that the US central bank, the Federal Reserve would start increasing its policy rates. Meanwhile, the ECB indicated that additional monetary stimulus would be required in the euro area. As a result, the euro weakened substantially against the US dollar. The euro/Swiss franc minimum exchange rate came under intense pressure, and by midJanuary 2015, it had become clear that it was no longer sustainable. Had the SNB not acted as it did in discontinuing the minimum exchange rate against the euro, it would have been forced to buy enormous amounts of foreign currency. The SNB’s balance sheet would have expanded rapidly, potentially to a size that would have severely impaired our ability to fulfil our constitutional mandate in the long term.

In the market for private sector bonds, interest rates fell as well, but not by as much as government bond yields, reflecting the greater substitution opportunities for corporate bond investors. While the introduction of the negative interest rate caused interest rates on the money and capital markets to decline, mortgage rates did not decrease to the same extent. Indeed, for long-term mortgages, interest rates are slightly higher than they were at the beginning of the year. This is because banks’ refinancing costs have not fallen to the same extent as money market interest rates. As a result, banks’ interest margins have come under pressure. 1 To partially offset this effect, banks have raised their mortgage interest rates. As yet, therefore, fears that the negative interest rate might contribute to stronger growth in mortgage lending have proved unfounded. 1  This affects the banks’ “liability margin”, which is the difference between the interest on maturity-matched alternative funding sources and the interest on deposits. BIS central bankers’ speeches  3  The Swiss economy in a difficult environment So far, I have spoken mainly about exchange rates and interest rates – that is, monetary conditions in the Swiss economy. I would now like to turn to the real economy. Switzerland is a relatively small open economy. 2 In general, this means that international developments matter a lot to Switzerland. However, during the global recession of 2009 and the sluggish recovery that followed, the Swiss economy proved to be surprisingly resilient.
The inadequacies of banks’ liquidity management became apparent when some markets for long-term debt securities (including ABS, ABS CDOs, etc.) experienced a sudden re-pricing, resulting from the fact that risks were not properly reflected in their prices. Banks faced  BIS central bankers’ speeches  1  substantial liquidity outflows and shortages owing to their excessive exposure to these instruments and their excessive reliance on short-term and volatile secured market funding sources. In the US, this phenomenon mainly materialised as a “run on repo”;1 in the euro area, it resulted into drying up of foreign currency funding, severe strains in bank unsecured funding, and/or a reduced access to repo through clearing houses. In all cases, the central bank had to step in and to expand its liquidity provision to banks. What does this imply for liquidity regulation? Regulations should start from first principles, and we therefore have to identify the market failures or negative externalities that liquidity regulation aims at addressing. I consider that there are three main objectives for liquidity regulation: a) to reduce the impact of uncertainty on the bank risk profile, b) to build up liquidity buffers and c) to mitigate the systemic characteristics of a liquidity crisis. Maturity transformation gives rise to liquidity risk since, by definition, a bank engaging in maturity transformation cannot honour sudden and large withdrawal requests by depositors. They may face similar difficulties if interbank market lenders refuse to roll over their loans.

