samchain/econo-pairs-v1 huggingface dataset:
The increase in sovereign spreads has elevated debt at risk for vulnerable EMDEs, including those in our constituency.  The high food and fuel prices have had a clear disproportionate impact on poorer countries and vulnerable populations in all countries, and the two overlapping crises have worsened poverty significantly in the developing economies since 2020, with food insecurity emerging as a new major challenge in low-income countries. In this regard, strong global initiatives are needed to address food insecurity, reduce poverty worldwide and alleviate the risks of social unrest that is already evident. The IMF would need to do its part as it did during the COVID pandemic. The IMF’s proposed Food Shock Window could play a useful role if the facility is more accessible, and its terms and conditions are less restrictive.  The adverse effects of climate change, to which no country is immune, continue to wreak havoc in all parts of the world. Most recently, the flooding in Pakistan, a member of our constituency, has created an unprecedented humanitarian catastrophe, a major health crisis, with initial damage assessed at 10-15 percent of GDP. We have to recognize and collectively address the existing highly inequitable system, where countries with negligible carbon footprints bear the burden of negative externalities of climate change. I stop here.

It is possible that some households planned on the basis that this increased economic stability would persist indefinitely. If so, the events of the past two years would have come as a substantial shock. Households’ consumption has slowed sharply since the beginning of 2008. Indeed, consumption is estimated to have fallen for the past five consecutive quarters, the first time this has happened since records began in 1955. Relative to an average rate of increase, the level of consumer spending has fallen by around 7½% since the start of 2008, and the savings rate has increased sharply. There has already been a considerable adjustment in households’ spending. In the near-term, the prospects for consumption depend importantly on the performance of the labour market. Although there has been a substantial fall in employment over the past year or so, the size of this adjustment to date has, if anything, been less than we might have feared given the falls in output. This may partly reflect the greater degree of wage flexibility that has been apparent in this recession compared to that in either the 1980s or 1990s. 6 This greater flexibility has meant that more of the burden of firms’ adjustment to the recession has been spread over the workforce as a whole, rather than on those losing their jobs.
Another thing was that economic policy had reached the end of the road, inflation was clinging tightly to an annual level of 8-10 per cent in Sweden, growth was poor and unemployment was showing a tendency to rise. When the deregulation of the financial markets got off the ground in Sweden, the process was rapid – in 25 years we had moved over from being one of the most regulated financial systems in the western world to being one of the most free! However, the process was not exactly painless. The consequences of the macroeconomic imbalances built up during the period of regulation, combined with the Swedish banking system's incapacity to manage risk in its lending when credit granting was deregulated were dramatic, to say the least. We experienced this at the beginning of the 1990s, after the bank crisis and after abandoning the fixed exchange rate regime. During the difficult years at the beginning of the 1990s, with what was for Sweden record-high unemployment, a risk of the central government debt running riot and stubbornly high inflation expectations, despite a low inflation rate, there were not many people who dared to hope for such a rapid positive development as that we saw during the second half of the 1990s. The central government finances are now in good condition, the current account has showed a surplus for several years now, inflation expectations are at a stable level of 2 per cent and unemployment is down to around 4 per cent.

