samchain/econo-pairs-v1 huggingface dataset:
Banks have liabilities to one another due to loans and securities trading, or  BIS Review 58/2003  1  because they participate in the payment system. Contagion effects can also arise if other economic players suspect that there are connections between the banks. Banks can then encounter difficulties, even if the original suspicions were completely unfounded. Given this, the work on financial stability may be undertaken along three main strands. The first concerns the rules and regulations that set the bounds for the operations of financial institutions, notably banks. The second is the continuous surveillance of the system that is performed by the supervisory authority as well as by the central bank. Thirdly, there is the management of crises, since, unfortunately, we must assume that crises may occur and we must be prepared to handle them. I will discuss these three strands in turn, concentrating on the last two. 1. Regulatory framework  First, of course, financial stability rests on a legal structure, which establishes the bounds for the operations of financial institutions. The parliament is responsible for legislation on financial operations, while the supervisory authority issues more detailed instructions. In many countries, including Sweden, the experiences of the 1990s have paved the way for a thorough review of the legal structure of the financial sector. In this context, it is worth noting that laws and regulations today to a great extent are developed through international negotiations such as in the Basel Committee and, for us in Europe, the EU.

The banks and the card industry can help by intensifying their efforts to protect customers against unauthorised transactions. One element of this may be to accelerate the phase-out of magnetic strips and replace them with chips or similar technology. The requirement that all card terminals and ATMs should use chips is a good first step as skimming and the use of stolen cards constitute more than half of all the cases of card fraud in Sweden today. 7 It is important that the customers feel that paying with cards that contain chips is simple and convenient. A uniform standard for how cards should be placed in card terminals can save time and reduce the risk of customers leaving cards behind after purchases have been made. The principle should be the same as for cars: Irrespective of the make of car, we know where the accelerator and the brake pedals are placed! Better reporting of the number of frauds and how much they cost the card industry would also be desirable. It is after all the cardholders that ultimately have to foot the bill and it is reasonable to expect that all the relevant information should be available to them. Such an approach would also increase the cardholders’ confidence in the cards. In France there is a forum for representatives of the authorities and the card industry. They work to inform customers, shop owners, car issuers and other authorities about the security levels in the various card systems.
If the uncertainty applies to the long-term inflation expectations or to the lower bound of the policy rate, one should act more aggressively. There is thus an on the one hand case where one should act less aggressively and an on the other hand case when one should act more aggressively. In other words, when it comes to monetary policy it can be an advantage to be a two-handed economist. Conclusion and summary Let me conclude by summarising my main messages today. Firstly, long-term trends play an important role in monetary policy. There are above all two trends that are of special significance; the long-term real interest rate and the long-term sustainable level of resource utilisation. The long-term real interest rate abroad has shown a falling trend for a long time and this is one reason why interest rates in Sweden and many other countries are unusually low. Secondly, the period following the financial crisis was special in Sweden in several ways, but also so in other parts of the world. Both inflation and wage increases have been lower than expected, at the same time as resource utilisation has on average been largely normal and the central banks’ policy rates have been low. Commonly recurring explanations for the low and slow development in prices and wages are globalisation and digitalisation.

