samchain/econo-pairs-v1 huggingface dataset:
Euromoney Conferences: The Greater Mekong Investment Forum “Confidence in Connectivity of the GMS” Speech by Dr. Veerathai Santiprabhob, Governor of the Bank of Thailand Bangkok, June 1, 2017 Excellencies, Distinguished Speakers, Ladies and Gentlemen. A very good morning to you all. Let me first thank Mr. Tony Shale, the CEO of Euromoney Asia, for organizing this conference and inviting me to join you once again this year. It is always a great pleasure to speak at the GMS Investment Forum. Let me also extend a warm welcome to those of you who travelled from abroad. *** Ladies and gentlemen, Established way back in 1992, the GMS marks a quarter of a century milestone this year. To me, the GMS today is like a promising 25-year-old graduate from a prestigious university, full of energy and potential, on her way to making a mark in her career. The GMS is a dynamic region, linked by the richness of the great Mekong river, with abundant endowments and opportunities awaiting to be further explored. Last year, I expressed my confidence in the future of the GMS, as a result of synergy and connectivity that had been harnessed over the years. Today, I would like to once again reiterate the importance of regional connectivity, as prospects for trade and investment opportunities in the GMS have improved with a more positive global economic outlook.

Reforms to Market Structure We should also keep in place the key structural reforms of financial markets that are making the financial system safer. In my mind, the most important of these include money market mutual fund reform, tri-party repo reform, and the mandate for the centralized clearing of OTC derivatives. In each case, the post-crisis structural reforms have made the system more resilient to the potential insolvency of a major financial institution. As a result, the level of stress placed upon the entire financial system by the failure of a single firm should be considerably lessened. As part of this, we must maintain the capability for robust oversight of key FMUs. Centralized clearing is a beneficial development for financial markets. It reduces the amount of risk in the system by facilitating the netting of exposures to the central clearing party. As a result, centralized clearing makes the financial system more resilient and enables greater efficiency and transparency for trading counterparties. However, the trade-off for these benefits is that more residual risk is now concentrated in the FMUs. Consequently, it is important to retain the protections contained in the regulatory framework provided by Title VIII of the Dodd-Frank Act. We must ensure that FMUs are appropriately supervised and can withstand the failure of one or two of their largest counterparties and continue to operate. Worth Another Look So, what hasn’t worked as well as we might have expected, or might be less crucial in light of the principles that I discussed earlier?
Cumulative returns earned by, on the face of it, very different financial models illustrate this story (Chart 7). Looking across global banks, large complex financial institutions (LCFIs), insurance companies and hedge funds, cumulative returns have exhibited a remarkably similar pattern, both in the run-up to crisis and in the subsequent run-down. Rolling averages of pairwise correlations across sectors averaged in excess of 0.9 throughout the period 2004-2007. At the height of the credit boom, financial imitation appears to have turned into near-cloning. Flattery gave way to fat-cattery. What was true across financial sectors was also true within them. For example, hedge fund strategies rejoice in such oblique names as “convertible arbitrage” and “dedicated short bias”. The average pairwise correlation between these different funds’ strategies was roughly zero at the turn of the century. By 2008, it had risen to around 0.35. Far from daring to be different, hedge funds seem increasingly to have hunted as a pack. 19  Worm et al (op.cit.). 20  Levin and Lubchenco (2008). 21  For example, Tilman (1999) and Clay (2004). 10  BIS Review 53/2009  Management of the risks resulting from these strategies amplified this homogeneity. Basel II provided a prescriptive rule-book ensuring a level playing field. Ratings were hard-wired into regulation. Risk models blossomed, with Value-at-Risk (VaR) and stress-testing providing seductively precise outputs. Like blossom, these models looked and acted alike – and may yet prove similarly ephemeral.

