samchain/econo-pairs-v1 huggingface dataset:
A major piece of work for us in this area in the coming year will be to develop a financial literacy core competency framework. Building on the three tiers of financial literacy in the MoneySENSE programme, the framework will set out the basic knowledge and life skills individuals would need to make informed financial decisions at key life stages, starting at an early age, continuing through working life and into retirement. These decisions include managing budgets, setting aside adequate funds for emergencies, managing CPF savings prudently for retirement, assessing affordability when buying a property, and understanding and evaluating risks when investing in particular products. The Financial Sector Development Fund has set aside $ million to fund financial educational programmes for the next three years. Going forward, we will invite the public to contribute new and imaginative ideas on how financial education can be delivered more  BIS Review 91/2009  5  effectively. Consumer education requires sustained efforts by each and everyone in the community. We will fund proposals that can best support the delivery of the knowledge and skills in the financial literacy competency framework. Our next measure to maintain confidence is a review of the deposit insurance (DI) scheme in Singapore. As part of MAS’ continual efforts to enhance the regulatory framework in Singapore, we are reviewing the DI scheme to ensure it remains relevant, provides adequate protection to depositors and is in line with international practice.

William C Dudley: Is the active use of macroprudential tools institutionally realistic? Panel remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the “Macroprudential Monetary Policy”, 59th Economic Conference of the Federal Reserve Bank of Boston, Boston, Massachusetts, 3 October 2015. *  *  *  It is a pleasure to be here today and to have the opportunity to talk about the potential use of macroprudential tools in the United States. Before I respond to Adam Posen, I’d like to make a few general comments on macroprudential tools. I am interested in such tools both as a U.S. policymaker and in my role as chair of the Committee on the Global Financial System of the Bank for International Settlements (BIS), a body that has done considerable work in this area in recent years. What I have to say today represents my own views and not necessarily those of the Federal Reserve System.1 The use of macroprudential tools has gotten considerable attention for several reasons. Some countries have implemented macroprudential measures with respect to the housing market that may have limited the extent of home price appreciation and made their financial systems more resilient when the boom unwound. Other countries have implemented countercyclical capital requirements that have made their banking systems more resilient. Thus, the hope is that U.S. policymakers can learn from these international experiences and incorporate effective macroprudential tools into our toolkit that could be used to limit financial stability risks.
The first two trends that I have cited relate to the internal efforts firms undertake to identify and measure their risks. The third trend I’d like to highlight concerns the dramatic increase in the use of transactions designed to transfer exposures to risk, especially to credit risk, to outside counterparties and even to investors. Credit risk transfer This past autumn, the Joint Forum released for public comment a study on the current use of credit risk transfer activities among financial service providers, along with a series of recommendations on how to promote sound risk management practices in this area. In recent years, the markets for credit derivatives, credit default swaps, collateralised debt obligations and other products have grown tremendously, providing financial service providers with new mechanisms through which they can reduce their direct exposure to credit risk. Such tools may also help to reduce concentrations of risks in particular firms. BIS Review 8/2005  5  I think that the emergence of these new channels for re-packaging and selling off credit risk serves as another means of looking forward to the future to manage risk. In this sense, the rapidly expanding secondary market for new credit-risk related instruments bears witness to the innovation and the search for new ways of managing risk that is so vital to the continued evolution of the financial sector. However, we must remember to look back at the fundamental risks involved in these practices.

This, in turn, should benefit emerging market economies by improving the degree of confidence that they can have in the future level of capital inflows. This is very much related to the discussion about procyclicality, an important issue that we at the Committee have taken up and addressed seriously. In particular, some have suggested that the ratings-based approaches will drive up the cost of credit for borrowers precisely at times when its supply is falling, namely during downturns in the business cycle. This is a very complex point and deserves a whole lecture in itself. Given the time constraints today, I would like just to summarise my own views. Of course, I fully respect the different opinions that may exist on this issue, but in my opinion, there are some elements that make me think that the concerns over procyclicality are exaggerated. There is some degree of procyclicality inherent in banking behaviour. The question that we should consider is whether Basel II, or any regulation, will unduly exacerbate this behaviour. Furthermore, it is also important to consider the trend around which cycles will fluctuate. I think that under Basel II, in the context of a more efficient and sound financial system, fluctuations will occur around a superior trend. This superior trend represents a better relationship between the capacity of the economy to absorb risks and the ability of the banking system to provide credit. Furthermore, one cause of pro-cyclical behaviour is low capitalisation and weak risk management.
This requires not only stronger financial intermediaries and better supervisors, but deeper and more liquid capital markets that provide greater access to capital for firms and greater freedom for households to borrow and to invest their savings. Certain features of today's emerging economies, notably the size of current account surpluses and the high levels of reserves, tend to be seen principally as sources of comfort against future crises. But you can also look at these phenomena as measures of the incompleteness of the institutional changes achieved in the monetary and financial arena, and as a sign of the persistent ambivalence in the emerging world about financial integration. The current account surpluses are, of course, the mirror image of the high rates of savings relative to investment. There are a range of factors that affect the flows of goods and services across international borders, but the sustained outflow of funds from some emerging economies witnessed in recent years may have as much to do with the limited intermediation capacity of the local financial systems as with the scarcity of profitable domestic investment opportunities. And in this sense you can read a large current account surplus as a sign of financial sector under development rather than of financial strength and maturity. The pattern of intervention in exchange markets and the scale of reserve accumulation provides a similar perspective on the challenges ahead. Policymakers in many emerging markets still reveal a substantial degree of reluctance to allow the exchange rate to adjust to market forces.