The latter approach is called “certainty equivalence” in academic research and is a good policy only under fairly restrictive assumptions of how the economy functions. It is therefore probably less useful as guidance in policy-making. Moreover, the central banks’ actual behaviour and communication indicate that uncertainty plays an important role in the monetary policy decisions. 21 See Greenspan (2003). 20 [24]  A more useful approach is probably William Brainard’s insight that monetary policy should be conducted more cautiously when there is considerable uncertainty over its impact. 22 Brainard’s uncertainty principle is based on the insight that central banks’ actions can affect the uncertainty in the economy. If, for instance, a central bank were to act more forcefully to try to attain its inflation target more promptly – in a scenario where there is great uncertainty over the impact of monetary policy – there is a risk that it would instead miss the target by a wide margin. By acting forcefully, the central bank contributes to greater variations in inflation and also to greater uncertainty in general. To avoid this, the central bank should act more cautiously. This uncertainty principal is often referred to by central banks and can be one reason why central banks, who want to avoid making major mistakes in all circumstances, are sometimes perceived as “sluggish” in their behaviour. One of my themes today has been long-term trends. When such trends change, it often takes a long time before one notes the change and this can moreover be difficult to assess.
The dilution of investment yields has reinforced risks for the industry such as a serious lapse risk if interest rates were to rise abruptly, financial losses for insurers who guarantee high technical rates compared to financial returns, or risks related to insufficient cost coverage. Among this quick review of the most salient characteristics of the environment in which insurers have been operating I would like to add that climate change risk has now become a reality and although insurers usually know how to deal with climate risks, including in extreme events, it is more than likely that further adjustments will be needed. Against this backdrop, French insurance companies have reacted in three main ways: lowering of paid interest rates in life insurance, development of alternative investment strategies  and  adaptation  of  their  traditional  business  model  including  an increased business diversification. As a result, for instance, unit-linked liabilities are increasing, and the profit-sharing payments for euro-denominated contracts are decreasing. However, I note that these payments remain significantly higher for mutual undertakings: they amounted to 2.3% last year while the French average is lower, and the reserves for deferred profit sharing have been strongly reinforced and amount to approximately 6% of mathematical reserves at YE 2017, which is 50% higher than the French average.

Regarding the International Capital Standard, which aims to develop an international capital standard in order to be able to establish a comparable basis in terms of prudential requirements for all international groups, recent progress was made in Kuala Lumpur in November 2017 which should lead to, by the end of 2019, a version called “ICS 2.0” that will be used as a reference in international supervision Colleges, for a transitory period of five years. During this timeframe, each internationally active insurance group will have to ensure a compulsory and confidential five-year monitoring period based on the ICS, after which this standard is expected to become effective. Now, I will turn to IFRS17: it would be unreasonable to apply the new IFRS17 accounting framework right now. Given the obvious issue of timing, it is quite welcome that the IASB reopened the discussion and that the application of this standard has now been postponed by one year. This will primarily give us time to reach an agreement on identifying groups of loss-making contracts. We also want to bring the discussion on the 4  treatment of reinsurance contracts held to a satisfactory conclusion. At this point, there is too much room for interpretation in the standard, which could interfere with the comparability and consistent application across countries. In Europe, the current “hot topic” is the forthcoming Solvency 2 review. This review must include a full and objective assessment of the framework that has now been in place for three years.
The system’s rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur though participation in it. VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing. VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy. 13. ECB proposal for core principles for retail systems IX. The system should have objective and publicly disclosed X.  criteria for participation, which permit fair and open access. The system’s governance arrangements should be effective, accountable and transaparent. In addition, this principle should also be fulfilled: IV. The system should provide prompt final settlement on the day of value, preferably during the day, and at a minimum at the end of the day. The Act relating to Financial Agreements and the Payment Systems Act ensure that Norway has a modern, comprehensive legal framework for payment services. The Payment Systems Act has also contributed to removing banks’ legal risk linked to participation in the payment system. Therefore, the Norwegian retail payment system should satisfy the principle of a well-founded legal basis. Earlier today, I concluded that settlement risk in the Norwegian payment systems was very limited. I believe we can also say that the financial risk has been publicly disclosed and is understood.

