samchain/econo-pairs-v1 huggingface dataset:
In one sense, this should not matter if the regulatory capital calculation provides a robust floor below which the “economic” capital should not fall. But it was unclear how we could know this was so, and the lack of line of sight into how the firm managed risk was disturbing. The second weakness is generic to simple systems which conflate different levels of inherent risk, namely that they tend to create incentives for banks to increase the average level of riskiness of their assets. And, one thing we now know, incentives are hugely important in the capital regime. As I noted earlier, Basel II was not in place properly when the crisis broke, but the Market Risk Amendment was, and this introduced the use of banks’ own so-called “internal” models. As an aside, my experience suggests that the contribution of Basel II to the crisis was far more that it diverted the attention and effort of regulators and the industry away from broader risk management and into the implementation of a new and more detailed approach to regulation. This was especially so for large banks seeking approval to use their internal models. Moreover, this process was not well done. The Market Risk Amendment and Basel II dramatically increased the complexity of the capital framework, and whilst it intended to increase the scope of risk capture in the regulatory capital measure it ended up creating new opportunities for “optimising” regulatory capital.

In brief: the definition of capital set in Basel I included instruments that did not properly absorb losses; capital requirements were too low in relation to the underlying riskiness of assets, particularly for the trading book; and banks were able to move risk assets increasingly into the trading book. The finger is often pointed at Basel II for enabling all of this to happen, but the timeline suggests that the problems built up under the combined Basel I and Market Risk Amendment regime. That said, Basel II had its own flaws, and was not well implemented, points I will return to later. But, first, I want to look more at the flaws of the pre-crisis regime, starting with the definition of capital. This was flawed from the outset in the late 1980s, both in the definition of eligible capital instruments and the approach taken to the adjustments which should ensure that accounting balance sheet items such as goodwill are not recognised in regulatory capital. A further issue in my view has been the treatment of provisions. Basel I allowed hybrid debt instruments to count as Tier 1 capital even though they had no principal loss absorbency mechanism on a going concern basis. They only absorbed losses after reserves (equity) were exhausted or in insolvency. It was possible to operate with no more than two per cent of risk-weighted assets in the form of equity.
My colleague Arthur first presented this vision at the Hong Kong Fintech Week last November. On that occasion, we also announced a series of activities to be launched these two years in pursuit of the vision. And today’s event is one of the many activities that we have planned for this year, 2021. 5. In practical terms, how should we go about bringing our Regtech vision into reality? We do recognise that we are starting from a position in which many banking practitioners remain quite unclear about the concept of Regtech. They may be uncertain about what values Regtech might bring, or exactly how they should leverage on Regtech in order to bring about measurable benefits. Here, we see four essential actions that are needed to transform bank attitudes and practices towards Regtech. Four actions towards Regtech 2025 6. The first action is that we at the HKMA mustunderstand the Regtech landscape evolution in Hong Kong. It’s no good launching initiatives that are out of touch with what’s actually happening on the ground. We need to be able to map our progress towards Regtech 2025, and understand where our banks and other ecosystem partners are at in that journey. 7. Our White Paper on Regtech published in November last year provided a very good starting point, supplemented by the Regtech Adoption Index that we have just launched recently. These have shown that most banks here are already using at least some form of Regtech in their operations, most commonly in preventing and detecting financial crimes.

