samchain/econo-pairs-v1 huggingface dataset:
Cross-chairmanship and membership from Bank executives should enable us to keep to coherent policies even when there are  11  Derivatives, prime brokerage, secondary market trading activities are all examples of what I mean here. BIS central bankers’ speeches  7  differences of opinion. And I say that – despite evidence from operation of the MPC where there has generally been as much dissent recorded between the Bank executive members as by the independent members – because we have a collective institutional need to make the whole framework function in the best interests of the UK economy. And another structural way of addressing divergent views is to have joint meetings and briefings on the issues which have most cross-over, which help bring the different externally appointed members together. That has already happened successfully on several issues, most notably housing. Concluding remarks It is important that we give the new structure time to work. First, because we will learn a lot. If there are flaws – and it would be reasonable to think there will be some – we need a bit of time to identify them and iron them out. Macroprudential tools are being used in the UK for the first time. And the PRA’s new approach to supervision is still being embedded. Second, the regulatory reform agenda is still being decided and implemented internationally – insurance regulation in particular has a long way to go to set truly global standards. Measures to tackle Too-Big-to-Fail are still being finalised.

The Board is constituted in a similar way to the other committees in that it is chaired by the Governor and has both internal executive members and externally appointed independent members. On the basis of current announcements it will have a total of 5 internal members 3, and 6 independent members 4 including the CEO of the Financial Conduct Authority (FCA). It meets approximately twice a month for formal meetings. In summary, the Board is responsible for meeting the PRA’s statutory objectives, including taking all the major supervisory decisions for the 1700 or so firms and groups it authorizes; formulates regulatory policy to meet those objectives; and has a range of strategic and management responsibilities including delegating some matters, principally to the CEO of the PRA or to formal PRA committees. Matters reserved to the Board and its delegations can be found in documentation on the Bank’s website via a link in this text. 5 In what follows I shall treat the PRA Board and the PRA as one policy making body, referring to one or the other as best fits the context. Before moving on, it is worth completing the picture by noting that the PRA works alongside the FCA, creating what is known as a “twin peaks” regulatory structure in the UK. The FCA is a separate institution and not part of the Bank of England.
Based on supervisory information from firms, currently around 25% of annuities are backed by such illiquid assets but firms have plans for that proportion to increase to 40% by 2020. This trend is welcome and may have wider economic benefits. As supervisors, we will be checking that firms have the risk management capabilities to hold and monitor such assets, and value them properly. Especially where firms are using internal ratings for these illiquid assets, we are also currently consulting on a supervisory approach intended to ensure that any Matching Adjustment benefit being taken is appropriate. 5  I now want to make a few points on the PRA’s implementation of Solvency II, which I believe has been robust but proportionate, in line with our statutory objectives. The first thing to say is that Solvency II is largely a so-called ‘maximum harmonising’ EU regulation. The PRA cannot set capital requirements that exceed the requirements of Solvency II. Unlike banking regulation, Solvency II does not allow supervisors routinely to set additional capital requirements or buffers akin to those applied under Pillar 2 for banks to reflect our judgement about risks specific to a firm – for example, based on stress testing. 6  Partly because we cannot simply require firms to top up capital if we think a model is too aggressive, we take an intrusive approach to model approval. We have to be sure that the models are up to scratch before we can allow firms to use them to determine their capital requirements.

