samchain/econo-pairs-v1 huggingface dataset:
This is particularly evident in foreign exchange and financial markets, where exchange and interest rates are influenced when participants shift large amounts partly on the basis of their expectations concerning economic policy and economic developments. The issues that receive attention, and that govern movements in exchange and interest rates, change. Financial and foreign exchange markets also have an inherent tendency to exaggerate - to be too optimistic or too pessimistic. When Norwegian households, perhaps with exuberant expectations of future income growth, encounter eager sales and marketing departments in banks, the result may easily be excessive borrowing. Equity markets have developed bubbles that burst. The exchange rate can be affected by short-term shifts in investments. At these times, it is important that the authorities conduct a policy that does not amplify this tendency, but rather tames the financial market. The authorities must not sow doubt; on the contrary, they must act in a long-term and predictable manner. The authorities must be credible and inspire confidence. There must be consistency between the stated objectives of economic policy and what is actually done to achieve them. This is the most important reason why the implementation of monetary policy is delegated to the central bank. In Norway, it was decided to delegate the responsibility for decisions to Norges Bank in 1986. In all the countries that normally figure in our comparisons, monetary policy has now been delegated to the central bank.

Sam Woods: Embarking on a new voyage? Solvency II in context Text of The Insurance Institute of London Lecture by Mr Sam Woods, Executive Director of Insurance Supervision of the Bank of England, at Lloyd’s of London, London, 27 January 2016. *  *  *  I am grateful to Kayleigh Guinan and Mark Cornelius for their assistance in preparing this speech. I am also grateful to Norma Cohen (Bank of England), Dr Adrian Leonard (Cambridge), Professor Philip Rawlings (Queen Mary) and Robert Thoyts (FCA) for their views and input. Good afternoon. The good ship Solvency II is now afloat. It has taken a long time to make it seaworthy. Some might question whether we need this newly improved vessel. Indeed, some might challenge whether we should have a ship at all. But that is largely academic, given we are now under way and in light of the gargantuan efforts insurance firms and regulators have put into getting us to this point. In my speech today, I would like to look at this development in the wider context of insurance history. First, I would like to offer a brief view on why, looked at through the lens of today, we regulate insurance companies at all. Second, we will take a very whirlwind tour of 5,000 years of insurance activity, for the single purpose of pointing out that for at least four-and-a-half of those five millennia there was very little regulation of insurance, if any.
This obviously had an impact on bank solvency, giving rise to significant capital requirements for some banks, which needed public support to cover the capital shortfalls identified. Since then, the situation has improved considerably, with the help of the monetary policy measures implemented by the European Central Bank to ensure that solvent banks had sufficient funding. Against a background of significant decline in banking activity, banks have managed to reduce the weight of troubled assets in their balance sheets very significantly. Specifically, 7/17  the NPL ratio has fallen by more than eight percentage points to stand at 5.8% of total lending. Foreclosed assets, meanwhile, are only 50% of the level recorded in 2014, so that their weight has been reduced to 3.6% of assets, vis-à-vis the resident private sector. Active management of these assets by banks, under supervisory pressure, has played a very important role in this process. In any event, there is still significant room for improvement; before the international financial crisis, the NPL ratio was below 1% and foreclosed assets were practically non-existent. The restructuring of credit institutions is also reflected in the reduction in the weight of the real estate sector (broadly defined),2 which stood at 52% of GDP in 2018, as compared with 99% in 2008. 2  Loans for house purchase, plus loans to businesses in the construction industry and related areas.

