samchain/econo-pairs-v1 huggingface dataset:
Kevin Stiroh: Emerging issues for risk managers Introductory remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the GARP Global Risk Forum, Federal Reserve Bank of New York, New York City, 7 November 2019. * * *  Prepared for delivery  Introduction Good morning and welcome to the GARP Global Risk Forum. The Federal Reserve Bank of New York has been collaborating with GARP on this forum for a decade and it is always a pleasure to participate. This discussion provides real-time insight into critical issues at the center of the practice of risk management. A quick scan of today’s agenda highlights a number of topics of obvious importance—operational resilience, cyclical aspects of risk management, technology and big data. We are all thinking about these issues, and I look forward to your insights. I’d like to briefly discuss two topics where I expect risk managers will increase their focus in coming years—climate change and the cultural aspects of digital transformation. Both issues reflect potentially transformative trends for the economy and the financial system, and I believe they will take an increasing share of your bandwidth over the next decade. In both cases, the relevant questions from a supervisors’ perspective are: what new risks are introduced? How do firms manage them? And how do supervisors view them?

Supervisory practices must be revamped so that supervision is also horizontal – looking broadly across banks, nonbanks, markets and geographies. This also means that regulatory standards need to be harmonized  BIS Review 14/2010  2  across different regions. Without harmonization, there will inevitably be a “race to the bottom” and regulatory arbitrage will be encouraged, rather than inhibited. Many steps are needed to make financial institutions and infrastructure more robust. For example, we need to strengthen bank capital requirements, improve liquidity buffers and make financial market infrastructures more resilient to shocks when individual firms get into trouble. In terms of capital requirements, many changes are needed, including global capital standards that put more emphasis on common equity, establish an overall leverage limit and better capture all of the sources of risk in the capital assessment process. Improved risk capture, for example, includes the trading accounts of banks. Some institutions had clearly not set aside adequate levels of capital given the risks that were embedded in their trading positions. It would also be very desirable to develop a mechanism to bolster the amount of common equity available to absorb losses in adverse economic environments. This might be done most efficiently by allowing the issuance of debt instruments that would automatically convert to common equity in stress environments, under certain pre-specified conditions. Such “contingent capital” instruments might have proven very helpful had they been in place before and during this crisis.
The National Bank started such activities in 2014 when it created foreign investment securities statistics, which was then supplemented with data on domestic securities. In addition, the crisis has shown that the risks can increase largely not only in the banking system, but also in shadow banking. Therefore, there is a need for upgrading the statistics with data not only for depository institutions, but also for all other financial institutions. Following these trends in 2012, we started with the preparation of the statistics of the most important non-bank financial institutions, which enabled us to 1/3  BIS central bankers' speeches  constantly monitor their activities and the potential risks. We recently fully complied this statistics with the latest IMF’s Guide on monetary and financial statistics. The second segment is the improvement of databases on cross-border financial systems. The consequences of the global crisis have clearly emphasized the risk of international financial integration, in particular the global connection of systemically important institutions. Such a context has had major consequences on the requirements for increasing the volume and structure of statistical data that will give a better picture of these global connections with a special emphasis on international investment position statistics, as well as more detailed portfolio investment and direct investment statistics. The National Bank already prepares all these surveys on a regular basis, although there is room for further improvement in the area of international position.

