samchain/econo-pairs-v1 huggingface dataset:
This has been topical recently, with a number of highprofile cases of executives being paid amounts which do not obviously align well with their company’s performance. Some investors have expressed discontent at these pay packages and some have even gone so far as to vote against them. Investors have had their “Say on Pay”. 50 And, as is often the case at this time of year, as the pollen count has picked up there has been talk of a “shareholder spring”. Ultimately, however, these investor votes are binding on neither management nor boards. They are a “Say on Pay”, but not a “Stay on Pay”. With very few exceptions, no differences were made to executive compensation packages as a result of investor action. And the cases of investors actively voting against pay packages have in any case been rather rare. The “shareholder spring” may be as ephemeral as that pollen. Yet high executive pay-outs potentially have implications, adverse ones, for value-creation by companies and thus longer-term returns to investors. Monies paid out to executives are monies not being re-invested in the company, reducing investment in physical and human capital. They also drive a wedge between management and their employees – a wedge that has widened to over 150 times median wages in the UK and over 300 times in the US. 51 That, in turn, erodes social capital. A company, like a country, whose physical and social capital is being eroded is one whose wealth-creation capacity is being impaired.

What applies to pay-outs to executives applies, with equal force, to pay-outs to shareholders. Whether as dividends or buy-backs, these too have been on a steadily rising tide over recent decades: from around 10% of profits in the 1970s, to 60–70% today, as short-term shareholder demands have risen steadily. 52 Yet monies paid-out to shareholders are monies also failing to be re-invested in future value creation by the company. In short – too short – the shareholder-centric model may have become a recipe for depleting long-term company wealth-creation and, thus, societal well-being. 53 Or that, at least, is the contention. So what to do about it? Earlier this week, an interim report was issued on “The Purposeful Company” by the Big Innovation Centre. 54 I should declare an interest here, as I and others at the Bank have been involved in putting together this report. The report serves two  49  Big Innovation Centre (2016). 50  “Say on pay” is a term used to describe a rule in corporate law where a firm’s shareholders have the right to vote on the remuneration of executives. 51  See High Pay Centre (2015) and Economic Policy Institute (2015). 52  Haldane (2015). 53  For example, Asker et al (2014) and Davies et al (2014) show, for the US and UK respectively, that private companies invest more than otherwise-equivalent public companies. 54  Big Innovation Centre (2016). 12  BIS central bankers’ speeches  purposes.
We have also increased the forecast range of the annual average key rate for the next year by 1.3 percentage points, as compared to July. Considering such policy, inflation will decline to 4.0–4.5% next year. I will now speak of the economic situation. Except oil production subject to the OPEC+ cuts, the economy generally bounced back to its long-term growth trends in the second quarter and even exceeded them in a number of industries. Growth slowed down in the third quarter, which is evidence that the recovery had completed. It should be noted that the third quarter GDP was affected by a decrease in harvest and the worsened epizootic situation. Excluding agriculture, we estimate that GDP growth quarter-on-quarter was positive. Consumer demand remains the main contributor to the growth. One-time payments to households also supported consumption. The surveyed companies expect a further expansion of demand. According to the data on GDP for the second quarter and recent statistics for the third quarter, gross fixed capital formation also grows fast this year, and even faster than we assumed in our July forecast. The oil industry is a large sector where there is still a substantial space for the recovery growth. The OPEC+ is gradually easing the oil production cuts. Furthermore, the environment in the global markets of energy commodities has improved considerably. We have raised the forecast oil price for 2021 and 2022, specifically to 70 and 65 US dollars per barrel, respectively. I will now briefly talk of the situation in the labour market.