The international economic scene has been marked throughout 2006 by the continuing robust growth in global trade and activity seen in recent years. Such growth has been particularly notable in that it has come about against a background of considerably high oil prices which have only eased in recent months. It is very likely that in the coming quarters this dynamism will be maintained in most of the main geographical areas. Nonetheless, signs have emerged lately of growth easing in certain areas, most notably in the United States, meaning that the pace of expansion of global activity as a whole should be somewhat more contained in the immediate future. Thanks to this global framework, the euro area's economic situation has improved substantially. On most available forecasts, GDP in the area could grow by around 2.5% this year, marking a significant acceleration on 2005. Accompanying this greater dynamism has been the recovery in internal demand, which should contribute to extending the length of this upturn. Prominent among the internal expenditure components is the robustness of investment, both in capital goods and in construction. The persistence of highly favourable financial conditions, companies' improved financial position and their higher earnings have contributed to buoyant corporate investment, in a setting in which capacity utilisation has reached the highest levels of the past five years and unit labour costs remain moderate. Household spending has recently gained some momentum and the course of the determinants of this variable paint a favourable picture.
Employing again the simple AD/AS framework, their initial impact may have resembled a leftward shift in supply (Chart 8a) – but in time these hits to real income also take their toll on demand, shifting the AD line to the left as well (Chart 8b). Charts 8a and 8b: The shocks hitting the UK have pushed up inflation and started to weigh on demand  That hasn’t happened to any appreciable extent so far. Households emerged from the pandemic with extremely high rates of saving: having been so suppressed during the lockdowns, consumer spending had ample room to bounce back when they were lifted (even without any subsequent growth in income). Those high saving rates had resulted in the accumulation of significant “excess deposits”: measured relative to household incomes, they were around 15% higher than before the pandemic (Chart 9). Wider measures of households’ financial wealth had also recovered strongly, along with global equity markets, and those too were comfortably above average. All this provided the support for a very steep decline in the rate of saving (i.e. for consumption to grow much faster than income) once the economy came out of the lockdowns.

Furthermore, as regards the comparison in Chart 10, the Energy Price Cap and the currency have not been the only pieces of news since August that might have influenced market expectations. For example, forward interest rates rose a cumulative 50bp on the (nine) days on which UK price and wage data were released. The market may also be wary about further changes in fiscal policy, and to take a skewed view of the risks in that respect. Bank of England  Page 19  Nevertheless, the graph does serve to illustrate quite how significant the moves in markets have been in the past couple of months or so. If Bank Rate really were to reach 5¼%, given reasonable policy multipliers, the cumulative impact on GDP of the entire hiking cycle would be just under 5% - of which only around one quarter has already come through (Chart 11). Chart 11: Most of the impact of cumulative tightening implied by market prices yet to come  0  Percent 0  -1  -1  -2  -2 Impact of tightening on GDP  -3  -3  -4  -4  -5 Dec 2021  Dec 2022  Dec 2023  Dec 2024  -5 Dec 2025  Chart shows estimated impact of policy tightening to date and as implied by forward market interest rates at close on 17 October, relative to a counterfactual in which Bank Rate is held constant at 0.1%.
The answer of monetary and fiscal policies and a sound and well regulated financial system were key factors in the ability to withstand and recover from all the hard times we have had to face in the last few years. The Chilean economy has picked up strongly. Expansionary policies applied have paid off. The current recovery process has posed two main challenges to emerging market economies. The first one has to do with the appreciation of currencies and the resumption of capital inflows. And the second, with the need to control inflation in an environment of rising commodity prices. 4  BIS central bankers’ speeches  Massive capital inflows are not a problem in Chile, as we have a current account surplus; therefore, in net terms we are lending to the rest of the world. In contrast, some other countries see this as a problem as economies grow strongly and current account deficits widen despite gains in terms of trade. Some economies are using capital controls to temper the pressures. Despite the fact that this is not a relevant issue now in Chile, in a longer-term view, the effectiveness of this type of measures has to be carefully evaluated. At least, the evidence for Chile shows that the effects of capital controls during the 1990s were very limited at best. 3 Overall, the currencies of most emerging and commodity-exporting countries have been appreciating, regardless of the presence of net capital inflows.

