samchain/econo-pairs-v1 huggingface dataset:
Equity release mortgages can be a valuable product for borrowers, allowing them to unlock the equity in their homes. They can also be an appropriate asset to back annuities as part of a diversified portfolio. But they are a more direct exposure to house prices than conventional mortgages for which the lender’s primary source of repayment is the borrower’s income. Insurers are protected by low loan-to-value ratios. However these will tend to increase over time as interest is rolled up, particularly if the interest rates exceed house price appreciation. And the Solvency II Matching Adjustment increases the effective loan-to-value ratio by allowing insurers to bring forward a portion of the expected income on the loan into current capital. The Matching Adjustment allows an insurer to reduce the value of long-term liabilities, such as annuities, by discounting them using a spread in excess of risk-free rates. The idea is that if long-term liabilities are fully matched by long-term assets, the Matching Adjustment captures the excess market returns in relation to risks to which such a buy-and-hold investor is not exposed. It is calculated as the remainder after subtracting two components of the market yield on an asset: first, the equivalent risk-free rate; and second, the so-called Fundamental Spread, which is mapped from the credit rating of the borrower and used as a proxy for risk. One desirable effect of the Matching Adjustment is to insulate an insurer’s capital position from volatility in 4  market prices.

Across the market, reserve releases continue to run at high levels by historical standards.   Insurers may be underestimating risks, particularly on new business. For example, they may be too sanguine about catastrophe risks, such as significant weather events.   Terms and conditions are loosening.   Insurers may be tempted to expand into new lines of business with apparently more attractive returns. But these may fall outside their knowledge and expertise. Over the course of 2017, we will carry out a number of supervisory initiatives to deepen our understanding of how individual insurers are being affected by these conditions. Our overall expectation remains that firms (and their Boards) are the first line of defence and accountable for the risks written on their balance sheets, regardless of distribution channel used. Where insurers participate in delegated underwriting arrangements, we will expect them to retain the ability to understand the impact of business written through these channels on their overall risk profile. Our specific work this year includes:   Reviews of underwriting and exposure management for selected lines of business at a number of large London Market insurers. In the course of these, we will seek to understand how changes in terms and conditions are carried through to planning, reserving and capital assessment. Where these insurers delegate aspects of underwriting through broker facilities, managing general agents or other arrangements, we will also assess whether they have sufficient information and control to manage their risks effectively.
Market participants engage in automated trading for a variety of reasons, including cost savings and efficiency gains from the relatively faster  6  Although this was market practice through 1992, the Federal Reserve Bank of New York neither encouraged nor required this use of the primary dealer list. BIS central bankers’ speeches  3  speed at which computer algorithms can make and process certain types of decisions. For example, a dealer may decide that for orders under a certain size, it is more efficient and cost effective to have a system automatically provide a quote when a customer shows interest than to have a trader manually do so. High-frequency trading (HFT) refers to a type of automated trading that relies primarily on speed to identify and act upon trading opportunities faster than other market participants. HFT is often associated with a high volume of order messages and rapid position turnover. Such trading typically requires a significant investment in technology and communications systems designed to reduce the amount of time necessary to transmit and process information. Although high-frequency trading has garnered much attention in the media, it is worth pointing out that distinguishing between “automated trading” and “high-frequency trading” is not clear cut. In fact, many features ascribed to high-frequency trading, such as minimizing the time between trading decisions and execution, also apply to automated trading more broadly. Automated trading is conducted by a range of different firms, including broker-dealers and specialized proprietary trading firms that trade without client money.

