samchain/econo-pairs-v1 huggingface dataset:
It will be important to have sound estimates of costs and timings before the plans are finalised and the heavy machinery starts to arrive on site. We have some clear design parameters for the build. The government has set out three objectives to ensure the review is tailored in the right way1: to spur a vibrant, innovative, and internationally competitive insurance sector; to protect policyholders and ensure the safety and soundness of firms; and to support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the government’s climate change objectives. I want to talk for a few minutes about the second objective, policyholder protection and safety and soundness, and why we think of it as the foundation stone on which any measures to reach the other two objectives must rest. Policyholder protection is ultimately the business we are all in. Insurers protect policyholders by reducing risk and uncertainty from their lives and businesses. Doing so provides certainty and security, allowing companies to innovate and grow, and individuals to plan for the future. For the system to work, policyholders need to have confidence that the promises made to them by insurers are going to be met. And we in the PRA have been clear that having left the EU, our approach to policy making will continue to have robust prudential standards at its heart, to safeguard UK financial services and policyholders.

But the consensus does not imply uniformity, and when making comparisons between regimes, it’s also important to control for the importance of the sector to the economy, the reliance consumers place on it, and the ability of firms to fail in an orderly way which causes the least damage to policyholders. Provided that the foundation of adequate policyholder protection remains in place, we believe there will be scope for making changes which meet the other objectives of the review. To make tailored change to the regime which better meet the needs of the UK market and the broader economy. Quantitative Impact Study In modern construction, modellers can render the proposed new building in 3D according to the architect’s plans. Even before the building work has begun, it is possible to have a sense of what the design looks like in practice and judge whether it will deliver on the original vision. In policymaking we also aspire to get a projection of the end result, but unfortunately we currently lack the required rendering software, so instead we have to rely on Impact Study exercises. These exercises are vital in giving us the detailed, accurate measurements we need. For this reason we, in agreement with HM Treasury, are planning a Quantitative Impact Study (QIS) for the Solvency II review. We intend to gather the data that will allow us to project the impact of a number of different possible designs; this will give confidence before the proposals are finalised that the ultimate designs will really work.
Those familiar with such things will recognise Chart 4 as the Black-Scholes formula for pricing financial options (Dixit and Pindyck (1994)). 4 “Married in haste”, said Congreve, ”we may repent at leisure”. See Park (1993) for an economic interpretation of this dictum, framed in terms of the option value of waiting. 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  If that seems steep, it chimes with what we often hear on our regular company visits. Last year, I went to see a successful SME that was thinking about an acquisition. The firm was in good financial shape – it had very little debt and a fair amount of low-yielding cash on its balance sheet. But it was nonetheless reluctant to make the investment without a prospective rate of return of at least 15%. This isn’t that unusual – I’ve heard similar things from several companies. Chart 3: Corporate earnings very volatile  Chart 4: Hurdle rate for irreversible investment rises steeply with uncertainty  Note: 12-month rolling window standard deviations of annual growth rates of earnings of all companies currently in the FTSE All-Share index. Source: Thomson Reuters Datastream  The importance of uncertainty is also borne out in aggregate data – for investment, overall economic activity and even some aspects of employment. Charts 5-7 set out some of the relevant numbers for the UK.

