samchain/econo-pairs-v1 huggingface dataset:
Work is under way to determine whether insurance would benefit from a special resolution regime that overrides normal insolvency rules in order to enhance the ability to ensure continuity of critical contacts through, say, the transfer to business to another firm. I will return to this subject later in this lecture because it is one that we should consider carefully. My general view is that the policyholder protection objective for insurance points to the need for a resolution regime for insurers, but the important issue is to be clear on what sort of regime. There is one further area of insurance that for me clinches the case for the policyholder protection objective in the PRA. I almost mention “With Profits” with trepidation, but I am afraid I must do so at this stage. With about £ of policy values outstanding, and policy maturities that can run into decades hence, With Profits is clearly a legacy that will be very much with us for a good while yet. Consequently, I do think that the industry and the authorities need to be alert to its inherent risks and complexities. In thinking about the implications of With Profits, let me step back for a moment. In broad terms, I can see two distinct types of financial contract involving deposits and savings. A deposit contract with a bank has at its core the promise that the bank will return the full value of the deposit at any time when it is contractually obliged to do so.

High productivity growth contributed to low inflation in 2006 Inflation rose last year, but was nevertheless below the 2 per cent target. CPI inflation rose by an average of 1.4 per cent. Underlying inflation, UND1X, was 1.2 per cent. A comparison with our forecasts shows that inflation was lower in 2006 than we had anticipated in 2004. On the other hand we succeeded in predicting last year’s inflation in the forecasts we made in 2005. One reason why inflation has been low in recent years is that prices of imported goods have developed weakly. This is probably linked to stiff international price competitive pressure. Another important reason is that productivity has risen faster than the Riksbank and other forecasters had expected. The unexpectedly high productivity growth has meant that companies have been able to increase production at a rapid rate without costs per unit produced rising to any great extent. Understanding which mechanisms and changes in the economy that lie behind the strong productivity has been, and is, an important task for the Riksbank. Other forecasters have also assumed that companies’ production conditions should have been affected by the various structural changes we have seen acting in the economy over many years now. I am thinking here of phenomena such as globalisation and the rapid development of information technology. Most analysts probably agree that these changes have contributed to increased competitive pressure and that they have enabled production to be made more efficient in several ways.
We must now make our financial sector, asset markets, and investment landscape conducive to sustainability. MAS is working on a comprehensive, long-term strategy to make sustainable finance a defining feature of Singapore’s role as an international financial centre, just as wealth management and FinTech have become. We have made some early moves to promote sustainable investing and mobilise private capital for environmentally-friendly projects. The introduction of the Green Bond Grant scheme two years ago is an example. The grant aims to level costs associated with issuing a green bond versus that of a conventional bond and to promote the adoption of internationally accepted standards on sustainability. To-date, some $ billion worth of green bonds has been issued here by local and foreign companies. 6/7  BIS central bankers' speeches  This year, MAS expanded the Green Bond Grant Scheme to include social and sustainability bonds. The grant is now renamed as the Sustainable Bond Grant Scheme. We also lowered the minimum issuance size requirement for the scheme, which will allow more qualifying issuers to gain access to the grant. But there is much more to do, to make Singapore one of the premier global centres for sustainable investing. Let me quickly cite two priorities. First, enhancing the disclosure of climate-related risks and opportunities. This is necessary to enable investors to channel their funds to sustainable enterprises and projects. The Singapore Exchange (SGX) has introduced the comply-or-explain sustainability reporting requirement for listed companies in 2016. Second, building industry expertise in sustainable finance.

