samchain/econo-pairs-v1 huggingface dataset:
6.4 The NPCs and the regulatory bodies should make all attempts to persuade retail payment service providers to use common national and inter-regional and infrastructure and fostering the standardization and harmonization of retail payment systems. The high cost involved in retail payment systems processes is not necessarily due to the large volumes or the wide array of payment instruments, but due to the use of a large number of proprietary infrastructure systems by service providers and the passing on of these high costs to users. While introducing customer-centric products, it is important to ensure that customers are protected and their rights are preserved. I hope some of the opportunities mentioned above and many others that will be highlighted during the rest of this Summit will be taken up by the banking community and service providers and that they will work closely with the SPC to take the region’s payment system development process forward. Thank you. 8  BIS Review 61/2008

This spread is influenced by a number of elements, such as the valuation attached to the right to service the mortgages underlying the security, and the annual guarantee fee that is paid to cover the credit guarantee provided by the government-sponsored enterprises (GSEs). The observed widening of the primary-secondary spread likely reflects many factors. Part of this widening is due to higher annual agency guarantee fees which are a necessary and overdue re-pricing of the credit guarantee provided to investors. While these guarantee fees differ by mortgage and by seller, the average effective guarantee fee has increased from 20 to 25 basis points to around 50 basis points today. But this still leaves a significant part of the spread left to be explained by other factors such as changes in originators’ costs and profits. As you all know, the primary-secondary spread is a technically imperfect measure of the pass-through from primary rates to secondary rates. A new study1, by authors including New York Fed staff, adjusts for these factors to come up with a measure of originator2 profits and unmeasured costs, or OPUCs. The basic picture remains the same, with OPUCs at historically elevated levels. The paper evaluates a number of potential factors that could help explain this increase. These include the decline in the value of mortgage servicing rights, credit losses and other costs associated with put-back risk, possible changes in pipeline hedging costs and other loan production expenses.
As far as we can see, these requirements have more or less had the effect that could have been expected: credit expansion has slowed down a bit and people who were previously taking very large loans are now taking smaller loans. 24 According to the random sample from 2018 upon which Finansinspektionen’s latest mortgage survey is based, the average debt-to-income ratio among new mortgage borrowers is 398 per cent, which is slightly lower than in the previous year. The proportion of new mortgage borrowers with mortgages exceeding 450 per cent of their annual gross income also fell between 2017 and 2018. The fact that many new mortgage borrowers are choosing to borrow amounts just below the stricter amortisation requirement indicates that this has affected households’ propensity to take out very large loans in relation their incomes and, ultimately, the kinds of objects they are deciding to purchase. 25 If a household has previously wanted to purchase a one bedroom flat in a metropolitan area at a price of just over 2,500,000 kronor, the macroprudential policy measures have made it more difficult for the household to purchase this object. However, it is important to use the terms correctly. Those households that have been affected by the amortisation requirements and that want to purchase a tenant-owned apartment have not been excluded from the housing market, but only from purchasing that one-bedroom flat for 2,500,000 kronor. Such households can, instead, choose to purchase another one-bedroom flat for a lower price.

I am well aware that both functional authority and tools lie beyond the Riksbank’s remit, but as household debt and problems on the housing market affect the way the economy works, this development is also a source of unease for the Riksbank. Housing prices have been rising for a long time To begin with, I would like to say a few words on how housing prices have developed in Sweden. Since 2005, they have more than doubled, but the price rise started before then. The fact that housing prices have risen so rapidly for such a long period of time and are now historically high can be explained by factors such as the imbalance between supply and demand for housing, rising real wages and lower taxes, which have increased households’ disposable incomes. 8 Housing prices fell in the autumn of 2017, but have since then recovered slightly. The fall in prices has also affected housing construction, which, after increasing strongly in recent years, slowed down again in 2018 and 2019. Over time, the development of housing prices has contributed towards increasing household indebtedness, even if the slightly weaker development in recent years has contributed towards lending for household mortgages now increasing more slowly than previously. All in all, this has led to household debt as a proportion of disposable income (the debt-to-income ratio) staying relatively unchanged over the last year, but being expected to continue to increase over the coming years. 9 The debt-toincome ratio for the entire household sector is currently over 186 per cent.
The purpose of these meetings is to enable the HKMA to get to know the future directors and chief executives better and to make clear the HKMA’s expectations of the roles and responsibilities their appointments will entail. It is important for all of us to appreciate that the ultimate responsibility for ensuring the safety and proper functioning of a financial institution rests with the institution itself. Regulation and supervision can only supplement or reinforce the process and cannot replace sound control and governance within the institution. (c)  Culture: the latest Global Financial Crisis and the subsequent developments have exposed clearly the fact that uncontrolled greed can and did generate highly undesirable outcomes. Not only were financial firms badly hit by these outcomes, but in some instances the reputation or brand of well-established financial centres has also been tarnished by these events. Of course, after the events many people sought to apportion blame. Obviously, the institutions concerned must take the bulk of the blame. Inadequate regulation and poor supervision were also culprits. But to me there is a much more fundamental issue that needs to be tackled if we wish to reduce the risk of similar events recurring. That is the culture and values of the financial firms and the market practitioners.

