samchain/econo-pairs-v1 huggingface dataset:
Estimated term premium Percentage points 3.0  Term premium, Swedish National Debt Office (10 year) Term premium, The Riksbank (10 year)  2.5  3.0 2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0  -0.5  -0.5  -1.0  -1.0 99  01  03  05  07  09  11  13  15  Note. The Swedish National Debt Office's estimate is based on swap rates while the Riksbank’s estimate is based on government bond rates. Sources: Swedish National Debt Office and the Riksbank  9 One uncertainty factor is how well these methods can capture changes in the interest rate’s n ormal level. There  are some signs that the fall in the estimated term premium has been caused by a decline in interest rate expectations, rather than by an actual change in the premium. 10 In this assessment, it is actually not a question of only the premium, but also of a difference in valuation between Riksbank certificates and government securities, where the market has valued government securities higher in the past year. The interest rate on government securities with a maturity of one week is now almost 0.4 percentage points lower than the repo rate despite them referring to the same maturity.

Eddie Yue: Opening remarks on regtech Opening remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at the HKMA's "Unlocking the Power of Regtech" event, 30 June 2021. * * *  Introduction 1. Good morning, good afternoon and good evening everyone. A very warm welcome to all the participants of today’s event, “Unlocking the Power of Regtech”. 2. Just a few years ago, a virtual conference like this would have been a near impossibility. I am sure you would also remember the days of expensive international travel, but today, advances in technology have transformed our ability to communicate and share with others in every part of the world. Similarly, technology has also fundamentally revolutionised the way banking business is undertaken. HKMA’s banking technology goals 3. One of the HKMA’s key policy goals is to encourage the application of innovative technology in the banking industry. Our recently announced "Hong Kong Fintech 2025" strategy, which goes far beyond our Smart Banking Initiatives which were announced a few years back, is an ambitious plan for getting Hong Kong’s banking sector to embrace and adopt new technology and rise to a high level of sophistication. 4. And within that Fintech journey that we are promoting, Regtech constitutes an integral and important driver within our strategy. On that, we have developed a vision that by 2025, Hong Kong will become a leading hub for developing Regtech solutions and cultivating Regtech talents.
It also includes developing a systematic framework so that banks can be required to raise capital to ensure that they have adequate resources to deal with adverse economic scenarios – even if those scenarios have a low probability of being realized. These innovations are designed to limit behaviors that we saw during the financial crisis that made the financial system less robust. Banks were reluctant to cut their dividend payments and compensation because of fears that this would signal weakness. These payouts depleted capital and made these institutions more vulnerable to deteriorating economic circumstances. Similarly, banks were reluctant to raise capital to protect themselves against particularly adverse states of the world. This was unfortunate because the collective behavior of banks to be less prepared for adverse states of the world, often made such adverse states of the world more likely. In an important sense, a poorly capitalized bank generates negative externalities, making the entire financial system less secure, with costs to other financial market participants, whereas the reverse is true of a well-capitalized bank. As noted earlier, another important step is to increase transparency throughout the financial system. There are at least two important elements to this. First, regulators need to have comprehensive access to information about the financial institutions and markets that they oversee – including ones that may not be directly regulated. Without such information,  4  BIS central bankers’ speeches  diagnosis of emerging problems is more difficult and less timely, and appropriate remedies are more difficult to develop.

The authors focus only on the United States. Thus, it is difficult to know whether the value of financial conditions indexes are specific to the United States or should be applied more broadly. Fifth, I thought the paper could have gone further in exploring the implications of its results. The focus of the paper is on how to construct a financial conditions index that does a good job of forecasting economic activity. The paper does not tackle the implications for monetary policy stemming from developments in financial conditions as measured by the new FCI. If financial conditions evolve in an unanticipated way, how should this influence the conduct of monetary policy? In particular, the authors note that during the 2003–06 period, financial conditions tightened less than expected given the rise in the fed funds rate and, during the 2007–08 period tightened even as the Federal Reserve slashed its fed funds rate target. These results raise a number of interesting questions. In particular, does the behavior of the new FCI imply that the Federal Reserve should have tightened more aggressively during the 2003–06 period or eased more aggressively during the 2007–09 period? The paper’s results seem to imply this, but it would be interesting to see whether this is the case or not. It also would be useful to know how qualitatively important these differences are.
It is successful as we copy the institutional setup of the central banks of the developed countries, where the independence of central banking is recognized as one of the main preconditions for efficient conduct of the monetary policy and the exchange rate. Fortunately, political institutions in the country understood that, too, and therefore it is general assessment that today NBRM enjoys a significant level of independence, both formal and actual. However, it is most important that we are aware where and how much we lag behind the central banks of developed countries, how much we must work in order to reduce the gap and where we should arrive at. We should improve a number of contemporary analytical and research models and practices. We should expand our knowledge in the area of economic modeling and econometric techniques. As a matter of fact, in a month or two we start with regular training of the NBRM employees in this area, in a systematic and permanent manner. We are already preparing for outlining and implementing other monetary strategies, as it is imposed by the processes of globalization and integration of markets, the forthcoming very close full liberalization of the capital account, justifiably anticipated larger inflows of capital, which create new environment for our economy, together with the risks from instability and speculative pressures.