While there are around 15 million unemployed workers, there are also around 9 million workers who are working part time for economic reasons (as opposed to their own choice), and around 1.3 million “discouraged” workers who want a job but who are not currently actively looking for work – and therefore are not counted as unemployed. As firms decide to increase their total hours, some of this additional labor demand will take the form of firms restoring part-time workers to full-time status – an action that does not reduce the unemployment rate. In addition, as conditions begin to improve in the labor market, discouraged workers may decide to reenter the labor force and to renew their search for a job. This reentry pushes up the measured unemployment rate until these reentrants find new employment. As the recession ended, consumption growth returned to positive, supported by improvement in disposable income growth and a leveling off of the household saving rate (Chart 20). Household wealth began to recover as equity markets improved and the deterioration in house prices abated, supported in part by demand created by the housing tax credit programs (Chart 21). As conditions in financial markets improved, banks ceased tightening their lending standards (Chart 22). Lending activity stopped contracting, and credit became more readily available for large firms that had access to the credit markets (Chart 23). Midway through 2010, however, questions started to arise as to whether the economy was entering a “soft-patch” or heading toward a “double-dip” recession.
The last turmoil in the global and domestic financial markets has been a concrete proof of this fact. Thus, the dedollarization is not a straightforward process. As a clear evidence of this, the findings of Reinhart and her friends 13 show that only two countries, Israel and Poland, out of a total of 85 countries managed to achieve large and lasting declines in domestic dollarization. Accordingly, we can say that dedollarization is a difficult and long lasting process that is very much related with the macroeconomic stability and proper incentives. Hence, what we should do first is to continue with the current sound macroeconomic policies and structural reforms in a decisive way. Second, in order to start dedollarization, an active dedollarization strategy such as the so-called “carrot and stick approach” in the literature, which consists of regulations that will encourage the use of the Turkish currency, should be planned. However, as Ize and Levy-Yeyati 14 suggest, before launching an overly ambitious policy agenda, we should make all the necessary researches to understand the roots, risks and costs of dollarization and the implications of policy reforms made against it. I think, this conference provides a big opportunity for all of us to share our opinions and experiences and to enlighten our way of dedollarization. Distinguished Participants, I would like to conclude my words by repeating that I am very glad to welcome such distinguished economists from all over the world. I am sure that we have a lot to draw on the experiences of each other.

Coordination problems arise because there are incentives for countries to free-ride or to undercut one another. [31] In these instances, deeper modes of cooperation are essential to align countries’ interests. The EU has thus far employed two methods of governance to facilitate cooperation. In some cases, we have invested common institutions with executive power – such as the Commission for trade policy or the ECB for monetary policy. In others, executive power remains with national governments, with cooperation through common rules, such as the framework for fiscal and structural policies. These areas of economic policy were considered too specific to the situation of individual countries to be entrusted to a common body. It was felt that the only possible form of governance was for countries to exercise national sovereignty, thereby respecting their own specific set of circumstances. A rules-based approach was seen to be the only solution that was consistent with this vision. But it is worthwhile to reflect on how successful this choice has been. For the cases where executive power has been invested with institutions, most would agree that the institutions have performed relatively well. Trade policy has been effective in opening up access to new markets: the EU has in place 36 free trade agreements, compared with 20 for the United States. [32] Monetary policy has successfully fulfilled its mandate. But for the areas that use a rules-based approach, some shortcomings have been revealed.
Chart 1 Tariffs and Global Value Chain Participation2  (Value added weighted average over countries and sectors percent) 50  6 5.5  45  5 4.5  40  4  35  3.5 3  30  2.5  Average GVC participation  2015  2014  2013  2012  2011  2010  2009  2008  2007  2006  2005  2004  2003  2002  2001  2000  1999  1998  1997  1996  2  1995  25  Average tariffs (right scale)  Source: Source: IMF, WEO April 2019  Global external imbalances have been at the forefront in the macro - discussions and risk assessments. One of the first steps when scrutinizing external positions and imbalances is the current account position. Current account imbalances can be healthy or a sign of  2 Chart extracted from the IMF WEO, April 2019. 2  macroeconomic and financial stress. In many cases, current account imbalances can be entirely appropriate, even necessary. For instance in converging economies, with vast investment opportunities, they benefit from foreign funding, and can afford to accumulate debts (by running current account deficits), provided they can repay them out of future income. Sometimes, however, external imbalances can point to macroeconomic and financial stress. Economies that accumulate external liabilities on too large scale may become vulnerable to sudden stops in capital flows that force abrupt cuts in spending–making financial crises more likely.

