samchain/econo-pairs-v1 huggingface dataset:
Chart: Excess return, cumulative annual since inception and quarterly The long-term return and the wide annual variations in the Fund’s value are largely dependent on financial market developments. The most important questions therefore relate to the Fund’s strategy. We have nevertheless continuously sought to exploit the scope for profitable active management. The contribution from active management to the overall annual return was set at 0.25 percentage point by the Executive Board in 2001, which may appear to be neither considerable nor demanding. According to the Ministry’s calculations, the expected real return on the Fund rose by 0.4 percentage point when the equity allocation was increased from 40 per cent to 60 per cent 10 . In this context, a contribution of 0.25 percentage point does not seem small. It is also fairly demanding to achieve this. The degree of efficiency in financial markets is generally high. In a model, Nobel prize winner William Sharpe divides investors into two groups: passive and active investors. In this model, all passive investors will achieve a return in line with the general market. The return earned by active investors will on average be lower than the market return because of higher management costs 11 . The idea that rational and profit-motivated participants should, on average, lose money is a paradox, as pointed out by Sanford Grossman and Joseph Stiglitz in 1980 12 . For investors and managers to expend resources on gathering and analysing information, opportunities for profit in the markets must be sufficient to cover their costs.

In ten years’ time the Fund is projected to be twice as high as annual GDP 6 . Total public expenditure accounts for somewhat less than half of GDP. The Fund may then become about four times as large as total government expenditure. With Fund withdrawals in line with the fiscal rule of 4 per cent, the return will be able to finance 15–20 per cent of government expenditure in ten years. A large share of government spending will thereby be financed without the functioning of the economy being exposed to tax disturbances. Chart: Time line Construction of the Fund The first capital transfers to the Fund were managed in the same way as Norges Bank’s foreign exchange reserves, which are invested in government bonds issued by our main trading partners. The purpose of the Fund, however, is entirely different from that of foreign exchange reserves and the operational management of the Fund must thus also be different. The main difference is the investment horizon. The Fund is meant to span a long period, preferably many decades. Through 1996, about NOK 40 billion was transferred to the Fund and it became clear that the Fund would be sizeable. It would be accurate to say that there were divergent viewpoints within Norges Bank when it was discussed whether the Bank should take on the assignment of managing the Fund. Three challenges were considered in particular. First: Norges Bank could risk impairing its reputation by accepting this assignment.
Still, while the labour market has proven surprisingly resilient to the repercussions of the doubledip recession, the perils of hysteresis – of real scars – remain: you can see on slide 6 that longterm unemployment as a share of total unemployment has increased from levels around 45% before the outbreak of the crisis to 50% today and has barely declined in recent years. In other words, one in every two of the more than 15 million currently unemployed face the risk of becoming increasingly detached from the labour market. Some of the long-term unemployed will be absorbed back into the labour force as the recovery continues, and some of the marginally attached will also rejoin. But expecting the economic cycle 5/9  BIS central bankers' speeches  to fully resolve these wider problems would be misguided. This is particularly worrisome for younger generations, for whom extended spells of unemployment at the start of their working lives may lead to lifelong “scarring” effects – including a higher propensity for further spells of unemployment, which are likely to constrain labour market choices and earnings throughout their working lives.12 In short, they risk becoming a “lost generation”. Concerns regarding labour market mismatches – effectively precluding the reabsorption of those displaced from some permanently downsized sectors – also remain. The euro area Beveridge curve – as you can see on the right-hand side of slide 6 – looks to have shifted outward during the crisis.

