samchain/econo-pairs-v1 huggingface dataset:
Macroprudential regulation and financial imbalances Macroprudential regulation of banks must be based on an understanding of how systemic risk arises. This understanding has been brought a step further since the financial crisis. There is a growing academic literature on the basis for macroprudential regulation. One of the main themes is how systemic risk can arise in the interaction between the financial sector and the real economy. Research is at an early stage, and so far no specific framework stands out. Some conclusions seem, however, to be robust across the various approaches. Many studies single out rapid credit growth in particular as a symptom of rising systemic risk. The theoretical literature is based on the principle that credit is a good. Borrowing enables households to smooth consumption over the life cycle and businesses to finance investments, thus promoting prosperity. But the literature also shows that debt can lead to vulnerability. Risk can be priced too low as a result of market failures of various kinds. Mispricing can contribute to excessive debt and the build-up of financial imbalances. Regulations that counteract credit swings may lead to fewer and less severe economic downturns. Chart: Rapid credit growth leads to deeper downturns The relationship between debt and systemic risk also finds support in many empirical studies. This chart shows the results of a study conducted by Jordà, Schularick and Taylor on downturns in 14 advanced economies, including Norway. 1 The study covers the period from 1870 to 2008. The chart illustrates two important findings.

The interest rate works through different channels, such as the house price channel. A lower key policy rate may lead to higher house prices via lower lending rates. This may, in turn, have a positive impact on consumption. If the ability to borrow against home equity is reduced, the house price channel will become weaker. Monetary policy, for its part, can be one of several factors that lead to a build-up of financial imbalances. History has shown that long periods of low interest rates can increase the risk that debt and asset prices reach unsustainable levels. Expectations of low interest rates may become entrenched among banks and borrowers when interest rates remain low for a long period. This may result in rapidly rising house prices. With low interest rates and rising house prices, banks may apply more lenient credit terms. We have also witnessed that low interest rates can prompt financial market participants to search for higher yields from alternative and often risky assets. Macroprudential regulation and monetary policy will often pull in the same direction. If the economy is booming, with rising inflation prospects and the risk of a build-up of financial imbalances, a tightening of monetary policy and capital requirements can underpin both objectives at the same time. Likewise, a pronounced downturn with increased banks losses can be addressed by lowering both the key policy rate and capital requirements. But in some situations, it may be appropriate to reduce the key policy rate at the same time as the capital requirements are tightened.
With consent, third parties can use MyInfo APIs to access data that is government-verified to authenticate their customers and make business decisions relating to that customer. Last year, MAS and the Government Technology Agency of Singapore (GovTech) started a pilot with four banks to enable individuals to open a bank account online using MyInfo. Today, we can open a bank account or apply for a credit card - online and instantly – when we give consent to the bank to access our data through MyInfo. More than 20 FIs are now using MyInfo to provide more than 110 digital financial services. We have substantially solved the personal KYC problem. But corporate KYC is far more complex. Last year, I shared with you that MAS is working with local and foreign banks to explore a shared services utility for doing corporate KYC. This is potentially a transformative project. And we made good progress in harmonising various banks’ KYC systems and integrating the proposed KYC utility with the banks’ infrastructure. This is no mean feat given the diversity of banks’ KYC processes and internal IT systems But the economics did not work out: our proposed solution was going to cost more than the savings that banks will get out of it. So we have decided to take a pause on the project. The banks participating in the KYC project will publish a report this week on their learning experience.

