samchain/econo-pairs-v1 huggingface dataset:
Second, there was a risk that offering these bonds with special conditions might be construed as distressed debt exchange. Third, these bonds could be seen as legacy bonds and might have had detrimental effects on the Government bond market in both krónur and euros. Fourth, the Government does not need to borrow these funds, as it has a financial surplus and Government debt as a share of GDP is on a declining trend. Fifth, as capital controls were lifted on domestic residents, it would become possible for holders of the long-term króna bonds to exit through the FX market much earlier than they would otherwise, through hedging contracts with domestic residents. In principle, this could have been avoided through  4  BIS central bankers’ speeches  prudential and other measures, but it would have been messy. It is for these reasons that when Iceland – by accumulating significant reserves in recent months – became able to offer much more FX in the auction than was previously envisaged, it was decided to opt for a straightforward FX auction. In this regard, remember what I said earlier about our preference for finality. Let me stop here, listen to the discussant, and then take questions. BIS central bankers’ speeches  5

Caleb M Fundanga: Innovation for leadership excellency Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Eastern and Southern African Management Institute (ESAMI) launch of MBA Alumni Zambia Chapter, Lusaka, 12 February 2010. *  *  *  The Eastern and Southern African Management Institute (ESAMI) Director General, Prof. Bonnard Mwape; The President, ESAMI MBA Alumni Zambia Chapter, Mr. Christopher Mulenga; The Ecobank Zambia Limited Managing Director, Mrs Charity Lumpa; ESAMI Alumni; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It is a great pleasure for me to officiate at the launch of the ESAMI MBA Alumni Zambia Chapter. I wish to take this opportunity to welcome Prof. Bonnard Mwape and other ESAMI staff that have travelled from Arusha to come and witness this important occasion. I am particularly delighted to be part of this launch because my first interaction with the ESAMI MBA alumni members was during the recent summer school event held in Arusha, Tanzania, where I was invited to present a paper on “The Effects of the Global Economic Crisis on Zambia”. Indeed my memories of that lively interaction are still very fresh and that is why I graciously accepted to officiate at this function when I received the invitation from the President of the association. Ladies and Gentlemen allow me to congratulate the President and his team for this excellent initiative of bringing together individuals with a common academic background under the Alumni umbrella.
In the past, banking was regarded as a reputable profession and bankers were highly trusted and respected both by their customers and by members of the public more generally. This was not surprising as basically customers entrusted their life savings to their bankers and the preservation and safety of their hard-earned money was in the hands of those bankers. Although nowadays customers still place their life savings with banks, bankers no longer enjoy the same high degree of trust and respect from society, especially after the Global Financial Crisis. What has changed so dramatically to bring the reputation of bankers so low? 1  FT.com – March 12, 2009 “Welch condemns share price focus”. BIS central bankers’ speeches  1  Change in modality and governance structure of banking 6. Well, the modality and governance structure of banking have changed a great deal over the last century. More importantly, these changes have created an incentive system that leads to a misalignment and disconnect between the interests of the owners of banks (i.e. the shareholders), bank management and customers. 7. Not so very long ago, banking was a business conducted by individuals, families and (more latterly) private partnerships, where the owners and managers of banks had ample “skin in the game”. They stood to lose not only their investments in the banks but also their entire family wealth or, in some more extreme cases, even their liberty, should their actions, or the actions of their partners, result in the failure of their bank.

This is ongoing and there is still some way to go. In the process, there will be arguments, frustrations and inevitably pushback. No doubt the new standards and regulations will lead to some changes in the behaviour and business models of banks. However, I do not for one moment believe that regulators and regulatory measures alone can possibly redress all of the problems stemming from the misalignment of interest amongst the various stakeholders in banking. Regulators can set standards and provide some external checks and balances. But there is no substitute for internal governance and controls that are designed to achieve the desired behavioural change across the entire firm. In this context, it is crucial that we have buy-in from the owners, directors and management of the banks. 4  BIS central bankers’ speeches  21. Only when the public sector and the owners, directors and managers of banks share the same goals and objectives can we induce the desired outcomes on a sustainable basis. Only when shareholders cease to put unreasonable pressures on bank management to keep on improving RoEs can regulators feel comfortable that the bank is not incentivised to take the short-term view on business growth and profitability. Only when bank management is not rewarded based on short-term financial performance can we be less concerned that bank managers will take excessive risks for near term bonus or share option value.
If a robust financial and regulatory system is one which is parsimonious and transparent, the answer might be that they are not. It may be time to take Occam’s razor to regulatory rulebooks. •  Rethinking capital structure: Asymmetry of payoffs risks excessive risk-taking. The source of this asymmetry is limited liability. It is revealing that limited liability was first introduced into banking in the UK in the mid-19th century. That was roughly the time state support for banks took shape. This is unlikely to have been serendipity. So could the distortions from limited liability be tackled at source? In the early days of banking, liability was not just unlimited; it was often as much personal as financial. In 1360, a Barcelona banker was executed in front of his failed bank, presumably as a way of discouraging generations of future bankers from excessive risk-taking. 16 It has not been conspicuously successful. From the Middle Ages, debtor prisons replaced the gallows. They were a common feature of many developed countries, including the US and UK, right up until the 19th century. The switch to limited liability at that time was a conscious attempt to encourage risk capital into the banking system to help finance growth. In essence, this meant trading off financial risk against future productivity. At first, equity in banks often carried “double liability”, with shareholders liable for losses on the purchase price of their shares plus their par value at issuance.

