samchain/econo-pairs-v1 huggingface dataset:
39 Moreover, there are some financial instruments (such as mortgage-backed securities where the mortgages have prepayment options), where the dynamic hedging behaviour of holders can amplify the price movement, as dynamic hedging can lead to additional short hedging positions being required after a price fall. With individual institutions being small relative to the market, each individual institution may think that their new short position will have little or no impact on market prices. But collectively, the aggregate demand for new short positions is likely to drag prices further down and amplify the original shock, generating additional losses for those who were slower to update their dynamic hedging 7 . Section 5: Some lessons and policy responses 40 We are now around a year into a severe credit crisis centred on many of the complex structured instruments described earlier. An immediate behavioural response of risk managers in major financial institutions has been to pull out of these markets entirely. This has dramatically reduced primary and secondary market liquidity and increased price volatility, further reducing incentives to invest in these instruments. The short term outlook for many of these innovative instruments is poor. And as described in section 4, the past year has revealed that market imperfections and frictions are more potent than was previously thought. It is clear that there are important limitations on the capacity of the financial system to deliver all of the benefits of financial innovation spelled out in section 3.

An investor wanting to make an inter-temporal transfer without taking on any credit risk, for example, could then buy a bond and purchase credit default swap protection, thus retaining exposure to the cash flows on the risk free component of the underlying instrument. Synthetically, this expands the volume of low risk investment portfolios. On the other side, a market is created for those who specifically want to trade default risk which allows cleaner pricing of this dimension of risk. Efficient markets for each element should raise the efficiency of the corporate bond market as a whole, with attendant benefits for both borrowers and investors. •  Furthermore, because credit default swaps have different maturities, investors could, for example, buy the corporate bond and retain the resulting exposure to default risk in the near term. But they could also buy protection against default at longer horizons, about which they may be more uncertain. •  Moreover, nominal corporate bonds can also be separated into a nominal and inflation-linked risk component if the corporate also issues inflation-indexed bonds. BIS Review 93/2008  3  Investors can utilise these instruments to buy or sell protection against exposure to inflation risk. As noted above, the markets for single-name corporate credit default swaps have become more liquid than the underlying bonds given the flexibility and specificity they provide to endinvestors. 9 The underlying components of risk can, of course, also be recombined by financial engineering to create new financial products with different risk characteristics.
Plans by the Housing Financing Fund (HFF) to raise its loan-to-value ratio and maximum mortgage amounts prompted a response from the banks, which began offering mortgage loans on far easier terms than had been customary. So far the main impact of increased credit supply on the price level has been through the housing component of the Consumer Price Index (CPI). In the beginning of March the twelve-month rate of increase in housing prices was 24%. Excluding the housing component, the CPI had increased by 2% over the same period. Housing inflation has therefore clearly made a major contribution to total inflation in recent months. Another cause of concern is inflation in services. Over the past twelve months, prices of public services have risen by 6.9%, driving up the CPI by 0.5 percentage points, and private sector services by 3.5%, adding a further 0.8 percentage points. Rising prices of private sector services have often been an indication of mounting demand pressures. According to estimates by Statistics Iceland, GDP growth amounted to 5.2% in 2004, on the back of 4.2% growth in 2003. Faster GDP growth was largely the result of a continued surge in national expenditure, while exports also increased significantly after a low in 2003. Private consumption also continued to firm up during the year with an estimated growth rate of 7.5%, the fastest for five years. Real disposable income increased more slowly than in 2003, but private consumption was spurred by lower mortgage debt service and easier access to credit.

