samchain/econo-pairs-v1 huggingface dataset:
The (scant) risk-sharing channels in the Economic and Monetary Union Completing Banking Union and developing the European Capital Markets Union are, moreover, key objectives for securing the appropriate and stable functioning of the European Economic and Monetary Union (EMU). Comparing the workings of EMU and of the United States, in terms of the mechanisms each have in place to cushion the impact of shocks affecting a single country or State, illustrates clearly how far we still have to go. Indeed, the empirical evidence suggests that, in the United States, around 70-80% of the impact of shocks affecting a particular State is distributed among the other States. In this case the main risk-diversification channel is through the workings of the capital markets. Hence, the cross-border ownership of capital allows around 40% of the asymmetric shocks within the United States to be shared. The credit channel, which operates through the granting of credit by non-resident institutions to resident agents, enables around a further 20% of asymmetric shocks in the United States to be shared. Conversely, in the euro area, around 70% of the financing received by households and firms is mediated by the banking sector, while only the remaining 30% is obtained on capital markets. This is practically the opposite of the United States, and reveals how the financing of the economy depends on the banking sector in Europe. As a result, capital markets in the euro area absorb 10% of shocks, and the credit channel around 34%.

4/9  In this respect, an agreement was reached at the Euro Summit in December 2018 to establish a common financial backstop for the SRF. This took the form of a credit line provided by the European Stability Mechanism, to be repaid by the banking system itself through its future contributions. The launch of this financial backstop, currently scheduled for 2024, could be brought forward to 2020 if it is considered that sufficient progress has been made to reduce banking risk. Here it is important to note that the percentage of bad loans on euro area banks’ balance sheets has fallen notably in recent years, down to close to 4% of all loans, albeit still somewhat above the pre-crisis level. Likewise, banks’ capitalisation levels have improved substantially; the total capital ratio for euro area banks overall now stands at 18%. A further key aspect for completion of the design of the euro area is the creation of the common European Deposit Insurance Scheme; this would be the third pillar of Banking Union. In my view, it is difficult to believe that, without this third pillar, the first two will be able to guarantee in a credible manner the same level of protection for all depositors across the euro area, irrespective of where they are located. Sufficient confidence to mitigate the risk of large-scale bank runs and the consequent financial fragmentation in severe crisis situations would thus fail to be generated.
Complex and opaque links between government, financial institutions and non-financial companies made it difficult for outsiders to understand the real nature of their exposures. Financial markets were not well developed, leaving the system heavily dependent upon the banks. There was inadequate regulatory or supervisory oversight. There was widespread government influence over financial flows, which importantly also contributed to a perception that much of the borrowing was effectively under-written by the government. The list could go on. The problem was compounded by the absence of any real perception of exchange rate risk. Borrowers were evidently confident that governments would maintain their exchange rate pegs against the dollar so that unhedged foreign currency debt, much of it at short term, appeared a cheap alternative to domestic currency borrowing. The result was a build-up of short-term private sector foreign currency liabilities, by banks and non-banks, which was not fully appreciated, and which left the Asian economies especially vulnerable to a flight of capital in the event of a change in sentiment. The problem is that national authorities can create their domestic currency, if they choose to do so, even if it leads to inflation, but they cannot simply create foreign currencies in the same way. So, once the run started, it was violent and contagious. There are certainly all sorts of lessons to be drawn from Asia’s experience for the future relating to the structural weaknesses in the financial system that allowed the problem to emerge.