As discussed in this report, a depreciation of the króna coinciding with a fall in asset prices – possibly originating in tighter global financial conditions – could amplify the forecast contraction. The necessary reduction of pressures in the economy will squeeze businesses and households, many of which are vulnerable due to heavy debt. They could withstand a short-lived reversal, but a lasting contraction would be difficult to weather. In late autumn 2005, after a surge in borrowing by Icelandic banks in international bond markets, investors revised their risk assessments of the banks. CDS spreads and secondary market yields on their issues increased. The banks deferred further borrowing in the European bond markets, which had been their main source of funding. Foreign analysts and agencies published negative reports about the banks and the state of the Icelandic economy. The climate turned most adverse at the end of February 2006 after Fitch Ratings changed Iceland’s sovereign outlook from stable to negative, claiming inter alia that the banks’ tight financing could have implications for the Treasury. This situation and its aftermath squeezed the banks for a while, forcing them to respond firmly to the uncomfortable position that had arisen. They made efforts to explain the structure and organisation of the Icelandic banks. The banks adjusted certain aspects of their operations and cross-ownership in response to relevant criticisms, and refuted what was less relevant with both communication and successful business performance. Temporarily they needed to look beyond their traditional markets for funding, with issuance in the US and Japan.
Negative interest also puts a strain directly on banks, and indirectly on pension funds and life insurance companies, which worry about their profitability and about meeting their obligations. As I have mentioned, the SNB takes these concerns very seriously. Yet the challenges now facing pension funds are not caused first and foremost by monetary policy. Rather, their problems stem from the fact that pension funds have to achieve returns that are nominally fixed and were set when the equilibrium interest rate was higher. For banks, the negative interest rate undoubtedly represents a cost because they have to pay interest on their deposits at the SNB. However, the SNB grants a generous exemption threshold, which reduces the effective interest rate burden for the banking sector. These exemption thresholds give banks the freedom to decide whether – and to what extent – they should pass on negative interest to their customers. From a financial stability perspective, it is not negative interest per se which poses a challenge, but rather the low level of interest rates more generally. It is conceivable that low interest rates will lead investors to take greater risks. This can result in imbalances developing on the real estate and mortgage markets. In Switzerland, a variety of measures have been implemented since 2012 – the countercyclical capital buffer for instance – with the aim of reducing the associated financial stability repercussions. Since then, the pace of growth on the real estate and mortgage markets has slackened somewhat, although mortgages continue to grow faster than GDP.

