samchain/econo-pairs-v1 huggingface dataset:
Funds investing in less liquid assets should extend their notice periods or ensure redeeming investors receive only a ‘quick sale’ price for their share of the funds assets. 16 The FCA has announced that it will “look to consult later this summer on finding a way in which funds could safely transition to a structure in which liquidity promises to investors are better aligned with the liquidity of fund assets”.17  Properly and consistently implemented, changes like this will help to level the playing field. With this would come the opportunity for both closed end funds and for open ended funds offering a longer redemption notice period to attract more investment. And that would open up the possibility of greater investment in growth capital. The fund industry – through the Investment Association – has been working on a proposal for a Long-term Asset Fund (LTAF). Properly designed, such an open ended structure could in principle allow investment in truly illiquid assets. I look forward to seeing the next stage of their proposals soon. If we can remove the current bias against the growth of closed ended and long-term asset funds, new opportunities for issuers and investors can be created.

The reality is that the location of financial activity does not depend upon the local currency. It will continue to be carried on wherever it can most conveniently, efficiently and profitably be carried on. And the fact that foreign-owned institutions -- from Europe itself and from around the world -- continue to build their presence here, despite the near universal assumption that the UK will not in fact participate in EMU from the beginning, suggests that they share this perception. I would hope that the rest of Europe would positively welcome the contribution that the City can, and I am confident will, make to the development of markets and other financial activity in the euro, because it is in their interest too. International or intra-regional trade and investment activity is not, at the macro-economic level, a zero-sum game. It is a positive sum game. And this is true of financial, just as much as of any other kind of economic activity. The prosperity of the City -- whether the UK is “in” or “out” -- is simply a particular case of the general point which I made at the outset. I welcome the BIS Review 106/1997  -3prospect of increasing financial activity in Frankfurt, Paris, Milan or Amsterdam or wherever because it will result in increased activity here too in London. And the converse is equally true. It is in this sense that the City is a major European, not simply a national asset.
•  But we need to make the payment experience seamless and convenient before adoption can take off. Let me highlight the key infrastructure initiatives: •  promote online fund transfers;  •  simplify acceptance of card payments at retail outlets;  •  facilitate online payment of bills; and  •  enable mobile payments for public transport. Online fund transfers – FAST and central addressing As I mentioned earlier, we have a world-class infrastructure for electronic fund transfers. •  In 2014, Singapore became one of the first countries in the world to build a 24/7, real-time inter-bank fund transfer system. •  We call it FAST; Fast and Secure Transfers. FAST is almost as convenient as cash, but safer and cheaper. •  You can make a payment securely from your computer or mobile device at any time of the day. •  You can receive confirmation of payment within seconds. 4  BIS central bankers’ speeches  •  If you are a company, near-instant payment and confirmation round-the-clock makes a huge difference to cashflow management. But FAST is grossly under-utilised. One key barrier is that making a payment through FAST requires you to know the bank account number of the person you are sending money to. •  Most of us, I think, do not remember our own bank account numbers, let alone will know the account numbers of those we want to send money to.

•  The PS(O)A also protects customer funds held in widely-accepted stored value facilities such as the Ez-Link and NETS FlashPay cards that commuters on public transportation use every day. •  Thanks to the PS(O)A, our key payment systems continue to operate safely and efficiently. But FinTech is changing the face of payments. •  Every month, MAS meets many FinTech firms that do not fit neatly into categories like remittance or stored value. 2  BIS central bankers’ speeches  •  Most internet-based stored value wallets today would be regulated under both the MCRBA and PS(O)A. •  It is not efficient for companies to be regulated under two pieces of legislation, which were not written with the FinTech solutions of today in mind. The nature of risk in the payments ecosystem is also changing. •  The current regulatory regime aims to ensure financial stability, protect stored values, and prevent money laundering and counter the financing of terrorism. •  But with the proliferation of innovative e-payment solutions and the rise of e-commerce, payment firms have become more enticing targets for cyber criminals. MAS will therefore update its regulatory framework. •  We will streamline the MCRBA and PS(O)A to create a single piece of legislation governing both traditional and innovative payment companies. •  We will enhance the provisions for consumer protection and strengthen cyber security requirements.
And his British counterpart, John Maynard Keynes, proposed an International Clearing Union with penalties on large surpluses or deficits (his suggestion of a new currency, the bancor, was included primarily because at the time national currencies were not convertible). His aim was to ensure symmetric obligations. As he wrote in 1941, “[T]he social strain of an adjustment downwards is much greater than that of an adjustment upwards. And besides this, the process of adjustment is compulsory for the debtor and voluntary for the creditor. If the creditor does not choose to make, or allow, his share of the adjustment, he suffers no inconvenience. For  BIS central bankers’ speeches  3  whilst a country’s reserve cannot fall below zero, there is no ceiling which sets an upper limit. The same is true if international loans are to be the means of adjustment. The debtor must borrow; the creditor is under no such compulsion”. And ever since then, the absence of an effective symmetric framework of obligations on both debtor and creditor countries has led to periodic crises. The obstacle to the creation of a binding framework is clear. Governments know whether they are debtors or creditors today. So a framework that has economic and indeed moral force when seen from behind the “veil of ignorance”, as suggested by John Rawls, is unlikely to appeal to governments.