In addition, there are increased concerns about financial and foreign exchange market stability in the event of a sudden reversal of capital inflows to the regional banking system. Recently dramatic changes are occurring in the global economic environment, including continuing monetary policy normalization by the U.S. Federal Reserve. These changes can potentially impact small, open economies and must be understood. Research conducted by the central Bank of Italy (BdI) is another example of research work, focused on the region, providing an interesting regional perspective for euro area policymakers regarding their policy decisions and actions. This research has formally provided researched-based evidence on the implications of their policy making on the large group of countries in the periphery of the euro area. These are just a few examples of interesting, useful and publishable research. This year we have a couple of projects that involve cooperation and joint works between Bank of Albania researchers and those from other central banks or academia. This is another way to increase the potential for publication and I would encourage you to increase the amount and scope of cooperation in research with foreign researchers. To conclude, I would like to reemphasize that we must enhance the overall efficiency of the transmission mechanism, and the resilience of the banking and financial systems so that potential and unexpected shocks do not advance to economic or systemic risk.
In contrast, the macroprudential policymaker’s loss function has no simply defined target – instead the policymaker has to make a judgement about when GDP-at-risk is within an acceptable range. GDP-at-risk, 𝐺@𝑅𝑡+𝑖 , is not directly observable and must be estimated. And optimising for policy, 𝜌𝑡 , requires estimating 𝐺@𝑅𝑡+𝑖 with and without policy, or for different policy calibrations – building estimates upon estimates. The fog of financial stability can be dangerous. A booming economy can give the illusion of lower risk, feeding assumptions that potential growth is stronger and GDP-at-risk lower. Proving otherwise can be difficult in the face of inherent uncertainty and growing complacency. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches  12  As GDP-at-risk is not directly observable, it must be estimated using intermediate indicators and drivers of financial stability.11 Bank of England research finds that the indicators with greatest signalling power for GDP-at-risk are credit metrics, the current account, asset prices and metrics of banking system resilience.12  Chart 4 plots the estimated contribution of these indicators to GDP-at-risk over time. Specifically it shows the 5th percentile of the estimated forecast distribution of the level of UK GDP in t+3 years’ time, conditional on risks at time t. The focus on 3 years ahead reflects lags between setting macroprudential policy and the full impact of that policy on GDP-at-risk. Chart 4: Intermediate indicators suggest UK risks around standard (a)  Sources: Aikman et al., (2019), Bank of International Settlements, UK house price index, Datastream, Office of National Statistics, Bank calculations.