Ravi Menon: Singapore FinTech - innovation, inclusion, inspiration Presentation by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at Singapore FinTech Festival 2018, Singapore, 12 November 2018. * * * Ladies and gentlemen, good morning. What a man and what a story. Saqib’s story shows how technology can help find innovative solutions to real problems. It shows how innovation guided by empathy can help create a more inclusive society. And of course it is a story that is inspiration to all of us – to do better, to be better, to help others. That is why we asked Saqib to kick off the third edition of the Singapore FinTech Festival this morning. Because Saqib’s story exemplifies what Singapore’s own FinTech journey is all about – innovation, inclusion, inspiration. Innovation – because we want to find better ways of doing things. Inclusion – because we want to benefit as many people as possible. Inspiration – because amidst all challenges around us, there is hope in a better world. Please join me once again in thanking Saqib for being here with us today. Financial Services Built Around Us Welcome to the third edition of the Singapore FinTech Festival (SFF). This year, we have close to 40,000 participants from more than 100 countries. SFF has become the biggest annual gathering of the global FinTech community. You guys made it happen. Thank you all for your overwhelming and unstinting support.
21 Therefore the focus of MAS’ monetary policy, as before, is on Core Inflation. Just as we were not unduly alarmed when All-Items inflation was running at 5%, we should not be complacent now just because All-Items inflation is running below 2%. Our focus remains on Core Inflation, which has persisted at 2–3% for the last few years. Monetary policy has therefore been steady and consistent during this period – a gradual and modest appreciation path for $ since April 2010. This was reaffirmed most recently in April 2014. This policy stance will ensure that Core Inflation stays within 2–3% this year. 22 We expect Core Inflation to be higher than historical average of 2%, during period of economic restructuring next few years. The aim of our monetary policy is to keep core  2  BIS central bankers’ speeches  inflation expectations anchored at around 2.5%. Inflation may exceed this level from time to time but we aim to ensure that it does not do so on sustained basis. Property cooling measures working but too early to ease 23 Next, I will touch on to the property market. 24 The MAS has also been focused on asset price inflation in recent years, especially in the property market. The MAS, working with other government agencies, has introduced several rounds of measures to cool an overheated property market. 25 There were three motivations behind MAS policy measures. •  Anchor inflation expectations. High and rising asset prices could fuel expectations of still higher general prices.

Year-on-year growth of household debt has moderated from nearly 13% in the third quarter of 2011 to 5.5% in the first quarter of 2014. Second, the risk profile of new housing loan borrowers has improved. Almost all new housing loans granted since introduction of Total Debt Servicing Ratio, or TDSR, were within the 60% threshold. 27 But it is too early to ease property-related measures 28 The measures can be broadly categorised into structural and cyclical measures. •  Structural measures include the TDSR and caps on loan tenures. They aim to ensure that households do not take on financial obligations beyond their repayment capacity. Structural measures are therefore meant for the long-term. •  Cyclical measures include MAS’ LTV limits and MOF’s stamp duties. They are designed to prevent households from over-extending themselves in purchasing property during periods of rapid price increases or elevated prices. Cyclical measures can be recalibrated according to market conditions. 29 It is too early to unwind cyclical measures as the risk factors have not changed. BIS central bankers’ speeches  3  •  Property prices remain at elevated levels. Prices went up 60% over last four years but have declined by just 3.3% over the last three quarters. •  Global interest rates are still at historical lows. Relaxing property measures in the current easy liquidity environment may set off another spiral of price increases. •  The level of debt among highly leveraged households remains high.
For example, a million U.S. dollars, made up solely of $ bills, would form a stack measuring approximately 43 inches or 109 centimeters in height and weighing 22 pounds or about 10 kilos. Consequently, currency is inconvenient to use, especially for those who seek to make large investments or payments. Second, currency is subject to theft, requiring a big investment in security and insurance. Third, recounting currency every time it is moved or transferred between people entails time and expense. Finally, currency is subject to degradation, accident, fire, counterfeiting, and other mishaps. Because currency is costly to invest in, then we could refine the proposition we stated earlier to say that a person would invest a dollar in an account or bond that promises to pay back less than a dollar so long as the person could not preserve more of his or her initial wealth by investing in currency, net of its costs. So one might suggest that it is the negative net return on currency that establishes the lower bound to interest rates – zero is only a rough approximation. This formulation is sharper, certainly, but it may also be too blunt for the following reason. Notice that the costs of handling currency vary by the size of the investment one is considering.