Svein Gjedrem: Trade-offs in monetary policy Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics/Norwegian School of Management, Oslo, 6 June 2006. Please note that the text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 31 May, Inflation Report 1/06 and on previous speeches. The  Charts in pdf-format can be found on the Norges Bank’s website. *  *  *  Low prices for imported consumer goods, combined with high prices for our commodities exports, have contributed to a strong improvement in Norway’s terms of trade. The contribution from the rise in oil and gas prices is particularly high, but the terms of trade for the mainland economy have also improved. The Norwegian economy has been exposed to a strong positive income shock. So far, the increase in income has not led to markedly higher price and wage inflation. Businesses are using resources with steadily greater efficiency and the supply of labour has been ample. Partly owing to the improvement in the terms of trade, the exchange rate has remained strong, which has contributed to keeping inflation low. In the face of such strong external influences, smoothing developments in the Norwegian economy is a demanding task.
Changes in production methods, including an altered pattern for adapting stocks and new technology, may have enabled the demand and supply for both goods and capital to be matched more quickly than before, which contributes to the milder downturns and longer upswings. A further factor that could have contributed is that the percentage of services in GDP has increased and the production of services has shorter lead times. Expansive economic policy - good years for the Swedish economy A low inflation rate and tidy public finances have provided room for manoeuvre when facing a downturn in economic activity. A changeover towards a more expansionary economic policy in a large number of industrial nations has laid the foundation for the recovery this year. In the USA there was a substantial change in monetary policy at the beginning of 2001. On top of this came considerable fiscal policy stimulation. Monetary policy in Europe and Sweden has also been expansionary. However, many large countries in Europe are still struggling with large budget deficits, which have limited their fiscal policy scope for action. Last year Sweden had one of the largest surpluses on public savings in the EU. This has enabled an expansionary fiscal policy. This year households’ disposable incomes are expected to increase by almost 5 per cent, almost 80 per cent of which comes from increased transfers and lower taxes and charges. Such a large increase in income has only happened on a few occasions over the past decades.

The global financial crisis highlighted a series of weaknesses in regulation, including most notably high bank leveraging, excessive credit growth (boosted in part by lax lending standards), a high degree of systemic risk and insufficient liquidity levels. The FSB and the Basel Committee have been developing a set of reforms involving, first, the adoption of more demanding criteria as regards the levels and quality of capital required of banks; and, further, a reassessment of the general framework, thereby acknowledging the need to complement the solvency ratios with other measures. Among these measures we may first mention the leverage ratio, which purports to be a simple, transparent and complementary metric to the risk-based capital ratio. Second, given the lack of liquidity risk regulation before the crisis, the Basle Committee decided to adopt two new ratios: one geared to ensuring the coverage of liquidity needs in the event of tensions (over a 30-day period); and the other aimed at achieving a financing structure suitable for the activities of each institution. Finally, the Basel III regulatory framework has included a new micro-prudential facet with twin aims. The first, to consider the impact that problems at a very large or complex institution may have on the rest of the financial system; and the second, to attempt to avoid the tendency of banks to excessively increase their risk during the cyclical upturn.
16  Figure 13 MPR Corridor (*) (promedio trimestral, porcentaje)  24.II  24.I  23.IV  23.III  23.II  22.IV  23.I  12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0  22.III  22.II  22.I  21.IV  21.II  21.I  21.III  Corredor Jun.22 FTS EES Mar.22 corridor MPR Forward MPR Jun.22 MP meeting  12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0  (*) The corridor is constructed following the methodology in boxes V.1 of March 2020 MP Report and V.3 of March 2022 MP Report. It includes the May Economic Expectations Survey (EES) and the June Financial Traders Survey (FTS) previous to the MP meeting, plus the average smoothed forward curve for the quarter ended on 1 June. This is calculated by extracting the implicit MPR considering the forward curve over the overnight swap curve of up to 2 years, discounting the fixed rates of each maturity to the simple accrual of the overnight index swap (OIS). For the current quarter, the surveys and the forward curve consider the average of daily effective data and are completed with the respective sources  Source: Central Bank of Chile.

