samchain/econo-pairs-v1 huggingface dataset:
6  Central Bank of Chile 29 June, 2017  Financial distortions that influence macro stabilization  Slide 10  ▪ Liquidity constraints prevent relative prices from helping macro adjustment ▪ Inefficient intermediation of savings reduces the return on real investment and balance incentives in favor of speculation and rent-seeking ▪ Underdeveloped financial systems are also prone to concentration and vertical integration, at the cost of clients and systemic risk  [SLIDE 10] The latter are rather dramatic examples of the challenges posed by protracted financial development for price and financial stability, the twin goals of central banks. But such challenges can take many more shapes. A low coverage of banking and credit means that a substantial fraction of the population and companies may not have access to liquidity when they need it, nor credit to live through a contingency. Liquidity and credit constraints prevent relative prices from resolving disequilibria, amplifying the impact of shocks on employment, production and consumption. Inefficient intermediation of savings reduces the return on real investment and tilt incentives in favor of speculation and rent-seeking. Shallow capital markets may be unable to hedge market risks, particularly exchange rate and term exposures, and foster concentration and vertical integration. Underdeveloped financial services can also contribute to economic informality. What is the point in registering a business, complying with regulations and paying taxes if you cannot get funding for working capital or investment projects? The financial dimension of informality is shadow, unregulated banking, which is prone to insolvency, abuse and fraud.

In the international arena, INCEIF has also established strategic alliances with the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank, Lembaga Pengembangan Perbankan Indonesia (LPPI) of Bank Indonesia, National Institute of Banking and Finance (NIBAF) of State Bank of Pakistan and Ceylinco Sussex Business School, Sri Lanka, among others. INCEIF is also in the midst of finalising its collaborative efforts with organisations in the United Arab Emirates, Kuwait, Bahrain and Qatar. Initiatives have also been taken to enhance the pool of talent is in the field of Shariah. This has been done by awarding research grants and scholarships to deserving outstanding candidates. This initiative will be funded by the Shariah Endowment Fund which was announced in August this year. The applications for the Shariah Scholarship Award and the Shariah Research Grant for 2006 are still open to qualified candidates until the end of the year. Apart from this, many other initiatives have been taken by the relevant bodies in Malaysia to strengthen talent development at all levels in Islamic finance. At the strategic leadership level, Malaysia has established the International Centre for Leadership in Finance or ICLIF as part of an effort to spearhead the development of a new generation of world class leaders in the financial services sector including Islamic finance towards high performance and excellence.
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 previous conferences (2018 and 2019), the former Executive Director for Insurance Supervision, David Rule, talked to you in his speeches ‘An Annuity is a very serious business’ Parts 1 and 2 1 about:   The key risks facing annuity writers and the treatment of unrated, direct investments under the Matching Adjustment in 2018, with a focus on equity release mortgages; and    How Solvency II works to address risks to annuity providers, serves protection of policyholders and allows insurers to invest for the long term in ways that support the UK economy in 2019  There is continuity in that I will be looking at aspects of the Matching Adjustment (MA), but today I will be focussing on three areas of our supervisory risk analysis. 1. I will take stock of market developments since 2019. 2. I will talk about the implications of those developments for our supervision, in particular the Matching Adjustment – putting it in context, setting out the rationale behind it, and discussing asset eligibility matters; and 3. Finally, I will share some thoughts from our supervisory analysis on the size of the MA, how the current fundamental spread (FS) approach has been implemented, and looking at the risk sensitivity of the FS. You will hear more on developments in regulation following HM Treasury’s Call for Evidence 2 in due course; but today I would like to explore what we have learnt through our supervision of annuity writers since the inception of Solvency II.
A review of how refinancing risk could arise across all of a bank’s business lines is a priority; as is an analysis of how refinancing risk interacts with market risk, credit risk and concentration risk. The Committee of European Banking Supervisors and the Basel Committee, at the global level, are currently reviewing the principles governing liquidity risk management. On a final note, I would like to add that the crisis has highlighted the need to enhance internal control systems and to improve the circulation of information about risks, especially for senior managers. The exceptional case of fraud affecting Société Générale has strengthened our resolve in this matter. In France, this should lead to the amendment of Regulation 97.02 on internal control, with provisions on managing operating risk, along with specific efforts to fight fraud. This reform is connected to moves to ensure greater involvement of banks’ highest governance bodies in monitoring their internal control systems. All these initiatives draw on the lessons learned from the past, but they are also forward-looking. Their purpose is to establish the principles of risk management. These principles do not eliminate all risks, but they enhance the resilience of the system when tensions do emerge. This is the objective of the reforms, which I am sure will contribute to greater financial stability in the long run.

