samchain/econo-pairs-v1 huggingface dataset:
It is early days for macro-prudential policy. It marks a radical departure from the past because it gives prudential tools an explicit role in managing the risk-taking cycle and activity in the wider economy (Haldane (2014)). To date, the focus of macro-prudential policy has been on the risks arising from leverage on the balance sheet of banks – the quantity of risk. That is why existing macro-prudential tools have tended to focus on bank capital and other bank balance sheet ratios. Yet if risk in the financial system, and activity in the wider economy, are shaped importantly by asset management behaviour and associated pro-cyclical swings in risk premia, then this focus may be too narrow. Macro-prudential action may be justified even when leverage is not present and when banks are not at the scene of the crime. Modulating the price of risk, when this is materially mis-priced, could be every bit as important as controlling its quantity. This is the next frontier for macro-prudential policy – whether, and if so how best, to moderate excessive swings in risk premia across financial markets which risk damaging the financial system or wider economy. This will require new analytical techniques to measure risk premia and their impact. And it will require fresh thinking on new policy tools to moderate movements in these risk premia. This is, in effect, an agenda for the second-generation of macro-prudential policy frameworks. BIS central bankers’ speeches  9  Third, portfolio allocation.

For example, PWC recently forecast that AUM would top $ trillion by 2020 (PWC (2014)). Simply extrapolating GDP per capita trends forward using the relationship in Chart 3, AUM could reach $ trillion by 2050. If these trends are even roughly right, asset management may not only have come of age – we may be about to enter the Age of Asset Management. As important as the absolute scale of the asset management sector is its composition. On the assets side, a number of important trends are at play. One is the rapid growth in specialist funds, often investing in less liquid asset classes. This is evident in the growth of so-called alternatives, such as hedge, private equity, real estate, infrastructure and commodity funds. These have risen from under $ trillion AUM in 2003 to over $ trillion by 2012, or from 5% to 10% of global AUM (Boston Consulting Group (2013)). Accompanying that, there has been strong growth in funds active in specialist, often illiquid, markets – for example, high yield bond funds and emerging market funds. Since 2008, these funds have grown at an annual rate of around 40% per year, outpacing growth in the global mutual fund industry by a factor of four (Chart 4). 3 Also rising rapidly have been flows into US mutual loan funds, which spiked to $ billion in 2013 having averaged $ billion in the preceding three years.
In addition, financial advisers may be perceived to be more independent than tied agents, which will be important as consumers become more discerning. As a relatively new channel in most of Asia, the primary focus is to establish public confidence through raising professional and ethical standards of financial advisers. This is a key focus under the LIFE Framework for Malaysia. In addition, the Bank will reduce paid-up capital requirements for financial advisors to encourage new entrants. Previously consisting mainly of tele-marketing and direct mailing, direct distribution is today considered an important channel by most insurers, in view of the new possibilities enabled by the high levels of internet penetration and proliferation of mobile devices such as smartphones and tablets. Social media has become a vital platform for business to engage with consumers and build their brand as well as being a rich data source in its own right on today’s fast moving consumer trends. The availability of instantaneous information has tipped the balance of power in favour of consumers. One such innovation is the aggregator, which has seen an increase in utilisation of 44% and 50% for motor and home insurance respectively in just a short period from July 2012 to April 2013 16 according to a report on the insurance market in Asia-Pacific. In Malaysia, the high levels of internet banking and mobile  11  25th Pacific Insurance Conference 2011- Plenary Session 1 – Bancassurance and Its Impact on Consumers and the Insurance Industry. 12  BNM IFAS System. 13  BNM TOSS System.

2 See Draghi (2015), “Monetary Policy: Past, Present and Future”, speech at the Frankfurt European Banking  Congress, 20 November 2015. 3 Using the Phillips curve approach presented in Box 2 of the ECB Economic Bulletin, Issue 3 / 2016. 6/6  BIS central bankers' speeches
In all of this - in our pursuit of both macroeconomic stability on the one hand and structural reform on the other - we share much the same basic philosophy as our partners in the European Union, though it may be true to say that, at least as a matter of degree, while we were later than some of them in coming to macroeconomic stability, we may have gone further in the direction of improving the supply-side flexibility of our economy through structural reform. The best thing that we can do for the time being - on both sides - is to pursue this common approach in parallel. That should help to bring about greater convergence between us, to reduce the risks of UK membership of the euro and to help meet the Government’s five economic tests for joining. In the meantime, ahead of any decision, it seems sensible to prepare in order to keep open the option to join. BIS Review 33/20009  6