These taxonomies help mobilise capital by reducing the need for financial institutions to conduct their own assessments of environmental impact. At present the two leading taxonomies are those recently developed by the Mainland and by the European Union. The two taxonomies differ in some important aspects, including definitions of economic activities eligible for green investment. Such differences could present impediments in tackling what is a global challenge: this has particular relevance for Hong Kong, which is a regional hub for global institutions committed to responsible investment. 24. It is therefore gratifying to know that in May this year, the Mainland authorities have taken important steps to reconcile some of the critical differences between the two taxonomies. For example, clean coal is no longer considered green in the revised bond catalogue. We 3/5  BIS central bankers' speeches  expect more harmonisation work to be done by the two sides, though this may take a bit of time. 25. We are making progress on “harmonisation” within Hong Kong, too. This year, the HKMA, together with other financial regulators and relevant Government bureaux, formed the Green and Sustainable Finance Cross-Agency Steering Group. The Steering Group has two main aims: to co-ordinate management of climate and environmental risks to the financial sector; and to help accelerate the growth of green and sustainable finance in Hong Kong.
That implies that a fall in tax burden due to higher debt financing is passed onto banks’ customers. 2  BIS central bankers’ speeches  liabilities. Under fractional-reserve banking, combining the provision of both demand deposits and committed lines of credit, banks offer liquidity insurance to their customers.5 That enables households and firms to economise on stocks of liquid savings, releasing more of the economy’s savings to the risky projects that help drive growth over the long term. There are social benefits from deposit-financing of banks. But not everything about banks points towards more leverage, or towards taking on leverage via regular debt rather than monetary deposits. Most obviously, Modigliani-Miller assumes that there is no difference between, on the one hand, shareholders bearing losses through lower dividend payments and, on the other hand, a firm’s creditors bearing losses through the bankruptcy proceedings that follow default or insolvency. This is manifestly not true for banks. First, as a bank approaches the point of failure, short-term funds will tend to run, with the value of its assets reduced by forced sales to generate liquidity. Second, beyond the point of failure, there are substantial costs – and not only the fees of the administrators, which are common to the bankruptcy of firms of all kinds. Crucially, bankrupt banks find it harder to collect their debts and to enforce contracts; counterparties will close out derivative and repo contracts if they can.

Still other banks have greatly increased their transaction processing, custody or asset management businesses, in the pursuit of fee income. Looking forward to the next century, I believe we will see major strides in the area that I suggest we call “e-finance”. More banks will venture into the relatively new world of on-line PC banking or will expand electronic bill presentment and paying services. Banks will be motivated to overcome obstacles such as systems incompatibility and consumer privacy concerns, to achieve greater operating efficiencies and to protect their valuable payments franchise. Going forward, on-line purchases and sales of securities by individuals also will continue to increase, producing a growing source of commissions for financial institutions. For most banks, these developments will mean a further increase in the diversity and complexity of risks to which they are exposed, including, but not limited to, credit, market and operational risks. The challenge for these banks will be to develop risk management systems that are rigorous and comprehensive, yet flexible enough to address the newer risks they take on as they expand into less familiar product areas. Today, I would like to highlight these risks and focus on how important it is for banks to integrate their risk management and capital planning processes. Also, I would like to focus on how the changing nature of banking is challenging supervisors to rethink their approach to capital regulation and supervision.
It was impossible to gain a clear insight into the complicated CDO structures. Consequently the interest rates on the interbank markets soared. Parallel to this, scepticism towards the credit rating agencies' ability to grade structured products increased, and this concerned not only products containing subprime loans. Several central banks decided at this point to intervene in different ways in the interbank market. In general, the interventions contributed to reducing interbank rates towards desirable levels for shorter durations. For the longer durations the difference between the interbank rate and the risk-free rate remained substantial. The unwillingness to lend money was a hard blow to institutions dependent on financing from the market. For example, the British mortgage lender Northern Rock was forced to seek help from the Bank of England to manage its acute liquidity problems when it could no longer obtain financing. The market turbulence during the autumn had relatively limited effects on the Swedish banks. The main effects were higher financing costs, some changes in the value of bond portfolios and less activity on some markets. Here an important factor was the fact that the Swedish banks did not have any significant exposure to securitised subprime loans, neither directly nor indirectly through investment companies. Deficiencies in the functioning of the credit markets have been exposed The rapid developments in the financial system over the past decade have essentially been beneficial. There is no reason to wish we were back in the financial iron age of the 1980s.

Still, the high level of annual inflation today is largely due to the significant depreciation of our currency in recent quarters. On the output side, third-quarter figures showed GDP and domestic demand growing less than forecasted. In addition, fourth-quarter figures at hand show no signs of significant recovery. Thus, we foresee that achieving higher output growth rates will take longer than we thought last September. On aggregate, the international scenario has changed little since our last IPoM. Perhaps the most significant development has been the sharp fall in the oil price in the past months, whose effects have begun to show in prices and will intensify in the near future. Meanwhile, although risk perceptions have increased and we had an important volatility episode in October – which vanished soon – no significant changes are observed in terms of global growth. At home, we completed a process of reducing the monetary policy interest rate (MPR), that took it from 5 to 3 percent between October 2013 and October 2014. This sharp reduction led the MPR to quite expansionary territory, in line with the economic slowdown already mentioned. Funding costs in the domestic market have declined significantly, with mortgage loan rates nearing their all-time lows. Notwithstanding, business and household expectations have deteriorated throughout the year and are now clearly pessimistic, influencing downward this year’s growth and slowing further the recovery foreseen for 2015.
Monetary policy was embarking on a path which targeted inflation and which, unlike monetarism before it, downplayed money and credit. And the regulation of banks, long the preserve of central banks, was in many countries being hived off to separate regulatory agencies. What happened next was truly extra-ordinary. Whether by coincidence or causality, the world experienced the largest banking bubble in history. Between 1990 and 2007, global bank balance sheets rose by a factor four. On the eve of the crisis they had reached around $ trillion, or almost 1.5 times the annual output of the entire planet. At the Bank for International Settlements, Andrew Crockett saw trouble brewing. In 2000, he gave a speech calling for a “macro-prudential” approach to regulation.12 Crockett argued that central banks needed to look at, and act on, developments across the whole financial system if systemic risk was to be headed-off. Credit booms, the like of which was occurring for real at the time, sowed the seeds of that systemic risk. The rest is of course history, as pre-crisis credit boom turned to shuddering bust. Or rather it would be history were it not for the fact that this crisis, whose seeds were sown in the credit boom, is still with us. Output in the UK is still well below its 2007 level. The so-called Great Recession in the UK is already as severe as the Great Depression of the 1930s. In response, the policy framework has, once more, been radically augmented. Macroprudential policy is the next big thing.