The Fed is in the process of implementing a framework that will embed compensation practices more deeply into the supervisory process. We have made it clear to the major banks and dealers that 2009 compensation should be consistent with the recently developed Financial Stability Board principles on compensation, which emphasize the importance of appropriate incentives. Finally, there is considerable work underway on the “too big to fail” problem. On this front, there are two main strands of work. First, we must improve the resolution mechanisms for large complex bank holding companies and nonbank financial firms that become troubled, and to complement that initiative with efforts to strengthen the financial market infrastructure. If regulators had at their disposal an effective resolution mechanism for large financial firms and the financial system was made more resilient to shocks, then the number of firms that were indeed “too big to fail” would be significantly reduced. Second, after building such a resolution mechanism, we must still act to ensure that no special advantage persists from being perceived by creditors, counterparties and investors as “too big to fail.” After all, it will be hard to build a resolution mechanism that credibly ensures that any firm will be allowed to fail under any circumstance. If there is a chance that a firm may be too big to fail, then there  3  For more on liquidity issues see “More Lessons from the Crisis,” Remarks by William C. Dudley at the Center for Economic Policy Studies (CEPS) Symposium, Princeton University, November 13, 2009.
Again, in principle, this can take place through two channels: through retrenchment of cross-border banking so that national safety nets of big countries are more sufficient, or through international expansion of safety nets. There was significant retrenchment during and immediately after the crisis, and it was unavoidable and necessary at that point in time.6 There are significant benefits to be derived from financial globalisation, including crossborder banking, so we will have to hope that extending public frameworks through international and regional co-operation will be an important part of the story. Here progress is uneven and occurs on three tracks: national, regional, and global. Policy initiatives taken at the national level after the crisis have partly made banking safer by contributing to the retrenchment of cross-border banking. In the absence of credible multilateral safety nets, countries will have to take unilateral action to reduce the risks they face. In my country, we have taken action to limit the FX liquidity risk of our banks by imposing limits on the size and composition of their FX balance sheets. Thus we have a specific liquidity coverage ratio in FX, as does Sweden. We have also introduced a specific net stable funding ration in FX, which at present goes one year out but might be extended further as we make the system safer in anticipation of lifting capital controls.7 There has been major progress within the EU through the implementation of a banking union.

