samchain/econo-pairs-v1 huggingface dataset:
Speech  Embargo 6 September 2018, 6.30 pm  After the storm: ten years on, how weatherproof is the Swiss banking system today? University of Lucerne  Fritz Zurbrügg Vice Chairman of the Governing Board * Swiss National Bank Lucerne, 6 September 2018 © Swiss National Bank, Berne, 2018 (speech given in German)  *  The speaker would like to thank Till Ebner and Rita Fleer for their support in drafting this speech. He also extends his thanks to Nicole Allenspach, Jürg Blum and Jacqueline Thomet, as well as SNB Language Services. Page 1/14  Ladies and Gentlemen Almost exactly ten years ago, on 15 September 2008, Lehman Brothers, the fourth-largest US investment bank at the time, filed for bankruptcy. The ensuing storm engulfed the global financial markets with a ferocity and magnitude that took all market observers by surprise. The collapse of Lehman Brothers made it clear that many financial institutions could not withstand such a buffeting without government support. The financial crisis spilled over rapidly into the real economy, resulting in the deepest global recession since the Great Depression. We all have our own personal memories of this difficult period. Many of you are probably thinking of 16 October 2008, the day on which the Swiss authorities stepped in to support UBS with a comprehensive package of measures. Back then, I was working at the Federal Finance Administration.

d) The ‘too big to fail’ issue is especially pronounced in Switzerland  As I’ve mentioned, in Switzerland, too, a package of state support measures for UBS in 2008 was unavoidable. The capital injection of around CHF 6 billion from the Confederation amounted to some 10% of federal receipts, while the distressed assets of up to USD 60 billion that the SNB was willing to take on represented some 10% of GDP. 6 In its 2011 dispatch on the ‘too big to fail’ (TBTF) legislation, the Federal Council noted that this commitment was associated with considerable risks for taxpayers, and that future rescue packages might not be financially sustainable for Switzerland. 7 This is because the ‘too big to fail’ issue is especially pronounced here in Switzerland. The two big banks, UBS and Credit Suisse, have very large balance sheets relative to GDP, owing to their substantial international activities (cf. slide 3). At the same time, they also have a significant market share of domestic lending and deposit business, and are major players in the area of payment transactions. Moreover, in an international comparison, three other banks which have been designated as systemically important by the SNB – PostFinance, Raiffeisen Group and Zürcher Kantonalbank – also have very large balance sheets relative to GDP. For example, Raiffeisen and ZKB relative to Swiss GDP are about double the size of the largest US banks relative to US GDP.
Mohd Razif bin Abd Kadir: SME Credit Bureau in the financial landscape of Malaysia Keynote address by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the SME Credit Bureau Seminar, Kuala Lumpur, 27 May 2008. *  *  *  It gives me great pleasure to be here with you this morning. I would like to express my appreciation to the Credit Guarantee Corporation or CGC, for inviting me to deliver the keynote address. It is encouraging to see many financial institutions and small and medium enterprises (SMEs) in the audience. The Bureau is also Malaysia’s first, under a joint initiative of CGC and Dun and Bradstreet Malaysia Sdn. Bhd., a subsidiary of Dun and Bradstreet Corporation in the US, which has vast experience in establishing and operating credit bureaus globally. The development of a strong and dynamic SME sector is a priority on the national economic agenda. The reasons for this are clear when one considers that 99.2% of the total business establishments in Malaysia are SMEs. The SME sector currently employs about 5.6 million people, and contributes about 32% of gross domestic product. Given its economic potential, the Government has accorded significant emphasis to developing and strengthening the SME sector, to enhance its contribution to the economy. The Government took a major stride forward in June 2004 with the establishment of the National SME Development Council.