Michael C Bonello: The euro and beyond Welcome address by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Conference “EMU Governance and Euro Changeover – Malta on the Path to the Euro”, Valletta, 1 October 2007. *  *  *  Prime Minister, President of the European Central Bank, Mr. Jean-Claude Trichet, Commissioner for Economic and Monetary Affairs, Mr. Joaquin Almunia, Excellencies, Distinguished Guests, Ladies and Gentlemen, Malta’s forthcoming adoption of the euro represents the final step in the country’s integration in the European Union (EU) and is clearly a major milestone in its economic history. The presence here today of such a distinguished gathering indeed testifies to the importance of the occasion. I therefore would like to start by joining the Prime Minister in extending a warm welcome to President Trichet, Commissioner Almunia and our other guests from abroad, including the Governors and other senior officials of twenty-two national central bank members of the European System of Central Banks. Reaching this milestone has by no means been an easy task. At the level of macroeconomic policy, difficult decisions were called for, and taken, to start addressing existing imbalances and other impediments to growth in order to satisfy the Maastricht criteria. As for the logistics involved in preparing for the change of currency, a wide-ranging effort has been undertaken during the past two years to mobilise both the public and private sectors and to coordinate preparations at a national level.
As a result, CGC is now able to undertake some new business activities such as securitisation, portfolio guarantees and collateralised loan obligations (CLOs). These are aimed at raising alternative sources of funds as well as attracting medium-term funding from the capital markets for SMEs. CGC firmly believes that these exercises are also key drivers in the Corporation's efforts towards achieving financial sustainability. The Corporation has also identified a number of strategies to help it to achieve financial independence. Of importance is the expansion in the product range that include capital  BIS Review 75/2008  1  market activities. In view of our commitment towards making CGC a financially sustainable institution, we have even gone a step further by working closely with our financial partners to ensure higher business quality. To encourage active participation, CGC introduced for the first time in 2008, a new award called the Best Financial Partner Award. The award acknowledges and recognizes the financial partner that contributed the most towards quality assets for CGC. It also recognises the financial institutions' conscientious efforts in ensuring that scarce funds are channelled to SME borrowers identified to have the capability and capacity to maintain good credit standing. The Best Financial Partner Award will be a regular feature in the years to come and we look forward to the active participation of all the financial institutions. In addition to the Best Financial Partner Award, another two awards were also introduced.

In the light of higher price and cost inflation in Norway than in other countries, it has been appropriate to maintain higher interest rates in Norway than in most comparable countries. Norges Bank increased the sight deposit rate - which is our key rate - by a total of 1½ percentage points last year. So far this year, the key rate has remained  1  2  The relationship between wage growth and price inflation was also discussed in the Annual Address in February this year. BIS Review 72/2001  unchanged. As a result, the difference between short-term rates in Norway and other countries has increased. The economic outlook The Bank last analysed the outlook for the Norwegian economy in the June 2001 Inflation Report. Price inflation is projected to fall to 2½ per cent by next year already. The risk picture is mixed. The Norwegian economy is still characterised by high capacity utilisation. The labour market is tight. There is a risk that domestic pressures may gradually translate into a stronger price impetus than we have projected. The consumer price index has risen by 2.7 per cent since July 2000. The consumer price index excluding the direct effects of changes in excise duties and energy prices (CPIXE) has risen by 2.6 per cent since July last year, as calculated by Norges Bank. Statistics Norway publishes a consumer price index excluding electricity prices and a consumer price index excluding energy prices. They have a broader definition of energy prices than we use in our calculations.
Perhaps the most natural explanation for the fact that inflation in the 1990s has been lower than its historical relationship with growth suggests, seems to be the markedly lower inflation expectations. This is also indicated by data from studies at the Riksbank. From a level between 6 and 8% in the 1970s and 1980s, in recent years expectations of longer-term inflation have gradually moved down to about 2%. This is an impressive change that stems in the main from regime shifts in various fields that have been achieved since the late 1980s. Furthermore, it looks as though expectations are now anchored relatively firmly in the vicinity of that level. Once a low-inflation regime has been established and people count on price increases being low in the longer run, the rate of inflation is determined mainly by the demand situation in relation to production capacity. During a process of disinflation, however, low capacity utilisation and falling inflation expectations both exert a downward effect on actual inflation. This can give the impression that the relationship between demand and inflation has changed. In that the pattern in the 1990s has been dominated by the reduction in expected inflation, the partial relationship between demand and inflation has been difficult to analyse, not least because it is hard to arrive at statistical measurements of the output gap, structural unemployment and their impact on the inflation process. Still, the hypothesis that inflation’s sensitivity to resource utilisation has changed from the 1980s to the 1990s does seem to have some support.