Even more important is how firms determine their capital resources. Reviewing the adequacy of reserving is a core element of our supervisory approach, particularly for general insurers. In the case of life insurers with significant annuity books, a key determinant of reserves is their use of the Matching Adjustment. Solvency II sets clear criteria for assets that can qualify for the Matching Adjustment. They must match the maturity of the underlying liabilities – so, for example, long-dated annuity liabilities require similarly long maturity assets – and they must have fixed cashflows. 8  These requirements are set by the Directive; they are not a feature of the PRA’s implementation. Indeed we have sought to interpret them in a purposive and proportionate way so that firms can back annuities with a wide range of assets, including illiquid assets, and still benefit from the Matching Adjustment. For example, we have allowed firms to restructure portfolios of illiquid assets, such as commercial real estate mortgages, infrastructure finance or equity release mortgages, using internal securitisations in order to create senior tranches that meet the Solvency II requirements. We have also allowed pairing and grouping of assets to meet the eligibility criteria - for example, combining a floating rate note with an interest swap, or a foreign currency-denominated bond with a cross currency swap. Restructuring of this kind has added complexity, operational risk and some costs for firms.
The high level of borrowing has resulted in a substantial increase in the household debt burden. Loan debt relative to disposable income is now as high as at the end of the 1980s. 4  BIS Review 34//2005  Interest expenses relative to income are nonetheless considerably lower now, whether based on current interest rates or expected rates in the next few years. Households will however be vulnerable if unexpected disturbances result in higher than expected interest rates. Oil gives us an economic base that is not available to many other countries. But it also presents us with considerable challenges: First, we must remember that our petroleum resources are part of our national wealth. When oil is extracted and sold, natural assets are transformed into financial wealth. Norway’s national wealth belongs not only to our generation, but also to future generations. This means that our petroleum wealth must be equitably distributed between generations. The authorities must therefore exercise fiscal discipline, taking into account long-term considerations. Moreover, the size of the cash flow from petroleum activities varies considerably. If petroleum revenues were to be used as they accrue, this would lead to considerable fluctuations in demand in the Norwegian economy, amplifying cyclical fluctuations as a result. Third, the use of petroleum revenues would have an impact on competitiveness in Norwegian business and industry. A high level and substantial fluctuations in the use of petroleum revenues would have a negative impact on the operating parameters for internationally exposed industries.

The current unusual circumstances are one of the main drivers for the prolonged boom in the local property sector. The risk of over-heating in the property sector to financial stability in Hong Kong is no smaller than that seen in 1997. We should note in particular that while mortgage rates were generally over 10% in 1997, after the burst of the property bubble, US interest rates have fallen, and mortgage rates in Hong Kong have spiralled down reaching about 2% in 2004. The situation we faced now is just the opposite. Mortgage rates are around 2%. And, even if the low interest rate environment were to remain until 2015 as anticipated by the US Federal Reserve, the US interest rates are bound to head back to more normal levels. Will mortgage borrowers in Hong Kong then be able to withstand the impact of interest rate hikes and property price falls? For example, under a 30-year mortgage, even though the borrower will be able to enjoy a low interest rate in the first two years, the repayment burden could become much heavier as a result of interest rate hikes in the years that follow. This could have serious consequences for the well-being of those families in the coming years. Therefore, I hope that the public will be cautious and should not underestimate the risks that rising interest rate could have on repayment ability, asset prices and the overall economy in Hong Kong. 2  BIS central bankers’ speeches
© Swiss National Bank

The unfortunate result was that these banks were not as protected from falling housing prices as many had assumed, and this contributed to the substantial decline in stock prices and the need for government support for many of these large financial intermediaries. Myth 4 – Investment banks were not subject to runs, because their liabilities were collateralized There has long been an understanding, and indeed a regulatory presumption, that banks could be subject to “runs,” resulting in a need for both deposit insurance and a heavily regulated environment to reduce that risk. At the same time, it had largely been presumed that investment banks were better protected against such runs. While the balance sheets of investment banks had substantial short-term liabilities, many of them were collateralized. Investment banks would buy longer-term securities but finance them with short-term borrowing (using repurchase agreements). It was assumed that because there was collateral backing up the loans, borrowers were protected and would not run. Financing securities with short-term borrowing allowed investment banks to substantially expand their balance sheets, as shown in Figure 10. However, the lenders in this market  3  Collateralized debt obligations (CDOs) constructed from subprime asset-backed securities (ABS) are perhaps the most potent example of underestimation of risk. Triple-A rated CDOs did more damage to balance sheets than Triple-A rated ABS. 4  Holding to maturity may have moderated some losses, but many did not have that luxury. Investors needing to sell with the threat of downgrades suffered substantial losses, particularly in an illiquid environment.
José Manuel González-Páramo: New investment fund statistics for the euro area Introductory remarks by Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank, for the first statistical release, Frankfurt am Main, 11 December 2009. *  *  *  Ladies and Gentlemen, Welcome to the ECB. Today it is my pleasure to introduce an important new set of statistics for the euro area as single economic entity. These statistics provide detailed harmonised information on the assets and liabilities of investment funds resident in the euro area. They are compiled by the ECB in close cooperation with the national central banks. Fruitful work has also been conducted in liaison with the European Fund and Asset Management Association (EFAMA), a business association represented in this room. Since the inception of the ECB, major progress has been achieved in developing monetary and financial statistics for the euro area. This work, carried out in close cooperation with the Member States, has resulted in a full range of timely and high quality euro area statistics, which the ECB constantly monitors in performing its policy functions. The first major steps were the implementation of euro area statistics for monetary financial institutions (in particular to derive statistical information on monetary aggregates), lending and interest rates, as well as on the balance of payments. In recent years, efforts have focused on the development of statistics for other financial sectors. This also reflects the increasing links between the banking sector and other financial institutions.

