samchain/econo-pairs-v1 huggingface dataset:
Nowadays, even presentations firmly oriented on return-maximising investment decisions dedicate more time to look at the absolute risks of trading strategies and assets, and this is particularly true for credit and liquidity risks. BIS central bankers’ speeches  1  Indeed, during the current crisis we have learned the hard way that those “forgotten” risks, which were perceived as not deserving a single slide in many presentations of the past, matter more than we previously thought. For those holding responsibilities in the design and implementation of public policies, to observe the increasing recognition among market participants of the importance of strengthening risk management practices constitutes one of its very few positive consequences. Causes and dynamics of the crisis Some of the main lessons from the crisis seem obvious in hindsight, but unfortunately were not seen as such before the outburst of the financial turmoil in 2007 and 2008. In particular, there are clear indications that the way we look now at the trade-off between risks and returns has significantly changed over the past thee years and a half. However, the key question is whether the shift in attitude towards risk has changed only as a consequence of the materialisation of some “forgotten” risks or whether there is a deeper and more structural explanation for this shift.

Expressions like “stress-testing”, “black-swan”, “animal-spirits” and even “sovereign debt” have become the new buzzwords in the financial industry. Risk managers have been reminded of model risk; portfolio managers have discovered the true face of risks; market participants have started to think about the compound effects of risks, the dynamics of crises and the impact of systemic risks arising from macroeconomic shocks, contagion effects and “hidden imbalances”; academic and practitioners have further analysed market failures, particularly based on behavioural and institutional aspects; and a certain degree of scepticism has spread, leading to some people wondering whether there is a genuinely risk-free asset and what are the real benefits of diversification. It seems clear that the “risk reassessment” process in the wake of the financial and economic crisis has been rather extensive and, perhaps, even excessive. For instance, market reactions to recent rumours about the financial soundness of institutions and sovereigns have been in some cases “off-the-charts”. Likewise, markets that had traditionally enjoyed lively trading activity and relatively good liquidity conditions completely dried-out. The shift in attitude that we have experienced in recent years relates not only to the ability of market participants to take risks, but also to their willingness to take them. In general, the crisis has eroded the capital position of the financial industry, forcing some institutions to embark on a process of deleveraging and risk downsizing that, in absence of an orderly  BIS central bankers’ speeches  3  mechanism, may bring global capital markets further down.
 The demographic problem: the equivalent of approximately 30 percent of the labour force in Romania and of 13 percent of the total population work abroad (from 3 percent in 2005). This is Romania’s lost GDP. 2   Moreover, even now, when Romania’s economy reports above potential growth rates, the country continues to record negative birth rates. The ageing of the population affects potential GDP; and it is not only about ageing – ageing is doubled by a high rate of people at risk of poverty (around 40 percent in 2016).  According to in-house studies that refer to a panel of 6 Central and Eastern European countries and cover the period from 2005 to 2016, a 1 percent increase in the share of population aged 65 and above triggers a 1.3 percent decline in potential GDP.  Real convergence is measured not only in quantitative terms, in cold figures, but also in qualitative terms. For instance, over 90 percent of the population owns a house, but housing quality is the lowest in Europe (about 30 percent of the individuals have no access to basic sanitary facilities and around 70 percent live in overcrowded dwellings).  The living standards and the wage differential further account for emigration waves even amid the high economic growth. This is a deeply uneven growth at both interregional and intergenerational levels, which is unbalanced in terms of structure and which reinforces inequalities within the society (the Gini coefficient stood at 38 percent in 2015).

Against that background it has been clear for some time that there needed to be a slowdown in the growth of the US economy to a rate which was more sustainable, both in the US itself but also in terms of the imbalance within the global economy – and the debate turned to whether it would come as the “soft landing” we would all welcome or a more disruptive “hard landing” which we could all well do without. And slowdown, of course, is what we have seen over the past six months. In the third quarter US GDP growth fell to an annualised rate of some 2¼% - less than half that in the earlier part of last year, and much of the more recent data suggest a further weakening. This slowdown has been reflected in a fall in equity prices – including a sharp fall in the previously hugely overblown “tech-heavy” NASDAQ index; and this in turn has contributed to a typically rapid escalation in the language of commentators, from slowdown, to imminent downturn or recession, to possible slump. Of course it is always possible that it will come to this – no-one has a crystal ball – and it goes without saying that we are all watching what’s happening very carefully. But that is not my own view of the most likely outcome, nor that of my central bank colleagues from around the world when we met in Basel a week ago.
The sixteenth President of the United States of America, Abraham Lincoln, once said that the best way to predict the future was to create it. As I see it, today, digital technologies are bringing this vision one step closer to becoming a reality. Thank you for your attention. 6

