samchain/econo-pairs-v1 huggingface dataset:
10 Today, let me focus on the first strategy of developing Singapore’s alternative risk transfer market through insurance-linked securities and public-private partnerships. Insurance-linked securities (ILS) 11 Let me begin with insurance-linked securities, or ILS. 12 We know that alternative capital has been growing more rapidly than traditional capacity over the years, a clear demonstration of greater acceptance of ILS instruments by both investors and issuers. In particular, issuance of catastrophe bonds have grown strongly and total catastrophe bonds outstanding reached a new high of almost USD 30 billion as at the third quarter of this year. This is despite the persistent reinsurance headwinds of excess capacity and depressed rates. 13 Catastrophe bonds present unique benefits to reinsurers: they provide multi-year capacity and pricing certainty; they are more secure due to their fully collateralised nature and ability to be rated; they are a good alternative to traditional reinsurance for risks that are hard to model; and they are capital-efficient. 14 To an investor, catastrophe bonds proffer strong benefits too: their low correlation with the 2/4  BIS central bankers' speeches  financial markets make them an effective asset diversification instrument; they have low volatility and stable returns; they provide liquidity; and they can be issued via private placements or as tradable securities. 15 We are therefore seeing a growing cluster of institutional investors and fund managers like Quantedge exploring allocation into catastrophe bonds, as they venture into niche and specialised strategies to extract better risk-adjusted returns.

Lim Hng Kiang: Metamorphosis – Singapore as a global capital for Asian risk transfer Official keynote address by Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of the Monetary Authority of Singapore, at the 14th Singapore International Reinsurance Conference, Singapore, 1 November 2017. * * *  Opening Distinguished guests, ladies and gentlemen, a very good morning to all of you. 2 I am delighted to be here with you today at the 14th Singapore International Reinsurance Conference. 3 This year’s conference is significant because this is the first year the SIRC becomes an annual event. It is a milestone worth commending as the SIRC is now finally able to serve as a platform for annual renewals, much like the Monte Carlo Rendez-Vous and Baden-Baden Meetings of the East. And this is just the beginning. In the longer term, I am confident that the SIRC can be built up into an annual gathering of key global and regional industry practitioners, meeting to discuss key issues facing the industry, and charting out future growth directions. 4 The SIRC’s journey reflects the transformation of the Singapore reinsurance industry over 20 years – from starting out as a domestic market in the early days, to going through market liberalisation in 2000, to being a regional insurance powerhouse in 2010, and now to becoming a global insurance marketplace going into 2020. 5 Singapore is now widely recognised as the leading specialty insurance and reinsurance hub in Asia.
Unlike a normal firm, part of the value of a bank does depend upon its capital structure. There is also a deeper point here about the wider benefits to the economy of the maturitytransformation services delivered by banks financing their longer-term loans with monetary  2  Basel 2 in effect required a minimum equity capital ratio of 2 percent. But under Basel 3 there is a greater focus on the equity that is truly free to absorb losses. As such, almost all regulatory deductions from capital are to be made from equity rather than being split across tier 1 and so-called tier 2 “capital” or made from total “capital”. Also, some risk-weights are increased; for example, on counterparty credit risk exposures. Together those changes mean that an old Basel 2 core tier 1 minimum risk-weighted asset ratio of 2% is equivalent to around 1% on a Basel 3 basis. Taking into account the capital conservation buffer and the surcharge for systemically important financial institutions, for the largest banks the Basel 3 equity minimum comes to around 10% (plus any Pillar 2 buffers). 3  For the original paper, see Modigliani and Miller (1958), “The Cost of Capital, Corporate Finance and the Theory of Investment”, American Economic Review, 48, 261–97. Later papers by the same authors addressed the implications for their result of tax, bankruptcy costs etc. 4  This assumes a bank’s post-tax return on equity is determined, given the riskiness of the bank’s business, in competitive global capital markets, with excess returns competed away.