It is also true that such developments will not only bring banking services closer to those who need them, but also improve competition among banks in Zambia while creating jobs for our people. However, there is need to complement physical branch expansion with product innovation programmes that will capture a lot more people in the remote areas of our country. In addition, the crucial role that banks play in financial intermediation cannot be overemphasised. The real challenge is for all financial sector players to play their honest part in enhancing savings mobilization and to effectively channel the public’s savings to support financing of economic activities in all parts of the country. Chairperson, it is pleasing to note that despite the recent challenges facing the global economies, Access Bank Zambia Limited remains committed to growth through its efforts to expand its branch network and through product innovation. Although the bank has been in existence for just under two years, it now has three branches which is a very welcome development. I am certain that this development will go a long way in enhancing access to finance. Furthermore, I am reliably informed that the bank is earmarked not only to expand its branch network to five this year but also bring to the financial sector some exciting and innovative products. An example of this is the Visa Debit-card which was launched today. It is the Bank of Zambia’s expectation that these efforts, accompanied by prudence in risk management, will contribute to the further deepening of our financial markets.
In the following periods, a reverse dollarization process will take shape and capital inflow will increase due to the favorable developments regarding European Union membership negotiations in addition to the completion of studies about the new three-year program concerning the continuance of fiscal and monetary discipline and structural reforms. Taking into account these predictions and the fact that a strong reserve position will boost confidence in the current program, the Central Bank has resumed the foreign exchange buying auctions that were suspended on April 27, 2004 starting from December 22, 2004. Unlike previous periods, a yearly program of auctions has been announced in order to minimize the effects of foreign exchange buying auctions on the foreign exchange market and exchange rates. In this way, it will be possible to minimize the effects on foreign exchange supply and demand conditions and stick to the main principles of the floating exchange rate regime. Secondly, the Central Bank may intervene in the foreign exchange market directly in the event of excessive volatility in exchange rates in either direction that could threaten the price stability target. The Bank analyzes the reasons of the volatility in the foreign exchange market thoroughly in daily and periodical terms and takes the intervention decision by taking into account the likelihood of future volatility by considering past data. In the upcoming period, economic agents will probably continue to hold domestic currency as a result of further achievements in economic stability, and capital inflow will increase.

Uncertainty has eased owing to reduced volatility in inflation and economic units have been able to foresee longer maturities, thus that the risk premium has declined. Graph 4: Volatility in Inflation* 2,5 1,99 2  1,89  1,5  1,08 0,71  1 0,5 0 2001  2002  2003  2004  * Volatility is calculated as the 12-month moving averages of the standard deviations of monthly inflation rates. Source. CBRT. Another significant point I will mention in relation to the changing dynamics of inflation is the apparent change observed in the pricing behavior of producers and consumers. Hand-in-hand with the start of the disinflation process and the acknowledgement to a large extent in economic units that this is a permanent state, producers and consumers have adopted a different approach. Producers have started to pay more attention to cost control and the increase in productivity, while setting their profit margins in pricing policy and consumers have begun to be more actively involved in the pricing process by conducting price and quality controls, using the advantage of a more competitive market.
With workers fearful of unemployment – and employers having less need to attract workers given the large pool of unemployed – voluntary job moves plummeted, falling from around 1% of the working population pre-crisis to a low of around 0.5% in 2009. As the economy and jobs market has recovered, and job insecurity has fallen, more people have voluntarily moved jobs to secure a higher wage. Job-to-job flows today are back to their pre-crisis averages. In this tightening market, the pay growth of “twisters” has picked up markedly, from a little under 4% in the  8  All speeches are available online at www.bankofengland.co.uk/speeches  8  aftermath of the crisis to over 7% now. 11  Through the direct (batting average) channel, this has in turn  boosted aggregate pay growth. More surprising, however, is how little impact strong employment has had on those not moving job. Wage growth for “stickers” has flat-lined at around 2%. Despite a tightening labour market, companies have so far not felt compelled to pay-up to any significant degree to retain workers. The indirect, or behavioural, channel for pay pressures has largely been missing during the recent jobs recovery. This may be a sign that stickers’ pay is behaving differently than in the past. Chart 15 plots two empirical Phillips curves – one for twisters, the other for stickers. The twisters’ Phillips curve is behaving relatively similarly to the past, with pay broadly as expected given the tightness in the jobs market.