This committee comprised members from among key government stakeholders, including the Attorney General’s Chambers as well as industry players and experienced Islamic finance legal practitioners. We are also pleased to announce the appointment of Tun Abdul Hamid bin Mohamad, the former Chief Justice who is also a member of our Shariah Advisory Council, to chair this committee. We will be engaging with the industry and general public for feedback on the laws which require harmonisation. Further details will be announced in due course. The underlying objective in having this Law Harmonisation Committee is to position and strengthen existing laws as the laws of choice for Islamic financial transactions. It is also consistent with our objectives to create an enabling environment that facilitates and accommodates the development of the industry, a clear and efficient system that preserves that enforceability of Islamic financial contracts and a credible and reliable forum for settlement of legal disputes arising from Islamic financial transactions. The support provided by the legal fraternity to Islamic finance has been instrumental to the progress of the industry. Crafting legislation to facilitate the growth and development of Islamic finance requires dedication and skill, and the ties that have since developed between lawyers, regulators, Shariah scholars and industry practitioners, have inevitably blossomed into a strong relationship based on mutual understanding and close co-operation. Going forward, it remains crucial for this close collaboration to continue so that more pioneering progress can be achieved in paving the way towards greater international integration and expansion of the Islamic finance industry.
At the same time, monetary policy can be used to smooth fluctuations in activity around the growth trend. But I should emphasise that this presupposes that the central bank is committed to price stability and that its policy is perceived as credible. With low inflation, moreover, the economy will function more efficiently. It is important, I believe, to realise that price stability’s status as the monetary policy objective does not imply a lower priority for growth and employment as economic policy’s overall objectives. Rather than being an impediment, low inflation creates good conditions for growth. In order for this to be combined with low unemployment, the labour market must also function properly. Monetary policy with an explicit inflation target Since the move to a flexible exchange rate in the autumn of 1992, monetary policy in Sweden has been conducted with an explicit inflation target. The Swedish target for the rate of inflation, which is appraised in an annual perspective and expressed in terms of the consumer price index, is 2 per cent. The target is surrounded by a band of ±1 percentage point, which serves among other things as a buffer for temporary effects on inflation. I should like to mention some factors which illustrate how the Riksbank works on the construction of monetary policy with an inflation target. As monetary policy is characterised by long and variable lags, the policy needs to be forward-looking and based on an inflation forecast.

Technically, this project is a real challenge and it will contribute to the definition of smartcontract standards for the automation of tokenised financial markets and the interoperability of CBDCs. These standards are necessary to allow the tokenisation of finance to take off securely and to reduce fragmentation in this environment. In case of success, project Mariana could be an important step toward the improvement of cross-border and cross-currency payments. Confident in the strength of our cooperation with MAS, we hope that other joint experiments will follow the Mariana project. There is still a lot to be done, especially on more complex financial activities around the lifecycle of financial securities in a cross-border and cross-currency context. In conclusion, I would like to say that financial innovation is promising and exciting but can be for an institution like the Bnaque de France, which has among its core mandates to ensure financial stability, a source of issues if not concerns. It is therefore for us in any case very stimulating and leads us to reconsider and adapt our role, our policies and our services. To that end, with the help of our team in Singapore and the new leadership of Stéphane Latouche, I very much hope that we will be able to continue  3/4  BIS - Central bankers' speeches  working with you here in Singapour, and in particular with the MAS, to better master innovation and build the future of our financial system. Thank you all for your attention. 4/4  BIS - Central bankers' speeches
The prices we can get for the goods we sell have not kept up with the prices we have to pay  Page 4  for the goods we buy. This has made us poorer as a country. The fall in our national real income has manifested itself in a rise in the prices we have to pay for the things we buy as consumers. The developments in energy prices have been particularly stark. The impact of that is very clear in the data so forgive me for spending a bit of time setting that out too. Chart 1: CPI inflation projection with direct energy contribution Based on market interest rate expectations  The purple bars on this chart show that a big part of the rise in consumer price inflation has been caused directly by energy prices. But the chart also shows the almost mechanical flipside of that. In the MPC’s central projection, inflation falls quite sharply over 2023 as last year’s large increases in energy prices drop out of the annual calculation. Page 5  Chart 2a: Typical household energy bill Smaller of Ofgem energy price cap and Energy Price Guarantee  This next chart illustrates what is going on. The blue line on the left-hand chart shows the evolution of the ‘typical’ household energy bill. Nobody actually pays the typical energy price bill, of course, but it has become an industry standard as a measure of what households pay on average.