Until there are equally secure electronic means of providing that anonymity, eliminating currency is not warranted. Economists have proposed many clever ways to implement the taxation of currency, or, equivalently, the payment of interest on currency holdings. Some of the proposals entail decreasing the value of the currency by imposing a negative rate of interest. This can be likened to making currency out of ice. As you can imagine, such cold currency would slowly disappear as the ice turns into liquid water. (Other proposals would, in effect, attempt to raise or lower the temperature of the air surrounding the ice money.) One might conjecture that the loss of purchasing power is the same whether a person holding a dollar for a period of a year sees the value of that dollar decline owing to inflation of 1 percent, or because he had to pay a penny of interest in an environment of stable prices. However, there is a subtle difference between a negative rate of interest charged on currency, and inflation decreasing the value of currency. With inflation, a dollar remains a dollar, but its purchasing power declines. In contrast, with negative interest rates, the dollar of currency is slowly whittled away as one makes interest payments, even though its purchasing power can remain unchanged (this would be the case if prices fell by the same rate as the negative interest rate). In other words, the value of the unit of account is unchanged when a negative interest rate is charged on currency.
As for the special instruments to provide liquidity, we are currently developing such a mechanism. We believe there could be liquidity provision lines for banks experiencing temporary liquidity shortages, not necessarily because of information attacks, but due also to various other factors. Having said that, we assume that these banks should be either solvent or explicitly capable of restoring their solvency independently in the near future. As we understand it, the intention is not to fund insolvent banks by means of these liquidity lines. We are currently working to determine possible parameters of such liquidity lines and to introduce them to our toolkit, because, as you may see, structural liquidity surplus has saved us the necessity of providing refinancing. The demand for both 312P (BoR loans secured by nonmarketable assets) and refinancing through the use of the Lombard list is falling. We will gradually revise these procedures. We are raising the requirements for securities to be included in the Lombard list and will continue to do so. However, you were certainly right to say that under these conditions such liquidity lines are increasing in significance in the face of unforeseen liquidity shortages in banks. We will certainly be working on it. QUESTION from Reuters: You have mentioned banking licences. Some large state-owned banks, such as Sberbank, as well as some bank products have increased their market share during the crisis. Being a regulator, does the Bank of Russia monitor competition in the banking market? Do you believe Russia still has a competitive banking environment? Thank you.

An economy being a living organism, it is only natural for inflation to hover around 4%, that is, slightly higher or slightly lower on any given day. This figure may appear as early as this year. This is a completely normal situation, without any indication of risk whatsoever. This is the way it should be. Risks may emerge only if we see either a substantial or lengthy deviation in the rate of inflation in either direction from the 4% target. 4 / 14  BIS central bankers' speeches  You will recall that in the early days of inflation targeting this range was defined as 4% plus or minus 1.5 percentage points. We rejected this range, for the following reason: we did this because both analysts and market players were of the opinion that we were aiming for a point outside the middle of this band, with expectations tending towards its upper limit. We decided to put the plug on this scheme and make known our intentions to ensure a sustainable downward movement in the rate of inflation towards the target. However, we leave open the possibility for this variation range to be reinstated once we have hit our 4% inflation target. Such a range exists in many economies, and it is open to variation. I think this issue will be on our agenda this autumn as we develop our Monetary Policy Guidelines; at this time we will look into the need for this range and its potential impact on our communication policy. Thank you.
Since then, MAS has been actively refining the regulatory framework and approach. We are currently undertaking a comprehensive review to enhance the risk-based capital framework, taking into account evolving international standards and market developments. In particular, we are seeking to improve the comprehensiveness of the risk coverage and the risk sensitivity of the framework. Conclusion Let me conclude. The operating environment – be it for individuals or enterprises – is becoming more complex and uncertain. Managing risk has become an increasingly important part of our existence, and doing it well has become a key determinant of success. Insurance – at its core – is about managing risk. You are in an industry that serves a larger public purpose. You are also in an industry that has great promise. Asia offers tremendous opportunity for the insurance industry. As the leading insurance and reinsurance hub in Asia, Singapore is well-equipped to serve the growing needs of the region. But to become a global marketplace for insurance, we have to continually reinvent ourselves. The industry’s support and partnership are critical to the achievement of this vision. Let us work together to build a truly global insurance marketplace in Singapore. Thank you. 6  BIS central bankers’ speeches