The crisis and the period before the crisis clearly illustrate the tendencies towards exaggerated cyclical behaviour that often characterise the financial markets. In periods of strong growth, there is usually an increase in demand for loans for corporate investments and property purchases. It also seems to be common for awareness of risks to decrease during such an upturn. Lenders often relax requirements for creditworthiness at the same time as they often take on too much debt themselves. When problems subsequently arise as a result of some borrowers finding it difficult to repay their loans, there can be an overreaction in the other direction, with severe credit tightening as a consequence. But systemic risk is not just a matter of a tendency towards exaggerated cyclical behaviour in credit granting. It is also a matter of how the concentration of risk and the links between different parts of the financial system at any given time affect the risk of a crisis hitting the system as whole. For example, several banks can take the same kind of risk or be dependent on the same funding sources. The high degree of interconnectedness in the financial system – between different institutions and between different markets– increases the risk of contagion when financial problems arise. 5 Circumstances that need not constitute a risk on the micro level can thus become risks on the macro level. Not knowing which risks will trigger systemic crises is in the nature of things.
Despite their possible limitations, the economic policies being pursued in various arenas should help restrain, in the medium term, the severe damage currently being wrought on our economy, enabling many jobs and firms to be saved. In the area of fiscal policy, which - while it may seem somewhat paradoxical at first sight is in the first line of response to the crisis, focused and decisive expansionary action in the short term will help to maintain the productive system, leading to debt service being less onerous in the future. Beyond the short term, reducing public debt will require contributions from the different levers of economic policy. In addition to keeping borrowing costs as low as possible, for which both action from the ECB and at the European supra-national level will be essential, there are two ingredients in the strategies that will ensure that debt does not become an excessive burden for present and future generations. Both must be applied without delay once we have overcome the worst of the health emergency and its economic effects. First, it is essential that multi-year fiscal consolidation plans are set up. Second, we have to look at policies that increase potential growth in the economy. Now more than ever, once the healthcare phase of the problem has passed, it is essential that institutional arrangements governing the functioning of our country adopt a long-term vision. Thank you. 40

Harmonization and coordination of this platform with those of the banking system, as well as giving priority to the necessary developments required in relation to them, will stem a facilitation coupled with a more efficient interaction, and in turn a strengthened synergy amongst all parties involved in these processes. However, all these developments absolutely could not have happened if a number of public institutions and companies had not carried out technological developments, which enable their interaction with banks. The fiscalization process is considered a very important progress, in the light of the economy formalization, and in the context of creating the necessary preconditions for businesses to provide electronic means of payments. This starts with the possibility of using the QR code in the payment of bills or any other electronic instrument that can use the established technological infrastructure, to the flexibility created by the legislation for making large value transfers through banking channels. On the other hand, the creation of a “central depository” of biometric data of the population, which can be used as security elements in communication and remote authentication, is a very positive step forwards the digitalization of banking services. Furthermore, the development of electronic signature and the improvement of legislation on signing distance contracts is also a supportive measure in this regard. Despite these positive developments, we need to be aware that there is still work to be done.
And the threat posed by climate change means we need to give serious consideration to the resilience of our physical and digital infrastructure. The New York Fed has the appearance of an historic institution, but behind the stone façade 1/2  BIS central bankers' speeches  we’re grappling with these issues in the same way that you are. In our economic research, our supervision of financial institutions, the payments systems we operate, in short – in all that we do. Talent, technology, and innovation challenge us every day. They create incredible opportunity, but they also test us by exposing new vulnerabilities. I know that over the next couple of days there will be lots of valuable insights shared by experts about how to handle the challenges posed by big data, cryptocurrency, and climate change. But first, to kick off the conference, it’s my pleasure to introduce John Dugan, Chair of Citigroup. Citigroup has operations in over 150 countries, with about 200 million customer accounts worldwide.2 As head of a global employer with complex, international operations, John is no stranger to the changing nature of risk. John became Chair of Citigroup at the start of this year. Prior to that he was chair of the Financial Institutions Group at the law firm Covington & Burling LLP, where he spent much of his career. He has also held a number of public sector roles, including Comptroller of the Currency during a critical time for our financial system and economy, from 2005–2010.