And if this is true in general, I think it’s particularly likely to be the case in this instance. The additional uncertainty brought about by the referendum involves the UK’s  Source: ONS  trading relationships once it formally leaves the EU. That is likely to be some way off – two years after the relevant treaty article is triggered. And by that time, much of the economic value in high-depreciating items like cars and computers will already have been exhausted. So a lack of clarity about events beyond that date won’t be as relevant as it is for longer-lived capital. As formal exit approaches the higher-depreciating items, and a greater share of investment, will become affected as well. That said, the shape of the UK’s trading arrangements may also become clearer during that time. Third, I should re-iterate that what we’re talking about here is a pure increase in uncertainty, not a change in the central expectation firms have about investment returns. The range of outcomes doesn’t have to shift downwards for firms to delay some projects, it only has to widen. But if that range were to shift, this would obviously matter as well. One thing this implies is that the effect of resolving uncertainty depends on how, and in which direction, the resolution occurs.
We are taking a four-pronged approach to building the digital asset ecosystem. first, explore the potential of distributed ledger technology in promising use cases; second, support the tokenisation of financial and real economy assets; third, enable digital currency connectivity; and fourth, anchor players with strong value propositions and risk management. EXPLORE POTENTIAL OF DISTRIBUTED LEDGER TECHNOLOGY IN PROMISING USE CASES The most promising use cases of digital assets in financial services are in crossborder payment and settlement, trade finance, and pre- and post-trade capital market activities. There are several promising developments, including in Singapore. In cross-border payments and settlements, wholesale settlement networks using distributed ledger technologies such as Partior – a joint venture among DBS, JP Morgan and Temasek – are achieving reductions in settlement time from days to mere minutes. In trade finance, networks like Contour – formed by a group of trade banks – are establishing common ledgers with traceability to automate document verification, enabling faster financing decisions and lower processing cost. In capital markets, Marketnode – a joint venture between SGX and Temasek – is leveraging distributed ledger technology to tokenise assets, which reduces the time needed to clear and settle securities transactions, from days to just minutes. SUPPORT TOKENISATION OF FINANCIAL AND REAL ECONOMY ASSETS The concept of asset tokenisation has transformative potential, not unlike securitisation 50 years ago. Tokenisation enables the monetisation of any tangible or intangible asset. It makes it easier to fractionalise an asset or split up its ownership.

On behalf of the Board of Governors, I wish to register our profound gratitude to the Centre for Central Banking Studies of the Bank of England and the UK Treasury Department for collaborating with WAIFEM to build capacity for macroeconomic management in the West African sub-region. Our particular thanks go to Messrs. Simon Gray and Tony Smith, who represent these collaborating institutions at this course, for taking time off their busy schedules to share their wealth of knowledge and experience with us. 2.0  The need for liquidity forecasting  This course could not have come at a more auspicious time than now when all the countries in the West African sub-region are operating the indirect approach to monetary management and for that purpose most have instituted monetary policy committees (MPCs). MPCs bring together the major stakeholders in monetary and fiscal management with responsibility, among other things, to derive the quantum of liquidity for mop up from, or injection into, the economy through Open Market Operations (OMO). The overriding objective has been to keep inflation at low and stable level. In recognition of those objectives this course augurs well in filling the capacity gaps in liquidity forecasting as an essential input in the design of sound monetary policy administration in countries of WAIFEM member banks.
Year after year international meetings expressed surprise, and indeed concern, that the imbalances continued to accumulate, but in the absence of a correction the theme became a worn groove in discussions and interest waned. The more forcefully the warnings were expressed, the more they were ignored, precisely because each country appeared able on its own to achieve price stability and steady growth despite the continued build-up of the imbalances. The consequences of this are now evident: a severe global downturn affecting virtually every country in the world. In a world of imbalances it is just as dangerous to rely too heavily on foreign demand for goods and services as it is to rely excessively on foreign borrowing. Surely now no country can be indifferent to the objective of improving the consistency of our macroeconomic strategies. So I hope that the debate about the need for symmetric obligations on surplus and debtor countries alike will move on from previous unsuccessful dialogues stretching back to the Bretton Woods conference in 1944. Turning to the “micro” cause of the crisis, a root cause was a degree of over optimism in financial markets. History, whether the run up to the 1929 stock market crash or more recently in the dotcom mania, suggests that only very substantial rises in short-term interest rates will bring to an end the excessive speculation, and that such rises bring about the very recession which the policy is designed to avert.