Clearly automated trading likely played an important role in the speed of transmission of price movements from the Treasury market to other markets, since such technology allows investors to quickly identify and execute trades that are predicated on tight linkages between different markets. At the same time, some have suggested that firms engaging in automated trading may have “unplugged” their systems or carried out strategies that prompted or exacerbated the volatility. To be sure, the response of firms relying heavily on automated trading strategies to market volatility may be different than that of non-automated participants, given the ability of automated systems to rapidly adjust their risk exposure in response to evolving order book and market price dynamics. However, a wholesale retreat on October 15 is inconsistent with the extraordinarily high trading volumes observed throughout the day, and the continuous nature of trading that occurred even during the most volatile periods. Indeed, some past periods of very sharp changes in financial asset prices have been characterized by prices “gapping” from one point to another, with little trading in between. But this appears not to have been the case on October 15. Even so, it is possible that changes in the participation or behavior of firms employing automated strategies – including broker-dealers and proprietary trading firms – had an effect on market liquidity and price movements that day, even if there was no wholesale disengagement.
Jean-Claude Trichet: Communication, transparency and the ECB’s monetary policy Keynote speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the New Year’s reception of the International Club of Frankfurt Economic Journalists, Frankfurt, 24 January 2005. *  *  *  Ladies and gentlemen, It is a great pleasure to be here at the New Year’s reception of the International Club of Frankfurt Economic Journalists. This is certainly the right place for me to discuss the “art of external communication”. The members of this club are among the most experienced and knowledgeable watchers of the ECB. Through your reporting you play a decisive role in our communication policy. Along with other media you have the important responsibility of informing the public about the Eurosystem’s monetary policy as well as other central banking activities and of contributing to a constructive public dialogue on our policies. Much has been said about the external communication of central banks in recent years and central bankers have reflected intensively on their external communication. Transparency, candid explanations given to investors, savers, market participants, households and, last but not least, to our 306 million European fellow citizens are of the essence for the ECB and its Governing Council. It is fair to say that communication is an integral part of monetary policy. Why are accountability and transparency so important for monetary policy?

This brings me to the other big uncertainty: how far will tighter credit conditions affect the wider economy – in the UK and the rest of Europe as well as in North America? It seems highly likely that growth was supported by easier credit over last few years. But to what extent? When it comes to quantifying the effect of changes in credit conditions, our workhorse economic models still cannot help us very much. As far as the UK economic outlook goes, our central judgement is that financial stress will act as a significant drag on demand over the next two years. But there is a high level of uncertainty about this; and, as we now see it, the risks, as they affect output, are tilted to the downside. These are two fold: first, that the financial crisis will persist and possibly intensify; and second, that over time tighter credit conditions and asset price weakness will combine, and in the worst case feed off each other, to sap the strength of overall demand, and put downward pressure on inflation in the medium term. Higher costs Let me come now to the other major area of risk: the upward pressure on inflation from higher external costs. The most recent build up of global cost pressures is just the latest episode in a remarkable period of soaring commodity prices. Oil prices have more than trebled since the start of 2004, and metals and food prices have more than doubled.
The main area of contention for us in the UK, the MA, is very little used in the EU (other than in Spain, where firms invest in a much more vanilla range of assets) and the EU therefore has no need to consider changes of the sort we need to look at. Conversely, the EU has had to tighten up its regime strongly in another area, but one which has no impact on the UK whatsoever as it relates to euro-denominated liabilities and not sterling ones. We must avoid a regulatory race-to-the-bottom following Brexit, but if we do want to make comparisons then it is worth noting that the net capital released for EU insurers as a result of the changes proposed by the EU Commission is significantly lower than those proposed in the UK when scaled for market size, although the EU position is not yet settled. Conclusion In our view our proposed package of reforms to insurance regulation will support all of the government’s objectives for the review. But it is essential that we take forward all three elements: a major loosening of one important part of the regime (the Risk Margin); changes to cut bureaucracy, and to enable insurers to invest in a wider range of assets; and changes to put another part of the regime (the Matching Adjustment) onto a more sustainable footing. Industry views at this stage seem broadly to support the first two elements of the package, but not the third.

And not only their quality, of course. Yesterday morning I spoke in Croatia about the need to improve the efficiency of the judicial system. It is fair to say that many reforms have already been undertaken across Europe and that many countries are now seeing the benefits of such policies. For the last couple of quarters, every new GDP data release by Eurostat has been a positive surprise, while forecasters have been raising their GDP forecast for the EA and the EU. However, while growth has resumed in all countries, medium-term growth potential in the region is insufficient to ensure pre-crisis pace of real convergence. Namely, for convergence to be sustainable, long-term potential per capita growth must be consistent with an expansion of demand. In other words, GDP growth that results from strong capital inflow, foreign demand shock, or fall in interest rates due to perhaps euro area enlargement process, could prove to be unsustainable. So, the question is, did we take convergence for granted? Was one of the great features of the European integration process only a temporary and unsustainable phenomenon related to the 2  initial 'low-hanging fruit' reforms that corrected vast resource misallocation problems, followed by a huge inflow of foreign capital before the crisis? Will convergence return back to a faster speed, will it continue at a slower speed, or maybe even stop or reverse? Is convergence still here and, even more importantly, is it here to stay?
For example, the speculative attacks at the end of 1992, which deepened the exchange rate crisis in Europe, highlighted the increasing importance of exchange rate stability in an economic area with a single market. The policymakers’ challenge consisted of gradually creating a large economic area with monetary stability and where capital controls were progressively relaxed with the ultimate aim of establishing a monetary union large enough to defend itself against speculative attacks. Indeed, we can safely conclude that based on the experience of the last 7 and half years, a viable monetary union is a more credible commitment device than a fixed or quasi-fixed exchange rate regime. This process is still ongoing, because the euro is not only the currency shared by the 12 euro area countries, but is also the anchor for most of the other EU countries’ currencies. In addition to influencing the economic and political debate in Europe in preparation for EMU, globalisation will also continue to shape the future of the global monetary system, once the Asian currencies and in particular the Chinese renminbi take a definite stance on their respective exchange rate regimes. The successful experience of EMU might encourage other economic areas to create new currencies and new joint central banks. Therefore, one might expect that globalisation will also affect the number of currencies currently circulating in the world. However, the creation of monetary unions requires a strong political commitment and forceful policy initiatives, as revealed by the EMU experience.

