samchain/econo-pairs-v1 huggingface dataset:
As I said earlier, MA portfolios already include many types of debt instrument, and where assets are not MA eligible firms may consider – if appropriate – holding them outside the MA portfolio to back other liabilities. And the PRA has taken, as far as possible, a pragmatic approach to fixity – for example for floating rate bonds and for assets with inadequate modified Spens clauses. Over 2020, we saw very few applications for asset classes not already held in peer MA portfolios, instead seeing firms applying to invest in less liquid asset classes such as ground rents and ERMs. While the asset classes may not be new to us, firms can expect to be challenged when investing in asset classes that are new to them. We have published supervisory expectations in Supervisory Statement 1/20 “Solvency II: Prudent Person Principle”5 and Supervisory Statement 8/18: “Solvency II: Internal models – modelling of the matching adjustment”6. These cover risk management aspects including the consistency of investments with the prudent person principle, the ability to manage the assets – including in stress or in default – and the ability to model the solvency capital requirement appropriately. Next I would like to touch on the future direction for new asset classes in MA portfolios. As Sam Woods, the Deputy Governor for Prudential Regulation, and PRA’s Chief Executive said in his March speech7 at the ABI, we are wary of calls to encourage specific forms of investment with prudential regulatory incentives.

In a similar vein, the sharp deterioration of the fiscal positions of many governments has also led to a re-assessment of sovereign risks. About 10 years ago, investors were concerned that the strong budget surplus of the US Federal Government might lead to a severe reduction in the supply of US Treasuries. Today, bond vigilantes are focusing attention on not just the short term fiscal health of governments, but on the impact of demographic changes, large entitlement benefits and unfunded pension liabilities on the longer-term fiscal health of these governments. 7. My third observation is the speed of structural changes in emerging economies and transformation in the patterns of global trade and investment. As these are superimposed on cyclical changes, it is often difficult to disentangle the two. Emerging markets, especially Asia, have weathered the crisis relatively well, and recovered quickly. This year, the IMF expects emerging Asia to grow by nearly 7%, almost double the rate forecast for the global economy as a whole. Many analysts expect the differential in growth rate to persist in the coming decade. The global economy went through stagflation in the 1970s, disinflation in the 1980s, and a roaring decade in the 1990s. In 2000s, we had the dotcom bubble, and a severe financial crisis. How the coming decade will turn out, especially for emerging economies, will change many of the risks and return assumptions on a wide range of asset classes. Dealing with the implications 8.
More generally, as I have already mentioned, we also have to ensure that our approach keeps up with market developments and takes account of new types of risk that may emerge. For this reason, we have recently commissioned a firm of consultants to carry out a study of the banking sector in Hong Kong over the next five years. 23 The study has two objectives. The first is to examine the strategic outlook for the banking sector in Hong Kong during the five-year period. This will include an assessment of the strengths and weaknesses of the banking sector and the opportunities and threats with which it is faced, taking into account the impact of global and local trends and issues. Among the issues to be examined will be the costs and benefits of certain features of the current regulatory system (such as the remaining interest rate rules and the one branch policy) and the potential impact of changes to these features. I should add however there is no presumption that changes to the current regulatory system should, or will, be made. We are going into this with an open mind. 24. The second objective of the study is to consider the adequacy and effectiveness of the HKMA’s current approach to banking supervision and to make recommendations for any changes that seem required in the light of the strategic outlook for the banking sector.