The new frameworks should be guided by the FSB’s new international standard for resolution regimes, as endorsed by G20 Leaders at their Cannes Summit of 4 November 2011.5 This standard could mean a substantial improvement, since it not only contains a broad arsenal of effective resolution tools, but also provisions to facilitate cooperation among national authorities. Nonetheless, in my view, a greater centralization of crisis management and resolution responsibilities for cross-border SIFIs would also be needed, with a strong coordinating role for the home authority. In this regard, I would very much welcome a move towards an EU-level resolution authority, the same way as our supervisory system moved already partly from national to the EU level. 3. A bird’s eye view: the size and role of the financial sector  With this quick résumé of where we stand in overhauling financial regulation in mind, let me turn to the more general question what role the financial sector is playing in our economies at large. A major German newspaper recently published a poll that had asked respondents to name those five professions for which they have the highest respect.6 The results of the survey found the respect for “Bankers and bank employees” ranking at the bottom. Even the profession of “Politicians” was considered more – albeit marginally – respectable. Only “TV moderators” fared inferiorly to bankers. Such a derogatory view of the financial industry is not a new phenomenon, though.
Perhaps the most important program was the purchase of deteriorated portfolios by the Central Bank under a variety of schemes, including repurchase agreements, and in exchange of debt instruments, liquid resources, and a new liability called “Subordinated Obligation”. The impact of these programs on the assets side of the Central Bank balance sheet was huge, and so were the costs of the complete rescue plan. Altogether, it is estimated that only the direct fiscal cost of the Chilean Financial Crisis of 1982 reached 41% of GDP. The aftermath of the crisis The lessons learned from this crisis highlighted the fact that banking regulation and supervision needed to be substantially upgraded. In 1986, the General Banking Law introduced limitations on currency mismatch, constraints on related party lending, and restrictions for banks to receive  Page 2 of 5  Central Bank of Chile March 2019  goods instead of liquid resources; all of them, elements which were common practice before the 1982 crisis. Paradoxically, what could be considered harsher regulation did not hamper financial deepening. Instead, it fostered solvency and credibility of the banking system and allowed its healthy development in the ensuing decades. Regulation and Financial Development Credit has a valuable role in the economy. Financial intermediaries channel resources from agents that save, to agents that need to borrow to smooth consumption or finance profitable projects.

Aggregate demand would thus grow at the expense of higher inflation or an increase in imports. This policy would be appropriate if the economy were in a situation of severely depressed demand relative to its supply capabilities. In an economy operating at relatively high employment levels with a deficit in the external current account, however, a fiscally-driven expansion in aggregate demand would only produce short-lived growth. At this juncture, therefore, the best contribution that fiscal policy can make to the economy’s growth prospects lies in the further consolidation of public finances, a policy stance that has already contributed positively to Malta’s standing with credit rating agencies and the IMF. 2  BIS Review 83/2001  Some commentators think it is possible to stimulate the economy via monetary policy, that is through the lowering of interest rates. As I have often had occasion to explain, the intermediate objective of monetary policy in Malta is to maintain a stable exchange rate by pegging the lira to a basket of currencies of low inflation countries. This restrains volatility in import and export prices, thereby contributing to lower costs; mitigates domestic inflationary pressures and contributes to export price competitiveness. If we are to continue enjoying the benefits of the exchange rate peg, our interest rates will have to shadow those prevailing in the currency basket countries, especially as restrictions on international capital flows are being lifted. The alternative would be to risk outflows of funds and a possible financial crisis.
They are supported by international lawyers, accountants and rating agencies that provide essential ancillary services in issuing a bond. b. Asian companies are coming to Singapore to issue debt. Bright Food Singapore Holdings Pte. Ltd., a Chinese bond issuer, issued EUR 400 million in 2016. PT Saka Energi Indonesia, also a new issuer here, issued a USD 625 million bond in 2017. Under the Chongqing Connectivity Initiative, first-time bond issuers from Chongqing issued a total of USD 900 million in Singapore. c. Many multinational corporations that have successfully issued bonds in Singapore, continue to tap on Singapore for repeat issuances. This is a clear testament of the attractiveness of our debt market ecosystem. For example, the treasury unit of Japan’s Hitachi International Limited, has been a frequent issuer in our bond market for over a decade. BOC Aviation has issued numerous bonds in currencies including USD, JPY, AUD, CNH and SGD since 2010. d. Singapore’s bond market has also grown in sophistication. For instance in the area of covered bonds, Singapore has transited from a debutant to an advanced covered bond market in the region. Our 3 local banks have established their global covered bond programmes, with wellreceived issuances denominated in USD, EUR and AUD. 9 . We are rolling out the red carpet for new Asian issuers. MAS introduced the Asian Bond Grant Scheme this year to support first-time Asia issuers in Singapore‘s bond market, up to an amount of $ We have received good interest thus far. II.

