samchain/econo-pairs-v1 huggingface dataset:
The Bank’s approach has therefore been to seek to reduce these risks to financial stability by engaging with initiatives which support an orderly market transition and facilitate a shift in financing to support climate goals. I want to talk about three specific areas: disclosure, green finance initiatives and the need for coordination. Disclosure The Bank has been supportive of the FSB’s Task-force for Climate Related Financial Disclosures (TCFD). The TCFD recommendations provide an excellent basis for firms to disclose their exposure to climate-related risks and opportunities and their related strategies, governance and risk management practices. Disclosure helps investors identify which businesses are best equipped to deal with the risks and opportunities that climate change presents. And that in turn creates the pressure for change that ensures the risks are managed better than they would otherwise be. For me what was ground breaking about the TCFD recommendations was the introduction of scenario analysis - where firms set out the resilience of their strategy in different climate related scenarios, including a two degree or lower scenario. To be clear these scenarios are not forecasts or predictions. Rather they are data driven stories that are designed to enable the market to drive better decisions today. They are thus hugely more informative than spot observations of current exposures. And they are absolutely what is required to help investors price medium and long term risks like these. The TCFD recommendations are voluntary. In my view that is important.

I am informed that one of the objectives of the Association is to utilise the acquired scholarly knowledge and experience to add value to society through leadership in various projects and initiatives. I know that alumni associations world over have existed for centuries and most of them have one basic principle, that of benefiting members wherever they may be and for free. However I am told that your association other than just carryout activities for the benefit of members will go a step further to do benevolent activities for the benefit of society at large. This is commendable and I am looking forward to see what initiatives you have outlined to advance welfare in our society. Mr President, the theme for this launch this evening “Innovation for Leadership Excellency” is indeed very timely and appropriate to the norms and beliefs that I am told your association espouses. It is innovations such as yours that gives us the comfort that you are indeed giving back to society following the huge resources that were invested in making it possible for you to acquire this very important qualification the Masters in Business Administration from ESAMI. You have been schooled as business managers and therefore it is inevitable that what is expected of you is nothing short of leadership excellence. We shall all be looking up to you to offer solutions to the business and economic challenges that your institutions and the economy as a whole are faced with.
As importantly, they have typically involved fiscal and monetary policies acting in tandem to cushion the effects of the crisis on jobs and incomes. The first line of defence against the crisis has come from fiscal policy. Fiscal tools act directly on the source of the problems caused by the Covid crisis – cash-flow shortfalls for companies and jobs risks for workers. 18  For example, Barro, Ursúa and Weng (2020). 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  To those ends, a wide variety of fiscal measures have been put in place over recent months, including job support schemes, tax rebates and holidays, grants to certain sectors and loan guarantee programmes.19  For the major economies, these programmes has been as large as any since the Great Depression, often double-digit percentages of GDP (Chart 15). Additional support will come from the automatic stabilisers built into tax and spending rules. All in, the IMF estimate that announced fiscal stimulus measures from the Covid crisis are near $ trillion globally, equivalent to around 8% of world GDP in 2019.

Since then, positive demand news has lifted the starting level of UK output. If this level was maintained along the same growth trajectory, the average output gap over the next three years would be 3 percentage points smaller than in May. With a Phillips curve slope of a third, inflation at years 2 and 3 would be around 1 percentage point higher than expected in May. Another significant piece of news since May has been in asset prices. Since then, shorter-term interest rates have fallen by around 25 basis points, risky asset prices such as equities have risen by almost 7% and the sterling exchange rate has fallen by around 2¼%. Taken together, these asset prices movements represent a material loosening in UK monetary conditions. On standard ready-reckoners, they would boost output by around ½%, and inflation by around 0.2 percentage points, at the policy horizon relative to the May scenario. Finally, imagine we plugged this news about the expected output gap and inflation into a standard Taylor Rule, in which interest rates are mechanically set in line with these two factors. Assuming weights on the 22  All speeches are available online at www.bankofengland.co.uk/speeches  22  two terms of 0.5 and 1.5 respectively, the Taylor Rule implied path of interest rates would, on average, be around 1 percentage point higher over the policy horizon as a result of the news about asset prices and demand, relative to the May-implied scenario path.
The forecasts were made under each participant’s unspecified views of appropriate policy, which is defined in true Fedspeak as: “the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her interpretation of the Federal Reserve’s dual objectives of maximum sustainable employment and stable prices.”  BIS central bankers’ speeches  5  Being more explicit about appropriate policy can clear up a lot of uncertainty. For example, suppose inflation were running higher than we would like, and the economic projections in the SEP showed it coming down over the next couple of years. In the absence of information on participants’ policy projections, the public would not know whether the FOMC thought inflation would simply come down on its own or whether it thought that a monetary tightening would be required to reduce inflationary pressures. Including policy projections will help clarify such judgments. In my opinion, this is a substantial, first-order improvement in policy communications, and this greater clarity may have significant additional value for improving how the economy operates. Expectations of the future path for policy and the degree of uncertainty surrounding those expectations are key determinants of private borrowing rates and other asset prices. These play an important role in the spending and saving decisions of households and businesses.