Before I go any further I’ll give the usual Fed disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. Dual mandate Apart from a stint running a pizza shop, I’ve worked in the Federal Reserve System for my whole career, nearly 25 years. And I’m not alone. When you ask people at a Federal Reserve Bank how long they’ve worked there, their response is often measured in decades, not years. What makes them stay? Working for a mission-driven institution. And speaking of our mission, the Federal Reserve has two goals: maximum employment and price stability. We want our economy to reach its potential in terms of jobs and growth and we want low, stable inflation. While these two goals are critically important, they are broad and highlevel. The monetary policy decisions we make have important effects on the overall number of jobs and wages, but they don’t determine what economic growth looks like across communities, or who benefits from it. That’s why our outreach and community-based work is a key priority. It’s an opportunity for us to take all of the data, all of the things we know about the economy, and help one another as we tackle the very real issues that shape the everyday lives of Americans. Equitable Growth We’re closing in on the longest economic expansion on record, unemployment is at historically low levels, and inflation is close to our 2 percent target.
Ravi Menon: Macroeconomic stability and financial stability – uncomfortable bedfellows? Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the 39th Federal Reserve Bank of New York Central Banking Seminar, New York City, 8 October 2015. *  *  *  Mr William Dudley, President of the Federal Reserve Bank of New York, ladies and gentlemen. It is an honour to be here and I thank the Federal Reserve Bank of New York for the opportunity. The good ‘ole days Central banking has become interesting again. For a time, it was almost getting boring. •  The Great Moderation, beginning in the mid-1980s and spanning two decades, marked the triumph of central banking over the menace of inflation. •  The formula was simple: an independent central bank, a single target (price stability), and a single instrument (the interest rate). •  It worked brilliantly: Many economies enjoyed what Mervyn King called the NICE equilibrium. N I C E – a “non-inflationary, consistently expansionary” economy. Of course, not all of it was due to enlightened central bankers. •  The deregulation of industry, the liberalisation of trade, and the entry of China into the global economy augmented productive capacity and kept a lid on prices. •  But central bankers were wise not to muck it up and remembered to take away the punch bowl whenever the party got too wild. Monetary policy was unencumbered by financial stability considerations. •  Central banks no doubt cared about financial stability.

•  Many of them were also banking supervisors. They saw financial stability as the preserve of prudential regulation and supervision. Those were the good ‘ole days. •  Keep monetary policy focused on macroeconomic stability and regulatory policy on financial stability and all will be well. •  In short, consistency between instrument and objective: Tinbergen would have been proud. Financial stability: what we know, what we don’t The Global Financial Crisis of 2008 changed all that. •  Its devastation and virulence, but most of all, its suddenness, shook conventional macroeconomic thinking. •  HM Queen Elizabeth II asked: “Why did no one see it coming?”  BIS central bankers’ speeches  1  •  That question illustrated vividly how little we knew about financial stability, let alone the interactions between the financial sector and the macroeconomy, between monetary policy and financial stability. But there are two things we did learn from the crisis about financial stability. First, macroeconomic stability does not guarantee financial stability. •  Beneath the still waters of macroeconomic stability during the 2000s, deadly whirlpools of financial imbalances were forming. •  The “Goldilocks” or “NICE” economy sharply reduced risk premiums, stoked a credit boom alongside speculative activities that ultimately undermined financial stability. Second, effective regulation of individual institutions does not deliver stability of the financial system as a whole. •  Risks may be reasonably well managed in individual institutions but the system as a whole could be pro-cyclical and hence more risky.
It was maintained due to the continuation of positive values in net financial result. Addressing the non-performing loans issue has been one of the major engagements of the Bank of Albania throughout 2015. For the first time, after a four-year period, the level of nonperforming loans fell below 20%. Decisions taken by the Bank of Albania have constantly increased the pressure on the banking system, which, in turn, has added the efforts for managing non-performing loans through restructuring, execution, provisioning and their write off from the balance sheet, accordingly. 4  BIS central bankers’ speeches  The inter-institutional initiative materialised in the Plan of Measures for Reducing NonPerforming Loans, which consists in a multidimensional action of legal, fiscal and regulatory improvements, contributed to lowering the stock of non-performing loans to 18.2 % at the end of 2015. This plan includes other steps over the course of 2016, which will render the positive result even more visible in the system. Moreover, in 2015 the banking system was tested by the psychological pressure arising from the Greek crisis; however, it passed the test successfully. On the other hand, the situation served to test the effectiveness of prudential measures that the Bank of Albania had taken in due time. 4. Banking supervision  During 2015, we have worked on further bolstering banking supervision.