We intend to strengthen our monitoring of funded reinsurance, for example analysing structures and the risks that they pose in detail. And we will think about whether protecting policyholders demands limits on acceptable structures or on volumes of transactions. The PRA also sees the continued and increasing levels of offshore longevity reinsurance as an important issue. Under both longevity and funded reinsurance arrangements, it is the insurers themselves who remain liable for their promises to millions of annuitants, and their ability to honour those promises depends on the effectiveness of these risk transfer strategies. Both types of reinsurance arrangements potentially expose insurers to complex and concentrated risk. And they will be supervisory priorities for us. Growth of private credit / illiquid assets The majority of credit risk, if not the insurance or longevity risk, is still retained by annuity firms. The second observed trend that carries potential concentration risk relates to investment in private credit or illiquid assets. The rapid growth of private credit has been striking, with global fund raising activities reaching $ in 2021 [see Chart 3][11]. The key reasons for this growth are widely understood: attractive returns tapping into the illiquidity premium, diversification benefits and more bespoke arrangements that match lenders’ appetites to borrowers’ needs. In addition, the long-term nature of many of these assets offers a good duration match for insurers with annuity liability portfolios. This is why UK life insurers have been an active participant of this trend, many with their own in-house origination functions[12] and engaging in direct lending activities.
In this respect, savings banks have always paid particular attention to the financial needs of households and companies integrated into the social fabric. Thus, by granting access to financial services to a large segment of society, they have made a considerable contribution to the increased efficiency of the financial sector and the economy. Secondly, we should not forget that savings banks allocate a high percentage of the profits they generate each year to financing social projects. Last but not least, the close relationship savings banks have with the region in which they are established is another of their differentiating and defining features. Throughout their history, they have been clearly committed to strengthening the social and economic fabric of their heartland, thus becoming key players in regional development. This, in turn, provides them with greater retail customer loyalty, which no doubt offers a higher degree of stability for their business model. Yet while all the foregoing is acknowledged and given the broad consensus that savings banks should retain their social commitments, I believe it should not be forgotten that, above all other considerations, they are deposit institutions. As such, and so as to promote the sound working of the financial system risk management, profitability and solvency should be at the heart of their concerns. Indeed, it is precisely through controlling risks, maintaining acceptable profitability and a level of solvency appropriate to their risk profile that savings banks will be able to survive and prosper over time.

I want to emphasise that in all these key positions Andrew has shown a remarkable capacity to generate new ideas, foster consensus, fuse different views and encourage dialogue, and all this with a subtle sense of humour and extraordinary attention for the human touch. Let me add that during his term at the helm of both the BIS and the Financial Stability Forum, his steady hand has been behind the international financial system’s success in confronting the serious shocks arising in recent years. In the case of Otmar Issing, I have the pleasure of meeting him regularly in the Governing Council of the European Central Bank, where his illuminating presentations on economic developments in the euro area are pivotal in guiding our monetary policy decisions. You should know that Otmar, an academic of outstanding personal and professional integrity, is a truly remarkable and experienced central banker. For many years as Chief Economist of the Bundesbank and a Member of its Board, he contributed to enhancing the reputation of this institution as one of the most successful central banks in the world. When the European Central Bank was created in June 1998 he became its Chief Economist and a member of the Executive Board. Over what has been nearly five years he has been deeply involved in the fascinating tasks of putting in place and managing the single monetary policy. Otmar Issing’s contribution to these tasks has, in my view, been outstanding.
Moreover, this good starting point has, for example, avoided the need to react to the current losses of revenue by raising taxes, which would have certainly magnified the intensity of the adjustment. That said, the slowdown in spending is having a significant impact on tax revenue, reducing the budget balance very rapidly, so that utmost prudence must be exercised in fiscal and budgetary decisions. The need to provide the appropriate incentives means that it is advisable not to adopt widespread and permanent discretionary budgetary measures that attempt to counter the effects on households and firms of the inevitable reduction in national spending required by the adjustment process. Measures to increase spending would, at best, enable activity to be sustained only temporarily and would not help to improve the prospects for expansion in the  BIS Review 117/2008  3  medium term. And I say at best because, without an improvement in external competitiveness, a large part of the increase in public spending would leak abroad and have only a minimal impact on domestic activity. Likewise, strengthening control over current general government spending is an essential measure in response to a low-growth phase, since it limits the deterioration in the budget balance, signals stability and rigour to the private sector, and provides greater leeway to undertake public investment projects that enable the Spanish economy’s productive base and competitiveness to be enhanced.