The new set of liquidity requirements will provide for a better monitoring of risks on banks’ balance sheets and will limit the social cost of liquidity crises. It has to be combined with actions ensuring a proper functioning of the money market, such as reform and oversight of reference rates. It should be seen as a complement to regulatory reforms that improve market discipline in other segments of the banks’ liability structure, such as capital buffers and the new bail-in rules for senior bond-holders and uninsured depositors. A more far-reaching question, which I did not address in this speech, is whether the increased risk-sensitivity of bank liabilities under the new regulatory regime will constrain the role of banks as providers of liquidity services to the economy, or as creators of “quasimoney”. If so, this could put undue pressure on central banks as producers of the only truly safe and liquid asset – bank reserves. This makes it even more important for governments to be fiscally responsible so that Treasuries can keep or regain their role as safe and liquid instruments. Going forward, central banks will continue to act as lenders of last resort, but the crisis has helped us better understand the conditions for it to be socially useful. One of these is an effective liquidity regulation that constrains the business models of banks in a way that ensures that liquidity risk is self-insured. If properly priced, instruments such as a Committed Liquidity Facility can complement liquidity regulation while protecting monetary policy.
I would like to commence my speech by reviewing the global economic outlook, given its ongoing influence on our policies. Volatilities in financial markets continue amid uncertainties about global monetary policies and concerns over global growth. Interest rate volatility experienced some decline right after the anticipated first Fed rate hike in December 2015; however, volatilities began increasing as of early 2016 mainly due to worries about the Chinese economy and geopolitical developments (Chart 1). The global economic slowdown since 2014 continued into the second half of 2015, especially across emerging market economies. Commodity prices remained on the decrease as well. Developing economies were largely affected by the global fluctuations in this period. Portfolio inflows stayed weak and exchange rate volatilities remained high (Chart 2). The effects of global market volatility were felt in the Turkish economy as well. However, reduced domestic uncertainty and the CBRT’s tight monetary stance and other liquidity –and financial-stability– oriented policies limited these effects. Chart 1. Chart 2. (MOVE Index) (Basis Points)  (4-Week Moving Average, Billion USD)  VIX and US Interest Rate Volatility Index  Source: Bloomberg. BIS central bankers’ speeches  Portfolio Flows to Emerging Economies and Currency Volatility Index (JPMVXYEM) (Percent)  Source: EPFR, Bloomberg  1  1. Monetary policy and financial conditions  As you all know, we released a road map on 18 August 2015 regarding the policies to be implemented before and after the normalization of global monetary policies.

SPEECH DATE:  2021-10-06  SPEAKER:  First Deputy Governor Cecilia Skingsley  LOCALITY:  Swedbank (digitally)  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Building payment systems for our grandchildren* Payments at the heart of our everyday lives Firstly, thanks for inviting me this morning to speak about payments and the infrastructure that makes them possible.1 A topic that currently commands quite a lot of time at both the Swedish banks and the Riksbank, due to large projects aimed at basically building the future payment systems. I will say more about this shortly. Many of us tend to pay without thinking so much about what actually happens. On a typical day, a first interaction with the payment system could be preloading your public transport card from your bank account. At work, you use your mobile phone to send – or ‘swish’ as we call it after the domestic mobile payment service – a contribution to a colleagues 50th birthday present. Later, lunch is paid for with a bank card that you may also use to buy groceries with on your way home. Back from work, you may still have a few payments to make. In the evening, perhaps you log on to your internet bank to pay a couple of bills. Also, if the month has not been too costly, a sum of money may be placed in your savings account or even invested in the stock market.
Private sector pay growth (again excluding bonuses) has been grinding through the gears; it recently hit the psychologically-important 3% barrier. Private sector wage settlements so far this year are running at 2.8% and in some sectors, such as construction and IT, are running well in excess of 3%. The public sector has, for a number of years, been held to a 1% pay cap. This had the effect of suppressing whole-economy pay growth, both directly (given the public sector comprises around 18% of total employment) and potentially indirectly (due to the possible spill-over effects of public pay awards on the private sector). That public sector pay cap has now been lifted and decisively so. Earlier this year, over 1 million NHS workers received a one-year pay settlement of at least 3%. Some workers have received double-digit pay rises. They have been joined recently by a further 1 million workers from the armed forces, police and teachers, who have secured pay rises of between 2-3.5%. The largest segment of public sector workers – including those in Local Authorities – have yet to settle. But with the cap breached, it seems possible their pay settlements could also ratchet upwards. We can see that upward ratchet in pay in the distribution of pay settlements (Chart 24). According to the Bank’s comprehensive wage settlements database, so far this year around 65% of deals have been struck at rates above their level the previous year. The largest contributor to this rightwards shift in the settlements distribution has been the public sector.