As a result, house prices are now rising in most areas of the country and homebuilding activity has strengthened. Moreover, there is further scope for gains in homebuilding. After all, the current annualized rate of housing starts – around 900,000 – is considerably below the rate consistent with the country’s underlying demographic trends and the expected long-run rate of household formation. By these metrics, housing starts should ultimately climb back to about a 1.5 million annualized rate. The underlying fundamentals supporting business investment are also good. Profit margins have been high and cash flows strong for some time. Credit availability has been gradually improving. For example, the Federal Reserve’s Senior Loan Officer Opinion Survey indicates that banks are continuing to gradually ease their lending standards for commercial and industrial loans. However, against these improving economic fundamentals, we have two important offsets. The first offset is the unusually high degree of fiscal drag, which the Congressional Budget Office (CBO) estimates at about 1¾ percent of potential GDP in 2013.1 The two most important components of this restraint are the end of the payroll tax holiday and the increase in income tax rates this past January, and, more recently, the government spending cuts resulting from budget sequestration. Another new source of drag for the economy is the sharp rise in long-term interest rates, especially residential mortgage rates – that has occurred since May. So far we don’t have much hard data on how this is affecting the housing sector.
The task of safeguarding price stability had to make way for other central bank tasks. It was partly therefore that almost the entire western world lived with a rising inflation rate during the late 1960s and the 1970s. At the same time, the upswing in inflation did not go hand in hand with higher growth and employment. When the world economy and world trade grew, the regulations became increasingly ineffective. Interest rate regulation, credit restrictions and exchange rate regulation hindered capital from flowing to where it could give the highest return. In addition, the regulations became more difficult to maintain when an increasing number of companies began to conduct operations in several countries, while new, unregulated companies and operations arose in the financial markets. In Sweden, as in many other countries, credit and exchange rate regulations were gradually abolished during the 1980s. This of course radically altered the conditions for monetary policy. The fixed exchange rate system was also subjected to considerable strain during the 1970s and 1980s. This had long been perceived as the best means for a small, open economy to promote international trade and at the same time maintain a low inflation rate. The idea was that a fixed exchange rate would lead to an inflation rate in Sweden that was roughly the same as that among our  2  BIS Review 8/2006  most important trading partners. However, for various reasons, economic policy did not manage to achieve this target.

During more recent decades, global inflation has declined. This is of course due to many factors. One is increased competition resulting from the deregulation of the financial and product markets as well as from the fact that previously closed economies are now integrated into the world economy. In Europe, the preparations for and introduction of the EMU contributed to a greater degree of price stability. In addition, the shift in economic policy in general has made a contribution, not least the introduction of inflation targets. In Sweden we chose the alternative of a flexible exchange rate combined with an explicit inflation target in 1993. Since then the inflation rate has gradually shifted down and appears to have stabilised at a low level. Inflation has been around 2 per cent a year on average since 1993, which can be compared with an average inflation rate of almost 8 per cent a year during the 1970s and 1980s. Everyone now understands that we are serious in our fight against inflation, which is important for the policy to succeed. There has been less fluctuation in the real economy than during the decades prior to the crisis in the early 1990s, and developments in both real growth and real wages have been significantly better. In addition to the introduction of an inflation target, the consolidation of central government finances and efficient wage formation have been important conditions behind this positive development. Where has this development taken us? The Riksbank’s tasks are stated explicitly in the Sveriges Riksbank Act.
Information about future demand and supply levels ought to be reflected in the current price and in the prices of commodity futures. But the increases from Autumn 2010 onwards were largely unexpected, and have been a genuine surprise for our forecasts. For example, spot oil and gas prices have risen very substantially since their low points in 2009.2 Spot oil prices are well above the levels implied by futures prices at the time of the February Inflation Report (Chart 2). Gas futures prices have also moved markedly higher since then (Chart 3). Chart 2  Chart 3  Sterling oil prices(a)  Sterling gas prices(a)  Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. Each futures curve assumes that the sterling-dollar exchange rate remains constant at its average during those periods. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. (b) One-day forward price of UK natural gas. (b) Brent forward prices for delivery in 10–21 days’ time converted into sterling. Third, we have been experiencing the ongoing effects of sterling’s fall during 2007 and 2008, when the nominal effective exchange rate fell by around 25% (Chart 4).