Let me just highlight two of them: First, since investment funds are large institutional investors, their portfolio choices may be indicative of more general trends in portfolio diversification. For that reason, these statistics are certainly also useful for explaining monetary developments. Second, changes in investment funds’ asset value are transmitted, through the valuation of their shares, to households and firms. In turn, these wealth effects, may have implications on aggregate demand. The structure of the financial assets held by investment funds also provides important information regarding the financial risks that are indirectly borne by households and firms through their portfolio of investment fund shares. BIS Review 165/2009  1  In addition to the new statistics on investment funds, separate data are now also published every quarter on euro area Money Market Fund balance sheets. As a consequence, one can now perform analyses for the whole sector of funds. These new data on Money Market Funds are also a useful addition to the ECB’s monetary analysis. Because of the close substitutability between their shares issued and bank deposits, money market funds form part of the Monetary Financial Institutions sector and are thereby contained in the M3 figures. From now on, the new investment fund and money market fund data will be published in regular monthly ECB statistical press releases. I am convinced that the new harmonised statistics yield novel insights into the structure and development of the financial sector of the euro area economy.
Globally, the Official Sector Steering Group (OSSG) established under the Financial Stability Board has been monitoring closely the LIBOR transition progress, and providing helpful guidance to the industry through the publication of the Global Transition Roadmap. As a member of the OSSG, we have been working closely with other overseas authorities and contributing our efforts to this global exercise. As with the implementation of other global financial reforms, international cooperation is crucial, not only in setting globally consistent expectations and milestones, but also in minimizing any potential fragmentation in the transition across different jurisdictions. 5. In addition to our active role in the international arena, we at the HKMA have also attached great importance to harness the region’s collective voice in these global issues. Especially, with my role as the chair of the Executives’ Meeting of East Asia-Pacific Central Banks’ (EMEAP) Working Group on Financial Markets (W GFM), we have devoted much attention to topical issues like LIBOR and local Alternative Reference Rates transition, and helped our regional peers push forward with their preparation for the transition. I’m glad to see that the W GFM has been a useful platform that complements the bilateral discussion of member jurisdictions with ISDA, and facilitates certain members’ participation in the 2nd ISDA IBOR Fallback Protocol. I understand that ISDA is planning to publish the 2nd Protocol by the end of this year. Joint Industry Efforts to Support the Transition 6. Besides policy guidance and regulatory push, active participation by industry is also key in ensuring a smooth LIBOR transition.

1997 Q1-Q2 = 100  Chart 12 Nominal GDP Indices in $ Terms  120  120  110  110  100  100  90  90 80  80 70 60 50 40  Hong Kong Indonesia Korea Malaysia Singapore Taiwan Thailand  70 60 50 40 30  30 Q1 1997  Q2  Q3  Q4  Q1 1998  Q2  7  Q3  Q4  Q1 1999  Q2 12  BIS Review 103/1999
International policy coordination, harmonisation and the consistent application of implemented instruments are vital to ensure effectiveness and limit the possibility and impact of adverse cross-border spillover effects 25. The potential spillover of nationally implemented macroprudential policies largely depend on the degree of financial cycle synchronisation, especially within the highly integrated (economically and financially) states, as in the case of the European Union, or even more so within the currency union members with a single monetary policy. Several aspects of the potential spillover should be considered when formulating the policy stance in a highly integrated environment that challenges us in pursuing financial stability. Outward cross-border spillovers of systemic risk create a need for countervailing macroprudential measures, clearly emphasising the need for policy coordination and measure reciprocation. In contrast, inward spillover effect is a direct consequence of the regulatory arbitrage that motivates internationally operating financial institutions to seek organisational restructuring that minimizes regulatory costs. The issue of converting subsidiaries into branches has recently attracted a lot of attention, as some member states are actively trying to reduce this risk, 26 alongside international efforts directed towards formulating a framework for voluntary cross-border reciprocity 27.