GDP growth and GDP components contributions (p.p.)
For instance, in some countries the central bank is responsible for bank supervision, while in others this is the task of a special financial supervisory  4  BIS Review 24/2003  authority. Countries also differ with respect to the private sector's involvement in fulfilling certain objectives. In some countries the private sector provides services that in other countries are provided by the central bank. Here, I believe that more empirical work could be done. The BIS has a natural role to play in this respect, and that was also the reason that I first contacted the BIS when I got the idea for this workshop. I also believe that more comparisons could be made within the European System of Central Banks to help us all improve our efficiency levels. Final remarks Let me conclude by referring back to my opening remarks. Questions of efficiency have been at the top of our agenda for a long period of time, and there are good reasons for central banks to pay extra attention to their costs. It is true that central banks provide public goods and that minimising costs is therefore not always the best solution. However, we should be aware that the pressure to at-tain efficiency is weak, as central banks are protected from competition. Private enterprises that compete with each other are forced to be efficient and profitable in order to stay in business and satisfy their shareholders. Central banks generally lack such pressure.

That said, much work still lies ahead to stimulate new intermediation mechanisms in order to diversify the funding of the economy when a single channel, such as the banking system, cannot adequately satisfy demand. The financing of small and medium-sized firms in the euro area is a case in point. In this regard, our new ABS purchase programme in the Eurosystem clearly aims to stimulate this nascent market in order to broaden the sources of  2  BIS central bankers’ speeches  funding of medium-sized corporates that do not yet enjoy direct access to financial markets and to free space in banks’ balance sheets for financing the smaller SME’s . In an increasingly globalized world, the third session will try to reconcile central banking policy autonomy with international capital flows. Professor Hélène Rey will revisit her groundbreaking conjecture that, in spite of flexible exchange rates, the Mundell trilemma may actually boil down to a dilemma because of the Global Financial Cycle. True, globalization does not necessarily imply that spillovers cannot be limited. As an illustration, let me take the euro area: since our business cycle differs from that of the USA, the Eurosystem has been able to disconnect the whole yield curve from the expected rise in US interest rates. But the euro area is a large economy. By contrast, some emerging market economies (EMEs) have learnt the painful way how capital flows can destabilize their domestic financial systems.
It is time for the industry to come together and make a more significant impact through wellplanned investments in product design, risk management and to support consumer education in retirement planning solutions. Third, catastrophic events in Asia Pacific is rising. The region is also confronted by an increasing frequency and severity of catastrophic events. Eight of the 10 countries in the world with the highest annual natural catastrophe losses as a percentage of GDP are located in Asia. Over the last 20 years, natural catastrophe losses suffered by Asia accounted for almost half of the world’s estimated economic losses from natural disasters, yet only 7.6 per cent of such economic losses in Asia were insured compared to 67 per cent in the United States for example. These significant protection gaps that are prevalent across most of Asia and expose the vulnerability of the population and economies of the region to hardship due to loss of lives and damage to properties following a catastrophic event. The poor are most severely affected. While some countries have implemented disaster-risk insurance schemes or provide Government assistance to alleviate such losses, others continue to be exposed. In response to this challenge, more is being done among developing economies, including under public-private sector partnerships, to develop and increase access to affordable micro protection plans as a means of helping millions of people cope in the most difficult times.

Strategies to seize opportunities in the new horizon Allow me now to turn to some of the key strategic imperatives for the industry going forward. 2  BIS central bankers’ speeches  First and foremost is the building of strategic and quality human capital. Human capital can be likened to the indispensable crew that you need for your ship to sail. Shortage of quality talent is one of the most important risks facing organisations globally today and the insurance industry is no exception. The Malaysian Insurance Institute, like many other insurance training institutes around the world, ought to expand investments in personnel with the relevant skills and knowledge in particular the ability to adapt and innovate. In today’s environment, training needs to be continuously changed, in some cases overhauled, to maintain its quality and relevance. Central to this is the industry’s collaboration with and support for training institutes. The experience of practitioners who are experts in their field would enrich training programmer considerably. In this regard, the Bank welcomes the efforts of the industry and the Malaysian Insurance Institute to build bridges with academia through practical collaborations that aim to create a ready pool of productive talent. New approaches and programmes could be tailored against proven methodology implemented by some graduate schools. On the part of Bank Negara Malaysia, the recently established Financial Sector Talent Council is collaborating closely with key members of the financial industry to identify issues surrounding talent gaps and formulate innovative proposals to address such gaps.