The mediation of payments is perhaps the most difficult to understand function of the financial market. But bear in mind that less than 10 per cent of all payments in Sweden are made with banknotes and coins. The remainder are through giro payments in various systems for small, mass transactions and large payments between banks and companies. If we were forced to use banknotes and coins, it would require a huge transport apparatus and considerable productive time to implement payments. New technology in this field is being developed all the time. Just consider charge cards and e-money, where payments is through book-keeping in different accounts, without any physical money being in circulation. Millions of transactions of this type are made every day within Sweden and across our borders. Globalisation, the freedom to make financial transactions across national borders, creates conditions enabling the financial systems to become more efficient in all of their functions. The possibility to find high yield investments increases, the possibility to spread risks increases and a large market also increases liquidity. When the financing costs become lower, there will be more investors all around the world, while savers will be able to obtain greater return for a given risk. It is for these reasons that the PPM (Premium Pension Authority) and the AP funds (National Pension Funds) invest a large part of our pension money abroad. Because the Swedish institutions managing pension funds are now able to invest money in foreign shares and bonds, there is less risk for our future pensions.
Many of Norges Bank’s activities within this area are linked to our role as issuer of banknotes and coins; these activities are a public service, and costs are covered by the central bank. However, Norges Bank is also often in competition with others when it performs a number of other payment system services for banks and the postal system, which incur either no charges or no cost-covering charges for these services. This practice is currently under internal evaluation at the Bank. Consequently, we must anticipate that pricing for processing cash will approach full cost over time. It will be interesting to see if this has any affect on the public’s use of cash. 3.2. Interbank systems (clearing and settlement systems)  I would now like to look more closely at risk and efficiency in interbank systems and, particularly, at our standing internationally. 3.2.1. We have made a fair amount of progress  The establishment of NICS and NBO8 provided us with a modern clearing and settlement system in Norway, which we managed to implement at approximately the same time as the G10 countries and the EU. Our systems have certain positive properties, such as the possibility of releasing a gridlock situation in gross settlement (in NBO) and centralised information on banks’ liquidity (in NICS). Our central bank lending arrangements are generally similar to those found in other countries, where it is commonplace for collateral to be furnished for all loans in the central bank.

The crisis highlighted the complex webs of inter-linkages between financial institutions, financial instruments and financial markets. As liquidity and confidence evaporated and the financial accelerator kicked in, credit markets and financial institutions experienced severe stresses. This in turn dragged down the real economy, and world trade collapsed. With globalisation, even though financial markets in emerging markets did not suffer the same problems, the collapse of trade and investors’ confidence, exacerbated by credit cutbacks, brought most developed and developing countries across the world into a deep and synchronous recession. 5. My second observation is that we should not underestimate how fast risks can build up. In the years leading up to the crisis, many new financial products developed and grew very swiftly. Credit default swaps for example, grew from just $ billion in 2001 to more  BIS central bankers’ speeches  1  than $ trillion within 8 years. In 2004, outstanding mortgages held in non-agency MBS in the US were just $ billion. It tripled to over $ trillion within 2 years. It is a similar story with the origination of subprime mortgages. In the same period, global CDO issuance more than tripled from $ billion to about $ billion. These assets were held in banks and non-banks globally. When the financial crisis struck, the world was shocked not only by its severity, but also by the speed in the transmission of shocks throughout financial markets. There is no better illustration of how new sources of systemic risk can build up rapidly. 6.
Likewise, in September and October 2008, at the peak of the world financial crisis, the spreads of the peso and dollar rates increased significantly. In scenarios of financial stress, it is imperative to align market rates with the MPR, because the latter may cease to act as a benchmark for the financial system. Therefore, the first actions we took were to provide the necessary liquidity and ensure that the financial system could continue operating as usual (figure 6). 2  BIS Review 145/2009  The timing of the interest rate cut can be subject to debate. It is possible that, with the information we have today, we could have done it sooner. But I must insist that monetary policy decisions are made with the information available at each moment in time, so it is useful to refresh some facts. In December 2008, we entered the monetary policy meeting with an annual inflation rate of 8.9%. The market expected the MPR to be at 6.25% and annual inflation to be at 3.9% by December 2009. Thus, despite the downward bias of monetary policy, the MPR was not reduced until January, and began a process rate cuts with a speed and magnitude unexpected by the market (table 1). This is how, after accumulating signals that the inflation phenomenon had ended and was strongly reversing, we began reducing the MPR, and we did it with vigor, taking it to the level we believe is the minimum it can take without jeopardizing the normal functioning of the money market.