Anita Angelovska Bezhoska: New statistical requirements in the post-crises era Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of Macedonia, at the event on the occasion of the European Statistics Day, Skopje, 17 October 2018. * * * Dear Prime Minister of the Republic of Macedonia, Zoran Zaev Dear Eurostat Director General, Mariana Koceva Dear Ambassador of the European Union, Samuel Zbogar, Dear Finance Minister, Dragan Tevdovski Dear President of MANU, Taki Fiti Dear Rector, Nikola Jankulovski Dear Dean of the Faculty of Economics in Skopje, Ljubomir Drakulevski Dear Director of the SSO, Apostol Simovski Distinguished guests, This year we are marking the European Statistics Day, exactly ten years after the outbreak of the global crisis. Its intensity and duration were so pronounced that in the last ten years it has become usual to make almost all reviews and insights through the prism of the “pre-and postcrisis period", and this is probably not surprising given that the great shocks inevitably lead to reassessment of the conventional paradigms. The statistics as well is no exception in this respect. As the great depression highlighted the need for development of the national accounts statistics, while the Asian crisis the need to better perceive the links between the domestic financial system and capital inflows, leading to the development of several new statistical standards, the global crisis of 2008 once again brought the financial system into focus.
One consequence is that it will bring us closer to the insurance industry, which for the most part resisted the appeal of Canary Wharf and stayed close to the roots that date back to Barbon. He would have approved, providing he could have built, insured, and rebuilt your building. Time will tell whether you will welcome having your prudential regulator near to your doorsteps, and as far as we know located in the City for the first time. I want to tackle a number of large issues today, which are closely connected. First, why do we think it makes sense to place prudential supervision of insurance in the PRA alongside banks and major investment firms? Second, what style of supervision will the PRA adopt and how will it affect insurers? And third, how do we think about the issue of systemic risk, and systemically important status for insurers? There are over 700 insurers in this country which will be subject to prudential supervision by the PRA and conduct supervision by the FCA (in addition, insurance brokers will be entirely supervised by the FCA). Why place prudential supervision of insurers in the PRA alongside banks? I am tempted to make one point here and conclude, namely that we asked to have one industry that caused us less trouble than banks. Of course, that would be on the basis of  BIS central bankers’ speeches  1  “please keep it that way”.

For me, the reason is that we have more work to do to develop the best tools to ensure continuity of access to critical insurance services. 2  BIS central bankers’ speeches  Why do I think we are short of tools? To explain my view on this requires some background on the resolution of banks. Statutory special resolution regimes for banks like the one adopted in the UK in 2009 have at their heart the power to alter property rights, the power to separate the business of a company from its owners, albeit with safeguards against unfair expropriation. It is a very powerful tool, and one that should be used carefully for that reason. For banks a typical use of the resolution regime is because depositors can lose confidence in their ability to have access to their funds, and thus a run can start which brings down the bank. A resolution regime can bring order to that process. For insurers, policyholders are less likely run in the sense that they can withdraw their contract and take it somewhere else, though it is possible for some life contracts to be surrendered without penalty. Unlike money, insurance contracts are not fungible because the cover is specific to the contract. In the limit, a bank depositor can exchange their claim on the bank (commercial bank money) for a risk-free claim on the central bank (by requesting bank notes). An insurance policyholder cannot do this.
Macroprudential policy – car loans and property loans While monetary policy is focused on overall price stability, macroprudential policies target specific areas to promote economic and financial stability. The two key macroprudential measures taken in recent years relate to the property market and car market. In the property market, MAS has implemented prudential limits on loan-to-value, loan tenure, and debt service ratios while the Ministry of Finance has implemented stamp duties on buyers and sellers. This collection of measures is the so-called property cooling measures. In the car market, MAS has implemented limits on loan-to-value and loan tenure. MAS eased the limits on car financing in May this year. But it is not time yet to ease the property cooling measures. The considerations and circumstances in the two markets are quite different. The restrictions on car financing were imposed in 2013 – at a stringent level – primarily to restrain the strong demand for cars and COEs, and consequential pressures on inflation. The objective of curbing inflationary pressures has been achieved. The contribution of private road transport (excluding petrol) to headline inflation has eased from +1.3% points in 2011– 2012 to –0.5% point in the first quarter of this year 2016. MAS therefore reset the car loan restrictions in May this year at a level that would continue to promote financial prudence and support the move towards a car-lite society over the long term.

Fritz Zurbrügg: The financial crisis in its sixth year – an end in sight? Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Zurich, 21 March 2013. The complete speech can be found in German on the Swiss National Bank’s website (http://www.snb.ch/en)  *  *  *  In this, the sixth year of the financial crisis, the situation on the financial markets has eased considerably. Is what we're seeing the prospect of an end to the crisis, or is this just a flash in the pan? Measures by central banks made a major contribution to stabilising the financial sector. This sector, however, is just a part of the whole, and while its stability is a precondition for sustained global economic growth, it is by no means a guarantee. The positive mood in the financial markets and leading economic indicators raise hopes that a recovery is underway. If these hopes are to be realised, however, structural reforms need to be implemented. The three most significant challenges for the global economy are increasing the resilience of the financial sector, improving the flexibility of labour and goods markets (especially in Europe), and consolidating the public finances of the advanced economies. Progress has been made in all three areas. The way ahead, however, is still both long and difficult. Due to the relatively lengthy period of weak growth, there is considerable danger that reform fatigue might spread in those countries most severely affected.
 In order to better diversify the risk arising from the concentration in banks’ investments in the international financial markets, lower thresholds were set for banks’ large exposures.  Internal control is considered an integral part of banks’ governance. Hence, special emphasis was put in designing the key principles for an independent, unbiased and accountable internal control. Internal control should cover each section of the bank in order to prevent the origination and development of undesired risks.  Accountable governance is a key principle, especially on financial institutions, whose success is, among others, largely dependent on public confidence in them. Accordingly, the Bank of Albania considers the quality of human capacities – implying the hiring of skillful people in the decision-making process and risk management – as fundamental. The decision making process, should always be based on such expert opinions and recommendations.  The transparency related to the banking and financial products and services provided, was also paid special attention. The new legal requirements standardize the manner and form of providing information to the clients on the banking products and services banks provide.  Part of this new package was also the standardization of the required information that banks and branches of foreign banks should disclose, related to the banks’ main activity, their organization and management, their financial performance and position, the risk management and the accounting policies. 6  BIS Review 173/2010