There are many institutional arrangements, ranging from formal contracts between the government and central bank to non-formalised consultations between the two bodies. The efficiency of such arrangements, however, depends in most cases on their actual implementation. Now I come to the fiscal sphere. A trend towards rule-based policy can be observed here as well, albeit with some time lag and in a different form compared with monetary policy. The difference originates mainly from the fact that fiscal policy is by definition a political issue with strong redistribution aspects, which cannot easily be mandated out of direct democratic control. The independence solution is thus not readily available here, even though there have been such suggestions in the economic literature. This contributes to the fact that no single elegant model has yet been found in practice. The existing rules usually take the form of self-imposed constraints, such as legal constraints (balanced-budget acts in some countries) or international treaties (S&G Pact). Apart from this difference, though, the aim to implement rules stems from the same reasons and faces similar challenges as in monetary policy. The idea that policy should be designed in a way that does not put short-term political gains above the longer-term interests of society, that takes into account its impact on private expectations, and that is transparent to the public, is common to the monetary and  fiscal spheres. Similarly, the rules must also address the issue of their costs in terms of macroeconomic stabilisation and finding a proper policy mix.
In fact, I find that public policy evaluation could be a key and powerful tool in this regard. A periodic evaluation of the central bank’s performance and impact in the pursuit of its objectives could be a very potent mechanism as regards accountability to citizens. 8/9  Despite all these challenges, let me conclude my intervention by saying that I remain optimistic about the ability, determination and capacity of independent central banks to keep on providing valuable services to the societies we serve. Thank you very much. 9/9

Since short-term finance is typically cheaper than long-term finance, profit-maximising intermediaries have an incentive to finance their illiquid long-term loans by potentially footloose short-term debt, relying on their ability to roll that debt over when it matures, or to find similar alternative funding sources. Moreover, the recent episode was also marked by increased reliance on short-term wholesale funding, which proved more prone to flight than traditional retail deposits. Now suppose that the returns on the bank’s loans turn out less than expected or the value of its securities falls. That could be the result of a macroeconomic shock or just reflect a correction to initially over-optimistic expectations. Then the bank’s net worth also falls, reducing the buffer available to cover any further unexpected losses, potentially raising the costs of unsecured debt. Moreover, the collateral available to back secured debt also shrinks. Suppose the bank initially held assets worth fifteen times the value of its equity and assume that it wishes to restore that degree of leverage (in practice, a deterioration in macroeconomic conditions might also lead to lower desired leverage). Then the bank is faced with either reducing its assets or increasing its equity. If it pursues the former strategy, then it would need to reduce its assets by fifteen times the amount by which its capital has fallen. Moreover, by depressing the prices of those assets, such a fire sale also impairs the balance sheets of other banks, amplifying the effect of the shock.
With such caracteristics of climate-related risks, climate « stress test » as well as climate « scenario analysis », can prove to be very useful tools for financial institutions and their supervisors, to examine and understand the effects of different pathways for climate  change, as well as the effects of different pathways for climate policy, technology and consumer and investor preferences. It can prove also useful to reflect on and examine the impact of management decisions. It is with those mainly qualitative objectives in mind that, at the ACPR and the Banque de France, we have conducted with the French insurance and banking industry our first scenario analysis, which was completed and published a few weeks ago. I must say that those qualitative objectives have been well met, from our perspective. In particular, the exercise has clearly incentivised the participants to reflect on and develop appropriate tools and methodological frameworks to incorporate climate-related risks as a  mainstream risk to be governed and managed on a day to day basis accordingly, in line with our supervisory expectations. Given the difficulties to assess the exposure to and the impact of climate-related risk we have not assigned to this exercise quantitative objectives, beyond providing participants and us with a first bottom up assessment of their exposure, based on common assumptions, assessment which appears to be moderate by 2050.

Denis Beau: Building an appropriate climate stress testing framework for capital markets Opening remarks by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Future Europe Sustainable Europe Global Virtual Conference "Europe’s global response - promoting global financial coordination towards our common sustainable future", 6 July 2021. * * * I would like to thank you very much for your kind invitation to present the work the Banque de France and the ACPR, its supervisory arm, conducted on climate stress-testing and to share some of the lessons we have drawn from it. I will focus my remarks on 1/ the objectives to be set to such exercice 2/ the tools to be used. ***** 1- I think it is not a matter of debate between financial institutions and their supervisors that climate change affect financial institutions through the traditional risks categories they face. Sizing the exposure to and impact of climate-related drivers on those traditional risk categories is however difficult, given the specificities of those climate-related risk drivers, which are not necessarily economic in nature, and the multiple layers of uncertainty which affect them. In particular, data on past changes in climate and their financial impact may be a particularly poor guide to future magnitude and dynamic of climate related risks. In addition, financial institutions decision-making horizons are usually too short-term oriented to fully account for the long time horizon of risks associated with climate change, the so-called “tragedy of the horizon".