Our floating regime admits interventions in exceptional situations, like the one announced at the beginning of the month. Nonetheless, it is important to consider that beyond the evolution of the dollar in international markets, there are some more long-lasting elements underlying the real appreciation of the peso, such as improved terms of trade, the accumulated increase in the ratio of public expenditure to GDP and the reduction in our net debtor position relative to the rest of the world. The effects of these factors on the real exchange rate and the competitiveness of some sectors goes beyond the horizon of the effects of this intervention. Those sectors need to improve their productivity and reallocate their exports to growing emerging markets in order to remain competitive. In any case, additional reserves available will allow to better deal with the contingency of a significant deterioration of the external environment. Foreign exchange markets are under stress and currencies are adjusting asymmetrically. There is also the risk that GDP growth decoupling between advanced and emerging economies will persist longer than expected, thus intensifying the pressure on the exchange rate. Accordingly, the effects of this measure, although temporary, should open room for smoother real adjustments in the domestic economy. Final thoughts and challenges The ability of macroeconomic policies in developing economies to react swiftly was essential to reduce the impact of the global crisis.
We are also establishing stricter requirements for financial standing of turnaround managers. However, stricter control does not remove systemic deficiencies of financial resolution, namely: –  longtime presence in the market of undercapitalised banks under resolution (up to 10 years);  –  high cost: the current lending scheme provides for allocation of 1.6-fold more resources than acquiring a share in the capital, that also has indirect implications and aggravates structural liquidity surplus;  –  consolidation of banks under resolution is impossible as they have different turnaround managers appointed under bankruptcy proceedings;  –  insufficiency of financially sound turnaround managers;  –  higher DIA debt burden;  –  long loan maturities;  –  and the last one is the above-mentioned use of banks under resolution as a ‘bad asset depot’ by turnaround managers. Also, all of these are indeed systemic shortcomings of our mechanism, the one that has been around for many years. This resolution mechanism has seen no change since the time it was set up. It is still grounded in long-term soft credits extended in large amounts to entities wishing to take part in a financial turnaround. It is time for us to make the next step – the one to enable us to overcome these problems. BIS central bankers’ speeches  7  The Bank of Russia stands ready to assume broad responsibility for the impact of bank resolutions, acting, in addition to its role of the main funding source, as a central enabling facilitator to this process.

If the Bank of Russia inspection reveals insufficiency of the available capital to cover the risks assumed taking account of stress-testing outcome, or that the low level of riskmanagement procedures does not allow banks to assess the risks assumed correctly and they may face capital shortage in future, the Bank of Russia will establish targeted elevated capital adequacy requirements for such banks. So far, stress tests conducted by banks shall meet basic requirements, but we are adjusting parameters of stress scenarios and stress-test requirements. Their outcomes will be progressively taken into account in supervisory decision-making. The outcomes of banks’ stress-testing are supposed to be taken into account in assessing possibilities of bank mergers, agreeing on a resolution plan, and taking other significant supervisory decisions. Another important line of our activity is improving the system of bank resolution. Our resolution analysis (and over the past three years we took 28 resolution decisions) shows that investors usually do not invest in capital of banks under resolution, do not develop their business and sometimes use the balance sheet of banks under resolution for bad debts while forwarding a sizeable share of funds for resolution purposes to their own projects. That is why we have tightened control over the ongoing financial resolution. Supervision will be focused on all the transactions between the bank designated as a turnaround manager and the bank under resolution. The turnaround manager will be prohibited to deteriorate financial position of the bank under resolution with its bad assets.
Factors which might influence banks simultaneously are in focus, for instance the emergence and bursting of financial bubbles, excessive debt leverage in a certain economic sector or structural changes leading to reduced revenues or increased risks. The purpose is to identify conceivable risks and present an analysis that will influence the behaviour of market participants. A first and very relevant question is whether a stability report really would help to prevent a crisis. Will the financial sector read and listen to what the central bank has to say? Will this kind of moral suasion be sufficient? Could we have written a report in the late 1980s that would have made the banks see what they did not see? We do not know. But at least as long as managements have a memory of the last crisis, they are likely to listen. And if the crisis develops slowly, there are certainly things to be done. I shall return to this question when I talk about crisis management. Let me now turn to the main elements of a stability report as I see them. First, we look at the banks’ borrowers, because as long as they are healthy the banks usually are as well. Borrowers are analysed in terms of the corporate and household sectors in general, with particular reference to levels of debt and the future ability to pay. The real-estate sector is considered separately because lending to this sector is in most countries a major part of banks’ total lending.