Fritz Zurbrügg: A snapshot of the financial situation in Switzerland Introductory remarks by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the media news conference of the Swiss National Bank, Berne, 20 June 2013. *  *  *  I will begin today with the situation on the financial markets. Then I will address the management of our currency reserves, before moving on to trends in the money market, as well as the current discussion regarding reference interest rates. Finally, I will say a few words on the future of the repo market infrastructure in Switzerland. Developments on the financial markets In December, at the last news conference, I remarked on an easing of tensions on the financial markets. This easing largely continued in the first half of 2013. The government bonds of the European peripheral countries, in particular, benefited from the greater trust of investors, with Ireland and Portugal raising funds via long-term bonds on the capital market for the first time since 2010 and 2011, respectively. The buoyant mood on the financial markets was also demonstrated on the advanced economies’ stock markets. In May, there were new historical highs in the US, the UK and Switzerland. Investors’ risk appetite was encouraged not least by the very expansionary monetary policy around the world. Various central banks, including the European Central Bank (ECB), again reduced their key interest rates early this year. The prospect of low yields on bond markets induced many investors to increase their equity investments.
In our case, the surge in speculative capital inflows at the end of last year caused a rapid appreciation of the baht relative to regional currencies. I must stress that the recent capital surge heralds the onset, and not the end, of the unwinding of global financial imbalances. There remains considerable room for US dollar correction. As such, the threat of global imbalances to the economic and financial stability of Thailand is still very much present. You may recall that we have experienced sizeable capital inflows, and accompanied with that, a rapid appreciation of the baht effective exchange rate toward the end of last year. In dealing with the rapid appreciation, conventional wisdom suggests an adherence to market mechanisms. This proved to be inadequate. The baht continued to appreciate with the likelihood of it becoming more and more out of line with its fundamentals. After a number of unsuccessful conventional measures, we resorted to the measure of imposing a reserve requirement on capital inflows in December 2006. The measure was designed to break the one-way currency momentum, to preserve our overall economic stability, and to buy some time to allow a smooth transition. Let me be clear that we intended for the reserve requirement to be a temporary measure, designed to preserve financial stability and to afford the real sector time to adjust to a more volatile market condition. To this end, I believe that it has succeeded. To be sure, no measure is without its costs.

However, this time there is also reason to ask whether we are sufficiently prepared. Is our economy sufficiently robust? The fall in oil prices was triggered by an international financial crisis and slower growth in the world economy. The Norwegian economy is highly exposed to international fluctuations. Is our own financial system and business sector strong enough to cope with this situation? How should monetary and fiscal policy be formulated in such an exposed and oil-dependent economy? These are the issues I would like to address this evening. A turbulent world Even before oil prices started to fall, the warning signals were flashing for everyone to see. The Norwegian economy was overheating in an environment of global economic distress. The signals from Asia were clear. 1  BIS Review 20/1999  The problems first appeared in Thailand a little more than 18 months ago, but spread quickly to Malaysia, the Philippines, Indonesia and South Korea. In most of these countries, a sharp upturn had been stimulated by low interest rates and financed through a considerable accumulation of debt in the business sector. Borrowers became increasingly nervous and withdrew capital. Capital inflows from industrial countries were suddenly reversed to massive capital outflows. Equity and property prices fell sharply and currencies came under pressure. The contagion effect led to a sharp downturn in production and employment. Large population groups that had recently experienced a pronounced increase in living standards slid back into poverty.