GDP growth 1981–2001 Per cent 5  5 4  Trend Actual Average  4  3  3  2  2  1  1  0  0  -1  -1 -2  -2 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01  Sources: Statistics Sweden and the Riksbank  10  BIS Review 16/2003  3 2 1  Fig. 10. Growth in hours worked 1981–2050, forecast from 2002 Actual / Forecast Average  3 2 1  0  0  -1  -1  -2  -2  -3  -3  -4  -4  -5 1981 1987 1993 1999 2005 2011 2017 2023 2029 2035 2041 2047  -5  Sources: Statistics Sweden and the Riksbank  BIS Review 16/2003  11
On my flight home from Zurich, I read about a bank with compliance failures; however, I have to say that as a whole, the Mexican banking system is quite healthy. Bank profits rose in 2013 and Mexican banks are well-capitalized, with an aggregate capital ratio of 16 percent as of year-end 2013. While four small banks failed year-end stress tests by the Comision Nacional Bancaria y de Valores (CNBV) and were asked to boost capital and diversify their portfolios, it was also the first year the regulator fully implemented the stringent Basel III capital rules. The share of nonperforming loans rose slightly; among commercial loans, this was partly due to changes in the accounting methodology, so it cannot fully be attributed to deteriorating credit quality. I am convinced that the biggest problem facing Mexico is not too much credit, but too little. That’s why the recently implemented financial reform is so important; that’s why its core objective is to boost credit. Another advantage that Mexico has is plentiful foreign exchange reserves, about $ billion, and a $ billion standing line of credit with the IMF. Mexico has been amassing more foreign exchange reserves as other emerging market nations have seen them dwindle. While excess liquidity from the U.S. has found its way to all emerging markets, there is a palpable investor commitment to Mexico that sets it apart from the rest. At over $ billion, 2013 was a record year for foreign direct investment in Mexico.

It is rather to assess to what extent a merger creates a more solvent bank and with a sound business model, enabling structural costs to be cut significantly and, in short, generating overall value. 6 7  CGFS (2018) Financial Stability Review – November 2019. 7/10  In my view, the lack of cross-border mergers is partly due to the overcapacity and fragmentation of the financial sector in Europe. True, the benefits of synergies, potential cost cuts and improvements in efficiency can be seen mainly in mergers between banks from the same country, thanks to the elimination of the doubling-up in branches and central services. In this connection, the radical consolidation of the Spanish banking system since 2009 is widely known. To give you some figures, there has been a reduction of over 30% in the number of banks. The number of offices has fallen by over 40% (some 20,000) while personnel figures have declined by more than 30% (90,000 fewer staff). Yet given the extremely competitive environment in place, I wish to stress that the map of national mergers may not yet be complete. This is particularly so when the reduction of structural costs is one of the few levers available to improve the profit and loss account. For most cross-border mergers, the economic rationale is more difficult to justify, although there will be potential gains in competitiveness for those banks with a business model that allows vertical savings.
It is remarkable how often problems in financial firms can be overlooked because of a sense that are they part of a normal, business-as-usual state of affairs. A diversity of inputs can help us see the flaws in what we accept as normal. Diversity is a frequent topic of conversation, but it is not easy. My view is that, like other ethics, diversity is a habit that takes practice. As first line of defense professionals, try to develop the habit of seeking out other points of view. Diverse points of view may come from junior employees in your line of business. They may also come from HR professionals, sociologists and psychologists, communications experts, even lawyers. For financial firms, prudential supervisors can also contribute to a diversity of viewpoints. Their horizontal view of practices across firms not only helps promote a more stable financial system, but also helps firms identify problem areas. A diverse set of views, professional training, and life experience may help you see shortcomings in your risk management framework—even in the three lines of defense model. Just because three lines of defense is a sensible way to manage risk does not mean it is perfect—no model is. A diverse set of inputs will help you figure out how to apply more effectively the three lines of 2/7  BIS central bankers' speeches  defense in your organization. Choice architecture I recommend as well that you pay attention to choice architecture in deciding how best to construct a first line of defense.