I shall be stepping up the efforts of the HKMA to promote a better understanding of them. Transparency 21. The second area that requires attention in the political process of monetary management concerns the transparency of the HKMA. To at least the minority of those members of Legislative Council who supported the defeated Motion to review the HKMA, the transparency of the HKMA was found to be lacking. Although the Motion was defeated, the fact that transparency was an issue, even to the minority of the Legislature, is quite surprising to me. It is perhaps not something that I can afford to ignore. However, compared with other central banks, the HKMA must be among the most transparent in the world. In monetary management specifically, I am quite sure that we are the most transparent in the world. I know of no other central bank that discloses information about the monetary base, and operations affecting it, on a real-time basis. There is also an abundance of information published in the HKMA’s regular series of monthly, quarterly and annual reports, and in the ad hoc publications on specific monetary and banking issues. Figures on foreign reserves are published monthly and soon we shall be publishing the balance sheet of the Exchange Fund also on a monthly basis. 22.
In some cases, however, the situation is improving and the recent more proactive approach of the Japanese supervisory authorities deserves a commendable mention in this respect. I stress again that I am not intending to cast doubt on the value of consolidated supervision, but rather to point out that the reality does not always match the rhetoric. The answer can only be for individual supervisory authorities to build up a relationship of trust which allows for a free flow of information in both directions, adequate safeguards on the confidentiality of information received and an avoidance of over-hasty and disruptive supervisory action based on that information. At the end of the day the effectiveness of global regulation depends in large measure on cooperation among regulators. As a major international financial centre, Hong Kong will continue, after 30 June 1997 as it has done before, to play its part in fostering such cooperation. BIS Review 55/1997

The programme will be rolled out next month as planned. All in all, with the support of the banking industry and the stakeholders, the CFI implementation is on track and on time. 5. Second, the HKMA has commissioned ASTRI to carry out a comprehensive study on distributed ledger technology (DLT). The very fact that DLT allows information or records to be transferred and updated by network participants in a trustworthy, secure and efficient way, carries enormous potential in its application. However, while the value proposition of DLT is gradually crystallising, the use of DLT in financial services may bring about new risks and challenges in its application. As a regulatory authority, the HKMA needs to have a better understanding of these issues before DLT can be adopted for wide application in the banking sector. 1/2  BIS central bankers' speeches  6. In this connection, I am pleased to announce that the first stage of this research project is completed and a white paper is published by ASTRI today. While the white paper affirms the good potential of DLT for application in financial services, it also highlights a number of possible issues which need to be carefully dealt with if DLT is adopted by the banking sector. For example, the decentralised model may pose some challenges for constructing an effective governance structure and oversight mechanism.
•  There is now a recommended template to help regional governments structure meaningful public-private-partnership agreements for infrastructure projects. The latest innovation is an infrastructure debt takeout facility. •  By providing a guaranteed takeout arrangement, the facility will enhance banks’ ability to originate, arrange and provide infrastructure project finance loans. •  At the same time, it will make it easier for institutional investors to invest in long-term infrastructure debt instruments as an asset class. Second, we need to deepen our markets. Take the asset management industry, where Singapore plays the role of a regional hub with $ trillion of assets under management. To deepen our market, we are embarking on several initiatives: •  To add diversity and resilience to the industry, we are seeking to anchor sovereign wealth funds and pension funds. 4  BIS central bankers’ speeches  •  To fund managers who use Singapore as their hub for Asian growth, build their investment capabilities and strengthen their local talent pool, MAS is giving out more investment mandates. •  To facilitate the domiciliation of funds in Singapore, MAS together with the Ministry of Finance is putting in place a more efficient corporate fund administration structure for asset managers. •  To meet the growing demand for family offices, we are providing greater clarity on the regulatory treatment of single family offices. The third way in which we build dynamism in the financial sector is by enhancing connectivity.

What’s important is that the banking system will be able to absorb these losses. •  Banks will continue to meet the Basel minimum capital requirements comfortably. •  And they will have sufficient liquidity to meet their cash flows. This resilience did not come about by accident. It reflects prudence and sound financial management in the financial industry: •  building up capital and liquidity buffers;  •  identifying and managing risks proactively;  •  provisioning against losses conservatively. A dynamic financial centre I have talked about imagining the worst and preparing for it – that is resilience. Let me now talk about seizing opportunities – that requires dynamism. Our financial sector has been able to grow handsomely because it is plugged into the region – which is growing two to three times faster than our own economy. •  But the continued growth of the financial sector is not a given. •  MAS and the financial industry have been working hard together to realise this potential. A key priority is to strengthen infrastructure. Let me give an example. Emerging Asia has enormous infrastructure needs. At the same time, global investors are seeking investment projects with good, long-term yields. There ought to be a good match. Yet, for all the promise and rhetoric, infrastructure finance has not really taken off. •  The basic problem is this: infrastructure projects are not structured in a way that would draw investors. MAS has been working closely with stakeholders to improve the bankability of projects.
But the consensus does not imply uniformity, and when making comparisons between regimes, it’s also important to control for the importance of the sector to the economy, the reliance consumers place on it, and the ability of firms to fail in an orderly way which causes the least damage to policyholders. Provided that the foundation of adequate policyholder protection remains in place, we believe there will be scope for making changes which meet the other objectives of the review. To make tailored change to the regime which better meet the needs of the UK market and the broader economy. Quantitative Impact Study In modern construction, modellers can render the proposed new building in 3D according to the architect’s plans. Even before the building work has begun, it is possible to have a sense of what the design looks like in practice and judge whether it will deliver on the original vision. In policymaking we also aspire to get a projection of the end result, but unfortunately we currently lack the required rendering software, so instead we have to rely on Impact Study exercises. These exercises are vital in giving us the detailed, accurate measurements we need. For this reason we, in agreement with HM Treasury, are planning a Quantitative Impact Study (QIS) for the Solvency II review. We intend to gather the data that will allow us to project the impact of a number of different possible designs; this will give confidence before the proposals are finalised that the ultimate designs will really work.