This action plan would require the support of all the stakeholders in the payments market, as well as interventions in many aspects, such as: 1. improvement of the applicable legal and regulatory framework; 2. development and improvement of financial services infrastructures; 3. expansion of the number and use of accounts and payment services; 4. expansion of access points for these services; 5. increase of education, awareness and financial inclusion; 6. increase of the volumes of transactions processed by payment systems. While the strategy was only recently approved, in June, concrete steps have been taken in this 1/3  BIS central bankers' speeches  regard, for example, the drafting of the bill “On Payment Services in the Republic of Albania", which transposes the revised directive of the European Union “On payment services” (PSD2). The adoption and implementation of this bill is considered to have a direct impact for fostering competition and innovation in the field of retail payments, thus promoting efficiency and reduction of the costs for using them. Moreover, the bill is expected to enhance transparency in the services provided by the market and to create a consolidated framework on consumer protection, a very important component for our market. Last but not least, the bill also aims to expand the presence of bank services across the territory of the country (including rural areas). Beyond legal improvements, important steps have been noted in the framework of financial education.
But beyond that, it is not the ECB’s role to have additional involvement. What we have in the case of the European Union is additional responsibilities for crisis management, which are responsibilities of the governments in the euro area, not the responsibility of the ECB. Q. The Irish Central Bank has an emergency liquidity assistance programme. Do you think there could be a similar one for Greece or is there actually already one in place? I would not comment on emergency liquidity assistance. This is a national responsibility that each national central bank in the euro area may apply as is necessary in their own context. Q. Cypriot banks hold a sizeable quantity of Greek debt. How damaging or potentially damaging could that exposure be? Could the Central Bank have taken any steps to limit banks exposure to a single borrower? With respect to the exposure of Cypriot banks to Greek debt, we have examined the situation and we have come to the conclusion that even though there is exposure in our banking system, that exposure is manageable because our banks are very well capitalized. 4  BIS central bankers’ speeches  So even in the highly unlikely situation, if you wanted to run the counter factual, for example, of imposing losses on the holdings of Greek debt, our banks would manage to weather that. To understand how well capitalised our banking system is, a comparison may be useful. Our banks already meet the stricter capital requirements that are being phased in under Basel III.

As president Trichet explained in the press conference following the April policy meeting, there were arguments on both sides. We took the decision not to rewiden the interest rate corridor to its normal size at the April meeting. However, going forward, I would argue in favour of normalising the width of the corridor sooner rather than later. In my view, it is increasingly harder to justify the non-standard width of the corridor as time goes by. I don’t think there is any mechanical link between the decision as to when to phase out specific non-standard measures that have been introduced during the crisis. Q. On bond buying programme. What is your point of view with Greece, Ireland and Portugal being in the hands of the EU and IMF? Does it give rise to the need for the ECB to intervene? It is increasingly hard to justify the continuation of the SMP in light of the fact that it was introduced in order to alleviate some of the dysfunction in the monetary policy transmission mechanism in some markets, and I do not think that those conditions hold at the moment to the same extent. Q. Do you think it should be stopped completely or just be there in case the need arises again? The mere presence of the programme, even if no purchases at all are made for a very long time, can be a stabilising force in the markets in case additional tensions appear on the horizon.
But when interest rates soared from 1980 onwards, the payments to service this debt began to cripple the economy. At the same time, the projects these investments went into failed to deliver the expected returns. It all ended in a severe debt crisis that set back Latin America by at least a decade. Essentially, a mispricing of capital resulted in cheap funding and overinvestment. 11. Developed economies are equally prone to the risks of mispriced capital. The subprime mortgage crisis, which precipitated the global financial crisis less than three years ago, is another example of mispriced capital leading to excessive risk taking and leverage. Low interest rates in the US fuelled both a housing and a credit bubble that eventually burst, dragging down investors and intermediaries alike. 12. In emerging Asia, today, high levels of domestic savings coupled with large capital inflows pose the risk of unproductive investments and asset bubbles. When capital inflows slow down, as they inevitably must, the consequent unwinding will be rapid and possibly unpleasant. Asian policymakers have been responding to the situation in various ways 13. First, they have allowed the price of capital to rise – either through exchange rates or interest rates or both. Second, they have regulated the demand for capital through fiscal tools, such as transaction taxes and stamp duties. Third, they have regulated the supply of capital through administrative tools, ranging from restrictions on bank lending to selective capital controls. 14. The most effective way is to price capital correctly.