A higher capital adequacy requirement for taking bigger risks will thus lead to the banks being forced to charge more for lending money to higher risk borrowers. This is a regulatory system that is used by 120 countries and it contributes to financial stability around the world. However, the current capital adequacy rules from 1988 are divided into 4 fairly rough risk classes, which do not very well reflect the risk with various borrowers. For instance, the risk classification means that all companies are in the same risk class, despite the fact that they can differ markedly from one another. There has therefore been intensive work on further developing these rules by the Basel Committee, in which both the Riksbank and Finansinspektionen (the Swedish financial supervisory authority) participate. The idea with the new rules is that the risk weighting will better reflect the actual credit risk. This means that the banks will become more thorough in assessing the relationship between the risk in the credit and its yield. An increased risk will therefore be marked in the banks’ pricing of loans, i.e. the interest rate. There are both advantages and disadvantages with the proposed capital adequacy rules. The proposed rules mean that the banks must hold more capital if the risks in their given loans increase. If they do not have more capital than the rules require, they must either acquire more capital or reduce the risks in their lending.
At the Central Bank we are following closely these new developments in the financial sector locally and globally to understand potential benefits and to identify potential risks that need to be mitigated. We will keep monitoring these developments, to incorporate them in the regulation issued by the Central Bank on payments, as well as in the analysis of emerging risks in the financial sector that we provide in our Financial Stability Report as well as in the new Report on Payments and Infrastructures that we started publishing this year. Challenges ahead I started this presentation explaining the measures taken by the Central Bank to reduce macroeconomic imbalances in pursue of its mandate of price stability and the main elements of the financial regulatory agenda which certainly has contributed to financial stability and will continue to do so in the next years. Before concluding, I would like to refer to some of the challenges that lie ahead for our financial sector. A deep capital market is critical to support economic recovery and a play a relevant role to the resilience of the financial system and its ability to accommodate external financial pressure. Therefore, it is imperative to recover our capital market. Pension funds 16  withdrawals affected this capacity and brought back our capital market some years in terms of size and depth. Getting back on track is not an easy task and it requires a shared effort from the public and private sectors.

The Basel Committee’s September paper outlines several elements that are critical to a sound corporate governance process. These elements include the installation of qualified boards of directors with clearly defined responsibilities, the importance of oversight by directors and senior management, the need for clear lines of management responsibility and accountability, and the effective use of internal and external auditors. Both the July and September reports provide a flavor of the Basel Committee’s efforts to promote stronger risk management practices within the global banking community. Although these efforts sometimes receive less public attention than our work on capital adequacy, I believe that they play significant roles in helping to set standards for prudent risk-taking that can be used by banks and their supervisors worldwide. Lastly, I would like to update you on the Basel Committee’s major effort to revise the 1988 Capital Accord. In June, the Committee released a Consultative Paper laying out our vision for a new capital adequacy framework. Our proposed timetable is to seek comments from both supervisors and industry participants through 31 March 2000 and then to publish, hopefully by late next year, a comprehensive set of proposals which are responsive to the comments and industry input we have received. During the comment period, the Committee and its subgroups are working hard to refine and further develop a number of the proposals put forth in the consultative document.
If they seem to be highly elevated in relation to before, or are difficult to justify through established economic arguments, the risk is greater. The risk of problems is also connected to other economic developments. If these are stable, there is a smaller probability that those who have borrowed to buy a house will have made their decision on what later proves to be the wrong grounds. An example can illustrate the latter form of reasoning. Interest rates are currently at an all-time low. This indicates that they will rise, which is an assumption that most households ought to have taken into account. However, many of them may also have been counting on rising income, as this is the normal situation; interest rates usually rise at the point when economic growth and thereby income in society increases. There is of course a risk here. A couple of decades ago we experienced a long period of both low growth and high inflation. If this should be repeated - although it does not at present appear likely - it is quite possible that many households would encounter difficulties. To sum up, one can say that the Riksbank in its normal work process does take into account, as far as is possible, the effects of indebtedness and house prices on inflation via effects on, for instance, consumption and general demand. These effects are taken into consideration in our inflation forecasts.