Rolling regressions suggest the effects of unionisation on pay were largest during this period. If we look at the sectoral level, similar effects are seen. Sectors of the UK economy with higher levels of unionisation have seen smaller falls in their labour shares (Chart 20). Over the past few decades, a sector like administration and support activities with under 10% unionisation rates has seen its labour share decline, while a sector like education with a unionisation rate close to 50% has seen its labour share rise. (c)  Automation  A third factor potentially affecting the pay power of workers is the degree of automation in the workplace. The easier and cheaper it is to replace human with machine, the lower is likely to be the wage bargaining power of workers relative to companies. Increased automation and the dawn of a Fourth Industrial Revolution could, then, result in slower pay growth and workers receiving a smaller slice of the income pie. 19  Recent research has confirmed that intuition. The IMF has found a significantly negative effect of automation on labour’s share. 20  Acemoglu and Restrepo (2018) look at the influence of multi-purpose industrial robots  on pay growth across different sectors of the US economy. They find that one extra robot per thousand workers lowers wages by 0.25-0.5%. At 71 robots per 10,000 employees, the UK’s degree of robot automation lies well below France (127), Spain (150), the US (170) and Germany (301) (Chart 21).
In that event, real economy loans could be financed instead by more expensive sources of funding, reducing the efficiency with which commercial banks extend credit. This could lead to greater reliance on non-banks for credit provision as some borrowers find it cheaper to seek credit opportunities outside the banking system. I should emphasise that our work – and the scenario we use to illustrate these effects in the paper – does not at this stage suggest that the impact on lending rates and credit provision is more than modest. So this does not look headline making. But, there is a lot of uncertainty around how this could work out. We don’t know much about the likely demand for digital money, or about how it will be remunerated, all of which is important for determining these effects. The authorities may also wish to limit the speed and scale of any transition to digital money in the interests of greater assurance that there will be no threat to financial stability. Continuing with the provision of credit, greater reliance on longer-term stable funding by banks could reduce the likelihood of a sharp deterioration in bank credit conditions. However, banks will 3/4  BIS central bankers' speeches  also be vulnerable to a deterioration in sentiment in wholesale funding markets. As a result, lending rates could be more volatile overall for those borrowers unable to access other sources of financing.

I hope from this you can get the sense of how important this potential innovation in digital money is, and why we must – both domestically and working with international partners – ensure that we understand and respond to the public interest issues that arise here, so that we can do our job of protecting stability, but also so that innovation can happen in a world where the public interest is well defined and protected. I am going to end – since time is up – by merely listing the other elements of public interest that I could, and probably should have covered, with respect to the innovation of digital currency, but which will have to wait for another day. I could have talked about monetary policy and controlling interest rates in a world of digital money. I could have talked about the public interest in competition in the financial system, about financial inclusion, and about data protection and privacy. I could have talked about the potential for digital money to speed up and reduce the transactions cost of international payments and transfers. And, finally, we cannot ignore the risks that digital money is attractive for money launderers and cyber criminals. All I can say today, I hope this gives the sense of the scale of this area of innovation and how important the subject is. Thank you I am grateful to Jas Ellis, Andrew Hauser, Karen Jude and Sam Woods for their help with preparing these remarks. 4/4  BIS central bankers' speeches
As the monopoly supplier of central bank money, which is the most liquid asset of all, the central bank is able to provide liquidity, either bilaterally (in the event of an idiosyncratic shock), or to the banking system as a whole (in the event of a market-wide shock). In doing so, there are some important constraints. Support from the central bank is not available to prop up a failing institution. The Bank of England will only lend to those commercial banks that are, in its judgment, solvent and viable. This is for two related public policy objectives. First, the central bank needs to guard against moral hazard – that is, our policies should not undermine the commercial banks’ responsibilities to manage their own liquidity prudently. If commercial banks know that we will always bail them out, then they may take too much risk: the bank’s shareholders and management might seek to profit from the extra gains arising from risky lending whilst relying on the authorities when the risks crystallise. Second, and in consequence, the central bank needs to protect its own balance sheet (and hence public money) against the risk of loss. As a result, central bank lending should be collateralised, and subject to haircuts which are prudently calibrated to be sufficient if the counterparty was to default. In a crisis, it can be difficult to judge whether a bank really does have just a temporary liquidity problem or an underlying solvency problem.