Mario Draghi: Short address on the occasion of the launch of the Europa series € banknote Speech by Mr Mario Draghi, President of the European Central Bank, at the launch of the Europa series € banknote, Bratislava, 2 May 2013. *  *  *  I mentioned this at the end of today’s press conference, but let me say again that I’m very pleased to be here today to see the launch of the new 5 euro, the first banknote of the Europa series. The new banknote will join 15 billion euro notes already in circulation. They are the most visible and tangible symbol of European integration, used from one end of the continent to the other. With the Europa series, we are giving a face to our currency. A portrait of Europa, a figure from Greek mythology, has been incorporated into some of the security features of the new series. After centuries of division, the European Union was awarded the Nobel Peace Prize last year for its contribution to “the advancement of peace and reconciliation, democracy and human rights in Europe”. We all know that Europe is experiencing some challenging times. Governments and citizens are making extraordinary efforts to put their economies on a sounder footing and to build a more stable future for the European Union. In times like these, it’s important to remember what the Union and the euro have achieved and what they mean in the longer term, especially for young people.
This, in turn, raises issues of co-ordination and communication for both internationally active banks and also supervisors, about which I will say more later. Risk aggregation and quantification Collecting risk data across many business lines has catalysed further efforts to aggregate those measures of risk by quantifying them in a more rigorous and more consistent fashion. This quantification of risk is the second major risk management trend identified in the Joint Forum report. It is not a new concept. In the insurance industry, for instance, actuaries have long sought to estimate the likelihood of various events taking place. What is new is that, in recent years, financial risk managers and researchers apply mathematics, statistics and modelling to many risk exposures that were previously not thought to be readily quantifiable. In the banking industry, for example, statistical and computational analyses developed for evaluating exposures to market risk led, over the past decade or so, to the application of similar techniques to credit risk. The introduction of increasingly reliable estimates of the drivers of credit risk, such as the probability of default, led to many of the proposals that form the basis for the new Basel II bank capital framework. The Joint Forum found that the “ultimate expression” of risk aggregation is the summation of many types of risk into a single risk measure. This measure, often called “economic capital,” estimates the amount of capital a firm requires to protect itself against all risks with a certain degree of confidence.

This, in turn, should benefit emerging market economies by improving the degree of confidence that they can have in the future level of capital inflows. This is very much related to the discussion about procyclicality, an important issue that we at the Committee have taken up and addressed seriously. In particular, some have suggested that the ratings-based approaches will drive up the cost of credit for borrowers precisely at times when its supply is falling, namely during downturns in the business cycle. This is a very complex point and deserves a whole lecture in itself. Given the time constraints today, I would like just to summarise my own views. Of course, I fully respect the different opinions that may exist on this issue, but in my opinion, there are some elements that make me think that the concerns over procyclicality are exaggerated. There is some degree of procyclicality inherent in banking behaviour. The question that we should consider is whether Basel II, or any regulation, will unduly exacerbate this behaviour. Furthermore, it is also important to consider the trend around which cycles will fluctuate. I think that under Basel II, in the context of a more efficient and sound financial system, fluctuations will occur around a superior trend. This superior trend represents a better relationship between the capacity of the economy to absorb risks and the ability of the banking system to provide credit. Furthermore, one cause of pro-cyclical behaviour is low capitalisation and weak risk management.
In the area of credibility, it is highly advisable to define a multi-year  2  BIS central bankers’ speeches  budgetary time horizon which offers certainty to agents and, moreover, to deploy fiscal measures which combine actions with a short-term impact and others acting on the sustainability of public finances in the medium term, impinging, among others, on those expenditure items most affected by population ageing. Regional government finances Let me begin my analysis of the 2013 State budget by looking at regional government finances. Spain is today a country characterised by strongly decentralised public expenditure. On 2011 figures, central government accounted for 22% of total expenditure, social security for 32%, regional government for 34% and local government 12%. Thus, 46% of public expenditure was by regional and local government. With this structure of public expenditure, the setting of budgetary objectives for the various political and administrative tiers, on one hand, and the monitoring of their fulfilment, on the other, are two sides of the same coin. Both are fundamental in building the credibility of budgetary policy. Let me mention here what I consider to be an extremely significant advance. At the end of October the Ministry of Financial Affairs and Public Administration began to publish for the first time, as a result of the commitments made under the Stability Law, monthly data on the regional government budget outturns. As these figures become available regularly, in accordance with the related Law, the task of monitoring regional government expenditure will be made immensely easier.

