samchain/econo-pairs-v1 huggingface dataset:
And finally, wealth management  3  Data from the SNB’s Swiss Balance of Payments 2011 report shows that international receipts from bank financial services stood at CHF 15.1 billion in 2011, equivalent to 43% of the total value added in the banking sector in 2011 (CHF 35 billion as reported by the Swiss Bankers Association). The Swiss Bankers Association reports that in 2011, around 51% of assets under management at Swiss Banks originated from foreign customers (cf. “Der Finanzplatz Schweiz und seine Bedeutung”, Swiss Bankers Association, 2012). 4  It is important not to underestimate the economic importance of international transmission of financial shocks via bank linkages. Goldberg and Cetorelli (2010) document the fact that global banks transmitted the international shock during the 2007–09 financial crisis to emerging market economies, leading to both cross-border lending contraction and contraction of domestic lending. BIS central bankers’ speeches  3  will have to adapt to changing international standards and international tax agreements. In such an environment, it is hard to maintain profit margins and retain clients. The second challenge for the Swiss financial sector relates to signs of overheating in the Swiss residential real estate market. Over the past two years, the SNB has repeatedly drawn attention to these risks. Residential mortgages are very important in Switzerland since they account for around 70% of the assets of domestically oriented Swiss banks. There are signs that residential properties are overvalued in the Geneva, Zurich and Zug regions, for instance, as well as some tourist areas.

First, banks play a crucial part in the transmission of monetary policy. There are various channels through which monetary policy is transmitted to the economy, but the primary channel is via changes to the short-term nominal interest rate, in other words, via the cost of borrowing and the return on savings. Monetary policy thereby affects investment and consumption decisions throughout the entire economy, thus influencing business level activity and price dynamics. In its implementation of monetary policy, the SNB provides short-term liquidity to the banking system, and not directly to firms and households. Banks, as financial intermediaries, in turn transmit these monetary policy decisions to the real economy. The extent, however, to which the banks respond to these decisions – by changing their interest rates on deposits, loans and their credit supply – depends on a number of factors, such as the degree of competition, but also the banks’ balance sheets. The effects of monetary policy can thus be impaired if banks have poor balance sheets. Thus, the banks’ function as financial intermediaries is a welcome and influential channel through which the SNB’s monetary policy decisions affect the economy. There is, however, a downside to this role. The banking sector can also propagate large financial shocks to the rest of the economy. In other words: the financial industry itself can have a large impact on the economy. In Switzerland, the propagation of financial shocks to the real economy is potentially large in magnitude.
Let me therefore underscore that the move was taken just because we were concerned that the confidence we had established in the commitment to low inflation would be eroded when inflation rose rapidly and unexpectedly, clearly exceeding our target, at the same time as the exchange rate weakened dramatically. In many respects this development was confined to Sweden. When we lowered the interest rate in September, the situation was different. It is true that the krona was still weak and inflation above the target, but the terrorist attacks in the United States threatened to almost paralyse an entire world and subdue activity even more. Looking ahead, there are no grounds for ruling anything out. The repo rate depends as usual on our assessment of inflation one to two years ahead. The current assessment is being made against the background, for example, of international economic activity that threatens to be weaker than we foresaw in the Inflation Report in May. By itself, this points to a more favourable picture of inflation. On the other hand there is, for instance, the weak exchange rate. For a time, moreover, inflation has been higher than we counted on. To some extent this has to do with more transitory price increases for certain goods. But even when these are excluded, inflation has continued to creep up. The ultimate conclusion from our assessment is something to which we will be returning in connection with the publication of the year’s third Inflation Report on 16 October.