And while, in this country particularly, we are having to work harder to keep her from tasting Father Bear’s porridge, there are now signs that the porridge itself may be beginning to cool down - as it needs to do, quite soon and quite quickly, if we are not to see inflation pick up. Some US business people - and certainly some British business people - engaged in international trade are understandably discomforted by the recent strength of our respective exchange rates - not vis-à-vis each other because the dollar-sterling rate has been relatively stable, but against the rest of the world. But the domestic environment, here and in the United States, remains - actually and prospectively - relatively benign. We are though both exposed to the chilly winds now blowing from Asia. And I should like to devote the rest of my remarks to discussing the problems in Asia and considering just how serious a threat they pose to the global economy. I emphasise “problems” in this context because it is important to recognise that the situation in Asia differs materially from one country to another, even though they are all inevitably affected to varying degrees - through their close commercial links with each other by the present economic weakness in the region as a whole. Let me begin with a few words on Japan. Japan is of course much the largest economy in Asia.
I am confident that LIAM is uniquely positioned to ensure that the industry remains focused on the right issues that will move the industry forward and expand the opportunities for growth. It should take an assertive and expanded role in aligning the interests of different stakeholders towards a common purpose, and it should deal firmly with any party that attempts to distract the industry from this purpose. This of course would call for a strong leadership, a strong conviction and desire to act in the long term interests of the common good. It was said that insurance business is about promises and trust. But its more than that. It is about delivering to the customer in their times of need. It also about delivering value to the promises we made. Its about fulfilling and exceeding the trust the policyholders placed on us. These principles are enduring and with infinite timespan. I hope that these principles would guide LIAM as the industry chart its a new path into the future. On behalf of the Bank, it gives me great pleasure to congratulate LIAM on this occasion of its 40th anniversary. Much has been achieved, much more still remains to be done. I have every confidence that the industry will rise to the occasion and throw its full support behind LIAM in navigating the road ahead. On its part, the Bank will continue to work with the industry in achieving the smooth implementation of reforms proposed for the industry.

But realising this potential would require an inspired leadership by the industry, to rise to challenge the status quo and raise the game in delivering value to stakeholders. After 40 years, I believe the industry is at another crossroad. A new and exciting wave of growth and development for the industries lies ahead of us, but it can only happens if we are prepared once again to embrace the change as we did before, and collectively rise to overcome the barriers that threaten to hold the industry back from achieving its full potential. Reform via introduction of LIFE Framework The next phase of transformation is at our doorstep. As you are well aware, the blueprint for the next phase of change is encapsulated in the proposed LIFE Framework. The Framework lays the ground for greater operational flexibility, competition and diversity in the life insurance industry. More importantly, it will encourage innovation including expanding new delivery channels to reach new target groups, provide the right incentives to raise the professional standards of insurance intermediaries and deliver better value to policyholders. The reforms envisaged also seek to leverage on the digital age which presents immense opportunities to revolutionize the delivery of insurance products in a more effective and cost efficient ways that benefit consumers at large. With Malaysia’s household internet penetration rate of 67.3% and more than 43 million cellular phone subscribers in Malaysia, this mode of delivery certainly demands serious consideration. Let us tap this opportunity in delivering new insurance products and services.
•  Growth in total credit reflects Singapore’s growing role as regional financial centre. •  Banks in Singapore are intermediating surplus funds to meet credit demand throughout Asia, particularly for productive economic activities like trade financing. •  The increase in resident credit-to-GDP ratio is less sharp, from 125% to 155% over last three years. •  Domestic credit growth is broad based across both households and corporates, including financing capacity expansions by the petrochemical industry. Nonetheless, the strong flow of domestic credit to real estate is a concern: •  Housing loans by banks grew 18% each year over last three years. BIS central bankers’ speeches  3  •  Housing loans as a percentage of GDP now stands at 46%, up from 35% three years ago. When interest rates rise and if property prices fall, any risks built up will materialise. •  A return to normal monetary conditions is not far off. •  Financial markets are already reacting to anticipated tapering and unwinding of quantitative easing (QE) in the US. •  Long-end bond yields are already rising as markets price in higher interest rates. So how do we stack up against this global backdrop? Our banking system remains sound. •  Our local banks have strong financial positions. They are well-capitalised with prudent provisions against loss. •  There is a healthy buffer against property price reductions. In fact, the average outstanding housing loan-to-value ratio in the banking system is just under 50%.