In December 2000 the annual rate of increase in the Harmonised Index of Consumer Prices (HICP) declined to 2.6%, from 2.9% in November. A confirmation of recent developments in oil prices and the euro exchange rate would contribute to a further downward adjustment of overall HICP inflation in the period ahead. Over the near term, this process may be slowed down by the delayed impact of past import price increases and possibly also by some transitory further food price rises caused by the current health issues associated with beef consumption. It may therefore take some time for HICP inflation to move back below 2%. Notwithstanding the assessment that the risks to price stability are now more balanced, there are still factors posing upside risks which therefore require continued attention. These are mainly related to potential second-round effects on wages of the past increases in import prices, as well as to bottlenecks and shortages in labour markets. For the medium term, it remains paramount that wage developments remain moderate. In addition, it is crucial that structural adjustments continue. This requires sustained labour market reforms, continuing liberalisation of product markets and further integration in the financial services sector, all of which will expand economic activity and increase employment.
We will carry out more thematic reviews of financial advisory firms’ consequence management frameworks to assure us that investor complaints are investigated in a fair and timely manner. 13 The reality of course, is that no amount of regulations nor supervision can prevent wrongdoings. To try to do so would require a large volume of pre-emptive rules as well as unlimited supervisory resources. Both situations are neither possible nor desirable. 14 This is why MAS also places importance on our enforcement actions. We will not hesitate to investigate and take errant financial institutions or their representatives to task for breaches of our law and regulations. We have issued prohibition orders against individuals for a range of misconduct, from mis-selling to dishonesty and fraud. Our message is clear— improper or illegal conduct have no place in our financial sector. Importance of market discipline 15 This brings me to the second topic. Market discipline. 16 As with our enforcement actions, market discipline can play an important role in shaping behaviour. It creates a strong incentive for financial institutions to conduct their business in a fair, transparent and responsive manner. A firm or its representatives with a poor record will deter prospective clients and investors. Similarly, investors will avoid companies that have poor standards of governance and disclosures. In other words, investors will penalise those that have fallen short, and reward those that have fared well. 17 To allow market discipline to work, different participants in the eco-system must play their part.

5 There are three important enablers: a culture of fostering customers’ trust in the financial industry; strong market discipline that incentivises right behaviours; and adequate and timely public disclosures of pertinent information. Engendering trust in the financial industry 6 Let me start with the theme of trust. It was a decade ago that we had the Global Financial Crisis. With a suite of regulatory reforms that followed, the global financial system is generally safer and stronger. Just being safe is not good enough. A vibrant financial sector must be able to support the smooth functioning of credit and money flows. It should meet the savings, investment and insurance protection needs of the people. Investors on their part want to have the confidence that they are treated fairly by financial institutions and that their savings are safe. This is why building trust in our financial institutions is so important. That trust goes beyond doing what is legally required, to include what is good and what is right. 7 Some of you may have seen recent reports on the Royal Commission review in Australia that investigated widespread misconduct issues in its banking industry. Financial institutions in Singapore are generally well regarded. But we have our share of malpractices too, such as the mis-selling of Lehman Minibonds and other structured or complex products. 8 Financial institutions have a duty to act in the best interests of their customers. However, in our supervisory reviews, we have uncovered lapses in conduct.
At the same time, the increased levels of non-resident investments in Malaysian financial assets had pushed non-resident holdings of Malaysian government bonds to rise to the height of 33.6% in May 2013. These heights came with costs, heightened risks and vulnerabilities. From the Taper Tantrum in 2013 onwards, our markets went through several bouts of volatility. These were largely driven by volatile portfolio flows. During the Taper Tantrum in 2013 itself, we saw outflows of USD19.1 billion and a depreciation of 9.7% of the ringgit against the US dollar. Despite this, our capacity, capability and resilience in managing these sizable and volatile financial flows have been fortified in a number of ways. Our economic fundamentals have remained healthy and our financial market is more diversified and well-developed. This enhanced the ability of the financial system to absorb capital inflows and outflows, thereby minimising disruptions while ensuring that these flows can be effectively intermediated to support real economic activity. Malaysia’s exchange rate regime has also accorded the necessary flexibility for the exchange rate to adjust to the changing conditions. This has provided a good balance between flexibility and stability. Our ability to manage domestic liquidity has also improved significantly, supported by a wider range of instruments to conduct monetary operations and strengthened surveillance systems. Pervasive impact of the offshore markets However, one noticeable observation over the years was that, for each episode of volatility we faced, the subsequent calm would see an even larger build-up of risks.