Meeting the target will depend on the numerous tax measures taking effect in the last quarter of the year ultimately yielding the expected returns, and on that offsetting the growth of debt service payments, unemployment benefits and pensions. Given the importance of meeting the deficit target in 2012, it should be foreseen that possible slippage in certain items may be offset with possible adjustments to others. The draft State Budget for 2013 sets an overall general government deficit target, in National Accounts terms, of 4.5% of GDP, in line with European commitments. That is down from 6.3% envisaged for 2012, excluding from that figure the impact of the measures to support banks which must be recorded this year (amounting to around 1 pp of GDP). The Budget envisages that the public debt ratio will increase from 85% of GDP in 2012  BIS central bankers’ speeches  3  (including € billion of FROB debt due to the drawdown in December of the credit line agreed with the European authorities) to 91% of GDP in 2013. The fiscal effort these targets entail is highly ambitious (around 2 pp in terms of the cyclically adjusted primary deficit), in a setting which will remain difficult. The macroeconomic scenario accompanying the budget envisages that GDP in real terms will contract 0.5%, as a result of the 2.8% fall in national demand which would be partly offset by a 2.3 pp contribution by the external sector.
This has led to a considerable expansion of its balance sheet. The chart shows the wide swings in central bank balance sheets since the 2008 financial crisis. Expansion of central bank balance sheets has been particularly rapid in the UK, the US and Switzerland and somewhat more moderate in the euro area. As I mentioned earlier, the purpose of balance sheet policy is to stimulate the economy by lowering interest rates and funding costs in a situation where the key rate is close to zero. Central banks themselves emphasise that the positive effects of balance sheet policy are uncertain – and the effects must be weighed against possible problems. 6 There are four factors that can be highlighted here: First, it may be difficult for central banks to exit the markets once they have built up large bond holdings, and this would require considerable portfolio adjustments for households, firms and banks. Postponing a reversal of the measures could generate expectations that interest rates will remain very low for too long a period after the economy has recovered. This could in turn generate expectations of high inflation further ahead. Indeed, the connection between inflation and the money supply constitutes the second challenge. When a central bank purchases securities or provides longer-term loans to banks, the monetary base, i.e. banks’ deposits at the central bank, increases. There is no direct relationship between the monetary base and inflation.

The views supporting Islamic finance state that Islamic financial institutions are more resilient to external shocks. Profit and loss sharing feature of the transactions in Islamic finance provides a protection to these institutions, apart from the capital. This feature of the Islamic financial institutions could transfer a negative shock on the asset side to the liability side. Furthermore, due to the fact that the investors (depositors) take on some part of the risk and do not have deposit insurance, they have more incentives to exercise tight oversight over these institutions. In addition, as compared to conventional banks, they have held a comparatively larger share of their assets in reserve accounts for the liquidity management. Thus, even if Islamic financial institutions have risky investments, these buffers make them more resilient to the negative external shocks. On the other hand, the opposing views claim that Islamic finance does not need to improve the financial stability. According to this view, profit and loss sharing feature of Islamic finance transfers the credit risk from Islamic institutions to their depositors, and therefore, motivates the excessive risk taking incentive of Islamic banks. While capital value and earnings of customers are not guaranteed in Islamic finance, this feature may increase moral hazard and motivation for excessive risk taking without adequate capital. 2  BIS Review 124/2009  During the recent financial crisis, Islamic financial institutions have demonstrated significant resilience. They have been less affected compared to the conventional financial institutions thanks to prohibitions on excessive leverage.
This unfavourable development is partly a consequence of reduced earnings from copper exports arising from the fall in copper prices as reflected in the lower supply of foreign exchange on the market by mining companies. For instance, the supply of foreign exchange to the market by mining companies has declined by 35.7% to a monthly average of US $ million in the first half of this year from an average of US $ million in the last half of 2008. Further, the weakness of the local currency is a consequence of increased risk aversion to emerging and developing economy financial assets, as stated earlier, attributed to the deepening global financial crisis. In this regard, the supply of foreign exchange by foreign portfolio investors for the purchases of Kwacha financial assets, such as Government securities and domestic company equities, has significantly declined, with most nonresidents preferring to liquidate their investments and externalising the foreign exchange. The result of this is the volatility in the exchange rate of the Kwacha against major foreign currencies. In the last quarter of 2008, the Kwacha depreciated by 26.9% to trade at an average of $ (BoZ mid-rate) from an average of $ in the third quarter. It should also be noted that the depreciation of the Kwacha against major currencies partly contributed to higher inflation, particularly as Zambia remains dependent on imports for a wide variety of consumer goods as well as inputs for domestic production. Further, this unfavourable development has a strong role in shaping inflation expectations.