Nevertheless, phases of low or negative interest rates also present monetary policy challenges and have economic side-effects, which must not be ignored and which I would like to address in the third part of my speech. I will stress that expansionary monetary policy is no panacea for growth in advanced economies. Only structural reforms and adjustments in the real economy can create the conditions for a sustained recovery – and thus for a normalisation of monetary policy. Expansionary monetary policy can make these necessary adjustments easier, but it cannot replace them and must not delay them. Before talking about the mechanism of negative interest rates in Switzerland, I would first like to examine the international environment and explain why global interest rates today are so low. Page 2/16  Low rates as a global phenomenon The current very low interest rate level is the result of a global secular trend. Interest rates have not just been declining since the outbreak of the financial crisis, they have been falling steadily in recent decades. Chart 1 shows that nominal yields on government bonds with a remaining maturity of ten years in Switzerland, Germany and the US are more than 6 percentage points lower today than they were back in 1990. Nominal interest rates are currently at a record low worldwide. But it is important to distinguish between nominal interest rates and real interest rates, which are ultimately relevant for most economic decisions.
But if the overall story of recovery in underlying growth still looks broadly intact, there has been bad news on the inflation front. The recent inflation data, particularly for goods prices, has come in a little stronger than expected. Sterling oil prices and wholesale gas prices have risen by more than 5% since February. Together with duty changes announced in the March Budget, that seems likely to leave the short-term outlook for inflation on a path a little higher than incorporated into the central projection described in the MPC’s February Inflation Report. I think inflation might remain above 3% throughout the second quarter of this year, and possibly into the second half of the year. Already in February, there was a risk that inflation might fall back towards target less quickly than incorporated into our “most likely” central outlook. Not only was there a prospect of supply disruptions to oil production, there was also a possibility that firms might seek to rebuild margins faster than assumed as and when economic recovery becomes more secure. So one possibility is that companies have begun to rebuild or protect their profit margins more quickly than expected. According to the latest ONS data, by the end of last year the profits of mainstream businesses (excluding oil and finance) had fallen to their lowest share of GDP for a couple of decades. Companies’ willingness to tolerate a further squeeze, in the  BIS central bankers’ speeches  5  face of rising import prices, might be limited.

Irma Rosenberg: Monetary policy and the Riksbank’s communication Speech by Ms Irma Rosenberg, First Deputy Governor of the Sveriges Riksbank, at Swedbank, Stockholm, 8 October 2007. *  *  *  Introduction In recent decades there has been a clear trend for central banks to strive for greater openness in their monetary policy. Central banks are now publishing an increasing amount of background material in the form of analyses and forecasts for inflation and other economic developments. The number of countries introducing explicit inflation targets is also growing. Something that is being discussed to an increasing extent, but which not so many central banks have dared to carry out yet, is the publication of the central bank’s own forecast for its policy rate 1 . At the beginning of this year the Riksbank decided to take this step. The purpose was to become even more open and clear regarding the way we conduct our monetary policy. I will begin today by discussing this new system and how it affects our communication. I will also give some reflections on the experiences of the two occasions on which we have published our own interest rate path in connection with the Monetary Policy Reports published in February and June this year. I will then conclude with a few words on the most recent monetary policy meeting in September. The Riksbank’s communication with an own interest rate path Advantages of an own interest rate path What are the advantages of publishing our own forecast for the repo rate?
Enabling Digital Financial Advice and Insurance The digital offering of financial advice and insurance is becoming more popular, catering to the needs of a growing segment of technology-savvy, self-directed consumers. MAS’ regulatory framework for financial advice is technology-agnostic. But we need to update it to make it easier for consumers to benefit from the lower cost and greater choice that digital advice and insurance can potentially provide. While at the same time ensuring adequate safeguards for these consumers. Automated, algorithm-based digital advice on financial or investment services by robo-advisers has taken off in the United States and will soon reach our shores. MAS will soon set out proposals on the governance, supervision, and management of algorithms for robo-advisers to ensure integrity and robustness in the delivery of financial advice. 3/9  BIS central bankers' speeches  We will consult the industry before finalising the guidance. In insurance, MAS already allows insurers to offer online without advice simple term life and direct purchase policies with broadly standardised features. MAS will now allow insurers to offer the full suite of life insurance products online without advice. MAS will be issuing guidance on the safeguards to be put in place for online distribution of life insurance products. Regulatory Sandbox to Test Innovative Ideas In June this year, MAS launched a regulatory sandbox for financial institutions as well as new FinTech players to test their innovations.