And, more fundamentally, should there be a Glass-Steagall type of provision to prevent retail deposits from being used to fund investment banking activities? There are good arguments in favour – to separate the utility functions of a retail bank taking household deposits and running the payments system from the casino trading of an investment bank, and good arguments against – the difficulty of maintaining a credible boundary between those institutions that are eligible to receive government support and those that are not. We need a public and informed debate on the merits of the arguments. We also should reflect on the fact that the belief that the authorities will step in when risks materialise encourages risk taking and means that risk-adjusted returns to financial activity are too high. The experience of unsustainably high returns in normal times interspersed by regular crises has been repeated across countries and over time. So if banks are to bear the true cost of the risks they take, changes need to be made to the environment in which banks operate. All these are important issues. While committing at international level to broad principles on regulatory reform, such as extending the net to all highly leveraged institutions and making capital requirements counter-cyclical, there is time to think through carefully the best way to implement them, and it is important that we take it. Many of these questions about the future of the regulatory structure will be discussed in the Turner review to be launched tomorrow. The Bank awaits the Review with interest.
Instead, monetary policy affects the economy as the current change in short-term interest rates and expectations about future monetary policy changes influence financial market conditions more broadly. Developments in financial market conditions are thus an important element in the transmission mechanism of monetary policy to the economy. Changes in financial market conditions influence economic growth through a number of channels. For example, a stronger equity market raises household wealth and lowers the desired personal saving rate – lifting consumer spending. A stronger equity market also reduces the cost of capital for business, which may help encourage greater investment spending. Lower long-term interest rates push down business financing costs, which also supports investment spending. At the same time, lower mortgage rates support housing demand and reduce household interest outlays. A weaker dollar supports growth by making imports more expensive and by increasing export competitiveness. The combined effect is to increase net exports. If the linkage from the federal funds rate to financial market conditions were stable over time, there would be no need to focus on financial market conditions. In a world in which the linkage was solid and unchanging, adjustments to the short-term interest rate and communication about future policy would have a predictable and reliable effect on financial market conditions. Central bankers, then, could keep their focus narrowly on their policy rate. However, as has been very clear, especially in recent years, this linkage is not stable.

First, when lift-off occurs, the pace of monetary policy normalization will depend, in part, on how financial market conditions react to the initial and subsequent tightening moves. If the reaction is relatively large – think of the response of financial market conditions during the so-called “taper tantrum” during the spring and summer of 2013 – then this would likely prompt a slower and more cautious approach. In contrast, if the reaction were relatively small or even in the wrong direction, with financial market conditions easing – think of the response of long-term bond yields and the equity market as the asset purchase program was gradually phased out over the past year – then this would imply a more aggressive approach. The key point is this: We will pursue the monetary policy stance that best generates the set of financial market conditions most consistent with achievement of the FOMC’s dual mandate objectives. This depends both on how financial market conditions respond to the Fed’s policy actions and on how the real economy responds to the changes in financial conditions. The second major implication is to be cautious about overreliance on simple monetary policy rules, such as the Taylor Rule, that do not include measures of financial market conditions in their formulation.
The programme had three key policy goals: (i) to stabilise the exchange rate, (ii) to put government finances on a sustainable path and (iii) to rebuild a financial sector serving the domestic economy. The first goal was imperative in order to stop an adverse spiral of fading confidence, exchange rate depreciation, and increased inflation and inflation expectations. It was also needed in order to stop the negative balance sheet effects coming through FX-denominated or FX-linked loans and CPI-indexed loans. The second, fiscal sustainability, was needed in order to stop adverse public debt dynamics from turning an external liquidity crisis into a potential solvency issue, which would have made it impossible to regain internal and external trust in the Icelandic economy. The third, financial sector reconstruction, is a precondition for private sector debt restructuring and economic recovery. As a result, exchange rate stability became the first priority of monetary policy. However, given the lack of confidence and the overhang of non-resident holdings of speculative ISK positions, estimated at the time to amount to ISK 600 bn, it would have required exorbitant  2  BIS Review 139/2010  interest rates to stabilise the exchange rate through interest rate policy alone, and the room for manoeuvre to use monetary policy to support the domestic economy would have been non-existent, at least in the short run. For this reason, it was decided to introduce comprehensive capital controls, which allowed more space to lower interest rates in line with falling inflation and provide some support to the domestic economy.