In Italy, the recent pension reform which approves the full transition to a contribution system completes the necessary correction of the pension spending dynamics which was started years ago. As Germany shows very well, large and effective welfare systems can be made more efficient without compromising social goals. We are living at a critical juncture in the history of the Union. The sovereign debt crisis has exposed serious weaknesses in the institutional framework; in this context, the difficulties in finding common solutions are having a negative impact on market valuations. The extraordinary measures taken by the ECB have gained us time; they have preserved the functioning of monetary policy. 2  BIS central bankers’ speeches  But we have now reached a point where European integration, in order to survive, needs a bold leap of political imagination. It is in this sense that I have referred to the need for a “growth compact” alongside the well-known “fiscal compact”. A growth compact rests on three pillars and the most important one, from a structural viewpoint, is political: the economic and financial crisis has challenged the myopic belief that monetary union could remain just that, and not evolve into something closer, more binding, into an arrangement whereby national sovereignty on economic policy is replaced by the Community ruling.
Svein Gjedrem: Uncertainty, economic models and 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, 17 September 2007. 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 15 August, Monetary Policy Report 2/07 and on previous speeches. *  *  *  I welcome the opportunity this time to discuss with you at the Centre for Monetary Economics certain themes that are not related to the most newsworthy economic policy issues. I will discuss the following three themes: •  the role of monetary policy  •  our view of economic models as a basis for interest rate setting  •  and finally, measuring inflation and uncertainty linked to the rate of inflation at a given point in time  Let me start by discussing the role of monetary policy. The primary objective of monetary policy is to ensure that inflation expectations are low and stable. Expectations of low and stable inflation provide a nominal anchor. Economic agents’ inflation expectations influence the decisions they make today. Our experience – and the experience of other countries – shows that without a nominal anchor we cannot achieve stability in employment and output.

The exit from exceptional monetary measures should be fully in the hands of the central bank and guided by its mandate of price stability. Fiscal authorities must also be credible and give guidance on their future actions, by committing to tightening the stance when the economy has recovered. They should follow a stronger countercyclical fiscal policy in good times, to create the space that is necessary in bad times. What Blanchard and Summers5 call “semiautomatic stabilizers” – stabilising fiscal policies that operate according to predefined triggers – could be an avenue worth exploring. Let me add as a conclusion that, against this backdrop, the Next Generation EU package constitutes a new and innovative element of the European fiscal framework, which contributes to a sounder policy-mix. Beyond the most recent political and institutional discussions, which belong to elected leaders, a quick implementation of this European Recovery Fund is an economic must. This innovation, while still a one-off, could also imply lessons for the Economic and Monetary Union, which from the start has lacked a permanent fiscal capacity at supranational level for macroeconomic stabilisation in deep crises. Either we succeed in designing – at end – credible and coordinated countercyclical rules for national fiscal policies, or we should think about some 4/5  BIS central bankers' speeches  central fiscal capacity, reversible in its use, controllable in its size, but effective through the cycle. This should be one area of discussion in the “European momentum” which the crisis has initiated. Thank you for your attention.
Likewise, to achieve greater consistency in the regulatory framework, it has also been necessary to review the national application of the various options permitted under European regulations. European solvency regulations – namely the Directive and Regulation on capital requirements – confer some degree of discretion upon Member States and national supervisors in the implementation of specific regulatory aspects. Such aspects include the timetable for the progressive adoption of new solvency standards and the granting of exceptions in respect of compliance with certain prudential requirements. This degree of national flexibility had to be accepted at the time by European legislators in the complex Directive and Regulation negotiations. Naturally, the fact such a diversity of rules are in place hampers supervisory action and prevents the homogenous treatment of banks based on their objective position. Accordingly, in recent months, the SSM Supervisory Board has worked intensely in this field. Their efforts have seen a preliminary agreement allowing a common approach to be adopted in relation to the application of these “national options and discretions” in the hands of the supervisory authorities. The terms of this agreement are now being subjected to public consultation, a process which will finalise on 16 December.