Constantly upgrading human and physical capital and freeing markets are as important as keeping unit labour costs under control. Portugal’s apparent inability to compete as successfully as Ireland is indeed largely attributable to relatively rigid product and market regulation; insufficiently market-friendly policies; relatively low levels of educational attainment, of R&D expenditure and of information technology use; and not enough wage and price flexibility. These contrasting outcomes clearly demonstrate that joining the euro area does not on its own provide a guarantee of sustainable growth and that the full benefits of monetary union can only be enjoyed if a country adopts appropriate economic structures and policies. Bridging the income gap with the euro area In a Maltese context the pursuit of excellence implicit in the Irish model requires in the first place a change in mindsets and behaviour that would allow us to arrive first at a common diagnosis of the obstacles to faster growth, and then at an equally consensual identification  1  L. Bini-Smaghi, Real and nominal convergence: policy challenges, speech delivered at the Conference on European Economic Integration 2007 – Currency and Competitiveness, Oesterreichische Nationalbank, Vienna, 20 November 2007. BIS Review 143/2007  3  of the means to overcome them. The ability to achieve a social compact was incidentally another no less vital ingredient of the Irish success story.
In view of the interest rate risks taken and the now extremely low provisions in the Swiss banking sector, the negative consequences of an unexpectedly sharp interest rate increase could be relatively far-reaching. The Swiss banking sector should nevertheless have sufficient capital to bear up, even under such circumstances. Hedge funds might pose an indirect threat to stability in that their failure affects systemically important banks. In our opinion, this is an unlikely scenario, however. Hedge fund risk management at Swiss big banks is adequate. The SFBC supervises the big banks’ hedge fund activities. Their exposure to hedge funds must be backed by capital as in the case of any other market and credit risks. It is, however, undisputable that, given the rapid developments in the hedge fund industry, activities must be monitored closely. System oversight In December, we reported on the situation with regard to the oversight of systemically important payment and securities settlement systems. In the meantime, the “systemically important” classifications of the interbank payment system Swiss Interbank Clearing (SIC), the securities settlement system SECOM, the central counterparty SIS x-clear and the multi-currency payment system Continuous Linked Settlement (CLS) have become definitive, and the preparations for the oversight measures stipulated in the National Bank Ordinance are going ahead as scheduled. In particular, detailed guidelines were drawn up in order to examine whether or not the regulatory minimum requirements are complied with.

Financial institutions should also educate their customers, and provide financial services that are suitable both in terms of business and risk management capability of the customers, followed by dedicated after-sales services. Improvements along these lines will further strengthen growth inclusiveness. Other policies The Bank of Thailand will also seek to strengthen the economy through its other functions. In managing international reserves, the Bank of Thailand advocates further diversification by expanding the investment asset universe, as permitted by the new royal decree. The Bank of Thailand also supports a speedy repayment of outstanding FIDF debt, based on the principles of monetary policy independence and long-term fiscal discipline. While monetary and financial stability certainly provide a favourable backdrop, the economy cannot prosper on the back of these alone. The nation’s competitiveness, in particular, needs to be strengthened and improved further. The private sector should continue to place greater emphasis on innovation and seek to compete on the basis of quality rather than prices. The public sector, meanwhile, must ensure that a sufficient part of budget is set aside for infrastructure investment on a sustained basis, which will help improve the productivity and benefit all parts of the economy in the long run. Joint efforts by all sides are needed to achieve our common goals of macroeconomic stability and economic strength and prosperity. BIS central bankers’ speeches  3
–  They are also collaborating with or buying over FinTech companies to tap their technologies. Financial technology, or FinTech, may well be the best hope for the future of finance. •  The financial industry is facing many headwinds –  •  slower economic growth, narrower margins, tighter regulation, and greater competition from outside. FinTech can potentially help the financial industry regain its dynamism and at the same time purposefully serve the economy and the people. But the FinTech phenomenon is not without risk. •  The rapid pace of innovation and adoption throw up many questions for the industry and financial regulators. •  What should be the policy approach? Will speak from the perspective of MAS. First – take a differentiated approach to different technologies and their applications. FinTech encompasses a wide range of technologies: we cannot take a “one-size-fits-all” approach. The nature of technologies, their benefits, and risks are very different. BIS central bankers’ speeches  1  •  Digital payments, digital currencies – they pose issues of authentication, identity  •  P2P lending platforms, crowdfunding – there are implications for consumer protection and fraud risk  •  Cloud computing, big data – there is the issue of cyber security  •  E-trading platforms, algorithmic trading – there are implications for market functioning, both good and bad. •  Blockchains and distributed ledgers systems (DLS) – this is potentially the most transformative innovation, at least until artificial intelligence comes along in a big way.

A monetary policy that “leans against the wind” may contribute to greater stability in the longer term, as the purpose of trying to prevent financial imbalances from building up is that they should not cause problems with financial or macroeconomic stability at some point in the future. Most people agree that monetary policy should not have the main responsibility for preventing financial imbalances, but that this should rest on micro- and macroprudential policy and a well-designed regulatory framework. A central issue is, however, what support to prudential policy and the regulatory framework monetary policy needs to provide so that they can fulfil their tasks. 5 I do not believe it is possible to completely ignore financial stability when conducting monetary policy. Different views in research and among central banks There is on the one hand a growing research-related literature on whether central banks should “lean against the wind” – or conduct “prudential monetary policy”, as it is sometimes called and which perhaps is a more telling term. 6 There is on the other hand a more practical policy discussion.