•  Our banks also undertake regular stress tests on their own and those coordinated by MAS. •  We have subjected the banks’ balance sheets to a combination of stresses – including a sharp rise in interest rates, a decline in property prices, and a rise in unemployment rate. They have enough capital to see them through. It is the household sector that we are concerned about. •  At the aggregate level, household balance sheets are resilient. Cash and deposits exceed household debt. •  But the health of the balance sheet is not uniform across all households. Many households could have over-extended themselves, fuelled by low interest rates and stretched loan tenures. •  The vast majority of mortgage loans are on floating-rate packages, which means that households will face higher monthly repayments when interest rates normalise. •  An estimated 5 to 10% of borrowers have probably over-leveraged on their property purchases, i.e. they have total debt service payments at more than 60% of their income. •  If mortgage rates were to rise by 3 percentage points, the proportion of borrowers at risk could reach 10 to 15%. •  In particular, lower income households and those with smaller saving pools may find this a strain. Those with longer tenure loans will also be adversely affected. So, when interest rates rise, long before any bank gets into trouble, some households will. Banks must therefore practice responsible lending, and consider the ability of borrowers to service their debt in a sustainable manner.
Under both the LA and EA scenarios, climate change has broadly been brought under control by the end of the 30 year period. By contrast, with no additional action the impacts will persist well beyond the 30 years of our scenario – incurring substantial economic costs not captured in these estimates. [11] Even sticking within the 30 year bounds of the scenario – and focusing on financial sector impacts – the NAA scenario is pretty grim. Projected impairment rates for banks are up 50% compared with normal levels. And whereas the ‘transition’ scenarios offer clear opportunities for banks to increase their profits by investing the transition, the ‘no action’ scenario offered no such opportunities. Instead the world gets poorer and more uncertain for all sectors, particularly those directly exposed to physical risks. The ‘no action’ scenario is particularly unpleasant for life and general insurers – even sticking to the 30 year window, their losses in this scenario were worse than in the transition. For instance UK and international general insurers, respectively, projected a rise in average annualised losses of around 50% and 70% by the end of the NAA scenario. It’s worth emphasising that these costs would be mostly passed on to consumers through higher premiums. Ultimately, in a ‘no action’ scenario, we would see a reduction in access to lending and insurance for so-called ‘climate vulnerable’ sectors and households. To give an example of what this means, homes at risk of flooding would likely become prohibitively expensive to insure or borrow against.

[13] This presents a challenge when considering implications for policy – and highlights the importance of continuing to plug the kinds of capability gaps I discussed earlier. As the results publication sets out, the Bank will engage with firms individually and collectively to help them target their efforts, and share good practices identified in this exercise. Implications for policy I hope it’s clear by this point that the CBES will be a valuable tool for helping us and financial firms to understand the challenges ahead. This exercise is not going to be used to set capital requirements for banks and insurers. But it clearly sheds light on that debate. The CBES results make clear that climate risk is a first-order strategic issue for the firms we regulate. But in my view it is not yet clear that the magnitude of transition costs require a fundamental recalibration of capital requirements for the system. [14] A persistent drag on profitability would be very nasty for firms, but so long as they are able to continue to make sufficient profits to maintain their capital buffers, its impact on safety and soundness might be less material. Had the results of this exercise suggested a fundamental threat to the solvency of these firms, our response would of course have been quite different. Set against that high level view, though, a world with climate change is without doubt riskier than one without.
Real house prices have almost trebled. The rise in house prices has been considerably stronger than earlier and has spanned a long period. With the exception of a few months in 2003, house prices have risen continuously since 1992. This is the second longest period of rising real prices since 1819. Statistics for earlier years do not exist. 8  BIS Review 28/2007  Norway is not the only country where house prices have shown a strong rise over a long period. House price inflation has been particularly high in Ireland and the Netherlands, but Denmark, the UK and Spain also stand out. The countries where house price inflation has been high are the same countries where economic growth has been strongest. Since prices are rising in tandem in many countries, it is natural to look for common driving forces. With increasing cross-border flows of intermediate goods, capital and increasingly so labour, prices will largely reflect growth and competition in the global economy. If capital or labour becomes too expensive in one country, businesses can relocate production. Prices for fixed factors of production, such as property, will on the other hand reflect income developments in different countries. Consequently, the rise in property prices will tend to be highest in those countries where income growth is highest. BIS Review 28/2007  9  External and domestic interest rates are low in an environment of solid growth. Long-term interest rates have fallen sharply both in nominal and real terms since the beginning of the 1990s.