For example, there is a striking correlation between the pattern of unemployment and wage growth in the UK and the US (Charts 3 and 4). In the US, unemployment has fallen to its lowest levels since 1969, while pay growth has remained modest. Given the strength of jobs growth, the weakness in pay has surprised many people, including the Bank of England. Chart 5 plots the Bank’s wage forecasts at annual intervals since 2012. Over this period, there has been a sequence of negative forecast errors, averaging around one percentage point per year. The same has been true of external wage forecasts, for the UK and elsewhere. These surprises suggest that the recent pattern in pay and unemployment has been unusual by historical standards. In the 1950s, A W Phillips uncovered a negative empirical relationship between pay growth and unemployment: pay grows faster when unemployment is lower. The Phillips curve was born (Phillips (1958)). This relationship has since become a central pillar of macro-economic theory and policy. Part of  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  the attraction of the Phillips curve lies in the fact that it tells a simple story: the tighter the jobs market, the greater the pressure on pay. Exactly 60 years on, the Phillips curve is still widely used, and widely debated, by economists and policymakers. But with pay undershooting expectations, and with unemployment touching generational lows, some big questions are being posed of it.
Ravi Menon: Being the change we want to see - a sustainable future Speech (via video conference) by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Launch of the Inaugural MAS Sustainability Report, 9 June 2021. * * * Good morning, and welcome to the launch of MAS’ inaugural Sustainability Report . How the world responds to the climate challenge will determine the future of generations to come. To avoid the most severe effects of climate change, global greenhouse gas emissions must come down 45% by 2030 and reach net zero around 2050 to keep global warming to within 1.5 degrees Celsius above pre-industrial levels. This is what 195 countries resolved as part of the Paris Agreement in 2016. Concerted action is necessary for the world to make the transition to a sustainable future. There is a renewed sense of urgency and commitment to the climate agenda. Despite the pandemic, 2020 witnessed numerous commitments to carbon neutrality and net zero emissions – by governments, corporations, and financial institutions. The United States has rejoined the Paris Agreement. The stage is set to translate long-term ambitions into tangible policies and early actions. Singapore is firmly committed to doing its part in the global effort to reduce greenhouse gas emissions. Earlier this year, the government launched the Singapore Green Plan, which sets out a comprehensive road map towards sustainable development, a green economy, and net zero emissions.

Population aging implies a continued decline in the proportion of the working-age population, which in turn poses a challenge to sustaining per-capita income growth, as a given income earner has to transfer a larger share of his or her income to the retirees. Chart 5 shows how diverse the region is in this context, with some countries already facing serious challenges. In this chart, the horizontal axis is changes in working-age population, and the vertical axis is the proportion of the working-age population to the total population. A rise in this proportion is often called a “demographic bonus,” while the opposite is called a “demographic onus.” And the size of the bubble is proportional to the absolute number of the working-age population. As you can see, over such a long period of time, even glacial demographic changes seem dramatic. Japan has already entered deep into the period of demographic onus, with the absolute number of the working-age population declining at a significant pace. The NIEs, China and some ASEAN countries are about to follow Japan in this regard in the not-sodistant future. Meanwhile, India and other Asian countries are expected to enjoy a favorable demographic environment at least until the middle of this century. The third challenge is what I call the “Malthusian trap.” In Malthus’ original work, the existence of a limited resource – land in his case – constrains growth. Likewise, limitations in the supply of natural resources, such as oil, are thought to threaten global growth in the longrun.
The economy must continue on a growth path consistent with its capacity, while the inflation trend must be aligned with the target. Moreover, the asymmetric pace of growth between the developed and emerging economies brings along exchange rate tensions that subject us to new trials. We face a complex scenario. Inflation has proceeded in line with the target, although, as we have been saying, it may cross over the upper bound of our tolerance range because of the strength of the world price hikes for oil and foodstuffs. It is important to limit the unwanted propagation of these shocks to other prices. Accordingly, the Bank has quickly come to the scene, making sure that no inflationary pressures incubate that might compromise the fulfillment of the objective of low, stable inflation. We have withdrawn the strong impulse that monetary policy brought in 2009–2010. We estimate that the MPR will have to be raised further in the coming months, but by how much and exactly when will depend on the implications of incoming data, without ruling out any scenario a priori. As always, the Board will guide its decisions to ensure that inflation remains low and stable, which is the best contribution that the Central Bank of Chile can make to the country’s development. Thank you.