As emphasised in our Financial Stability Report published last May, the first of these risks is that derived from the possibility that asset prices may undergo a downward adjustment as a result of rising risk premia. The potential triggers of this situation are a slowdown in economic activity and geopolitical uncertainty. 13/17  Trade tensions indeed seem to have grown and the risk of a hard Brexit now seems greater. In addition, the economic situation in the euro area has deteriorated more than in other areas, particularly in some countries such as Italy and Germany. Meriting special mention are some emerging economies where Spanish banks operate, which are undergoing difficulties associated with their high net borrowing in foreign currency and lack of a substantial cushion of international reserves. Thus, Turkey, which went through a recession in the second half of 2018 and has shown weak momentum in recent months, is moreover facing a complicated political situation which has given rise to significant depreciation of the lira in the past year. Meanwhile, the economic plan implemented in Argentina as part of the financial support programme agreed with the International Monetary Fund is helping to reduce its fiscal and external imbalances at the cost of a sharp recession, but has not altered the deterioration on the inflation front. Additionally, much uncertainty persists mainly in relation to the results of the presidential elections to be held at the end of the year and which will define the economic model for the coming years.
Unlike with bonds, equities still tend to be traded most actively in the exchanges where they have primary listings, either their home countries or nowadays perhaps NASDAQ. The NYSE lists many foreign companies as secondary listings, but these foreign shares are much less liquid than US shares. SGX should also seek alliances with other exchanges, both in the region and globally. Exchanges worldwide are transforming themselves and consolidating, even faster than anyone expected just a few months ago. So SGX must forge these links quickly, and position itself to collaborate with other major players. On the futures side, the SGX-DT (formerly SIMEX) linkup with CME, and now as part of the Globex alliance, was a vital strategic move. On our part, MAS will help to facilitate such alliances, by continuing to seek agreements for regulatory cooperation with foreign regulators. SGX will face competition as an exchange, just like the brokers. In the US, ECNs pose a significant challenge to NYSE and NASDAQ. This is partly because NYSE and NASDAQ are less efficient than  7  BIS Review 30/2000  ECNs, and partly the result of regulatory arbitrage. If SGX is to hold its own against competition, it must not leave openings for ECNs to exploit. MAS will develop appropriate supervisory oversight over SGX, as a profit-oriented exchange. We are also looking to further improve disclosure standards of listed companies. For individual brokerage firms, we are taking measures to help them improve their competitiveness.

BIS central bankers’ speeches  3  As you will recall, in January this year a recommendation on dividend distribution policy was adopted in which banks were urged to keep conservative dividend distribution arrangements so as to preserve their solvency. This recommendation will be shortly reassessed. In turn, common criteria have been laid down for recurring decisions such as authorisations for the acquisition of qualifying holdings in credit institutions, assessment of fitness and properness of board members, or the requirements to be made in capital reductions and issuances. Finally, I must highlight the relevant role played by the SSM in the management of the Greek crisis. The SSM not only monitored the situation of the banks continuously, but, once agreement was reached between the European and Greek authorities last summer, it was entrusted with determining the recapitalisation requirements of Greece’s four significant institutions on the basis of a specific comprehensive assessment exercise, whose results were recently published. In the coming months, the SSM must ensure that the recapitalisation of these banks goes ahead as stipulated. 3. Some challenges  That said, and as I stated at the outset, the SSM has numerous challenges to face in the near future. I would like to mention four in particular. Firstly, the microprudential policy stance sought must be clearly defined. The SSM, despite its exemplary start-up, is still under construction and its criteria, practices and specific objectives have not yet reached the degree of stability desirable.
Obviously, Global works in an international group of experts brought together through the global network of experts. His participation in the project  4  BIS Review 90/2006  is highly welcome, even though he is not an urban planner or sociologist. He has been included in the project team because of his valuable experience won during his participation in numerous already completed projects. Problems they are dealing with include optimal location of a sewage treatment plant and usage of treated water in public lavatories, sending waste via pneumatic mail at 100 km/h directly from a rubbish chute to a waste incineration facility and using the heat from their incineration to generate power and produce heating for the neighbouring area, or the arrangement of car parks in central city districts in the form of a remotely controlled warehouse (no room for people means much more room for cars and no more problems with battered doors). Perhaps you recall that such solutions existed in Tokyo Teleport Town, the Japanese town of future, already in 2006. Evening Global takes his wife to the theatre. Two days ago, when he was in Hong Kong, during a videoconversation they decided that they would love to spend an evening together in a theatre. They both approved the idea and could simultaneously see the repertoire, and were assisted in making their choice by an e-reviewer. They chose to see Shakespeare – his plays will never grow old. Global’s wife can listen to this play in English via her own mini communicator earphone.