Only with powers and plans to resolve cross-border banking groups can we arrest the risk of national regulators progressively putting up barriers to cross-border finance. A lot of progress has been made over the past few years. For most Global SIFIs it is fairly apparent whether, at least with their current structures, they are best suited to single-point-ofentry or multiple-point-of-entry resolution. Once home and key host authorities have determined a preferred resolution strategy, we need to ensure that minimum levels of goneconcern loss‑absorbing capacity are maintained in the right parts of each group; and that any necessary changes to group structure are made. Behind the scenes discussions on individual firms are underway in official-sector Crisis Management Groups or at more senior levels. Those planning discussions will need to intensify as more key jurisdictions put the necessary statutory regime in place. The crucial next step is for a EU resolution directive compliant with the FSB Key Attributes to be passed. With the stakes so high, it is the moment to press ahead. This can transform international finance for the better. BIS central bankers’ speeches  11
15 The SNB, in its Financial Stability Reports from 2003 onwards, pointed out that both big banks were highly leveraged in an international comparison. 16 Together with the SFBC, the SNB was also an early advocate within the Basel Committee on Banking Supervision of an international tightening of capital requirements for big banks. However, these calls failed to garner enough support, and, due to 12  For example, cf. Stulz (2008) and Basel Committee on Banking Supervision (2016). 13  For example, cf. UBS (2004), p. 7: ‘We have an ambitious vision – to be recognized as the best global financial services firm. We are the world’s largest wealth manager, while in the investment banking and securities business we are in a select bracket of major houses.’ 14 Cf. Control Committees of the National Council and the Council of States (2010), p. 3104. 15 Cf. FINMA (2009), p. 22. 16 For example, cf. Swiss National Bank (2003). Page 7/14  considerations relating to international competitiveness, it was decided that Switzerland would not go it alone. 17 At the same time, the Swiss authorities and banks, like their peers elsewhere, also fell victim to the widespread over-reliance on models, leading to a distortion of risk assessment. Thus in 2004 the SFBC, for instance, granted UBS permission to use its own adapted risk model to assess the market risk, i.e. the financial risk, stemming from changes in the market valuation of the bank’s assets.

A data-dependent normalization means policymakers need to see tangible evidence of a solid recovery, prior to any policy tightening. 2/4  BIS central bankers' speeches  Given the fragile recovery policymakers would be best advised to lean on the side of caution. Faced with additional shocks, we believe our priority should be to offer additional accommodation to the economy. However, policy makers should be careful in getting the policy mix right so that potential long-term costs do not outweigh short term benefits. To that extent, we believe: Fiscal policy should provide additional support, subject to existing fiscal space. So far, public sector sin the developed economies have little financing constraints, partly on account of massive injections of liquidity from central banks. The same appears to be true also for the emerging market economies, such as Albania, which continue to enjoy both market access and relatively low financing costs. However, the fiscal authorities of emerging market economies should be mindful on the need to preserve market credibility on the sustainability of their finances. Financial intermediaries – such as banks – have also shared their fair share of the burden. They would naturally absorb a large part of the additional financial costs incurred in case of further shocks. However, financial and macroprudential policies should avoid the temptation of shifting an ever increasing part of the cost on the banks’ balance sheets. Financial stability and a robust banking sector remain paramount for the long-term growth. Finally, monetary policy should offer additional stimulus.
The tactic would have undercut our primary goal in providing AIG with necessary liquidity – enabling AIG to pay creditors, maintain consumer, regulator, and counterparty confidence, and avoid default. A default would have triggered AIG’s bankruptcy, with all of the systemic risk that bankruptcy would have entailed. While these tactics have been used in certain sovereign debt restructurings, they can be used there only because sovereigns cannot go bankrupt, and only with months of pre-planning. Any attempt to condition our lending would have created further uncertainty in a time of panic as to which of AIG’s counterparties would get paid and which would be forced to take substantial losses. One of our objectives was to calm market participants, and uncertainty (and the allegations of favoritism that surely would have followed) does not do that – it fuels fear. Would the conditions extend only to AIG’s Credit Default Swap (CDS) counterparties, or might the Federal government make value judgments as to other AIG contracts? Would senior unsecured debt holders be forced to take concessions? And most importantly, would a creditor who was pressed for a discount simply refuse and declare a default? Conditional lending would have heightened the risk of an AIG default, which is what we were trying to – and did – avoid. The default risk would have been exacerbated by the credit rating downgrade that almost certainly would have followed any effort by AIG to coerce creditor concessions.