11  In this  10  See Rachel, L and Smith, T (2015), ‘Secular drivers of the global real interest rate’, Bank of England Working Paper No. 571 and ‘Resolving the climate paradox’, speech by Mark Carney at the Arthur Burns Memorial Lecture, Berlin, 22 September 2016, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2016/speech923.pdf. 11 Among companies responding to the Bank’s Decision Maker Panel survey between February and April 2017, Brexit was the largest current source of uncertainty for 10%, one of the top two or three sources of uncertainty for 30%, one of many drivers of uncertainty four 40% and not important for the remaining 20%. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  context, the best contribution the Bank of England can make is maintaining financial and monetary stability by pursuing the right policies within consistent frameworks. In recent years, the Bank has been determined to remove any lingering uncertainties that companies may have about access to finance in good times and bad. The Bank is building the resilience of the financial system through much higher capital levels, more prudent underwriting standards, rigorous stress testing and appropriate contingency planning. The core tier 1 capital ratios for major UK banks are now almost 14% (Chart 12). Yesterday, the FPC increased the countercyclical capital buffer rate to 0.5% from 0%, announced higher expectations of lenders’ underwriting standards for consumer credit, and recalibrated the leverage ratio.
Undoubtedly, the most significant effect of the global crisis on our banks was the fact that the path of gradual adjustment of imbalances that Spain had undertaken and which until then was the scenario shared by all analysts and national and international organisations, suddenly turned into a collapse of all macroeconomic indicators. That obliged banks and savings banks to accelerate the clean-up of their balance sheets and to set in train what has ultimately become a full-fledged industrial restructuring of the Spanish banking system. 2  BIS central bankers’ speeches  The toolkit at hand, which had been successfully used in the past, was not up to facing a crisis of this nature. The legislation on bank resolution had not been adapted to the demands of the Monetary Union, in particular to the prohibition of monetary financing, and nor did it envisage that it was savings banks that would essentially need to be repaired. Moreover, the singularity of a systemic crisis, on a global scale and with absolutely unrestricted capital movements, made it impossible to make creditors take haircuts without running the very serious risk that market alarm would ultimately lead healthy institutions to sink. Our main strength – one by no means insubstantial – was that the large credit institutions were reasonably sound and that the problems were concentrated in a clearly defined group of small and medium-sized institution.

While the merit of what has been achieved should be accorded to many, allow me briefly to acknowledge the work of the staff of the Banco de España, and most specifically the body of bank examiners, economists, lawyers and the senior managers of the supervisory, regulatory and legal arms of the Bank, on whom the greatest burden has fallen in terms of implementing the strategy approved in legislation. The fact is, the task discharged by them has perforce been complex and time-consuming. The decision by the authorities – previous and present alike – to use limited public funds in the reconstruction of the banking system was warranted because the big Spanish banks did not and do not need help and because, given the delicate situation of our country’s public finances then and now, the impact on the markets of a sharp and sudden increase in the budget deficit might have led to the collapse or intervention of the entire Spanish economy, as indeed occurred in some other countries. But with this strategy of minimising the use of public resources, the restructuring work increases exponentially and extends over time. The Spanish supervisor has had no “bad bank” with which to restructure the sector. Here we have not seen a State which, armed with taxpayers’ money, has bought bad assets from banks, thereby resolving all supervised banks’ problems at a stroke. Our Bank’s supervisory team has had to apply a strategy which has obliged it to seek predominantly private solutions.
The reason that the HKMC can offer rather high annuity rates is because it will place the entire annuity premium received from policyholders with the HKMA. The HKMA will then invest the money alongside with the Exchange Fund portfolios, half in the public markets (bonds and listed equities) and half in private markets (private equity and real estate). As the HKMA already has the investment capability and infrastructure for managing a portfolio as large as around $ trillion, it would be easy to take on the additional investment generated by the HKMC’s annuity premium. The HKMC has now received around 10,000 applications amounting to $ billion in subscription. We are processing the applications and the exercise is expected to be completed soon. By end-October or early November this year, the first annuitants will be receiving their first monthly annuity payments. 8. Let me do some quick maths here by using a married couple at the age of 65 who has joined both the Reverse Mortgage Programme and the Life Annuity Scheme. If the property they own is worth $ million, (which is the average value of the properties under the Programme), then they would get a monthly payment of $ plus the right of lifelong occupancy under the Reverse Mortgage Programme. If they each subscribe for $ million Life Annuity, then they will get another $ $ + $ per month. So they will receive $ per month.