The MPC’s inflation target sits within the Bank’s wider mission – set out in our founding charter from 1694 – to promote the good of the people of the United Kingdom. These are not just words from an old charter. It is the heart and soul of what we do. It is therefore important to us to listen to what the people of the United Kingdom have to say. We of course also talk to financial market participants through our market intelligence gathering, and our Agents travel to all corners of the country. We join them regularly in this work. I personally go on visits to each of the 12 regions and nations of the UK at least once a year to hear from businesses and organisations first-hand. Page 3  Bank of England outreach programmes Listening to people from all parts of the United Kingdom  But today I would like to focus on our outreach programmes: our citizen’s forum consisting of 12 regional panels, each chaired by a devoted volunteer from the local community, and currently counting 4,000 members; our community forums for charities and the people they support; and our youth forum specifically for young people aged 16 to 25. These are the events where we talk with and listen to people from all walks of life. We set out some of the high-level themes from those conversations in a report from the chairs of the regional panels published today. What we hear from them is sobering.
Furthermore, although the soundness and solvency of banks tend to strengthen their capacity to grant credit, it is true that the combined effect of all the measures will (by their very nature) tend to reduce the profitability of banking and banks’ ability to channel savings to business activities involving risk. Further evidence on the quantitative importance of this effect would be useful for assessing the key parameters of each measure. Effects in Spain Against this background, how do the regulatory changes affect the Spanish banking sector? It is true that the regulatory avalanche represents a huge challenge for Spanish banks, but I do not think that it is greater than that faced by other banking systems, especially after all the financial reforms adopted in Spain over the past year. Currently, we have confirmation that Spanish banks are reasonably capitalised, that they have substantially improved their liquidity situation and that their leverage ratios are relatively low, in comparison with those of other European banks. In addition, the bank business model in Spain continues to be based on traditional commercial activity so that own-account investment securities portfolios are generally moderately sized. As a result, the structural measures that may be approved by the European Union will have a more limited impact on Spanish banks than on banks in other jurisdictions. Moreover, international banks have established a model of independent subsidiaries that is conducive to the application of simple resolution arrangements.

In addition to earnings, equity must generate a reasonable surplus so that the Riksbank has profits that can be used to build up equity in the event of losses. The Inquiry’s proposals restrict the Riksbank's equity to SEK 60 billion, calculated only using inflation. As I have said, one interpretation of this is that the Inquiry sees a return to a steady state in which the balance sheet should be small – and, in such a world, a small amount of equity is adequate, assuming that the real interest rate returns to at least 1 per cent and that adjustments to the repo rate are enough to achieve the monetary policy objectives. The proposed act certainly makes it possible for the Riksbank to ask to raise the capital ratio, for example if seigniorage should fall or the real interest rate become lower. The problem is that, if the earnings capacity is initially set to just cover expenditure, there will be no scope to use the profit to build up equity independently. If revenues fall because real interest rates are low, it will not matter if target equity is higher – the Riksbank will make losses until the framework triggers a recapitalisation. When it comes to allowing for a larger balance sheet, the problem is that risks can increase quite quickly – and then, the Riksbank could find itself in a situation where retained profits are not enough to build equity up quickly enough.
Federal reserve provision of overnight money-like assets Even without expressly pursuing a financial stability objective, a central bank’s balance sheet can provide safe and money-like assets to a wide range of financial institutions in normal times.23 The October 2008 introduction of the Federal Reserve’s ability to pay interest on reserve balances and the 2013 development of an overnight reverse repo (ON RRP) facility provided critical tools that allow the Federal Reserve to maintain control of overnight interest rates regardless of the size of its balance sheet.24 This ability is important because, before the crisis, the Federal Reserve could not increase the supply of its money-like liabilities in normal times without compromising monetary policy objectives.25 Figure 5 shows the size of selected liabilities of the Federal Reserve before the crisis, in December 2017, and market participants’ estimates for average 2025 levels. 26 Before the crisis, the Federal Reserve’s provision of money-like liabilities other than currency was negligible to ensure control of overnight rates in the operating system used at that time. Reserves were kept scarce in the banking system, and other liabilities—such as the Treasury’s account at the Fed and overnight investments by foreign central banks—were kept very limited, with tight control 6 / 10  BIS central bankers' speeches  around their daily variation.