It was at that time – as early as in August 2006 – that Poland's first fully electronic public service was launched in Poznan. This service helps make transactions via the Internet. This means that it is possible to download and fill in an electronic form, authorize it (for instance with electronic signature), make a payment (including stamp duty) and receive confirmation that a given service has been provided by the e-authority – and all this takes place via the Internet. If a physical document is necessary (extremely rarely though it happens in 2026), the relevant document is delivered to the indicated address by courier within 24 hours. When Global was moving to Poznan, he was hoping that e-government would grow fast here, and that it will be possible to set up a company via the Internet within several minutes or to file a passport application from any photographer’s shop immediately after the photo has been taken, etc. He knew that things already looked like this in many places around the globe, but not yet in Poland. He analyzed strategic documents of local authorities in Poznan, took a closer look at their aims and methods to measure the results, and decided that Poznan was very likely to meet his expectations. He knew that government bodies were frequently inefficient only because they did not know or employ modern yet already proven methods of administration. Poznan, however, was different.
Moreover, it was plausibly the case that pre-crisis liquidity may have been too plentiful and too cheap in some financial markets, so some correction in the quantity and pricing of liquidity was to be expected, and indeed was potentially desirable, from a welfare perspective. Research at the Bank of England has sought to identify the impact of leverage ratio requirements on the functioning of UK government bond (‘gilt’) and gilt repo markets, using transaction-level data (Bicu et al (forthcoming)).18 It does find some causal impact of the leverage requirement on various metrics of liquidity, a worsening that is particularly acute at quarter-ends. Significantly, the banks most constrained by the leverage ratio reduced their activity in financial markets most. At the same time, however, dealers unaffected by the leverage ratio requirement also reduced their liquidity provision and, if anything, by more. This suggests factors other than the leverage ratio may have been at work in curtailing liquidity in these markets. It also leaves open the question of whether the correction in liquidity, even if privately costly, came at any social cost. Baranova, Liu and Shakir (2017) assess the costs that could arise from regulation which affects market liquidity at different levels of stress. They find higher costs in benign conditions, but substantial benefits in situations of stress as dealers make markets for longer. Overall Implications for Optimal Capital  How do these research findings tilt the optimal bank capital calculus relative to the LEI study? Table 1 summarises the evidence. They are a mixed bag.

While the costs of the global financial crisis are still being counted, it seems likely they will be the largest since at least the Great Depression. Two approaches are typically used to gauge these costs of crisis: the cumulative loss of output relative to its trend and the cumulative fiscal costs of supporting the financial system.1 Let’s take these in turn. Chart 1 looks at the path of output relative to a simple measure of its pre-crisis trend in the US, UK, France and Germany after the Great Depression of 1929 and the Great Recession of 2008. In either case, it is debatable whether estimated “pre-crisis trends” were sustainable, as they may have been artificially inflated by credit booms. Nonetheless, it is clear that the output losses from both crises, relative to pre-crisis trends, have been extremely large and long-lasting. In the US, the level of output is currently around 13% below a continuation of its pre-crisis trend. Ten years into the Great Depression, output was around 28% below its pre-crisis trend. Even if not quite on the scale of the 1930s, the global financial crisis has imposed a huge opportunity cost on US citizens. In the UK, the losses since the Great Recession, currently at around 16% of pre-crisis GDP, are larger than in the US and indeed larger than those that followed the Great Depression.
As stated on previous occasions, the provision of liquidity and the allotment modes for refinancing operations will be adjusted when appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are, by construction, temporary in nature. Let me now explain our assessment in greater detail, starting with the economic analysis. In the first quarter of 2011, the euro area recorded strong real GDP growth of 0.8% quarteron-quarter, following the 0.3% increase of the fourth quarter of 2010. Recent statistical releases and survey-based indicators point towards a continued expansion of economic activity in the euro area in the second quarter of this year, albeit at a slower pace. This easing reflects the fact that the strong growth in the first quarter was partly due to special factors, which will cease to play a role in the second quarter. Hence, it is appropriate to look through such short-term volatility and to emphasise the positive underlying momentum of economic activity in the euro area. Looking ahead, euro area exports should be supported by the ongoing expansion in the world economy. At the same time, taking into account the  BIS central bankers’ speeches  1  favourable level of business confidence in the euro area, private sector domestic demand should contribute increasingly to economic growth, benefiting from the still accommodative monetary policy stance and the measures adopted to improve the functioning of the financial system.