In Chile, the structure of pension fund portfolio as of the end of 2006 was as follows: domestic Treasury bonds -13%, domestic equities -17%, other domestic debt securities -22%, foreign equities and certificates of participation in investment funds -32%. In Argentina and Peru, the foreign assets accounted for ca. 10% and 14%, respectively, of pension funds assets. The findings of Fisher Black’s studies indicate that the foreign positions should be hedged against exchange rates risk. His famous work shows that the optimal hedge ratio amounts to 77% for investment in equities 10 . Open pension funds could manage their investment portfolios more effectively if they were allowed to invest in derivatives (equities, interest rate instruments and currencies), because – not infrequently – transactions costs on derivatives are much lower than the costs involved in cash market. By way of illustration, the costs in the US cash market are over five times higher than the costs in the market of stock index futures 11 . Additionally, this step could also contribute to the development of the derivatives market in the WSE. It is worth remembering too that as early as in 1974, a well-known study by Bruno Solnik 12 provided an example of American investors to show that the risk of investment portfolio composed of ca. 20 international equities (international dispersion) is twice lower as compared to the portfolio of domestic equities only.
In the case of non-financial corporations, the subdued levels of production and trade, as well as the ongoing uncertainty surrounding the business outlook, continue to dampen firms’ demand for bank financing, a tendency which is likely to prevail in the coming months. In this respect, it is worthwhile to note that the growth of loans to enterprises typically only picks up with some lag compared with the cycle in economic activity. At the same time, the ongoing improvement in financing conditions should support the demand for credit in the period ahead. Against the background of highly demanding challenges, banks should take appropriate measures to strengthen further their capital bases and, where necessary, take full advantage of government measures to support the financial sector, particularly as regards recapitalisation. To sum up, the current rates remain appropriate. The incoming information and analyses that have become available since our meeting in early October have confirmed our expectations. While annual HICP inflation was -0.1% in October, according to Eurostat’s flash estimate, it is expected to turn positive again in the coming months and to remain at moderately positive rates over the policy-relevant horizon. At the same time, the latest information continues to signal an improvement in economic activity in the second half of this year. The Governing Council expects the euro area economy in 2010 to recover at a gradual pace, recognising that the outlook remains subject to high uncertainty.

Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. Cross-checking the outcome of the economic analysis with that of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as money and credit growth continues to slow down. Against this background, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. As the transmission of monetary policy works with lags, we expect that our policy action will progressively feed through to the economy. Hence, with all the measures we have taken, monetary policy has been supporting the availability of liquidity and the recovery of the euro  2  BIS Review 136/2009  area economy. Looking ahead, and taking into account the improved conditions in financial markets, not all our liquidity measures will be needed to the same extent as in the past. Accordingly, the Governing Council will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. By so doing, the Governing Council will continue to ensure a firm anchoring of mediumterm inflation expectations. Such anchoring is indispensable to supporting sustainable growth and employment and contributing to financial stability.
As the staff of the Riksbank has knowledge and experience of significance in this field we have agreed to contribute factual information. We have also agreed that any senior managers wishing to express their views on various issues relating to the EMU discussion may do so, as long as this is done in a factual manner. Our ambition here is of course to ensure that the general public retains confidence in the Riksbank regardless of the outcome of the referendum. Today I intend to briefly discuss three issues that have arisen in the discussions and of which the Riksbank has knowledge and experience. The first concerns whether the differences between the ECB and the Riksbank are as large as is sometimes claimed. The second issue is the need for a national stabilisation policy. Finally, I shall discuss, on the basis of our own experiences, the conditions for influence in economic policy forums if we choose to remain outside the Eurosystem. Are there major differences between the Riksbank and the ECB? In Sweden we lived for a long time - rather longer than the core EMU countries - under the impression that better economic growth and lower unemployment could be achieved merely by allowing inflation to be slightly higher. This led to repeated devaluations and to much poorer economic growth. Sweden fell behind the other EU countries in terms of GDP per capita and purchasing power. There was a break in this policy at the beginning of the 1990s, in connection with the crisis during that period.

According to Kenneth Rogoff and Carmen Reinhart, the Norwegian banking crisis is in the top five list of the most severe banking crises in history, which also includes Spain 1977, Finland 1991, Sweden 1991 and Japan 1992. Three of Norway’s four biggest banks received capital injections from the government, after writing off the entire equity capital. The banks were fully nationalised. Two of them were later sold 100 per cent to private owners, while the government retained a large share (34 per cent) in DnB Nor. The banks had too little capital, as much of it was unable to bear losses. Therefore, the Norwegian definitions of Tier 1 capital were stricter than most countries. Like many resource-rich economies, Norway expanded its welfare state rapidly after the discovery of oil. During the latter half of the 1970s, the government increased its ambitions in many key areas of the economy: the pension age was cut, agricultural subsidies increased, industrial policy widened and the government reduced taxes to bring wages under control. The consequences were galloping inflation, a depreciating currency and worst, meager productivity development in the Norwegian economy. BIS central bankers’ speeches  3  After 1986, steps were taken to get back on track. Interest rates were increased to subdue lending and the fiscal deficit was reduced. By 1990, Norwegian government believed a potentially upcoming crisis had been averted. But Norway, like most European countries, was hit by the high interest rates following the German unification.