The excessive financial expansion was also accompanied by a reduced perception of risk by investors and intermediaries, contributing to spending growth and the leveraged buyout boom. This situation was gradually changing as central banks tightened their monetary policy, but the most radical change took place from the summer of 2007, when the turmoil led to a rapid and substantial reassessment of the risk of financial instruments and a sudden standstill in many segments of the money and capital markets. There then began a process of deleveraging, the opposite of the one that took place in the previous years of this decade, in which debtors are striving to rebuild their balance sheets, while investors exercise the greatest prudence in choosing where to place their savings. During the stage of strong credit growth, the Spanish economy accumulated certain imbalances, linked to the fact that (residential and capital) investment exceeded national saving. However, Spain has preserved a number of very important stabilising factors, such as the balanced budget, to which I will refer later. Also, as I have mentioned in detail in other speeches, Spanish banks were not involved in the financial innovation operations that, through the creation of highly sophisticated instruments, lie at the source of the current financial crisis. This means that our institutions are in a somewhat more solid position to face the new stage than those of other countries.
John C Williams: A New York moment Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at "The Future of New York City: Charting an Equitable Recovery for All", Federal Reserve Bank of New York, New York City, 31 March 2022. *** Good morning, everyone, and welcome to the Federal Reserve Bank of New York. I am excited to see many of you joining us here-live-at our building on Liberty Street in downtown Manhattan. It means so much to us to be able to bring people together to discuss the future of New York City in our first-ever hybrid public event. I'd also like to welcome all the guests and panelists who are joining us virtually. This is more than a conference. It's a moment that marks a new era for how we think about living and working in this city. In fact, if you were to wander down these halls, you'd see my colleagues bringing that idea to life. We reopened our doors to all employees last month, and we're so glad to be back and working together in person. For us, this is part of a flexible model that allows for a mix of days in the office with remote work. We believe that being here in this way is best for our employees, best for this city, and best for the Federal Reserve's Second District, which is the region we serve.

1/2  BIS - Central bankers' speeches  Two years later, we've seen great progress toward a recovery. The most recent data show that well over two-thirds of New York City's job losses have been reversed. Still, areas of the New York City economy, especially those dependent on visitors and office workers, continue to struggle and are lagging the nation in recovery. Despite the challenges, there is palpable energy and momentum propelling us into the future. Now that our focus is on the recovery, we must create an equitable future for all residents of this city. We must make sure that all of the people who live, work, or own a business here have a chance to succeed. It is essential that we build a stronger foundation so that everyone can fulfill their economic potential, both here in New York and around the nation. That's why it's critical that we prioritize tackling some of the city's biggest problems, including poverty and inequality, and issues in areas such as infrastructure and transportation. These issues are not new; they existed long before the pandemic. And there is no simple or single solution to solve them. But as we plan for a better future, we must understand how New York's challenges have evolved since March 2020 and how they are playing out in the current environment. With that knowledge and awareness in mind, we can chart the path forward. The New York Fed's Role This brings me to our conference today.
But of course speculative situations cannot be ruled out either in the present ERM or in ERM 2, as is clear from developments in Finland in recent months. The Swedish position has been to avoid making the new exchange rate arrangement mandatory. Basically, we consider it would be better to achieve coordination in Europe with a single inflation target. We find the present construction of Swedish monetary policy satisfactory. But we can get along with the system that has been chosen. Cooperation will not be mandatory, which means that monetary policy can be conducted with an inflation target as well as with a fixed exchange rate with the euro. Still it is clear that there will be strong pressure on us to participate in ERM 2. It is also conceivable that a period of participation in the exchange rate mechanism will prove to be a condition for EMU membership. In any event, as a EU member state we have undertaken to conduct exchange rate policy as “a matter of common interest”. Changeover plan for the financial sector It is the Riksdag (Sweden’s parliament) that decides if Sweden should join EMU. The Riksbank has the task of helping to ensure that Sweden does in fact have a choice when the time comes to decide, so that Sweden is ready to join if a Riksdag majority so requires. The Ministry of Finance and the Riksbank each have an organisation for the euro’s practical introduction.