Emphasis on improved corporate governance goes hand in hand with the need for improvements in risk management standards. Sound risk management practices will minimise adverse consequences  BIS Review 51/2004  3  faced by financial institutions during periods of uncertainty. Robust internal controls to provide qualitative standards are also necessary to complement the quantitative analysis of risk to provide the necessary checks and balances. In the area of Islamic banking, the requirement to manage the risks becomes more important because of the unique peculiarities in the contracts. Basel II has, to a certain extent, incorporated some aspects in the identification of risks, in particular the credit, market and operational risks that can be assimilated by the Islamic banks in terms of its product offering. Another important pre-condition to sustain the continued growth of Islamic banking and finance is a comprehensive legal infrastructure for legal redress arising from disputes in Islamic financial transactions. The legal infrastructure needs to comprise both effective regulatory and substantive laws as weIl as appropriate adjudicative fora to resolve disputes relating to Islamic financial transactions. To address this, efforts are needed to develop a sufficient number of competent lawyers and judges that are equipped with sound knowledge and expertise in both Shariah and civil laws to deal with such matters. This would need to be supported by an efficient court system that can effectively deal with all Islamic banking and finance cases, whose decisions are enforceable over the range of financial issues.
BIS central bankers’ speeches  3  This rigour has a purpose. The dangers of using poorly designed models were made all too clear in the banking sector. So the Bank won’t hesitate to withhold approval of inadequate or opaque models. Models must be based on appropriate data and account for all quantifiable risks. Boards have the responsibility to ensure models remain appropriate and to show they are used in practice. Of course, risk-based capital standards are about more than models. Models can never be relied upon in all circumstances or in isolation, nor can they be substitutes for sound judgment. Solvency II recognises this in its three-pillar approach – supplementing a modernisation of the quantitative regime with new supervisory review, governance, risk management and transparency requirements. These requirements, under pillars 2 and 3, build a coherent framework for the future. Tools like scenario testing and the Own Risk Solvency Assessment are therefore fundamentally important. By thinking about the risks that could harm future solvency – and the possible responses to a stress – ORSAs promote the protection of safety and soundness of insurance firms, while providing insights into overall financial stability. Right idea 2: a regime that holds the right people to account The step-change in regulatory standards under Solvency II has several implications for the industry. Risk professionals like yourselves have a central role to play in building models; in using expert judgment to marry quantitative and qualitative assessments of risk; and in making technical subject matter accessible to Boards.

However, it is often the case that a rapid fall in a credit and debt cycle entails a corresponding fall in the normal economic cycle – and not uncommonly a balance-sheet recession.6 Monitoring the credit and debt cycle thus becomes a way of stabilising the normal economic cycle. With this view, it is less obvious that financial stability policy and monetary policy should be conducted separately. But, once again, it is probably quite rare that there will be reasons to coordinate them. The policy rate will probably need to support financial stability policy With regard to the question of the role of the policy rate in financial stability policy, it is my personal opinion that one must always be prepared to use it to slow down an excessive expansion in credit, or to “lean against the wind” as it is usually called. Hopefully, it will be possible to find a set of macroprudential tools that are efficient enough so we do not need to use the policy rate for this purpose. Hopefully it will also be possible to find appropriate forms as to when they shall be used and by whom. But my feeling is that even when we have a proper framework for macroprudential supervision, situations may arise where support is needed from monetary policy “leaning against the wind”. One reason is that experience shows that it is difficult to construct regulations that can never be circumvented. The policy rate is a blunt instrument, as it has a broad impact on the economy.
Inflation has been above target, not below it – and is expected to remain so for some time. Because of these changes in economic conditions, I have voted for a rise in interest rates at recent MPC meetings – as a start to a gradual movement away from the exceptional level of monetary stimulus put in place to combat very difficult economic conditions last year. And I continue to believe that this the right policy for the situation the UK economy currently faces. In the years ahead, we will see much tighter restraint of public spending as the large deficit which built up over the recession is reined in. That process of deficit reduction is necessary to ensure longer term confidence in the future stability of the economy in financial markets and more generally. In this environment, it is the private sector which will be the engine of growth for the UK economy – just as it was in the 1990s recovery and the previous recoveries we have experienced here in the UK. Confidence that inflation is being kept under control is a key factor in sustaining that private sector engine of growth. My view remains that we should be starting now to make a gradual adjustment of monetary policy.

First, employment has been more resilient than in past recessions and appears to have turned around more quickly than in the previous recoveries. The total number of people in employment in the UK has increased by over 300,000 since last winter, according to the official Labour Force Survey. 2  Chart 2 shows this contrast with previous economic cycles very clearly. Employment is down by not much more than 1% on its level at the peak of the cycle in 2008, compared with a decline of around 5% at the equivalent phase of the early 1980s and early 1990s cycles. This employment picture points to a rather mild recession in terms of the labour market, which contrasts with the much larger fall in GDP relative to previous UK downturns. The resilience of employment through the recession should help to sustain consumer confidence. It is also a positive indicator about medium-term economic prospects – as companies would not be retaining and taking on workers if they were not reasonably  1  UK economic growth averaged 2.5% in the sixty years 1948 to 2008. In the year to 1982Q1, GDP in the United Kingdom grew by 2% and in the year to 1993Q2, it grew by 2.1%. However, if growth is measured from the trough of output in 1991Q3, growth in the first year of the 1990s “recovery” would be just 0.5%.