The pre-positioning drive has gathered pace in the last year or so – there is now over £ of collateral pre-positioned for use in the DWF. After applying appropriate haircuts to each piece of collateral pre-positioned, this means the Bank could, subject to solvency and viability assessments and repayment plans, lend around £ in the DWF without the complications of further detailed collateral checks. 11 Although not a substitute for firms  9  Further details on how central banks can use their money market operations to implement monetary policy and provide liquidity support to banks are set out in Clews, Salmon and Weeken (2010), “The Bank’s money market framework”, available in the Bank’s Winter 2010 Quarterly Bulletin. 10  Further details are available at http://www.bankofengland.co.uk/markets/marketnotice100719.pdf. 11  That is around 10% of annual nominal UK GDP in 2011 – slightly higher than that in the United States, where the lendable value of collateral pledged by all depository institutions in the Discount Window (around $ in January 2012) is equivalent to around 8.5% of nominal US GDP in 2011. BIS central bankers’ speeches  5  building up their own holdings of high quality liquid assets to a more satisfactory level, that represents a very substantial “war chest” of potential liquidity in the event of significant adverse shocks. There is limited cost to the counterparty of pre-positioning, as collateral can be withdrawn on demand for use in other operations or market transactions.
Next, we need to address skills, jobs, and careers in an integrated manner. Finally, workforce transformation must become a core business capability for all firms. The main effect of technology is to transform jobs rather than to destroy existing ones or create new ones. Research1 has found that technology changes tasks within jobs rather than displaces entire jobs. 4/7  BIS central bankers' speeches  In other words, some tasks within jobs are made redundant by technology, but new tasks are created within that job or combined with tasks from other jobs. Let me share with you some insights from the financial sector. MAS commissioned Ernst & Young to study the impact on jobs in the financial sector from two specific technologies – data analytics and automation. The study looked at 121 distinct job roles in the financial industry, broken down by the various tasks within each role. It then examined how data analytics and automation are likely to change the tasks within each job role. It also identified the skills that would be necessary to perform any new tasks created. The study found that one in three job roles in the financial sector will be heavily transformed by data analytics and automation. This means that some tasks will be automated and others substituted by data analytics. The remaining tasks will converge into new job roles that require more judgement and customisation – both of which require new skillsets.

A private-sector-led panel will be set up later this year to advise the Ministry of Finance and the Monetary Authority of Singapore on matters relating to corporate governance, disclosure requirements and accounting standards. Through feedback from market players and continual reviews, we will continue to refine our regulations to promote competition and innovation whilst maintaining high prudential standards and the stability of the financial system. The future of SEACEN The Asian financial crisis clearly demonstrated that the world has become more inter-linked. Liberalisation of markets in the region resulted in the fortune of each economy being more intertwined to one another than ever before. There is much scope for co-operation, and room for economies to learn from the experiences of one another. Over the past couple of years, there has also been a proliferation of regional and international foras, bringing together regulators and government officials to deliberate the intricacies of financial stability. In this regard, the challenge for SEACEN is to remain attuned to the needs of its various members, and to maintain its relevance by reaching out to its members. The SEACEN Centre has played an important role in facilitating the exchange of information and expertise on financial supervision and the conduct of monetary policy among the staff of SEACEN central banks. There is room for greater co-operation among regulators, as well as with other regional groupings and international financial institutions. SEACEN should explore ways to leverage off the expertise of these various groupings, and to create greater synergies through partnership and co-operation.