BIS Review 86/2009  5  For its part, the Bank of Zambia continues to closely monitor global developments and always stands ready to intervene in the local financial market with a view to prevent any systemic risks that may have negative effects on macroeconomic gains achieved thus far. Once again, Your Excellencies let me thank you most sincerely for this opportunity to discuss the challenges Zambia is facing in view of the current global economic crisis. I thank you. 6  BIS Review 86/2009
It is, moreover, a model for regulation based on the introduction of the incentives needed to stimulate prudent and responsible action by the institutions. These incentives will promote the establishment of appropriate risk measurement and management systems, such that the better they are, the lower the capital requirements applied to the institutions in recognition of this superiority. The desire to offer alternatives and incentives is clear in the design of the Accord. For example, it proposes that institutions should have various alternatives for calculating their regulatory capital, ranging from the simplest possibilities based on the use of external rating systems, to other more complex ones based on internal rating systems designed by the institutions themselves. The requirements to gain access to the most advanced methodologies are, undoubtedly, considerably more demanding. That said, it is up to the institutions themselves to decide, on the basis of their specific operations and of their needs in general, which methodology they wish to apply. In fact, it is not clear that small and medium-sized institutions should opt, at least initially, to use the most advanced approaches. In particular, the Banco de España foresees that, both on account of the type of operations carried out by Spanish institutions and owing to the minimum requirements for access to the different methodologies, the number of those adopting the most sophisticated methods (i.e. the advanced IRS approach) will be limited and will be the result of a gradual process over time.

All this has been possible thanks to the dedication, hard work and initiative of every member of staff, and I should like to express my sincere gratitude to all of them. There remain projects to be carried out and objectives to be achieved, and I therefore wish to express my desire that we will continue to work with resolve, striving to combine our efforts. Lastly, my thanks to you, ladies and gentlemen, for your contributions, collaboration and support. 10  BIS Review 39/2004
So, if wage costs rose over the room created by the growth of productivity and price rises on the international markets, unemployment would be allowed to rise. The state would no longer accommodate economic disruptions neither by devaluations nor by public expenditure. I do not need to go into more detail about the period from January 1991 to November 1992. A fixed exchange rate and free capital movements are hardly compatible. I can only draw to attention how such regimes have collapsed. Scandinavia and the United Kingdom in autumn 1992, the EU’s ERM system in 1993, Mexico in 1994-95, South-East Asia in 1997, Russia in 1998 and Brazil in 1999. With free capital movements, it is necessary to choose between a floating exchange rate and an inflation target (or a target for the quantity of money). The only alternatives would seem to be an irrevocable linking of the currency by a “currency board arrangement” or a fully implemented monetary union. In January 1993, the Riksbank announced an inflation target of 2 per cent inflation ± 1 per cent. The target was to be achieved in 1995. This was the second major realignment of stabilisation policy. Sweden went in for an inflation target and a floating exchange rate. This had been forced on Sweden by international developments with deregulation of the capital markets, in Sweden as well, and not least by failures in attempts at corporative co-operation and stabilisation policy interventions. The Government could now look back at 15 years of unsuccessful stabilisation policy.

Another example of problems with CPI is as follows: If the Government tightens fiscal policy with a VAT increase, CPI rises, as VAT has a direct effect on inflation measured in this way. The effects of  BIS Review 59/1999  4  such measures, interest rate changes and tax changes are temporary. These normally result in one-off effects on the price level. However, it cannot always be right to tighten monetary policy and increase the interest rate because inflation has been increased by a VAT increase which in time will dampen demand and lower the level of activity and capacity utilisation. In time, inflation will be dampened by the VAT increase, although this takes place by means of an increase in prices – bear in mind though that this depends on inflationary expectations not being affected. A different situation arises then. This shows that CPI movements must be interpreted and analysed when deciding on monetary policy. Temporary effects on the price level should not initiate changes in monetary policy. The Riksbank is therefore studying a number of other indexes that do not have the weaknesses of CPI in the aspects taken up here. A harmonised index, HICP, is being designed for the entire EU area. This is used by the European Central Bank, ECB, and this measure does not include interest rate changes, although it does include indirect taxes and subsidies. Another index, UNDIX, measures the “underlying” inflation by excluding the direct effects of indirect taxes, as well as interest effects.