Banks sharply curtailed their lending. A full fledged panic had started and was spreading rapidly; the financial system was facing the threat of collapse. In light of the circumstances at the time, a bankruptcy filing by AIG would have had disastrous consequences. Federal Reserve Chairman Bernanke has stated that it could well have “resulted in a 1930’s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs.” Because of the decisions made that morning, we can never really know. Let us be clear, though, about the risks that the policymakers did know. Policymakers knew that AIG’s largest creditors were other financial firms and that those firms clearly would have been directly impacted by an AIG bankruptcy filing. But the gravest risks were not the direct exposure of other financial firms to AIG. The gravest risks related to the indirect consequences of a bankruptcy of AIG, indirect consequences that would impact millions of Americans. AIG’s role as one of the world’s largest and storied insurance companies meant that its failure likely would have had a contagion effect, causing damage as it spread throughout the insurance industry. Policy holders would be hurt. Municipalities, who were already reeling from a lack of financing options for their building projects, would have seen their financial protection disappear. Workers whose 401(k) plans had purchased $ billion of insurance from AIG against the risk that their stable value funds would decline in value would see that insurance disappear.
Although they are second in the risk-bearing queue, debt-holders as well as equity-holders would be expected to shoulder, and hence price, this balance sheet risk. This could be done either by raising its cost or by restricting its quantity. Either way, debt would then serve as a restraining device on riskhungry, rent-seeking shareholders. In theory, this debtor discipline mechanism ought to work like a dream. Under the assumptions of Modigliani and Miller (1963) (MM), the pricing of risk by debt-holders ought to neutralise fully any effect of increased leverage on the value of the firm. Provided  12  Anglo-Continental Guano Works v Bell (Surveyor of Taxes) (1894) 3 TC 239. 13  Farmer (Surveyor of Taxes) v Scottish North American Trust, Ltd (1912), AC 118. 14  For example, the introduction of a separate corporate tax schedule in the UK in 1965 led for a time to the double taxation of equity. 15  These investors account for perhaps half of the US equity market and two-thirds of the UK equity market. 6  BIS central bankers’ speeches  shareholders maximise firm value, and the world behaves according to MM, debtor discipline ought to defuse completely incentives to gear-up. Figure 3 illustrates the point diagrammatically, showing payoffs to debt and equity. They are a mirror-image. The downside risk avoided by equity is assumed by debt and vice-versa for upside returns. In principle, then, combining debt and equity would lead to offsetting payoffs, neutralising risk-taking incentives.

Since the beginning of this year, lower risk premiums have accompanied a stronger krone. Developments in the GRI were also an important factor during the Russian crisis in 1998-1999. When global risk premiums and interest rates are low, investors may turn to higher-yield currencies. There is also a tendency for more peripheral currencies to attract increased attention when volatility between the major global currencies is subdued and risk premiums are low. The interest rate differential has been an important explanation for the movements in the krone exchange rate, at least since the summer of 1999. A higher interest rate differential has accompanied a stronger krone. The krone has appreciated significantly since the beginning of this year, however, and apparently somewhat more than what can be explained by the interest rate differential alone. One explanation may be that market participants react to signs of pressure in the economy by adjusting their interest rate expectations in the longer term. This has an impact on longer-term interest rates. Thus, movements in the exchange rate may be a result of changes in forward rates, as well as current interest rates. Since early January, the 12-month money market differential appears to have followed the krone exchange rate more closely than the 3-month differential. The pressure on internal resources seems to have resulted in expectations of tight monetary conditions, which contributed to the recent appreciation of the krone. The nominal appreciation of the krone has been accompanied by a significant real appreciation of Norwegian labour.