Whether it is liquidation or resolution that beckons makes a difference, as resolution can materially reduce both the private and social costs of bankruptcy. Relative to a world in which liquidation is a credible threat, having an effective resolution regime will tend to reduce the cost of bond finance and so increase its share in the capital structure. But as explained earlier, it will tend to raise the cost of bonds and reduce their share in the capital structure relative to a state of affairs in which government bailouts are confidently expected. Effective  5  See Kashyap, Rajan and Stein (2002), “Banks as liquidity providers: an explanation for the coexistence of lending and deposit-taking”, Journal of Finance, vol, 57(1), pp. 33–73. 6  See Kashyap, Lamont and Stein (1994), “Credit Conditions and the Cyclical Behaviour of Inventories”, The Quarterly Journal of Economics, Vol 109, Issue 3 (Aug. 1994), P565–592. That bank failure itself has wider spillovers, through impaired credit availability, is itself another departure from Modigliani-Miller, which assumes that all households and firms have symmetric access to credit markets. 7  In addition, the management of the bank will find themselves out of a job. In contrast to the managers of failed firms in other sectors, they face regulatory hurdles to re-entering the industry. That provides a clear incentive to avoid a fragile capital structure. As widely discussed, that needs to be reinforced by remuneration packages that expose their wealth to downside risks. Agency issues internal to banks are not covered in my remarks today.
Overall, it is surprising how little commentary there has been from the perspective of securities market regulators. An exception is Luigi Zingales, “The Future of Securities Regulation”, Chicago Booth School of Business Working Paper No. 08–27. While I do not necessarily support all of his prescriptions, the paper is noteworthy for approaching the reform agenda from the perspective of securities markets and regulation rather than solely that of bank soundness and prudential supervision. 12  See Gorton, op cit. 13  See Bank for International Settlements (1986), “Recent innovations in international banking”, prepared by a Study Group established by the Central Banks of the Group of Ten Countries, known as “the Cross Report”. 14  For examples of market intelligence on innovations at the beginning of the latest cycle see, Rule D (2001), “Risk transfer between banks, insurance companies and capital markets: An overview”, Bank of England Financial Stability Review, December 2001. BIS Review 6/2010  7  “shadowing banking” has become significant to sustaining stability in the provision of essential financial services to the broader economy; when it is founded on liquidity lines, incomplete risk transfer or other kinds of support from the core commercial banking system; and when it involves the provision of the liquidity or monetary functions of banking as well as credit intermediation. Running leverage and liquidity risk is not sufficient to make a firm or fund a de facto bank. I do not think AIG’s securities lending/credit spread business was really a bank. More like a hedge fund.

5  And as recommended in the recent Group of 30 (G30) Report, “Financial Reform: A Framework for Financial Stability”. BIS Review 6/2010  3  ABCP, and SIVs The same is true of the Asset-Backed CP market. These vehicles are similarly reliant on committed lines of credit from commercial banks and, furthermore, in many cases were sponsored and managed by a bank. The case of Structured Investment Vehicles was subtly different. Some were sponsored by banks but did not have committed lines from them. Other SIVs were independently managed. With hindsight one fairly obvious solution would have been for banks to consolidate, for accounting and regulatory purposes, any such vehicles that they sponsored, managed and provided credit lines for. Looking ahead, banks should perhaps quit using such devices to move assets off balance sheet while retaining de facto control. Supervisors should be alert to such devices in future. They might consider whether consolidation for these and other vehicles could be avoided only where a sponsor had made it 100% clear that they would not provide any support in any circumstances. Securities dealers The case of securities dealers is different – in that they were real businesses which had developed over many decades. After Big Bang – in the 1970s in the US, and a decade later in the UK – their balance sheets grew.
Commercial paper investors who had shunned the market returned because they were no longer worried that they could get their money back. In extremis, the Federal Reserve could purchase the commercial paper from the issuer, generating the funds to repay the private investors’ commercial paper investment. The fourth and final goal of the Fed’s liquidity facilities has been to ease financial conditions. This has been particularly important in the current environment because the federal funds rate cannot be pushed below zero (the so-called zero-bound constraint). This means that with the federal funds rate having been effectively lowered as far as it can go, the Federal Reserve has had to turn to other tools such as asset purchase programs if it is to ease financial conditions further as warranted given macroeconomic conditions. The Federal Reserve’s purchases of agency debt, agency MBS and longer-term Treasuries have been implemented mainly with one goal in mind – reduce longer-term private sector interest rates, and thereby provide stimulus to the U.S. economy. The Federal Reserve’s Treasury purchase program is designed to hold down the level of longer-term interest rates. To the extent that a lower level of long-term Treasury rates pulls down the level of private long-term rates, then these purchases should also ease financial market conditions. So how have the Fed’s facilities worked in practice? In general, I think the facilities have worked quite well. In those areas where the facilities have been active, we generally have seen an improvement in market conditions.