However, even if liquidity worked,  4  BIS Review 22/2005  their impact on interest rates and the exchange rate would be broadly the same as raising the policy rate, although the transmission mechanism might be different, and they would affect individual segments of the credit system unevenly. In addition, changing the minimum reserve requirement is not a transparent measure and its impact on expectations is unpredictable. The Central Bank firmly advocates that housing costs should remain part of the reference index for the inflation target, and believes that by and large the best available methodology is being used by Statistics Iceland to evaluate them. This is because housing costs are a major item in household consumption in Iceland, where the level of owneroccupancy is 80%. Excluding changes in housing prices would ignore a large proportion of household expenditures. Experience also shows that housing inflation has the advantage, from the perspective of central banks on an inflation target, of being a leading indicator of general inflation later on. Presumably this is because the housing market is independent from foreign markets. Increased housing demand cannot be channelled out of the economy, unlike various other goods and services, nor is foreign competition present to any significant extent. When demand surges, housing prices often rise sooner and by more than prices of goods and services in general.
Among others, we would adopt the Regulatory Sandbox Framework, allowing banks and FinTech firms to test their innovation with limited group of customers before launching their services to broader public. Financial institutions are also allowed to invest more flexibly in FinTech related venture capital . It is worth noting here that the benefits of FinTech are not only limited to lower cost of financial services but also greater financial inclusion, to which I now turn. Greater financial inclusion not only improves welfare of the people but also unleashes economic potential of the previously excluded. The Bank of Thailand has focused on promoting financial system’s access and inclusion. For instance, e-Payment channels play an important role in providing payment access at low costs. Money transfer via the PromptPay platform will be free for the amount not higher than 5,000 baht. Besides, the government will also be able to use e-Payment as a means to directly transfer welfare benefits to the targeted group of end beneficiaries as mentioned by the Minister of Finance. In addition to embracing FinTech and implementing the e-Payment as part of the key measures to improve financial access, other notable measures are the implementation of the Business Security Act and the expansion of data bases for individual and SME borrowers. The Business  Security Act, which came into effect in July of this year, expands the list of eligible collaterals for secured lending by financial institutions to include things like inventories, and receivables.

For the first time in two years the median price for houses has fallen, according to Swedbank’s Boindex. Moreover, the rate of increase in household borrowing from mortgage institutions is now slightly lower than it was in the spring. Of course, it is impossible to draw any far-reaching conclusions solely on the basis of these observations. However, we will make a thorough assessment of the situation later in the autumn when we publish our twice-yearly Financial Stability Report. Summary and conclusion Let me briefly summarise my message today. •  We have raised the repo rate four times this year and my assessment is that it is reasonable to assume that further increases will be necessary. This will ensure that inflation is close to the target and that developments in the real economy are balanced. •  Our focus is on the inflation target and the central aim is, as before, to anchor inflation expectations in the economy around this target. When we formulate our monetary policy we also give consideration to the way the rest of the economy is developing. You can read more about this in our recently published strategy document “Monetary policy in Sweden”, which can be ordered from our Communications Secretariat. It can also be downloaded from our website and is available in both Swedish and English. •  The social partners can sign new agreements based on the assumption that the Riksbank’s inflation target stands firm.
Zeti Akhtar Aziz: Implications of emerging global economy trends for Malaysia Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, on the occasion of the International Women's Day Forum, Kuala Lumpur, 1 April 2008. *  *  *  Fundamental changes occurring in the international environment have dramatically altered the configuration of the global economy. A global shift is taking place resulting in a rebalancing of economic power. Accompanying these changes is the increase in the international mobility of talent and capital flows. In this more dynamic environment, comparative advantages and distinct capabilities are also shifting. This has resulted in a rethinking of the business models and the manner in which we operate to achieve performance. In addition, corporate cultures have needed to change. This reorientation has entailed reviews of the strategic focus, the strategies, approach and processes as well as the redeployment of resources. In conjunction with the International Women's Day that was on March 8, it is my honour to be here today to speak at this forum organised by Accenture. My remarks will focus on the implications of these newly emerging trends in the global economy on Malaysia. More specifically, to discuss the new future that is emerging before us, and the opportunities it accords. Equally important, is the ability to raise the level of our flexibility and capacity to adjust to these changing conditions.