In the case of housing, rents reflect the flow of benefits obtained from housing assets—either the monetary return from rental property, or the value of living in owner-occupied housing. Historically, the ratio for the nation as a whole has had many ups and downs, but over time it has tended to return to its long-run average. Thus, when the price-to-rent ratio is high, housing prices tend to grow more slowly or fall for a time, and when the ratio is low, prices tend to rise more rapidly. I want to emphasize, though, that this is a loose relationship that can be counted on only for rough guidance rather than a precise reading. Currently, the ratio for the country is higher than at any time since data became available in 1970— about 25 percent above its long-run average. Of course, the results vary widely from place to place. For Los Angeles and San Francisco, the price-to-rent ratio is about 40 percent higher than the normal level, while for Cleveland the ratio is very near its historical average. Closer to home, the figure for Seattle is just over 35. For Portland, it turns out that the price-to-rent ratio is a bit anomalous. Unlike the ratio for the nation and many of the cities I’ve mentioned, Portland’s ratio has been trending up, and this pattern has been going on since the late 1980s.
This means, quite simply, that the members act as individuals. This applies both when we are out speaking and when the interest rate is set. The interest rate decisions are made through voting and the members can publicly state whether or not they share the majority view. In the case of so-called collegial committee, there is instead an agreement that the individual members’ views are subordinate to the group’s overall opinion. If there are internal differences of opinion, they  8  See, for example, Blinder, A.S., (2007), "Central Banking by Committee: Why and How?” European Journal of Political Economy 23, 106-123. BIS Review 40/2007  7  are often concealed from the outside world and once a decision has been taken, all of the members officially support it. The combination of making interest rate decisions in a group and signalling between the monetary policy meetings is not entirely problem-free. If we assume, for instance, that an individual member is to hold a speech a few weeks prior to a monetary policy meeting where he or she gives signals that the interest rate should be changed. Regardless of whether or not the Executive Board is an individualistic committee, I believe that sometimes there may be uncertainty as to who is actually sending the signal. Is it merely the individual member who is describing his or her view, or is he or she expressing the majority's opinion?

In the case of Hong Kong, where the financial industry is so critical to the economy, this obviously carries even more importance. Now, as a survey has found, we are fortunate in Hong Kong to have one of the highest levels of consumer trust in banks and financial services compared to other places.3 But we’ve seen in the financial crisis how fragile trust can be. So we need to guard against complacency, and work towards ensuring that Hong Kong remains a beacon to the rest of the global financial services industry. Whether one is a financial institution, a financial regulator or a consumer, this is in all our interests. So, how do we get there? In short, my argument this morning is that we will do so by recognising the interdependence of these three groups. Each has a role to play, but each also needs the help of the others. And, I would argue, at the heart of this interdependence lies effective consumer protection and education. I would like to discuss briefly each group in turn – first, the role of financial institutions. “The role of financial institutions” As I alluded to just now, financial-services institutions have a direct interest in upholding the reputation of the industry as a whole. I believe success in this regard rests on two pillars. First, nurturing a culture of honesty among practitioners. Second, an absolute commitment to  1  Mr André Laboul, Head of the Financial Affairs Division, OECD and Chairman of the International Network on Financial Education.
But looking at the comparison, I wonder what banks in the other euro area countries that have significantly reinforced their capital ratios will think. Moreover, unlike Spain, most of our peers have activated – or have announced the activation – of countercyclical capital buffers, which may partly explain the increase in their solvency ratios. 6/15  Dividend policy  It is worth remembering that the clearest route to strengthening capital is through the organic generation of reserves. That leads once again to highlighting the importance of profitability and, in relation to profits, of dividend policy. Each bank should give structure to this dividend policy, bearing in mind its present and future capital needs. As I have occasionally indicated, in my view dividend payments are excessively rigid. They have functioned more as a fixed remuneration than as a genuine, variable distribution of each year’s return. In this respect, one possibility used by banks at various times has been to use scrip dividends. These allow remuneration to the shareholder to take the form of the delivery of new issued shares, instead of cash. This policy enables the necessary remuneration of capital to be combined with the organic generation of capital, although it inevitably entails some dilution of earnings per share, as also occurs whenever there are capital increases. It is the responsibility of each bank to assess these aspects when setting its dividend policy.