That is because the balance sheet size is being driven by a large number of different actions. Is a dollar of TAF lending equivalent to a dollar extended through the CPFF or to a dollar of Treasury purchases? How important is the PDCF? It backstops lots of lending, but outstanding amounts are very low. The differences between the various programs and activities mean that the balance sheet size should be interpreted in light of the impact on market function and financial market conditions, not by the impact on the size of the balance sheet. The size of the balance sheet is also not a good standard because the use of the different facilities depends on the degree of impairment in market function. If market conditions were to deteriorate, I would expect that usage of the Fed’s facilities would increase and the balance sheet would grow in size. This would be appropriate. The Fed’s balance sheet would act as a shock absorber, cushioning the impact of the shift in market conditions. In such  4  BIS Review 48/2009  circumstances, the balance sheet would act as a counter-cyclical dampening mechanism. I would view that as a desirable outcome. In contrast, if the Fed were committed to a particular balance sheet trajectory, then, as market conditions improved and financial conditions eased and usage of the Fed’s liquidity facilities diminished, the Fed would have to offset this by increasing the scope of its liquidity facilities or by expanding its asset purchase programs.
And I recognise the theoretical attraction of having an additional degree of freedom in economic adjustment. In practice, however, there must be doubt about whether, in view of the possibility of severe exchange rate volatility and overshooting, this is a luxury that all economies can afford. There is also the question of whether the relationship between the current account balance and the exchange rate is always the same across different economies so that exchange rate adjustments are a panacea for correcting external imbalances. Regrettably these questions are simply not asked, or, if asked, they are drowned by political noises that appear to be made on the basis of narrow, political concern over bilateral, rather than multilateral, trade imbalances. In any case, flexible exchange rates for many currencies in Asia does not necessarily mean exchange rates determined freely by the market, as proponents would have it. As it turns out, more flexible exchange rates in Asia have meant exchange rates being determined in a flexible manner by the authorities, through intervention, controls and restrictions, at levels that are considered in their best interests. And their best interests, whatever they are, seem for the time being to be manifested in the substantial accumulation of foreign reserves. Perhaps reserve accumulation is the objective. And I can understand why, if this is the case. The comfort of substantial ammunition for coping with the recurrence of financial turmoil has become essential for emerging markets in Asia.

Here I am specifically referring to those with financial markets that are small relative to the amount of international portfolio capital that can be mobilised by foreign investors, and those acting for them, but big enough to whet their appetite for profit. Arguably, the market discipline imposed on macro-economic policies of emerging markets may de facto be more stringent than those imposed on developed markets. Indeed, what is acknowledged by many as an unsustainable, large current account deficit has been sustained in the United States for some time now, no doubt for a lot longer than if one of equivalent size relative to GDP were run by an emerging market. To be sure, there is consensus on the need for greater macro-economic discipline, robust institutions and market structures, as a defence against monetary and financial instability. There has been much progress, for example, on improving corporate governance, and I do not wish to belittle the serious efforts made at this important micro level, through the promotion, and the interaction, of individual, regulatory and market disciplines. There is also much greater discipline in pursuing prudent macro-economic policies, to the extent of attracting criticisms of excessive conservatism, particularly in respect of the running of substantial current account surpluses and the accumulation of large foreign reserves. I am sure these independent efforts of individual jurisdictions, reflecting their different pre-occupations, arising from different domestic circumstances, will, in the fullness of time, ease their tasks in the maintenance of monetary and financial stability.
On the other hand, significant increases in international energy, food and goods prices over the past year imply a substantial squeeze in UK residents’ real incomes, which will weigh on future demand and employment. Looking beyond the shorter term, UK inflation is set to fall as global commodity prices stabilise, bottlenecks in global supply chains ease, and domestic inflationary pressure dissipates as the real income squeeze opens up a margin of economic slack. These two elements define the two sides of the narrow path along which the MPC has to navigate. The MPC sees an upside skew in the risks around the inflation baseline in the latter part of the forecast period. The balance of risk is tilted towards inflation proving stronger and more persistent than anticipated in that baseline. A number of underlying structural developments point in this direction. For example: (1) Brexit may  Page 14  have reduced the contestability of UK labour markets by EU immigrants and workers;[13] (2) the broader globalisation process – which helped contain external inflationary impulses to the UK around the turn of the century[14] – looks to have stalled and may be in retreat, reducing the competitive pressure on UK producers to contain costs; and (3) the impact of aging and longerterm health consequences of the pandemic may have led to a decline in UK labour force participation.