José De Gregorio: Financial stability, monetary policy and central banking Introductory speech by Mr José De Gregorio, Governor of the Central Bank of Chile, to the 12th annual conference of the Central Bank of Chile “Financial stability, monetary policy and central banking”, Santiago, 6 November 2008. *  *  *  Welcome to this 12th Conference of the Central Bank of Chile, entitled Financial Stability, Monetary Policy and Central Banking, which will gather a select group of central bankers, experts and academics today and tomorrow. I cannot open this conference without sending my most heartfelt condolences to Klaus Schmidt-Hebbel, our former director of Economic Research and creator of this series of conferences, and to all his family, on behalf of the Central Bank of Chile and myself, for the terrible loss of his beloved son Diego. To him we dedicate these two days' work. Like every year since 1997, we are looking forward to two days of intensive work with discussions of the highest technical level, which usually have opened areas for us to develop our research agenda with rigor and relevance, in an ever more complex world. This version of our Annual Conference finds us in the midst of severe global financial crisis. After the Asian crisis, many of us wondered about where the next blow would come from and what shape it would take. The academic literature has analyzed foreign exchange and financial crises in small, open economies.
There will be significant deregulation of the economy – in key sectors like financial services, healthcare, and energy – unleashing animal spirits and new investment. The disinflationary drags from oil and commodity prices will fade and lift producer prices while a tightening labour market will feed faster wage increases. In response to higher growth and higher inflation, the US Fed will hike interest rates faster than previously forecast. The US Dollar will strengthen against most major currencies. The most recent data give some support to the reflation story. The OECD’s monthly leading indicators for October show signs of rising growth momentum – not just in the US but in other advanced economies as well. We are seeing an incipient upswing in the global manufacturing cycle. Inventories have been drawn down significantly. Purchasing managers’ indices have recorded sharp improvements in many countries. But how realistic or sustainable is the growth resurgence scenario? The broad elements appear probable – there are indeed grounds for some optimism. But there is considerable uncertainty over the details, and there are several risks on the horizon. The market’s exuberance in recent months does not seem to have accounted for these uncertainties and risks. Perhaps realising this, the market has begun to retrace some of its steps in more recent weeks.

On two further points – dynamic volatility adjustment and the risk margin – we are still working and will respond to the TSC in due course. On the risk margin we will act to tackle the problems we, the industry and the TSC have agreed exist. 4 5  From 2.5% to -0.75%. The Ogden rate is used to discount future liabilities for personal injury and fatality claims. Based on 2016 data. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  But let me be clear: we are not going to go soft. We can tell the difference between feedback about a genuine technical flaw and generalised lobbying for lighter-touch regulation. And we will continue with our forward-looking, judgement-based approach to supervision – which will inevitably mean that conflicts with firms sometimes arise. This is inherent in a system in which a regulator is charged with pursuing the public interest through the activities of privately-owned firms. In that spirit, let me say a few words about the Matching Adjustment (MA). Allowing insurers to capitalise an illiquidity premium has long been a feature of the UK regime. It makes sense and we fought hard to get it included in Solvency II. It delivers a massive benefit to those insurers that use it – £ billion in capital which is the difference between those firms being at 155% of their capital requirement and 65% of it.
That is why systemic risk entered the public lexicon. And that is why financial regulation has, in the period since, been fundamentally re-oriented towards the monitoring and management of systemic risk. Interestingly, that lesson would have come as no surprise to anyone familiar with dynamic, integrated networks outside of the world of finance. Assessing the stability of almost any network known to man – whether natural, physical, social or economic – relies upon a system-wide assessment. And protection mechanisms for this system need to be calibrated to system-wide characteristics (Goldin and Mariathasan (2014)). Financial webs are no exception. The history of financial crises suggests they may be closer to the rule. BIS central bankers’ speeches  1  This new orthodoxy has framed the post-crisis regulatory reform agenda. It is why so-called macro-prudential policy has risen in prominence. It is why the world’s most inter-connected banks will in future be required to run with extra capital and liquidity. It is why OTC derivatives will in future be centrally traded and cleared. And it is why resolution of the world’s largest, cross-border banks has become such a priority. For the global banking system we now have a blueprint, an emerging new set of international rules of the road.