13.12.2017  “The relationship with bank customers” Opening Session of the 13th Banking Industry Meeting “Competitive Banking in a New Society”, IESE (Madrid) Javier Alonso Deputy Governor  Good morning. It is a pleasure to open this 13th edition of the Banking Industry Meeting and I thank the organisers, and IESE in particular, for their kind invitation to join this eminent gathering today. The information disseminated by the organisers states, by way of introduction to the programme for today’s conference, that “following an intense shake-up of the industry, the banking sector must address challenges and problems that place its operations at a critical juncture.” This has, indeed, been the central tenet of my public addresses throughout the year. In previous speeches I have stressed that the banking business is facing far-reaching changes whose implications are still difficult to foresee. And I have paid particular attention to what I consider are the main challenges the industry must address. I have shared my thoughts on the challenges posed to banking at the current juncture as regards: (i) maintaining appropriate profitability levels to ensure the viability of banks in the medium and long term; (ii) adapting to new and demanding regulations in response to the financial crisis; (iii) technological developments and the so-called fintech firms; and (iv) restoring the customer’s confidence.
•  A growth of 27.5% in the accumulated surplus of the Exchange Fund during the year, or 15% if the gains from the equity portfolio acquired in August are excluded. •  Continuing currency stability, within the framework of the linked exchange rate system, against unprecedented speculative attacks, and during a year of currency instability in much of the rest of the region. •  Substantial improvements to the currency board system, which have made it more resilient, more transparent, and less vulnerable to manipulation than it was before. •  Increased involvement in regional and global initiatives to promote Hong Kong as an international financial centre and to seek action to repair defects in the international financial architecture. Progress in this field has been slow, but not for lack of any advocacy on Hong Kong’s part. The three broad mandates of the Hong Kong Monetary Authority are to maintain currency stability, to promote the safety and stability of the banking system, and to enhance the efficiency, integrity and development of the financial system. I think that the HKMA can justifiably claim that it has successfully delivered on all of these mandates during 1998, and in the face of considerable difficulties. Accountability and transparency Monetary and banking stability is, of course, the result of efforts by the whole of the financial sector, and not just the work of the HKMA. It also depends on international faith in the integrity of our system, and, equally important, on the confidence of the community of Hong Kong.

So what do we think we can affect through monetary policy? To put it simply, the repo rate affects other Swedish market rates (the interest rate channel), the banks’ lending to the general public (the bank channel) as well as other asset prices, such as share prices, and the exchange rate (the  BIS Review 32/2002  1  exchange rate channel). The size of the impact made by a change in the interest rate on households’ mortgages or on share prices varies over time. Monetary policy can also have an effect via households’ and companies’ expectations of the future. An inflation target of 2 per cent shall act as a kind of nominal anchor for expectations regarding the future development of inflation and thereby affect pricing, rates and wage-setting. When it comes to setting prices and wages, a major role is played by the expectations of the parties on the labour market or companies and households as to how the Riksbank will react. That is to say, they trust that the Riksbank will on average deliver an inflation rate of around 2 per cent. We know that forecasts are uncertain. We not only have a tolerated deviation interval and a mediumterm target horizon (normally 1-2 years), we also try to assess the uncertainty of the forecast for each forecast we make. Is there a normal level of uncertainty, higher than normal or lower than normal? This is illustrated in the Inflation Report by means of an uncertainty interval with different outcomes for inflation.
Such asset purchases involve taking more credit risk onto the public sector balance sheet. That is why the Bank will consider purchasing only high quality assets. Despite the existence of a range of unconventional instruments, monetary policy is likely to be more effective when the banking system is working normally. So the first priority for policy is to fix the banking system so that it can resume its normal lending function. The contraction of lending to ordinary viable businesses – your businesses – is threatening to drive the economy further into recession. The package of measures announced yesterday by the Chancellor are not designed to protect the banks as such. They are designed to protect the economy from the banks. In particular, the Asset Protection Scheme aims to remove a degree of uncertainty about the future losses banks will make. It also has the effect of reducing the amount of capital banks need to hold against their risky assets. Both effects will serve to strengthen and underpin banks' balance sheets and so support their lending to the real economy. To be clear, the scheme does not mean that the taxpayer will bear the full brunt of past lending mistakes by banks. Rather, there is sharing of losses between shareholders and the government – or coinsurance – with the government providing, at a price, insurance against only extreme outcomes for the banks.