If not too big to fail, it was certainly large enough to look after itself – as the Bank found out in1860. Two years earlier, the Bank had abolished the right of other banks to come to it for cash by discounting bills. The banks took umbrage. With Overend and Gurney playing the role of shop steward, they collectively withdrew £ million from the Bank over three days in an attempt to bring the Bank, if not to its knees, then at least to its senses. Dark, anonymous messages were sent to the Bank, presumably not by Twitter, warning: “Overends can pull out every note you have”.1 In the event Overend eventually caved, returning to the Bank the notes they had withdrawn apologetically – or at least semi-apologetically, as the notes actually came back cut in half. Six years later in 1866, when Overend and Gurney asked the Bank for an emergency loan of £ the answer was “No”. The Bank won this battle, but was to lose decisively the war. Overend and Gurney failed. The City shook. Panic took hold. The Bank was forced to lend £ million – ten times the initial sum – to support other banks. There was a chorus of disapproval. The Bank’s role in crisis management would never be the same again. Supporting the financial system Criticism of the Bank’s role in the Overend crisis came prominently from Walter Bagehot, then-editor of The Economist and Bank-of-England basher of his day.
The expansion of global banks through subsidiaries provides for this deep involvement of the local supervisor. This may be a more effective – and therefore safer – arrangement, as it provides for a double layer of supervision, by both home and local supervisors. Moreover, from the group’s perspective, the combination of decentralized management and strong controls at the parent company creates as well a double layer of control within the group. This can have a drawback in terms of higher costs but some international active banks have demonstrated that it can be compatible with a good efficiency ratio. The subsidiaries model is one way of approaching this issue, but I am very conscious that it is not the only one. Nor is it suitable for all banks. It depends on many factors, including the type of business conducted by the institution – retail, investment banking etc. So let me be clear that I am not prescribing this model, and that I do not think it is the answer in all circumstances. But it is a factor that makes certain international groups less dangerous for the rest of the system in terms of their likely impact in case of difficulties. In other cases, the institutions concerned may also be able to argue that they have other controls, or business models, in place which reduce their risks. The validity of all reasonable approaches should be explored. In this context, let me mention here the work underway in the FSB and BCBS to deal with the global SIFIs issue.

Caleb M Fundanga: Monetary policy issues and the process of foreign payments Presentation by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambian Heads of Missions Briefing Seminar, Lusaka, 19 July 2005. *  *  *  The Hon. Minister of Foreign Affairs, Lt. Gen. Ronnie Shikapwasha, MP Hon. Deputy Minister of Foreign Affairs Permanent Secretaries Your Excellencies, High Commissioners and Ambassadors Senior Government Officials Distinguished Invited Guests Ladies and Gentlemen It is an honour for me to be here this morning to talk to you on the topic of “Monetary Policy Issues and the Process of Foreign Payments”. This topic provides me with an opportunity to explain the role of the Bank of Zambia in the economy and the process of foreign payments which has been a topical issue. As you may be aware, the Bank of Zambia’s mission is to formulate and implement monetary and supervisory policies that will ensure price and financial system stability. However, in line with the topic above, my presentation this morning will focus on the first aspect of the mission of the Bank, namely, price stability. There are generally three prices of major concern to the Bank of Zambia. These are general prices of goods and services, interest rates and the exchange rate of the kwacha against major foreign currencies. I will now deal with each of these in turn. The central bank deals with general prices of goods and services in the context of inflation.