I suppose it should not be a surprise that the challenges I have outlined involve relatively long horizons. As a central banker, we are trained to focus always on the medium to long run. After all, it is precisely such a focus that enables central banks to best serve as pillars of economic stability over time. Against this backdrop, let me now turn to the BOT’s role in meeting these challenges. Starting with monetary policy, the key focus at this juncture is to strike the right balance between accommodating the domestic recovery while ensuring stability in the long-term. In the context of the sharp slowdown in economic activity from the floods, moderating inflationary risks, and pronounced headwinds from the global economy, the MPC decided to ease policy during the last two meetings. These policy actions have helped to shore up private sector confidence and accelerate the return of economic activity to normal levels. The MPC is firmly committed to maintaining long-term price stability and interest rates are currently at a level that is deemed to be consistent with that goal. Moving further afield, it is clear from my earlier remarks that setting Thailand on a path to long-run economic prosperity will entail lifting the competitiveness of our economy. What contribution can the BOT make in this regard? First and foremost, as well as most obviously, the BOT needs to deliver on its mandate of macroeconomic stability. Ample evidence has demonstrated that a stable macroeconomic environment is a key prerequisite for sustainable growth in the long run.
26.02.2019  Keynote speech Bloomberg Capital Markets Forum Madrid Pablo Hernández de Cos Governor  Introduction Let me begin by thanking Bloomberg for their kind invitation to participate in the opening session of the Bloomberg Capital Markets Forum Madrid. In my address I shall refer firstly to the phenomenon of banking disintermediation in Spain in the European context, discussing the main implications. And secondly, I shall focus on the importance of the Capital Markets Union project as a private risk mitigation and sharing mechanism in the Economic and Monetary Union (EMU) which, in conjunction with the Banking Union, will provide for an increase in financial stability in the euro area. Banking disintermediation in Europe and in Spain As is well known, in the continental European countries banks have traditionally played a key role in the intermediation of economies’ financial flows. However, recent years have seen an increase in European firms’ preference for tapping capital markets. Fixed-income financing has thus risen from accounting for 8% of European firms’ total financial debt at end-2007 to 12% in the third quarter of 2018. Spain has been no stranger to these global trends of banking disintermediation. Indeed, the proportion of fixed-income securities relative to the business sector’s financial debt has risen over the same period by 10 percentage points (pp). This has been mirrored by a fall, since 2010, of 9 pp in banks’ weight in the total financial assets of the financial sector.

Pan-European banks are an essential requirement if we are to have a single market for wholesale and retail financial services. That will provide both for gains in efficiency and cost reductions in banking services. And, moreover, it would contribute to improving the euro area’s stability in the face of shocks. In this respect, the culmination of the Banking Union with its three pillars and the subsequent creation of pan-European banks would also enable the link between sovereign risk and bank risk to be substantially mitigated. There has been significant progress on the first two pillars, the Single Supervisory Mechanism and the Single Resolution Mechanism. But the third pillar – the creation of a European Deposit Guarantee Scheme – remains pending. In conclusion, in Europe, and in Spain in particular, we have witnessed a phenomenon of greater disintermediation in recent years. Associated with it is a more significant role for capital markets when it comes to providing financing for the economy and channelling citizens’ savings. In parallel, technological change conducive to disintermediation is under way, and is prompting the creation of new services and risks that must be addressed by the supervisory community. To harness these market trends so as to promote the soundness and stability of Economic and Monetary Union, resolute progress must be made towards the greater European integration of banking markets, fomenting at the same time the development and integration of capital markets throughout the Union. Thank you. 7/7
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Conclusion Let me reiterate that Singapore’s financial system remains sound and we are well-placed to meet the challenges facing us. This global crisis is unprecedented, and requires Singapore to respond effectively, decisively but also prudently. The provision of a Government guarantee on deposits is a necessary temporary measure to protect the interests of Singaporeans and the economy, which are in turn dependent on a strong and competitive financial sector. The risk of drawing on the guarantee and potential impact on Singapore’s reserves are low. This is a measured, precautionary action that will help us to weather the global economic slowdown and the ongoing financial crisis in international financial markets. BIS Review 127/2008  3