Although unemployment has been stubborn, the key challenge expressed by many Europeans is to make labor markets more flexible, and indeed, some change is evident. This past year, unemployment in the euro area finally seems to have started to trend down, falling to 9.6% in January, a seven-year low and almost 1 percentage point below its level a year earlier. Further, output growth has begun to revive from the falloff in 1998, and the outlook is for solid growth in the 11 euro countries to continue into 2000. Core inflation throughout the euro area has also been subdued, although with rising energy prices, it may edge up a bit. Producer prices for finished goods show no signs of inflation pressure. Growth elsewhere in the industrial world - the United Kingdom and Canada - also appears to be strong, with no signs of accelerating inflation. In both countries, strong private consumption - and in Canada an unemployment rate that is the lowest since 1981 - continues to keep GDP growth on a reasonably steady path. More broadly, there is active debate within Europe today about what kinds of labor and financial market changes will accelerate technological change. Countries have taken different approaches in addressing these issues. The diversity of experiences among the European countries allows each to assess the impact of the various approaches others have taken and to draw lessons from which it may benefit.
But I think there is much more to be said for "one country, two systems" beyond politics and governance, for the simple reason that there are many differences between the two systems within our country, on whatever dimension one chooses to examine the situation, and differences present opportunities for relative strengths to be exploited and relative weaknesses to be addressed, and synergies maximised to the benefit of all concerned. The economic system on the Mainland, described as a socialist market economy, is very different from the economic system of Hong Kong, a capitalist free market economy. The medical system on the Mainland is different from that in Hong Kong, in terms of the manner in which medical services are delivered and funded, and in terms of the types of medicine used. The tax systems are also very different, so are the labour systems, the educational systems and the transport systems (we drive on different sides of the road); and, of primary interest to me as Monetary Authority, so are the monetary and financial systems. China is therefore probably unique in having two different systems, including two different financial systems, in one country. I believe that, beyond politics and governance – the arrangements for which have been quite well bedded down – there is perhaps a need for all concerned to pay greater attention to the opportunities presented by the differences between the two financial systems and to developing a beneficial working relationship between them.

The phrase is included in the article "the Speech during the Shanghai visit" in the Selected Works of Deng Xiaoping, Volume 3. ("视察上海的谈话"，《邓小平文选》第三卷)  2  BIS Review 98/2006  (now equivalent to over 40% of GDP) into the hands of those who need funding to finance consumption, investment and other economic activities. Currently, domestic savings on the Mainland are mostly trapped in the banking system earning fairly low rates of interest and as a result sustaining or even increasing a savings rate that is already far too high. There is a serious lack of diversity in investment opportunities. The ability of the banking system to allocate funds in accordance with the credit-worthiness of the borrower, although improving, is still not quite efficient in view of the relatively low degree of market orientation in credit allocation. Thus, the overall effectiveness of the financial system on the Mainland in the important task of financial intermediation is not high. There is, of course, room – and there are concrete plans – for improvement. But meanwhile the financial intermediation needs are there and have to be satisfied. This is where, quite clearly, the other financial system of the country can come in. As reform and liberalisation of the financial system on the Mainland continue, allowing the greater play of market forces, there is a need to conduct experiments in specific areas of activity in finance, including currency convertibility. The free market environment of Hong Kong provides the ideal laboratory for conducting such experiments.