Mortgage companies should therefore take housing market fluctuations into account when issuing covered bonds. Conclusion I think it is fair to say that housing finance in Norway is in its infancy. There is a large proportion of adjustable-rate loans. Fixed-rate loans offered in Norway are less customerfriendly than, for example, in Denmark, where it is less expensive to cancel a fixed-rate mortgage and where there is a secondary market, providing risk diversification. Mortgage companies have a limited role in housing finance. Loan-to-value ratios are in some cases alarmingly high. And last, but not least, banks finance their housing loans by means of shortterm asset swaps in foreign markets. This is not a sustainable solution. I hope that this forum can contribute towards the development of a better foundation for housing finance in Norway. 1  See Van den Noord, Paul (2005): “Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence”, Économie Internationale 101, pp.29–45. This paper shows that house price volatility is higher in countries where tax regimes favour owner-occupied housing. See also IMF (2004): World Economic Outlook, September, p.81, where house price volatility is higher is countries where adjustable-rate mortgages are common. BIS Review 8/2010  3  4  BIS Review 8/2010  BIS Review 8/2010  5  6  BIS Review 8/2010  BIS Review 8/2010  7  8  BIS Review 8/2010  BIS Review 8/2010  9  10  BIS Review 8/2010  BIS Review 8/2010  11
Over the same period, core CPI inflation has fallen from average annual rates of over 6% to 2%. One important sign of underlying change is that the volatility of economic fluctuations has declined since the mid-1980s, evidenced by the fact that there has been only one recession in the United States in the past 17 years. Improved macroeconomic policy management and such positive supply factors as generally lower commodity prices certainly have contributed to the strong performance of the US economy in recent years. Also critical has been the emergence of new technologies, specifically the adoption of “just-in-time” inventory systems, which we copied from Japan. Research at the Federal Reserve Bank of New York suggests that these new inventory systems have helped account for a significant reduction in the magnitude of inventory swings and hence less volatile growth of the US economy. The spate of recent announcements of new resource management systems by auto companies, retailers, and others suggests that we have not yet exhausted the potential benefits from such inventory and production systems. These inventory and production management techniques are just one aspect of the most significant factor that has characterized the improved performance of the US economy, which is non-farm business productivity growth. As I have noted, this had averaged about 1½% a year over the previous 20 years, but since 1995 has improved steadily.

Road shows to investors in the US and Europe ceased to be the preserve of the international giants and became common among smaller players whose whole asset base was in the UK. As the difficulties in the financial system have persisted and worsened, it has become clear that these developments have created real structural weaknesses in the banking sector. In particular: •  inflated aggregate balance sheets, whose expansion had outpaced growth in the real economy;  •  expansion into assets whose underlying value, credit quality and liquidity were uncertain;  •  liability structures which were overly reliant on sustained availability of wholesale funding whose maturity was often short;  •  capital and liquidity buffers which became too low , given these asset and liability risks; and  •  underappreciated, but potent interconnections between firms in the global financial system. Policy response For most of the last year, the Bank has adopted a twin track approach, as part of the Tripartite partnership with the FSA and the Treasury. The first track has been to provide liquidity to the market in order to give most banks time to make the necessary adjustments – including by raising capital. That has involved an increasing range of measures including long term repos on a wide range of collateral and the introduction of the Special Liquidity Scheme which allows banks to swap illiquid assets for Treasury Bills for periods of up to three years.
The worst of the recession now thankfully appears to be behind us. Financial conditions worldwide have improved. Risk premia in money and credit markets have dropped to precrisis levels and equity markets have registered strong gains. Although at a slow pace, growth has resumed, boosted by the strong performance of Asian economies and a degree of stabilization in industrialized countries. The euro area economy, too, has been improving, and finally emerged from recession in the third quarter on the back of stronger external demand. A word of caution is warranted, however, because the experience of recessions that followed financial crises suggests that the recovery will only be gradual. Both the IMF and the European Commission expect the world economy to expand by only about 3 per cent next year, compared with an average of 5 per cent in 2004-2007. 1 This expansion, moreover, is expected to be led by emerging economies, especially in Asia, because growth in the industrialised economies is forecast to average below 2 per cent. The recovery in the euro area is similarly expected to be modest. The Commission forecasts growth rates of 0.7 per cent in 2010 and 1.5 per cent in 2011. Foreign demand is seen as the main engine of growth, while the required de-leveraging of balance sheets in the financial sector, along with excess capacity and unemployment heading for double digit levels will continue to weigh on domestic demand.