Although their financial systems and economic activity have begun picking up, they have been unable to significantly reduce their high unemployment rates and their large output gaps (figure 3). In addition, growth prospects are poor and, as we have seen in recent weeks, each piece of information that is disclosed may put substantial volatility on the market’s evaluation of the strength of the economic recovery. Furthermore, their financial fragility hinders the possibility of a strong come back. The financial situation of households and governments is complex because of their high degree  2  BIS central bankers’ speeches  of indebtedness. Therefore, it is unlikely that their domestic demands will become a source of output expansion. Thus, the basis for faster growth lies, for now, on the demand from the rest of the world. Their weak currencies are consistent with this. In this scenario, another paradox arises. Germany, the strongest economy in the European Union, whose example the peripheral countries should follow, has been one of the biggest winners in this conjuncture. Its fiscal rigor and productive strength as one of the world’s greatest suppliers of capital goods have been boosted by a relatively weak euro. If Germany did not share the common currency, the Deutschmark would be without a doubt the strongest in the world, quite above the equivalent of 1.4 US dollars per euro. Belonging to a fragile monetary union has given it the benefits of a relatively weak currency, which has been an important factor of its fast expansion.
In view of this, it was decided to impose broad-based capital account restrictions and thereby create the scope for less restrictive monetary policy than would otherwise have been feasible. As is usually the case, there were probably other options available at the time. But because I prefer to focus on the current situation and the road ahead, I would prefer not to spend time rehashing the past and ruminating about hypothetical options. Such speculation cannot change the past. Generally speaking, however, it seems to me that other options would have entailed significantly higher interest rates – initially, at least – and more risk to the exchange rate. But that doesn’t change the fact that, although the capital controls provided a certain temporary shelter, they also entail significant cost and inconvenience, which probably vary directly with the length of time the controls are in place. That cost will ultimately cut into GDP growth for the short term and reduce the level of GDP in the longer term. Understandably, then, we do not wish to maintain the capital controls a minute longer than necessary. Strictly speaking, monetary policy is not based on an inflation target at present – at least, not for the short term – as the interim goal of arresting the fall of the króna and then stabilising it has taken priority. Ultimately, of course, this policy is consistent with the attainment of the inflation target.

If we do that, then we might profit on the whole arrangement. I expect this spurs questions about whether we need all of the loans that we have negotiated as a part of the IMF programme. In my opinion, this is an eminently justifiable question. First of all, we need the loans in order to ensure that we have sufficient foreign exchange at all times to enable us to pay amortisation and interest on the foreign debt of the Treasury and Treasury-guaranteed entities. As far as the Treasury is concerned, there will be little activity until late in 2011, when a loan of one billion euros, taken in 2006 to reinforce the foreign exchange reserves, will mature. But we can also use the loans to buy the bonds from this series and others offered in the secondary market at low prices, thereby easing the debt service burden and profiting on the whole arrangement. Furthermore, we will need reserves in order to engage in moderate foreign exchange market intervention, with the aim of supporting the króna and reducing volatility. And last – but certainly not least – we need reserves in order to create confidence in the króna and fend off those who would attack it. But such an arsenal, which is only to be used in an emergency, is extremely expensive because it is impossible to invest the reserves at rates comparable to those on the loans themselves without taking an unacceptable amount of risk.
2/4  BIS central bankers' speeches  The Path Forward While the short-term outlook for the economy is highly uncertain, the longer-term picture is more favorable. With the ongoing vaccine rollout, more people will be able to travel, eat out, and shop in person safely. In addition, the fiscal package enacted in December provides much-needed support to households and businesses until vaccinations are more widespread. Moreover, additional measures are currently being discussed in the Congress. Fiscal support, combined with highly favorable financial conditions and steady progress on vaccinations, are all reasons to be optimistic the economy will experience a strong recovery this year. But the speed of the recovery will also depend on the global picture. We are seeing a slower rollout of immunizations in parts of Europe and a more subdued rebound in other parts of the world, which will have an effect on the United States. In addition, the emergence of new strains of the virus could slow the path to a post-COVID world. Our Response Given all the factors I mentioned earlier, in January the FOMC decided to maintain the target range for the federal funds rate at zero to ¼ percent.

1 Beverly Hirtle, The Economic Health of the Region, Remarks at the Waterfront Alliance Regional Symposium:  Recovery and Resiliency in a New Era (delivered via videoconference), January 14, 2021. 2 Jaison R. Abel and Richard Dietz, “Some Workers Have Been Hit Much Harder than Others by the Pandemic,”  Federal Reserve Bank of New York Liberty Street Economics, February 9, 2021. 3 David Dam, Meghana Gaur, Fatih Karahan, Laura Pilossoph, and Will Schirmer, “ Black and White Differences in  the Labor Market Recovery from COVID-19,” Federal Reserve Bank of New York Liberty Street Economics, February 9, 2021. 4 3/4  BIS central bankers' speeches  4 Small Business Credit Survey: 2021 Report on Employer Firms, a collaboration of the twelve Federal Reserve  Banks (2021). 5 Claire Kramer Mills and Jessica Battisto, “Double Jeopardy: COVID-19’s Concentrated Health and Wealth  Effects in Black Communities,” Federal Reserve Bank of New York, August 2020. 6 Outreach and Education, Economic Inequality & Equitable Growth hub, Federal Reserve Bank of New York. 7 Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement, January 27,  2021. 4/4  BIS central bankers' speeches