The composition of the Governing Board may be a problem; the appointment of members of Parliament to the Governing Board runs counter to traditions in Central Europe. 4. Debt conversion and issues The countries that join the euro area may - and it is also envisaged that they will issue treasury paper denominated in euro. A member state wishing to convert its stock of debt into euro will be allowed to initiate the appropriate measures. A member state may also take steps whereby private issuers and marketplaces (e.g. the Stockholm Stock Exchange, OM and the Securities Register Centre) can switch to euro in the changeover period. Many institutions and agents are in fact planning to do this. All private economic agents are to be free to choose between using euro from the start of Stage Three and waiting until the changeover has been completed. However, the agents in the Swedish securities market, banks, financial institutions, the Securities Register Centre, the Stockholm Stock Exchange, OM and others are unanimously in favour of a “big-bang” solution, that is, a quick, concerted changeover from kronor to euro right from the turn of 1998. 5. Banknotes and coins Euro banknotes and coins will not be introduced until the beginning of 2002. For a time, commerce will have to cope with two sets of prices, one in krona and the other in euro. A timetable for the substitution of banknotes and coins is to be fixed by each country.
To the extent that they cannot meet target returns, it will be harder for them to accrete capital to build resilience. Although the NIM effect has been present for some years now, we have not yet seen a broadly based move by banks in advanced economies to push up returns by taking on greater risk. Post crisis regulation has almost certainly played a role in constraining aggressive search for yield behaviour, as perhaps have banks’ memories of the crisis. 8 For example, using the data for banks from 47 countries from 2005 to 2013, Claessens et al (2018) find that a 1 pp fall  in interest rates implies an 8 bps lower NIM – compared to 20bps at low rates. 9 In the euro area, NIMs are very low at around 130bps and retail-focused German savings banks in particular have seen their NIMs fall by 40bps since the ECB introduced negative rates in 2014. In the United Kingdom, NIMs are higher at around 230bps and have remained relatively stable over the past few years, supported by higher policy rates and the more international focus of major UK banks. 10 Low current and expected profitability appears to be the main driver of banks’ equity prices. There is little evidence that investors are concerned about asset quality: the proportion of banks’ loans that are non-performing and credit default swap premia remain low. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  But more recently we started seeing some evidence of search for yield behaviour.

I will start off briefly with the past journey of Asian development, and then focus on how to prepare our bank centric financial system for challenges and opportunities that lie ahead in this rapidly evolving economic environment and financial landscape. Having a smooth-functioning financial system is of course a necessary condition for growth as finance is often referred to as the life blood of the economy. On the other hand, if the blood is infected, it could lead to severe malfunctions of the body and serious adverse consequences. Thus, going forward, in pursuit of the prosperity of Asia, I propose that the role of finance and banking must focus on three key words: “productivity, immunity, and inclusion”. I will come back to these three key words later in my talk. Ladies and Gentlemen, Let’s begin by looking back over the past fifty years. Undoubtedly, it has been an incredible journey of Asia’s achievements. From a primarily agrarian and poor region in the 1960s, Asia has transformed itself into today’s key engine of the global economy. According to the latest IMF’s World Economic Outlook, emerging and developing Asia is expected to 1  grow at 6.4 percent in 2017, making it the fastest growing region and contributing almost half of the world’s output growth. To get to where we stand today, Asia has gone through various rounds of boom and bust cycles.