The Riksbank is still prepared to do more to ensure that inflation rises towards the target if this is necessary. The exchange rate is floating – and highly volatile In other words, the exchange rate has considerable significance for inflation trends. The Swedish krona has floated since 1992. There are several factors that affect a floating exchange rate. Differences in rates of inflation in Sweden and abroad and differences in interest rates between Sweden and the rest of the world are two such factors. Net trade in goods and services is another. Differences in economic growth and monetary policy are also significant. It is very difficult to predict how the exchange rate will develop. One reason for this is that different factors have different significance at different points in time. Figure 7 shows how the value of the Swedish krona has developed in relation to an index of international currencies, the KIX. The greater the significance a foreign currency has for Swedish foreign trade, the larger the weight it is given in the index. The curves in the figure can be interpreted as showing what the foreign currency costs in Swedish krona. When the krona weakens, the foreign currency costs more and the curve rises. The KIX index is the exchange rate the Riksbank considers most important. The Swedish krona showed an appreciation trend from 2010 until the first part of 2013. However, there were substantial variations. From the beginning of 2014, the trend has turned, and the krona has weakened.
Given the risks we saw before us - primarily a slightly stronger economic upturn - inflation was expected to be in line with the Riksbank's inflation target a couple of years ahead. This was why the repo rate was left unchanged. The outlook from May had not changed significantly at the meetings in June and August. However, we observed in August that economic growth appeared slightly stronger both in Sweden and abroad. This meant there was also reason to expect slightly higher resource utilisation. Moreover, the economic upturn had continued for a further couple of months. What is the present outlook for inflation over the coming years? My own assessment is that the conclusions drawn by the Riksbank at the previous meeting in August remain valid on the whole. It is likely, however, that some upward revision of the inflation forecast may be warranted compared with  BIS Review 51/2004  5  the May assessment, and perhaps even compared with the August forecast. In the short term the high oil price points to such a scenario. It also appears reasonable to expect somewhat higher resource utilisation over the coming years compared with in May and August. Factors that support this are the strong data releases during the summer and the more expansionary fiscal policy that now appears likely. Another factor is international developments, which appear to be strong. Slightly higher resource utilisation should lead to a slight increase in inflationary pressures over the coming years, compared with previous assessments. There are, of course, uncertainty factors.