As for the elderly, the Government provides a non-contributory means tested Old Age Living Allowance for those aged 65 or above; and people that do not fall within either of the first two groups. Typically this group of citizens are those who have worked hard for their whole life, used up the bulk of their earnings in raising their children, and may be owning a small apartment. Most (iii) of them, by the time they retire, do not enjoy any pension or other forms of voluntary retirement benefits. They do have some accumulated savings in their Mandatory Provident Fund accounts, but it is unlikely that, for various reasons, the amount, on its own, would be large enough to support a decent retirement life. 3. It is the retirement protection of this third group of citizens that I wish to address today. In Hong Kong, about 70% of the 1.7 million privately owned residential housing units, including subsidized home ownership flats, are owner-occupied. Around 65% of the owner-occupiers have fully paid down the mortgage loans, if any, of their properties. For those owner occupiers who have already paid off their mortgages, many of them don’t have a lot of other savings or assets at their disposal. Even for those with some savings, they are having a tough time in managing their money if they don’t have the expertise or the appetite in active investment.
11  While the positive unconditional correlation between average firm-level mark-ups and concentration at the sector level shown in Chart 4 is not statistically significant, a regression of individual firm-level mark-ups on market concentration in their sector (at the two-digit SIC level) shows a statistically significant positive relationship when we include firm and time fixed effects. 12 For example, Díez et al (2018) find that the majority of industries in the US have seen mark-ups rise since 1980. 13 Díez et al (2018) find that the increase in US mark-ups since 1980 is also relatively broad-based across sectors. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  This fattening of the upper tail of the mark-up distribution is not uniform across sectors. Chart 10 plots a measure of the skew of the mark-up distribution across different sectors over time. The fattening of the upper tail of the distribution is most pronounced in the ICT, transport and storage and manufacturing sectors, each of which is associated with higher average levels of mark-up. In understanding the characteristics of these firms, one revealing cut comes from taking into the account the extent to which UK-based firms’ sales are domestic or foreign-focussed (Chart 11). While both categories have seen their mark-ups rise somewhat, this has been far larger among firms selling predominantly into foreign markets (almost 60 percentage points) than domestic markets (around 15 percentage points).

28  All speeches are available online at www.bankofengland.co.uk/speeches  28  Chart 9: Mean and median UK-listed firms’ mark-ups Mark-up (e.g.
Of course, greater economic integration in Europe has been accompanied by greater institutional cooperation. Although now supplemented by the (still untested) Chiang Mai Initiative, the framework for economic policy cooperation in Asia involves less deep and intense collaboration than in the European Union. The single monetary policy in the euro area is the acme of Europe’s economic integration. And the situation in the 1990s in Asia was much less developed than now. Several Asian countries (notably Malaysia at an early stage) introduced capital controls in the face of the financial crisis, something which cannot be done in Europe given the depth of financial integration and the commitments made to the free movement of capital within the Single Market in the EU Treaties. 4. Policy responses to the crises  The much deeper set of economic and institutional linkages within the EU and euro area today compared with those that existed in Asia in the mid-1990s has important implications for the policy responses. In particular, the lack of a regional framework in Asia placed the responsibility for addressing the financial crisis in the 1990s immediately and squarely on the international financial institutions, notably the IMF. By contrast, the close cooperation between EU countries has meant that the IMF has played a less prominent role in the recent crisis, even though it makes a significant contribution to the design and implementation of the adjustment programmes implemented in Greece and Ireland.