According to the Banco de España 2018 Annual Claims Report, published last Wednesday, the number of claims processed by the Bank last year fell by more than 50% on 2017 to close to 19,700.1 Nonetheless, the total percentage of rectifications by banks relative to those estimated by the Banco de España was 70.6%, a similar percentage to that of 2017. 1  In any event it should be borne in mind that, since 2013, the annual claims figures have shown strong year-to-year oscillations, generally linked to the impact of specific legal rulings. 14/15  Business model Evidently, banks should analyse their current business models with a view to assessing to what extent they respond to this new technological and customer-relations reality, but also to identifying their strengths and weaknesses. To conduct this analysis, the above-mentioned management information is needed, which depends, in turn, on the quality of systems. Consequently, technology becomes an objective of the change in business model and a prerequisite for such change to occur, hence its central role. Naturally, another prerequisite worth mentioning is governance, without which all these changes will be destined for failure. Importantly, reflection on the business model should be individualised, and adapted to the particular characteristics of each bank. Indeed, the results of a theme-based review by the Single Supervisory Mechanism on profitability and business models show that there is no single approach and that there are differences in strategies among those banks with the best profitability results.
It’s entirely possible that some new FinTech players will eventually make their mark as enduring brands in finance. But we are also likely to see the growing collaboration I have talked about, between established players and start-ups. It is not a zero sum game. And FinTech ventures are also acting as a catalyst for existing players to reengineer legacy systems. But most importantly, FinTech is promoting a shift from the traditional focus on products to a focus on customers. It’s about understanding their needs, and finding a way of delivering cheaper, or more convenient and more tailored services to the customer. The second tension is also important, and which we must be willing to manage. It’s the tension between allowing for experimentation in finance and preserving trust and credibility in our financial system. They are both important and we must be willing to manage the tension. There was I think, in the first wave of FinTech, a certain breathlessness in the way which new businesses were coming up, and in the way which they were perceived and talked about. Such as, in the (Peer-to-Peer) P2P lending platforms, where the name of the game was often to lend as quickly as you can, leveraging on investments in these FinTech companies. The scene is now maturing. Some of these new lending platforms in the US and elsewhere are now more concerned with the quality of loans they make. Like banks, whose business is credit underwriting, they have to be good at both data analytics and judgment.

We are going to put grants to work – grants for any financial innovation in Singapore – on a competitive basis. Very importantly, we are going to develop the skills and capabilities required to make this a new wave, not just a passing trend. It requires many new skills, as well as some of the old instincts that help ensure sustainability across the cycles. And which preserve trust in finance. We have a major national program in Singapore called SkillsFuture which we are putting a lot of effort into. Finance will be an important vertical in SkillsFuture: investing in the skills of the future. Finally, we will ensure that the overall environment is supportive of start-ups and innovation. Not many of the new players will succeed, not many will last. But they will always leave an idea behind, to be modified, taken over or improved. Thank you very much. BIS central bankers’ speeches  3
Interconnectedness This financial crisis has exposed how important the interconnections are among the banking system, capital markets, and payment and settlement systems. For example, the recent disruption in the functioning of the securitization markets caused by the poor performance of highly-rated debt securities, led to significant problems for major financial institutions. Banks had to take assets back on their books; backstop lines of credit were triggered; and banks could no longer securitize loans, increasing the pressure on their balance sheets. This  BIS Review 125/2009  1  reduced credit availability, which increased the downward pressure on economic activity, which caused asset values to decline further, increasing the degree of stress in the financial system. This interconnectedness implies that regulation and risk management practices that focus only on individual parts of the system will inevitably fail to address important vulnerabilities elsewhere. Thus, we have to make widespread changes in how we approach supervision and regulation, particularly in the context of our most systemically important financial institutions. First, although supervision cannot lose its vertical perspective, looking firm by firm or region by region, it also must place more emphasis than before on gaining a horizontal perspective – looking broadly across banks, securities firms and other types of financial institutions, and across markets and geographies. Second, the supervision of our financial institutions and the regulation of markets need to be risk focused, coordinated and multi-disciplinary.

For example, multi-year guaranteed bonus payments would raise a red flag for us as not likely being consistent with the evolving consensus on sound compensation practices. Thank you for your kind attention. I would be happy to take a few questions. 8  BIS Review 125/2009