Benoît Cœuré: Cyber resilience for pan-European financial market infrastructures Introductory remarks by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the High-Level Meeting on Cyber Resilience, Frankfurt am Main, 19 June 2017. * * *  Introduction It is a pleasure to welcome you here today to this strategic high-level meeting on cyber resilience for pan-European financial market infrastructures. The aim of bringing together high-level representatives from large European market infrastructures, critical service providers and public authorities is threefold: First we would like to gain a deeper understanding of the cyber threat landscape in Europe. The European Union Agency for Network and Information Security (ENISA) will make a presentation on the cyber threat landscape and its relevance for the financial sector. Second, we will share with you the Eurosystem’s cyber strategy for financial market infrastructures and also explain ECB Banking Supervision’s approach to the issue of bank cyber resilience. Third, we would like to hear your views on how we can all collaborate in a trusted environment to enhance the cyber resilience of financial market infrastructures. More specifically, we would like to assess with you how much interest there is in creating a highlevel cyber resilience forum for pan-European financial market infrastructures, critical service providers and competent authorities. Before we start, let me briefly set the scene.
The Bank’s model-based estimates suggest that US high-yield and investment grade corporate debt currently reflect historically low risk premia, and so may be vulnerable to a correction (Chart 14). Moreover although much of the recent issuance reflects refinancing of existing bonds or loans (with companies seeking to lock in low interest rates and extend maturities) and M&A activity, there have also been growing reports of US issuance to finance “dividend recapitalisations” (where debt is issued to pay special dividends). Issuance of covenant-lite leveraged loans (which include fewer of the usual protective covenants for the benefit of the lending party) was $ in the first five months of 2011, compared with $ in the whole of 2010. And US contacts have reported renewed issuance of bonds with Payment-in-Kind (PIK) toggles (where issuers have the option of deferring cash interest payments, choosing instead to roll interest payments into additional debt securities). Although the incidence of these sorts of deals remains significantly below that associated with the pre-crisis exuberance, these examples might be indicative of the reach for yield/assets encouraging investors to chase returns via higher risk assets. Despite the low-yield environment, market contacts have been telling us that some investors’ expectations of returns were little changed by the crisis, reflecting a combination of investor inertia and the need to earn sufficient returns to cover their liabilities. But we also hear that investment horizons are often shorter and tolerance of volatility and desire for leverage is lower.

The SNB takes stock at the end of each year and distributes part of these profits to the Confederation and the cantons. If the SNB had to pay out money ‘debt-free’, as called for by the initiative, it would be giving money away without receiving an equivalent amount in return. However, the SNB would not be able to earn income on the money it gives away. In a system with ‘debt-free’ payments, we would therefore be unable to make an annual distribution to the Confederation and the cantons. It is important to recognise that economically speaking, the two approaches are ultimately equivalent. We can distribute the profits on our investments every year, or we can give newly created money away, but then no longer pay out any profits. In other words: Under established practice today we distribute the interest on our capital, while under a sovereign money system we would be selling off the family silver, as it were. ‘Debt-free’ payments would not make our country any richer. The initiative’s authors also suggest that, with the introduction of sovereign money, the SNB would be able to redirect the profits that banks currently earn from money creation to taxpayers. This idea is based on the assumption that, by creating money, banks are filling their own coffers. But, in reality it is all the banks’ customers – private individuals as well as companies, savers and borrowers – who benefit from the creation of money by banks.
At the end, I hope I have managed to pinpoint the main aspects of the ongoing and evolving discussion on the main challenges for the statistics on the backdrop of the “Great recession”. The crisis was hopefully once in a century adverse event, which made a revolution in the manner in which the statistics is thought of. Many issues and challenges in statistics which arose after the crisis have been tackled in the advanced world, but still there are many remaining challenges which are to be tackled in the times to come. As for the less developed countries and less developed statistical systems, the challenges are twofold. First, even absent the crisis, there was a lot of work to be done in order to converge to the systems and practices of the developed world. Of course, lots have been done and gaps have been narrowed. But the changes in the approach to the statistics in the developed economies after the crisis mean that their systems will gain additional layer of quality. Hence, the crisis has made the challenges for us even bigger, as the benchmarks for convergences in the area of statistics are much higher. But I am positive that the efforts and the energy that we invest in this will be enough to get us closer to what is currently being perceived as the best practice in the world of statistics. In fact there is no other alternative.

By now we all know that the reliance on second-best solutions in statistics might entail wrong policy decisions, inability to detect and respond to vulnerabilities, and large costs for the society. Let me wish you a successful seminar with productive and interactive discussions. Thank you. BIS central bankers’ speeches  3