The Fed and the Bank of England have introduced a new “collateral swap facility”, under which the banks can temporarily swap their unsaleable securities against liquid government paper. The pressure on banks to refinance their balance sheets is thus reduced without additional central bank money having to be injected into the market. The Fed went even further in providing support during the sale of investment bank Bear Stearns. It took illiquid and risky securities directly onto its own balance sheet. Thus, in the third phase, some countries administered new remedies in addition to the existing ones, and even performed a few emergency operations. In the SNB’s case, the range of counterparties admitted to repo auctions has already been very broad for some time. Indeed, shortly before the turmoil began, we decided to expand the range of eligible securities for money market operations, whilst still retaining stringent quality standards. Measures such as those used in the US and UK have not proved necessary in Switzerland to date. Monetary policy steering during the crisis The measures taken by the SNB, as described above, were primarily aimed at ensuring the smooth functioning of the Swiss franc money market during the turbulence. However, it is also important to look at the actual implementation of monetary policy strategy during the crisis. Of particular interest in this regard are two aspects which have occasionally been misinterpreted by the general public.
Joseph Yam: Establishment of the Treasury Markets Association Welcoming remarks by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the inaugural ceremony of the Treasury Market Association, Hong Kong, 23 January 2006. *  *  *  Good afternoon, Ladies and Gentlemen, 1. First of all, let me, as President of the Council of the Treasury Markets Association, welcome you all to this inauguration ceremony to celebrate the establishment of the Treasury Markets Association. The establishment of the TMA has the strong support of market participants. I am glad to learn that the Association has already successfully registered about 2,000 market practitioners and over 50 institutions as members. This strong membership provides a solid base for the Association to take forward its strategy and plans. 2. To maintain the status of Hong Kong as an international financial centre, a requirement specified in Article 109 of the Basic Law, I believe that it is important for us to have, among other things, treasury markets that are active, professional and efficient, and that operate in accordance with international standards. The volume of financial business in Hong Kong is enormous.

National balance sheets and the crisis Recently, when events have centred on the euro area, the focus has been on the risk of sovereign default. The underlying issue is the cumulative loss of competitiveness of some economies, and the consequent strains in government balance sheets resulting from their attempts over the years to use fiscal policy to sustain growth. A look at Spain’s external balance sheet reveals (net) liabilities of around 100% of GDP (Chart 1). Italy’s net external liabilities are, perhaps, rather smaller than that (Chart 2). But in terms of total government debt, Italy’s new administration inherited the greater burden. Put those two facts together and it becomes clear that Italy’s fiscal problem is partly about the distribution of debt and resources within the country. Japan is, perhaps, not dissimilar. Go back four-five years, to the beginning of the crisis, and the problem was the mortgage obligations of US households – subprime households in particular were hugely over borrowed. The commercial real estate sector too. Defaults there triggered the crisis. Every set of defaults and problems around the world has reverberated through the UK, due to London’s role in intermediating international capital flows. We have one of the largest gross external balance sheets (Chart 3). Although much of it is accounted for by foreign banking activity, the City is not an entrepôt. UK banking is linked to the wider City’s fortunes via complex counterparty-credit exposures and investments.
For example, by identifying the common characteristics and residual risks underlying various types of credit risk mitigation techniques - collateral, guarantees, netting, and credit derivatives - it is hoped that a more uniform and consistent treatment can be applied to these instruments in place of the various, somewhat ad hoc, treatments that have grown up to date. There is perhaps one caveat that should be attached to the aim of introducing greater risk sensitivity. This is that it often entails much greater reliance on the judgement and competence of the supervisors. This can be seen in the evolution of the Basel Accord to encompass banks’ internal market risk models, if approved by supervisors, and in the new proposals to allow some banks’ internal ratings to be used for credit risk capital. It is also evident in the emphasis on individual supervisory judgement in Pillar 2 of the consultative paper. We believe this is the right direction to follow in the case of G10 banks and supervisors. It is, however, more questionable whether such a system is easily exportable outside the G10, in particular to some emerging markets. Indeed, even amongst the G10, some supervisors (such as the US) are actively contemplating drawing a two or more tier distinction in the capital rules applied to banks, depending on the level of complexity of the organisation.

However, we are at least talking about a reasonably well-defined type of risk and one which is quantifiable in statistical terms. We are in much more difficult territory when it comes to operational risk. The term operational risk covers a wide range of types and sources of risk, and banks’ data bases of loss are generally patchy. There are numerous questions not only about the appropriate design of the charge, but also about the appropriate level. It is clear that some types of operational risk, such as fraud, can result in huge spikes of loss, as we saw in the case of Barings and Morgan Grenfell. Even though we are concerned with protecting the system, I feel it would be inappropriate to expect most banks to hold an additional cushion of capital to cover these sorts of very rare events: it would either be grossly excessive for most of the time, or alternatively seriously inadequate if a major problem arose. So the focus here must be on systems and controls, and on using variable target capital ratios under Pillar 2 to encourage improvements in these. Moreover, the appropriate level of capital will depend in part on how far we think operational losses are correlated with other types of loss which are already covered by capital. Probably there are some types of operational loss - processing errors, settlement delays - which do not exhibit a high correlation with either credit or market risk.