Current estimates suggest that approximately 7500 hedge funds manage assets totaling close to USD 1000bn (graph 1).3 Remarkably, according to the CSFB/Tremont Hedge Fund Index, there have been only a few quarters with net outflows since 1994.4 These figures demonstrate that the hedge fund industry has matured at an extraordinary rate and today constitutes a non-negligible component of the global asset management industry.5  1  A more detailed study on hedge funds will be published in the forthcoming Quarterly Bulletin of the Swiss National Bank (March 2005). 2  Alfred Winslow Jones is credited for the creation of the first hedge fund in 1949. His strategy consisted in combining long positions in undervalued stocks and short positions in overvalued stocks, in an attempt to minimise the influence of overall stock market moves. To magnify his portfolio’s return, Jones added leverage. 3  According to Hedge Fund Research Inc., 7436 Funds managed USD 973bn of assets at the end of 2004. Other sources may come up with different figures. 4  The CSFB/Tremont Hedge Fund Index is the largest asset-weighted hedge fund index. The CSFB/Tremont Index is broadly diversified, encompassing around 400 funds across ten style-based sectors, and representative of the entire hedge fund industry. Assets included within the CSFB/Tremont Hedge Fund Index amounted to USD 615bn in September 2004. Performance is calculated net of fees.
We are at a crossroads where economic policy action may be decisive in setting us once more on a path of growth and increasing well-being. My testimony today, as part of the Parliamentary discussions on the Budget, offers me an opportunity to analyse the role budgetary policy should play and the need for this policy to be underpinned by a series of structural reforms that remove the obstacles to a recovery in economic activity, in employment and in public finances. I shall begin with a brief reference to the international setting and to the economic outlook for the euro area. It is well known that these settings determine the behaviour of monetary policy. Regarding this latter point, allow me to remind you that the ECB Governing Council will meet later this week; accordingly, my appearance here is during what we call purdah period, and my comments should not be interpreted, under any circumstances, as a prelude to or anticipation of the monetary policy discussions or decisions at this meeting. After several quarters of continuous deterioration which led the world economy to the biggest contraction since the Second World War, the latest economic indicators are beginning to point to a pick-up in activity and in international trade, which is more evident in the emerging than in the more advanced economies, where the signs of improvement are somewhat more incipient.

The complexity of such a process means it is necessary to design forthwith efficient exit strategies, so that they may be implemented when the time is right. The euro area also shares, albeit to a lesser extent than other zones, these signs of incipient improvement. The latest economic data have been less adverse than expected and the quantitative and qualitative indicators coming to light point to a stabilisation of activity in the very short term which, according to the ECB's projection exercises, will be followed by a presumably slow recovery that will not be free from difficulty. Public finances have deteriorated considerably as a result of the operation of the automatic stabilisers, the discretionary measures to stimulate aggregate demand and action to shore up the financial system. In turn, the financial crisis and the fall-off in activity have severely affected certain European banks, which depend in part on public sector support and which remain subject to a deleveraging process whose scope is still not readily discernible. On the prices front, the risks of deflation have diminished substantially. Although the strong easing in commodities prices until mid-year meant that inflation turned negative, there is a broad consensus, of which the ECB is part, that anticipates inflation will resume positive levels towards the end of the year. Such levels would, however, be moderate for a relatively lengthy period, against a background marked by considerable slackness in productive capacity which will help contain potential inflationary pressures.
Our experience is that changes in the Norwegian interest rate level only have a predictable effect on the krone exchange rate when the change in interest rates also contributes to stabilising inflation. However, the relationship between interest rates and price and cost developments is uncertain. The setting of interest rates thus requires the use of professional judgement and discretion. The basis for exercising discretion is subject to limitations, however. Should any doubt arise as to whether the interest rate is oriented towards nominal stability, this would trigger substantial capital movements. House prices and real interest rate after tax Index 160  140  Per cent  8 Real house price (left-hand scale)  4  120  0  100  -4  Real interest rate (right-hand scale)  80  -8 1980  1984  1988  1992  1996  2000  An inappropriate setting of interest rates could easily jeopardise financial stability in the domestic economy. The experience of Norway and other countries shows that credit and property markets can be very unstable. If interest rates are kept at too low a level for too long, credit demand will rise  BIS Review 14/2001  3  sharply, as we witnessed in the 1980s. At that time, rising property prices generated expectations of further price increases, which in turn led to rising credit demand. When the bubble burst, recession ensued with falling asset values, a debt crisis and a growing number of bankruptcies.