For example, clothing and footwear, audiovisual equipment, furniture and white goods have shown very strong price declines. Low prices for imported consumer goods, combined with high prices for our commodity exports, have resulted in a strong improvement in Norway’s terms of trade. Since 2002, the terms of trade have  4  BIS Review 28/2007  improved by about 40 per cent. A similar situation has not been seen since World War I, when earnings in the shipping industry and other export industries were exceptionally high for a period. The supply of foreign labour has increased markedly after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for more than 30 per cent of growth in our labour force. Norwegian companies have also been able to be considerably bolder in undertaking new assignments and investments knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. Inward labour migration delayed the fall in unemployment in this expansion. It has also reduced bottlenecks in the economy and curbed the impact of the fall in unemployment on wage growth. Labour inflows have also had a dampening effect on wage growth, probably because the wage level of foreign workers is somewhat lower than for Norwegian labour.
According to the International Monetary Fund (IMF), in the past four decades, we have witnessed the warmest years on record and the number of natural disasters has more than doubled. 4. The global community is already taking concrete actions to tackle climate change and there have been many admirable efforts. For example, countries around the world are putting in place policies to implement the 2015 Paris Agreement. In the world of finance, central banks, financial regulators and institutions are increasingly adopting agendas to promote green finance. The IMF has highlighted in its latest Global Policy Agenda the importance for international collaboration to combat climate risk and what the IMF will do to support this effort. 5. Here in Asia, huge investments in green and climate-resilient infrastructure are needed across the region. The Asian Development Bank (ADB) estimates that $ trillion per year will be needed through 2030 for the region to maintain growth momentum, eradicate poverty and respond to climate change. 6. There is also growing awareness in the region of the need to ensure not just the level but also the quality of growth. This has forced policymakers to make a fundamental shift towards a more sustainable economic model which is less resource and carbon-intensive. 7. This requires a massive reallocation of capital and substantive involvement of the capital markets. Hence, the momentum of sustainable finance is building up strongly and will continue even more so in the coming years. For the global financial community, sustainable finance is no longer nice-to-have, but a necessary direction.

Speeches Published Date: 08 December 2020  "FinTech for an Inclusive Society and a Sustainable Planet" - Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Singapore FinTech Festival 2020 on 8 December 2020 In his keynote speech at SFF x SWITCH 2020, Mr Ravi Menon, Managing Director, MAS, spoke on leveraging FinTech to create a more inclusive society and a more sustainable planet. VIEW ALL NEWS  © 2021, Government of Singapore. https://www.mas.gov.sg/news/speeches/2021/riding-the-growth-momentum-in-asia  11/11
These extra protection measures include audio recording of the marketing process, segregation of investment corner from the main banking hall or counters, and a mandatory 2-day pre-investment cooling off period for vulnerable and inexperienced investors. (b) Banks must take extra care in marketing and distributing investment products to their customers. They must remain vigilant throughout the entire distribution process, from product due diligence, risk assessment of the products, suitability assessment of the customers, training for the frontline staff and control and governance of the sales process. Universal banking vs. narrow banking 8. Let me move to the second issue, with a different meaning attached to the phrase “universal banking”. Here, “universal banking” refers to a business model in which banks are allowed to conduct their own proprietary trading and market making in addition to trading on behalf of their customers and offering other traditional banking services and products. This is another area which has attracted heated debate and a diversity of views. 9. We’ve seen the Volcker Rule in the US and we’ve heard the Governor of the Bank of England speak out in favour of narrow banks. Their concerns spring from the potential ability of the universal banks to leverage their cheaper sources of funds obtained from public deposits for risky ventures to raise the return on equity and to meet ever rising shareholders’ expectations.

But the precautionary measure has served us well. We will continue to be vigilant in anticipating issues, and in taking proactive measures to strengthen the resilience of our system. With regards to the flow of credit from banks to corporations, we believe this is best facilitated through government schemes to co-share some of the risks with banks. In February, the Government announced the Special Risk-Sharing Initiative (SRI). Under this Initiative, the Government will absorb 75% of the risk for insurance covering working capital and trade-financing loan facilities. The Government will also absorb 80% of the risk for bridging loans which go towards meeting firms' working-capital needs. We also have schemes for SMEs and micro-loans. Apart from ensuring that the financial system continues to function effectively, the Government has, as in past periods of downturns, used fiscal measures to minimise the impact of the crisis. This involves targeted help for families and companies, while continuing to build capabilities to prepare for the upturn. This time, a creative Jobs Credit Scheme has been added to help companies keep their workers. Conclusion Ladies and Gentlemen, these are very challenging times. The global economy is in recession, and the financial system remains fragile. We need tough, decisive and forwardlooking actions in the core economies that are deeply affected. Asian economies have also been severely affected, and policy adjustments are necessary. However, the medium-term prospects for growth remain strong.