This is a substantial project that will take about a year to complete. In the meantime, we shall be issuing new and revised supervisory guidelines in the new format as they come off the production line. Conclusions To sum up, our reform package is not intended to be revolutionary. The Hong Kong banking system is already well-managed and competitive. But even good players need to improve their game as conditions become tougher. The main responsibility for doing this in the Hong Kong banking context will rest with the banks themselves. We in the HKMA are trying to do our bit by removing possible barriers to change in a cautious manner, and by making sure that our supervisory approach remains appropriate to the changing market environment. 5  BIS Review 69/2000
However, it can be difficult to achieve the right balance In theory, balancing the need to achieve the inflation target and the need to stabilise the real economy seems relatively simple, even when there is a conflict between these objectives as in 2008. However, when it comes to conducting monetary policy in practice, achieving the right balance is not always so easy. One problem that I have probably underestimated in the past is that there are no simple and unambiguous measures of how much of the economy's resources are being utilised and what should be considered as a normal level for what we call resource utilisation. In theory it is relatively easy to define the so-called production gap. It is often defined as the difference between what is actually produced and what could be produced if the resources available were used to the full. But I do not really think that it is possible to measure this gap with any great degree of precision. One problem is that it is difficult to measure how much could be produced if all the resources were used to the full. This, which is sometimes called potential production, can not be observed directly but must be estimated. 1 At the same time, there is a great deal of uncertainty about the best way to perform such an estimate.

There is also great uncertainty about how strong and stable the recovery will be. It is positive that there has been a clear improvement in the situation on the financial markets. This reduces the risk of a serious setback. On the other hand, the situation on these markets has not completely normalised. Central banks around the world will continue to use various measures to help the banks find funding. The extensive fiscal policy stimulation measures that have been and are being implemented in all the major economies have in all likelihood helped to dampen the fall in GDP. But, they are also leading to increases in national debts. This can create anxiety among the households and thus entails a risk that recovery will stop short. Nevertheless, the situation looks brighter today than it did a couple of months ago. This in itself justifies a somewhat tighter monetary policy than that which we regarded as a wellbalanced monetary policy in July. However, there are also factors that can have the opposite effect and thus represent arguments for a more expansionary monetary policy. The development of the krona has been stronger than we expected. Just as it is difficult to explain the earlier weakening of the krona in terms of developments in the Swedish economy, it is difficult to explain the recent appreciation in the krona. The best explanation might be that it is a question of an adjustment towards more normal levels after the exchange rate had strongly deviated from its long-term reasonable rate.
The banking sector should carry out a reassessment of the stability of the borrowers’ business model, under the post -Covid reality. Clients facing temporary financial difficulties but with stable business models, should be supported with liquidity and temporary operational easing. Clients facing serious difficulties may be supported through the restructuring of credit, always so far and at the level that the long-term perspective of the business remains solid. On its side, the Bank of Albania will encourage a pro-active approach of the banking sector towards this process, without prejudice to the stability of the sector and transparency of its balance sheets. Lastly, the fifth challenge is the safeguarding of the monetary and financial stability of Albania. In this regard, I would like to underscore that: The Albanian business should show transparent and loyal to the banking sector. This sector should provide its help to face the crisis, but it may not counter alone its financial costs. Also, banking sector should find a fair equilibrium between the support to borrowers in need – in a bilateral long-term interest and benefit – and the safeguarding of its balance sheet soundness. As I already mentioned, the monetary and financial stability is not negotiable to the Bank of 3/4  BIS central bankers' speeches  Albania. In compliance with our legal mandate it has been and will continue to be the milestone of our polices.

Discussions are ongoing among central banks as to what the significance of low interest rates will be for monetary policy and how the scope for monetary policy to act in economic slowdowns can be increased. One conclusion is that complementary monetary policy measures of the type used by many central banks in recent years, such as the purchasing of various assets, may become more common in the future. Other feasible measures in the monetary policy toolbox are loans directly to companies via banks, and foreign exchange interventions. 11 [13]  The new environment also affects other policy areas Another possibility is other policy areas being used more actively to stimulate the economy in times of recession. In the international debate, it has, for example, been said that the limitations imposed on monetary policy by the low interestrate environment mean that fiscal policy may need to contribute to stabilisation policy to a greater extent than before. 13 I think, to start with, that it is important to point out that monetary policy has not be exhausted as a result of the policy rate being lowered as far as is practically possible. As I just mentioned, there are several tools in the monetary policy toolbox that can be used if need be, in order to stimulate the economy. That said, there are obviously feasible tools in other policy areas as well.