McConnell, M. and G. Perez Quiros (2000), Output Fluctuations in the United States: What Has Changed Since the Early 1980s?, American Economic Review. Mian, A. and A. Sufi (2009), The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis, Quarterly Journal of Economics. Morgan, D. (2002), Rating Banks: Risk and Uncertainty in an Opaque Industry, American Economic Review. Rajan and Diamond (2009), The Credit Crisis: Conjectures about Causes and Remedies, American Economic Review. Rochet and Vives (2004), Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?, Journal of the European Economic Association. BIS central bankers’ speeches  5
Against this backdrop, the facing of the economic activity contraction at a global level remains an open issue. The Euro area economy is already experiencing an economic slowdown. Euro area GDP contracted in the third quarter while the unemployment rate reached 7.8 percent in November 2008. The U.S. economy showed quite similar features. The further contraction of economic activity – owing to the deterioration of financial indicators in the U.S. corporate and household balance sheets, mirrored in lower consumption spending and reduced aggregate investment – drove the unemployment rate to reach 7.2 percent. Monetary and financial stimuli managed by central banks and the ministries of finance have helped to bolster confidence and relieve pressure on the financial institutions. Against this backdrop, the “resilience” shown by emerging countries is displaying the first signs of weakening. In contrast to the first half of 2008, the latest data attest to the moderation of economic growth rates in the majority of these countries. The channels through which the slowdown in advanced economies has affected the emerging countries differ depending on their development characteristics. China and India have been severely hit by the slowdown in exports; Russia had hard times owing to the slump in raw material prices in the global market, while East European countries have been impacted by the tightening of funding conditions on a global level.

During the 1700s and 1800s, the earlier forms of captives were mutual insurers, formed together by firms from a particular industry that shared similar exposures. Today, mutual models are still very much alive. Their contributions to global premiums have risen in recent years after years of decline, and they include captives set up as mutuals. The takaful industry is also thriving and poised to continue growing, in large part driven by growth in Asia. The overlapping markets of the mutual, captive and takaful industries, is likely to provide an important impetus for the wider use of group captives among mid-sized and smaller companies. This region is especially well-placed to harness this potential, given the vibrance of SMEs and fast growing takaful market. Southeast Asia alone contributes almost 30% to global takaful contributions, and this offers an opportunity, as Malaysia has long sought to develop a facilitative regulatory environment to drive an innovative, competitive and sustainable growth of Islamic finance. Second, technology will be a key driver and opportunity for new captive models. Technological advancements are already driving the growth of captive insurance business due to the new risks that businesses face. As an industry founded in response to an inflexible insurance market, the history of captives is very much intertwined with innovation. The first captive can itself be seen as a disruption to the market! Captives can be expected to leverage on new technologies to modernise legacy processes and systems, strengthen risk management capabilities and capture efficiency gains.
Economic literature besides country experiences has shown that the value of the currency of a country is the result of all other economic variables. Putting interest and exchange rate policies in the forefront leads structural reforms, the prerequisites for sustainable and high growth rates, to remain in the background. The level of foreign exchange rates is of course a noteworthy and influential factor on economic variables. In the short run, the foreign exchange rate is determined by monetary and fiscal policies, international capital movements, expectations and even political developments and current issues. However, in the medium to long term, the most important factor determining the value of a local currency is the economic performance of that country. The foremost factor influencing this performance is productivity increase. Productivity increase, at the same time, is the only variable to ensure the permanent increase in the welfare of a society. The monthly real exchange rate index, which is released by the Central Bank, shows that compared to 2003, the Turkish Lira appreciated in real terms compared to the currencies of developed countries, while no significant change occurred against the currencies of developing ones. 4  BIS Review 104/2010  This is not surprising. The increase in the real exchange rate index against developed countries is a natural consequence of the high productivity increases in our economy compared to these countries. For example, OECD data suggest that in the 2003–2008 period, the productivity increase per employee in Turkey is approximately 6 times higher than that in Europe.

There is a clear investment philosophy behind risk taking in Norges Bank. First and foremost, it is important to have a clear separation between activities directed towards achieving beta-exposure and activities linked to active risk taking. In that way, a true assessment of realised returns as well as costs associated with active management is possible. Moreover, active risk taking is done with humility and with a strong belief in the effectiveness of markets. Hence, we mostly apply active bets when we think we, either internally or through our external managers, possess an informational advantage. Such an advantage is sought through a high degree of specialization. Another type of active position is based on collecting risk premiums where we as an investor have a comparative advantage to bear the risk. An example of this is liquidity premiums. It has been a challenge to us to establish a professional and vigilant business culture within the central bank. I think we have succeeded. An important instrument in this respect has been performancebased remuneration for the Bank's investment managers. The investment management wing of the bank now resembles a private investment manager rather than a typical central bank investment office. In particular, all investments are delegated to professionals in a clear line structure. But recruiting and keeping skilled human capital requires more than competitive wages. Whether we succeed will depend on our ability to create an environment where such capital can thrive and prosper.