It is in no way justifiable to allow bank customers or taxpayers to pay for either exorbitant profits or inefficient operations, which is happening in many countries in the euro area. There is no doubt that we in Sweden can also do more to promote competition in the financial market, not least when it comes to banking activities aimed at private customers and small firms. The largest market players continue to enjoy a high level of market concentration. However, the establishment of a number of new niche banks in the past few years and the recently raging price war on credit for tenant-owned apartments show that deregulation gradually leads to increased competition and consequently to lower prices for consumers. Continued reforms necessary To sum up, we have reason to be proud of the reforms introduced in Sweden over the last decade. They have resulted in Sweden today having a higher growth potential than several of the large economies on mainland Europe. At the same time, we cannot settle for what we have done so far. Sweden must continue to remain a step ahead on the reform agenda that the EU Member States  BIS Review 45/2003  5  decided upon in Lisbon in 2000 and which aims to make the euro area “the most competitive and dynamic knowledge-based economy in the world by 2010”. Reforms are under way in a number of countries in the euro area and will in the long run make the euro area countries more attractive to international investors.
Henrique Meirelles: Brazil-Argentina Local Currency Payment System Speech by Mr Henrique Meirelles, Governor of the Central Bank of Brazil, at the Inauguration of the Brazil-Argentina Local Currency System, Buenos Aires, 2 October 2008. *  *  *  It is an honor to attend today the launching of the Brazil-Argentina Local Currency Payments System (SML). I am certain that this initiative will be a watershed in the bilateral relations between the two nations. Coincidentally, the new system kicks off in a period of financial turmoil and liquidity crunch in international trade, in which cooperation among central banks becomes fundamental to facilitate trade and to deepen economic ties. Central banks are responsible for ensuring adequate international payments systems. In processes of economic, financial and trade integration, the objective is to establish an efficient payments structure for intra-regional transactions. When flexible and unobstructed payments systems are available, trade transactions flow with greater ease and lower costs, and financial flows tend to intensify. This is what we expect from the new SML system. Initial obstacles have been overcome. The mechanism of the SML will trigger significant changes in the way in which companies export and import. In Brazil, exporters may now operate in real, while Argentine businesspeople may operate in pesos. Each one of our countries established a consistent framework for management of the system.

Second, to facilitate market adoption, MAS also started publishing, on a daily basis, Compounded SORA rates for 1-month, 3-month and 6-month tenors, and a SORA Index.7 These provide market participants with a standardised and simplified way of obtaining compounded rates for any given tenor, and can easily be referenced in new SORA products of different maturities, to suit the needs of different customers. Third, to provide a market-based pricing reference for SORA cash products, and spur hedging activities through the SORA derivatives market, MAS has broadened our suite of money market instruments by issuing floating rate notes based on SORA (MAS SORA FRN). We are encouraged that the first two MAS SORA FRN auctions were met with strong market demand. Fourth, to facilitate price discovery in a nascent SORA derivatives market, MAS established in June, a daily auction process for SORA Overnight Indexed Swaps (or OIS) and SOR-SORA Basis Swaps up to 5-years in tenor. These are the key instruments for developing the SORA derivatives market and for facilitating a transition from SOR derivatives. Going forward, MAS will extend the auction tenors, and  make available this process to the wider interdealer market. 11 But MAS’ efforts alone are not enough to achieve a successful transition from SOR to SORA. The financial industry and its stakeholders have a critical role to play, given that you are the ultimate end-users.
Banks’ profits have become significantly more volatile over the past few decades, with the standard deviation of banks’ return on equity trebling comparing the forty-year periods either side of  16  “At Goldman Sachs, we calculate the fair value of our positions every day, because we would not know how to assess or manage risk if market prices were not reflected on our books. This approach provides an essential early warning system that is critical for risk managers and regulators”, Lloyd Blankfein, Financial Times, October 13 2009. 17  Quoted in Seligman (2003). BIS Review 28/2010  7  1970. There is also evidence of banks’ equity prices having exhibited higher correlation as fair value principles have been extended. 18 Consider a hypothetical experiment. Imagine banks in the UK had been required to mark their banking books to market over the period 1999 to 2008, in addition to their trading book. Market prices are used to proxy different categories of loan. For example, Residential Mortgage Backed Securities (RMBS) and covered bond prices are used to proxy mortgage loans. As with banks’ trading books, all gains and losses arising on the banking book are assumed to flow directly to profits. Chart 6 plots the path of UK banks’ profits, both actual and simulated under the mark to market assumption. Simulated profits are around eight times more volatile. Between 2001 and 2006, UK banks’ cumulative profits would have been around £ billion higher than recorded profits, as the expected future returns to risky projects were brought forward.

This may well be the true answer or reality, but it is rather disappointing if not frustrating that the wide gap between demand and supply has continued to exist. 3. So the natural question for us would be how we can close that gap and bring about a winwin outcome for project proponents and operators on the one hand and financiers or investors on the other. And in this connection, I should say that Hong Kong is uniquely well positioned to play a pivotal role in facilitating and catalysing investment flows to infrastructure projects in the region. We have well-developed capital markets and a deep pool of professional talents, in addition to Hong Kong being a leading centre in arbitration and dispute resolution, all of which are essential building blocks in support of infrastructure investments and their financing. It was against this background that the HKMA set up the Infrastructure Financing Facilitation Office (IFFO) in July 2016. IFFO has the following mission: (a) provide a platform for the key stakeholders to get to know each other and share experiences; (b) enhance the capacity of the investing and recipient countries in infrastructure financing; and (c) facilitate infrastructure investment and financing flows. 4. IFFO now has 90 stakeholders from Hong Kong, Mainland China and overseas joining as Partners. They include project developers or operators, commercial and investment banks, multilateral development financial institutions, asset owners and managers and professional service firms. In the last two years, IFFO has accomplished a lot.