The government’s motive for saving resembles the motives underlying saving in pension funds and life insurance companies. Among the government’s saving vehicles, investments in the National Insurance Fund and the Government Petroleum Fund are best adapted to this motive for saving. For both funds, there is a clear division of responsibility between the manager and the government, with the Ministry of Finance as owner. In the case of the Petroleum Fund, Norges Bank’s mandate is to achieve the highest possible financial return in keeping with the strategy and risk limits established by the government. The Fund’s investments are distributed among many countries and spread among a large number of equities and bonds. At end-2000, the Fund had invested NOK 153 billion in about 1800 companies in 21 countries, while NOK 234 billion had been invested in bonds in 18 countries. All ownership interests are now less than 1 per cent of the companies’ total value. A turnaround in one country or a region, which in isolation may be pronounced, will not have a major effect on the total value of the Fund. The value of the Fund’s equity portfolio will therefore shadow developments in prices on international stock exchanges. There is a substantial element of risk diversification, although we are not immune to the risk associated with the uncertainty in global developments. Along the same lines, the return on bond investments will reflect international interest rate developments. The Government Petroleum Fund is built up through transfers of petroleum revenues that are not used domestically.
Ong Chong Tee: Life insurance industry - riding the technology wave Address by Mr Ong Chong Tee, Deputy Managing Director (Financial Supervision) of the Monetary Authority of Singapore, at the LIA Annual Luncheon, Singapore, 7 March 2018. * * * Mr Patrick Teow, President of LIA Singapore Distinguished Guests Ladies and gentlemen Thank you for inviting me to join the 2018 LIA Annual Luncheon. Allow me to first congratulate the new LIA Management Committee. I last spoke at this event in 2015 on a theme of confidence and resilience of the industry. Last year, my Assistant Managing Director Lee Boon Ngiap spoke on the importance of strong culture and ethics as key drivers of good conduct. Today, I like to build on these themes with the backdrop of the technological wave sweeping our shores. For those of you who have visited London and taken its underground trains, you will be familiar with the rather famous broadcast in the Tube stations repeatedly telling commuters to “mind the gap”. In an analogous way, as technology innovation and business model disruptions impact various economic areas including the insurance sector, it is worthwhile to remind ourselves to “mind the gap” as we ride the technology wave. Let me elaborate. My remarks will cover three aspects: (a) Bridging the protection gap; (b) Leveraging FinTech (or more specifically, InsurTech); and (c) Doing more to eliminate ‘conduct gaps’. Protection gap Many studies have found sizeable insurance protection gaps across countries.

It is for these reasons that changes in the exchange rate level are only a last resort option for an economy like ours. It should be clear, therefore, that isolationist policies and expansionary fiscal, monetary and exchange rate measures cannot be relied upon to generate sustainable economic growth. There are indeed no easy fixes. The only viable option is to compete successfully in the global market-place. I believe that this objective should be approached by pursuing a virtuous triangle of mutually-reinforcing policies: i)  increasing the amount of resources available in the economy and the efficiency with which they are employed, by cutting costs and raising productivity;  ii)  focusing on the market niches in which we can excel;  iii)  ensuring the best international market access for our products and services. On the last of these points, there is at present a lively debate on the pros and cons of different arrangements with our main trading partner, the EU. While not wishing to enter the debate at this point, I cannot fail to observe that the uncertainty surrounding this issue is causing considerable harm to Malta’s economic prospects. It is in our common interest that the direction the country is to take be clarified as soon as possible. And this within a realisation that with Malta’s main competitors themselves seeking closer trade ties with the EU, we cannot afford to fall behind.
Jiří Rusnok: The changing world of central banking Keynote speech by Mr Jiří Rusnok, Governor of the Czech National Bank, at the conference of the Czech Economic Society, Prague, 17 May 2021. * * * Ladies and gentlemen, members of the Czech Economic Society, esteemed guests from the Czech Republic and around the world: Let me start by thanking the organisers for inviting me to this conference. It is an honour and a pleasure to be here today to communicate some thoughts about central banks. I will split my address into two thematic parts. In the first, I will talk about central bank independence, about the central banking paradigm from the historical perspective, and about some of the challenges that central banks face today. In the second, I will try to shed some light on the humdrum reality of our monetary policy decision-making during the Covid crisis. I say that with tongue in cheek, because, as you know, real-life decision-making is fortunately never humdrum. Let’s turn the clock back a few decades and briefly remind ourselves how central banks gained their independence and what consequences it had. This will help us understand the framework in which central banks have long been operating and the it is now facing. How did central banks gain their independence? Central bank independence stands on theoretical and empirical foundations.