The concern for financial stability is reflected not only on the regulations that the CBC is responsible for issuing, but also in a permanent monitoring and assessment of the Chilean financial system, its vulnerabilities and the risks it faces. This is done by analyzing many sources of information and the ongoing communications with the financial market’s players and supervisors. Whenever the view emanating from this analysis so warrants, it is verified with the respective institutions and communicated to the competent supervisors. Aside from the continuous monitoring by the CBC, the view of the Bank on the status and risks of the Chilean financial system is communicated twice a year in our Financial Stability Report (IEF), which is made available to the public and presented to Congress together with the Monetary Policy Report (IPoM). The Bank’s communication of risks in the Financial Stability Report seeks to inform financial system participants of the Bank’s vision regarding the main vulnerabilities and risks in the financial system from a forward-looking perspective and thus encourage them to take action to reduce those vulnerabilities. This scheme has proved effective. For example, after following the accelerated development of post-crisis housing prices, in the December 2012 Financial Stability Report the Central Bank expressed its concern about this trend and the risk that it implied in a context of high leverage in the origination of credits. After this warning, we saw a fall in the LTV of new loans, especially noticeable in the significant drop in loans carrying an LTV of 100%.
We therefore explicitly look at many  2  BIS Review 40/2002  other indicators and analyses in the context of our two-pillar strategy, and we do not try to hide the complexity of monetary policy-making behind the production of a single Governing Council forecast. The projections reflect the expert judgement of Eurosystem staff and we prefer to keep this distinct from the judgement of the Governing Council regarding the overall assessment of the risks to price stability. Therefore, our decision to clearly separate the production of the projections from the analysis of the Governing Council is fully transparent as it honestly reflects the decision-making process within the ECB. As regards communication, we have always taken an approach that ensures a high level of transparency and clarity of our message. Our monthly press conferences are key in this respect. The timeliness and detail of our communication is without comparison. At the same time, we have not changed our view regarding the publication of minutes. We fear that, given the multi-country context in which the Governing Council works, published minutes - or a procedure in which dissenting views of Council members are published (even without mentioning names) - could lead to undue pressure on national central bank governors to deviate from a euro area perspective. This cannot be in the interest of the euro area, no more than if the Governing Council were to end its approach of speaking with one voice.

Lower inflation and improved macroeconomic balance will also create a climate in which the nominal exchange rate of the króna can begin to appreciate. Furthermore, I underline that interest rates definitely do have the same effect in Iceland as in other countries, and that our research and studies indicate beyond any doubt that the impact of monetary policy in Iceland is similar to that elsewhere. However, people need to understand exactly what monetary policy is capable of, and what it is not. Transparency Finally, I shall turn to issues which are no less important than those I have already mentioned. Greater central bank independence in recent years has been accompanied by much more stringent requirements about transparency and accountability towards the government and general public. This means that central banks should operate as openly as possible. They must give clear accounts of their policies and assessments of the economic and monetary situation and outlook, and explain in detail the assumptions underlying their monetary decisions. All this serves the purpose of informing the government and public as fully as possible about monetary policy, providing them with a basis for understanding it and, depending on the circumstances, making an independent evaluation of it. One way in which the Central Bank fulfils this function is with the publication of its quarterly Monetary Bulletin.
This adds objectivity to what is in many senses a subjective process. Here is an example:  4  BIS Review 36/2005  MATRIX: ORGANISING PRINCIPLES FOR FINANCIAL STABILITY  Sources of Threat Credit Risk Activities  Assessment of Threats Financial Stability  Market and Liquidity Risk  Infrastructure (including Payment Systems)  International Architecture  to  Risk Reduction Preparation for and Managing a Financial Crisis  The matrix is a common sense map, which enables us to visualise why something is being done, and where it fits into the overall financial stability effort. The specific activities and deliverables that are located in each of the boxes can be scrutinised to see if they meet our objectives or if they should be discontinued. This helps us decide on the level of resource and the nature and qualities of people we need. It also helps with budgeting, and provides a basis for motivating good performance. To explain the relevance of the boxes let us look first at the columns: sources of threat. Our desired end objective is to promote financial stability by seeking to prevent threats from crystallising, or at least to reduce their impact. Then we will look at the rows – the different types of activity we undertake: the means if you will to achieve our ends. ii)  Sources of Threat  First, the columns: the sources of threat.

Allow me also to stress that the analysis of monetary indicators at the ESCB consists of an articulated process, whereby a detailed study of all the components and counterparts of M3 provides a detailed picture of the latest monetary developments, alongside the broad picture of the underlying trends. As I said, a world in which policy is conducted in a “data-rich environment” - to quote an article by Ben Bernanke2 - can be one in which both central bankers and other economic agents become captive to the latest macroeconomic indicator and may lose direction. In such a world, a central bank will only be successful in delivering price stability if it provides an anchor for the inflation expectations of the public and if it is as transparent as possible about its ultimate policy objective. For this reason, the ECB decided to be fully transparent about the numerical definition of its goal, price stability, that the Treaty on European Union assigned to it. As you know, in 1998, when taking up its monetary policy tasks, the Governing Council of the ECB defined price stability as a year-on-year increase in the euro area Harmonised Index of Consumer Prices of below 2% and close to 2%. The definition of price stability not only has the advantage of helping to anchor inflation expectations and to enhance the transparency and accountability of the European Central Bank. It has also been very instrumental in preserving continuity during the transition from the national currencies to the euro.