At the same time, it is common knowledge that the law has assigned most of the costs associated with granting a mortgage to the institution. Some institutions have even decided 10/15  to assume the cost of appraisal as well, which is in practice the only one that the law places upon the customer. In addition, the requirements relating to the minimum number of instalments that must be due and payable before it is possible to initiate judicial enforcement proceedings, will delay the recovery of debt outstanding on non-performing loans, which will inevitably increase the costs of the foreclosure process. This will also initially have negative effects on the overall level of non-performing mortgage loans. Clearly, banks, like any other firm, can only survive if they are profitable. Consequently institutions must be able to measure the costs and risks associated with each new transaction. I would like to stress here that, to guarantee their viability and to be able to adequately remunerate their capital, each individual institution must have an appropriate pricing policy allowing it to cover all the costs and risks associated with each loan, and must establish governance structures and management processes that ensure effective management of such risks. When assessing solvency and assigning an appropriate price to each new transaction, institutions will have to optimise the use of the information available on their customers. For this purpose they need to have technological solutions enabling such information to be appropriately collected and used efficiently subsequently.
It is an important precedent, which shows that when needed the euro area can take important decisions and cooperate swiftly. The Eurogroup probably won't need to meet regularly in this format – as this would risk overshadowing the finance ministers’ meetings – but now at least it is an option, a feasible one. Let me give you another example of ongoing political integration. The current crisis has shown the need to strengthen prudential supervision and, in particular, its links with central banking. This is a recommendation contained in various documents and reports, in particular that of the Financial Stability Forum’s to the G7 Ministers and central bank governors. Several countries will be moving in this direction. In the US the Federal Reserve will receive  4  BIS Review 20/2009  greater responsibilities for macro-prudential supervision. The euro area has a centralised decision-making process for monetary policy but a de-centralised system of supervision. The conclusion is obvious: cooperation between supervisors needs to be much stronger within the euro area. This also implies that the ECB, which conducts the monetary policy for the euro area, should be entrusted with greater supervisory powers, in particular concerning macro-prudential supervision. There should be a broad consensus on such a proposal among euro area members. However, this can be implemented only by activating article 105.6 of the EU Treaty, which requires unanimity of the EU member states. Will some noneuro area members oppose this? A final word on political union.

So, have we done enough in terms of financial inclusion? 14. The pandemic has taught us that we must deepen our commitment to financial inclusion. And we should try to weave that into our financial development objectives going forward. In fact, our ability to enhance the financial inclusion role can be helped hugely by technology. With technology, our banking system can provide a more equitable and fairer access to banking services for all. 15. And this brings me to the second role the financial system can play – to build a smarter financial system. Let me share with you an example of how a smarter financial system can help promote financial inclusion. For a long time, SMEs have found it difficult to obtain bank financing without collateral, because banks lack reliable and timely financial data to assess the repayment ability of SMEs. 16. We believe that the introduction of the Commercial Data Interchange can help address this long-standing pain point. This next-generation financial data infrastructure can facilitate banks’ access to customers’ commercial data with their consent. With such data, banks can apply advanced data analytical tools for credit risk assessment. This could allow corporates, especially SMEs, without sufficient collateral or credit history to borrow more quickly, easily and at a lower cost. It is a win-win situation as this will also enhance banks’ risk management capability and unleash new business opportunities. 17. So, we strongly encourage banks, large or small, to embrace digital transformation to provide fair and efficient financial services to customers.
This is being displayed most obviously in the decline in lending margins already mentioned, particularly on residential mortgage lending which is a major part of the loan portfolio of most of the local banks. The margin has recently reached a new low of 2.25% below prime compared with the pre-crisis level of 1.25% above prime. To some extent this reflects the temporary conditions of a depressed property sector, sluggish loan demand and plentiful liquidity. As loan demand picks up, as inevitably it will, the decline in margins will stabilise and may even reverse somewhat. But lending margins are unlikely to get back to where they were before the crisis. Competitive pressures will be further intensified on the funding side when we deregulate current and savings accounts next year. This is due to take place at the end of June 2001, and will only be postponed if the prevailing economic and financial conditions are clearly unfavourable, which we do not expect to be the case. The banks therefore need to prepare for the pressure on margins that this will cause and to be able to quickly introduce new deposit products like interest bearing current accounts. If they do not do so, their competitors will. How do the local banks need to respond to these challenges? Most obviously, the challenges raise the issue of consolidation of the banking sector, through either merger or take-over. This is the trend we have seen happen in other financial centres, including in Japan.