For a start, each year’s deficit translates into higher debt and debt-servicing burdens, which already stand at 67 per cent and 3.4 per cent of GDP, respectively. 5 Put differently, the 196 million euro in interest due on the debt next year is equivalent to what the Government would spend on medicines  2  Structural Issues Report 2010, which focuses on the impact of the energy markets on the macroeconomy. A detailed report is to be published next year in the form of an ECB Occasional Paper. 3  Weathering the challenges, in Ernst & Young’s 2009 Malta Attractiveness Survey. 4  Paul Krugman, The Age of Diminished Expectations: US Economic Policy in the 1980s, MIT Press, 1992  5  Estimates taken from the Budget speech 2010. 4  BIS Review 154/2009  in three years at today’s prices. To complete this perspective, despite the reduction planned from 2011, the general government deficit in that year is still expected to remain just above the 3 per cent benchmark, and the forecast reduction to 2.9 per cent in 2012 is contingent on seemingly optimistic nominal growth assumptions. What are the options for reducing the deficit? Since any increase in the tax burden, already high at around 40 per cent of GDP, would have a negative impact on competitiveness, expenditure restraint seems to be the only possibility. This option is more complex than it might seem, however, because of the structure of recurrent government spending.
M R Pridiyathorn Devakula: Challenges and opportunities facing the Thai futures market Remarks by Mr M R Pridiyathorn Devakula, Governor of the Bank of Thailand, at the gala dinner hosted by The Agricultural Futures Exchange of Thailand, Bangkok, 23 February 2006. *  *  *  Distinguished Guests, Ladies and Gentlemen, It is a privilege for me to be here today amongst distinguished personalities from the banking and finance industry. First of all, I would like to thank the Agricultural Futures Exchange of Thailand for inviting me to address this distinguished audience. I have been asked to share some thoughts with you on the challenges and opportunities that I see facing Thai futures market going forward. Thailand has been one of the world’s leading producers of agricultural products. Thailand has always been top-ranked in rice, tapioca starch, sugar and natural rubber production. In fact, Thailand has been the world’s largest rice exporter for more than a decade. Our rice export accounts for no less than one quarter of total world’s rice exports. Likewise, we supply more than one-third of the world’s total natural rubber production. With roughly half of our labour force being employed in the agricultural industry and with rice alone earning almost 2 billion U.S. dollars last year, the importance of the sector towards Thai economy cannot be overstressed. However, unique characteristics of agricultural products are that of long supply adjustment lags and inelastic demand. Prices therefore tend to exhibit inherently high volatility.

One possible solution I think is that of making all contracts on AFET U.S. dollar denominated. This way, the arbitrageurs are not exposed to any foreign exchange risk and they can manage their positions across markets with ease. Of all the commodities listed on SICOM, only one contract namely ribbed smoked rubber sheet no. 1 is Singapore dollar-denominated and coincidentally, it is also the least liquid contract on the SICOM. All other contracts are denominated in U.S. dollar. Moreover, commodity prices in the world are generally quoted in U.S. dollar, therefore, corporate buyers and sellers are already aware of their costs and revenues in terms of U.S. dollar. If we aim to establish futures price of, for instance, white rice on the AFET as a benchmark, it is logical for this reference price to be denominated in an international currency such as the U.S. dollar. That way, the price quotations would purely reflect all relevant information relating to demand and supply conditions of the products and are not influenced by exchange rate fluctuations. Some may express concern, however, that by eliminating foreign exchange risk for foreign arbitrageurs, we in turn, expose our local producers and end-users to the very same risk. I feel, on the contrary, that local buyers and sellers are already accustomed to commodity prices being quoted in U.S. dollar in the world market and manage the risk in a proficient manner.