There is a generally-accepted principle that looking a few years ahead, CPIF inflation is the relevant operational measure of inflation. The reason for this is that in the short term, CPI inflation is affected directly by the Riksbank’s own repo-rate adjustments and monetary policy should not react to these temporary effects. CPIF inflation does not include these effects. In the longer run, these effects largely cancel one another out, and then it is CPI inflation that is relevant. 4 The point of using CPIF inflation as the operational measure is thus to best stabilise CPI inflation in the longer run. In the longer run, monetary policy should therefore be assessed with regard to how well it stabilises CPI inflation around the target and unemployment around a long-run sustainable rate. 3  The employment gap is equal to the labour-force gap (the “participation” gap) minus the unemployment gap, where the “gap” refers to the difference between the actual rate and the long-run sustainable rate. If the labour force gap is not so small that it can be ignored, the employment gap can be stabilised by more precisely stabilising unemployment around the sustainable unemployment rate minus the labour force gap. 4  This is entirely in line with the recommendations in the assessment made by Goodhart and Rochet (2011), and which the Riksbank agreed with in its consultation response.
Despite this, we expect manufacturing output to continue to expand because of improving domestic demand and foreign demand for U.S. manufactured exports. Yet, if this recovery follows the typical pattern for past recoveries, the prospect for growth in factory jobs will likely be weaker here than the rest of the nation. Longer term, the sector’s prospects are likely to be governed by a continuation of the trends I mentioned before in international trade, technology and consumption patterns. This means that output and wages will likely continue to rise, both nationally and regionally. However, the sector is unlikely to be a major source of job growth. Beyond the national trends that work against an expansion of factory jobs, the New York-New Jersey region faces ongoing competitive pressures as a location for manufacturing production. That competition comes from other regions of the country, as well as from abroad. One key to meeting these competitive challenges will be for the region to ensure that it develops and attracts a highly skilled workforce that can meet the needs of innovative and rapidly changing firms. IV. The Empire State Manufacturing Survey  In order to monitor conditions in the region, the New York Fed conducts a monthly survey of manufacturing firms in New York State, our Empire State Manufacturing Survey. Let me tell you a little about the survey and then review recent patterns. The survey is sent to a pool of about 200 manufacturing executives in a wide variety of industries across the state. About 100 responses are usually received.

As a result of these crises, and in collaboration with other international agencies and with national authorities, the Fund conducted a far-reaching review of the so-called “international financial architecture”. Numerous initiatives were adopted over recent years with the aim of lessening the frequency and cost of crises and of improving the stability of the international monetary system. Accordingly, there has been a notable effort to increase the transparency of member countries’ economic policies and to improve the information at the disposal of economic agents and, in particular, international financial markets so that the latter may exert market discipline more effectively. Specific measures have been adopted to reinforce financial systems. And it has also been sought to improve the crisis prevention and crisis resolution mechanisms available to the international financial community, including those particularly difficult cases in which sovereign debt restructuring proves inevitable. Moreover, instead of relying on exhaustive international regulations which, as experience has shown, are difficult to approve and even harder to implement, all these reforms have relied on voluntarily mechanisms, based frequently on the adoption of codes of best practices, international standards and systems that offer incentives for their application.
Kevin Stiroh: Misconduct risk, culture and supervision Remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the Culture Roundtable Session with Business Schools and Financial Services Industry, Federal Reserve Bank of New York, New York City, 7 December 2017. * * * Good morning everyone. Thank you for joining us at the New York Fed today and for your ongoing participation in the important discussion around culture and ethics in the financial services sector. This workshop and discussion are a critical part of our ongoing collective efforts on promoting financial industry culture reform. Business schools serve as a major supply source of the talent pool for mid-level management positions in the industry. This relationship makes aligning business education curricula and pedagogy with demands around improving industry culture a mutually beneficial strategy. While your conversation today has focused on the role of academia and industry, I want to take this opportunity to share with you how I’ve been thinking about the role of bank supervisors in the culture reform dialogue. I am the head of the Supervision Group of New York Fed, but my perspective and approach are influenced by my background and training as an economist. You’ll hear me talk about frictions and market failures; about production processes and intangible capital; and the conceptual rationale for a role for the official sector. There are, of course, multiple ways to consider the relationship between culture and bank supervision.

9 See Beverly Hirtle, Anna Kovner and Matthew Plosser, The Impact of Supervision on Bank Performance,  (February 1, 2014) for more on the distinction between supervision and regulation and the relative effectiveness of each. 10 Financial Stability Board, Guidance on Supervisory Interaction with Financial Institutions on Risk Culture (April 7,  2014). 11 An Act Supplementary to the Act to Incorporate the State Bank of Ohio, and Other Banking Companies, Chapter  299, Laws of the State of Ohio (January 6, 1846). 5/5  BIS central bankers' speeches