No banks required financial assistance from the Government during the crisis, in contrast to the situation in some of our Asian neighbours where the cost to the public finances of bank rescues and restructuring could reach as much as $ billion. The rapid recovery in the Hong Kong economy is now helping to improve the banks’ performance and to bring down bad debts. In the first half of this year, the pre-tax operating profits of the local banks BIS Review 65/2000  2  from their Hong Kong operations rose in aggregate by more than 50% over the same period of last year. Admittedly, much of this was due to the reduction of 58% in the bad debt charge, which will be a temporary factor in improving profitability. But even at the pre-provision level, profits grew by about 15% compared with 1999. Surprisingly, after the publicity about declining margins on mortgage lending, the growth in profits was helped by an increase in the overall net interest margin. This reflected the fact that funding costs remained low during the period. The position of the local Hong Kong banks is therefore looking better than at any time since the Asian crisis. However, like the Japanese banks, the banks here are also faced by a number of important challenges, albeit on a smaller scale than those in Japan. Foremost amongst these is increasing competition.
The experiences of many countries, including Sweden at the beginning of the 1990s, show that the foreign exchange market should not be deregulated until the banking system has been reformed. Could China not revalue then and adapt the exchange rate to its trade surplus without floating its currency? In my opinion, this would not be such a wise decision either. It is wrong to attribute China’s trade surplus with the US to the currency issue. The surplus is probably best explained by the cost advantages enjoyed by Chinese producers in labour-intensive goods compared with the US. China’s trade surplus can be seen as a natural consequence of the division of labour within the Pacific region where China’s position as supplier and sub-supplier of low value-added goods is highly favourable for US productivity. This is a segment in which the Chinese compete with very few US producers, which is why an exchange rate adjustment would have only a marginal impact. In actual fact, an excessively large one-off adjustment would be required to have any effect at all on the US-Chinese trade balance. Such a large correction would in turn give rise to problems for Chinese trade elsewhere. It is with the US that China enjoys a large surplus, while the trade balance is close to zero or is negative with many other areas, including the euro area. This picture is confirmed by many fundamental analyses of an equilibrium exchange rate for China, which come relatively close to China’s fixed exchange rate today.

The economic purposes of these contracts include hedging or gaining exposure to: outright interest rate risk, basis risk, cross currency risk, and interest rate volatility. Banks, pension funds, insurers and hedge funds are all heavy users of Libor derivatives. Libor is also important for the real economy in the UK, with more than £ of SME and corporate loans, around £ of Floating Rate Notes and £ of structured debt referenced to sterling Libor. Libor’s role here is typically to provide a transparent and widely accepted reference point for the floating interest payments on loans. The dominance of Libor might be taken as evidence of the overwhelming need for Libor-linked financial contracts. However I do not believe this is the case. A large part of the reason Libor is so widely used is due to what economists call network effects. Using Libor is attractive because Libor instruments are liquid. This is self-reinforcing – liquidity drives use of Libor, which drives liquidity. In many cases the use of other benchmarks would be preferable for users. For example, most users of interest rate swaps are seeking to hedge the general level of interest rates, not bank credit risk. For this, near risk-free rates would be more appropriate. However, liquidity for long-dated sterling swaps is firmly rooted in contracts referencing six-month sterling Libor, and individual participants cannot change this.
Deleveraging by some international banks is leading to a pull-back into home markets. But some regulatory responses, not just market responses, may reinforce this pull-back, by restricting the flow of capital and liquidity outside home markets. Not only will this ring-fencing of national systems weaken international banking and trade, it may introduce new risks to financial stability when global banks are not able to deploy liquidity from one part of the banking group to other parts in need. Better international co-ordination in the implementation of rules is therefore needed to ensure that they serve their intended national objectives without weakening the global system as a whole and introducing new vulnerabilities. A sound financial system anchored by a core of strong local banks Just as we derive lessons from troubled banking systems, it is worth looking too at those that have not run into problems. It is notable that among the jurisdictions with systemically important financial centres, Canada, Australia, Hong Kong, and Singapore have held up well during the global financial crisis. A little remarkably, the top ten banks in Bloomberg’s latest annual ranking of the world’s strongest banks included four Canadian banks, the three Singapore local banks and two Hong Kong banks. There is no room for complacency – the financial crisis has shown how volatile financial markets can be and the speed with which contagion can spread. Banks have to be constantly vigilant against the build up of risks and maintain strong buffers against contingencies.

To reduce the lock-in effects and increase mobility in the housing stock, a review is needed of capital gains taxation when homes are sold, of property taxation and of the current tax relief on interest expenditure. Housing policy: The fundamental causes of increasing indebtedness need to be addressed. The fact that the housing market is functioning poorly, among other reasons due to the construction of new homes not corresponding to the demand, is an important cause of the indebtedness. It is therefore necessary to introduce measures that create a better balance between supply and demand for housing. Another reason why the housing market is functioning poorly is that the rent-setting system creates housing supply limits and lock-in effects that make it particularly difficult to find housing, particularly for young people and for people who are not yet established on the housing market. More rented accommodation would probably improve the balance of supply and demand. In addition, it is important to have measures that lead to the existing housing stock being used more efficiently. Suggestions in the area are not lacking either. See, for example, the recently published special study on more flexible rent-setting and uniform taxation from Finanspolitiska rådet (the Swedish fiscal policy council). 28 If such reforms are adopted, complaints over the amortisation requirements will also decrease. 28 Finanspolitiska rådet (2019). 10 [13]  “My vision” As you see, I have a strong desire for the housing market to change from the way it is today.