The main argument for central bank independence is inflationary bias, the existence of which was confirmed by the high rates of inflation seen in most advanced economies in the 1970s and 1980s. Inflationary bias is the outcome of discretionary monetary policy that leads to a higher than optimal level of inflation. Two theoretical explanations were offered for inflationary bias. The first was the time, or dynamic, inconsistency of governments, and the second was governments’ efforts to introduce an “inflation tax” to reduce public debt. Time inconsistency occurs when policymakers announce that they will pursue a particular policy in the future but then follow a different one in reality because their preferences change in the meantime. The “today’s actions = tomorrow’s regrets” problem arises because time-inconsistent decision-makers value the present more than the future. The general solution to this problem is not to allow decision-makers to make discretionary decisions, but to impose certain rules on them instead. This was the conclusion reached by Kydland and Prescott in a pioneering paper published in 1977, which later won them the Nobel prize for economics. The theory evolved in two directions. In 1985, Kenneth Rogoff developed the rules argument by introducing the concept of a conservative central banker. According to Rogoff, society can sometimes make itself better off by appointing a central banker who does not share the social objective function, but instead places a larger weight on inflation rate stabilisation relative to employment stabilisation.
During the past four-year period, real wages have increased on average by almost 4% per year despite low nominal wage increases. This is to be compared with the fact that real wages only increased by a half per cent per year during the period of high inflation from 1975 to 1995 despite nominal wage increases during these years totalling 8% on average. The development clearly indicates that there has not been a positive correlation between high nominal wage increases and the development of real wages. High credibility for the goals of monetary policy has led to a reduction in inflation expectations. And stable inflation expectations per se reduce the risk for pay negotiations leading to higher wage increases than there is room for. Stable inflation expectations reduce the uncertainty of the parties as to what a nominal wage demand means for the real wage. This can in turn reduce the risk for wage spirals. Increased competition in globalised markets could also contribute to increased flexibility in wage formation. Globalised highly competitive commodity markets probably reduce the ability of businesses to compensate high wages by price increases. At the same time, it is probable that the strongly globalised capital market makes it more difficult for businesses to press down profit margins even in the short run. A conclusion is that businesses’ opposition to wage costs increases that cannot be sustained by productivity increases may have increased. Another change in the Swedish labour market is the tendency towards increased short-term employment.

The Basel Committee is thus introducing quantitative liquidity requirements for banks for the first time. Basel III works with two liquidity measures – one short-term and one long-term. The shortterm measure is based on, in principle, every bank having sufficient liquid assets to survive for at least 30 days. It is difficult to see such a requirement as unreasonable. The long-term measure, in principle, limits the gap between the maturity of a bank’s assets and the maturity of its debts. This limits the duration risk of the bank. …and particularly the regulation of systemically-important banks A particular focus has been placed on systemic risks and the most systemically-important institutions. To a great extent, this is a work in progress. So far, the Basel Committee has  1  2  In principle, Basel III defines Common Equity Tier 1 as share capital and previous profits. BIS central bankers’ speeches  identified almost 30 global systemically-important banks (G-SIBs). The list was published last week and includes one of the major Swedish banks, as you may have noticed. The Committee feels that it is particularly important that these banks have extra strong resilience. Those identified as G-SIBs should thus have an additional capital buffer, the size of which depends on how systemically important each bank is deemed to be on a global level. A framework should be put in place for how the authorities in different countries should handle them if they find themselves teetering on the brink.
Investment cycle is expected to be further strengthened by the continuation of the productive fiscal investments. As the external demand is envisaged to recover further, additional stimuli is expected through this channel. The above mentioned growth factors are expected to strengthen further the labor market and the disposable income of the households, hence boosting the private consumption as well. The growth expectations provide room for additional rise of the deposit potential in the banking system, which accompanied with the rise in the credit demand and the willingness of the banks to lend, should enable credit growth at a rate of 9–10% in the period to come. The inflation is expected to be influenced mainly by the global prices of primary commodities and the consumers prices of our main trading partners. An average inflation of 0.5% is expected for 2015, with the current forecast indicating its reversal to 2% in 2016, reflecting the rise in the demand and in the import prices. The structural improvements in the export sector are expected to continue in 2015, which along with the overall external recovery and the much lower oil prices, are envisaged to bring about a moderate current  2  BIS central bankers’ speeches  account deficit of bellow 1.6% of GDP. In the following year, widening to 3% is expected, reflecting the fall in private transfers and import pressures from the new investment.

Given that the banking system entered the crisis with sufficient capital and liquidity buffers, the credit flows to the economy in fact never seized. Yet, during the last year, on the backdrop of the economic recovery and the improvement in the overall risks perceptions, the credit accelerated to 10% on an annual basis, reflecting both the supply and demand for credits. A notable rise of the allocation of credits to corporate sector compared to the previous years was observed. Hence, both the size and the structure of credits were growth supportive. The financing of the credit growth was underpinned by solid rise in deposits (10.4% p.a. ), confirming yet again the reliance of the banks on domestic sources of financing, rather than on cross-border flows, which might be quite volatile at the current juncture. An important point here is the trend of rising preferences to save in domestic currency, which continued in 2014, reflecting stable expectations and reducing the monetary policy burden. The banking sector remained stable and sound, with solid liquidity and capital adequacy ratio of 15.7% at the end of 2014. Nonperforming loans of the banks remained at a moderate level during the crisis period, compared with the region. In 2014, they were relatively stable, slightly decreasing to 11.3% at the end of the year and remained highly provisioned. The actual and the envisaged economic recovery is expected to further improve the quality and the financial soundness of the borrowers, and to further support the downward path of the NPLs.