To build as accurate a picture as possible of the impact of reforms, we need high-quality data. In particular we are asking firms to validate internally the data they submit to us. Other aspects of the review There are some aspects of the review which are important but which do not lend themselves to being tested quantitatively through a QIS, and I wanted to touch briefly on a few of these. To support thinking about asset eligibility criteria for the Matching Adjustment, there will be some qualitative questions about this in the QIS, alongside the main part of the exercise. The Solvency II review also presents an opportunity to simplify the regime, not just for the MA but more broadly: streamlining of the process for approving internal models and model changes, for example. And there are some simplifications that can be made by the PRA even within the existing framework: we plan to produce a consultation paper on simplifications to the Solvency II reporting process. Together, these changes will allow our supervisors to increase their focus on the big risks that matter, while reducing cost, and increasing flexibility for industry. LIBOR The building work for the Solvency II review is important, but insurance isn’t the only sector with construction work going on. And as is so often the case, the building work next door is affecting us too. Sterling Libor is ceasing at the end of this year.
The nexus between banks and sovereigns and financial fragmentation in the euro area are phenomena that contradict the very essence of a monetary union, where monetary and financial conditions should in principle be uniform in the whole union. Plans to establish a financial market union in the euro area are very important, I would say decisive, in breaking  BIS central bankers’ speeches  7  the link between financial conditions and countries. An important and very well advanced element of the financial market union is the Single Supervisory Mechanism (SSM), whereby the ECB shall assume ultimate responsibility for specific supervisory tasks related to the financial stability of all euro area banks as foreseen in the EU Treaty. While I will not go into the details of the proposals currently on the table, which establish direct ECB supervision of the largest euro area banks and delegate the supervision of the other banks to the national authorities (with the possibility for the ECB to claim direct supervisory powers also for these banks if necessary), let me mention that the ECB considers them an appropriate basis for taking on supervisory responsibilities, while being aware of the many practical challenges associated to them. It is important that the SSM does not remain the only staple of the financial market union. It is essential that the SSM is accompanied by a euro area (and even better EU) Single Resolution Mechanism. Economic union.

The longer the krona remains 2  2  These calculations are based on a Cobb-Douglas production function with a constant returns to scale. BIS Review 78/2001  undervalued, the greater the risk of bad investments being made in domestic businesses. I do not intend to go into these issues in greater detail here and now, but would nevertheless like to point out that undesirable effects on business can arise through a misaligned currency giving flawed relative prices. Companies may make decisions regarding investment and employment on the basis of these relative prices. The foremost risk here is that too many resources will be drawn to the export sector and to the import competition sector before there is a return to the equilibrium exchange rate and to corresponding relative prices. At that point, the resources overinvested in these sectors will be transferred to other sectors. We know from previous structural changes in, for instance, shipping, steel manufacture and the property sector, that such a development would result in considerable costs to the real economy. One should not underestimate the importance for welfare of a correctly valued Swedish krona. Openness is important Factor productivity is also affected by a country's capacity to utilise technological progress in the outside world. This capacity in turn depends on how open the country is to impulses from outside, which is determined by the barriers that exist to ideas, goods, services and production factors moving freely across the borders.