In fact, in a number of jurisdictions such as Bahrain, Brunei Darussalam, Maldives, Nigeria and Malaysia, Islamic finance is increasingly becoming an important component of the broader financial system. In essence, Islamic finance is impacting the lives of many – individuals and business alike. All these progress would not have been possible without the dedication of Shariah scholars such as yourselves in harnessing collective wisdom to resolve many practical and contemporary issues facing the Islamic finance industry. From enabling deposit taking to facilitating funding, investments and protection solutions – Shariah has been the underpinning thrust of Islamic financial intermediation in meeting the evolving expectations of businesses and consumers. My remarks today will focus on three imperatives for Shariah scholars to be the beacon for financial, social and economic developments. Engagement with wider stakeholders First, the world we live in is not static. It is important to understand that issues confronting the global economy and our modern society are intricately linked to the issues facing the financial sector. This therefore demands for Shariah rulings to constantly be contextualised towards addressing contemporary issues facing the ummah. From ending poverty and hunger to promoting responsible production and consumption; providing affordable housing; better healthcare and education – Shariah deliberations on Islamic finance matters should reflect on the evolving needs of the economy and society. Shariah scholars are constantly challenged to have a thorough and sound understanding of other fields of expertise such as economics, law, psychology and technology to formulate well-rounded and pragmatic ijtihad.
It was quite simply impossible to know who was actually left with the direct or indirect exposures to the subprime loans. This led to liquidity waning in parts of the interbank market. It therefore became more difficult and more expensive for the banks to refinance themselves. When many banks experienced problems, a number of central banks chose to take measures to increase liquidity in the interbank market. The unease in the credit markets has continued during the winter and spring. Many large and established banks have been gradually forced to write down the value of their subprimerelated assets. This has led to some major financial groups requiring new capital. At the same time, there has been increased uncertainty over international economic activity. This has in turn contributed to major fluctuations on the world’s stock markets. Over the past week the unease has increased again. This has contributed to rising interest rates on the interbank market in, for instance, the United States and the United Kingdom. With the free capital movement this of course also affects Swedish interbank rates. But higher interest rates in the interbank market do not by definition mean that the banks will experience liquidity problems. The Swedish banks have had good liquidity throughout the entire period of turmoil. They have not been exposed to subprime-related securities to any great extent. Their solidity was and remains good and their loan losses are at present very small. Nevertheless, the Swedish banks have not been able to entirely escape the effects of these events.

The structures were a side-effect of the desire to avoid regulation It is also interesting that the abstruse structures, which led to the current financial turmoil and the bank crisis in the 1990s, were in both cases partly due to so-called regulatory arbitrage. The most recent wave of securitisation of the banks’ credit portfolios was partly propelled by deficiencies in the capital adequacy rules. Through securitisation the banks could easily avoid a lot of expensive capital adequacy. Since 2004 a new capital adequacy regime, Basel II, has applied. This is more finely meshed and does not allow the same possibilities to avoid capital adequacy through securitisation. However, it has not yet been implemented in all countries, such as the United States, for instance. The Swedish finance companies were in their day the result of regulatory arbitrage. Prior to the abolition of credit regulation in Sweden, the finance companies were often used as a means for the banks to get round the credit restrictions. This “grey” credit market was once substantial and an important source of additional income for the banks. Around 25 years ago I myself wrote quite a lot about this. Credit insurances existed then as now One can also observe another similarity, namely the occurrence of so-called credit insurances. A company that sold credit insurances to the Swedish banks in the 1980s and 1990s was Svenska Kredit. Many banks bought insurances against losses from their loans to property companies from this company.