At the same time, economists are increasingly being given the opportunity to help governments design new policies and regulations2. And, in this respect, we should bear in mind that carefully designed scientific experiments have been an engine of economic, technological, and social progress. Social experiments have become crucial to ensure that governments implement policies with a proven record of success3, that are based on evidence and not on prejudice or intuition. We are now in a position to create a virtuous circle that begins with the allocation of resources to the compilation of data and the provision of access to them, continues with the evaluation of public policies, and ends with the application of the findings to the design of policies. However, unlike medical trials, social experiments – large-scale, publicly funded randomised controlled trials – have not become the gold standard for the evaluation of public policy interventions. 1  Einar, L. y Levin, J. (2014) "The data revolution and Economic Analysis", Working Paper 19035 National Bureau of Economic Research (NBER) 2  Duflo, E (2017)"The Economist as Plumber" Richard T. Ely Lecture, American Economic review: Papers and Proceedings 2017, 107(5):1-26 3  Heffetz, O y List, J (2021) "Who's afraid of evidence-based Policymaking?" Artefactual Field Experiments 00739, The Field Experiments Website 1  In many cases, critics argue that such experiments are inherently unfair. Ironically, this resistance to experimentation could eventually lead to less progress and even less fairness.
As you know, it can pursue two courses of action. The first, aimed at facilitating mergers of viable institutions, focuses on improving their efficiency in the medium term, strengthening the solvency of the post-merger institution and promoting a reduction of capacity. Thus, for example, the merger plans approved within the framework of the FROB envisage cuts of approximately 20% in the number of offices. The aid given is conditional, since the institutions have to comply with a plan previously approved by the Banco de España; it is temporary, because the funds provided in the form of preference shares will have to be returned within five years; and it involves a cost, because these funds bear interest at 7.75%. The second course of action open to the FROB is designed to achieve a swift and efficient resolution of the institutions which have not been able to overcome their difficulties and are no longer viable. If it is necessary for the Banco de España to take control of an institution and to replace its directors, the FROB contributes financial resources and ability to act. To date, this second form of action has only had to be used at CajaSur. Consequently, the FROB has predominantly used the first course of action. Eight mergers have been approved and € billion in government assistance have been requested. The request yet to be made by Banca Cívica will be for an estimated further € billion. Additionally, there are another five mergers under way which have not involved a request for assistance.

The institutions exposed to them and the amount of their exposure were unknown. Liquidity dried up and many banks experienced very heavy losses. These increased when off-balance-sheet transactions had to be returned to the books. The bankruptcy of Lehman Brothers in September 2008 was the trigger that brought the international financial system to the verge of collapse and marked the end of this period. Consequently, the authorities had to rescue the largest banks. This phase left us with a legacy of profound risk aversion which will take a long time to fade. Throughout 2009, the second phase of the financial crisis interacted with a sharp decline in global economic activity. Corporations and households experienced a loss of wealth which, in turn, weakened the quality of assets on banks’ balance sheets. The third and most recent phase of the crisis, which particularly affects Europe, has unfolded throughout 2010. It stems from the rapid deterioration of public finances in a climate in which markets are reluctant to keep financing increases in public debt that they consider may run into problems of sustainability. Simply put, this deterioration is explained by the loss of momentum of the European economy, the attempts of public authorities to alleviate its most painful effects on society and the consequences of States’ efforts to avoid the collapse of the financial system. How have these three successive phases affected the Spanish banking system? Spanish banks held up reasonably well in the first phase of the crisis.